Reconciliation in the United States

Reconciliation in the Federal Budget Process

Meaning of Reconciliation in the congressional and executive budget processes (GAO source): A process Congress uses to reconcile amounts determined by tax, spending, credit, and debt legislation for a given fiscal year with levels set in the concurrent resolution on the budget for the year. Section 310 of the Congressional Budget and Impoundment Control Act of 1974 (2 U.S.C. § 641) provides that the resolution may direct committees to determine and recommend changes to laws and pending legislation as required to conform to the resolution’s totals for budget authority, revenues, and the public debt. Such changes are incorporated into either a reconciliation resolution or a reconciliation bill. (See also Concurrent Resolution on the Budget; Congressional Budget Act.)

Reconciliation in NAFTA

The reality of modern international trade is that many elements of a transaction may be undeterminable at the time the merchandise is entered. For example, the final value of equipment provided as an assist may not be known until the close of an accounting period, so the correct value of the merchandise is not known until that time.

Reconciliation allows the importer, using reasonable care, to file entry summaries with CBP with the best available information, with the mutual understanding that certain elements, such as the declared value, remain outstanding. At a later date, when the specifics have been determined, the importer files a Reconciliation which provides the final and correct information. The Reconciliation is then liquidated, with a single bill or refund, as appropriate.

In the ACS Reconciliation Prototype, the following issues are allowed Reconciliation:

Value (Assists, Royalties, etc.)
HTS 9802 Value
Certain free trade agreements eligibility (e.g., NAFTA, Chile FTA, CAFTA-DR, Colombia TPA, Korea FTA, Oman FTA, Panama TPA and Peru TPA)

Because classification is closely linked to the admissibility of merchandise, Reconciliation of classification will be limited to certain situations.

ACS Reconciliation Prototype

Starting October 1, 1998, the ACS Reconciliation Prototype will be the exclusive means to reconcile entries. Existing local block liquidation procedures will no longer be permitted.

The U.S. Customs and Border Protection has designed a menu approach to Reconciliation. Importers will be able to select the methods which best suit their business needs.

Notifying the U.S. Customs and Border Protection (CBP)

Entry summaries may be flagged individually or via a blanket application. The blanket application results in the automatic flagging of all entry summaries for a specified time period.

Filing the Reconciliation:

The Reconciliation may be filed with data showing Entry-by-Entry adjustments to duties, taxes, and fees, or with Aggregate data showing only the adjustment without entry-level detail.

For fiscal control reasons, the Aggregate method will be allowed only when the Reconciliation does not claim a refund in duties, taxes and fees. Similarly, drawback claims against the reconciled amount will not be accepted. (The original underlying entry summaries remain eligible for drawback once the Reconciliation has been filed.) Also, refunds in duties may not be netted against duties owed on a Reconciliation.

How it Works

When an importer files an entry summary while certain elements remain undeterminable, the entry summary is “flagged” (either individually or via a blanket application), thereby providing CBP a “notice of intent” to file a Reconciliation.

The importer is obligated to use reasonable care in filing entry summaries, even when they are subject to reconciliation. For example, importers must provide their best estimates in declared value, rather than using values which bear no relation to the reality of the transaction.

When the information becomes available, the importer files a Reconciliation. A Reconciliation can cover up to 9,999 underlying entry summaries. The Reconciliation is due within 12 months of the earliest entry import date for certain trade agreements (e.g., NAFTA, Chile FTA, CAFTA-DR, Colombia TPA, Korea FTA, Oman FTA, Panama TPA and Peru TPA), or within 21 months of the earliest entry summary date for all other issues.

When the Reconciliation is filed (prior to the end of 12 or 21 months as described above), the payment of additional duties, taxes, fees, and interest (or claim for refund) is made. The Reconciliation is processed, subject to verification, if necessary, and liquidated.

A Reconciliation is treated like any other U.S. Customs and Border Protection entry for purposes of liquidation and protest.

Is it Mandatory?

After October 1, 1998, existing local practices for cost submissions and block liquidations will not be permitted. The ACS Reconciliation Prototype will be the exclusive means to reconcile entries. With the following exceptions, it will be mandatory for those importers making post-summary adjustments.

Importers still have the option of requesting that the U.S. Customs and Border Protection withhold liquidation on all entries involved, and making adjustments to them individually.
The Supplemental Information Letter process is still available (see ABI administrative message #97-0727, dated 08/04/1997).
For importers who were in the midst of a fiscal reporting period on Oct. 1, 1998, the Grandfather Clause policy applies, meaning those importers can finish that reporting period using previous methods. Any new fiscal periods are subject to the exclusive means policy.

Other adjustments (e.g. cost submissions / requests for block liquidations) received outside of the Reconciliation Prototype will be treated in accordance with law, e.g. as Prior Disclosures.

All importers will be allowed to participate in the ACS Reconciliation Prototype. Applications may be submitted throughout the duration of the prototype. The prototype started on 10/1/1998, with an initial test period of two years. It will be extended indefinitely starting 10/1/2000.

Reconciliation in ACE

The U.S. Customs and Border Protection is working to develop reconciliation capabilities in ACE, at which time reconciliation will no longer be processed in ACS and must be done via ACE. Reconciliation processing will be expanded from 13 processing ports to all ports nationwide. The date for deployment of this capability is still being finalized.

While reconciliation in ACE is new, there are several foundational functions that will stay the same:

Reconcilable Issues: Reconciliation will continue to be filed for value, classification, 9802, and FTA issue types.
Timeframes: Entries flagged for FTA must be reconciled within 12 months; all other entries flagged for value, classification & 9802 must be reconciled within 21 months
Reconciliation types: There are two types of reconciliation entry types: Aggregate and Entry-by-Entry.

Changes with Reconciliation in ACE

Reconciliation Processing

Expanding from 13 processing ports to include CEEs nationwide. If the importer is assigned to a CEE then the CEE’s will work the reconciliation. However, if the importer is not assigned to a CEE then those reconciliation entries will be routed to one of the 13 processing ports.

Participation Eligibility

All participation eligibility indicators for importer of record accounts will default to “Yes.” Applications to request reconciliation participation eligibility will no longer be needed. In ACE, importer of record accounts will automatically set reconciliation participation eligibility indicators for importer of record accounts to “Yes.” If an importer exhibits misconduct, CBP retains the right to set the participation indicator to “No.” The Trade will still need to secure a bond rider in order to qualify for eligibility.

In addition the importer is still required to have on file a Reconciliation Bond Rider. The two objects will authorize the filer to flag entry summary types 01, 02, & 06.

Reconciliation Liquidation Process

A CBPF 28 will be issued and responded to through ACE. If additional information is required, the U.S. Customs and Border Protection will issue the CBPF 28 through ACE and the Trade will respond to this call for additional information through ACE, instead of paper.

ACE Reports for reconciliation data are forthcoming. The U.S. Customs and Border Protection will notify the Trade when these reports are available.

A Federal Register Notice will be published to announce the transition of all electronic filing of reconciliation in ACE. All published notices are available on the Federal Register Notice website

Reconciliation