[Federal Register Volume 85, Number 127 (Wednesday, July 1, 2020)]
[Notices]
[Pages 39576-39579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14200]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Modification of the National Customs Automation Program (NCAP) 
Test Regarding Reconciliation for Filing Post-Importation Claims 
Arising Under the Agreement Between the United States of America, the 
United Mexican States, and Canada (USMCA)

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: General notice.

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SUMMARY: This document announces a modification to the Automated 
Commercial Environment (ACE) National Customs Automation Program (NCAP) 
reconciliation prototype test to include the flagging for filing of 
post-importation preferential treatment claims arising under the 
Agreement Between the United States of America, the United Mexican 
States, and Canada (the USMCA) as implemented pursuant to the United 
States-Mexico-Canada Agreement Implementation Act (the USMCA Act). 
Importers may file USMCA post-importation claims for refunds of certain 
duties assessed on merchandise that both qualifies for preferential 
tariff treatment under the USMCA and was entered for consumption, or 
withdrawn from warehouse for consumption, on or after July 1, 2020. 
Unless and until the USMCA Act is subsequently amended, refunds for 
merchandise processing fees (MPF) are excluded from USMCA post-
importation claims. Except to the extent expressly announced or 
modified by this document, all aspects, rules, terms and conditions 
announced in previously published Federal Register notices regarding 
the test remain in effect.

DATES: The test is modified to allow reconciliation of post-importation 
preferential tariff treatment claims to be filed on or after July 1, 
2020, for refunds of certain duties assessed on merchandise that both 
qualifies for preferential tariff treatment under the USMCA and was 
entered for consumption, or withdrawn from warehouse for consumption, 
on or after July 1, 2020.

ADDRESSES: Comments concerning the reconciliation prototype test may be 
submitted via email to Randy Mitchell, Director, Commercial Operations, 
Revenue & Entry (CORE) Division, Office of Trade, U.S. Customs and 
Border Protection at [email protected], with a subject line 
identifier reading, ``Modification of Reconciliation Test-USMCA''.

FOR FURTHER INFORMATION CONTACT: For policy-related questions, contact 
Randy Mitchell, Director, Commercial Operations, Revenue & Entry (CORE) 
Division, Office of Trade, U.S. Customs and Border Protection, at (202) 
325-6532 or via email at [email protected], with a subject line 
identifier reading ``Modification of Reconciliation Test-USMCA''. For 
technical questions related to ACE or Automated Broker Interface (ABI) 
transmissions, contact your assigned client representative. Interested 
parties without an assigned client representative should direct their 
questions to Tonya Perez, Director, Client Services Division, Office of 
Trade, U.S. Customs and Border Protection, at (571) 421-7477 or via 
email at [email protected].

SUPPLEMENTARY INFORMATION:

Background

    This document announces a modification to U.S. Customs and Border 
Protection's (CBP's) Automated Commercial Environment (ACE) 
reconciliation prototype test (hereinafter ``reconciliation test'') by 
adding the processing of post-importation claims arising under the 
United States-Mexico-Canada Agreement Implementation Act (the USMCA 
Act), Public Law 116-113, 134 Stat. 11 (January 29, 2020) (19 U.S.C. 
chapter 29), to permit an importer, who did not claim preferential 
tariff treatment at the time of importation, to file a claim, at any 
time within one year after the date of importation of qualifying 
merchandise, to receive a refund of certain excess duties paid on that 
merchandise at the time of importation. As is further explained below, 
although the USMCA eliminates the assessment of the merchandise 
processing fee (MPF) on qualifying goods from Canada and Mexico, the 
USMCA Act excluded the refund of MPF under 19 U.S.C. 1520(d) post-
importation claims for USMCA preferential treatment.

Purpose of the Reconciliation Test

    Reconciliation, a planned component of the National Customs 
Automation Program (NCAP), is 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 Stat. 2057 (December 8, 1993)) 
(19 U.S.C. 1411).
    Section 637 of the Customs Modernization Act amended section 484 of 
the Tariff Act of 1930 to establish a

[[Page 39577]]

new section (b), entitled ``Reconciliation'', and a planned component 
of the NCAP. (19 U.S.C. 1484(b)). Reconciliation is the process that 
allows an importer, at the time an entry summary is filed, to identify 
indeterminable information (other than that affecting admissibility) to 
CBP 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 of the applicable estimated 
duties is deposited.
    Section 101.9(b) of title 19 of the Code of Federal Regulations (19 
CFR 101.9(b)) provides for the testing of NCAP components. See T.D. 95-
21, 60 FR 14211 (March 16, 1995). The NCAP reconciliation test was 
announced in a general notice document published in the Federal 
Register (63 FR 6257) on February 6, 1998. Clarifications and 
operational changes were announced in subsequent Federal Register 
notices: 63 FR 44303 (August 18, 1998); 64 FR 39187 (July 21, 1999); 64 
FR 73121 (December 29, 1999); 66 FR 14619 (March 13, 2001); 67 FR 61200 
(September 27, 2002) (with a correction document published at 67 FR 
68238 (November 8, 2002)); 69 FR 53730 (September 2, 2004); 70 FR 1730 
(January 10, 2005); 70 FR 46882 (August 11, 2005); and 71 FR 37596 
(June 30, 2006). On September 13, 2000, CBP extended the test 
indefinitely in a notice published in the Federal Register (65 FR 
55326). On July 23, 2016, the NCAP test regarding reconciliation 
transitioned from the Automated Commercial System (ACS) to ACE. (83 FR 
2645). This document announces a modification to the reconciliation 
test to expand reconciliation to include post-importation preferential 
tariff treatment claims arising under the USMCA Act, which is permitted 
under 19 U.S.C. 1520(d). Aside from this modification, the test remains 
as set forth in the previously published Federal Register notices.

Reconciliation Generally

    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 CBP 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 of the applicable estimated duties is deposited.
    The flagged entry summary (the underlying entry summary) is 
liquidated by CBP for all aspects of the entry except those issues that 
were flagged. Upon liquidation of an underlying entry summary, any 
decision by CBP entering into that liquidation, e.g., classification, 
may be protested pursuant to 19 U.S.C. 1514. The means of providing the 
outstanding information flagged on the underlying entry summary to be 
reconciled is through the filing of a reconciliation entry. A 
reconciliation entry is treated as an entry for purposes of 
liquidation, reliquidation, and protest.
    When the outstanding information, e.g., value as determined by the 
actual costs, is later furnished in the reconciliation entry, CBP will 
liquidate the reconciliation entry as to the flagged issues. Any 
adjustments in duties owed will be made at that time. (See February 6, 
1998 Federal Register notice (63 FR 6257) for a more detailed 
presentation of the basic reconciliation process.) The liquidation of 
the reconciliation entry will be posted in the same manner and place as 
the notices of liquidation of other entries. Liquidation of a 
reconciliation entry may be protested pursuant to 19 U.S.C. 1514, but 
the protest may only pertain to the issue(s) flagged for and contained 
in the reconciliation entry (i.e., the protest may not address issues 
previously liquidated on the underlying entry summary).
    Previously published Federal Register notices have set forth that 
the issues for which an entry summary may be ``flagged'' (for the 
purpose of later reconciliation) are limited and relate to: (1) Value 
issues other than claims based on latent manufacturing defects; (2) 
classification issues, on a limited basis; (3) issues concerning value 
aspects of entries filed under heading 9802, Harmonized Tariff Schedule 
of the United States (HTSUS) (9802 issues); and (4) issues concerning 
post-importation claims, under 19 U.S.C. 1520(d), for preferential 
tariff treatment for merchandise entered under the acts implementing 
the North American Free Trade Agreement (NAFTA), the United States-
Chile Free Trade Agreement, the Dominican Republic-Central America-
United States Free Trade Agreement, the United States-Oman Free Trade 
Agreement, the United States-Peru Trade Promotion Agreement, the United 
States-Korea Free Trade Agreement, the United States-Colombia Trade 
Promotion Agreement, and the United States-Panama Trade Promotion 
Agreement.
    The filing of a reconciliation entry, like the filing of a regular 
consumption entry, is governed by 19 U.S.C. 1484 and can be done only 
by an importer of record, who is required to exercise reasonable care 
in filing the underlying entry summary, flagging issues for later 
reconciliation, and filing the reconciliation entry. Importers are also 
reminded of the distinction between prior disclosure and 
reconciliation. A prior disclosure exists when a person discloses the 
circumstances of a violation of 19 U.S.C. 1592 pursuant to CBP 
regulations. The person disclosing this information must do so before, 
or without knowledge of, the commencement of a formal investigation of 
that violation. Under reconciliation, the importer is not disclosing a 
violation, but rather identifying information which is indeterminable 
and will be provided at a later time when the reconciliation entry is 
filed.

Modification of the Reconciliation Test

    The Agreement Between the United States of America, the United 
Mexican States, and Canada (the USMCA) was entered into by the 
governments of the United States of America (United States), the United 
Mexican States (Mexico), and Canada on November 30, 2018. The USMCA was 
signed on December 10, 2019, and ratified by all three countries, with 
final ratification on April 24, 2020. The USMCA covers all merchandise 
entered for consumption, or withdrawn from warehouse for consumption, 
on or after July 1, 2020.
    Section 103 of the USMCA Act authorizes the President to proclaim 
the tariff modifications and to promulgate the regulations for 
preferential tariff treatment and other customs related provisions of 
the USMCA. This notice announces that a post-importation claim under 19 
U.S.C. 1520(d) for preferential tariff treatment pursuant to the USMCA 
may be made under the reconciliation test, but without a refund of 
merchandise processing fees (MPF) at this time.

1. Use of Current FTA Flag for USMCA Post-Importation Claims

    Importers that file an entry for USMCA preferential treatment under 
the reconciliation test must use the existing Free Trade Agreement 
(FTA) flag, as authorized in this notice.
    Section 205(a) of the USMCA Act provides for the reliquidation of 
entries. The USMCA Act repealed the NAFTA Implementation Act. Section 
205(a) of the USMCA Act amends section 520(d) of the Tariff Act of 1930 
(19 U.S.C. 1520(d)) by removing the reference to ``section 202 North 
American Free

[[Page 39578]]

Trade Agreement Implementation Act'' and replacing it with ``section 
202 of the United States-Mexico-Canada Agreement Implementation Act 
(except with respect to any merchandise processing fees)''. 
Additionally, Section 205(a) amends the certification of origin 
requirement in 19 U.S.C. 1520(d) by removing ``(2) copies of all 
applicable NAFTA Certificates of Origin (as defined in section 
1508(b)(1) of this title), or other certificates or certifications of 
origin, as the case may be; and'' and replacing it with ``(2) copies of 
all applicable certificates or certifications of origin; and''. 
Accordingly, Section 205 of the USMCA Act effectively replaces 
reliquidation of entries under NAFTA with the reliquidation of entries 
under the USMCA, eliminates the refund of MPF under USMCA post-
importation preferential treatment claims, and replaces the requirement 
to submit a NAFTA certificate of origin with the requirement to submit 
any applicable certificate or certification of origin as part of a 
post-importation preferential treatment claim (as discussed in Section 
204 of the USMCA Act). Consistent with Section 205 of the USMCA Act, 
the importer must make a post-importation preference claim pursuant to 
19 U.S.C. 1520(d), within one year from the date of importation. Post-
importation claims for reconciliation are made electronically in ACE 
and must include the following:
    (1) A declaration stating that the good qualified as an originating 
good at the time of importation and the number and date of the entry or 
entries covering the good (this is provided as part of the electronic 
submission of the claim containing the special program indicator for 
the USMCA);
    (2) A statement indicating whether the entry summary or equivalent 
documentation was provided to any other person; and
    (3) A statement indicating whether a protest, petition, or request 
for re-liquidation has been filed relating to the good and 
identification of such filing(s).
    Claims for preferential treatment under the USMCA may be made as of 
July 1, 2020. CBP is publishing an interim final rule (IFR) in the 
Federal Register (CBP Dec. 20-11) amending part 181 and adding a new 
part 182 containing several USMCA provisions, including an appendix 
that contains the trilaterally negotiated and agreed upon Uniform 
Regulations Regarding the Interpretation, Application, and 
Administration of Chapter 4 (Rules of Origin) and Related Provisions in 
Chapter 6 (Textile and Apparel Goods) (Uniform Regulations regarding 
rules of origin) (Appendix A to part 182).
    In addition to the IFR, persons intending to make USMCA preference 
claims as of July 1, 2020, may refer to the CBP website at https://www.cbp.gov/trade/priority-issues/trade-agreements/free-trade-agreements/USMCA for further guidance (including the U.S. USMCA 
Implementing Instructions). The United States International Trade 
Commission has also modified the HTSUS to add a new General Note 11, 
incorporating the USMCA rules of origin for claiming preferential 
treatment and providing for the special program indicators ``S or S+'' 
for the USMCA in the HTSUS ``special'' rate of duty subcolumn.\1\ For 
ACE, please note that CBP will update the information on USMCA post-
importation claims submitted via reconciliation in the Reconciliation 
Entry Summary Create/Update chapter of the CBP and Trade Automated 
Interface Requirements (CATAIR) posted on https://www.cbp.gov/trade/ace/catair.
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    \1\ The S+ indicator is used for certain agricultural goods and 
textile tariff preference levels (TPLs).
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2. Entry Into Force of USMCA and Import Eligibility for Reconciliation

    Section 205(a) of the USMCA Act further provides that these 
amendments (replacement of NAFTA preference from 19 U.S.C. 1520(d) with 
USMCA preference) will take place on the date on which the USMCA enters 
into force on July 1, 2020. Therefore, importers may file USMCA post-
importation claims for refunds of certain duties assessed on 
merchandise that both qualifies for preferential tariff treatment under 
the USMCA and was entered for consumption, or withdrawn from warehouse 
for consumption, on or after July 1, 2020.
    This notice does not modify the current reconciliation test, which 
waive the requirement to file a certification of origin for post-
importation claims, under 19 U.S.C. 1520(d), for preferential tariff 
treatment for merchandise qualifying under the other agreements covered 
by the FTA flag. For reconciliation entries making a post-importation 
claim, under 19 U.S.C. 1520(d), for preferential tariff treatment for 
qualifying merchandise entered under the USMCA, a certification of 
origin is not required to be presented at the time of filing the 
reconciliation entry, but must be in the importer's possession at that 
time and must be presented if requested by CBP. The failure to present 
the certification of origin when requested by CBP may result in the 
denial of the post-importation claim for preferential tariff treatment 
under the USMCA, the reliquidation of the reconciliation entry, and/or 
administrative and judicial sanctions including, but not limited to, 
liquidated damages and recordkeeping or other penalties and may be 
considered misconduct under the rules, terms and conditions of this 
test.
    Importers filing a reconciliation entry making a USMCA post-
importation claim for preferential tariff treatment for a covered 
vehicle, as defined in the Appendix to Annex 4-B of Chapter 4 of the 
USMCA, are reminded that the following certifications must be filed 
with CBP in order to receive preferential tariff treatment: (1) A 
certification providing that the labor value content requirements are 
met; and, (2) a certification that the steel and aluminum content 
requirements are met. These certifications are not filed with the 
reconciliation entry, but would be separately submitted; and, this 
notice does not waive any requirements related to these certifications 
for purposes of the reconciliation test.

3. Transition From NAFTA Treatment-Reliquidation

    Section 205 provides for a transition from NAFTA treatment. 
Consistent with this section, the amendments to 19 U.S.C. 1520(d), as 
discussed above, do not apply in the case of a good entered for 
consumption, or withdrawn from warehouse for consumption, before the 
date in which the USMCA enters into force, which is July 1, 2020. This 
section further provides that the section 1520(d), as it is in effect 
(on June 30, 2020) will apply, and shall continue to apply on or after 
that date with respect to the good. Therefore, importers may submit 
post-importation claims for NAFTA preference only for those goods 
entered for consumption, or withdrawn from warehouse for consumption, 
prior to July 1, 2020. Since importers may file post-importation claims 
at any time within one year after the date of importation, no post-
importation claims for NAFTA preference will be accepted after June 30, 
2021.

4. Ineligibility for Post-Importation Refunds of Merchandise Processing 
Fees

    Section 203 of the USMCA Act, which amends Section 13031(b)(10) of 
the Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(b)(10)), 
eliminates the refund of merchandise processing fees (MPF) for USMCA 
post-importation claims. That section also disallows the use of the 
Customs User Fee Account to refund MPF. Accordingly, not only are 
refunds of MPF not allowed, but there is also no mechanism available 
for CBP

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to refund MPF for goods that qualify for preferential treatment under 
the USMCA. Importers may, however, wish to flag USMCA entries for the 
possibility of MPF refunds for a post-importation USMCA claim, as CBP 
will provide for refunds consistent with any legislative changes to 19 
U.S.C. 1520(d). Importers are reminded that FTA reconciliation entries 
must be filed within 12 months of the earliest import date and that the 
FTA flag expires after 12 months.

    Dated: June 26, 2020.
Brenda B. Smith,
Executive Assistant Commissioner, Office of Trade.
[FR Doc. 2020-14200 Filed 6-30-20; 8:45 am]
BILLING CODE 9111-14-P