[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73121-73124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33809]


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DEPARTMENT OF THE TREASURY

Customs Service


Modification of National Customs Automation Program Test 
Regarding Reconciliation

AGENCY: Customs Service, Treasury.

ACTION: General notice.

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SUMMARY: On February 6, 1998, a general notice was published in the 
Federal Register announcing the Customs Automated Commercial System 
(ACS) Reconciliation Prototype test. Additional notices announcing 
modifications to the prototype were published on August 18, 1998, and 
July 21, 1999. This notice serves to make further modifications, as 
well as to announce operational aspects of the prototype not covered in 
the previous notices. These changes include, among other things, making 
the filing of NAFTA Reconciliations optional and announcing a 
liquidated damages process for late-filed and non-filed 
Reconciliations. Other aspects of the prototype test not affected by 
the changes announced in this notice remain the same.

DATES: The prototype testing period started on October 1, 1998. It will 
run for approximately two years from that date and may be extended. 
Applications to participate in the prototype will be accepted 
throughout the duration of the prototype. The liquidated damages 
provision and the change regarding optional filing of NAFTA 
Reconciliations set forth in this notice are effective on the date this 
document is published in the Federal Register.

ADDRESS: Written inquiries regarding participation in the prototype 
test should be addressed to Ms. Shari McCann, Reconciliation Team, U.S. 
Customs Service, 1300 Pennsylvania Ave. N.W., Mailstop 5.2A, 
Washington, DC, 20229-0001.

FOR FURTHER INFORMATION CONTACT: Mr. Don Luther at (202) 927-0915 or 
Ms. Shari McCann at (202) 927-1106.

SUPPLEMENTARY INFORMATION:

I. Administrative Procedure

    Reconciliation, a planned component of the National Customs 
Automation Program (NCAP), as provided for in Title VI (Subtitle B) of 
the North American Free Trade Agreement Implementation Act (the NAFTA 
Implementation Act; Pub. L. 103-182, 107 State. 2057 (December 8, 
1993)), is currently being tested by Customs under the Customs 
Automated Commercial System (ACS) Prototype test. Customs announced and 
explained the prototype

[[Page 73122]]

test (also referred to as the prototype or the test) in a general 
notice document published in the Federal Register (63 FR 6257) on 
February 6, 1998, which replaced all previous notices. A notice 
published in the Federal Register (63 FR 44303) on August 18, 1998, 
announced clarifications and operational changes. Further changes to 
the prototype were announced in a Federal Register (64 FR 39187) notice 
published on July 21, 1999. This notice announces additional changes. 
Except for the modifications herein specified, all other aspects of the 
test remain the same.

II. Background

    Reconciliation is the process that allows an importer, at the time 
of entry summary, to identify undeterminable information (other than 
that affecting admissibility) to Customs and to provide that 
outstanding information at a later date. The means of providing that 
outstanding information at a later date is through the filing of a 
Reconciliation entry.
    An importer indicates its intent to file a Reconciliation entry by 
``flagging'' an entry summary and indicating which undeterminable 
issues will be covered and resolved in the Reconciliation. (The 
flagging is done electronically at the time of filing the entry 
summary. See the notice published in the Federal Register on August 18, 
1998, for the two methods of flagging entry summaries: individual entry 
flag and blanket flag.) Later, the importer files the Reconciliation 
entry that resolves only the issues that were specified as 
undeterminable in the flagged entry summary. The issues that may be 
covered for later resolution in a Reconciliation are: (1) Value; (2) 
classification, on a limited basis; (3) value aspects of entries filed 
under heading 9802, Harmonized Tariff Schedule of the United States 
(HTSUS) (referred to as 9802 issues); and (4) merchandise entered under 
the North American Free Trade Agreement (NAFTA).

III. Filing of NAFTA Reconciliations Optional

A. Existing Requirements

    As set forth in the Federal Register notice published on February 
6, 1998, the flagging of an entry summary creates an obligation on the 
part of the importer to file a Reconciliation to resolve and close out 
the issue(s) specified. Reconciliations covering a NAFTA eligibility 
issue, which cannot include other issues, are due within 12 months of 
the earliest import date of all entry summaries grouped on the 
Reconciliation. Reconciliations covering any of the other issues (alone 
or in combination) are due within 15 months of the earliest summary 
date of the entry summaries grouped on the Reconciliation.

B. Policy Discussion

    The value, classification, and 9802 issues allowed under 
Reconciliation have a direct bearing on Customs ability to regulate the 
importation of merchandise and enforce the customs laws. For this 
reason, Customs will continue to require timely closure of these issues 
via timely filed Reconciliations and will issue liquidated damages 
claims against the importer in cases where this obligation is not met.
    The function of NAFTA Reconciliations is to allow the importer to 
make a post-importation claim of NAFTA eligibility under 19 U.S.C. 
1520(d), which requires the filing of a claim thereunder within one 
year of importation. If a NAFTA Reconciliation is not filed within the 
12 months allowed under the prototype, it simply means that no post-
importation NAFTA claim can be filed timely under the statute, as the 
one-year time limit provided under 19 U.S.C. 1520(d) will have expired.
    Thus, the only consequence of a failure to file a NAFTA 
Reconciliation is the importer's loss of the benefit provided under the 
statute. By eliminating the formality of closing open NAFTA flags 
(entry summaries flagged to indicate the intended filing of a NAFTA 
Reconciliation) where no claims under 19 U.S.C. 1520(d) are being made, 
Customs hopes to further streamline the prototype and prevent 
unnecessary work by Customs personnel and the trade community.

C. Change in Requirement

    Based on the foregoing policy considerations, upon publication of 
this notice, the filing of NAFTA Reconciliations (as opposed to 
Reconciliations covering other issues) will be optional. As before, 
importers wishing to make post-importation NAFTA claims under the 
Reconciliation process must do so via a timely filed NAFTA 
Reconciliation. However, as announced in this notice, NAFTA 
Reconciliations that are filed against flagged entry summaries past 
their 12-month deadline will simply not be accepted by Customs and 
liquidated damages claims will not be issued. Late-filed NAFTA 
Reconciliations may be refiled (electronically retransmitted) after 
removal of all entry summaries for which the deadline has passed, and 
NAFTA claims may be made against those entry summaries that were still 
within the 12-month deadline at the time of original Reconciliation 
filing.

D. Effect on Drawback

    As mentioned in the previous Federal Register notices, drawback 
claims may not be made against flagged entry summaries (open flags) 
until all issues have been closed by a Reconciliation. This restriction 
was built into Customs automated system to ensure proper financial 
controls under drawback. Thus, when a Reconciliation is not filed, the 
entry summary remains flagged and drawback is precluded.
    Customs plans eventually to implement a mechanism to delete open 
NAFTA flags that are more than 12 months old (flagged entry summaries 
as to which the intended NAFTA Reconciliation was not filed). This will 
serve to enable drawback on those entry summaries flagged for NAFTA 
reconciliation that were not reconciled within the required 12 months. 
(Flagged entry summaries covering other issues will remain flagged 
until a Reconciliation is filed.)
    The flag deletion capability for entry summaries flagged for NAFTA 
reconciliation will not be ready until spring, 2000. Until its 
implementation, drawback claims will not be accepted where NAFTA 
Reconciliations were not filed for flagged entry summaries. Customs 
will notify filers when the flag deletion capability has been 
implemented. Reconciliations for NAFTA may still be filed timely, 
either with or without NAFTA claims being made, which will enable 
drawback on the entry summaries without delay.

IV. Definition of Reconciliation Filing Date

    As described in the previous Federal Register notices, the 
Reconciliation entry comprises three components: the Header, the 
Association File, and the Summarized Line Item Data Spreadsheet. In 
order for a Reconciliation entry to be considered filed, all three of 
these components must be received by the Customs processing port 
assigned to the importer. Additionally, for NAFTA Reconciliations where 
NAFTA claims are being made, the statements specified in 19 CFR 181.32 
are required. Accordingly, the actual filing date for each 
Reconciliation is the date when all of these required elements have 
been properly presented to Customs. This actual filing date will be 
used for determining whether Reconciliations were filed timely.

[[Page 73123]]

V. Liquidated Damages for Failure To File Reconciliations Timely

    As described in this notice (subsection (C) of Section I), the 
filing of NAFTA Reconciliations is now optional. Accordingly, the 
liquidated damages provisions in this section apply only to value, 
classification, and 9802 Reconciliations. They do not apply to NAFTA 
Reconciliations.

A. Requirements

    As described above and in the Federal Register notice of February 
6, 1998, the flagging of an entry summary creates an obligation on the 
part of the importer to file a Reconciliation within the allotted time, 
covering the flagged issue(s) on that entry summary. This notice 
removes the obligation to reconcile NAFTA eligibility for entry 
summaries flagged for that issue.
    Each entry summary flagged for value, classification, and/or 9802 
issues must be covered by a Reconciliation filed prior to the due date, 
15 months from the earliest entry summary date of the underlying entry 
summaries. Up to 9,999 underlying entry summaries may be covered by a 
single Reconciliation. If any one of the underlying entry summaries' 
due dates has passed prior to Reconciliation filing, the entire 
Reconciliation is considered late. However, the importer and filer have 
discretion to determine which and how many entry summaries are grouped 
on a Reconciliation, regardless of the flagging method and timing 
involved in the original flagging of those entry summaries.

B. Liquidated Damages for Non-Filed and Late-Filed Reconciliations

    The obligation to file Reconciliations created by the flagging of 
entry summaries carries liquidated damages implications for failure to 
do so timely. Each flagged entry summary remains an independent entity 
until reconciled. Customs has no way of knowing which entry summaries 
will be covered by a single Reconciliation until one is actually filed. 
Once the Reconciliation has been filed, the universe of entry summaries 
covered by it is established. Moreover, the Reconciliation is an entry 
in its own right and has the same legal status as other Customs 
entries. For these reasons, late-filing and non-filing of 
Reconciliations will be dealt with using different mechanisms.

C. Liquidated Damages Mechanisms

1. ``No File'' Liquidated Damages
    Periodically, Customs will perform research to identify flagged 
entries that were not reconciled timely (within 15 months of their 
date). In cases where flagged entry summaries are found to have not 
been covered by a Reconciliation, Customs will issue a single ``No 
File'' liquidated damages claim against the importer of record for all 
unreconciled flagged entries past their due dates for the calendar 
month. Subsequent filing of Reconciliations to cover entries on this 
monthly consolidated liquidated damages report will result in 
mitigation of the initial liquidated damages claim.
2. ``Late File'' Liquidated Damages
    In cases where flagged entry summaries are found to have been 
covered by a Reconciliation that was filed late, Customs will issue a 
single ``Late File'' liquidated damages claim against the 
Reconciliation entry itself (as opposed to a claim against the importer 
that covers the calendar month, as in the case of ``No File'' 
liquidated damages claims). This mechanism applies also to 
Reconciliations, filed timely or not, where payment of additional 
monies (duties, taxes, fees, and interest) due is made late or not at 
all.
3. Where Liquidated Damages Claims Are Processed
    Each importer participating in the ACS Reconciliation Prototype is 
assigned to a particular Reconciliation processing port. Liquidated 
damages claims involving Reconciliation will always be processed by the 
Reconciliation processing port. This is true regardless of the port(s) 
where the underlying entry summaries were filed.

D. Summary of Liquidated Damages Claims

    There are five different types of liquidated damages violations 
under the ACS Reconciliation Prototype. The descriptions, assessed 
liquidated damages amounts, and ``option 1'' amounts are shown below. 
``Option 1'' refers to the option where importers may agree to pay a 
reduced amount, but waive rights to mitigate the claim below that 
amount. The term ``money'' in this listing refers to the additional 
duties, taxes, fees, and interest due upon Reconciliation.
1. Reconciliation No File
    Description: Entry summaries flagged, but no Reconciliation filed. 
Customs will issue a single consolidated liquidated damages claim for 
all such instances for a given importer, per month, per surety. (For 
example, if an importer had flagged entry summaries covered by two 
sureties during one month, two separate consolidated liquidated damages 
claims would be issued, one covering entry summaries insured by one 
surety and the other covering entry summaries insured by the second 
surety.)
    Assessed Liquidated Damages Amount: Total entered value of the 
underlying entry(ies).
    Option 1 Amount: Not Applicable.
2. Reconciliation Money No File
    Description: Reconciliation filed timely, but without payment of 
additional duties, taxes, fees, and interest due.
    Assessed Amount: $1,000 or double the duties, taxes, and fees due 
on the Reconciliation, whichever is greater.
    Option 1 Amount: Not Applicable.
3. Reconciliation Late File
    Description: Reconciliation filed and paid after the 15-month 
deadline.
    Assessed Amount: $1,000 or double the duties, taxes, fees, and 
interest, if applicable, due on the Reconciliation, whichever is 
greater.
    Option 1 Amount: $500+(Total duties, taxes, fees, and interest, if 
applicable, due on Reconciliation x number of days late x 0.1%).
    4. Reconciliation Money Late File
    Description: Reconciliation filed timely, but payment of additional 
duties, taxes, fees, and interest due submitted late.
    Assessed Amount: $1,000 or double the duties, taxes, fees, and 
interest due on the Reconciliation, whichever is greater.
    Option 1 Amount: $500+(Total duties, taxes, fees, and interest due 
on Reconciliation x number of days payment is late x 0.1%).
    5. Reconciliation Late File with Money No File
    Description: Reconciliation filed late, without payment of duties, 
taxes, fees, and interest due.
    Assessed Amount: $1,000 or double the duties, taxes, and fees due 
on the Reconciliation, whichever is greater.
    Option 1 Amount: Not Applicable.

E. Surety Issues

    The liquidated damages claims that result from failure to file 
Reconciliations or filing them untimely may be for substantial amounts. 
Failure to resolve these claims could saturate the importer's 
continuous bond. Thus, in certain circumstances, importers may be 
required to submit single entry bonds for further entry summaries or 
make live entry with payment to secure release of merchandise.

VI. Courtesy Notification of Impending Due Dates

    Because of the serious consequences involved in not filing 
Reconciliations

[[Page 73124]]

timely, Customs has been providing importers with lists of their 
flagged entry summaries upon request. However, workload considerations 
make this practice unsustainable. While the tracking and timely 
reconciliation of flagged entry summaries is solely the responsibility 
of the importer and filer, Customs appreciates the logistical burden of 
this task. For this reason, Customs is currently developing an 
Internet-based lookup system, where interested filers and importers can 
obtain the list of flagged entry summaries that are coming due in the 
upcoming months (referring to the Reconciliation filing due date (or 
deadline)). This system will provide entry summary numbers sorted two 
ways: by filer code and by an encrypted version of the importer of 
record number, which will be made available to the importer.
    Importers who prefer that their entry numbers and flag codes not be 
made available via this mechanism may opt out by sending written 
notification to that effect to the Reconciliation Team at the address 
shown in the Address section of this notice. Such written notifications 
must be received by January 31, 2000.
    It is anticipated that this lookup system will be operational in 
spring, 2000. In the interim, the Reconciliation team will continue to 
provide filers with monthly lists of flagged entries coming due during 
the following month. Importers and filers retain the right to request 
data from Customs under the authority of the Freedom of Information Act 
(FOIA), for which monetary charges may be assessed.

VII. Conclusion

    Regarding the ACS Reconciliation Prototype test generally, 
interested parties should consult the Federal Register notices of 
February 6, 1998 (63 FR 6257), August 18, 1998 (63 FR 44303), and July 
21, 1999 (64 FR 39187). All terms and conditions set forth in those 
notices remain in effect, except as specifically modified or affected 
by this notice.

    Dated: December 23, 1999.
Charles W. Winwood,
Assistant Commissioner, Office of Field Operations.
[FR Doc. 99-33809 Filed 12-28-99; 8:45 am]
BILLING CODE 4820-02-P