CSMS Message: 96-001203

TO : ALL ABI BROKERS.

FROM : NEIL ZZ-SHANNON

SUBJECT : RECONCILIATION PILOT

DATE : 12/23/96

DISTRIBUTE TO ALL INTERESTED PARTIES

CUSTOMS ELECTRONIC BULLETIN BOARD NOTICE
NATIONAL CUSTOMS AUTOMATION PROGRAM TEST OF
RECONCILIATION
DECEMBER 23, 1996

BACKGROUND

RECONCILIATION IS A PROGRAM ENGENDERED BY THE CUSTOMS
MODERNIZATION AND INFORMED COMPLIANCE ACT (THE "MOD
ACT"), WHICH PERMITS ELEMENTS OF AN ENTRY(OTHER THAN
THOSE RELATING TO ADMISSIBILITY) THAT ARE
UNDETERMINED AT THE TIME OF ENTRY SUMMARY, TO BE
PROVIDED BY THE IMPORTER AT A LATER TIME. WHEN AN
IMPORTER REQUESTS RECONCILIATION, IT PERMITS CUSTOMS
TO "TRANSFER" THE ISSUE IN QUESTION TO THE
RECONCILIATION ENTRY, AND PROVIDES CUSTOMS WITH THE
AUTHORITY TO LIQUIDATE THE UNDERLYING ENTRIES
CONCERNING ALL OTHER ISSUES.

LIQUIDATION OF THE NON-RECONCILED ISSUES ON THE
SUBJECT ENTRIES RESULTS IN A SIGNIFICANT REDUCTION OF
CONTINGENT LIABILITY FOR THE IMPORTER, WHILE THE
INFORMATION IS BEING GATHERED FOR THE ISSUE HELD OPEN
ON THE RECONCILIATION SUMMARY. THE FILING OF THE
RECONCILIATION WILL MOST OFTEN OCCUR AFTER
LIQUIDATION OF ITS UNDERLYING CONSUMPTION ENTRIES.

CURRENTLY, THERE IS ONE RECONCILIATION PROTOTYPE
UNDERWAY, WHICH DEALS EXCLUSIVELY WITH THE ISSUE OF
ANTI-DUMPING AND COUNTERVAILING DUTY (AD
CVD).
IT IS LIMITED TO THE PARAMETERS OF ONE
IMPORTER/FILER, ONE AD/CVD CASE, ONE REVIEW PERIOD,
AND ONE MANUFACTURER, FOR ENTRIES FILED
ELECTRONICALLY, WITHIN ONE PORT.

RECONCILIATION WILL ALSO BE A COMPONENT OF THE
NATIONAL CUSTOMS AUTOMATION PROGRAM (NCAP) PROTOTYPE,
WHICH IS BEING DESIGNED TO TEST THE AUTOMATED
COMMERCIAL ENVIRONMENT (ACE). THE ASPECT OF THE NCAP
PROTOTYPE DEALING WITH RECONCILIATION WILL PRIMARILY
INVOLVE A FEW MAJOR ACCOUNTS, USING ENTRIES
FILED IN THE PORTS OF DETROIT AND LAREDO.

SCOPE
CHARACTERISTICS OF PROTOTYPE

IN SUPPORT OF THE GOALS OF THE "MOD ACT," THE OFFICE
OF FIELD OPERATIONS, TRADE COMPLIANCE DIVISION, HAS
ALSO BEGUN DEVELOPMENT OF A THIRD PROTOTYPE ON
RECONCILIATION.
THE PURPOSE OF THIS PROTOTYPE IS TO TEST OPERATIONAL
ISSUES REGARDING THE ESTABLISHMENT OF STANDARD
OPERATING PROCEDURES FOR RECONCILIATION ON A NATIONAL
SCALE.

ONLY TYPE 01 CONSUMPTION ENTRIES WILL BE ELIGIBLE FOR
THIS PROTOTYPE, AND THE ONLY RECONCILABLE ISSUE WILL
BE VALUE. OTHER RECONCILIATION ISSUES, SUCH AS
CLASSIFICATION, ANTIDUMPING/COUNTERVAILING DUTY, AND
SPECIAL TRADE PROGRAMS, WILL NOT BE INCLUDED.

FOR THE DURATION OF THIS PROTOTYPE, CUSTOMS WILL NOT
ALLOW DRAWBACK CLAIMS(INCLUDING ACCELERATED DRAWBACK)
AGAINST ENTRIES FLAGGED FOR RECONCILIATION UNTIL
AFTER THE RECONCILIATION ENTRY IS LIQUIDATED.

THE PROTOTYPE WILL BE CONDUCTED WITH MINIMAL CHANGES
TO AUTOMATION, AND WILL UTILIZE INTERIM STANDARD
OPERATING PROCEDURES. THE NUMBER OF PARTICIPANTS MAY
BE RESTRICTED BECAUSE OF THE LIMITED AUTOMATION
CHANGES, WHICH WILL REQUIRE CUSTOMS TO MANUALLY
INTERVENE IN TRACKING AND PROCESSING.

WHILE ALL INTERESTED PARTIES ARE ENCOURAGED TO APPLY
FOLLOWING PUBLICATION OF THE FEDERAL REGISTER NOTICE
IN FEBRUARY, IT IS IMPORTANT TO NOTE THAT CUSTOMS
INTENDS TO FOCUS ON VALUE ISSUES, IN TEN TO TWELVE
PORT LOCATIONS. THESE LOCATIONS WILL BE SPECIFIED IN
THE FEDERAL REGISTER NOTICE. EACH CONSUMPTION ENTRY
MUST BE FILED IN THE SAME PORT AS THE RECONCILIATION
ENTRY.

SPECIFICALLY, OUR VALUE FOCUS WILL BE ON 9802
(MAQUILADORA) ISSUES, AND NON-DUTIABLE FREIGHT
CHARGES IN THE STEEL INDUSTRY. THE TRADE IS
ENCOURAGED TO NOTIFY CUSTOMS OF ANY OTHER VALUE
ISSUES WHICH MIGHT BE APPROPRIATE FOR THE PROTOTYPE.

PARTICIPATION IN THE PROTOTYPE BY THE TRADE IS
STRICTLY VOLUNTARY. ITS ADVANTAGES INCLUDE THE
FASTER PROCESSING OF REFUNDS, WHICH SHOULD SAVE MONEY
IN INTEREST ACCRUALS, AND RESULT IN BETTER CASH FLOW.
SIGNIFICANTLY, RECONCILIATION ALSO PROVIDES A
MEANINGFUL REDUCTION IN AN IMPORTER'S CONTINGENT
LIABILITIES. BECAUSE THE AUTOMATED EFFORT IS
LIMITED, THERE SHOULD BE LITTLE, IF ANY, ADDITIONAL
COST TO THE TRADE TO PARTICIPATE.

PARTICIPANTS MUST HAVE AUTOMATED BROKER INTERFACE
(ABI) CAPABILITIES, IN ORDER TO TRANSMIT PERTINENT
INFORMATION DIRECTLY TO CUSTOMS. IT IS IMPORTANT TO
NOTE THAT A NEW ENTRY TYPE, 09, WILL BE ESTABLISHED
FOR THE RECONCILIATION ENTRY, EFFECTIVE WITH THIS
PROTOTYPE.

STANDARD OPERATING PROCEDURES

I. INITIAL INTERVIEW

1. UPON AN IMPORTER'S ACCEPTANCE INTO THE
PILOT, CUSTOMS PORT PERSONNEL WILL INTERVIEW THE
COMPANY'S REPRESENTATIVES TO DISCUSS THE SPECIFIC
VALUE ISSUE TO BE RECONCILED, THE MERCHANDISE AND
HARMONIZED TARIFF SYSTEM (HTS)CLASSIFICATION, WHICH
PORTS THE IMPORTER USES, AND WHETHER THE IMPORTER HAS
REQUESTED RECONCILIATION IN ANOTHER PORT.
2. DURING THE INTERVIEW, THE RECONCILIATION
ISSUE IS AGREED UPON, AND DOCUMENTED. THIS PERMITS
CUSTOMS TO LIQUIDATE THE UNDERLYING CONSUMPTION
ENTRIES CONCERNING ALL OTHER ISSUES (E.G.,
CLASSIFICATION), BUT TO HOLD OPEN THE ISSUE OF
LIABILITY FOR VALUE, AT THE REQUEST OF THE IMPORTER,
AND TRANSFER IT TO THE RECONCILIATION ENTRY.

3. SUBSEQUENT TO THE INTERVIEW, CUSTOMS WILL
ISSUE AN ACCEPTANCE OR REJECTION LETTER TO THE
IMPORTER/FILER REGARDING THE PROPOSED RECONCILIATION
ISSUE. THE APPROVED IMPORTER MUST APPEAR AS THE
IMPORTER OF RECORD ON EACH OF THE ENTRIES DESIGNATED
FOR RECONCILIATION.

II. IMPORTER FILES "FLAGGED" CONSUMPTION ENTRIES

1. ONCE THE PARTICIPANT IS SELECTED AND
APPROVED, HE BEGINS TO FILE TYPE 01 CONSUMPTION
ENTRIES WHICH ARE "FLAGGED" AT THE HEADER LEVEL WITH
AN ELECTRONIC INDICATOR THAT THESE ENTRIES ARE TO BE
RECONCILED FOR THE AGREED-UPON VALUE ISSUE. THE
RECONCILIATION ENTRY MUST BE FILED WITHIN 15 MONTHS
OF THE DATE OF THE OLDEST OF THESE UNDERLYING ENTRY
SUMMARIES.

III. IMPORTER ELECTRONICALLY TRANSMITS THE
ASSOCIATION FILE

1. WHEN THE IMPORTER HAS COMPLETED HIS
INFORMATION-GATHERING, AND HAS THE ANSWER TO THE
ISSUE IN QUESTION ON THE RECONCILIATION, HE WILL
ELECTRONICALLY (VIA ABI) TRANSMIT AN "ASSOCIATION
FILE" TO CUSTOMS. THE ASSOCIATION FILE WILL LIST THE
RECONCILIATION ENTRY NUMBER AND ALL OF THE ASSOCIATED
(UNDERLYING) CONSUMPTION ENTRY NUMBERS. THE FILE MUST
SHOW BESIDE EACH ENTRY NUMBER THE AMOUNT OF DUTY
WHICH WOULD HAVE BEEN PAID ON THAT ENTRY, HAD THE
COMPLETE INFORMATION BEEN AVAILABLE TO THE IMPORTER
AT THE TIME OF FILING OF THAT ENTRY.

2. TRANSMISSION OF THE ASSOCIATION FILE MUST
OCCUR WITHIN 15 MONTHS OF THE DATE OF THE OLDEST
UNDERLYING ENTRY SUMMARY.

3. THE IMPORTER MUST CLEARLY DOCUMENT HOW THE
INFORMATION WAS DERIVED, AND PROVIDE ALL SUPPORTING
DOCUMENTATION TO CUSTOMS WHEN THE RECONCILIATION
ENTRY IS FILED.

EXAMPLE:
HEADER: RECONCILIATION ENTRY NUMBER XXX
DETAIL: FLAGGED CONSUMPTION ENTRY #123
TOTAL RECONCILED DUTY = $500
FLAGGED CONSUMPTION ENTRY #456
TOTAL RECONCILED DUTY = $1,000
ETC.

IV. IMPORTER MANUALLY FILES THE RECONCILIATION ENTRY

1. IN CONJUNCTION WITH THE ABI TRANSMISSION OF
THE ASSOCIATION FILE, THE IMPORTER/FILER WILL
MANUALLY SUBMIT THE RECONCILIATION ENTRY (ENTRY TYPE
09). THE RECONCILIATION MUST BE MANUALLY FILED ON A
CF7501, WITHIN 15 MONTHS OF THE DATE OF THE OLDEST
UNDERLYING CONSUMPTION ENTRY. THE RECONCILIATION
SHOULD INCLUDE NO LESS THAN 10 UNDERLYING ENTRIES.
IT MUST INCLUDE ALL SUPPORTING DOCUMENTATION FOR THE
INFORMATION PROVIDED.

2. ADEQUATE BONDING WILL BE REQUIRED FOR EACH
RECONCILIATION. SINCE THERE IS NO ADDITIONAL
LIABILITY CREATED ON THE RECONCILIATION, THE BOND
FILED ON THE UNDERLYING ENTRIES WILL IN MOST CASES
SUFFICE.

3. THE MANUAL RECONCILIATION ENTRY HEADER DATA
ELEMENTS WILL INCLUDE, BUT ARE NOT LIMITED TO:
A. RECONCILIATION ENTRY NUMBER
B. RECONCILIATION ENTRY TYPE (09)
C. IRS NUMBER
D. BOND TYPE/NUMBER
E. PORT OF ENTRY CODE
F. SURETY CODE
G. SUMMARY DATE OF OLDEST UNDERLYING
CONSUMPTION ENTRY
H. RECONCILIATION DATE

THE RECONCILIATION ENTRY LINE DATA ELEMENTS
WILL INCLUDE, BUT ARE NOT LIMITED TO:
A. RECONCILIATION ISSUE
B. COUNTRY OF ORIGIN
C. SPI (IF ANY)
D. HTS NUMBER
E. QUANTITY
F. VALUE
G. CHARGES

4. EACH RECONCILIATION LINE ITEM WILL INCLUDE
ALL OF THE ABOVE INFORMATION, CONSOLIDATED BY ISSUE
FOR ALL OF THE UNDERLYING CONSUMPTION ENTRIES LISTED
IN THE ASSOCIATION FILE. FOR CENSUS REPORTING
PURPOSES, EACH DIFFERENT HTS NUMBER MUST GENERATE A
NEW CONSOLIDATED LINE. THE RECONCILED (OR CORRECTED)
INFORMATION WILL BE INCLUDED BELOW THE CONSOLIDATED
(ORIGINAL) INFORMATION, AS FOLLOWS:
EXAMPLE:
ISSUE:
VALUE
(ORIGINAL) C/O SPI HTS QUANTITY VALUE CHARGES

(CORRECTED)C/O SPI HTS QUANTITY VALUE CHARGES

V. LIQUIDATION OF RECONCILIATION ENTRY

1. THE RECONCILIATION ENTRY WILL BE REVIEWED
AND LIQUIDATED, WITH A BILL OR REFUND ISSUED AS
APPROPRIATE AGAINST EACH UNDERLYING CONSUMPTION
ENTRY, CALCULATED AGAINST THE DUTY AS SHOWN IN THE
ASSOCIATION FILE. CUSTOMS WILL CALCULATE ANY
INTEREST DUE IN EITHER CASE.

2. ON A MATTER OF DISPUTE, THE IMPORTER MAY
FOLLOW NORMAL PROTEST PROCEDURES WITH REGARD TO THE
RECONCILIATION ENTRY.

CONCLUSION
THE PROTOTYPE IS EXPECTED TO BEGIN IN THE SPRING.
THE OFFICIAL NOTICE IS ANTICIPATED TO BE PUBLISHED IN
THE FEDERAL REGISTER BY THE FIRST OF FEBRUARY, 1997.

COMMENTS CONCERNING THIS ELECTRONIC NOTICE MAY BE
DIRECTED TO MS. RENE ORME, RECONCILIATION TEAM, US
CUSTOMS SERVICE, 1301 CONSTITUTION AVE, NW,
ROOM 1322, WASHINGTON, DC 20229-0001.