DHS OIG, OIG-20-79, CBP's Entry Reconciliation Program Puts Revenue at Risk (2020)

(cid:54)(cid:40)(cid:49)(cid:54)(cid:44)(cid:55)(cid:44)(cid:57)(cid:40)(cid:3)(cid:54)(cid:40)(cid:38)(cid:56)(cid:53)(cid:44)(cid:55)(cid:60)(cid:3)(cid:44)(cid:49)(cid:41)(cid:50)(cid:53)(cid:48)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49) CBP’s Entry Reconciliation Program Puts Revenue at Risk (REDACTED) (cid:58)(cid:36)(cid:53)(cid:49)(cid:44)(cid:49)(cid:42)(cid:29)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:71)(cid:82)(cid:70)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:54)(cid:72)(cid:81)(cid:86)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:23)(cid:28)(cid:3)(cid:38)(cid:41)(cid:53)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:86)(cid:3)(cid:20)(cid:24)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:20)(cid:24)(cid:21)(cid:19)(cid:17)(cid:3)(cid:3)(cid:39)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:68)(cid:3)(cid:180)(cid:81)(cid:72)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:15)(cid:181)(cid:3)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:23)(cid:28)(cid:3)(cid:38)(cid:41)(cid:53)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:86)(cid:3)(cid:20)(cid:24)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:20)(cid:24)(cid:21)(cid:19)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:90)(cid:85)(cid:76)(cid:87)(cid:87)(cid:72)(cid:81)(cid:3)(cid:83)(cid:72)(cid:85)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:82)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3) (cid:36)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:85)(cid:72)(cid:87)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:39)(cid:72)(cid:83)(cid:68)(cid:85)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)(cid:3) (cid:54)(cid:40)(cid:49)(cid:54)(cid:44)(cid:55)(cid:44)(cid:57)(cid:40)(cid:3) (cid:54)(cid:40)(cid:38)(cid:56)(cid:53)(cid:44)(cid:55)(cid:60)(cid:3) (cid:44)(cid:49)(cid:41)(cid:50)(cid:53)(cid:48)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49)(cid:3) September 30, 2020 OIG-20-79 September 30, 2020 SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL Department of Homeland Security Please send your response or closure request to [email protected]. Consistent with our responsibility under the Inspector General Act, we will provide copies of our report to congressional committees with oversight and appropriate responsibility over the Department of Homeland Security. We will post a redacted version of the report on our website. Please call me with any questions or your staff may contact Sondra McCauley, Assistant Inspector General for Audits, at (202) 981-6000.

Attachment cc: Brenda Smith, Executive Assistant Commissioner, Office of Trade, CBP www.oig.dhs.gov SECURITY SENSITIVE INFORMATION WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by 5 U.S.C. 522 and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION DHS OIG HIGHLIGHTS CBP’s Entry Reconciliation Program Puts Revenue at Risk September 30, 2020 What We Found Why We Did This Audit In 2015, the U.S. Customs and Border Protection (CBP) identified revenue collection as a Priority Trade Issue. CBP scrutinizes revenue collections from importers because of illicit attempts to evade duties, taxes, and fees. Reconciliation is the means by which an importer is able to correct information initially provided to CBP at the time of import. Our audit objective was to determine to what extent CBP’s reconciliation program and reporting is accurate and complies with requirements.

What We Recommend We made four recommendations to improve the overall effectiveness of the program. For Further Information: Contact our Office of Public Affairs at (202) 981-6000, or email us at [email protected] www.oig.dhs.gov CBP cannot ensure its Entry Reconciliation Program reporting is accurate or complies with requirements. Specifically, CBP did not always validate importers’ self-reported final values of imports when it assessed duties and fees. The inaccuracies occurred because CBP Standard Operating Procedures (SOP) do not require importers to substantiate self-reported merchandise values with source documentation.

In addition, CBP did not always follow its policies when conducting reviews of reconciliation entries. These problems occurred because different ports of entry have implemented CBP’s SOPs differently. Finally, CBP missed opportunities to collect additional revenue when it did not assess monetary liquidated damages for importers that filed reconciliation entries late or did not file them at all. This occurred because CBP’s controls were insufficient to ensure the ports properly assess liquidated damages for importers who file reconciliations late or not at all.

CBP’s actions compromised the integrity of the Entry Reconciliation Program and, as such, may have put approximately $751 million of revenue, in the form of reconciliation refunds, at risk. CBP Response CBP concurred with recommendations 2 through 4 but did not concur with recommendation 1. We included a copy of CBP’s response in Appendix B. OIG-20-79 SECURITY SENSITIVE INFORMATION WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation.

Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security Table of Contents Background .................................................................................................... 1 Results of Audit .............................................................................................. 3 CBP Did Not Always Require Source Documentation from Importers to Substantiate Their Self-Reported Import Values ..................................... 4 CBP Inconsistently Reviewed Reconciliation Entries ...............................

5 CBP Did Not Always Properly Assess Liquidated Damages...................... 6 Revenue Remains at Risk ...................................................................... 7 Recommendations........................................................................................... 8 Management Comments and OIG Analysis……………………………………………..9 Appendixes Appendix A: Objective, Scope, and Methodology .................................

12 Appendix B: CBP Comments to the Draft Report .................................. 15 Appendix C: Variable Testing Methodology........................................... 19 Appendix D: Attribute Testing Methodology ......................................... 20 Appendix E: Office of Audits Major Contributors to This Report ...........

22 Appendix F: Report Distribution .......................................................... 23 Abbreviations ACE ACS CBP CFR HMF NAFTA OIG SOP Automated Commercial Environment Automated Commercial System U.S. Customs and Border Protection Code of Federal Regulations Harbor Maintenance Fee North American Free Trade Agreement Office of Inspector General Standard Operating Procedures www.oig.dhs.gov OIG-20-79 SECURITY SENSITIVE INFORMATION WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action.

For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Background Revenue collection is one of U.S. Customs and Border Protection’s (CBP) most important and oldest functions. A part of CBP’s mission is to protect revenue and facilitate movement of legitimate trade. Today, CBP is the second largest revenue collector for the U.S. Government. CBP scrutinizes revenue collection because of importers’ illicit attempts to evade duties, taxes, and fees, thereby defrauding the U.S. Government and undermining lawful business.

In fiscal year 2017, CBP collected $40.1 billion in revenue. CBP collects the following types of revenue: (cid:120) duties — amounts collected on imported goods, (cid:120) user fees — amounts collected for certain services as provided by law, Figure 1: Entry Reconciliation Process Source: DHS Office of Inspector General (OIG) (cid:120) excise taxes – amounts collected on certain commodities, and (cid:120) fines and penalties — amounts collected for violations of laws and regulations. Entry Reconciliation Program Reconciliation is the means by which importers are able to correct information initially provided to CBP at the time of import. Figure 1 provides an overview of the various steps in the reconciliation program.

Each step is detailed below. Importer Transaction and Entry Summary When importing goods into the United States, importers must pay duties, taxes, and fees. To do so, importers file entry documentation with CBP. The entry summary consists of the documentation necessary for CBP to assess duties, collect statistics, and determine whether importers have met other www.oig.dhs.gov 1 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security requirements of law. In FY 2017, CBP processed about 33 million import entries at 328 ports. Per the Customs Modernization Act,1 importers provide information such as the classification and value of imported merchandise in the entry. The law also requires importers use “reasonable care” when providing this information to maximize adherence to customs laws and regulations.

CBP then assesses duties based on reported classifications and values of the merchandise. Reconciliation Entry Reconciliation is the means by which importers are able to correct information in the entry summary initially provided to CBP. Importers file a reconciliation entry, which provides the final and correct information in the following types of reconciliation categories: (cid:120) Value, (cid:120) Classification (limited), (cid:120) Harmonized Tariff Schedule 9802,2 and (cid:120) Certain Free Trade Agreements. Importers have 21 months from the date of filing the underlying entry summary to file reconciliations for issues with value, classification, and the Harmonized Tariff Schedule 9802.

Importers have 12 months from the date of filing the underlying entry summary to file reconciliations for issues with Free Trade Agreements. CBP assesses liquidated damages3 on filers and brokers who do not file or do not do so timely.4 Liquidation Once importers file reconciliation entries indicating the final and correct information about imported merchandise, such as its value, CBP liquidates the reconciliation entry. Reconciliation entry liquidation is the point at which CBP settles with importers by either providing a final bill for outstanding duties or fees, or issuing a refund based on the final value of the merchandise. 1 Title VI of the North American Free Trade Agreement Authorization Act, Pub.

L. 103-182 (1993).

2 Provision 9802 of the Harmonized Tariff Schedule permits reduced duty treatment for the value of components manufactured in the United States and assembled abroad. 3 CBP assesses liquidated damages for violation of law, regulations, or breach of bond. 4 North American Free Trade Agreement (NAFTA) reconciliations are not assessed liquidated damages. www.oig.dhs.gov OIG-20-79 2 SECURITY SENSITIVE INFORMATION WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation.

Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Additionally, reconciliation entries may result in neither a bill nor a refund if no update to the original entry information is necessary. From January 1, 2014, through July 31, 2017, CBP liquidated 43,842 reconciliation entries totaling about $18 billion. Previously, CBP managed the reconciliation process using the Automated Commercial System (ACS), which it implemented in 1998. In February 2018, CBP implemented the Automated Commercial Environment (ACE), which contains a reconciliation module.5 Results of Audit CBP cannot ensure its Entry Reconciliation Program reporting is accurate or complies with requirements.

Specifically, CBP did not always validate importers’ self-reported final values of imports when it assessed duties and fees. The inaccuracies occurred because CBP Standard Operating Procedures (SOP) do not require importers to substantiate self-reported merchandise values with source documentation. In addition, CBP did not always follow its policies when conducting reviews of reconciliation entries. These problems occurred because different ports of entry have implemented CBP’s SOPs differently.

Finally, CBP also missed opportunities to collect additional revenue when it did not assess monetary liquidated damages for importers that filed reconciliation entries late or did not file them at all. This occurred because CBP lacks controls to ensure the ports properly assess liquidated damages for importers who file reconciliations late or not at all. CBP’s actions compromised the integrity of the Entry Reconciliation Program and, as such, may have put approximately $751 million of revenue, in the form of reconciliation refunds, at risk. 5 We limited our review to the reconciliation aspect of ACS.

The Trade Facilitation and Trade Enforcement Act of 2015 includes funding to complete the development and implementation of ACE, but the Customs Modernization Act directly addresses reconciliation requirements through ACS, and the Trade Facilitation and Trade Enforcement Act of 2015 did not alter those requirements. www.oig.dhs.gov 3 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security CBP Did Not Always Require Source Documentation from Importers to Substantiate Their Self-Reported Import Values CBP did not always properly validate importers’ self-reported final values of imports when assessing duties and fees. When importers filed reconciliation entries, CBP relied on them to declare the final value of the merchandise so CBP could assess accurate duties and fees. According to the United States Code, CBP shall ascertain or estimate the final value of the imports using all reasonable means, including source documentation such as statements of cost or invoices.6 However, CBP did not require importers to provide source documentation with their initial reconciliation submissions. Rather, to help determine the final value, CBP may request additional documentation.

In practice, CBP only requested additional documentation from importers for reconciliation entries containing large variations in the value of merchandise. For 14 import entries we reviewed, we requested from CBP source documentation for each and determined CBP lacked sufficient documentation to verify the accuracy of importer-reported amounts for 10 entries totaling $32.3 million in refunds. This might involve list price less markup, discounts, or rebates. Justifying this type of value adjustment requires verification of specific importer documentation.

However, CBP did not review the required documentation before liquidating the related reconciliation entries — that is, settling with the importer by either providing a final bill for outstanding duties or fees or issuing a refund based on the final value of the merchandise. Table 1 shows the results of our testing and the refunds at risk of being inappropriate. 6 19 United States Code § 1500, Appraisement, Classification and Liquidation Procedure. www.oig.dhs.gov 4 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation.

Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Table 1. Refunds at Risk No. of Entries Tested Total Refund Exceptions Potential Entries with Revenue at No. of Risk 2 $ 31,631,181 Port 2 $ 31,631,181 New York 409,139 2 Otay Mesa 286,036 2 Nogales 254,522 6 Champlain 96,864 1 Laredo 44,796 1 Hidalgo Grand Total 14 32,722,538 Source: DHS OIG analysis of CBP’s reconciliation entry data January 1, 2014, through July 31, 2017 1 6 1 - - 282,536 254,522 96,864 - - 10 32,265,103 We reviewed an additional 113 reconciliation entries to determine the accuracy of reported duties and fees. Of these entries, 12 (11 percent) contained inaccurate amounts of duties and fees totaling $8,159 (Appendix C contains our variable testing methodology). We identified these inaccuracies by comparing reported duty and fee amounts against calculated duties and fees based on importers’ source documentation.

Had CBP sufficiently reviewed the importer documentation, it may have identified the inaccuracies and recovered the additional duties and fees. The inaccuracies occurred because CBP’s SOP does not require importers to provide source documentation substantiating self-reported merchandise values when reporting reconciliation entries.7 According to CBP officials, CBP only requests additional documentation from importers for reconciliation entries containing large variations in the value of merchandise. Because CBP did not sufficiently review importer documentation and only obtained additional documentation upon request, it compromised the integrity of the entry reconciliation program and missed the opportunity to collect accurately duties and fees due the U.S. Government. CBP Inconsistently Reviewed Reconciliation Entries According to policy, CBP must document its reviews of reconciliation entries. assessed.

These spreadsheets reflect the most recent duties 7 ACS Reconciliation Prototype Standard Operating Procedure, September 2004. www.oig.dhs.gov 5 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security 9 However, CBP did not appropriately document its review of 69 (61 percent) of the 113 reconciliation entries we examined, as required by CBP’s policy. Specifically, for: (cid:120) (cid:120) 44 (39 percent) of the 113 entries, CBP did not sufficiently annotate the extent of its review 25 (22 percent) of the 113 entries lacked hardcopy documentation required by CBP policy. CBP policy requires the importer provide header records, association files, cover sheets, and line item spreadsheets (if applicable) at the time of filing the reconciliation entry.10 ; and These problems occurred because CBP’s SOP has been implemented differently across all ports of entry. As a result, CBP may not be identifying inaccuracies in reported data and ensuring collection of all revenue possible through the Entry Reconciliation Program.

CBP Did Not Always Properly Assess Liquidated Damages CBP also missed opportunities to collect additional revenue by not always properly assessing liquidated damages where appropriate. CBP requires ports seek liquidated damages if importers do not file reconciliation documentation timely.11 Importers must file reconciliations within 21 months of the date of filing the underlying entry summary. CBP policy calls for the issuance of “late file” or “no file” liquidated damage claims against importers who file late or do not file their reconciliations within the required 21-month timeframe, based on three of the four reconciliation categories. However, according to CBP officials at three ports we reviewed, they do not assess liquidated damages as required.

Specifically, the Port of New York did not assess “late file” liquidated damages, while the ports of Hidalgo and Laredo, Texas did not assess “no file” liquidated damages. 8 Lines on the line item spreadsheet reflect the most recent duties assessed. 9 Appendix D contains additional support 10 Appendix D contains additional documentation importers must submit to CBP for its reconciliation entry review. 11 19 CFR 142.15, Failure to File Entry Summary Timely. www.oig.dhs.gov 6 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security This occurred because CBP’s controls were insufficient to ensure the ports properly assess liquidated damages for importers who file reconciliations late or not at all. Prior to December 2015, CBP Headquarters provided monthly “no file” reports to all 13 ports that processed reconciliation entries, which the ports could use to assess liquidated damages. According to a port official, they stopped receiving these reports from CBP Headquarters in December 2015. CBP Headquarters officials said they stopped providing the reports because they no longer had the capability to run them.

Instead, CBP Headquarters relied on the ports to seek alternative methods for obtaining the necessary information. Without a consistent means to obtain the “no file” and “late file” information, CBP cannot assure individual ports are assessing liquidated damages in compliance with policy. It is imperative to assess required liquidated damages to prevent a loss of revenue for CBP and the U.S. Government. Based on limitations with the data received, we are unable to quantify the effect of this deficiency on revenue collection.

Revenue Remains at Risk CBP’s inconsistent reviews of reconciliation entries, coupled with its reliance on importers’ self-reported data, put potential revenue at risk. CBP also missed opportunities to maximize revenue because of inadequate reporting on importers who filed reconciliation entries late or did not file at all. Between January 1, 2014 and July 31, 2017, importers filed 43,842 reconciliation entries with refunds in duties, taxes, and fees amounting to approximately $751 million. We consider the accuracy of these refunds to be at risk due to the deficiencies we identified.12 Further, importers self-reported additional payments to CBP totaling approximately $257 million associated with these reconciliation entries.

However, we could not substantiate the accuracy of these additional payments because of a lack of documentation. The amounts shown in Table 2 represent the revenue as reported by CBP in ACS. 12 The $751 million revenue risk arises because importers’ self-reported information is not supported by source documentation at the time of reconciliation entry. www.oig.dhs.gov OIG-20-79 7 SECURITY SENSITIVE INFORMATION WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation.

Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Table 2. Reconciliation Program Revenue Reported by CBP Source: DHS OIG analysis of Entry Reconciliation Program data obtained from ACS To modernize trade processes, CBP implemented a new reconciliation module within ACE on February 24, 2018. Based on our limited review, the improvements will not likely resolve the issues we identified related to importers self-reporting values of imported goods or CBP’s inconsistent review of importers’ self-reporting. For example: (cid:120) ACE will not require the importer community to provide source documentation; and (cid:120) ACE will not affect CBP’s judgment regarding the extent of and documentation for the review performed.

CBP’s transition to electronic data submission in ACE may mitigate missing documentation issues, but given its implementation in February 2018, we did not have enough historical documentation to determine the effectiveness of the controls in ACE during our audit fieldwork. Recommendations Recommendation 1: We recommend the Executive Assistant Commissioner of the Office of Trade update and implement policies and procedures including: (cid:120) requiring importers provide source documents to CBP when filing reconciliations; and www.oig.dhs.gov 8 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action.

For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security (cid:120) a process to ensure reconciliation submissions include accurate information and appropriate agency reviews to address complex underlying causes for value changes. Recommendation 2: We recommend the Executive Assistant Commissioner of the Office of Trade update and implement procedures to ensure personnel review reconciliations consistently and document the results of the reviews performed. Recommendation 3: We recommend the Executive Assistant Commissioner of the Office of Trade establish procedures with appropriate internal controls ensuring the assessment and collection of “no file” and “late file” liquidated damages. These procedures should be implemented uniformly across all ports.

Recommendation 4: We recommend the Executive Assistant Commissioner of the Office of Trade update and implement policies and procedures including a process to ensure the data maintained in the newly implemented ACE system is accurate and reliable. Management Comments and OIG Analysis CBP concurred with recommendations 2 through 4 but did not concur with recommendation 1. A copy of CBP’s response to a draft of this report is included in its entirety in Appendix B. CBP also provided technical comments on the draft report in a separate document. We reviewed the technical comments and made revisions to the report where appropriate.

As CBP management indicates in its comments, ensuring importers provide accurate reconciliation information is vitally important. We also recognize the importance of allocating finite resources to areas presenting highest risk. dictate the extent to which substantiation is necessary to review reconciliation entries. Without verifying importer’s self-reported reconciliation data with source documentation, CBP cannot appropriately safeguard revenue, in the form of reconciliation refunds. to A summary of CBP’s responses and our analysis follows. We consider recommendation 1 open and unresolved, while recommendations 2 through 4 are open and resolved. www.oig.dhs.gov 9 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security CBP Comments to Recommendation 1: Non-concur. CBP does not agree with implementing a requirement that importers provide source documents when filing all reconciliations. CBP recognizes the importance of ensuring reconciliation entries include accurate information. However, it follows risk management principles for reviewing entries to focus resources on transactions presenting highest risk.

CBP reviews reconciliation entries based on established risk factors, subject matter knowledge of the importer, and the issues being reconciled. OIG Analysis of CBP Comments: We reviewed CBP’s response and recognize the significance of requiring importers to provide source documentation along with all reconciliation entries. However, CBP is unable to ensure appropriate duties, taxes, and fees are collected for imports without verifying importer self- reported reconciliation information against source documentation. As evidenced by our audit work, these reconciliation entries oftentimes result in significant refunds to importers, and when aggregated, represent a significant amount of potential lost revenue.

As such, this recommendation will remain unresolved and open until CBP implements procedures requiring importers to provide source documentation supporting their reconciliation entries. CBP Comments to Recommendation 2: Concur. Since the OIG completed its audit fieldwork in April 2018, CBP’s Office of Trade has issued additional guidance to ensure consistent review and documentation of reconciliation entries, begun reconciliation processing in the Automated Commercial Environment (ACE), and conducted additional training for representatives of CBP’s Centers of Excellence and Expertise. OIG Analysis of CBP Comments: CBP has taken steps to satisfy the intent of this recommendation.

We consider this recommendation resolved, but it will remain open until CBP provides documentation to substantiate that all planned corrective actions have been completed. CBP Comments to Recommendation 3: Concur. Since the OIG completed its audit fieldwork in April 2018, CBP’s Office of Trade has issued additional guidance addressing assessment and collection of liquidated damages. Additionally, CBP has conducted training with representatives of CBP’s Centers of Excellence and Expertise regarding issuance of liquidated damages. www.oig.dhs.gov 10 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security OIG Analysis of CBP Comments: CBP has taken steps to satisfy the intent of this recommendation. We consider this recommendation resolved, but it will remain open until CBP provides documentation to substantiate that all planned corrective actions have been completed. CBP Comments to Recommendation 4: Concur. CBP began reconciliation processing in the Automated Commercial Environment (ACE) in February 2018.

ACE conducts far more system checks to validate reconciliation data than the prior Automated Commercial System (ACS) did. Additionally, ACE checks the filer’s reconciliation transmission for format, syntax, and business rule validations to ensure that valid data is captured in the system. OIG Analysis of CBP Comments: CBP has taken steps to satisfy the intent of this recommendation. We consider this recommendation resolved, but it will remain open until CBP provides documentation to substantiate that all planned corrective actions have been completed. www.oig.dhs.gov 11 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Appendix A Objective, Scope, and Methodology Department of Homeland Security Office of Inspector General was established by the Homeland Security Act of 2002 (cid:11)(cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:47)(cid:68)(cid:90)(cid:3)(cid:20)(cid:19)(cid:26)(cid:239)(cid:21)(cid:28)(cid:25)(cid:12)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3) the Inspector General Act of 1978. We conducted this audit to determine to what extent CBP’s Entry Reconciliation Program and reporting is accurate and in compliance with requirements. To assist in answering the audit objective, we interviewed CBP headquarters personnel. We interviewed personnel from CBP’s Office of Field Operations, Office of Trade, Office of Finance, Office of Information Technology, and the Office of Regulatory Audit.

We interviewed personnel at the ports to gain an understanding of controls at each site. We conducted one site visit to the New York Port of Entry located in Newark, New Jersey, to observe CBP personnel conducting demonstrations of the entry reconciliation process. We also completed a review of DHS and CBP policies, procedures, and internal directives to ensure they meet specified requirements. Our assessment may not have disclosed all material weaknesses in this control structure; however, it disclosed weaknesses in CBP’s internal policies and procedures governing the Entry Reconciliation Program as discussed in this report.

In addition, we considered the reliability of the ACS electronic data to be sufficiently reliable for the purpose of this report’s findings, conclusions, and recommendations. We requested reconciliation entries from CBP covering the period from January 1, 2014 through July 31, 2017. Out of 43,842 liquidated reconciliation entries valued at $18 billion, we judgmentally selected 127 reconciliation entries for testing. Of the 127 entries, we selected 113 entries to determine the accuracy of reported amounts and compliance with program requirements.

Our judgmental sample of 113 entries originated as a statistical sample of 271 entries. During fieldwork, we identified trends warranting a reduction in testing. Subsequently, we reduced our fieldwork and adjusted the scope of our audit from 271 entries to 113 entries. Therefore, our sample is judgmental in nature and the results cannot be projected across the universe.

We obtained, reviewed, and tested documentation for our sample of 127 reconciliation entries from the following ports: (cid:120) (cid:120) Champlain-Rouses, New York Nogales, Arizona www.oig.dhs.gov 12 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security (cid:120) (cid:120) (cid:120) (cid:120) New York, New York Otay Mesa, California Hidalgo, Texas Laredo, Texas13 We separated our transaction testing into two main sections based on attribute and variable characteristics. We based the attribute characteristics on standard operating procedure requirements and additional CBP guidance. We identified 69 instances of noncompliance in the review process for reconciliations. For variable testing, we manually recalculated duties and fees to ensure accuracy of the reconciliation entry.

Because we judgmentally selected our sample, we were unable to project the results from this analysis to the population. As a result, we relied upon the transaction testing results of the 113 entries in our sample. We performed transaction testing on the remaining 14 reconciliation entries to determine the extent to which source documentation existed to support the amounts reported. We used a risk-based analysis to target high-risk entries.

The risk analysis identified entries with large percentages of refunded duties, as well as entries submitted by importers with a historic tendency to file entries resulting in a refund. At our request, CBP obtained source documentation from the importers via CBP Form 28, US Customs Request for Information, to support the amounts claimed in the reconciliation entries. Upon receiving documentation from the importers, we evaluated the completeness of the documents received and the accuracy of the reconciliation entry. While conducting our audit testing, we identified concerns with the reliability of CBP’s import data.

Specifically, CBP did not identify discrepancies between importer-reported merchandise final values in its electronic system, ACS, and the importer-provided supporting documentation. According to CBP’s SOP, importers must electronically submit reconciliation duties, taxes, and fees through the Automated Broker Interface and report the duties using paper- based documentation. However, CBP’s reviews of entries did not identify discrepancies and those entries were not returned to the importer for correction. For example, of the 113 entries we reviewed, 6 contained 13 Our judgmental sample covered reconciliation entry processes of large, intermediate, and small ports.

Our sample included the CBP Port of New York, which is the largest port for processing reconciliation entries. www.oig.dhs.gov OIG-20-79 13 SECURITY SENSITIVE INFORMATION WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security discrepancies between the amounts reported in ACS and the amounts supported in the source documentation resulting in duties and fees discrepancies amounting to $378,038. Although we identified issues with the reliability of the ACS data we used for testing, we determined the data to be sufficiently reliable for our audit findings, conclusions, and recommendations. We reached this conclusion because CBP does not verify reported amounts against source documentation; thus, it is unclear which amounts were accurate. Table 3 summarizes the discrepancies between amounts electronically reported in ACS and amounts identified in paper-based documentation.

Table 3. Summary of Discrepancies between ACS Data and Paper-Based Documentation for Six Reconciliation Entries Source: DHS OIG analysis of data from CBP’s Entry Reconciliation Program January 1, 2014 through July 31, 2017 We conducted this performance audit between May 2017 and April 2018 and pursuant to the Inspector General Act of 1978, as amended, and according to generally accepted government auditing standards. Those standards require we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based upon our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based upon our audit objectives. www.oig.dhs.gov 14 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

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Department of Homeland Security Appendix B CBP Comments to the Draft Report www.oig.dhs.gov 15 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security www.oig.dhs.gov 16 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security www.oig.dhs.gov 17 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security www.oig.dhs.gov 18 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Appendix C Variable Testing Methodology We performed variable-based testing of 113 entries to determine whether reported amounts were accurate. To accomplish this, we manually recalculated duties and fees the importer owed to CBP. Specifically, we verified whether CBP calculated reported amounts using appropriate duty rates according to the Harmonized Tariff Schedule, Merchandise Processing Fee, and Harbor Maintenance Fee (HMF) rates per regulation; and interest rates published in the Federal Register. As part of our review, we considered Special Program Indicators, such as claims for North American Free Trade Agreement (NAFTA) merchandise, to determine the applicability of duty and Merchandise Processing Fee payments.

In addition, we also reviewed CBP port codes to determine the applicability of HMF payments. Term Definition Harbor Maintenance Fee Harmonized Tariff Schedule Merchandise Processing Fee Special Program Indicator Upon importation, commercial cargo loaded onto or unloaded from a commercial vessel is subject to a port use tax of 0.125 percent of its value if the loading or unloading occurs at a port within the definition of 19 CFR 24.24. Specification of the duty requirements and exemptions pertaining to goods imported into Customs territory and all vessel equipment, parts, materials, and repairs. A fee applicable to certain countries assessed for the processing of merchandise at a rate of 0.3464 percent.

There is a minimum fee of $25.00 and a maximum fee of $485.00. Designation of an entry summary line item as subject to a specific trade program (e.g., MX indicates NAFTA treatment for goods originating in Mexico). Port Identifies the ports subject to the HMF. Source: ACS Reconciliation Prototype Standard Operating Procedure, September 2004, 19 CFR 24.24 www.oig.dhs.gov 19 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520.

No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Appendix D Attribute Testing Methodology We performed attribute-based testing of 113 entries to determine the extent to which CBP complied with its entry reconciliation program policy. Of the attributes tested, we identified two material noncompliance issues. Required Documentation CBP policy requires the importer provide the following at the time of filing reconciliation entries: (cid:120) Header Record: Printout of the Header Record from the reconciliation entry specifically identifying entry type 09 and the reconciliation entry number; (cid:120) Association File: Document showing all entries, their adjustments, and dates; (cid:120) Cover Sheet: Name, telephone, and fax number of a filer’s point of contact; (cid:120) Line Item Spreadsheet (if applicable): One copy of the Line Item Data Spreadsheet on compact disk and one paper copy. Based on these requirements, we defined attribute failures as missing one or more of the required listed documents.

Complete Review According to its policy, CBP must document its review of reconciliation entries. These notations should include the reconciliation entry number, the completed and documented review, and the results of the review. Specifically, the policy states: These records will be reviewed during internal audits by the Office of Finance and the Office of Inspector General personnel. If you didn’t record it, you didn’t review it.

If you didn’t review it, you have a problem. Furthermore, CBP policy states www.oig.dhs.gov 20 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action.

For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Additionally, CBP uses risk management to allow Import Specialists’ the flexibility Based on these requirements we further defined attribute failures as follows: (cid:120) Omission of the reconciliation entry number, the type of review, or the results of the review to enable a third party to understand how import specialists came to their conclusion, and Inappropriate selection of lines for review. (cid:120) www.oig.dhs.gov 21 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action.

For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Appendix E Office of Audits Major Contributors to This Report William Johnson, Director Deborah Mouton-Miller, Audit Manager Tia Jackson, Auditor-in-Charge David DeHaven, Auditor Henry Kim, Auditor Falon Strong, Auditor Michael Nasuti, Auditor Thomas Hamlin, Communications Analyst Kevin Dolloson, Communications Analyst Nicholas Genitempo, Independent Referencer Leigh Francis, Attorney Advisor www.oig.dhs.gov 22 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SECURITY SENSITIVE INFORMATION OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Appendix F Report Distribution Department of Homeland Security Secretary Deputy Secretary Chief of Staff Deputy Chiefs of Staff General Counsel Executive Secretary Director, GAO/OIG Liaison Office Under Secretary, Office of Strategy, Policy, and Plans Assistant Secretary for Office of Public Affairs Assistant Secretary for Office of Legislative Affairs Executive Assistant Commissioner, Office of International Trade Audit Liaison, U.S. Customs and Border Protection Office of Management and Budget Chief, Homeland Security Branch DHS OIG Budget Examiner Congress Congressional Oversight and Appropriations Committees www.oig.dhs.gov 23 SECURITY SENSITIVE INFORMATION OIG-20-79 WARNING: This record contains Sensitive Security Information that is controlled under 49 CFR parts 15 and 1520. No part of this record may be disclosed to persons without a "need to know", as defined in 49 CFR parts 15 and 1520, except with the written permission of the Administrator of the Transportation Security Administration or the Secretary of Transportation. Unauthorized release may result in civil penalty or other action. For U.S. government agencies, public disclosure is governed by and 49 CFR parts 15 and 1520.

SENSITIVE SECURITY INFORMATION ADDITIONAL INFORMATION AND COPIES To view this and any of our other reports, please visit our website at: www.oig.dhs.gov. For further information or questions, please contact Office of Inspector General Public Affairs at: [email protected]. Follow us on Twitter at: @dhsoig. OIG HOTLINE (cid:3) To report fraud, waste, or abuse, visit our website at www.oig.dhs.gov and click on the red "Hotline" tab.

If you cannot access our website, call our hotline at (800) 323-8603, fax our hotline at (202) 254-4297, or write to us at: Department of Homeland Security Office of Inspector General, Mail Stop 0305 Attention: Hotline 245 Murray Drive, SW Washington, DC 20528-0305 SENSITIVE SECURITY INFORMATION