[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]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Customs Service
Modification of National Customs Automation Program Test
Regarding Reconciliation
AGENCY: Customs Service, Treasury.
ACTION: General notice.
-----------------------------------------------------------------------
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