Sec. 146.23  Accountability for merchandise in a zone.

    (a) Identification of merchandise--(1) General. A zone lot number or 
unique identifier will be used to identify and trace merchandise.
    (2) Fungible merchandise. Fungible merchandise may be identified by 
an inventory method authorized by Customs, which is consistently 
applied, such as First-In-First-Out (FIFO) and using a unique 
identifier.
    (b) Inventory records. The inventory records will specify by zone 
lot number or unique identifier:
    (1) Location of merchandise;
    (2) Zone status;
    (3) Cost or value, unless operator's or user's financial records 
maintain cost or value and the records are made available for Customs 
review;
    (4) Beginning balance, cumulative receipts and removals, 
adjustments, and current balance on hand by date and quantity;
    (5) Destruction of merchandise; and
    (6) Scrap, waste, and by-products.
    (c) Physical inventory. The operator shall take at least an annual 
physical inventory of all merchandise in the zone (unless continuous 
cycle counts are taken as part of an ongoing inventory control program) 
with prior notification of the date(s) given to Customs for any 
supervision of the inventory deemed necessary. The operator shall notify 
the port director of any discrepancies in accordance with Sec. 146.53.