Modification of the National Customs Automation Program Test Regarding Reconciliation and Transition of the Test From the Automated Commercial System to the Automated Commercial Environment

AGENCY:

U.S. Customs and Border Protection, Department of Homeland Security.

ACTION:

General notice.

SUMMARY:

This document announces U.S. Customs and Border Protection's (CBP's) plan to modify the National Customs Automation Program (NCAP) test regarding reconciliation, and the transition of the test from the Automated Commercial System (ACS) to the Automated Commercial Environment (ACE). The modifications made by this notice eliminate several requirements for participation in the test, impose new data requirements, and establish the requirement that reconciliation entries be filed in ACE beginning January 14, 2017, regardless of whether the underlying entry was filed in ACS or ACE. Except to the extent expressly announced or modified by this document, all aspects, rules, terms and conditions announced in previous notices regarding the reconciliation test remain in effect.

DATES:

The changes made by this notice are effective January 14, 2017.

ADDRESSES:

Comments concerning this test program may be submitted any time during the test via email, with a subject line identifier reading, “Comment on Reconciliation test”, to OFO-RECONFOLDER@cbp.dhs.gov.

FOR FURTHER INFORMATION CONTACT:

Acenitha Kennedy, Entry Summary and Revenue Branch, Trade Policy and Programs, Office of Trade at (202) 863-6064 or ACENITHA.KENNEDY@CBP.DHS.GOV.

SUPPLEMENTARY INFORMATION:

I. Background

A. Reconciliation

The National Customs Automation Program (NCAP) was established by Subtitle B of Title VI—Customs Modernization in the North American Free Trade Agreement (NAFTA) 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 on trade compliance and the development of the Automated Commercial Environment (ACE), the planned successor to the Automated Commercial System (ACS) as the CBP-authorized electronic data interchange (EDI) system. ACE is an automated and electronic system for commercial trade processing which is intended to streamline business processes, facilitate growth in trade, ensure cargo security, and foster participation in global commerce, while ensuring 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 meet these objectives depends on successfully modernizing 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 designed to replace specific legacy ACS functions and add new functionality. Section 637 of the Customs Modernization Act amended Section 484 of the Tariff Act of 1930 to establish a new section (b), entitled “Reconciliation”, a planned component of the NCAP. (19 U.S.C. 1484(b)).

Reconciliation is the process that allows an importer, at the time an entry summary is filed, to identify indeterminable information (other than that affecting admissibility) to CBP and to provide that outstanding information at a later date. The importer identifies the outstanding information by means of an electronic “flag” which is placed on the entry summary at the time the entry summary is filed and payment (applicable duty, taxes, and fees) is made.

Section 101.9(b) of title 19 of the Code of Federal Regulations (19 CFR 101.9(b)) provides for the testing of NCAP components. See T.D. 95-21, 60 FR 14211 (March 16, 1995). This test is established pursuant to this regulation. The reconciliation program is currently being tested by CBP using the Automated Commercial System (ACS). CBP announced and explained the test in a general notice document published in the Federal Register (63 FR 6257) on February 6, 1998. Clarifications and operational changes were announced in subsequent Federal Register notices: 63 FR 44303, published on August 18, 1998; 64 FR 39187, published on July 21, 1999; 64 FR 73121, published on December 29, 1999; 66 FR 14619, published on March 13, 2001; 67 FR 61200, published on September 27, 2002 (with a correction document published at 67 FR 68238 on November 8, 2002); 69 FR 53730, published on September 2, 2004; 70 FR 1730, published on January 10, 2005; 70 FR 46882, published on August 11, 2005; 71 FR 37596, published on June 30, 2006, 78 FR 27984, published on May 13, 2013; and 79 FR 34334 published June 16, 2014. A Federal Register (65 FR 55326) notice published on September 13, 2000, extended the prototype indefinitely.

The previously published Federal Register documents have set forth that the issues for which an entry summary may be “flagged” (for the purpose of later reconciliation) are limited and relate to: (1) Value issues other than claims based on latent manufacturing defects; (2) classification issues, on a limited basis; (3) issues concerning value aspects of entries filed under heading 9802, Harmonized Tariff Schedule of the United States (HTSUS) (9802 issues); and (4) issues concerning post-importation claims, under 19 U.S.C. 1520(d), for preferential tariff treatment for merchandise entered under the Acts implementing the North American Free Trade Agreement, the United States-Chile Free Trade Agreement, the Dominican Republic-Central America-United States Free Trade Agreement, the United States-Oman Free Trade Agreement, the United States-Peru Trade Promotion Agreement, the United States-Korea Free Trade Agreement, the United States-Colombia Trade Promotion Agreement, and the United States-Panama Trade Promotion Agreement.

The flagged entry summary (the underlying entry summary) is liquidated by CBP for all aspects of the entry except those issues that were flagged. Upon liquidation of an underlying entry summary, any decision by CBP entering into that liquidation, e.g., classification, may be protested pursuant to 19 U.S.C. 1514. The means of providing the outstanding information flagged on the underlying entry summary to be reconciled is through the filing of a reconciliation entry. A reconciliation entry is treated as an entry for purposes of liquidation, reliquidation, and protest. When the outstanding information, e.g., value as determined by the actual costs, is later furnished in the reconciliation entry CBP will liquidate the reconciliation entry as to the flagged issues. Any adjustments in duties, taxes, and/or fees owed will be made at that time. (See 63 FR 6257, February 6, 1998 for a more detailed presentation of the basic reconciliation process.) The liquidation of the reconciliation entry will be posted in the same manner and place as the notices of liquidation of other entries. Liquidation of a reconciliation entry may be protested pursuant to 19 U.S.C. 1514, but the protest may only pertain to the issue(s) flagged for and contained in the reconciliation entry (i.e., the protest may not address issues previously liquidated on the underlying entry summary).

CBP reminds test participants that the filing of a reconciliation entry, like the filing of a regular consumption entry, is governed by 19 U.S.C. 1484 and can be done only by an importer of record who is required to exercise reasonable care in filing the underlying entry summary, flagging issues for later reconciliation, and filing the reconciliation entry. Importers must also be aware of the distinction between prior disclosure and reconciliation. A prior disclosure exists when a person discloses the circumstances of a violation of 19 U.S.C. 1592 pursuant to CBP regulations. The person disclosing this information must do so before, or without knowledge of, the commencement of a formal investigation of that violation. Under reconciliation, the importer is not disclosing a violation, but rather identifying information which is indeterminable and will be provided at a later time when the reconciliation entry is filed.

B. Transition Into ACE

Over the last several years, CBP has tested ACE and provided significant public outreach to ensure that the trade community is fully aware of the transition from ACS to ACE. On October 13, 2015, CBP published an Interim Final Rule in the Federal Register (80 FR 61278) that designated ACE as a CBP-authorized EDI system. The designation of ACE as a CBP-authorized EDI system was effective November 1, 2015. In the Interim Final Rule, CBP stated that ACS would be phased out and anticipated that ACS would no longer be supported for entry and entry summary filing by the end of February 2016. Filers were encouraged to adjust their business practices so that they would be prepared when ACS was decommissioned.

CBP has developed a staggered transition strategy for decommissioning ACS. The first phase of the transition was announced in a Federal Register notice published on February 29, 2016 (81 FR 10264). The second phase was announced in a Federal Register notice published on May 16, 2016 (81 FR 30320). The third phase of the transition was announced in a Federal Register notice published on May 23, 2016 (81 FR 32339). Most recently, CBP announced in a Federal Register notice published on July 28, 2016 (81 FR 49685) that ACE is the sole CBP-authorized method for filing electronic protests. This notice announces a further transition from ACS to ACE as CBP is transitioning the reconciliation test from ACS to ACE. The changes made by this notice related to the application process for participation in this test, the flagging of underlying entries and the filing of reconciliation entries are effective January 14, 2017. Except to the extent expressly announced or modified by this document, all aspects, rules, terms, requirements, obligations and conditions announced in previous notices regarding the reconciliation test remain in effect.

II. Test Modifications and Transition Into ACE

This document announces numerous modifications to the reconciliation test and the transition of the test from ACS to the Automated Commercial Environment (ACE). Each modification and the transition from ACS to ACE are discussed separately below. Except to the extent expressly announced or modified by this document, all aspects, rules, terms, requirements, obligations and conditions announced in previous notices regarding the reconciliation test remain in effect. It should be noted that the changes made by this document related to the filing of reconciliation entries apply only to reconciliation entries filed in ACE; they do not apply to reconciliation entries filed in ACS.

A. Mandatory Use of ACE for Filing Reconciliation Entries

This document announces that beginning January 14, 2017, all reconciliation entries must be filed in ACE regardless of whether the underlying entry was filed in ACS or ACE and regardless of whether it is a replacement, substitution or follow-up to a reconciliation entry originally filed in ACS. As of January 14, 2017, ACS is decommissioned for the filing of reconciliation entries.

B. Elimination of Reconciliation Processing Ports

This document announces that CBP is eliminating the requirement that reconciliation entries be filed at specified reconciliation processing ports. Beginning on January 14, 2017, reconciliation entries may be filed in ACE at any CBP port. CBP reminds importers and customs brokers that the filing of a reconciliation entry is considered customs business under 19 U.S.C. 1641, which requires that a broker wishing to file a reconciliation entry have a district or national permit authorizing the broker to file the reconciliation entry at the port where the reconciliation entry is filed.

C. Application Process and Participation Preconditions

This document announces that, except for suspended parties wishing to be reinstated into the test, CBP is removing the requirement that interested importers apply to participate in this test. Beginning January 14, 2017, CBP is opening this test to all non-suspended importers without any need for interested importers to apply and be accepted into the test. The only importers who may not participate in this test, i.e., not flag underlying entries for reconciliation, are those who have been suspended from participation. Any party suspended from the test will not be allowed to flag entries until the suspension period ends and the party applies for reinstatement and reinstatement is granted. Suspended importers are still required to file reconciliation entries timely during the suspension period for underlying entries flagged prior to the suspension becoming effective. Any party suspended from the test who wishes to be reinstated must submit an application to its assigned Center of Excellence and Expertise designee if it has one; otherwise the application should be submitted at the local CBP port. The application for reinstatement must address the reasons for the suspension and fully describe all corrective action taken to address the grounds for suspension. CBP will respond to all applications for re-instatement but until and unless reinstatement is granted, the suspended importers may not participate in the test, i.e., importers may not flag underlying entries for reconciliation.

Importers wishing to participate in the test are still required, as a precondition to participation, to have a continuous bond on file with CBP with the required reconciliation bond rider. An importer without the required reconciliation bond rider will be unable to flag underlying entries.

D. Elimination of Importer Requests That CBP Blanket Flag on Importer's Behalf

This document announces that CBP is streamlining the process for blanket flagging underlying entries for reconciliation. Prior to the changes announced herein, importers provided CBP a request asking that CBP input and apply a blanket flag to all underlying entries filed by the importer for a specific time period. Importers also identified the specific issue(s) for which they requested that CBP input and apply the requested blanket flag. This document announces that effective January 14, 2017, importers no longer will submit requests asking that CBP apply a blanket flag on their behalf. Instead, importers may input and apply a blanket flag themselves. Importers who use blanket flagging must continue to identify the issue(s) they are flagging.

E. Requests for Retroactive Flagging

This document announces that beginning January 14, 2017, all test participants may request that CBP retroactively flag underlying entries on their behalf. A request may be made by sending an email to OFO-RECONFOLDER@cbp.dhs.gov. The request must be made at least 60 days before the scheduled liquidation date of the underlying entry the importer wishes to have CBP flag retroactively. CBP's decision to grant or deny such a request is entirely discretionary and solely within CBP's province. CBP's decision is final and cannot be appealed. CBP will send an email to the importer or his agent when its request is approved or denied along with a list of the entry numbers which were flagged and a list of the entry numbers which were not flagged. It should be noted that CBP intends to grant these requests sparingly and only as a courtesy where appropriate.

F. Automation of the Reconciliation Entry Filing Process and Elimination of Spreadsheets

This document announces that reconciliation entries filed in ACE will be fully automated and all required data and information must be transmitted electronically on the reconciliation entry. Reconciliation entries must continue to be filed using the Automated Broker Interface (ABI). This document also announces that paper and compact disc spreadsheets will no longer be accepted as part of the filing of reconciliation entries. The data formerly contained in the associated files and spreadsheets, reduced as explained in section G below, will be transmitted electronically as part of the reconciliation entry.

G. Reduction of Information Requirements for Reconciliation Entries

This document announces that reconciliation entries with no changes to flagged entries must only report the flagged underlying entry numbers (no line item data) and must be filed as an aggregate reconciliation entry, i.e., no entry-by-entry reconciliation entry will be allowed when there are no changes to declare. Reconciliation entries with changes to the flagged entry will no longer have to include original transaction values, or original duties, fees and taxes amounts declared in the flagged entry. As a result, reconciliation entries with changes will only have to report the newly determined transaction value and the newly reconciled duties, fees and taxes. Reconciliation entries claiming preferential tariff treatment pursuant to a free trade agreement post-importation claim must include electronic certifications of the statements and declarations required by regulation. Reconciliation entries reconciling classification issues must provide information indicating the protest, administrative ruling or court action which necessitates reconciling the classification of the underlying flagged entry. Reconciliation entries flagged only for a value change must indicate by checking a checkbox if the value change results in a classification change as well.

H. New Data Requirements

This document announces that reconciliation entry filers must check a checkbox indicating if a prior disclosure has been made on any of the flagged underlying entries. If no prior disclosure was made, the checkbox should not be checked. Additionally, the reconciliation entry line item data must include the line number of the underlying flagged entry being reconciled.

I. Elimination of Masterfile Extract and Liquidation Extract Reports

This document also announces that the Masterfile Extract and Liquidation Extract Reports that CBP provided upon request, for a fee, will be discontinued in both paper and diskette form as soon as that information is available in an ACE report CBP will be discontinuing the issuance of the Masterfile and Liquidation Extract reports because the information usually contained in these reports will be available free of charge in ACE reports for those parties having an ACE Portal Account. For information on ACE Portal Accounts please see CBP's general notice published in the Federal Register on October 21, 2015 (80 FR 63817). ACE Portal Accounts allow the trade community to run reports, as needed, to access their customs data. CBP will provide notice that the information is available on an ACE report by announcing it on the ACE reports home page and through the issuance of a message made on the Cargo Systems Messaging Service (CSMS). CBP recommends that trade members subscribe to CSMS to receive email notifications from CBP regarding ACE reports and other important information. For information about subscribing to CSMS, please go to: http://apps.cbp.gov/csms/csms.asp?display_page=1.

III. Development of ACE Prototypes

A chronological listing of Federal Register publications detailing ACE test developments is set forth below.

• ACE Portal Accounts and Subsequent Revision Notices: 67 FR 21800 (May 1, 2002); 69 FR 5360 and 69 FR 5362 (February 4, 2004); 69 FR 54302 (September 8, 2004); 70 FR 5199 (February 1, 2005).
• ACE System of Records Notice: 71 FR 3109 (January 19, 2006).
• Terms/Conditions for Access to the ACE Portal and Subsequent Revisions: 72 FR 27632 (May 16, 2007); 73 FR 38464 (July 7, 2008).
• ACE Non-Portal Accounts and Related Notice: 70 FR 61466 (October 24, 2005); 71 FR 15756 (March 29, 2006).
• ACE Entry Summary, Accounts and Revenue (ESAR I) Capabilities: 72 FR 59105 (October 18, 2007).
• ACE Entry Summary, Accounts and Revenue (ESAR II) Capabilities: 73 FR 50337 (August 26, 2008); 74 FR 9826 (March 6, 2009).
• ACE Entry Summary, Accounts and Revenue (ESAR III) Capabilities: 74 FR 69129 (December 30, 2009).
• ACE Entry Summary, Accounts and Revenue (ESAR IV) Capabilities: 76 FR 37136 (June 24, 2011).
• Post-Entry Amendment (PEA) Processing Test: 76 FR 37136 (June 24, 2011).
• ACE Announcement of a New Start Date for the National Customs Automation Program Test of Automated Manifest Capabilities for Ocean and Rail Carriers: 76 FR 42721 (July 19, 2011).
• ACE Simplified Entry: 76 FR 69755 (November 9, 2011).
• National Customs Automation Program (NCAP) Tests Concerning Automated Commercial Environment (ACE) Document Image System (DIS): 77 FR 20835 (April 6, 2012).
• National Customs Automation Program (NCAP) Tests Concerning Automated Commercial Environment (ACE) Simplified Entry: Modification of Participant Selection Criteria and Application Process: 77 FR 48527 (August 14, 2012).
• Modification of National Customs Automation Program (NCAP) Test Regarding Reconciliation for Filing Certain Post-Importation Preferential Tariff Treatment Claims under Certain FTAs: 78 FR 27984 (May 13, 2013).
• Modification of Two National Customs Automation Program (NCAP) Tests Concerning Automated Commercial Environment (ACE) Document Image System (DIS) and Simplified Entry (SE): 78 FR 44142 (July 23, 2013).
• Modification of Two National Customs Automation Program (NCAP) Tests Concerning Automated Commercial Environment (ACE) Document Image System (DIS) and Simplified Entry (SE); Correction: 78 FR 53466 (August 29, 2013).
• Modification of National Customs Automation Program Test Concerning Automated Commercial Environment (ACE) Cargo Release (formerly known as Simplified Entry): 78 FR 66039 (November 4, 2013).
• Post-Summary Corrections to Entry Summaries Filed in ACE Pursuant to the ESAR IV Test: Modifications and Clarifications: 78 FR 69434 (November 19, 2013).
• National Customs Automation Program (NCAP) Test Concerning the Submission of Certain Data Required by the Environmental Protection Agency and the Food Safety and Inspection Service Using the Partner Government Agency Message Set Through the Automated Commercial Environment (ACE): 78 FR 75931 (December 13, 2013).
• Modification of National Customs Automation Program (NCAP) Test Concerning Automated Commercial Environment (ACE) Cargo Release for Ocean and Rail Carriers: 79 FR 6210 (February 3, 2014).
• Modification of National Customs Automation Program (NCAP) Test Concerning Automated Commercial Environment (ACE) Cargo Release to Allow Importers and Brokers to Certify From ACE Entry Summary: 79 FR 24744 (May 1, 2014).
• Modification of National Customs Automation Program (NCAP) Test Concerning Automated Commercial Environment (ACE) Cargo Release for Truck Carriers: 79 FR 25142 (May 2, 2014).
• Modification of National Customs Automation Program (NCAP) Test Concerning Automated Commercial Environment (ACE) Document Image System: 79 FR 36083 (June 25, 2014).
• Announcement of eBond Test: 79 FR 70881 (November 28, 2014).
• eBond Test Modifications and Clarifications: Continuous Bond Executed Prior to or Outside the eBond Test May Be Converted to an eBond by the Surety and Principal, Termination of an eBond by Filing Identification Number, and Email Address Correction: 80 FR 899 (January 7, 2015).
• Modification of National Customs Automation Program (NCAP) Test Concerning Automated Commercial Environment (ACE) Document Image System Relating to Animal and Plant Health Inspection Service (APHIS) Document Submissions: 80 FR 5126 (January 30, 2015).
• Modification of National Customs Automation Program (NCAP) Test Concerning the use of Partner Government Agency Message Set through the Automated Commercial Environment (ACE) for the Submission of Certain Data Required by the Environmental Protection Agency (EPA): 80 FR 6098 (February 4, 2015).
• Announcement of Modification of ACE Cargo Release Test to Permit the Combined Filing of Cargo Release and Importer Security Filing (ISF) Data: 80 FR 7487 (February 10, 2015).
• Modification of NCAP Test Concerning ACE Cargo Release for Type 03 Entries and Advanced Capabilities for Truck Carriers: 80 FR 16414 (March 27, 2015).
• Automated Commercial Environment (ACE) Export Manifest for Air Cargo Test: 80 FR 39790 (July 10, 2015).
• National Customs Automation Program (NCAP) Concerning Remote Location Filing Entry Procedures in the Automated Commercial Environment (ACE) and the Use of the Document Image System for the Submission of Invoices and the Use of eBonds for the Transmission of Single Transaction Bonds: 80 FR 40079 (July 13, 2015).
• Modification of National Customs Automation Program (NCAP) Test Concerning the Automated Commercial Environment (ACE) Partner Government Agency (PGA) Message Set Regarding Types of Transportation Modes and Certain Data Required by the National Highway Traffic Safety Administration (NHTSA): 80 FR 47938 (August 10, 2015).
• Automated Commercial Environment (ACE) Export Manifest for Vessel Cargo Test: 80 FR 50644 (August 20, 2015).
• Modification of National Customs Automation Program (NCAP) Test Concerning the Submission of Certain Data Required by the Food and Drug Administration (FDA) Using the Partner Government Agency Message Set through the Automated Commercial Environment (ACE): 80 FR 52051 (August 27, 2015).
• Automated Commercial Environment (ACE) Export Manifest for Rail Cargo Test: 80 FR 54305 (September 9, 2015).
• Modification of the National Customs Automation Program (NCAP) Test Concerning the Automated Commercial Environment (ACE) Document Image System (DIS) Regarding Future Updates and New Method of Submission of Accepted Documents: 80 FR 62082 (October 15, 2015).
• Modification of the National Customs Automation Program (NCAP) Test Concerning the Automated Commercial Environment (ACE) Cargo Release for Entry Type 52 and Certain Other Modes of Transportation: 80 FR 63576 (October 20, 2015).
• Modification of the National Customs Automation Program (NCAP) Test Concerning the Automated Commercial Environment (ACE) Entry Summary, Accounts and Revenue (ESAR) Test of Automated Entry Summary Types 51 and 52 and Certain Modes of Transportation: 80 FR 63815 (October 21, 2015).
• Modification of the National Customs Automation Program Test Concerning the Automated Commercial Environment Portal Account to Establish the Exporter Portal Account: 80 FR 63817 (October 21, 2015).
• Modification of National Customs Automation Program Test Concerning the Automated Commercial Environment Partner Government Agency Message Set Regarding the Toxic Substances Control Act Certification Required by the Environmental Protection Agency: 81 FR 7133 (February 10, 2016).
• Notice Announcing the Automated Commercial Environment (ACE) as the Sole CBP-Authorized Electronic Data Interchange (EDI) System for Processing Certain Electronic Entry and Entry Summary Filings: 81 FR 10264 (February 29, 2016).
• Modification of the National Customs Automation Program (NCAP); Test Concerning the Partner Government Agency Message Set for Certain Data Required by the Environmental Protection Agency (EPA): 81 FR 13399 (March 14, 2016).
• Cessation of National Customs Automation Program (NCAP) Test Concerning the Submission of Certain Data Required by the Food and Drug Administration (FDA) Using the Partner Government Agency (PGA) Message Set Through the Automated Commercial Environment (ACE): 81 FR 18634 (March 31, 2016).
• Automated Commercial Environment (ACE); Announcement of National Customs Automation Program Test of the In-Transit Manifest Pilot Program: 81 FR 24837 (April 27, 2016).
• Announcement of National Customs Automation Program (NCAP) Test Concerning the Submission through the Automated Commercial Environment (ACE) of Certain Import Data and Documents Required by the U.S. Fish and Wildlife Service: 81 FR 27149 (May 5, 2016).
• Notice Announcing the Automated Commercial Environment (ACE) as the Sole CBP-Authorized Electronic Data Interchange (EDI) System for Processing Certain Electronic Entry and Entry Summary Filings Accompanied by Food and Drug Administration (FDA) Data: 81 FR 30320 (May 16, 2016).
• Notice Announcing the Automated Commercial Environment (ACE) as the Sole CBP-Authorized Electronic Data Interchange (EDI) System for Processing Electronic Entry and Entry Summary Filings: 81 FR 32339 (May 23, 2016).
• Notice Announcing the Automated Commercial Environment (ACE) Protest Module as the Sole CBP-Authorized Method for Filing Electronic Protests: 81 FR 49685 (July 28, 2016).
• Modification of the National Customs Automation Program (NCAP) Test Concerning the Automated Commercial Environment (ACE) Portal Accounts to Establish the Protest Filer Account and Clarification that the Terms and Conditions for Account Access Apply to all ACE Portal Accounts: 81 FR 52453 (August 8, 2016).
• National Customs Automation Program (NCAP) Test Concerning Electronic Filing of Protests in the Automated Commercial Environment (ACE): 81 FR 53497 (August 12, 2016).