CSMS Message: 00-000643

TO: ALL ABI FILERS

FROM: OFFICE OF INFORMATION AND TECHNOLOGY

SUBJECT: MPF CALCULATION FOR AGGREGATE RECONCILIATION

AGGREGATE RECONCILIATION IS THE METHOD FOR MAKING ADJUSTMENTS
APPLICABLE TO MANY ENTRY SUMMARIES, WITHOUT SPECIFICALLY
APPLYING THEM TO THE INDIVIDUAL SUMMARIES. AN IMPORTER NEEDING
TO MAKE AN UPWARD ADJUSTMENT TO THE VALUE OF A GIVEN PRODUCT MAY
DO SO VIA THE SUMMARIZED LINE ITEM DATA SPREADSHEET OF AN
AGGREGATE RECONCILIATION. IF ALL OF THE SHIPMENTS OF THE
PRODUCT IN QUESTION ADD UP TO $100,000, SIMPLY APPLYING
THE UPWARD ADJUSTMENT TO THE $100,000 SPREADSHEET LINE
WILL SUFFICE. THE RESULTING CHANGES IN DUTIES, TAXES, AND
FEES ARE SIMILARLY CALCULATED AS PERCENTAGES OF THE ADDITIONAL
VALUE. THE AGGREGATE METHODOLOGY ALLOWS CUSTOMS TO MOVE
CLOSER TO AN ACCOUNT-BASED APPROACH TO COLLECTING CORRECTED
DATA AND REVENUE.

THERE IS A SMALL IMPEDIMENT TO AGGREGATE PROCESSING IN
CERTAIN SITUATIONS: THE MERCHANDISE PROCESSING FEE (MPF)
IS STRUCTURED SO THAT THERE ARE MINIMUM ($25) AND MAXIMUM
($485) ASSESSMENTS PER ENTRY. THESE ARE NECESSARILY AT ODDS
WITH AGGREGATE PROCESSING. THE AGGREGATE RECONCILIATION IS
NOT ALLOWED FOR REFUND CLAIMS, SO CUSTOMS IS NOT AT RISK, BUT
THE QUESTION DOES ARISE WHETHER AN UNFAIR AMOUNT OF
ADDITIONAL MPF COULD BE PAID VIA THE RECONCILIATION IF
MINIMUM OR MAXIMUM AMOUNTS HAD APPLIED TO THE UNDERLYING
IMPORT ENTRIES. THIS ONLY PRESENTS A PROBLEM IF THE
PER-ENTRY VALUE IS UNDER $11,905 OR OVER $230,952.
OTHERWISE, MPF IS CALCULATED ON A LINE BY LINE AD VALOREM BASIS.

IN THE FEDERAL REGISTER NOTICE OF AUGUST 18, 1998, CUSTOMS
PUBLISHED A FORMULA INTENDED TO PROTECT IMPORTERS WHO HAD
ALREADY PAID THE $485 MAXIMUM ON INDIVIDUAL ENTRIES AND
WERE FILING AGGREGATE RECONCILIATIONS. AS IT TURNS OUT, THERE
CAN BE SITUATIONS WHERE APPLICATION OF THE MINIMUM ($25)
ASSESSMENT CAN BE ADVERSE TO THE IMPORTER. (IF THE 'TRUE' MPF WERE
$16, BUT THE FILER WAS FORCED TO PAY $25 BY THE MINIMUM REQUIREMENT,
AND THE RECONCILED VALUE INCREASED SO THAT THE TRUE MPF WERE $19,
THAT WORKS OUT TO THREE MORE DOLLARS PAID VIA THE AGGREGATE
RECONCILIATION WHEN THAT ENTRY HAD ALREADY PAID MORE THAN ITS
FAIR SHARE.)

A FIELD MEMBER OF THE RECONCILIATION TEAM HAS DEVISED THE
METHODOLOGY DESCRIBED BELOW, WHICH IS ALLOWABLE FOR AGGREGATE
RECONCILIATIONS. (FOR ENTRY-BY-ENTRY RECONCILIATIONS, EACH
ENTRY IS BASICALLY REWORKED, SO THE MINIMUM AND MAXIMUM
AMOUNTS CAN BE ACCOUNTED FOR.)

THE TYPICAL AGGREGATE ASSESSMENT OF ADDITIONAL MPF IS DONE BY MULTIPLYING
THE ADDITIONAL VALUE BY THE MPF RATE, (E.G. $30,000 X 0.0021).

IN ORDER TO PROTECT AGAINST THE PROBLEMS DESCRIBED ABOVE, THE FOLLOWING
METHODOLOGY MAY BE EMPLOYED BY THE IMPORTER:

1. FOR THE ENTRIES BEING ADDRESSED BY A RECONCILIATION, ADD UP
THE TOTAL MPF PAID.

2. SEPARATELY ADD UP THE MPF AMOUNTS FOR ALL ENTRIES WHERE THE
MPF IS NOT $25 OR $485.

3. DIVIDE THIS FIGURE BY THE TOTAL DOLLAR AMOUNT OF MPF PAID TO FIND
THE PERCENTAGE OF MPF PAID THAT WAS CALCULATED ON A LINEAR BASIS,
NOT FORCED TO $25 OR $485.

4. APPLY THIS PERCENTAGE TO THE TYPICAL AGGREGATE CALCULATION ABOVE.

EXAMPLE: $30,000 ADDITIONAL VALUE ON RECONCILIATION. THE UNDERLYING
ENTRIES HAD $8520 TOTAL MPF PAID. $1600 OF THE MPF WAS PAID AS $25
OR $485 PER ENTRY. THE REMAINING $6920 WAS CALCULATED ON A LINEAR BASIS.

1. TOTAL MPF = $8520

2. MPF NOT FORCED TO MINIMUM OR MAXIMUM = $6920.

3. PERCENTAGE OF CALCULATED MPF = 6920 / 8520 = 81.2%

4. $30,000 VALUE ADJUSTMENT X (.0021 MPF RATE X .812) = $51.16.
IN ADDITIONAL MPF, RATHER THAN THE $63 THAT WOULD RESULT FROM
APPLYING THE STANDARD MPF RATE OF .21% TO THE AGGREGATE ADDITIONAL
VALUE OF $30,000 (.0021 X $30,000 = $63.00)

QUESTIONS REGARDING THIS MESSAGE MAY BE DIRECTED TODON LUTHER
AT 202-927-0915.