Customs Value and Reconciliations

By Alex Romero
A.F. ROMERO CO

When an importation is made in to the country, it is self-evident that a correct Customs Value must be declared. It should not be necessary to remind a party that the Customs Value declaration on an importation must be the correct value.

There is no law or regulation that allows an importer to simply estimate the value of the imported product and then leave it at that, even if the product is duty-free, much less so if the product does pay duties.

The correct Customs Value of the imported product must be reported.

There are two legal ways to do so;

1.	Declare the correct customs value when it is imported.
2.	Estimate the customs value when it is imported, and then subsequently correct the declared value by filing a Reconciliation report.

Most maquiladoras operate by estimating the value of the product, and subsequently filing a corrective Reconciliation report.

If you estimate the value at the time of importation into the USA, and fail to subsequently correct the value, you are subjecting the U.S. company to charges of declaring false values to the U.S. Government. Believe it or not, there are penalties and sanctions for filing false values and failing to correct them, even if the product does not pay duties or MPF. Obviously the penalties and sanctions are worse if the product does pay duty, and it makes sense, if the declared value is lower than the true value of the product, the U.S. importer is underpaying duties.

How can you tell if your maquiladora is reporting estimated value or actual value?

The Customs invoice used for importation declares material value and "value added".
Is the material value shown on the Customs invoice true material value or is it

underdeclared or overdeclared? The value-added shown on the Customs invoice represent the actual amount of money that the U.S. company will send to the Mexican facility for the work performed? It is easy to say ''yes'', but you must be careful, if it is ''yes'', it means that if U.S. Customs audited your records, and summed up all the value-added that was declared on the import invoices for a year, and it checks the U.S. company's accounting books to check how much money was paid to the Mexican facility, the two must equal. If they don't, then the value-added shown on the Customs invoices is estimated, not real.

And, and, and the customs invoice must also declare, whether in a separate column, or integrated into the value-added charge, the depreciation of all the equipment and machinery that is in the Mexican plant to assemble or produce the imported product, whether it is U.S.-owned or Mexican-owned, and it must also declare the cost of any supplies, tooling or any other production-related purchases that were used and consumed in Mexico, whether paid by the U.S. company or the Mexican company. (if paid by the Mexican company be careful not to double-declare).

If, after this analysis, you determine that the value is estimated, not actual, then you must take the necessary steps to file a Reconciliation report.

Given that the correct Customs Value must be reported, U.S. law allows, permits, consents, suffers, acquiesces, tolerates to declaring estimated values, IF , the importer will subsequently Reconcile the values by correcting the value. Given that Customs will allow a subsequent Reconciliation of values, there is ONLY ONE WAY in which to do so--- by filing a RECONCILIATION REPORT, in the manner, format and procedure dictated by U.S.Customs.

HERE IS WHAT U.S. CUSTOMS STATES IN THE FEDERAL REGISTER:

Reconciliation is the process that allows an importer, at the time an entry summary is filed, to identify undeterminable information (other than that affecting admissibility) to CBP and to provide that outstanding information at a later date. The U.S. importer identifies the outstanding information by means of an electronic "flag" which is placed on the entry summary at the time the entry summary is filed. The issues for which an entry summary may be "flagged" (for the purpose of later reconciliation) are limited and related:

1.	Value issues
2.	Classification issues, on a limited basis
3.	Issues concerning value aspects of entries filed under heading 9802, HTSUS
4.	Post-entry claims under 19U.S.C. 1520(d) for NAFTA refunds for merchandise as to which a NAFTA claim was not made at the time of entry. [this option is when the entry summary is flagged for NAFTA reconciliation, but which was not claimed NAFTA at the time of entry.]

The means of providing the outstanding information at a later date relative to the flagged issues is through the filing of a Reconciliation entry. Any adjustments in duties, taxes, and MPF will be made at that time.

HERE IS MORE USEFUL INFORMATION FROM AFRCO:

1.	The purpose of the Reconciliation is to report to U.S. Customs the actual value of merchandise imported into the USA from Mexico during the reporting year.
2.	The reporting year can be fiscal or calendar. It is up to the U.S. importer.
3.	There is a deadline to file the report. If the U.S. importer does not file by the deadline, U.S.Customs will issue penalties for failure to file the Reconciliation.
4.	The deadline is 15 months from the oldest importation. For example, if the first importation of the reporting period is January 1, 2003, the deadline to file the entire report is March 31, 2004-----15 months later.
5.	To use the RECONCILIATION format dictated by Customs, the U.S.importer must have a Customs Bond with a Reconciliation Rider, see text at the end of this.

There is more to the Reconciliation Process than what is included here. If you need additional information please email me with your questions, and I will respond.