DHS IG Recommends Requiring Source Documents for Reconciliation; CBP Pushes Back
A combination of “inconsistent reviews” and the “reliance on importers’ self-reported data” within the CBP reconciliation process leaves millions of dollars at risk, the Department of Homeland Security Office of the Inspector General said in a report released Oct. 2. “CBP also missed opportunities to maximize revenue because of inadequate reporting on importers who filed reconciliation entries late or did not file at all,” it said. CBP took issue with parts of the OIG report, it said in a response.
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The OIG recommended that CBP require importers to “provide source documents to CBP when filing reconciliations” and develop “a process to ensure reconciliation submissions include accurate information and appropriate agency reviews to address complex underlying causes for value changes.” CBP responded to the recommendations with a “non-concur” and said it doesn't agree with a requirement for source documents. “It follows risk management principles for reviewing entries to focus resources on transactions presenting highest risk,” CBP said. “CBP reviews reconciliation entries based on established risk factors, subject matter knowledge of the importer, and the issues being reconciled.” CBP asked that the OIG “consider this recommendation resolved and closed, as implemented.”
The OIG said it understands CBP's points but will consider the recommendation “unresolved and open until CBP implements procedures requiring importers to provide source documentation supporting their reconciliation entries.” The OIG said it is aware of the “significance” of requiring source documents, but CBP is unable to ensure “appropriate duties, taxes, and fees are collected for imports without verifying importer self-reported reconciliation information against source documentation.”
An OIG reconciliations audit of transactions between Jan. 1, 2014, and July 31, 2017, turned up “concerns with the reliability of CBP’s import data,” it said. “CBP’s reviews of entries did not identify discrepancies and those entries were not returned to the importer for correction,” it said. “For example, of the 113 entries we reviewed, 6 contained discrepancies between the amounts reported in [the Automated Commercial System (ACS)] and the amounts supported in the source documentation resulting in duties and fees discrepancies amounting to $378,038.”
CBP's response to the report included more general criticisms, too. The agency said it was concerned that the report “indicates continuing misunderstandings” despite “numerous fieldwork meetings” and the “sharing of extensive supporting documentation.” CBP said it “strongly disagrees with OIG's overall conclusions that 'CBP cannot ensure its Entry Reconciliation Program [ECP] reporting is accurate or complies with requirements,' and that 'CBP's actions compromised the integrity of the ECP and, as such may have put approximately $751 million of revenue, in the form of reconciliation refunds, as risk.'”
The OIG also recommended that the “Executive Assistant Commissioner of the Office of Trade update and implement procedures to ensure personnel review reconciliations consistently and document the results of the reviews performed.” The EAC also should “establish procedures with appropriate internal controls ensuring the assessment and collection of 'no file' and 'late file' liquidated damages.” Lastly, the OIG recommended that the EAC “update and implement policies and procedures including a process to ensure the data maintained in the newly implemented ACE system is accurate and reliable.” CBP said it concurred with those recommendations and has started work to address those issues.