Modification of National Customs Automation Program Test Regarding Reconciliation

[Federal Register Volume 64, Number 139 (Wednesday, July 21, 1999)]
[Notices]
[Pages 39187-39190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18560]


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DEPARTMENT OF THE TREASURY

Customs Service


Modification of National Customs Automation Program Test 
Regarding Reconciliation

AGENCY: Customs Service, Treasury.

ACTION: General notice.

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SUMMARY: On February 6, 1998 and August 18, 1998, general notice 
documents were published in the Federal Register regarding the Customs 
Automated Commercial System (ACS) Reconciliation Prototype test. These 
documents announced, explained, and modified the prototype test. This 
notice serves to notify interested parties of two additional 
modifications to the prototype. The first allows downward adjustments 
on Aggregate Reconciliations, subject to certain conditions, and the 
second authorizes the use of a midpoint interest calculation method for 
Aggregate Reconciliations. All other aspects of the prototype remain 
the same.

EFFECTIVE 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 effective date for use of 
the downward adjustment reporting option for Aggregate Reconciliations 
is July 21, 1999. Prototype participants may use that option for 
Aggregate Reconciliations filed on or after that date. The effective 
date for use of the midpoint interest calculation method is July 25, 
1999. Prototype participants will use that method for Aggregate 
Reconciliations filed on or after that date.

ADDRESSES: Written inquiries regarding participation in the prototype 
test should be addressed to Ms. Shari McCann, Reconciliation Team, U.S. 
Customs Service, 1300 Pennsylvania Ave. NW, 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:

Background

    Reconciliation is the process which allows an importer, at the time 
of entry summary, to identify undeterminable information (other than 
that affecting admissibility) to Customs and provide that outstanding 
information at a later date. 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 Stat. 2057 
(December 8, 1993)), is currently being tested by Customs under the 
Customs Automated Commercial System (ACS) Prototype test.
    Customs announced and explained the ACS Prototype test of 
reconciliation in a general notice document published in the Federal 
Register (63 FR 6257) on February 6, 1998. A notice published in the 
Federal Register (63 FR 44303) on August 18, 1998, announced 
clarifications and operational changes. This notice modifies the test 
by providing a downward adjustment option and a midpoint interest 
calculation method for Aggregate Reconciliations. Except for these 
particular modifications, all other aspects of the test remain the 
same.
    The downward adjustment modification is an enhancement to the 
prototype test. The midpoint interest modification is authorized under 
the Miscellaneous Trade and Technical Corrections Act of 1999 (Pub. L. 
106-36 (June 25, 1999)), which amended 19 U.S.C. 1505(c) (see section 
further below pertaining to the midpoint interest calculation method). 
Prototype participants should note that these modifications have 
different effective dates (see ``Effective Dates'' section) and both 
apply only to Aggregate Reconciliations. The Entry-by-Entry 
Reconciliation aspect of the prototype remains unchanged.

Aggregate Reconciliation for Decrease in Duties, Taxes, and Fees

    As set forth in the Federal Register notice published on February 
6, 1998

[[Page 39188]]

(63 FR 6257), there are two types of Reconciliations that may be filed:
    (1) Entry-by-Entry Reconciliations, where adjustments for duties, 
taxes, and fees are shown for every entry being reconciled. Such 
Reconciliations may be used to report increases, decreases, or no 
change to the duties, taxes, and fees determined on the underlying 
entry summary (ies); and
    (2) Aggregate Reconciliations for reporting absolute increases in 
duties, taxes, and fees, where reconciled adjustments are shown on an 
aggregate basis, rather than on an entry-by-entry basis.
    The same Federal Register notice (63 FR 6257) described the term 
``absolute increase'' to encompass only entry summaries that result in 
either an increase or no change in duties, taxes, and fees. Thus, prior 
to publication of this notice, only increases and no changes have been 
eligible for Aggregate Reconciliations.
    In this notice, Customs announces an enhancement to the Aggregate 
Reconciliation option that has the effect of altering this limitation. 
Upon publication of this notice, participants in the prototype may now 
also use the Aggregate Reconciliation to report changes resulting in a 
decrease in duties, taxes, and fees (referred to as downward 
adjustments), provided that the participant waives any claim for a 
refund (of duties, taxes, and fees) and releases Customs from any such 
liability.
    While upward and downward adjustments will be allowed on a single 
Aggregate Reconciliation, they will be reported in separate sections of 
the line item data spreadsheet. Importers and other interested parties 
must be aware that the prohibition against netting remains in effect: 
decreases may NOT be netted against increases. For example, if a given 
product has two value issues, one resulting in an increase in value 
(and corresponding duties) and one resulting in a decrease in value 
(and corresponding duties), these two adjustments may not be offset 
against each other and reported as one line on the spreadsheet. They 
must be reported in separate sections of the spreadsheet, the increase 
adjustment as an increase for which additional duties will be tendered 
upon filing the Reconciliation and the downward adjustment as a 
decrease for which a refund is waived.
    Downward adjustments, while reported on the spreadsheet, will not 
be reported on the Aggregate Reconciliation Header File in ACS. The 
Header File will be prepared without regard to decrease items, 
reflecting only increases in duties, taxes, and fees. In the event 
there are only decreases on the Aggregate Reconciliation, the Header 
File will be prepared as if the Reconciliation resulted in no change in 
duties, taxes, and fees.
    Aggregate Reconciliations showing a decrease in duties, taxes, and 
fees will be liquidated as appropriate but without refund or reduction 
in duties, taxes, and fees otherwise due, since participants waive all 
claims for refunds due to downward adjustments.
    The following certification must be included in the line item data 
spreadsheet of all Aggregate Reconciliations that report decreases. It 
contains the waiver, the release from liability, and a pledge that the 
changes reported do not reflect netting:

    The tariff items shown below are items for which the 
reconciliation adjustment resulted in a decrease in duties, taxes, 
and/or fees. On this Aggregate Reconciliation, we hereby declare 
these changes and acknowledge that we waive any claims for a refund 
of any monies due us as a result of these changes, release Customs 
of any liability for the refund, and certify that the changes shown 
below are not included elsewhere in the Reconciliation or netted 
against increases.

    This certification must appear immediately before the listing of 
tariff items for which decreases are reported. It will separate the 
sections of the data spreadsheet, with absolute increases listed above 
and decreases listed below (see sample spreadsheet further below, 
showing increases, decreases, and the required certification).
    The downward adjustment modification described above serves only to 
add another voluntary option for importers participating in the 
prototype test. It does not remove any other options. Importers wishing 
to obtain refunds for monies due them pursuant to reconciled 
information (downward adjustments that result in monies owed to the 
importer) may still do so via the Entry-by-Entry Reconciliation method.

Sample Spreadsheet

    Below is an example of an Aggregate Reconciliation spreadsheet 
where increases and decreases are reported in separate sections. The 
downward adjustments are reported but not calculated in the 
Reconciliation Adjustment.

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[[Page 39189]]

[GRAPHIC] [TIFF OMITTED] TN21JY99.002



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Midpoint Interest Calculation for Aggregate Reconciliations

    Section 1505(c) of Title 19, United States Code, provides for the 
accrual of interest on underpayments and excess deposits applicable to 
ordinary entries and Reconciliations (19 U.S.C. 1505(c)). Under the 
statute, interest accrues for underpayments of duties, fees, and 
interest from the date the importer of record is required to deposit 
estimated duties, fees, and interest to the date of liquidation or 
reliquidation of the entry or Reconciliation. Interest accrues on 
excess deposits from the date the importer of record deposits estimated 
duties, fees, and interest to the date of liquidation or reliquidation 
of the entry or Reconciliation. Thus, under the prototype test, 
interest accrues on all Reconciliations where monetary adjustments take 
place, whether the adjustments are increases (Entry-by-Entry or 
Aggregate Reconciliations) or decreases (Entry-by-Entry 
Reconciliations) in duties, taxes, and fees. If interest is due to 
Customs, the filer will pay the interest, along with duties, taxes, and 
fees, upon filing the Reconciliation.
    The previously mentioned Federal Register notice of August 18, 1998 
(63 FR 44303) indicated that Customs was seeking a statutory amendment 
to 19 U.S.C. 1505(c) to authorize use of an alternative midpoint 
interest calculation method, an alternative to the entry-by-entry 
interest calculation method described in the previous paragraph. On 
June 25, 1999, the Miscellaneous Trade and Technical Corrections Act of 
1999 was signed into law (the Act) (Pub. L. 106-36, 113 Stat. 127 (June 
25, 1999)). Under section 2418(e) of the Act (Title II, Subtitle B), 
section 1505(c) was amended to authorize, for purposes of the prototype 
test, an alternative midpoint interest calculation method based upon 
aggregate data. This amendment predicates this modification of the 
prototype test.
    Under the midpoint interest calculation method, interest is 
calculated on the entire amount of adjusted duties, taxes, and fees as 
if they had been due on the midpoint date of the period covered by the 
Reconciliation. For example, if an Aggregate Reconciliation covers 
January 1, 1999, through December 31, 1999, and results in $20,000 in 
increased revenue due to Customs, the interest would be calculated on 
that amount from the midpoint date of July 1, 1999. Interest would 
accrue from the midpoint date until the date the Reconciliation is 
filed with payment. The midpoint interest method will be used for 
Aggregate Reconciliations filed on or after July 25, 1999. Such 
Aggregate Reconciliations may cover underlying entries filed during the 
period from October 1, 1998, through October 1, 2000, or the end of the 
prototype, whichever occurs first.
    Prototype participants are reminded that they have the option of 
filing either an Aggregate Reconciliation or an Entry-by-Entry 
Reconciliation. As above, the midpoint interest calculation method will 
be used for Aggregate Reconciliations, and the entry-by-entry interest 
calculation method will be used for Entry-by-Entry Reconciliations. 
Under the entry-by-entry method, interest is calculated based on the 
monetary changes and dates associated with each underlying entry 
summary.
    Prototype participants also are reminded that where a refund is 
claimed (on Entry-by-Entry Reconciliations), no interest calculations 
are required of the filer. Customs will calculate the interest due on 
the refund using the entry-by-entry method of calculation. For NAFTA 
Reconciliations, interest runs from the date the Reconciliation is 
filed until the date the Reconciliation is liquidated by Customs.

Conclusion

    Regarding the prototype test generally, interested parties should

[[Page 39190]]

consult the Federal Register notices of February 6, 1998 (63 FR 6257) 
and August 18, 1998 (63 FR 44303). All terms and conditions set forth 
in those notices remain in effect, except as specifically modified by 
this notice.

    Dated: July 16, 1999.
Charles W. Winwood,
Assistant Commissioner, Office of Field Operations.
[FR Doc. 99-18560 Filed 7-20-99; 8:45 am]
BILLING CODE 4820-02-P