International rade oday’s ACE Weekly ews Brief€¦ · Send news materials to [email protected] Email: [email protected] C 26 W C N I EIRIAL BSINESS EAARERS 25 W C NW

WEDNESDAY, SEPTEMBER 21, 2016

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Miscellaneous CBP Releases (September 16, 2016)CBP issued the following releases on commercial trade and related matters:

• ACE Export PGA Discussion for Software Developers (here)• U.S.-China Joint Intellectual Property Rights Enforcement Operation (here).


• Dog and Cat Protection Act Fact Sheet (here)• ACE 353 Customs Events Advisory Details (here).

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2—ACE WEEKLY NEWS BRIEF WEDNESDAY, SEPTEMBER 21, 2016


CBP Faces Challenges Funding New ACE Capabilities Post-2016, CBP Official SaysCBP faces a challenging budget environment for ACE as it works to find funding for improve-

ments and new functionalities long desired by the trade community, said Cynthia Whittenburg, deputy executive assistant commissioner at CBP’s Office of Trade, at a National Customs Brokers & Forwarders Association of America conference in Washington Sept. 12. Following completion of “core” ACE in December, the “funding profile” will “adjust downward” as CBP will be legally required to use ACE operations and maintenance funding for operations and maintenance, and will not be able to use the funds for building new capabilities, including for partner government agencies (PGAs). “So when you see in our appropriations and funding, ‘ACE,’ those dollars are going strictly to fixing bugs and keeping the system running,” she said.

Funding for new ACE development will instead have to come from the budget of the CBP program or PGA that wants the new functionality, Whittenburg said. For example, any enhancements to ACE draw-back processes after Dec. 31 will have to come from CBP’s drawback program budget. CBP is working with the Office of Management and Budget on a mechanism for PGAs, through the Border Interagency Executive Council (BIEC), to provide CBP with money for development of new PGA capabilities, she said. “That’s our world going forward.”

Whittenburg addressed the conference immediately following presentations from several customs brokers that detailed a lengthy list of ACE concerns. Brokers await several functionalities CBP has deemed “post-core,” including house bill release, an ACE Automated Invoice Interface (AII), Section 321 filing through the Automated Broker Interface (ABI) and filing for many PGAs, said Stuart Schmidt of UPS. Existing PGA requirements have ballooned the amount of data brokers have to obtain from their importer clients, said Myra Reynolds of John S. James. For example, one shipment of auto parts required filing of data elements for eight programs within four agencies, including a disclaim from medical device require-ments for a car cover, she said. System outages and messaging issues continue to plague brokers attempting to enter cargo, particularly via land borders, said Amy Magnus of A.N. Deringer.

The completion of “core” ACE is only the “end of the beginning,” Whittenburg said. The legacy Au-tomated Commercial System (ACS) was built incrementally over a period of 20 years starting in the 1980s, she said. ACS was reaching capacity, and getting funding for a clunky, outdated system would have been difficult. From a budgeting standpoint, CBP had to set limits on what it would build in its initial implemen-tation of ACE “in a way that those who fund us can understand,” Whittenburg said. “When we stick the thermometer into the system, it’s done. It might be rare, but it’s done.”

Streamlining PGA requirements is part of the work CBP still has ahead of it, Whittenburg said. Working through the BIEC, CBP will look to harmonizing data elements between agencies, such as manu-facturer and product codes. And now that CBP has shown PGAs the potential of getting data electronically, the “next stage of our conversation needs to be about risk management,” she said. Even CBP, with its large staff, cannot examine every shipment, she said. CBP also plans to work on addressing system availability issues, Whittenburg said. Actual ACE availability, including scheduled down time, is around 93%, “ac-counting for slowdowns and issues related to PGA availability,” she said. “It is our goal to get that number much higher, closer to 99%.” The problems are frequently related to network issues, and CBP needs to upgrade network switches and servers to address them, she said. — Brian Feito



Delay of ACE Deadline for Reconciliation, Drawback May Not Be Enough, Customs Lawyer Says

CBP and the trade community may still not be ready for ACE drawback and reconciliation by Oct. 29, despite CBP’s recent delay of the deadline, customs lawyer Michael Cerny said during a panel discussion at a National Customs Brokers & Forwarders Association of America conference in Wash-ington Sept. 12. Both systems have been “barely tested,” and software developers still aren’t ready with programming, said Cerny, who chairs the Trade Support Network’s drawback subcommittee. CBP’s CATAIR requirements and business rules still aren’t set with less than two months before the deadline, a situation reminiscent of the approach to CBP’s original November 2015 deadline for all of ACE, he said.

Complicating matters is CBP’s late realization that the ACE certification testing environment wasn’t working for reconciliation and drawback because of a glitch in the system wherein no import entries were available to reconcile or claim drawback. Only since the third week in August has ACE certification been available, with “dummy” entries added for testing. Software developers need business rules and CATAIR (CBP and Trade Automated Interface Requirements) to be set before they complete their programming and subsequent testing, and filers need time after that to adjust their business practices. Meanwhile, CBP rec-onciliation personnel are only now undergoing training, and drawback personnel won’t be trained until the end of September, raising concerns over the agency’s own readiness. CBP was not immediately available for comment.

CBP recently delayed its original Oct. 1 deadline for post-release processes in ACE, after trade groups asked for additional time due to readiness concerns. The trade community had asked for 60 days, mindful of the Obama administration’s overarching mandate of completing ACE “core” by the end of the year, but were only given 29, Cerny said. Though that still may not be enough time, moving to Oct. 29 does take the deadline out of the “reconciliation season” surrounding the end of some companies’ fiscal years on Sept. 30. “I think they saw this was a potential nightmare,” he said.


• FDA ACE Affirmation of Compliance updates for Medical Devices and Radiation Emitting Prod (here)

• Updated ACE CATAIR Documentation Posted (here)• ACE Cargo Release Status Notification message delays (here)• ACE CERTIFICATION Outage, Wednesday, Sept. 14 (here)• Reminder—ACE Mandatory Filing Date for National Marine Fisheries Service

Sept. 20, 2016 (here)• ACE HTS Query recent modifications (here).

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CBP Report to Congress on Broker Importer ID Standards Delayed by DHS RejectionWork continues on a report due to Congress on how CBP can improve importer verifications through

customs brokers after the Department of Homeland Security sent it back to CBP following a review, said Jerry Malmo, director of CBP’s Commercial Enforcement Division. DHS sent the report back to CBP because it was “too specific on what our plans were,” said Malmo, who spoke Sept. 12 at a National Customs Brokers & Forwarders Association of America conference. Still, the agency recently started briefing lawmakers on the report, which was due Aug. 22 as part of the customs reauthorization law’s Section 116.

CBP rewrote the report and it’s now again being reviewed by DHS, Malmo said. The report likely will be released publicly after DHS approves CBP’s submission to the House Ways and Means and Senate Finance Committees, he said. Malmo was unable to discuss some of the specifics involved in the report. While industry continues to gauge the impacts of the coming regulations on importer ID in Section 116, it’s important to also look at Sections 114 and 115 that also update CBP’s importer-of-record numbering and bonds based on risk assessment, Malmo said. “As you’re looking at TFTEA and the trade act, you need to kind of look at it within the context of compliance around the risk of new importer and non-resident importers and the risk that Congress feels they impose on our ability to collect revenue,” he said.

There was some clear anxiety at the conference over CBP’s plans. The notion of “reasonable proce-dures” for verifying an importer described in Section 116 is an area of concern and could be “one of those times we are caught between CBP and the client,” said Mary Jo Muoio of Geodis, who is NCBFAA Cus-toms Committee chair. “You want to know who your customer is” because there’s a better chance of getting paid, but at the same time “we’re not a law enforcement agency,” she said. Considering that the regulatory changes “will impact us dramatically” and CBP’s plans are still in draft form, “it’s not too late to bring us into the room,” said Alan Klestadt, a lawyer with Grunfeld Desiderio and the NCBFAA’s customs counsel. While Klestadt said he is aware CBP accepted input from various industry groups on Section 116, he’s also “equally aware of the stone cold silence that’s come back from the agency.”

While acknowledging Klestadt’s concerns, Malmo said some of CBP’s approach to this issue so far is partially due to the leeway allowed by the law and the prioritizing of resources. Whereas CBP was re-quired to issue regulations for new antidumping and countervailing duty evasion enforcement processes, for example, the agency isn’t under a time constraint to issue regulations under Section 116, he said. Malmo is also still operating under a “mandate” to have the broader broker regulatory update out by January, though that mandate preceded the additional work created by the customs law.

CBP faces an ongoing challenge related to ACE because the account functionalities were built in the “legacy ACE platform,” Malmo said. “So we know that we have to go back and revisit that because it’s an old system and needs to be modernized into the new ACE system and, quite frankly, the functionality we

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did get when we got ACE accounts doesn’t really work as well as we need it to work,” he said. With ACE headed toward an operational and maintenance mode, “we have to get in line with everyone else in the agency that wants to change or add functionality to ACE.”

The new data elements on the Form 5106 will allow CBP to fulfill elements of Section 114 that re-quires a CBP database for importers of record, Malmo said. That form continues to be under review within the government, but is expected to be approved soon, he said. Despite previous plans to release a mobile application for Form 5106 access on smart phones and tablets, that idea may be scuttled, Malmo said. That 5106 app effort started some two years ago and with Section 116 becoming law, it may no longer be useful, he said. — Tim Warren

FWS to Shift to Series of Tariff Flags, Different ACE Filing Requirements for EachThe Fish and Wildlife Service will soon begin allowing ACE filing of data required by the agency

under an approach that includes several tariff schedule flags with differing filing requirements, said Sheila Einswaller, a senior wildlife inspector at the agency, during the National Customs Brokers & Forwarders Association of America Government Affairs Conference Sept. 12 in Washington. FWS recently announced the beginning its pilot, but the test is not a “live functioning pilot at this time” as FWS is still working with developers and CBP to get business rules in place. Though the timing of live piloting is still unknown, FWS has completed the exercise of dividing the tariff schedule into four “buckets,” with different data element requirements for each based on how likely it is that FWS data is required for any given 10-digit subheading, she said.

FWS will put the 137 subheadings that always require data under the extended data set, or “EDS,” flag, Einswaller said. The second flag, “N scenario / Y scenario,” will include tariff codes that cover only animals and fall under FWS jurisdiction but may be exempt from full filing requirements, she said. These flags will require the filer to answer a series of questions that “works through providing us the evidence that a particular commodity is exempt from filing.” For example, one series of questions might ask for the species’ scientific name, then whether it is domesticated. Another may discern whether the product is shellfish that is exempt from FWS filing requirements, Einswaller said.

A third flag includes subheadings that are “very likely” subject to FWS filing requirements but don’t only include animals. These subheadings may also cover plastic, rubber and linen, Einswaller said. For these 667 subheadings, FWS has set up a “certified disclaimer” process whereby products that are not subject to FWS jurisdiction may be disclaimed. The disclaimer will be associated with the importer, “our regulated entity,” rather than the current disclaimer associated with the broker, she said. The rest of the tariff schedule will not be flagged, though FWS “will provide additional guidance of the kind of things we often find that are [FWS-regulated] under these tariff codes, Einswaller said. For example, dyes hardly ever require FWS data, but may in rare cases if the importation is of cochineal insects used to make red food dye, she said.

For any “yes” flag, including the EDS flag, an answer of “yes” for the “N scenario / Y scenario” flag, and the “disclaimer” flag when the product is not disclaimed, the extended FWS data will come into FWS’ eDocs system for processing, Einswaller said. The shipment will have to go through an FWS-designated port,



unless a port exception permit is issued. In a change from current practice, FWS will no longer issue port ex-ception permits for ports without FWS personnel, though it may still issue the permits for ports with FWS per-sonnel that are not designated for the commodity in question. Any shipment with a flag that results in a “no,” such as an answer of “no” for the “N scenario / Y scenario” flag or a disclaimer filed on an entry with a “certi-fied disclaimer flag,” will receive an automated “may proceed” from the agency, she said. — Brian Feito


• Cutover Plan for Statements in ACE (here)• Publication of a Federal Register Notice Announcing the Conclusion of the FSIS Pilot (here)• Guidance for Cargo Moving In-Bond from an FTZ to a Bonded Warehouse (here)• ACE Entry Summary Business Process 7.5a—Trade (here)• Two arrested in crackdown on Northern California businesses suspected of selling counterfeit

and misbranded goods, including medications (here)• CBP Launches Trade Facilitation and Enforcement Webpage (here).

CBP’s Smith, NCBFAA Call for Continued Funding for ACE After December 2016 DeadlineAs implementation of core ACE capabilities nears completion, CBP and the trade community “need to

keep an eye on” congressional budgets to make sure the resources are in place for improvements after 2016, said Brenda Smith, executive assistant commissioner of CBP’s Office of Trade, at the National Customs Brokers & Forwarders Association of America Government Affairs Conference on Sept. 12 in Washington. Though completion of core ACE by the Obama administration’s December 2016 deadline is “in the bag,” there is “vast room for improvement,” Smith said. CBP and the trade community need to make sure that ACE is not only the “best of the best” single window in 2016, but continues to be going forward, she said.

ACE core is only what CBP needs to get day-to-day processing done, Smith said. “It isn’t the fancy stuff. It’s not all the things that are going to make our leaves easier.” More simplified processes still need to be put in place, as do reports, tools and information that CBP would like to inform its management of risk and that the trade community can use to inform its business decisions,” Smith said. CBP has also “done a lot of thinking” about a North American single window combining ACE with systems from Canada and Mexico.

CBP “still has a lot of work ahead of us” over the next month and a half as it prepares to meet the Oct. 29 deadline for post-release processes like reconciliation and drawback in ACE, Smith said. But looking fur-ther ahead, the agency’s challenge over the next 12 months will be prioritizing the work that remains on ACE, making sure the right stakeholders and subject matter experts “are at the table,” and doing the political work in Congress and at the White House “to make our dream of trade in 2025 or 2050 a reality,” she said.

An NCBFAA position paper distributed at the conference also highlighted the need for funding for ACE to continue after 2016. Many “significant and necessary” functions have been set aside during the

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development process so that CBP could meet the administration’s “arbitrary” December 2016 deadline, in-cluding the ability to file de minimis entries in the Automated Broker Interface, filing of entries larger than 9,999 lines, house bill release and the Automated Invoice Interface. “These and other features necessary for improving the trade functions at CBP and the regulatory agencies are unfinished,” the NCBFAA said. “Plans to address these and omissions refer to ‘next year’ or are unspecified—and clearly depending on funding that permits more than merely maintaining an incomplete system,” it said.

ACE has also been “plagued with system outages, failures to perform its necessary functions, and significant added and unacceptable costs to customs brokers,” the position paper said. This unreliability has had its greatest impact on the land borders with Canada and Mexico, it said. “CBP must be pressed to address the instability of ACE/ITDS operations” alongside the “long list of missing functionality,” the NCBFAA said. “For its part, Congress must view this big investment as still investment as still a ‘work in progress,’ nearing completion – but with some distance to go."

Email [email protected] for a copy of the position paper.

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International rade oday’s ACE Weekly ews Brief€¦ · Send news materials to [email protected] Email: [email protected] C 26 W C N I EIRIAL BSINESS EAARERS 25 W C NW