PreDecisional U S CUSTOMS AND BORDER PROTECTION PreDecisional

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional Simplified Processes Initiative March 2017 1

U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional Simplified Processes Initiative Background Objective: Develop transformation strategy and manage implementation of policy, processes and technology recommendations to optimize the import and export process through collaboration with the trade and CBP. Background: § In 2011, CBP launched the Simplified Processes Initiative, a collaborative effort to develop innovative solutions to critical issues emerging at the intersection of trade facilitation, enforcement, and national security. § The successes resulting from the start of this initiative, to include the Simplified Entry pilot, established a foundation for new solutions aimed at simplifying the importation process. § CBP reengaged the Simplified Processes Initiative in 2014 to advance border security and management; enhance U. S. competitiveness by enabling lawful trade and travel; and promote organizational innovation – all in line with Commissioner Gil Kerlikowske’s CBP 2020 Vision and Strategy. Approach: A Simplified Processes Working Group was established to identify challenges and discuss potential solutions to critical trade needs; gather requirements; and develop a proposed alternative. 2014 Summary and Revenue Collection 2015 Other Post-Summary Processes 2016 -2017 Recommendations Refinement & Prioritization R Examined the import summary and revenue collections processes and identified opportunities for improvements. R Conducted a research and development effort to define the desired future-state of post-summary processes. q Socialize recommendations from Phase 1 and Phase 2 Working Group sessions with associations. R Developed a draft Simplified Processes concept, which included recommendations to improve the Entry Summary, payment, and adjustment processes. R Identified government and trade business needs and opportunities for improvement within the reconciliation, liquidation, protest, drawback and remote location filing (RLF) processes. q Prioritize recommendations based on inputs and feedback. q Develop a multi-year Simplified Processes Action Plan. q Plan for the future of ACE and programmatic enhancements. 2

U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional The working groups from 2014 and 2015 proposed recommendations that transform existing programs and processes. The working groups developed over 60 recommendations to improve the import process starting from the vetting of Trusted Trader programs, to filing an Entry Summary, the finalization of Drawback claims, to liquidating entries. Below are several key recommendations across the functional areas analyzed by the working groups. Functional Area Monthly Summary & National Statements Key Recommendations § § § Filers may submit a monthly summary that includes releases over a calendar month's time. Each line of a monthly summary is considered a "reconfigured entry" that is subject to liquidation, protest and any other downstream process. A separate National Financial Monthly Statement will include debits (duties, taxes, fees, bills and interest) and credits (refunds) netted as a total balance due for a calendar month. Liquidation § § § Allow for deem liquidation of all consumption entries at one (1) year from the date of entry. Implement processes to accommodate line-level liquidation. Allow for the importer to obtain liquidation status details from their ACE portal account or CBP. gov. Protest § § Transition the protest process to an electronic format. Expand the electronic protest filing to a broader range of trade stakeholders such as attorneys, importers, and sureties. Auto-populate numerous Entry Summaries onto one protest while providing protest statuses on ACE. § Reconciliation § § § Drawback § § § File all reconciliation data electronically and only with necessary data elements. Eliminate the requirement of having to file an 09 entry and extend liquidation for flagged entries/lines an extra year from the date of entry. Manage reconciliation by account and permit filing at any Center or POE. Develop a process for the claimant to submit a “drawback profile” electronically along with automating other Drawback processes in ACE. Track/validate if the bond coverage is sufficient prior to processing an Accelerated Payment requests. Initiate the Desk Review and response processes electronically, to include DIS. 3

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional We are already implementing many of these recommendations as part of the ACE 2017 deployment. Liquidation § Official notice of liquidations (bulletins) will be entirely paperless and will be posted on CBP. gov. § Liquidation will occur on weekly cycle vice the biweekly cycle it currently follows. § Importers have the ability to obtain liquidation status details from their ACE portal account. § ACE has the technical infrastructure to implement new updates and liquidation processes modifications. For example, ACE has the capability to liquidate and account for changes in duties, taxes, and fees at the line level. Protest § Protest can be submitted electronically through a Protest Portal. § Filers can easily upload up to 9, 999 entries using standard. xls or. cvs files. § ACE will automatically generate a protest tracking number. § If a protest is submitted electronically, then the approval or denial notification will be sent electronically. § The system will provide an interim status of submitted protest. Reconciliation § Reconciliation will be filed electronically. As a result, CDs and spreadsheets are no longer required. § Trade will no longer need to provide original and reconciled amounts. Trade will only need to provide reconciled amounts, as the system will automatically calculate duties, taxes, and fees of the original entry. § Working towards expanding Reconciliation processing beyond the 13 designated ports. The goal is to have the reconciliation program expanded across all 10 Centers. Drawback § ACE controls will track and validate if the bond coverage is sufficient prior to processing an Accelerated Payment request. § Developed a process for the claimant to submit a drawback profile electronically leveraging the 5106 form. § CBP Form 7552 will be eliminated with respect to Certificate of Manufacture and Delivery (CM&D). § The desk review and response process will be electronic and will include DIS capability. 4

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional Simplified Process Initiative: Activities in 2016 Mockup Development Data Analysis Stakeholder Engagement The team leveraged the following approach to develop a transformation strategy that manages the implementation of policy, processes, and technology recommendations in order to optimize the process of importing goods through collaboration with the trade community and CBP. Engaged with 14 trade associations including: AAEI, BACM, NAM, PCC, NRF, CSEC, NCBFAA, USCIB, BTA, EAA, NAFTZ, NBCBA, ITSA, API. Trade associations were asked to contact their members for priorities as well as quantitative and qualitative benefits of Simplified Processes. Coordinated with ACE Business Office to discuss ongoing Post-Summary accomplishments related to Simplified Processes. Facilitated two meetings with U. S. Census to discuss the impact to their analysis and reporting if a simplified summary recommendation was implemented. Facilitated three workshops with AAEI members, hosted by Honda. Attendees included importers, brokers, sureties, and software developers. Analyzed 5 months of entry data for a selection of filers from Center industries. Reviewed nearly 100, 000 entries and 250, 000+ lines to determine opportunities where filers could potentially benefit from transitioning to a monthly Simplified Summary format. Additionally analyzed impacts of a National Monthly Statement and how it can streamline the amount of Daily and Periodic Monthly Statements. Developed a Monthly Statement mockup to include debits (duties, taxes, fees, bills and interest) and credits (refunds) netted as a total balance due for a calendar month. Coordinated with CBP and ABO SMEs to determine header and line level requirements for a Simplified Summary. Developed a Monthly Summary mockup based on the data analysis for stakeholder discussion. 5

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional CBP will prioritize its efforts to develop the Simplified Processes Road Map Four factors will be used to evaluate and prioritize recommendations: Factor 1 Stakeholder Priority Factor 2 Business Requirement Is the recommendation a top priority for the trade? Has the concept been vetted by stakeholders, and has a design been developed? Factor 3 System Infrastructure and Capability Factor 4 Statutes and Regulations Does the capability and technological infrastructure exist within ACE/CBP Systems? Does the recommendation requires statue or regulation changes? High priority for a majority of the trade Business requirements for the recommendations are developed, or are in the process of being finalized The capability and technological infrastructure exist within ACE/CBP Systems The recommendations do not require statue or regulation changes A high priority for select members of the trade, or considered a mid-tier priority Business requirements for the recommendations are in the development phase The capability and technological infrastructure partially exist within ACE/CBP Systems and would require modifications The recommendations potentially requires statue or regulation changes and additional research is needed Not seen as a top priority for a majority of the trade The business requirements for the recommendations have not been developed The capability and technological infrastructure does not exist within ACE/CBP Systems The recommendations do require statue or regulation changes National Monthly Statement (phased implementation) Top Recommendations: Reconciliation Line-Level (eliminating 09 Entry; Liquidation use PSC process) (longer term) Monthly Summary 6

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional NATIONAL MONTHLY STATEMENT • The proposed next steps for designing and developing the requirement for the Monthly Statement include rolling out three different phases. • Each phase would be a version of the Monthly Statement that would include a new feature that accounts for a different type of financial transaction (e. g. , bills, refunds, protests, and possibly drawback). • Improves the Periodic Monthly Statement process and streamlines financial transactions Version 1. 0 • Requirements and format would include all entries in a calendar month for all POEs into one statement • Process would apply for both importer statements and broker statements • Eliminate the need for Daily Statements Version 2. 0 • Adding bills incurred during the referenced calendar month • Statute changes need to address 30 -day due date requirement • Immediate need is adding additional payment methods, like Pay. gov, to pay bills and in an aggregate manner Version 3. 0 • Adding refunds (excluding Drawback) that accrued during the referenced calendar month. This may be difficult from an accounting perspective • Collections and Financials need to be fully incorporated into ACE 7

U. S. CUSTOMS AND BORDER PROTECTION The Monthly Statement captures all transactions, including credits and debits issued from bills and refunds. DRAFT MONTHLY STATEMENT MOCK-UP: FOR DISCUSSION Monthly Entry Data Entry Summary Number Entry Type Entry Date Entry Summary Date Processing Port/CEE Filer Code Reference Num. Duty Tax ZZZ-00000010 6/1/2016 6/11/2016 01 ZZZ-000 0101 100000001 $90, 000 ZZZ-00000011 6/3/2016 6/13/2016 03 ZZZ-001 1703 100000002 ZZZ-00000012 6/5/2016 6/15/2016 06 ZZZ-002 2704 100000003 ZZZ-00000013 6/7/2016 MONTHLY MULTI ZZZ-003 MNTHLY 100000004 ZZZ-00000014 6/9/2016 6/19/2016 11 ZZZ-004 1703 ZZZ-00000015 6/11/2016 6/21/2016 01 ZZZ-005 2704 ZZZ-00000016 6/13/2016 6/23/2016 03 ZZZ-006 ZZZ-00000017 6/15/2016 6/25/2016 06 ZZZ-00000018 6/17/2016 6/27/2016 01 ZZZ-00000019 6/19/2016 6/29/2016 ZZZ-00000020 6/21/2016 MONTHLY ZZZ-00000021 6/23/2016 ZZZ-00000022 6/25/2016 ZZZ-00000023 6/27/2016 ZZZ-00000024 6/29/2016 Totals ADD CVD MPF Fees or Penalty HMF Total $4, 500 $900 $0 $100 $20 $50 $95, 570 $18, 000 $900 $180 $30 $100 $20 $19, 230 $20, 000 $1, 000 $200 $0 $100 $20 $21, 320 $0 $0 $0 $100 $250 $370 100000005 $14, 000 $700 $140 $0 $100 $20 $100 $15, 060 100000006 $0 $0 $0 $100 $200 $320 0101 100000007 $0 $0 $3, 000 $100 $20 $3, 120 ZZZ-007 1703 100000008 $0 $0 $0 $100 $20 $120 ZZZ-008 2704 100000009 $60, 000 $3, 000 $600 $0 $100 $20 $100 $63, 820 11 ZZZ-009 0101 100000010 $22, 000 $1, 100 $220 $0 $100 $20 $23, 440 MULTI ZZZ-010 MNTHLY 100000011 $50, 000 $2, 500 $0 $100 $200 $53, 320 7/3/2016 03 ZZZ-011 2704 100000012 $10, 000 $500 $100 $0 $100 $20 $10, 720 7/5/2016 06 ZZZ-012 0101 100000013 $0 $0 $0 $100 $20 $120 7/7/2016 01 ZZZ-013 1703 100000014 $36, 000 $1, 800 $360 $0 $100 $20 $38, 280 7/9/2016 Interest 11 ZZZ-014 2704 100000015 $20, 000 $1, 000 $200 $0 $100 $21, 420 $340, 000 $17, 000 $3, 400 $3, 000 $1, 500 $300 $1, 000 $366, 230 Other Bills and Refunds Protest or Claim Number Entry Type Entry Date Entry Summary Date Case Filing Date Entry Number Processing Port Liquidation Date PRTST CLAIM 001 6/1/2016 6/11/2016 01 ZZZ 0001112 0101 100000001 1/1/2016 PRTST CLAIM 002 6/3/2016 6/13/2016 03 ZZZ 00011123 1703 100000002 3/15/2016 Bill- 001 6/5/2016 6/15/2016 06 ZZZ 00011124 2704 100000003 - Bill- 002 6/7/2016 Totals 6/17/2016 01 ZZZ 00011125 2704 100000015 Duty ($25, 000) Tax Interest ADD CVD MPF HMF Fees or Penalty $4, 500 $900 $0 $0 ($100) Entry Summaries and Monthly Summaries filed within the Monthly Statement reporting period Net balance owed or refunded after aggregating all debits and credits for one final financial transaction Total ($19, 700) $0 $900 $180 $30 $0 $50 $1, 160 $10, 000 $1, 000 $200 $0 $0 $11, 200 ($30, 000) $1, 000 $200 $0 $0 ($50) ($28, 850) ($45, 000) $7, 400 $1, 480 $30 $0 $0 ($100) ($36, 190) Processed bills and refunds from VA reviews and/or Protest cases posted during the Monthly Statement reporting period 8

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional LINE-LEVEL LIQUIDATION Working Group recognized this is an inevitability, but stated it would be a paradigm shift to start tracking everything at the line level. Identified Benefits Line Level Liquidation Life Cycle Process 1. Line-level liquidation allows importers and filers to liquidate entry summaries without having to wait for lines subjected to AD/CVD case reviews or other CBP reviews to be resolved. 2. Since Drawback is filed at the linelevel, having line-level liquidation would allow importers to submit their Drawback claims a lot faster. 3. Importers with limited importer goods and Special Program Indicators (SPIs) would benefit form line-level liquidation. 4. With line-level liquidation, an importer can file a protest at the line-level and closeout remaining transactions. 5. CBP operates at the line-level and many of the post-summary processes are executed at the line level (e. g. , drawback, Recon, Protest) which can help streamline CBP’s workload. Open Items § Can CBP have two liquidation processes (header & line-level) for filers to choose? § Identify downstream effects and touch points including how MPF wo be handled § Confirm line-level liquidation should be completed before reconciliation and monthly summary § Confirm legal challenges 9

U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional MONTHLY SUMMARY: Analyzing How to Create a Monthly Summary Requirements Step 1 Output Identify er Import r Numbe Identify header and line-level requirements for CBP to process "reconfigured" entries based on previous Working Group feedback Step 2 Surety Number $ % e igne Cons ber Num Importer Number Surety Number Bond Numbers ➭ Reviewed Entry Summary (CBP Form 7501) input fields and identified the inputs CBP requires to facilitate trade and conduct trade enforcement activities Bond Numbe rs Coun try o f Orig ins = Analyze Based on the Step 1 assumptions, determine opportunities where importers across different industries could potentially benefit from transitioning to a Monthly Summary format Step 3 - + Manufacturer ID Selected importers from different industries and analyzed over 100, 000 entries, consisting of 250, 000+ lines to better understand their respective monthly importing trends Consignee Number HTS Codes Entry Types Country of Origins … Reconfigure Consolidated line level information under the identified key requirements and reconstructed a proposed Monthly Summary format Based on Step 2 activities, restructure data to form a more streamlined, efficient and user-friendly Monthly Summary format Examples Importer #1 Importer #2. Importer #3. Importer #4. 4, 236 200 5, 789 103 Entries consolidated into 1 Monthly Summary (Petroleum Industry) (Pharmaceutical Industry) (Apparel Industry) (Automotive Industry) 10

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional MONTHLY SUMMARY: Mockup, Benefits, and Other Feedback A Monthly Summary example Identified Benefits 1. Organizing thousands of entries into a single Monthly Summary, the cost and manpower of an importer to maintain and for CBP to verify compliance would potentially be dramatically reduced. 2. Instead of managing hundreds or even thousands of financial transactions (including checks), the importer can file a single Monthly Summary with a single estimated amount of duties, taxes, and fees due at the 10 th calendar day of the subsequent month. 3. The data provided to CBP and PGAs from the trade community will be updated and more accurate. Currently, there is a 10 -day requirement to file an entry summary. If the Monthly Summary is due in the following month, then importers have more time to modify their entry information with more informed/precise data. Feedback from the trade and Partner Government Agencies 1. Further define proposed requirements and structure of the Monthly Summary 2. Due to the time, resources, and investment needed to participate in a monthly summary program, the fees (i. e. , MPF) need to be reduced to add to as a benefit 3. CF-28 and Audit pools would need to be reduced as an added benefit 4. Propose a cap on liquidated damages to offset the financial risk 5. Census requires the Monthly Summary to be submitted by the 10 th calendar day of the subsequent month in order to meet U. S. economic and GDP reporting requirements 4. The use of reconfigured entries on Monthly Summary enables each issue with respect to the covered imports to be handled individually without reference to other reconfigured entries. This allows importers to receive refunds without having to wait for all other issues to be resolved. 11

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional The Reconciliation changes and recommendations are intended to automate and simplify the paper-based and cumbersome process. • A lot of good discussion with the working group on the Reconciliation program improvements to be implemented in January 2017 • Group recommended the trade community see how the upcoming improvements work with their business operations before additional enhancements are added into ACE • Reconciliation is recognized as one program that needs the most streamlining Remaining Reconciliation Recommendations Extend liquidation for flagged entries/lines an extra year from the date of entry. This will change the current process for the various types of Reconciliation and associated liquidation periods (e. g. , NAFTA). Eliminate the separate filing of 09 entry. This will be achieved through the Post-Summary Correction (PSC) process. If the reconciled entry requires updates (e. g. , classification or value), the filer will make the changes and then the entry will then be subjected to liquidation. If no PSC is made, it indicates no changes are needed on the reconciled entry and is then subjected to liquidation. Allow a filer to retroactively flag/un-flag an entry/line through a PCS in ACE up to the deem liquidation date. When unflagged, the entry/line will revert back to the original deem liquidation date. Receive and process reconciliation issue changes for an entry in an aggregate manner (i. e. rolled up by Harmonized Tariff Schedule (HTS), country of origin, Manufacturer Identification Number (MID), or other common data element(s)) or at the line level using the entry number and reconciliation adjustment. Systemically account for all changes at the line level. Allow for the filer to request accelerated liquidation of the underlying entry when an entry/line is reconciled. Implement the Simplified Processes Reconciliation requirements in a phased manner in order to accommodate more complex entry types (e. g. , 03 -Consumption AD/CVD). 12

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional Reconciliation Process Concept • Filers will flag an entry line for reconciliation which extends the liquidation date an extra year • The filer can unflag the entry line during the normal PSC process timeframe within the first year, which will revert the liquidation date back to the one-year mark • If no reconciliation changes are required, no action is required and will be set for liquidation • Reconciliation changes made via the PSC process and can be done in an aggregate manner 13

Pre-Decisional U. S. CUSTOMS AND BORDER PROTECTION Pre-Decisional Question and Next Steps For additional information, please contact: Randy Mitchell, Director, Commercial Operations and Entry Division Randy. Mitchell@cbp. dhs. gov or Simplified. Processes@cbp. dhs. gov 14