SUPPLEMENTARY INFORMATION:

I. Background

A. The National Customs Automation Program

The National Customs Automation Program (NCAP) was established by Subtitle B of Title VI—Customs Modernization in the North American Free Trade Agreement Implementation Act (Customs Modernization Act) (Pub. L. 103-182, 107 Stat. 2057, 2170, December 8, 1993) (19 U.S.C. 1411). Through NCAP, the thrust of customs modernization was focused on informed trade compliance and the development of the Automated Commercial Environment (ACE), the successor to the Automated Commercial System (ACS). ACE is an automated and electronic system for commercial trade processing, which has streamlined business processes, facilitated growth in trade, ensured cargo security, and fostered participation in global commerce, while facilitating compliance with U.S. laws and regulations and reducing costs for U.S. Customs and Border Protection (CBP) and all of its communities of interest. The ability to continue meeting these objectives depends on successful modernization of CBP's business functions and the information technology that supports those functions. CBP's modernization efforts are accomplished through phased releases of ACE component functionality, which update the system and add new functionality.

Sections 411 through 414 of the Tariff Act of 1930 (19 U.S.C. 1411-1414), as amended, define and list the existing and planned components of the NCAP (Section 411), promulgate program goals (Section 412), provide for the implementation and evaluation of the program (Section 413), and provide for Remote Location Filing (Section 414). Section 411(a)(1)(A) lists the electronic entry of merchandise, Section 411(a)(1)(B) lists the electronic entry summary of required information, and Section 411(a)(1)(D) lists the electronic transmission of manifest information, as existing NCAP components. Section 411(d)(2)(A) provides for the periodic review of data elements collected in order to update the standard set of data elements, as necessary.

B. Crude Oil Tracing Issues

As a continuous flow commodity, a batch of crude oil (typically 60,000 barrels or more, and tied to a specific sales contract) travels at an approximate speed of 2 miles per hour (mph) through the pipeline, and thus can take weeks to travel through the North American pipeline network and days to cross the United States border, although importation occurs daily as the crude oil crosses into the Customs territory of the United States.^[1] The network is comprised of pipelines operated by different entities, and batches of crude oil can be bought and sold several times after the oil is dispatched and while the oil itself is traveling through the network before it reaches the United States. Currently, CBP uses a mostly manual process to manage the requirements for crude oil transported through pipeline, such as tracking the volume of crude oil importations and tracing its origin.

Historically, importers of record of crude oil imported by pipeline filed daily entries for the flow of oil crossing into the United States.^[2] In 1970, however, the U.S. Customs Service, CBP's predecessor, established a monthly consolidated entry program, which began with pilot programs in the Ports of Buffalo and Detroit and was then expanded to the entire country, allowing for monthly entry processing to handle repetitive, high-volume cross-border shipments of non-dutiable merchandise, including non-dutiable crude oil and natural gas. U.S. Customs Service, Circular ENT-1-AC (July 1, 1970) (hereinafter the “1970 Circular”).^[3] The monthly entry procedure is an arrangement whereby all shipments during a calendar month between one shipper and one importer through one port are treated for examination, entry and liquidation purposes as a single transaction or importation.^[4] Although this program was not created specifically for pipelines, it is common practice for pipelines to use the monthly consolidated entry process.^[5] And while the monthly consolidated entry program is optional, and participation is not required, most importers of crude oil choose to participate rather than being required to file daily entries.^[6] The 1970 Circular was subsequently clarified with additional guidance issued in 1992 and 2006.^[7] In accordance with this guidance, the monthly entry must be filed within 10 calendar days after the end of the month.^[8]

Although pipeline operators (as carriers) are not required to file a manifest pursuant to Section 431 of the Tariff Act of 1930, as amended, 19 U.S.C. 1431, pipeline operators are ( printed page 32987) required to maintain daily manifest records, and those records must be provided to CBP upon request in accordance with 19 U.S.C. 1508 and 1509, and part 163 of title 19 of the Code of Federal Regulations (19 CFR part 163).^[9]

As background, prior to the late 1980s, the U.S. Customs Service monitored crude oil importations using analog meters and manual labor. For a given shipment, a U.S. Customs Inspector and pipeline operator representative typically met twice, by appointment, to jointly read a meter located near the border—once when a shipment began and again when it was closed—to establish an agreed upon volume of product for which U.S. Customs would require an entry. Throughout the early 1990s, industry gradually introduced remote, digital meters to replace the analog process. To maintain oversight as these changes occurred, individual U.S. Customs ports worked with local pipeline operators to develop activity reporting schemes using various combinations of paper manifests, delivery tickets, and/or monthly transaction lists on paper and (ultimately) electronic spreadsheets; these schemes were not standardized across the industry. To monitor compliance and ensure accurate volumes were reported, U.S. Customs reconciled the volumes of crude oil reported by the operators to the paper CBP Form 7512 (Transportation Entry and Manifest of Goods Subject to CBP Inspection and Permit) (if the product moved inland) or to entry transactions filed separately by importers, variously using the paper CBP Form 3461 (Entry/Immediate Delivery for ACE), CBP Form 7501 (Entry Summary), and/or direct a comparison to electronic entry summary data in the Automated Commercial System (ACS), the predecessor to ACE.

With passage of the Customs Modernization Act of 1993 (Mod Act),^[10] it became more standard for U.S. Customs to accept industry recordkeeping practices as its baseline for compliance oversight. However, this created challenges for crude oil because the documentation provided to U.S. Customs, and now CBP, does not reflect a complete picture of ownership of a crude oil batch at any given time. Generally, on a monthly basis, pipeline operators provide CBP a report of the crude oil moved into the United States in accordance with the 1970 Circular and subsequent clarifying guidance.^[11] These reports are delivered by the tenth calendar day of the month following arrival and are transmitted to CBP at the port of arrival as an email attachment or submitted in paper form. There is no standard format for these reports. The monthly reports list crude oil batches by volume and reflect ownership of the batches only at a particular point in time—the end of the month that covers the transaction.

CBP personnel at the port of arrival manually reconcile the crude oil volumes from monthly operator reports with the volumes reported on individual entry and admission filings covering the same period and location ( e.g., consumption entries, applications for admission to a Foreign Trade Zone (FTZ), or in-bond transportation entries). In theory, the total volume reported by pipeline operators should match the sum total volume indicated on the individual entry and admission filings for the same period and location.

In practice, however, obtaining a baseline of data with regard to the changes in ownership that occur between commercial entities as the crude oil passes through the pipeline and tracing those exchanges to a monthly operator's pipeline report is exceptionally difficult and extremely labor intensive. As noted above, a batch of crude oil can take days to cross into the United States via pipeline. The slow speed of the crude oil poses issues each month as an individual entry or admission filing for a batch of crude oil may cover crude oil passing through the pipeline that straddles two months, limiting CBP's full visibility into its arrival due to the timing of the operator's monthly report because the report only includes data for crude oil that passed through prior to the end of a month. Moreover, industry practice to sell or swap fungible crude batches while in transit makes it difficult to identify the party responsible for filing the entry or admission for any given batch. The monthly operator's report does not account for ownership changes to a batch of crude oil that occur after the end of a given month, but the party filing an entry may not be the same owner as the one reflected in the report. Batches may also be subdivided while in transit and/or subject to last minute diversions to a new destination which can lead to volume-related reconciliation issues.

Further, there can be limitations on CBP's and the trade's visibility into the crude oil's origin and ownership throughout the supply chain. Supply chain traceability issues can arise in situations such as sales or re-sales, which result in the comingling of crude oil from different sources, thereby making tracing the origin of the imported crude oil difficult, which in turn presents challenges for verifying free trade agreement eligibility.

C. Silicon Valley Innovation Program

The Silicon Valley Innovation Program (SVIP), part of the Department of Homeland Security's Science and Technology Directorate, helps find new technologies that strengthen national security with the goal of reshaping how government and industry work together to find cutting-edge solutions to challenges, such as those involved in pipeline-borne imports. For more information on SVIP, please see https://www.dhs.gov/​science-and-technology/​svip. Neoflow, a private sector company and SVIP participant, built a platform to document the movement (including ownership changes) of crude oil in the pipeline environment. This test will use the Neoflow platform for the purposes stated below. For more information on Neoflow, please see https://www.neoflow.energy/​.

D. Purpose of the Test

The purpose of the test is to evaluate the accuracy and usefulness of participant data regarding pipeline processes ( e.g., movement and sales) for crude oil being uploaded to the Neoflow platform and transmitted to the ACE Crude Oil testing environment using global interoperability standards, i.e., specifications or rules for software development that enable different systems to connect and exchange data. The global interoperability standards, which are made up of decentralized identifiers (DIDs) and verifiable credentials (VCs), should help CBP in identifying legitimate products and associated companies resulting in a more transparent supply chain. DIDs are globally unique identifiers made up of a string of letters and numbers that can be used to recognize an entity on different networks. VCs are tamper-proof credentials with authorship that can be cryptographically verified. DIDs can be used to digitally sign and issue VCs, allowing CBP to more easily ( printed page 32988) confirm the authenticity of import data presented in this format.

In the test, CBP anticipates that global interoperability standards will enable test participants to record bilateral transaction data at each step in a supply chain ( e.g., both the pipeline operator and importer will upload respective documents pertaining to a completed delivery),^[12] secure the transaction details from disclosure to unauthorized parties, allow dynamic updates of ownership and destination information, and make this data available to CBP in near real time. Moreover, during the test, CBP will have the ability to view actions related to the movement, transfer, and ownership of crude oil throughout the supply chain that test participants upload to the Neoflow platform for any filing ( e.g., consumption entries, applications for admission to an FTZ, or in-bond transportation entries).

CBP will review the data received over the course of the test and determine its usefulness for a range of possible purposes including, but not limited to, further test expansion, regulatory updates, supply chain visibility, monthly pipeline report reconciliation, and free trade agreement compliance, such as evaluating compliance with country of origin certification requirements. CBP will publish technical specifications for the pipeline global interoperability standards necessary to participate in this test on CBP website at https://trade.cbp.dhs.gov/​ace/​developer/​interoperability/​.

As discussed further below, participants will upload relevant data regarding the movement, sale, and entry of crude oil, to include an entry for consumption, admission to an FTZ, or transportation in-bond, into the Neoflow platform where CBP can view the uploaded information in near real time. It is important to note that all participants must continue to provide all required data to CBP in accordance with the current regulatory requirements, e.g., for entry, FTZ admission, and in-bond movement/entries, as well as the monthly pipeline operator reports (in accordance with the above-mentioned CBP guidance), in addition to providing the information via the test procedures.

The Neoflow platform will ingest and format the data uploaded by test participants and transmit the data to CBP via the ACE Crude Oil testing environment. Subsequently, CBP will compare the data transmitted via the Neoflow platform to the data which is provided to CBP in accordance with current regulatory requirements and the monthly operator reports in order to evaluate the accuracy and usefulness of the data transmitted via the Neoflow platform pursuant to this test. Accordingly, no regulatory requirements are being waived as part of this test and pipeline operators should continue to submit monthly reports as usual.

During the test, CBP will evaluate whether the data uploaded to the Neoflow platform for formatting and transmission to the ACE Crude Oil testing environment enables the tracking of the entire volume of a batch of crude oil transiting to or through the United States by compiling data from the relevant supply chain parties. Such tracking should facilitate a more manageable and timely reconciliation process each month and provide CBP with greater visibility into the crude oil in transit, including its ownership. This improved reconciliation process should lead to easier verification of the data reported to CBP with entry, FTZ admission, and in-bond filings, and greater accountability while ensuring that the relevant parties are known to CBP in a more timely manner.

E. Data Transmission

Test participant importers, pipeline operators, and licensed customs brokers will upload the specified documentation and information to the Neoflow platform in near real time as specific events or transactions occur for pipeline processes relevant to crude oil from Canada and Mexico destined for the United States. The Neoflow platform will format the uploaded documentation and information and transmit the formatted data to the ACE Crude Oil testing environment utilizing DIDs and VCs.

In general, importers (or their brokers) and pipeline operators utilize similar documents to record and track the movement of batches of crude oil through pipeline networks, which typically begins at a consolidation hub. While there may be minor differences between the exact format of the documentation to be uploaded to the Neoflow platform ( e.g., Portable Document Format (PDF) file or Comma Separated Values (CSV) file), the documents to be uploaded will contain specific data sets relevant to this test. Neoflow will work with the participants to ensure the documentation is uploaded successfully into the Neoflow platform regardless of format.

Participants will upload the following documentation and information, which are generally used within the pipeline industry, into the Neoflow platform:

Consolidated Delivery Schedule. This is a file that the pipeline operator creates, outlining the volume of crude oil that it has scheduled for delivery for that month. Each importer is able to view on the pipeline operator's web portal the volume that is scheduled to ship for the importer's account on that pipeline for that month. During the test, this file will be uploaded by the pipeline operator to the Neoflow platform.

Delivery Schedule. This is a file that is downloaded from the pipeline operator's web portal that outlines the details of each batch of crude oil that the importer is moving on that pipeline system. During the test, this file will be uploaded by the importer to the Neoflow platform.

Pipeline Delivery Ticket. This is a file that the pipeline operator generates and makes available to the importer after a batch of oil has been delivered to the importer in the United States. It outlines the details of that batch of delivered crude oil. During the test, this file will be uploaded by both the importer and the pipeline operator to the Neoflow platform.

In-transit Sale Notification (new or updated Delivery Schedule). The pipeline operator is notified by the parties involved in an in-transit sale of crude oil as the party who takes ownership of the oil in an in-transit sale is generally responsible for paying the freight charge to the pipeline operator. A new or updated Delivery Schedule is created to reflect the updated information as a result of an in-transit transaction. The test participant who is the seller in the relevant in-transit transaction will cancel or remove the batch from the Delivery Schedule that was previously uploaded to the Neoflow platform. If participating in the test, the buyer will upload its Delivery Schedule to the Neoflow platform. If the buyer is not a test participant, then no further information regarding that batch of crude oil will be uploaded to the Neoflow platform. It is important to note that CBP will retain access to the information (as shown in the tables below) because canceling or removing the batch from the Delivery Schedule will not delete the information from the Neoflow platform.

The information uploaded to the Neoflow platform is traceable to each submitting party and batch of crude oil using the global interoperability standards to create entity- and transaction-specific identifiers.

Once the documentation and information are uploaded to the ( printed page 32989) Neoflow platform, the formatting and transmission to the ACE Crude Oil testing environment occurs in near real time and CBP will be able to view this data as part of this test. When the importer or the importer's broker transmits the entry number and filer code, or a filing for FTZ admission or in-bond movement/entry, to the ACE Crude Oil testing environment, the data from the documentation and information previously uploaded to the Neoflow platform for the relevant batch of crude oil covered by that filing will automatically populate in the ACE Crude Oil testing environment. Viewing the test data in the ACE Crude Oil testing environment will enable CBP to compare it to the data CBP collects under the current regulatory framework, including for entry, FTZ admission, and in-bond movements/entry, as well as the monthly pipeline operator reports submitted by operators, more efficiently.

While there may be overlapping data provided at different times when both the importer and pipeline operator upload documentation to the Neoflow platform, this data will aid in the tracking of the product throughout the pipeline lifecycle. Moreover, the overlap of data elements by the parties involved in the event or transaction may provide mutual validation. When aggregated, this uploaded event and transaction data should match the relevant data submitted to CBP in accordance with current statutory and regulatory requirements, and CBP will evaluate whether it matches as part of this test.

In the current environment, the delivery schedules containing the data elements to be uploaded into Neoflow (and reflected in the tables below) are summarized in the monthly pipeline operator reports, but the schedules themselves are only provided to CBP upon request, and thus, under current practice, CBP does not have access to those documents without specifically requesting them or in near real time as it will under the test. The tables below represent an overview of the data elements currently exchanged by private parties ( e.g., operators and importers) in a crude oil supply chain and will become discrete data points required by CBP as part of the test. In addition, test participants will agree under the test to standardize the information in the reports that must be submitted to CBP in order to provide more accurate information on the oil that passes through the pipelines and is entered into the United States.

The first column in the tables below entitled “Data Elements” lists the current data elements supporting an entry or admission filing for crude oil ( e.g., consumption entries, applications for admission to an FTZ, or in-bond transportation entries), which will also be entered on the Neoflow platform as part of the test. The second column, “Description,” provides a brief description of the data element; the third column, Uploading Party, indicates which party will provide that same data element under the test by uploading the relevant document containing the data element to the Neoflow platform; and the last column, “Document Source,” provides the name of the document from which the data element is obtained under the test. CBP is evaluating whether the data collection and transmission process under this test could replace or supplement existing regulatory requirements for crude oil including for entry, FTZ admission, and in-bond movements/entry. The documents are to be uploaded by test participants in real time when the relevant supply chain events or transactions occur. The data elements below are those that will be viewable in the Neoflow platform ^[13] and which Neoflow will format and transmit to the ACE Crude Oil testing environment. In addition to the data elements listed in the tables below, CBP will also collect new data elements as part of this test, which can be found in the tab entitled “Data Definitions” at https://trade.cbp.dhs.gov/​ace/​developer/​interoperability. The word “Aggregation” indicates that the Neoflow platform compiles data for submission to CBP in the Automated Broker Interface (ABI) format. Where the term “Free Text” appears in the left most column, the data is consistently provided to CBP as part of the current process that the ports use to collect pipeline oil documents. The terms “Quantity” and “Volume” are used interchangeably in this Federal Register notice.

II. Authorization for the Test

The Pipeline Global Interoperability Standards Test is authorized pursuant to 19 CFR 101.9(b), which provides for the testing of planned NCAP components. See T.D. 95-21, 60 FR 14211 (March 16, 1995); see also19 U.S.C. 1411-1413.

III. Conditions for the Test

A. Participation in the Test

The test is voluntary, and importers of record, pipeline operators, and licensed customs brokers involved in the importation of crude oil from Canada or Mexico interested in assisting in evaluating the usefulness of the global interoperability standards may submit a request to participate in the test. As discussed above in section I.E., if a batch of crude oil is sold while in-transit on the pipeline, the seller (who may have originally qualified to serve as the importer of record but for the in-transit sale) will no longer be a participant in the test or provide data via the Neoflow platform. (Because the new buyer in that in-transit sale may or may not be a test participant, it is possible that CBP will no longer receive test data from a participant after the in-transit sale.)

Interested parties must contact CBP to indicate their willingness to participate in the test at OTInnovation@cbp.dhs.gov. CBP will notify interested parties whether they have been approved to participate in the test and will provide a list of approved participants to Neoflow. CBP will provide approved participants with information on obtaining access to the Neoflow platform for crude oil. Participants must comply with any terms and conditions set forth as part of their access and use of the Neoflow platform, as established between Neoflow and the participant(s). Test participants will coordinate with Neoflow's technical teams to ensure system compatibility. Additional technical support will be provided throughout the test by both CBP and Neoflow, as needed. Neoflow will provide interested parties with specific information regarding costs prior to commencing participation; the terms, conditions and costs of a participant's access to and use of the Neoflow platform, including for purposes of participating in this test, shall be established solely between Neoflow and the participant; CBP will not be a party to such terms or conditions or responsible for any costs.

Once a participant is approved by CBP and establishes the necessary access to the Neoflow platform with Neoflow, test participants will have the opportunity to utilize the Neoflow platform and give feedback to CBP throughout the duration of the test.

Under this test, CBP does not intend to take enforcement action based solely on discrepancies or inaccuracies in the data CBP receives as part of this test via the Neoflow platform. However, discrepancies or inaccuracies between the data transmitted via the Neoflow platform as part of this test and data that is ultimately filed under the current regulatory framework ( e.g., in an entry, FTZ admission or in-bond movement/entry) or a monthly pipeline operator's report will be evaluated to determine the basis for the discrepancy or inaccuracy and CBP may request additional information to resolve the discrepancy or inaccuracy.

B. CBP Access to Underlying Data

As part of the test, CBP has entered into an agreement with Neoflow for access to the data that is provided by and associated with the participants. ( printed page 32991) Consistent with the agreement, CBP may access the Neoflow platform to monitor and evaluate the data provided by test participants for any lawful purpose. The data will assist CBP in evaluating possible uses of the data to support product and entity identification, product tracing, supply chain data verification, comparison with other data submitted to CBP (including data submitted as part of an entry, FTZ admission, or in-bond filing), and enforcement, among other purposes.

C. Partner Government Agencies (PGAs)

CBP may utilize this test to enhance trade data sharing and access between CBP and partner government agencies (PGAs). CBP will announce any PGAs that will receive data pursuant to the test in a notice published in the Federal Register .

D. Duration of Test

The test will commence on July 2, 2026, and is scheduled to run for one year, subject to any extension, early termination, or modification, including possible data integration with ACE or testing of data related to additional commodities that arrive via pipeline, as announced by way of a notice published in the Federal Register .

E. Misconduct Under the Test

Misconduct under the test may include, but is not limited to, submitting false information through the Neoflow platform or failing to abide by the terms and conditions regarding the test and use of the Neoflow platform. As stated above, test participants are expected to adhere to all applicable regulatory requirements because CBP is not waiving any regulations as part of this test.

If CBP determines that there is a basis to discontinue a participant's involvement in the test, CBP will provide written notice, via email, proposing the discontinuance with a description of the facts or conduct supporting the proposal. The test participant will be offered the opportunity to respond in writing within ten business days of the date of the written notice. The response must be submitted to the Innovation Branch Chief by email to OTInnovation@cbp.dhs.gov, with a subject line reading “Appeal—Pipeline Global Interoperability Standards Test Discontinuance.”

The Director, Trade Modernization Division, Trade Programs, Office of Trade (OT), will issue a final decision on the proposed action within 30 business days after receiving a timely filed response from the test participant, unless such time is extended for good cause. If no timely response is received, the proposed notice becomes the final decision of CBP as of the date that the response period expires. A proposed discontinuance of a test participant's privileges will not take effect unless the response process under this paragraph has been concluded with a written decision that is adverse to the test participant, which will be provided via email.

F. Confidentiality

Data submitted and entered into the Neoflow platform and transmitted to CBP in the ACE Crude Oil testing environment may include confidential commercial or financial information which may be protected under the Trade Secrets Act (18 U.S.C. 1905), and the Privacy Act (5 U.S.C. 552a). However, participation in this test is not confidential and, therefore, upon receipt of a written Freedom of Information Act request, the name(s) of an approved participant(s) will be disclosed by CBP in accordance with 5 U.S.C. 552.

IV. Comments on the Test

All interested parties are invited to comment on any aspect of this test at any time. CBP requests comments and feedback on all aspects of this test, including the design, conduct and implementation of the test, in order to determine whether to modify, alter, expand, limit, continue, end, or fully implement this program. Comments should be submitted via email to OTinnovation@cbp.dhs.gov, with the subject line reading “Comments on Pipeline Global Interoperability Standards Test.”

V. Paperwork Reduction Act

The Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3507(d)) requires that CBP consider the impact of paperwork and other information collection burdens imposed on the public. An agency may not conduct, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by the Office of Management and Budget (OMB).

The new collection of information gathered under this test has been approved by OMB in accordance with the requirements of the PRA and assigned OMB control number 1651-0148.

VI. Evaluation Criteria

The test is intended to evaluate the accuracy and usefulness of the global interoperability standards and Neoflow platform for data collection of pipeline processes relevant to crude oil. CBP will evaluate the data viewed via the Neoflow platform to determine if it would aid CBP in enforcing applicable laws, protecting the revenue, reducing risk, and improving compliance operations. Moreover, CBP will evaluate if the Neoflow platform could continue CBP's trade modernization efforts by reducing the need for paper/near paper-based filings and other submissions via possible ACE integration. CBP's evaluation of the test, including the review of any comments submitted to CBP during the duration of the test, will be ongoing with a view to possible extension or expansion of the test.

At the conclusion of the Pipeline Global Interoperability Standards Test, an evaluation will be conducted to assess the accuracy and usefulness of the information received throughout the course of the test. The final results of the evaluation will be published in the Federal Register as required by section 101.9(b)(2) of the CBP regulations (19 CFR 101.9(b)(2)).

91 FR 32985