Section 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;(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 § 146.53 .