We recently discovered a strange feature of U.S. Customs and Border Protection’s (CBP’s) automated commercial environment (ACE) that we wanted to flag for you.
As you know, ACE provides importers with easy-access to a wide range of reports that provide extensive visibility into the company’s import activity. ACE also provides specific functionality that allows the merging of top-level ACE accounts, which might be appropriate in the wake of a merger or acquisition. (ACE guidance on the topic of merging accounts from 2012 can be found here: Merging Ace Accounts.) What we found strange is that what CBP describes as a “merging” of accounts, is really more like the “deleting” of an old account and the creation of a new sub-account that is unrelated to the old account (the old data is no longer accessible).
To illustrate, suppose Company A acquires Company B, and Company B will become a division of Company A, losing its old EIN, and continuing operations using a new suffix under Company A’s EIN. Given that Company B’s import activity is being merged into the new consolidated entity, it might seem reasonable to “merge” Company B’s ACE account into Company A’s existing ACE account. What’s odd is that merging accounts in ACE will cause the historical data from the subsumed entity to be eliminated. Historical import data for Company B will no longer be accessible. CBP plainly acknowledges this fact in the attached guidance, and recommends running ACE reports to capture the acquired entity’s import activity, prior to merging accounts.
This seems odd, to say the least (Company A should be able to continue to access Company B’s historical data in such a situation – it most likely assumed the liability for it). We asked CBP’s ACE Business Office if they could explain why the system is designed in this way. We were told that (1) CBP aims to “prevent unauthorized access by one (new) IOR of another no longer existing (old) IOR”, and (2) CBP aims to “prevent unauthorized access [by the old ACE account users] to the data they no longer own.” While there certainly is an interest in maintaining the security of data in ACE accounts, it is difficult to discern the rationale for deleting historical import data for which the acquiring entity will, in most circumstances, bear liability on a going forward basis.
If faced with the fact pattern described above, it may be better for Company A to allow the Company B ACE account to remain intact. Post-acquisition, user accounts within Company B’s ACE account could be cancelled (as needed) and the Trade Account Owner might be swapped out (e.g., if the former TAO of Company B is not staying on is part of the new consolidated Company A). That way, Company A would preserve access to the historical data of Company B it acquired—and now likely bears liability for—when it purchased Company B. This advice may become especially important if CBP eventually eliminates the ability of companies to request historical ITRAC data, as has been rumored with the ACE transition.
So, in short, be wary of “merging” ACE accounts because, as things currently stand, you may lose access to the historical data of the entity being merged.
We hope you find this useful. If you have any questions, please let us know.