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 -5-
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)