ERP Part II Letter

July 5, 2000

Mr. John A. Durant
Director, Commercial Rulings Division
Office of Regulations and Rulings
United States Customs Service
1300 Pennsylvania Avenue, NW, HM: 3,4-A
Washington, DC 20004

Re: Comments on Entry Revision Project, Second Draft

Dear Mr. Durant:

The Joint Industry Group (JIG) appreciates this opportunity to comment on the Entry Revision Project, Second Draft ("ERP II"), published on June 2, 2000. Overall, this Second Draft is an improvement over the initial proposal, and generally reflects Customs' careful consideration of industry comments and discussions since publication of the initial proposal. Many of JIG's areas of concern have been addressed in ERP II, but there are still aspects of the revised proposal that are of concern or require clarification, which we discuss below.

I. Money Management System (MMS)

Customs discusses the subject of interest in ERP II, as follows:

There has been some discussion on whether interest would apply from the time an entry summary was posted to the account and the monthly credit card bill was issued. Changes implemented by Customs must be revenue neutral. A credit card type grace period of up to 30 days would not meet that standard. A running balance subject to interest would be revenue neutral. An importer averse to interest could simply pay via ACH on a daily basis, or pay ahead. Of course, paying once monthly could mean systemic savings that outweigh the interest at stake, too.

Thus, it appears that under ERP II interest would be charged from the date the entry summary is filed until payment of the amounts listed in the monthly "credit card statement." However, section 505(a) of the Tariff Act of 1930, as amended (19 U.S.C. 1505(a)), already provides as follows:

If an import activity summary statement is filed, the estimated duties and fees shall be deposited together with interest, at a rate determined by the Secretary, accruing from the first date of the month the statement is required to be filed until the date such statement is actually filed.

We believe that this provision reflects that Congress has already considered the subject of interest in the context of aggregate periodic reporting, and has concluded that interest should run from the first day of the reporting month. The JIG submits that ERP II should not backtrack on the principle implicit in 19 U.S.C. 1505(a), and that interest should not accrue until the first day of the month in which the credit card statement is issued, at the earliest.

The JIG also is concerned about the format of the credit card statement. We would prefer that the statements continue to list the individual outstanding charge items from the previous periods, instead of simply showing the previous balance outstanding.

In commenting on ERP I, the JIG and other groups argued that disputed or unresolved charges should not appear as "due and payable" items in the MMS, at least until such time as the charges are finally determined. We are pleased to see that in ERP II Customs has stated that:

Penalty and liquidated damages could be tracked via a subsidiary statement of outstanding but not yet billed amounts, or left off the MMS completely, and handled in accordance with current billing procedures.

However, it should be made clear that all disputed or unresolved charges, and not just penalties and liquidated damages claims, would be separately tracked and not included in the monthly credit card statement. Examples of such charges could be those attributable to protested entries or marking duties. We also believe that tracking such charges on a subsidiary statement would be preferable to complete omission of such items from the MMS.

II. The Import Entry Process

The JIG believes that the Regular Option (RO) period should be lengthened beyond the 30-day period currently proposed. Much of the public discussion of the RO has been premised on the assumption that only "small" importers would opt for the RO. However, it is conceivable that even certain large importers may not feel the need to wait until the end of the fiscal year to finalize their declarations. For those companies, 30 days may be too short a corrective period as the only other option. We suggest the period be lengthened to a more realistic timeframe.

We also support the notion that an importer should be able to elect both the Regular Option and Extended Option (EO) during a fiscal year. For example, that importer may purchase goods from a related company for which the final transfer prices may not be determined until after the end of the fiscal year. The same importer may also purchase goods from unrelated suppliers in "garden variety" transactions as to which all information is known and available contemporaneously. There would seem to be no basis for requiring that importer and Customs to wait until the end of the EO period to finalize those garden variety entries.

The JIG also stated its position clearly with respect to ERP I that the corrective period must be a true grace period. In ERP II Customs has clarified, and the JIG can agree, that the importer should be held accountable for the accuracy of all of the information provided at time of entry that relates to admissibility. The implication is that other data may be corrected during the corrective period without the threat of penalty liability. However, several statements in the ERP II paper suggest that Customs may in some cases still seek to assess penalties when the data reported within the corrective period differs from that provided at time of entry:

Routine, frequent corrections don't necessarily indicate non-compliance.

* * *

However, for certain sensitive issues, particularly other agency requirements, port entry/entry summary corrections will be viewed more carefully for possible reasonable care deficiencies.

We believe it is imperative that Customs clarify that there will be no liability for penalties when non-admissibility data is corrected in the corrective period.

III. Summary and Beyond

The JIG agrees with the ERP II observation that in the near term there are too many unanswered questions about how liquidation could or should be replaced, and that difficulties related to the liquidation concept can be overcome by policy changes in the meantime. The JIG also agrees with the Finality of Declarations aspect of ERP II. However, we still have the following concerns and/or questions relating to the Mega-Summary aspect of ERP II:

1. If Mega-Summary is treated as an "entry," would the importer have the option of protesting the liquidation of either the relevant underlying entry/ies or the Mega-Summary liquidation?

2. Does the one-year period for "deemed liquidation" run from the entry date or from the end of the Extended Option period?

3. If it is intended that under EO protest cannot be filed until the end of the Customs review period, then should not provision be made by which decisions can be contested earlier?

Finally, though not a subject directly implicated by the Entry Revision Project, the JIG firmly believes that clarification needs to be made that any issue in any liquidation can be protested, including "No Change" liquidations, "deemed" liquidations, etc. JIG member companies for years have been filing protests against "no change" liquidations, with no questions being raised about their jurisdictional basis. We believe the right to protest is a fundamental principle that needs to be reaffirmed by Customs in an interpretative announcement. Alternatively, if need be legislation should clarify this principle.

Conclusion

The Joint Industry Group will continue to work with Customs and other industry groups on this important initiative. We would be pleased to discuss any of the comments herein with Customs representatives at your convenience.

Sincerely,

Ron D. Schoof
Chairman
Joint Industry Group