Audit Report 

OIG-05-006 

REVENUE COLLECTION: Formalizing the Review Process Could 

Better Ensure Continued Treasury Oversight of Customs 

Revenue Activity 

November 8, 2004

Office of 

Inspector General 

Department of the Treasury 

Contents 

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Audit Report................................................................................................. 3 

 Background ................................................................................................ 4 

Audit Results ........................ ..................................................................... 9 

 Customs Revenue Function-Related Regulations Were Not Always 

 Reviewed by Treasury............................................................................. 10 

 Control Weaknesses in Treasury’s Customs Revenue Function ..................... 13 

 Conclusions................................................................................................ 15 

 Recommendations ....................................................................................... 15 

 

Appendices

 Appendix 1: Objective, Scope, and Methodology........................................ 19 

 Appendix 2: List of Customs Issuances Approved by Treasury 

 During the Period March 2, 2002-March 1, 2003 ..................... 20 

 Appendix 3: Management Response ......................................................... 22 

 Appendix 4: Report Distribution................................................................ 29 

Abbreviations

 CBP U.S. Customs and Border Protection 

 Customs U.S. Customs Service 

 DAS Deputy Assistant Secretary 

 DHS Department of Homeland Security 

 FY Fiscal Year 

 HSA Homeland Security Act 

 TD Treasury Directive 

 Treasury Department of the Treasury 

 TO Treasury Order 
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OIG Audit 

Report

The Department of the Treasury 

Office of Inspector General 

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November 8, 2004 

Mr. Gregory F. Jenner 

Acting Assistant Secretary (Tax Policy) 

With the March 2003 transfer of the U.S. Customs Service to the 

Department of Homeland Security (DHS), the Department of the 

Treasury (Treasury) delegated to DHS authority to prescribe all 

Customs regulations related to customs revenue. Treasury, 

however, retained authority to review and approve regulations 

related to such matters as import quotas, user fees, marking, 

labeling, classification of goods and merchandise, and associated 

tariff rates. This report discusses how Treasury has carried out its 

retained authority over the customs revenue function. 

Although Treasury did not have documentation to demonstrate the 

effectiveness of its retained authority over customs revenue, 

Treasury reviewed most customs revenue function-related 

regulations as required. However, we found that DHS issued two 

such regulations without the required Treasury review and 

approval. An apparent cause was Treasury’s reliance on DHS to 

forward regulations to Treasury and the lack of procedures and 

controls within Treasury about how the review and approval 

process was to be implemented. In addition, we were told that 

few of the rulings forwarded by DHS were actually reviewed in 

detail. Moreover, we observed that within the Office of Tax Policy, 

the review and/or approval of customs revenue function-related 

regulations and rulings was relegated to a single individual.1

 These 

factors increase the risk that Treasury’s policy objectives with 

respect to its authority over customs revenue may not be achieved. 

 

1

 The Treasury General Counsel’s office also reviews and approves regulations, including those that are 

customs revenue-related. 
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We are recommending that Treasury: (1) ensure all customs 

revenue function-related regulations are forwarded to Treasury for 

review and approval; and (2) establish written procedures regarding 

the Office of Tax Policy’s responsibility to monitor DHS’s 

compliance with this requirement. 

In your September 29, 2004, written response to this report, you 

indicated actions were taken to implement both recommendations. 

You advised us that Treasury and DHS documented processes 

through an exchange of letters to prevent the publication of 

retained customs-revenue function regulations without Treasury 

approval. Treasury has also established written procedures to 

ensure that regulations and rulings subject to Treasury review 

and/or approval are transmitted to Treasury. The full text of the 

response is provided as Appendix 3. 

A description of our objectives, scope, and methodology is included 

in Appendix 1. 

Background 

Each year, the United States collects tens of billions of dollars in 

revenues from duties, taxes, and fees that are paid by importers 

who bring goods and merchandise into the country through the 

ports of entry. Prior to the creation of DHS, these revenues were 

collected by the Department of the Treasury’s U.S. Customs 

Service. Pursuant to the Homeland Security Act (HSA) of 2002, 

when Customs transferred to DHS in March 2003, the revenue 

collection responsibility was transferred to DHS with Customs. 

Therefore, these revenues are now collected by the U.S. Customs 

and Border Protection (CBP). 

Although CBP is responsible for revenue collection, the HSA 

provided that Treasury retain authority to review certain revenue 

functions. In accordance with provisions of the HSA, however, the 

Secretary of the Treasury delegated much of that authority to the 

Secretary of DHS. While CBP handles the day-to-day collection of 

revenue from duties, taxes, and fees collected on imported goods 
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and merchandise, Treasury reviews certain revenue function 

regulations and rulings to ensure they are implemented in 

accordance with national tax, trade, and tariff policies. In addition, 

DHS may not consolidate, alter, discontinue, or otherwise diminish 

those customs revenue functions. 

Significant Revenue Collected

Customs collections are a significant source of revenue for the U.S. 

Over the last 6 years, Customs net revenue collected has averaged 

over $21 billion per year. While at Treasury, the legacy Customs 

Service reported the collection of $21.1 billion in net revenue2 in 

Fiscal Year (FY) 2002. In FYs 2001 and 2002 net revenue 

declined, but in FY 2003 trended upward. CBP reported net 

revenue of $22.2 billion in FY 2003. 

The chart that follows depicts revenue for FYs 1998 through 

2003. 

Regulations and Rulings Affect Revenue Collected

Revenue collected is affected by regulations and rulings. CBP is 

responsible for prescribing regulations and issuing rulings and 

 

2

 Net revenue is total revenue less refunds, including drawback (refunds of duty paid on imported 

merchandise that is subsequently exported). 

$20.7

$21.0

$21.8

$21.4

$21.1

 $22.2 

19.5

20.0

20.5

21.0

21.5

22.0

22.5

1998 1999 2000 2001 2002 2003

Net Revenue Collected ($Billions)

FYs 1998-2003
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determinations related to international trade.3 Regulations 

implement U.S. trade laws while rulings and determinations are 

decisions made by CBP personnel regarding the proper 

classification and/or valuation of imported merchandise. 

More specifically, the amount of revenue collected is dependent 

upon tariff rates contained in the Harmonized Tariff Schedule. A 

tariff rate is assigned to merchandise based upon the classification 

of the merchandise by specific ruling rendered by CBP. In addition, 

the amount of tariff imposed is often affected by the declared 

value of the merchandise and the country from which the 

merchandise originated. The amount of revenue that is collected is 

also impacted when importations are subject to provisions of 

preferential trade programs or quotas. 

Treasury Internal Guidance

Treasury issued two Orders and a Directive following the transfer 

of Customs to DHS related to authorities and responsibilities over 

customs revenue. 

• Treasury Order (TO) 100-16, Delegation from the Secretary 

of the Treasury to the Secretary of Homeland Security of 

general authority over customs revenue functions vested in 

the Secretary of the Treasury as set forth in the Homeland 

Security Act of 2002, dated May 15, 2003, delegated to the 

Secretary of DHS the authority to prescribe all Customs 

regulations, except on those matters in which Treasury 

retains sole approval authority. The matters for which 

Treasury retains authority to approve regulations include 

requirements for import quotas or trade bans, user fees, 

marking, labeling, copyright and trademark enforcement, and 

the completion of entry summary documentation, including 

duty assessment and collection, classification, valuation, and 

eligibility or requirements for preferential trade programs. 

 

3

 The Department of Commerce and other agencies have similar responsibilities. 
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• TO 111-02, Oversight for the Alcohol and Tobacco Tax and 

Trade Bureau, and Customs Revenue Functions, dated 

April 3, 2003, delegated all retained authorities, powers, 

duties, and responsibilities relating to customs revenue 

functions from the Secretary of the Treasury to the Assistant 

Secretary (Tax Policy). 

• Treasury Directive (TD) 18-03, Delegation to the Deputy 

Assistant Secretary (Tax, Trade and Tariff Policy), dated 

April 11, 2003, delegated all retained authorities, powers, 

duties, and responsibilities relating to customs revenue 

functions to the Deputy Assistant Secretary (Tax, Trade and 

Tariff Policy) in Treasury’s Office of Tax Policy. 

The provisions of TO 100-16 also state that DHS shall periodically 

identify and describe for Treasury, in an appropriate and timely 

manner, all rulings constituting a change in practice or the result of 

a petition that are under consideration. DHS should consult with 

Treasury, as necessary, prior to the Secretary of DHS’s exercise of 

such authority. The Secretary of the Treasury retains the authority 

to review, modify, or revoke any determination or ruling that falls 

within the areas that are retained under his or her authority. The 

Secretary of the Treasury must notify the Chairmen and Ranking 

Members of the House Committee on Ways and Means and the 

Senate Committee on Finance of any determination or ruling that is 

modified or revoked. 

Treasury Oversight

As specified in TO 100-16, DHS personnel are required to send to 

Treasury for review and approval only those regulations pertaining 

to customs revenue-related functions. Immediately after the 

institution of the delegation order, the procedure was that DHS 

personnel would inform Treasury when a particular regulation is a 

revenue function-related issue and may need to be referred. 

Following discussion between DHS and Treasury, the regulations 

needing referral are sent to the Deputy Assistant Secretary (DAS) 

for Tax, Trade, and Tariff Policy, who reports to the Assistant 
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Secretary for Tax Policy.4 According to the DAS in 

September 2004, CBP now informs Treasury of all regulations to 

be prescribed by CBP. 

The DAS for Tax, Trade, and Tariff Policy position was created 

under the Treasury’s 2003 reorganization plan, following passage 

of the HSA, and was assigned the responsibility for monitoring and 

assisting in the development of policies for regulations relating to 

tariff and trade laws. The HSA authorized Treasury to appoint up 

to 20 new personnel to work with DHS in performing customs 

revenue functions. At the time of our audit, Treasury had not 

appointed any additional personnel other than the DAS to customs 

revenue functions. This function is one of various duties he 

performs. 

The DAS relies on DHS personnel for notification of when new or 

revised regulations or proposed rulings are being considered. In 

addition to a telephone call, the DAS receives notification formally 

by written correspondence or electronic mail. Initial notification is 

generally received before the proposed new or modified regulation 

or proposed ruling is received. According to the DAS, the 

proposed regulation or ruling is reviewed to ensure that its content 

and impact reflects and does not violate Treasury’s numerous tax, 

trade, and tariff policies. 

To ensure effective coordination on trade policy issues, Treasury’s 

Assistant Secretary for International Affairs and the DHS Border 

and Transportation Security Directorate’s Assistant Secretary for 

Policy and Planning were finalizing a memorandum of 

understanding at the time of our audit. The two Departments, 

Treasury and Homeland Security, have agreed to establish a joint 

 

4 Prior to the passage of HSA, Customs sent proposed new or revised regulations for review and 

approval to the DAS for Tax, Trade, and Tariff Enforcement in the Office of Enforcement. There was no 

distinction made as to whether the issues were revenue-related, because all regulatory changes were 

subject to Treasury review and approval. 
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working group to facilitate consultations on issues involving trade 

policy positions that impact customs revenue functions. 

Review of TO 100-16

TO 100-16 included a provision that the delegation of customs 

revenue functions be reviewed by May 14, 2004. In preparation 

for the review, the TO also prescribed that by March 15, 2004, the 

Secretaries of the Treasury and Homeland Security would consult 

with the Chairmen and Ranking Members of the Senate Committee 

on Finance and the House Committee on Ways and Means. 

According to a letter from the Secretary of the Treasury to the 

Secretary of Homeland Security dated June 10, 2004, senior staff 

from both departments consulted with senior staff from the 

Committees in March 2004. The letter stated the consultations 

included a complete briefing on how the TO was implemented over 

the past year and that the Congressional staff responded that the 

TO was functioning to their satisfaction. Treasury concluded in the 

letter that the delegation was functioning well and in no need of 

changes at the time. 

Audit Results 

Treasury did not have specific documentation in place that would 

demonstrate its effectiveness in fulfilling its responsibilities related 

to customs revenue. However, by reviewing external sources, we 

found that Treasury reviewed most customs revenue functionrelated regulations as required. We found a number of regulations 

that CBP referred to Treasury that were reviewed and approved by 

Treasury in accordance with the requirements of the HSA and the 

related Treasury Orders and Directive. At the same time, though, 

two regulations were finalized by CBP without required Treasury 

review and approval. We also noted that DHS had forwarded 

numerous determinations and rulings to the Treasury for review. 

However, the DAS stated that he reviewed these issuances in 

detail on a selective basis. 
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From a standpoint of internal control over this process, we noted 

certain weaknesses that warrant management’s attention. 

Specifically, the Office of Tax Policy has not developed policies, 

procedures, and controls to ensure: (1) all matters related to 

customs revenue that require Treasury review are, in fact, 

submitted by DHS for Treasury review; and (2) the reviews and 

conclusions reached are documented in a consistent manner and 

subjected to supervisory review within the Office of Tax Policy so 

as to ensure Treasury’s policy objectives are achieved. 

Notwithstanding the fact that Treasury’s General Counsel’s office 

reviews all regulations as a matter of policy, including customs 

revenue function-related regulations, the customs revenue function 

within the Office of Tax Policy is essentially the responsibility of a 

single individual, the DAS for Tax, Trade and Tariff Policy. Without 

complete documentation or supervisory review of Treasury’s 

review and approval process for customs revenue matters, should 

that individual leave this position or Treasury, his extensive 

institutional knowledge and network of contacts with CBP would 

be lost. 

Currently, Treasury relies on the provisions in TO 100-16 as the 

basis to determine which regulations the Department is required to 

review and approve. Treasury does not have a formal agreement 

with DHS that provides for timely coordination of efforts to ensure 

all required regulations and rulings are properly identified and 

forwarded to Treasury for review and/or approval, or that allows 

Treasury to have input in the process of deciding which matters to 

forward. 

Customs Revenue Function-Related Regulations Were Not Always 

Reviewed by Treasury

Using TO 100-16 as our criteria, we performed several tests to 

determine whether customs revenue function-related issuances5

 

5

 Issuances include regulations, rulings, notices (scheduled hearings and meetings open to the public, 

grant applications, and administrative orders), requests for information, policy statements, petitions for 

rulemaking, and other officially published items. Treasury reviews Customs revenue-related regulations 

and specific rulings but is required to approve only the revenue-related regulations. 
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were submitted for Office of Tax Policy review. Those issuances 

included regulations that had been forwarded and approved by 

Treasury as well as specific determinations and rulings that had 

been forwarded for review by Treasury. In this regard, we 

(1) identified all Customs issuances published in the Federal 

Register during the 12-month period before divestiture and the 

12-month period after divestiture6; and (2) determined, based on 

data provided by CBP personnel, those regulations during the above 

periods that were forwarded to Treasury. For regulations that were 

published without Office of Tax Policy review, we looked for 

indicators that the regulations were customs revenue functionrelated and therefore may have bypassed Treasury review. 

We found that for the 12-month period ended March 1, 2003, 

which represents the year prior to the Customs Service divestiture 

to DHS, Customs presented a total of 48 regulations to the 

Treasury Office of Enforcement for review and approval (see 

Appendix 2). The subject matter for most of these regulations 

appeared to be clearly revenue-related based on key terms, such as 

duties, tariff, and drawback. 

For the year following transfer of the Customs Service to DHS, 

CBP published 81 issuances in the Federal Register which included: 

(1) 10 regulations that CBP presented and obtained Treasury 

approval; and (b) 71 issuances consisting of regulations, notices, 

requests for information, or other matters, which were not 

forwarded to Treasury for review before published. The 10 

Treasury-approved regulations were related to matters like civil 

fines for importation of merchandise bearing a counterfeit mark, 

refunds of duties paid on certain wool products, and preferential 

treatment of certain merchandise and are listed in the following 

table: 

 

6

 Regulations, proposed rules, and notices are published in the Federal Register. Rulings, notices, and 

other items are published in the Customs Bulletin, Web site, or elsewhere. Since 1989, Customs has 

issued over 90,000 individual rulings. 
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Table 1: List of Customs Regulations Approved by Treasury 

 During the Period March 2, 2003-March 1, 2004

Number Subject Date 

Published 

1 Technical Corrections: Rules of Origin of Imported Goods For Purposes of 

NAFTA 

7/24/2003 

2 User Fees 7/24/2003 

3 Civil Fines for Importation of Merchandise Bearing A Counterfeit Mark 7/24/2003 

4 Refund of Duties Paid on Certain Wool Products 7/24/2003 

5 Manufacturing Substitution Drawback: Duty Apportionment 8/22/2003 

6 Changes to Customs and Border Protection List of Designated Public 

International Organizations 

8/22/2003 

7 Anti-counterfeiting Consumer Protection Act: Entry Documentation 8/22/2003 

 8 Delegations of Authority: Signature of Customs and Border Protection 

Regulations 

8/28/2003 

9 Preferential Treatment of Brassieres Under the Caribbean Basin Economic 

Recovery Act 

9/30/2003 

10 Merchandise Processing Fees Eligible To Be Claimed as Certain Types of 

Drawback 

10/2/2003 

 Note: These regulations were all considered to be Customs revenue-related. 

Source: Federal Register (March 2003-February 2004) 

We discussed the other 71 issuances which were not forwarded to 

Treasury before published with the DAS. The DAS advised that 2 

of the 71 issuances involved import restrictions on ethnological 

material from Cambodia and from Cyprus. According to the DAS, 

DHS personnel had concluded the subject of these 2 regulations 

did not meet customs revenue function-related criteria listed in 

TO 100-16. However, Treasury determined that the import 

restrictions qualified as trade bans under TO 100-16 and should 

have been forwarded for Treasury review and approval. While the 

DAS stated Treasury would have approved the 2 regulations as 

published, these examples illustrate the difficulty and risks involved 

in determining whether certain issues or areas require Treasury 

review and approval. 

We also reviewed regulations referred by CBP to Treasury for the 

period November 2003 through April 2004 and found only one 

customs revenue function-related regulation had been sent to 

Treasury for review and approval. According to the DAS, the 
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decline in the number of revenue function-related regulations being 

promulgated is likely due to the high priority assigned to securityrelated issues. 

Control Weaknesses in Treasury’s Customs Revenue Function

We found that Treasury’s oversight of customs revenue functionrelated activities was not internally documented. We inquired 

about whether written criteria existed beyond that provided in 

TO 100-16 for the types of CBP regulations and rulings that must 

be submitted for Treasury review based on the requirements of the 

HSA. The DAS informed us that such criteria did not exist because 

it would not be possible to delineate matters more clearly than 

what was already contained in the TO. 

In addition, we asked the DAS for a copy of any written 

procedures regarding the roles and methods used to exercise 

Treasury’s review and approval responsibilities. We found that 

there were no written procedures providing guidance on how the 

DAS was to implement his responsibilities under TO 100-16. The 

DAS acknowledged that at the time of Treasury’s reorganization in 

2003, written procedures for this newly-created position were not 

developed.7

 The DAS advised that the process was informal; 

decisions to submit regulations to Treasury were primarily made on 

a case-by-case basis through discussions between the DAS and 

CBP personnel. CBP personnel alone decide what rulings qualify 

under provisions of TO 100-16 and forward them to the DAS for 

review. 

CBP officials involved in sending matters to Treasury for review 

and approval similarly told us that the process was informal and 

handled on a case-by-case basis. They said they communicate on 

a regular basis with the DAS via electronic mail and telephone 

regarding customs revenue function-related matters that may 

involve Treasury review. However, CBP does send a formal Notice 

of Planned Regulatory Action that accompanies any proposed 

 

7

 At the exit conference, the DAS indicated he has begun to put together a list of procedures for his 

Customs revenue-related review activity. 
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regulation requiring Treasury review and approval. CBP officials 

send copies of the pertinent rulings under consideration directly to 

the DAS via electronic mail. 

We asked the DAS for (1) documentation related to the review of 

customs revenue function-related regulations and rulings reached 

for the period following the transfer of the legacy Customs Service 

to DHS; (2) matters that CBP had submitted for review, items 

reviewed and approved, items rejected (if any), and similar tracking 

data; and (3) if there was any related documentation in place to 

summarize Treasury’s customs revenue function activity. 

The DAS told us that these types of summary documents were not 

available. The DAS further stated that he reviews in detail only 

those rulings that he believes may warrant his attention, which 

were only a few. 

There are also no procedures in place that require the DAS to 

maintain documentation regarding the tracking and review of the 

rulings that are forwarded to him. For example, there is no 

procedure in place providing for verification that CBP personnel are 

sending all pending determinations and rulings that meet the 

specific criteria listed in TO 100-16. In addition, there are no 

procedures that ensure the DAS’s responsibilities for monitoring 

and reviewing rulings and determinations are subject to supervisory 

review. As a result, the Office of Tax Policy lacks sufficient 

documentary evidence to show compliance with the intent of 

TO 100-16. 

A major component of effective program management is internal 

control. According to the U.S. Government Accountability Office’s

(GAO) Standards for Internal Control in the Federal Government, 

internal control comprises the plans, methods, and procedures used 

to meet missions, goals, and objectives of a program. Control 

activities include approvals, authorizations, verifications, and the 

creation and maintenance of related records, which provide 

evidence of execution of these activities. 
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Treasury does not have formal written procedures or adequate 

separation of duties to ensure the customs revenue review and 

approval process is standardized, consistently managed, and 

documented. Treasury’s review and approval is based almost 

entirely on the experience of the DAS. While we found the DAS to 

have a good understanding of his responsibilities, managing the 

process in this manner carries certain risk, including the risk 

associated with insufficient separation of duties. Treasury needs 

to take steps to mitigate those risks. This includes developing 

written procedures that provide guidance on how the DAS’s review 

and approval functions should be implemented. At a future date, 

another individual could assume the position of DAS, and he or she 

may have difficulty in determining the Treasury role as it relates to 

customs revenue without this additional internal guidance. 

Conclusions 

The decision process used to determine whether or not Treasury 

should be notified regarding a regulatory issue needs to be 

formalized Formalizing expectations would help ensure Treasury’s 

legally delegated responsibilities with respect to customs revenue 

are achieved. In addition, for the various formal and informal 

notifications that Treasury currently receives, Treasury needs to 

ensure they are more standardized, and actions taken related to 

these notifications documented. 

Treasury needs to develop written procedures for the review and 

approval process to mitigate risks associated with managing this 

process in an informal manner. The procedures would also help 

reduce the risk associated with managing this process through a 

single individual within the Office of Tax Policy. 

Recommendations 

 The Assistant Secretary for Tax Policy should: 

1. Ensure all customs revenue function-related matters requiring 

Treasury approval or review are provided by DHS in accordance 
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with TO 100-16. One means to accomplish this is to formalize 

the responsibilities and mechanics for submitting and reviewing 

these matters through a memorandum of understanding with 

DHS. 

Management Response To implement this recommendation, the 

Acting Assistant Secretary stated that Treasury has 

documented, through an exchange of letters between Treasury 

and DHS, the processes developed to prevent the publication of 

retained customs revenue-function regulations by DHS without 

Treasury approval. CBP will inform Treasury of all regulations 

promulgated through a consultation process that occurs during 

the preparation of the semi-annual regulatory agenda, through 

supplemental monthly reports, and by providing copies of all 

Notices of Proposed Regulatory Action. 

OIG Comment Management’s response, including the 

correspondence between DHS and CBP provided with the 

response, satisfies the intent of our recommendation. 

2. Establish written procedures regarding the Office of Tax Policy’s 

responsibility for monitoring DHS compliance with TO 100-16. 

The procedures should provide that documentation be retained 

to show that Treasury is receiving and reviewing all pertinent 

regulatory matters and rulings subject to Treasury review and/or 

approval. The procedures should also require an annual review 

be conducted to evaluate the performance and effectiveness of 

the Office of Tax Policy in ensuring compliance with delegated 

responsibilities under TO 100-16. 

Management Response The Acting Assistant Secretary stated 

that this recommendation has been implemented. In addition to 

the exchange of letters noted in response to the first 

recommendation, Treasury established written procedures to 

ensure that regulations and rulings subject to Treasury review 

and/or approval are transmitted to Treasury. 

Management also commented that all DHS regulations not 

subject to Treasury review are reviewed by OMB. Additionally, 
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while our report notes that no summary documents are prepared 

with regard to Treasury action on retained customs revenue 

function regulations, complete files recording all Treasury 

changes in published regulations and related memoranda are 

maintained by both the Office of Tax Policy and the Executive 

Secretariat. As another comment addressing a statement in our 

report that not all rulings subject to TO 100-16 are reviewed in 

detail, management stated that such rulings are carefully read at 

Treasury but only those few that involve legal or factual issues 

that implicate important policy considerations are subjected to 

more extensive scrutiny, independent legal research, and 

additional consultation. According to management, subjecting 

all rulings subject to TO 100-16 to such examination would be 

an unnecessary expenditure of resources. 

OIG Comment The corrective action to establish written 

procedures is generally responsive to the intent of our 

recommendation. While the response did not specifically 

address that an annual review process was incorporated in 

these procedures, management in earlier oral comments stated 

that a review of work is provided for in the preparation of the 

semi-annual regulatory agenda. However, beyond that, it would 

not be possible to measure performance of the Office of Tax 

Policy relative to review and/or approval of customs revenue 

function-related regulations according to management. We 

believe periodic assessments are still a useful tool to ensure that 

Treasury’s policy objectives with respect to customs revenuerelated functions are being achieved. 
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* * * * * * 

We would like to extend our appreciation to the DAS for Tax, 

Trade and Tariff Policy for the cooperation and courtesies extended 

to our staff during the reviews. If you have any questions, please 

contact me at (202) 927-5400 or Donald Benson, Director, Eastern 

Field Audit Office, at (617) 223-8640. The major contributors to 

this report were Mr. Benson, Director; Robert Mello, Audit 

Manager; and Thomas Mason, Auditor-in-Charge. 

Marla A. Freedman 

Assistant Inspector General for Audit 
Appendix 1 

Objective, Scope, and Methodology 

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Our objective was to identify the specific functions the Secretary 

of the Treasury retained under the Homeland Security Act of 2002 

and assess Treasury’s performance in meeting its responsibilities. 

We reviewed the pertinent provisions of the Homeland Security Act 

of 2002, TO 100-16, TO 111-02, and TD 18-03. We interviewed 

the DAS for Tax, Trade and Tariff Policy and staff from the 

Customs and Border Protection’s Office of Regulations and Rulings. 

We held discussions concerning the procedures used by both 

Departments that related to the issuance and review of regulations 

and rulings. We reviewed drafts of a proposed agreement between 

Treasury and Homeland Security regarding coordination of efforts 

involving trade policy matters. We reviewed the Federal Register

to identify entries relating to customs revenue functions and 

determined whether the entries were subject to Treasury review 

and approval. 

We conducted our audit between December 2003 and April 2004 

in accordance with generally accepted government auditing 

standards. 
Appendix 2 

List Of Customs Issuances Approved By Treasury 

During The Period March 2, 2002-March 1, 2003 

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Number Subject Date 

1 Prototypes Used Solely for Product Development 3/8/2002 

2 User Fees 3/18/2002 

3 Payment of Duties on Certain Steel Products 3/20/2002 

4 North American Free Trade Agreement 4/2/2002 

5 Drawback Conforming Amendments 4/8/2002 

6 Single Entry for Unassembled/Disassembled Entities 4/8/2002 

7 Amended Procedure For Refund of HMF on Exports 5/13/2002 

8 Duty Free Treatment For Volvo Ocean Race Event 5/14/2002 

9 User Fee Airport 5/21/2002 

10 Technical Amendment Reusable Shipping Devices 5/23/2002 

11 Petition Classification of Textile Slippers 5/23/2002 

12 Import Restrictions Archaeological Material Peru 6/6/2002 

13 Duty Free Entry of Civil Aircraft Merchandise 6/7/2002 

14 Conditional Release/Importers of Food, Drugs, Devices 6/7/2002 

15 Civil Fines For Importation of Counterfeit Merchandise 6/7/2002 

16 Elimination of Tariff Rate Quotas On Imported Lamb Meat 7/16/2002 

17 Import Restrictions Archaeological Material Cyprus 7/19/2002 

18 Manufacturing Substitution Drawback 7/24/2002 

19 Merchandise Processing Fee Eligible For Drawback 7/25/2002 

20 Expanded Weekly Entry Procedure FTZ 7/25/2002 

21 Presenting Cargo Declarations at Foreign Ports 8/8/2002 

22 Technical Corrections Rules of Origin Textiles/Apparel 8/9/2002 

23 Entry of Certain Steel Products 8/9/2002 

24 Administrative Rulings 8/16/2002 

25 Consolidation of Customs Drawback Centers 8/21/2002 

26 Re-Use of Air Waybill - Air Cargo Manifest 8/30/2002 

27 Licenses Certain Worsted Wool Fabrics Subject to Quota 8/30/2002 

28 Petition Tariff Classification of Dairy Protein Blends 9/18/2002 

29 Extension of Import Restrictions Archaeological - Mali 9/20/2002 

30 Import Restrictions Archaeological Material Guatemala 9/30/2002 

31 Duty Free Treatment of Beverages With Caribbean Rum 10/9/2002 

32 Reimbursable Customs Services 10/9/2002 

33 Performance of Customs Business Parent/Subsidiaries 10/15/2002 

34 Presenting Cargo Declarations at Foreign Ports 10/31/2002 

35 General Order Warehouses 11/8/2002 

36 Private Aircraft Programs Establishment of GATE 12/2/2002 

37 Customs Service Field Organization Fargo North Dakota 12/2/2002 

38 Confidentiality Protection of Vessel Cargo Information 1/9/2003 

39 Expansion of Port of Portland, Maine 1/9/2003 
Appendix 2 

List Of Customs Issuances Approved By Treasury 

During The Period March 2, 2002-March 1, 2003 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 21 

Number Subject Date 

40 Consolidation of Customs Drawback Centers 1/24/2003 

41 Single Entry For Split Shipments 2/25/2003 

42 Rules of Origin Textile and Apparel Products 2/25/2003 

43 Tariff Treatment Disassembly Operations NAFTA +3/13/2003 

44 Compliance With Inflation Adjustment Act +3/21/2003 

45 Entry of Certain Steel Products +3/21/2003 

46 Benefits Under Caribbean Basin Economic Recovery Act +3/21/2003 

47 Benefits Under African Growth and Opportunity Act +3/21/2003 

48 Implementation of Andean Trade Promotion and Drug Act +3/25/2003 

 

 +Issuances approved by the DAS before March 2, 2003. 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 22 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 23 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 24 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 25 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 26 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 27 
Appendix 3 

Management Response 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 28 
Appendix 4 

Report Distribution 

REVENUE COLLECTION: Formalizing the Review Process Could Better 

Ensure Continued Treasury Oversight of Customs Revenue Activity 

(OIG-05-006) 

Page 29 

Department of the Treasury

Acting Assistant Secretary (Trade Policy) 

Deputy Assistant Secretary (Tax, Trade and Tariff Policy) 

Office of Strategic Planning and Performance Management 

Office of Accounting and Internal Control 

Office of Management and Budget

 OIG Budget Examiner