A combination of “inconsistently reviewed entries” and the “reliance on importers’ self-reported data” within the U.S. Customs and Border Protection’s Entry Reconciliation Program leaves potential revenue totaling an estimated three-quarters of a billion dollars at risk, the Department of Homeland Security Office of the Inspector General said in a new audit report released last week.
Reconciliation is the means by which importers are able to correct information in the entry summary initially provided to CBP. Importers file a reconciliation entry, which provides the final and correct information pertaining to value, classification, HTS 9802 (U.S. fabricated goods assembled abroad), and certain free trade agreements, within 21 months, or 12 months in the case of FTAs.
Reconciliation Process Issues
In addition to being unable to ensure that reporting in connection with the reconciliation process is accurate or complies with requirements, the DHS OIC also found that CBP did not always follow its own internal policies when conducting reviews of such entries. These problems occurred, ironically enough, because different ports of entry have implemented CBP’s standard operating procedures differently, the report said.
The audit also found that “CBP missed opportunities to collect additional revenue when it did not assess monetary liquidated damages for importers that filed reconciliation entries late or did not file them at all.”
With respect to CBP’s efforts to modernize the process through the implementation of a new reconciliation module within the Automated Commercial Environment in 2018, the OIC indicated it “will not likely resolve the issues we identified related to importers self-reporting values of imported goods or CBP’s inconsistent review of importers’ self-reporting.” This was owing to the fact that ACE does not require importers to provide source documentation and, moreover, the transition to electronic data submission would “not affect CBP’s judgment regarding the extent of and documentation for the review performed.”
- CBP should require importers to provide source documents to CBP when filing reconciliations and should implement “a process to ensure reconciliation submissions include accurate information and appropriate agency reviews to address complex underlying causes for value changes.”
- CBP personnel should review reconciliations consistently and document the results of the reviews performed.
- CBP should establish uniform procedures across all ports with appropriate internal controls ensuring the assessment and collection of “no file” and “late file” liquidated damages.
- CBP should implement a process to ensure the data maintained in the newly implemented ACE system is accurate and reliable.
While CBP concurred with recommendations 2 through 4, it disagreed with OIC’s suggested requirement that importers provide source documents when filing all reconciliations.
CBP contends this would somehow be inconsistent with its “risk management principles for reviewing entries to focus resources on transactions presenting highest risk.” In this regard, the agency maintains that it “reviews reconciliation entries based on established risk factors, subject matter knowledge of the importer, and the issues being reconciled.”
In view of CBP dismissing the federal watchdog’s key recommendation, the OIC concludes its analysis saying the matter “will remain unresolved and open” until CBP makes it a requirement for importers to provide source documentation supporting their reconciliation entries.
Regarding the other recommendations, CBP indicates that it has already taken steps, such as issuing new guidance to all field offices, to address the areas of concern highlighted in the audit.
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Should you have any questions about how these recommendations could affect the entry reconciliation process, don’t hesitate to contact one of our knowledgable trade experts today.