oversight

Accounting for Import Duties on the Bureau of Customs Automated Revenue Accounting System

Published by the Government Accountability Office on 1971-06-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Dear Mr. Ambrose:

        We have made a revxew of the accounting                  for Import dutLes by
the Bureau of Customs automated revenue accounting                       system. We found
that input data submitted by the port of Baltimore                       and the New York
Region and reJected by the computer as erroneous or unacceptable
was not being corrected             promptly.      The re-jected data consisted          of
errors in the coding and recording                 of cash collections        and errors
related      to other than cash, referred            to by the Bureau as noncollectlon
items.
                     .
        Failure    by the regions and ports to promptly correct                   errors
in the coding and recordrng              of cash collections         results   in delays
in credltrng       the collection        to the proper account or entry transaction.
Failure      to promptly correct         either cash collection          or noncollection
items can also result            in fl) delays in llquldatxng            an entry and in
notifying       the importer       of the liquidation,        (2) delays in billing
the importer *for additional             duty, (3) delays In making refunds to
the importer,        (4) billing       an importer     for duties which have been
paid, and (5) inadequate             records of revenue collections            for management
purposes.

ACCOUNTING FOR IMPORT DUTIES

        Input data to the automated revenue accounting       system on import
duties is submitted to the Bureau's Data Center in Silver           Spring,
Maryland,     by the port 5; of entry and the regional  offxes.       Input
data includes      lnformatlon  such as 11) entry number, importer number,
and duty estimated by the importer at the time of entry,           (2) cash
collection     of the estimated duty, (3) liquxdatlon    of the entry based
on the 3ureauls determlnatlon        as to the correct amount of duty, and
(4) subsequent collection       of any amounts due.

      As designed,   if all the input data is correct,    when the Bureau
determines   the actual amount of duty at lrquidatlon,     the Data Center
brlls   the importer   for any amount due, makes a refund for any
overpayment,    or advises the importer   or his agent that the estimated




                              50 TH ANNIVERSARY         1921- 1971
    duty      was correct.      Subsequent collections        of amounts bllled         remove    the
    accounts       receivable    from the system.

             During the processing      of input data, the computer rejects       erroneous
    or    unacceptable    input data and lists      the rejected  data on weekly listings
    which are sent,to        the regions and ports for corrective      actlon.     Separate
    listings      are prepared for rejections       relatlnglto  (1) cash collection
    transactions       and (2) noncollectlon     transactlons.

             The rejected       cash collection       listing     includes      errors in the coding
    and    recording       of cash coliectlons.           The rejected       cash collections      shown
    on this listing          are credited     to an unapplied          receipt     account until    the coding
    and recording          of the collection       has been corrected,             An end-of-month
    llstlng      includes cash<collectlon           stems rejected         for the week, plus all
    previously        rejected    cash collection         items,that      have not been corrected.
    The weekly listing           of reJeCted     noncollection         ltems,lncludes      items rejected
    for various         reasons, such as an xmporter's              number shown on an entry
    document which does not match an assigned number in the system. Periodxally,
    the listing        of rejected     noncollection         Items Includes        some types of
    previously        rejected    data that has not been corrected,

           During our review we visited     the port of Baltimore and the New
    York Regional Offlce     to determine   the action being taken to correct the
    rejected     input data on import duties.,

    REJECTED DATA NOT CORRECTED ON A
    TIMELY BASIS

            For the Baltimore     Region, the end-of-month     listing   of rejected    items
    for September 1970 showed that there had been 410 errors               in the coding
    and recording      of cash,collectlons,      including  211 cash transactions     for
    correction     by the Baltimore      Port.  Our review of the 211 Baltimore       Port's
    reJeCted    cash transactions       showed that they,were    not being corrected      on
    a timely    basis:
.
           --129   items had been rejected         prior  to September       1970, including       one
              transaction  first  rejected        &n October 1968,

           --20 of the 129 items       rejected      prior to September       1970 still     appeared
              on the end-of-month      listing     for December 1970.

           The weekly llstlnET;of   rejected    noncollection     transactions    for
    September 1970 contained      about 3,600 -input rejectlons         for the Baltimore
    Region of which about 1,300 were applicable             to the Baltimore    Port.
    Our review of the 1,300 Baltimore         Port's   rejected   noncollectron     trans-
    actions showed that they were not being corrected             on a timely basis.
    The llstlngs    for the Baltimore     Port for September 1970 included           items
    such as:
                                                                                                   -2-
           Code                  Quantity                   Cause of computer        rejection,

             V                       105              Entry of merchandise recorded    III
                                                      computer for over 2 weeks;    however,
                                                      there IS no record of collection
                                                      of duty

             6                        21               No valid  Importer number on file
                                                       for which a refund 1s due

             z                       240              The importer's   number does not
                                                      match a corresponding   number z.n
                                                      the system

        Of the 105 Items, with estimated duty of about $848,000, on the
September llstlng          where there was no record that duty had been collected
(code VI, 78 items, with estimated duty of about $814,000 were still
shown as uncorrected            on the December Ilstlng,        lncludrng      some which
dated back to July 1967. We were Informed that the port d1.d not take
prompt corrective          actlon on this type of error because it would eventually
be corrected         when the entry was processed for llqurdatlon.                  However,
since a conslderable            period of time can elapse between the time the com-
puter rejects         the Input data and the trme the entry 1s llquldated,                   we
believe      that every effort         should be made to correct          these items promptly.
One of the benefrts           of ADP revenue controls        1s to ascertaln        that estimated
duties declared at entry are, 1n fact, collected.                      Unless efforts       are made
on a timely basis to correct              these rejected     items, the full benefits           of this
control     are not being attained.            The financial      management ooffxer        at the
Baltimore       Regxon agreed that these items should be corrected                   promptly.
   .
         Similarly,      we noted that for the 21 Items where a refund was due
the importer         but the importer's       number could not be ldentlfled            (code 61,
13 items remained on the error listing                as uncorrected         as of December 31,
1970. We found that (1) four of the 13 items had been llquldated                            manually
on the port's         records and the monies refunded In parch and August 1969,
but actlon had not been taken to correct                 the transactlons         In the revenue
accounting        system, (2) action had not been taken to locate the data needed
to correct        four entries,       (3) actlon had been taken by the port to correct
two    Items which had not been plcked up ln,the computer and were still
llsted     as uncorrected,         (4) one item was lrquldated          In January 1971, and
 (5) action had been lnltlated              to obtarn the importers'          number for the
remaining       two items.

     About 240 of the 1,300 rejected      noncollectlon    Items for the port
of Baltimore   for the month of September, were classlfled        as 2 type errors
where the rejectlon    occurred because the importer's       number shown did
not match a corresponding      number In the system.    Action was not being                              L
taken to resolve    and remove these types of items from the error llstlngs.

                                                                                                  -3-
  National    Offxe      offlclals      advised us that these computer reJeCted items
  are not consldered           matters that require         Immediate resolution          by the field
. offices    because     correctlon       of  the   data   has  no  effect    on the    liquidation
  of the entry.         We believe       that to receive       the full benefit       of the system
  these errors should be corrected                 promptly because if the importer               is
  not properly       identified      prior    to liquidation,       the Data Center cannot
  immediately     notify       the importer      of liqurdatlon,       bill   the importer       for
  additional     amounts due, or make a refund to the importer                     for any over-
  payment.     These actlons are therefore               delayed until      the port researches
  its files    after     llquldatlon        to obtain the name and address of the importer
  and Inserts     it on a notlce of llquxdatlon,                 or on a billing      for additional
  duty prepared by the Data Center, or furnishes                     the information         to the
  Data Center In order that a refund can be made.

         We also visited     the New York Reglonal Office        in October 1970 and
 discussed the correctron        of computer reJeCted      Items.    Although we did
 not analyze these llstlngs,        we did note that, as In the Baltimore            Region,
 certain    reJected    Items were not being corrected,         or were not being corrected
 in a timely manner.         The end-of-month    listing   for September 1970 showed
 that about 7,000 cash collection          items had been rejected       by the computer
 because of errors In the coding and recording             of cash collections.         We
 noted that about 5,500 reJected cash collection              Items, or about 79 percent,
 were for prior mont,h transactlons          some dating back to March 1969. Of ap-
 proximately      31,000 Items appearing      on the weekly llstlngs       of noncollectlon
 errors   for the month of September, about 4,700 were classified                as 2 type
 errors and about 5,200 were classlfled            as V type errors,     dlscussed previously
 in connection      with the port of Baltimore,        on which no corrective      action
 was berng taken.

         In dlscusslng        the correction of computer rejected         items with National
 Offrce     officials,       we were advised that considerat%on        is being given to
 establlshlng          a monthly statistical  report   system for computer IeJeCted               items.
 We were also informed by National           Office  offlclals      thattwo reglonal         offxes
 are in the process of documenting           the detailed      procedures     followed     in,the
 correction        of rejected    items, and that these procedures will            be used by
 the National          Office as an aid in the preparation        of a revised      correction
 procedures        manual to be used by all ports and regions.

         We belleve  that these proposed actions can be useful in solving
 this problem, if appropriate         steps are taken to analyze the type of errors
 that are occurrlng      and lnstructlons      Issued to the ports and regions ad-
 vlslng    them of why the errors are occunxng and the steps needed to reduce
 the number of errors,        We believe    that emphasis should be placed on the
 effect    that these errors,     and the failure      to promptly correct xdentifled
 errors,     have on the proper operation        of the system.


                                                                                               -4   -
      We appreczate the cooperatron    extended to our representatives
during our review.   Please advrse    us of any actions taken on theOmatters
dlscussed In this report.

                                        Sincerely   yours,




                                       Charles P. McAuIey              I
                                       Assistant Dlrector              L



The Honorable Myles J. Ambrose
Commlssloner
Bureau of Customs




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