To reconcile or not to reconcile? That is the question

By Rodney C. Schonland -- Logistics Management, 5/1/1999

With apologies to William Shakespeare, the above question is far more serious than the one penned by the great bard. The question of whether or not to "reconcile" entries faces virtually all U.S. importers today.

"Reconciliation" is a new U.S. Customs Service program that is part of the agency's "Responsible Care" initiative. It would allow importers to review, correct, and update information up to 15 months after importation. Reconciliation is not mandatory, but customs would like all importers to participate. In the agency's view, reconciliation would accomplish several goals.

First, reconciliation is designed to make uniform the various "arrangements" that have been struck between local customs officials and importers in order to deal with cases in which the precise value of imported merchandise is not known at the time of importation. For example, in El Paso, Texas, port of entry for most of the electrical wiring harnesses imported into the United States, much business is done on the basis of "constructed value" (the cost of building the goods). That value is not known until weeks after the goods have been shipped. To address this problem, customs authorities there agreed to accept entries with estimated values from approved importers; once each quarter, these estimated entries were adjusted with the actual value and reported to customs. This was an elegant solution, but one that was not in sync with customs regulations in force at the time. Reconciliation would formalize and make uniform such local procedures.

The second goal of reconciliation is to reduce the agency's paperwork load. When errors in entry documents are discovered, they must be corrected. But making those corrections--even when they are in the importer's favor--creates new paperwork and requires customs authorities to reprocess the original entry. Reconciliation would shift most of this work to the importer, while allowing revisions to be submitted in batches rather than one at a time.

Customs' third goal is to reduce its liquidation workload. Customs usually reviews or "liquidates" entries approximately one year after the date of import. That process involves pulling entry packages out of storage and looking at them one more time--an inefficient procedure. Reconciliation would shift this burden to the importers, who would review their own entries and present a spreadsheet summary of reviewed and adjusted entries to customs.

Simply put, customs is looking at the Reconciliation Program as a way of stretching its limited resources to deal with increasing import volumes. If that's the case, then what's in it for importers?

For the responsible import manager, reconciliation will mean that every entry must be reviewed and reported to customs. There will be some benefits, though.

Reconciliation will finally allow importers to deal with imports as a continual stream of commerce, instead of having to treat each import as a separate business transaction. Things like assists and cost adjustments could be reported at reconciliation instead of at the time of entry. Reconciliation also would allow importers more time for classifying merchandise; that may eliminate the sometimes hurried choice of a Harmonized System number on the basis of an invoice description and the need to move the goods quickly.

What I haven't figured out about reconciliation is how an importer will deal with a customs "Request for Information" in the future. When one of these forms arrives, will importers reply that they will supply the requested information up to 15 months later, during reconciliation? It will be interesting to see how U.S. Customs reacts to that response.

Rodney C. Schonland is a Boston-based attorney who specializes in international trade, transport, and U.S. Customs law. He also is a licensed customs broker. He may be reached at One Broadway, Suite 600, Cambridge, MA 02142. Phone: (617) 621-1560.