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Flagging for Reconciliation to be More Difficult Under Feb. 24 Change

Thursday, January 18, 2018
Sandler, Travis & Rosenberg Trade Report

Effective Feb. 24 U.S. Customs and Border Protection will move the filing of reconciliation entries to the Automated Commercial Environment and make a number of associated changes. As part of that transition CBP is making a change that could make the process for blanket flagging underlying entries more difficult and leave importers vulnerable to penalties for noncompliance.

Background. Reconciliation allows an importer to identify undeterminable information (other than that affecting admissibility) at the time an entry summary is filed and provide that information at a later date. The importer identifies the outstanding information by means of an electronic flag placed on the entry summary at the time it is filed and payment (applicable duties, taxes, and fees) is made. Issues for which an entry summary may be flagged for reconciliation relate to value issues other than claims based on latent manufacturing defects, classification issues (on a limited basis), issues concerning value aspects of entries filed under HTSUS heading 9802, and issues concerning post-importation claims under 19 USC 1520(d) for preferential tariff treatment for goods entered under many free trade agreements.

Blanket Flagging. Many importers who participate in the reconciliation program signed up for “blanket flagging,” under which CBP inputs and applies a blanket flag for specified issues to all underlying entries filed by the importer. Under this system customs brokers filing entries for such importers have no responsibilities with respect to flagging, and in fact many are not even aware that their importer clients are participating in the reconciliation program or that their entries are being flagged automatically.

However, with the Feb. 24 transition of reconciliation to ACE, CBP is eliminating the existing blanket flagging method. After that date importers who still wish to blanket flag will have to require any customs broker that files an entry on their behalf, including couriers and brokers that only handle a small number of entries, to individually flag each entry they file for reconciliation.

While many brokers are able to set up their software to automatically flag all entries, states Tom Gould, senior director, customs and international trade, for Sandler, Travis & Rosenberg, entries will not be flagged without specific instructions from importers. Gould explains that many brokers are not familiar with reconciliation or how to flag entries and that it is the importer’s responsibility to ensure that flagging is being done properly. Any failure to flag entries by the importer or the broker will in most cases lead to the importer being in violation and subject to penalties.

Other Changes. Other changes being made to reconciliation as of Feb. 24 include the following.

- reconciliation entries must be filed in ACE regardless of whether the underlying entry (a) was filed in ACS or ACE or (b) is a replacement, substitution, or follow-up to a reconciliation entry originally filed in ACS

- reconciliation entries may be filed at any CBP port (although a broker wishing to file a reconciliation entry must have a district or national permit authorizing it to file at the port where that entry is filed)

- the reconciliation test is being opened to all importers without any need for application or acceptance (though importers wishing to participate will still be required to have a continuous bond on file with CBP with the required reconciliation bond rider)

- all required data and information must be transmitted electronically on the reconciliation entry, which must continue to be filed using the Automated Broker Interface (paper and CD spreadsheets will no longer be accepted)

- information requirements have been modified (click here for more information)

For additional information on reconciliation, including the upcoming changes and how to properly flag entries, please contact Tom Gould at (213) 453-0897.

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