[Federal Register Volume 66, Number 49 (Tuesday, March 13, 2001)]
[Notices]
[Pages 14619-14622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6222]


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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: This document announces several changes to the Customs 
Automated Commercial System (ACS) Reconciliation prototype test. They 
include a reduction of data required for ``no-change'' Aggregate 
Reconciliation entries, a new fee-for-service procedure for requesting 
reports of flagged entries, a modification of the liquidated damages 
provision, and a new diskette labeling procedure. In addition, the 
document discusses the continued use of the midpoint interest 
calculation for Aggregate Reconciliations. Other aspects of the 
prototype test not affected by the changes announced in this document 
remain the same.

DATES: The two year prototype testing period commenced on October 1, 
1998, and was extended indefinitely starting October 1, 2000. 
Applications to participate in the prototype will be accepted 
throughout the duration of the test. The modification of the test's 
liquidated damages provision and the new diskette labeling procedure 
set forth in this document are effective on March 13, 2001. The 
effective date relative to the test's reduced data requirement for no-
change Aggregate Reconciliation entries and the fee-for-service 
procedure for flagged entry reports will be announced soon after 
publication of this document via an Automated Broker Interface (ABI) 
administrative message.

ADDRESSES: Written inquiries regarding participation in the prototype 
test should be addressed to Mr. John Leonard, Reconciliation Team, U.S. 
Customs Service, 1300 Pennsylvania Ave. NW, Room 5.2A, Washington, D.C. 
20229-0001.

FOR FURTHER INFORMATION CONTACT: Mr. John Leonard at (202) 927-0915 or 
Ms. Sandra Chilcoat at (202) 927-0032.

[[Page 14620]]


SUPPLEMENTARY INFORMATION:

Background

    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 (also referred to as 
the prototype, test, or prototype test). Customs announced and 
explained the prototype test in a general notice document published in 
the Federal Register (63 FR 6257) on February 6, 1998, which replaced 
all previous notices. Clarifications and operational changes were 
announced in three subsequent Federal Register notices published on 
August 18, 1998 (63 FR 44303), July 21, 1999 (63 FR 39187), and 
December 29, 1999 (64 FR 73121). A Federal Register (65 FR 55326) 
notice published on September 13, 2000, extended the prototype 
indefinitely. For application requirements, see 63 FR 6257 and 63 FR 
44303. Additional information regarding the prototype can be found at 
http://www.customs.gov/recon.
    This document announces additional changes to the prototype. Except 
for these modifications, all other aspects of the prototype remain the 
same.
    Reconciliation is the process that allows an importer, at the time 
an entry summary is filed, to identify undeterminable information 
(other than that affecting admissibility) to Customs and to provide 
that outstanding information at a later date. The importer identifies 
the outstanding information by means of an electronic ``flag'' which is 
placed on the entry summary at the time the entry summary is filed and 
payment is made. The kinds of information for which an entry summary 
may be ``flagged'' (for the purpose of later reconciliation) are 
limited and relate to: (1) value issues; (2) classification issues, on 
a limited basis; (3) ``9802 issues,'' those concerning value aspects of 
entries filed under heading 9802, Harmonized Tariff Schedule of the 
United States (HTSUS); and (4) NAFTA issues, those concerning 
merchandise entered under the North American Free Trade Agreement 
(NAFTA). The flagged entry summary (the underlying entry summary) is 
liquidated for all aspects of the entry except those issues that were 
flagged. The means of providing the outstanding information at a later 
date is through the filing of a Reconciliation entry. The flagged 
issues will be liquidated at the time the Reconciliation entry is 
liquidated. (See the February 6, 1998, Federal Register notice for a 
more detailed presentation of the basic Reconciliation process.)

Aggregate Reconciliation Entries and Reduced Data Requirements for 
No-Change Aggregate Reconciliation Entries

Aggregate Reconciliations Generally

    The Federal Register notice published on February 6, 1998, set 
forth the two kinds of Reconciliation entries: (1) An Aggregate 
Reconciliation entry (or Aggregate Reconciliation) contains a list of 
the underlying entry summaries affected and the aggregate revenue 
adjustment relative to those underlying entry summaries; (2) the Entry-
by-Entry Reconciliation entry (or Entry-by-Entry Reconciliation) shows 
the individual revenue adjustment for each underlying entry summary 
covered. In addition, that notice set forth that an Aggregate 
Reconciliation applies only to entry summaries showing either an 
increase (upward adjustment) or no change in duties, taxes, and fees. 
An Entry-by-Entry Reconciliation may include entry summaries that show 
a decrease (downward adjustment) in the amount of duties, taxes, and 
fees owed.
    The Federal Register notice published on August 18, 1998, discussed 
the components of Aggregate Reconciliations (the Header, Association 
File, and Summarized Line Data Spreadsheet; the same as for Entry-by 
Entry Reconciliations) and provided that in cases where a 
Reconciliation entry is filed with no adjustments to value or other 
reconcilable issues--that is, merely to satisfy the obligation to file 
a Reconciliation entry after entry summaries had been flagged, the 
spreadsheet need not be provided. Importers were cautioned to be 
mindful of the distinction between true ``no-change'' Reconciliations 
(no adjustments) and Reconciliations where there are adjustments but no 
revenue implications. In the latter case, a spreadsheet is required.
    The Federal Register notice published on July 21, 1999, provided 
importers the option to report entry summaries with a downward 
adjustment in duties, taxes, and fees through an Aggregate 
Reconciliation. These entry summaries must be listed separately from 
the upward adjusted and no-change entry summaries reported and must be 
accompanied by a certification that, among other things, waives any 
claims for refunds relative to these downward adjusted entry summaries.

Current Data Requirement for No-Change Reconciliations

    A ``no-change Reconciliation'' is a Reconciliation entry covering 
only flagged entry summaries that do not show a change or adjustment at 
the time of Reconciliation (the filing of the Reconciliation entry). 
This kind of Reconciliation may be filed using either the Aggregate or 
Entry-by-Entry method. Which method to use for this specific type of 
Reconciliation depends entirely on the importer's preference and/or 
software capabilities. These Reconciliations serve merely to ``close 
out'' flags on entries that were later found to require no adjustments 
at the time of Reconciliation. As noted above, no spreadsheet is 
required for this type of Reconciliation. Importers, however, must 
still provide information regarding the original duties, taxes, and 
fees paid on the underlying entry summaries covered in the 
Reconciliation when they transmit their Header and Association File via 
ABI. The Aggregate Reconciliation requires only the aggregate amount of 
original duties, taxes, and fees paid on the underlying entry summaries 
covered in the Aggregate Reconciliation entry, while the Entry-by-Entry 
Reconciliation must show the original amount of duties, taxes, and fees 
for each individual entry summary covered.

New Reduced Data Requirement for No-Change Aggregate Reconciliations

    In order to further simplify the Reconciliation process, Customs 
will allow importers filing no-change Reconciliations by the Aggregate 
Reconciliation method to file the Reconciliation entry without the 
original duty, tax, and fee information. This document announces this 
modification to the prototype.
    These no-change Aggregate Reconciliations, by definition, cannot 
include entry summaries showing upward or downward adjustments. 
Importers who wish to take advantage of this option must transmit zeros 
in the money fields for this type of Reconciliation. Transmission of 
the Association File is still required. This change will eliminate the 
redundancy of providing information that has been reported previously 
to Customs (on the flagged entry summary). It also will eliminate the 
expenditure of time and effort (by Customs and the trade) required to 
reconcile instances of disparity between filer (importer or its broker) 
information and Customs information on no-change Reconciliation 
entries. Customs believes

[[Page 14621]]

that this change will greatly improve the prototype.
    Customs emphasizes that this reduced data option is available only 
for no-change Reconciliations filed via the Aggregate Reconciliation 
method. ACS is not programmed to accept this type of reduced data, no-
change Reconciliation via the Entry-by-Entry Reconciliation method. 
Therefore, no-change Entry-by-Entry Reconciliations must include the 
original duty, tax, and fee information for each entry summary covered.
    The choice to use the Entry-by-Entry or Aggregate method to report 
no-change Reconciliations remains at the importer's discretion; 
however, no-change Reconciliations reported via the Aggregate method 
must be transmitted as described in this document (zeros in the money 
fields). Customs strongly encourages importers to take advantage of 
this streamlined method. ACS is expected to be ready to accept the 
reduced data, no-change Aggregate Reconciliation entries in February 
2001. The exact date will be announced via an ABI administrative 
message.

Fee-for-Service Procedure for Requesting Reports of Flagged Entries

    The tracking and timely reconciliation of flagged entry summaries 
is the responsibility of the importer (and filer/broker). To assist the 
importer in this regard, Customs has been providing importers with 
reports of their flagged entries upon request. Additionally, Customs 
has been providing importers with monthly reports of flagged entries 
coming due during the following month (known as the ``Heads-Up 
Report''). However, due to workload considerations, continued issuance 
of these flagged entry reports has become unsustainable.
    Because Customs believes that a centralized, efficient 
clearinghouse for providing flagged entry reports is beneficial to both 
Customs and the Trade, it proposed an Internet-based lookup system in 
the December 29, 1999, Federal Register. This system was not developed 
but has been replaced with a fee-for-service procedure to be handled by 
Customs Accounting Services Division in Indianapolis, IN. Thus, this 
document announces the fee-for-service report procedure as a 
modification to the prototype. Customs believes that the announced fee-
for-service procedure will be more efficient and provide a better 
product than in the past. Additionally, Customs will be properly 
reimbursed for manpower and computer time spent downloading and 
compiling these reports.
    The new fee-for-service flagged entry reports are extensions of two 
reports Customs already provides: the Masterfile Extract and the 
Liquidation Extract. The Masterfile Extract reports all open bills and 
unliquidated formal entries. The Liquidation Extract reports all 
liquidated entries during a given fiscal year. Under the test, both 
reports will provide, among other things, dates of entry and entry 
summary; total duties, taxes, and fees paid on a given entry; whether 
the entry was flagged for reconciliation; and the particular issue or 
issues for which the entry was flagged (Value, Classification, 9802, 
NAFTA or a combination of these). Listed entries which do not reflect 
any flag data either were never flagged or the flags were already 
closed out on a previously submitted Reconciliation. Since flagged 
underlying entry summaries for a certain period may be liquidated or 
unliquidated, importers are encouraged to request both reports to 
maintain complete records.
    Customs expects to be ready to issue these reports with 
Reconciliation information in February 2001. The exact date will be 
announced via an ABI administrative message. In the interim, the 
Reconciliation team will continue to provide the flagged entry reports 
upon request. When the fee-for-service report system becomes 
operational, the free reports currently provided by the Reconciliation 
team, including the ``Heads-Up Report,'' will cease to be issued.
    As stated before, the Masterfile Extract will list all open bills 
and all unliquidated formal entries, and the Liquidation Extract will 
list all liquidated entries for a given importer number during a given 
fiscal year (October 1-September 30). Under the new procedure, requests 
for reports must be in writing on company letterhead and include 
payment for processing fees. They also must specify the Importer of 
Record Number (the IRS number).
    The fees for Master File Extracts are as follows: $150 for the 
first importer number; $50 for the second importer number; and $25 for 
each additional importer number.
    The pricing for the Liquidation Extract is separate from the Master 
File Extract and is as follows: $200 for the first importer number for 
a given fiscal year, plus $50 for each additional fiscal year requested 
for that importer number; $100 for the second importer number for a 
given fiscal year, plus $50 for each additional fiscal year requested 
for that importer number; and $75 for each additional importer number 
for a given fiscal year, plus $50 for each additional fiscal year 
requested relative to those importer numbers.
    In addition to requesting reports in letter form, importers can 
request that Customs furnish a report via computer diskette. If the 
importer requests that Customs furnish the report on both computer 
diskette and paper, an additional fee of $50 will be charged. The 
written request, with payment in the form of a check made payable to 
the U.S. Customs Service, should be mailed to: U.S. Customs Service, 
Accounting Services Division, ATTN: Collections Section, 6026 Lakeside 
Blvd., Indianapolis, IN 46278. Each request requires approximately one 
week from receipt to process. If further information or assistance is 
needed to determine charges, please contact Debbie Wolfley at (317) 
298-1200, extension 1363.

Modification of the Liquidated Damages Provision

    The liquidated damages process for non-filed and late-filed 
Reconciliation entries was announced in the December 29, 1999, Federal 
Register notice. This document announces a modification of the 
liquidated damages and mitigation guidelines for non-filed and late-
filed Reconciliations.
    The guidelines set forth the assessed liquidated damages amounts 
for each violation type and provide a mitigation amount for each 
violation, described as the ``Option 1'' amount. An importer may agree 
to pay the lower Option 1 amount and waive the right to further 
mitigate the claim below that amount. There are five types of 
liquidated damages violations under the prototype guidelines: (1) 
Reconciliation No File; (2) Reconciliation Money No File; (3) 
Reconciliation Late File; (4) Reconciliation Money Late File; and (5) 
Reconciliation Late File With Money No File. The new guidelines set 
forth their descriptions, assessed liquidated damages amounts, and 
``Option 1'' amounts.
    For administrative convenience, Customs has decided to drop the 
interest calculation (total duties, taxes, fees, and interest, if 
applicable, due on Reconciliation x number of days late x 0.1%) set 
forth in the December 29, 1999, Federal Register notice as a component 
of the Option 1 amount. Instead, the Option 1 amount under the new 
guidelines will be a flat amount ($100 per entry to a maximum of $500) 
based on the number of entries filed late. No relief will be afforded 
until all entries identified on a ``Notice of Penalty or Liquidated 
Damages'' form (CF-5955A) issued to the importer by Customs are 
reconciled. These new Option 1 amounts are effective on the date this 
document is published in the Federal Register. All other aspects of

[[Page 14622]]

the liquidated damages process announced in the December 29, 1999, 
notice remain the same.

New Liquidated Damages Guidelines

1. Reconciliation No File
    Description: Entry summaries flagged but no Reconciliation filed. 
Customs will issue a single consolidated liquidated damages claim for 
all entries fitting this description for a given importer, per month, 
per surety.
    Assessed Liquidated Damages Amount: Total entered value of the 
underlying entry(ies).
    Option 1 Amount: The filing of the Reconciliation entry (or 
entries) covering the flagged entry summaries listed on the 
consolidated liquidated damages claim (CF 5955A), with all applicable 
duties, taxes, fees, and interest owed, will be treated as a petition 
for relief. Payment of the Option 1 amount will be authorized only upon 
the proper filing of this Reconciliation, with duties, taxes, fees, and 
interest. For a consolidated monthly liquidated damages claim covering 
five or more flagged entry summaries, the Option 1 amount is $500. For 
consolidated monthly claims involving four or fewer flagged entry 
summaries, the Option 1 amount is $100 per entry.
2. Reconciliation Money No File
    Description: Reconciliation filed timely but without payment of 
additional duties, taxes, fees, and interest due.
    Assessed Liquidated Damages Amount: $1,000 or double the duties, 
taxes, fees, and interest due on the Reconciliation, whichever is 
greater.
    Option 1 Amount: Payment of the Option 1 amount will be authorized 
only after all duties, taxes, fees, and interest due are paid. For 
claims involving five or more flagged entry summaries, the amount is 
$500. For claims involving four or fewer flagged entry summaries, the 
amount is $100 per entry.
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: For claims involving five or more flagged entry 
summaries, the amount is $500. For claims involving four or fewer 
flagged entry summaries, the amount is $100 per entry.
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: For claims involving five or more flagged entry 
summaries, the amount is $500. For claims involving four or fewer 
flagged entry summaries, the amount is $100 per entry.
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, fees, and 
interest due on the Reconciliation, whichever is greater.
    Option 1 Amount: Payment of Option 1 amount will be authorized only 
after duties, taxes, fees, and interest due are paid. For claims 
involving five or more flagged entry summaries, the amount is $500. For 
claims involving four or fewer flagged entry summaries, the amount is 
$100 per entry.

New Diskette Labeling Procedure

    The Federal Register notice of February 6, 1998, announced that, 
along with the ABI-transmitted Header and Association File, importers 
must submit line item data in both hard copy and commercial spreadsheet 
format via diskette. All aspects of the test concerning line item 
spreadsheets remain the same. This document merely addresses the 
labeling of the diskettes.
    Starting on the date this document is published in the Federal 
Register, importers, per the Bureau of the Census, must label diskettes 
with the following information: Reconciliation entry number, importer 
of record number (generally the IRS Tax Identification number), and the 
calendar year or years covered by the Reconciliation spreadsheet 
contained on that diskette. For example, regarding the latter bit of 
information pertaining to calendar year, if the Reconciliation covers a 
fiscal year's worth of entries that were entered from October 1, 1999, 
through September 30, 2000, the diskette should be labeled ``1999-
2000,'' along with the Reconciliation entry number and the IRS number.

Continued Use of Midpoint Interest Calculation for Aggregate 
Reconciliations

    The use of a midpoint interest calculation method was authorized 
for Aggregate Reconciliations when the Miscellaneous Trade and 
Technical Corrections Act of 1999 was signed into law on June 25, 1999. 
The law included a sunset provision of October 1, 2000. Use of midpoint 
interest calculation under the test was announced in the July 21, 1999, 
Federal Register notice. On November 9, 2000, the Tariff Suspension and 
Trade Act of 2000 was signed into law (Pub. L. 106-476; the Act). Under 
section 1451 of the Act, section 505(c) of the Tariff Act of 1930 (19 
U.S.C. 1505(c)), as amended, was amended to remove the sunset 
provision. Therefore, importers may continue to use the midpoint 
interest calculation method for Aggregate Reconciliations. Procedures 
regarding the use of midpoint interest remain the same as described in 
the July 21, 1999 Federal Register notice.

The ACS Reconciliation Prototype Survey

    A Reconciliation Prototype survey was published on the Customs web 
site in order to solicit comments and suggestions from various entities 
of the trade community (see also Federal Register (65 FR 36505) notice 
published on June 8, 2000. The number of responses to this voluntary 
survey was minimal in comparison to the volume of importers approved 
for Reconciliation. A summary of the survey responses will be compiled 
and published on the Customs web site in the near future.

    Dated: January 31, 2001.
Bonni G. Tischler,
Assistant Commissioner, Office of Field Operations.
[FR Doc. 01-6222 Filed 3-12-01; 8:45 am]
BILLING CODE 4820-02-P