CustomsEntry

ReconciliationProgram
GeorgeTuttle,III,Attorney
LawOfficesofGeorgeR.Tuttle
geo@tuttlelaw.com
CindydeLen,SeniorTradeAuditor
DeleonTradeLLC
(FormerU.S.CustomsAuditorandAssistantFieldDirector)
cindy@deleontrade.com

Theinformationinthispresentationisgeneralinnature,andisnotintendedtoconstitutelegaladviceortocreateanattorneyclientrelationshipwithrespecttoanyeventoroccurrence,andmaynotbeconsidered
assuch.
Informationhasbeenobtainedfromsourcesbelievedtobereliable.However,becauseofthepossibilityofhumanormechanicalerrorbyourofficesorbyothers,wedonotguaranteetheaccuracy,adequacy,or
completenessofanyinformationandarenotresponsibleforanyerrors,omissions,orfortheresultsobtainedfromtheuseofsuchinformation.

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WhyEntryReconciliation?
ObligationtoReporttheCorrect&AccurateValue
ReasonableCare 19U.S.C. 1484
...partiesqualifyingasimporterofrecord...shall,usingreasonablecare completetheentry...byfiling
withCustomsServicethedeclaredvalue,classificationandrateofdutyapplicabletothemerchandise,...
necessarytoenabletheCustomsServiceto (i)properlyassessdutiesonthemerchandise (ii)collectaccurate
statistics withrespecttothemerchandise,

19U.S.C. 1485(a)(2)&(3)
Animportermakinganentry... mustfileadeclarationunderoathstatingthat"thepricessetforthinthe
invoicearetrue...[andthat]allotherstatementsintheinvoice...orintheentryitself,aretrueandcorrect.

Allinvoicesforimportedmerchandisearerequiredtosetforth,amongotherthings,(5)thepurchase
price ofeachitem(6)Ifthemerchandiseisshippedotherwisethaninpursuanceofapurchaseor
anagreementtopurchase,thevalueforeachitem.19U.S.C. 1481(a)(5).

Deleon Trade/ Tuttle Law Offices (c) 2015

WhyEntryReconciliation?
Transactionvalue 19U.S.C. 1401a(b)(1)
"thepriceactuallypaidorpayableforthemerchandisewhensoldforexportationtothe
UnitedStates,plusamountsequalto

thevalue,apportionedasappropriate

Commissions

Royaltiesorlicensefees

Assists

Proceedsofasubsequentsaleoruse.

SupplementalpaymentsandtheGenerra Rule

Arebuttablepresumptionthatallpaymentsmadebyabuyertoaseller,orapartyrelatedtoaseller,are
partofthepriceactuallypaidorpayable.("HQ")545663datedJuly14,1995.GenerraSportswearCo.v.
UnitedStates,8CAFC132,905F.2d377(1990)

Deleon Trade/ Tuttle Law Offices (c) 2015

EntryReconciliation:WhentoParticipate?
EntryReconciliationisnotjustfortransactionvaluesituations

StandardCost/ComputedValue/Maquiladoraoperations/Tollingcontracts(ShelterOperations)

RelatedPartyTransferPricingAdjustments

ImportsintoaVendorManagedInventory(VMI)warehouse(valueattimeofremovalchanges);

Assiststhatarenotquantifiableattimeofentry(includingforeignresearch,development,design,etc.);

SupplementalPaymentstoforeignvendors(tooling,mold,equipment,orother);

Proceedspaidtoforeignvendors(e.g.1%ofnetsalesareremittedtovendorafterentry);

Materialacquisitionchargesorsurchargesthatarenotknownattimeofentry(spotbuycharges,precious
metalsurchargesbasedonamarketrate[e.g.,LME LondonMetalsExchange],etc.);

Productreworkortestingcharges;

OtherpostentrypriceadjustmentsoranyadjustmentstothevaluedeclaredtoCustomsattimeofentry;

Anytimetheenteredvalueisestimatedorthetrue,correctandfinalvalueisnotknowatthe
timeofentryfiling!
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WhyUseEntryReconciliation?
Obligationtofilecorrectandaccurateentriesattachesatthetimeof
filing
Whatifatentryyoudontknowwhether
thevalueisaccurateattimeoffiling(assists,additions,endofyear
adjustments,etc.)
ArticlequalifiesforFTA
forHTS9802/allowance?

Deleon Trade/ Tuttle Law Offices (c) 2015

WhyUseEntryReconciliation?
19U.S.C. 1952

Noperson,byfraud,grossnegligence,ornegligence(A)mayenter,introduce,orattempt
toenterorintroduceanymerchandiseintothecommerceoftheUnitedStatesbymeansof

(i)anydocument,writtenororalstatement,oractwhichismaterialandfalse,or

(ii)anomissionwhichismaterial ....

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AppendixBtoPart171CustomsRegulations:Violationsof19U.S.C.1592
Negligence ...failuretoexercisethedegreeofreasonablecareandcompetenceexpected
fromapersoninthesamecircumstances:
inascertainingthefacts...drawinginferences...orascertainingtheoffender's
obligationsunderthestatute
failuretoexercisereasonablecareandcompetencetoensurethatstatementsmade
andinformationprovidedarecompleteandaccurate;ortoperformanymaterialact
requiredbystatuteorregulation.

GrossNegligence
anact(oromission)donewithactualknowledgeoforwantondisregardfortherelevantfactsand
withindifferencetoordisregardforobligationsunderthestatute.

Deleon Trade/ Tuttle Law Offices (c) 2015

WhyEntryReconciliation?
BeforereconciliationfilersandPortsmadetheirownspecialarrangementsto
reportadjustments.
Localprocesseswereproblematicbecause
informal,noconsistencyfromporttoport
nolegalbasis,and
lackedadequatefinancialcontrols
couldnotcontestorchallengefinalassessments

1993 CustomsModActamendedsec.1484toincludeprovisionsforanew
typeofentry areconciliationentry.

Deleon Trade/ Tuttle Law Offices (c) 2015

CustomsReconciliationGuide
http://www.cbp.gov/sites/default/files/docume
nts/acs_recon_guide.pdf
Providesrulesanddesktopinstructionsfor
brokersandotherusers
21monthsfromdateofimportationtofile
reconciliationcontainingcorrectvalue
Reconciliationentryistype09
ReconciliationentryisprocessedABIandwill
liquidate

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WhatisReconciliation?
Aprocessthatallowsimportersto
fileentriesusingthebestavailableinformationand
electronicallyflag entrydataelementsthatareestimated

actualfinalinformationissubmittedatalaterdatevia

Reconciliation Entry(type09)
cancoveroneorthousandsofpreviouslyfiledindividualentries(onlyentrytypes01
Consumption,02Quota/VisaConsumption,06FTZConsumption)
aReconciliationentryisliquidated,withasinglebillorrefund,asappropriate
CBPdecisionsonreconciliationentriescanbeprotestedandcontestedincourt
mayfilemultiple reconentries
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WhatisACSReconciliation?
WhatCanBeReconciled?
ACSReconciliationistheexclusive meansforreconcilingpostsummaryadjustmentsto:

Dutiablevalue

HTSUSHeading9802value

FTAssuchasNAFTA,Chile,CAFTADR,ColombiaTPA,Korea,Oman,PanamaandPeru).

Limitedclassificationissues

Otheroptions(knownvs.unknownerrors)

AddSlips?PEAorPSC?

PriorDisclosure?

Workingwithvendortocaptureaccuratevalueinfooninvoicesattimeofentry

Extensionofliquidation( 159.12 forproperappraisementorclassificationofthemerchandise)

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WhatisEntryReconciliation?
Approximately4,282importersparticipatedintherecon
programduringcalendaryear2012

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EntryReconflagging
Flagging:

Identifiesunknowninformation
TransfersliabilityforthoseissuestoaReconciliation
Elementsthatareflaggedarewithheldfromliquidation
Permitsnormalliquidationoftheremainderoftheentrysummary

Afilermayflagentriesviaanindividualentryflagorablanketflag
Individualentryflagging Theentryfilerflagstheunderlyingentriesontheheaderrecordofan
entrysummaryatthetimeoffiling
BlanketFlagging AflagisautomaticallyaddedbyCBPtoall entriesforall portsmadeunderthe
reconfilersimporterofrecordnumber.

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Reconflagging&TimePeriods
BlanketFlagging
Meanseach entrysummarymustbeclosedbyaReconciliation,eventhoseentriesthatdonotrequire
adjustments.
Entriesthatdonotrequireadjustmentscanbefiledonaseparatenochangereconentry.

TimePeriodForFilingReconEntries
ParticipantsinReconprogramhaveupto21monthsfromtheflaggedentrysummarydatetofilethe
recon
ExceptforNAFTA/FTAclaims limitis12monthsfromentrysummarydate
Failuretofileatimelyreconciliationwillresultintheassessmentofaliquidateddamages.
ImporterswhowishtoobtainreportsofflaggedentriesmaydosobycontactingCBPNational
FinanceCenter.ITRACdataisalsousedforreconciliation.
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ReconciliationFlagCodes

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ITRACData
(Importer
Trade
Activity)

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GettingStarted:
ApplyingforReconciliation
Mustapply toparticipateintheprogram
Onceaccepted,onlyprospectiveentriescan
beflagged
MusthaveaReconciliationriderto
continuousbond.
TheReconciliationBondRidermustbefiled
andacceptedatNFCpriortosubmittingthe
application
ApplicationissubmittedtoHQforprocessing
andacceptance.

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GettingStarted:ApplyingforReconciliation
Informationneeded

Importername,IRSnumber(includesuffix(s)),identificationofCenterofExcellenceandExpertise,ifapplicable
andemailaddress.

TypeofFlaggingRequested(Blanket orindividual)

Brokername(s),filercode(s)andemailaddress(es).

Suretyname(s)andsuretycode(s).

Port(s)atwhichunderlyingentrieswillbefiled.

Descriptionofspecificissue(s)tobereconciled.

Pointofcontact,email,telephoneandfaxnumbers.

CopyofReconciliationrider

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GettingStarted:HowDoIReconcile?
Entrysummariesfiledatanyportmaybeflaggedforreconciliation
Areconciliationentrymustbefiledatapreassignedreconciliationprocessingport
13processingportsdesignatedforprocessingreconciliationentries:Boston,Champlain,New
York,Laredo,Pharr,ElPaso,OtayMesa,Nogales,Portland,Minneapolis,Detroit,Miamiand
Houston.
Pickinganexperiencedbrokertofilereconciliationsiscritical:
Notallbrokershavereconciliationexperience
Reconciliationbrokermusthaveanationalpermit
Anybrokercanfilethetype09reconentry(theymusthaveaccesstoallentrydata)

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GettingStarted:HowDoIReconcile?
Theroleandresponsibilityofthereconciliationprocessingportisto
addressthereconciliationnottheunderlyingissues.
Legalissues,suchas:
Basisofappraisement,methodofdeterminingvalueaddition,or
methodofapportionment
FTAeligibility,etc.,
MustberesolvedwithCustomsentryportI/Steam,CEEoraccount
managerbeforefiling

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GettingStarted:HowDoIReconcile?

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TypesofReconciliations
TwotypesofReconciliationsmaybefiled:

EntrybyEntry

Aggregate

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TheReconEntry
WhatitlooksLike
ReconciliationEntryconsistsof:
AHeaderPage,
Associationfile,and
Summarizedlineitemdataspreadsheet

Othercomponents(e.g.,thespreadsheetdiskettesandsupporting
documentation)aresentdirectlywiththedesignatedprocessingport.

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TheReconEntry
TheHeaderSheet
TheReconciliationheaderprovidesgeneral
informationabouttherecon,including:

Reconciliationentrynumber

TypeofReconciliation

IssuesonReconciliation

Grandtotalsfordutiesandfees,bothoriginaland
reconciled

Interest

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TheReconEntry
AggregateReconciliations

ConsolidatesallentriescoveredbytheReconciliationwithout
identifyingindividualentryadjustments

Appliesgenerallytothosesituationsthatinvolveonlyan
increase

TheAssociationfileonlyrequiresalistofunderlyingentries
andnottherevenueadjustmentbrokendownbyentry.

TheImporterwaivesanyrefundsthroughthereconciliation
filingprocessforaggregatereconentryfiling.

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TheReconEntry
ThemajordifferencebetweenAggregateandEntrybyEntryReconciliationisthe
structureoftheassociationfile
Theassociationfile containsalistofaffectedentrysummariesflaggedforReconciliationsorted
byPortcodewheretheywerefiled.
ForEntryByEntryReconciliation,thefollowingelementsarealsorequired:

Theactualamountoffees(brokenoutbyclasscode),dutiesandfees,depositedperunderlyingentry
summary

Thereconciledamountoffees(brokenoutbyclasscode),duties,andfeesowedforeachunderlying
entry

Adetailedsubmittalattheentrylinelevelinwhichtheadjustmentisspecificallyprovidedforeachentry
summaryidentifiedintheassociationfile.

Canincludeupwardsanddownwardadjustmentsinvalueandcanprovidefordutyrefundsattheentry
level.

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EntrybyEntryReconciliation:
AssociationFileStructure
Entrynumberreference

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TheReconEntry
SummarizedLineItemDataSpreadsheet
ThethirdelementoftheReconciliationmustshow,atamacrolevel,allsubstantivechanges
reportedintheReconciliation.
Thedatamustbepresentedinastandardformat(Seesamplespreadsheet).
ThedataelementsinthespreadsheetarethesameforbothEntrybyEntryandAggregate
Reconciliations.

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TheReconEntry
SummarizedLineItemDataSpreadsheet
Thesummarizedlineitemdataspreadsheetcapturesadjustmentsthathaveaneffecton
reportabledataelementsdeclaredthroughoutthereconciliationperiodwithout referenceto
theunderlyingentrynumbers
EachcombinationofHTS,countryoforigin,SpecialProgramIndicator(SPI), andcalendaryear
ofrelease(perCensusrequirements)willrequireaseparateline.
Eachspreadsheetlineistoshowtheoriginalandreconcileddata.

Theoriginaldataisextractedfromtherolledupgroupingsoftheentrylinesfromflaggedentries

Thereconcileddataiseitherinputmanuallyorproratedautomaticallyviaformula

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SummarizedLineItemdataSpreadsheet

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CustomsValidationofData
Customscomparesinformationonthereconciliationentrytotheinformation
inACS/ACE.
FromHeaderrecord,associationfileandSLDS
Reconentrywillberejectedifthereisatotaldifference induty/feespaid
informationofmorethan$20foraggregateor$.01forentrybyentry.
30daysforreview:ifrejectedfilerhas30daystorefilewithcorrections
ThesearecommonlyreferredtoasMISMATCHES!

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Mismatches(thecauseandsolutions)?
CAUSES(Customswillrejectthereconciliationentry):

Differencesinoriginalduty,MPF,orHMFperCustomsACSsystemvs.Importerrecords(EVERYPENNYCOUNTS!)

Wherepossible,PostEntryAmendments(PEA)shouldnotbefiledonflaggedentries!TheValuePEAcausesthe
originaldutyandfeestochange.ITRACdataandtheandCustomsLiquidationextractreportdonotreflectPEAactivity
untilentryisliquidated.

Importerofrecordnumberorbondnumberdifferences

Roundingerrors

Flaggingerrors

SOLUTIONS

DontfilePEAsonflaggedentriesortrackPEAsandmakeadjustmentsduringreconprocess.

MonitorimporterofrecordandbondchangesviaACEperiodically

MonitorflaggingstatusviaACE.

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PostEntryAmendmentTrackingWorksheet

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CommonBrokerErrors
Errorsinflaggingstatus
OverridingCustomsBlanketflag
Allocatingadjustmentsoverallentriesvs.allocatingoveronlyentries
requiringchanges
Notreconcilingentriesfromotherbrokers(causesLiquidateddamages)
ImportersareNOTrequiredtousethesamebrokerwhofiledtheoriginal
entrytofilethereconentry.
Pickabrokerwithextensivereconexp.

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WhatifIneedMoreTime?
ExtensionsarerarelyallowedonReconciliationfilingdeadlines.However,undercertain
circumstancesthePortwillgrantaRequestforanExtensionandWithholdingLiquidation
IfelementsremainunknownwhentheReconciliationisdue,importermustsubmita
timelyfiledReconciliationwithbestavailableinformationornochanges
AlongwithawrittenrequestexplainingwhyliquidationoftheReconciliationshouldbe
withheldandforhowlong
Iftheimporterjustifiesgoodcauseonwhytheextensionshouldbegranted,CBPwillissuea
letterofapprovaltotheimportertodocumentthedecisionandthedateofthatdecision

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TheGood,thebad,theugly
NoFilewithin21months
Penaltyamountisthelesserofthevalueofallflaggedentriesdueduring
thecalendarmonth,orthevalueofthebond.
MitigatedOption1amount($100$500)offeredwhenallflaggedentries
coveredontheliquidateddamagesclaimareproperlyreconciled.
LateFile
Penaltyamountisgreaterofdoubletheduties,fees,taxes,andinterest
dueontheentirereconciliationor$1,000.

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HowdoIreconcileEntries?
Situationspecific:whatisyourissue?
Assistsandsupplementalpayments?
Apportionmenttospecificproductsorsuppliers?
Apportionmenttoflaggedentries

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HowdoIreconcileEntries?
Recordsneeded
ACEorITRACreports
CBPFlaggedentryreport
CBPliquidationReport
FinancialRecordsforassists/additions(royalties,RPuplifts,etc.)

Determinewhetherreconciliationissueaffectsalloronlysomeproductsfromsupplier(s)?
Whichentrylineitemsrequireadjustment(commonCBPauditfindingisthatalllineswere
adjustedwhenonlycertainlinesneedadjustment).

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HowdoIreconcileEntries?
Importer(orserviceprovider)shouldcreateareportattheentrylineorinvoicepartnumber
linelevel?
Makevalueadjustmentsattheentrylineorinvoicepartnumberlinelevel
RollupinvoicepartnumberlineleveltoHTSlinelevelforEntry
CreateassociationfileandSummarizedLineItemDataSpreadsheetfrominvoicepartnumber
Rollup(usingMicrosoftAccess).

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HowdoIreconcileEntries?
AuditableandverifiablefinancialrecordsmustbethebasisforReconciliation
CBPmayrequestdocumentationtosupportthechangemadeattheHTSUS/countryoforiginlineorpart
number.
MustclearlydocumenthowtheinformationintheReconciliationwasderived.
Supportingdocumentsmayinclude:

CBPForm247CostSubmission(althoughthisisnotarequiredformanymore)

Detailedlinelevelspreadsheets

Landedcostanalysisspreadsheets

Invoices,purchaseorders,andcontracts

Documentssupportingapportionmentofassists

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ExampleEntrybyEntryAdjustments

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ReconciliationProcedures
EXAMPLES OF RED FLAGS
No Recon Internal Controls
Importer lacks knowledge of Recon Prototype
requirements.
EXAMPLES OF BEST PRACTICES
Reconciliation Internal controls are written,
accurate and complete
Importer attends Recon seminars
Importer maintains software application that tracks
underlying entry information and ensures all
underlying entry adjustments are supported.
MANY OTHERS! READ FOCUSED
ASSESSMENT KIT EXHIBIT 5T

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Exhibit5T Reconciliation
TechnicalInformationforPre
AssessmentSurvey(TIPS)
Reviewsredflagsand
bestpractices

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ReconciliationProcedures(BestPractices)
WhatCustomslooksforwhenauditingyourreconciliationprogram
Section1 ProceduresforIdentifyingAnnualValueAdjustments(G/Lreview)
Section2 ProceduresforEnsuringallEntryLineItemsFlaggedareReconciledusing
ITRAC/ACEdata
Section3 ProceduresforVerifyingthatallEntriesWereFlagged(flaggingerror
identification)
Section4 ProceduresforCreatingtheAssociationFile
Section5 ProceduresforCreatingtheSummarizedLineDataSpreadsheet(SLDS)
Section6 ProceduresforCreatingtheHeaderFile
Section7 ReviewandMonitoringProceduresforValueReconciliation

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ReconciliationRecords!
Cantprovewhatyoudontkeep!
Sourcerecordsfromfinance:

documentingassistvaluesand/orsupplementalpayments

Royaltyorlicensefeepayments

Transferpriceadjustmentamounts,etc.

Recordsidentifyingwhatproductsorsuppliersadjustmentsrelateto
Reports&worksheetsonmethodofallocationofadjustmentsto
products,entrylinesorentries
Rollupworksheets

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