The world economy is rapidly growing in size and complexity. Joint ventures, material assists, currency adjustments, transfer pricing, and maquiladoras are no longer the rare exceptions, but the rule. This increasingly means that some elements of a transaction may be unknown until some months after the entry summary is filed.

Current laws and regulations require that each entry summary be appraised separately, the liquidation of it withheld until such time as the correction can be made.

For many years, this legal requirement has often been unattain-able as a practical matter. At many busy Customs ports, the sheer volume of this kind of activity would quickly make the daily work of CBP grind to a halt. Facing these realities, Customs ports have devised various unofficial methods for reconciling cost submissions and the like, often through block liquidation methods such as applying a fiscal year’s worth of changes to a few representative entry summaries.

While the dedication and innovation that has been shown by our field officers is to be commended, the use of these methods must cease. CBP is required to do its job in accordance with all applicable laws. CBP is mandated through the Chief Financial Officers’ (CFO) Act to manage fiscal matters in responsible, auditable ways, with strict financial controls over the monies we take in and pay out. Our current local methods do not address these legal concerns.

There are more than just legal reasons for ending the current practices. While uniformity is a key goal of the Service, the local agreements between importers and CBP officers are as varied as the backgrounds and personalities of the people involved. Moreover, the scope and volume of these kinds of post-summary adjustments are growing to an extent that would outpace CBP best efforts to keep up.

The ACS Reconciliation Prototype will address all of these concerns, and after the initial unavoidable discomfort of change, should result in a process that is better and easier for both CBP and the trade community.

The description of the prototype in this memo is for general information only; for complete information on the prototype, interested parties are urged to read the complete notice in the Federal Register (63 Fed. Reg. 6257, dated February 6, 1998.)

Previous reconciliation prototypes have been announced and implemented. Those were limited, small-scale activities which should not be confused with this prototype, which is open to all importers and multiple issues, and is national in scope.

The ACS Reconciliation Prototype will allow the importer, using reasonable care, to file entry summaries with CBP using the best available information, with the mutual understanding that certain elements (such as the exact declared value) remain outstanding. At a later date, when the specifics have been determined, the importer files a Reconciliation which provides the final and correct information. The Reconciliation is then reviewed by CBP, and liquidated, with a single bill or refund, as appropriate.

The issues which may be reconciled are Value, HTS 9802 value, Classification, and NAFTA eligibility. Because classification is closely linked to admissibility, it will only be considered a reconcilable issue when the tariff classification is the subject of an open protest, ruling request, or court action. NAFTA also differs from the other issues, because NAFTA is separately provided for by laws which give it different treatment from other issues.

The timeframe for filing a Reconciliation (providing the previously unknown information and making the required adjustments) is 12 months from the date of earliest import date for NAFTA Reconciliations, 15 months from the date of oldest entry summary for all other Reconciliations. Of course, if the information is available sooner, the Reconciliation may be filed sooner as well. Because of the different due date and legal requirements, NAFTA eligibility will be reconciled separately from the other three issues.

Starting October 1, 1998, the ACS Reconciliation Prototype will be the exclusive means to reconcile entries. Existing local block liquidation procedures will no longer be allowed. The only exception to this is a "grandfather clause." For example, if an importer currently makes a yearly submission each December, they may finish out the time period covered by it under existing procedures. Any new time period to be covered for such adjustments will be done under the ACS Reconciliation Prototype.

For efficiency purposes, some ports have established local policies stating that a cost submission/Reconciliation is not required if the situation has no revenue change, e.g., a change in value on merchandise which is duty free under NAFTA. Such policies will not be permitted upon implementation of the Reconciliation Prototype, for purposes of CBP verification and Census reporting. CBP will not grant exemption from reconciliation based on duty-free status of merchandise.

Outside of the Reconciliation Prototype, importers may still request that CBP withhold liquidation on all entries with issues, and make adjustments to them individually. The Supplemental Information Letter process (see ABI administrative message #97-0727, dated 08/04/1997) is also unaffected.

Other adjustments (e.g. cost submissions / requests for block liquidations) received outside of the Reconciliation Prototype will be treated in accordance with law, e.g. as Protests or Prior Disclosures.

Importers participating must first apply to participate in the Reconciliation Prototype, in accordance with the Federal Register notice. Included in the eligibility requirements is a special rider to the importer's continuous bond, which provides coverage for the Reconciliation.

Entry summaries filed by the importer with outstanding issues will be flagged as having those issues outstanding. CBP personnel will recognize them as such, and in general, not pursue verification or questioning of those issues. Issues not flagged remain subject to normal CBP scrutiny.

When the outstanding issues have been resolved, the importer will file a Reconciliation. A Reconciliation is a type '09' entry, which may close out up to 9,999 flagged underlying entry summaries. The Reconciliation will be received through ABI, and can address underlying entries on a nationwide basis. That is, an importer can file flagged entries nationally, and close them out with a single Reconciliation. Reconciliations may be filed in any port where the filer is permitted, but due to resource considerations and the prototype status of the program, they will be processed only at certain processing ports, similar to the way drawback entries are processed only at certain locations.

The grouping of individual entry summaries to be reconciled at one time will largely be left to the importer's discretion, subject to certain constraints. This will allow the reconciled information to closely match the actual accounting records of the company, allowing easier preparation by the importer, and easier verification by CBP officers.

The Reconciliation Processing Ports have been selected, and training of personnel from those ports will begin during the month of June. ACS programming for Reconciliation is well underway. A handbook of Reconciliation procedures will be published prior to the start of the prototype. This book will be distributed to all affected CBP personnel, all trade community entities participating in the prototype, and will be made available to other interested parties.

For those ports not processing Reconciliations, the major change will be the general policy of not initiating verifications on those issues flagged. CBP officers in the processing ports working with companies, commodities, and issues that are new to them may contact the ports where those issues had been previously addressed. The employees who have worked these issues in the past are an important and valuable resource, and their cooperation is necessary and expected.

All ports, whether designated a CBP processing port or not, are instructed to advise importers of the Reconciliation Prototype, and the fact that it will serve as the exclusive means to reconcile entries.

Reconciliation is a great leap forward in many areas. It will allow CBP to regain control of a critical and expanding area of international trade, while fully complying with applicable laws. Reconciliation is also an important testbed for new automation and concepts such as account-based processing and electronically moving workload to where workers are available to do it. In addition to being a fix to a big problem, it will be a great improvement of our processes, our service to the taxpayers and the trade community, and finally, a great learning opportunity for us all.

Questions regarding Reconciliation may be directed to: