IT-Silkroad

[AEO System]

■ Outline

ㅇ The Authorized Economic Operator(AEO) system is designed to prevent the importation of goods that could threaten social safety and public health, and to provide various benefits in customs procedures such as expeditious customs clearance and customs inspection exemption, and this system is authorized by the customs authorities after examining the compliance of logistics related companies with the laws and the level of safety management.

ㅇ The World Customs Organization (WCO) has adopted 'the International Convention on the Simplification and Harmonization of Customs Procedures(Kyoto Convention)' as a measure for trade facilitation, including standardization and simplification of customs documents, utilization of IT technologies, and simplification of customs control over customs clearance, etc.

ㅇ The question of securing the stability of the trade supply chain amplified after the September 11, 2001 terrorist attacks in the United States was discussed in conjunction with the revised Kyoto Protocol, and as a result, in June 2005, the 'WCO Framework for Standards and Secure and Facilitate to Global Trade (WCO SAFE Framework)' was established to harmonize trade safety and facilitation.

ㅇThe main contents of the WCO SAFE Framework are the establishment of integrated standards for the safety and facilitation of international trade, the strengthening of cooperation between customs and customs, customs and private companies, customs and governmental organizations, and the AEO system for private self-examination.

- The WCO SAFE Framework is divided into seven parts: ① Preface, ② Profit (national / government, customs and private companies), ③ Pillar 1. Customs cooperation standard, ④ Pillar 2. Customs-private cooperation standard, ⑤ Pillar 3. Cooperation standards of customs-foreign government and customs-foreign government agencies, (6) Sustainability and resumption of trade, and (7) mutual recognition agreement (MRA).

- Each standard contains technical details for implementation.

■ AEO certified standards of the WCO SAFE Framework

ㅇ In order for private companies to obtain AEO authorization, they must comply with the WCO SAFE Framework Annex IV: AEO Conditions, Requirements and Benefits.

- The AEO Certified Standards set out 13 internationally unified rules for roles and qualifications for customs authorities and AEO-authorized companies, which are guidelines for accredited AEO vendors in their respective countries.

☉ Qualification Standards of the AEO Qualified Company

① Law Compliance

- Customs should consider whether the AEO support company has faithfully fulfilled its obligations in relation to customs obligations when applying for AEO qualification.

② Commercial Records Management and verification

- The management of company records is an essential element in the security of the international logistics system. The company must possess and verify the import and export data through the records management system.

③ Financial Solvency

- Financial viability is an important measure of the ability to secure and maintain and promote the safety of logistics system.

④ Consultation, cooperation and communication

- All countries should consult regularly on topics including the safety and speed of the logistics system through consultation, cooperation and communication with customs and other relevant agencies and companies.

- These consultations are intended to contribute to the maintenance of customs development and crisis management strategies and should not interfere with the enforcement of laws.

⑤ Education, training, awareness

- Customs and AEO-authorized companies should establish a system to provide education and training to employees and, if necessary, trading partners for security policies, security policy violations and security processes.

⑥ Exchange of Information, processing and confidentiality

- Because exchange of information , access and confidentiality are important aspects of information security, we must develop and secure means to prevent misuse or unusual change of information.

⑦ Cargo security

- Customs and AEO-authorized companies must establish and maintain an integrated cargo system to ensure that access control is at the highest level as well as daily responsibility for cargo security.

⑧ Transportation security

- Security measures should be established to ensure that the means of transport are effectively managed and maintained, and transportation security must be maintained, such as by carrying out carrier security drills.

⑨ Workplace security

- You must monitor and control the inside and outside of the building, taking into account international standards and the status of AEO-authorized companies.

- Buildings and facilities must be provided to prevent illegal intrusion of the workplace, and unauthorized persons and vehicle control procedures must be in place.

⑩ Personnel security

- As far as legally possible, the employee is required to verify the identity of the employee, and the visitor must verify the photo identification.

- You must prohibit unauthorized access to facilities, vehicles, shipments, or cargo storage that may affect the safety of the logistics system.

⑪ Security of trading partners

- It is necessary to enhance the security of trade partner by stipulating the terms of security implementation in the contract.

⑫ Risk management and recovery

- Crisis management and accident recovery should be planned in advance in preparation for emergency situations such as disaster or terrorism, and manuals must be available.

⑬ Assessment, analysis and improvement

- Measurement, analysis and improvement procedures are needed to complete to assess the consistency with the guidelines, to ensure the integrity and sufficiency of the security management system, to improve the security of the logistics system, and to identify potential factors to enhance the security management system.

☉ Benefits of AEO

① AEO must have the benefit of expediting freight forwarding, and savings of transportation time and warehouse cost.

- Submission of data can be skipped for cargo release

- Rapid procedures and shipments are available.

- Minimum cargo security inspection

- Considering x-ray inspection as a top priority when inspection is needed

- Reduce certain fees or liability for a company that is well-performing AEOs

② If you have any of the following freight procedure programs, you should consider them first.

- Apply customs clearance procedures by company rather than transaction-by-transaction

- Can receive simplified post-import or pre-clearance system

- Qualify for self-examination or reduced examination

- Reduction of negligent administrative penalty.

- Ensuring continuous paperless procedures in connection with import and export

- Receive top priority response from customs authorities for inquiries about laws and regulations

- Eligibility for remote Customs clearance

- Exemption from payment obligations for penalties imposed on delayed customs duties or interest charged on repayment damages

③ AEO authorized companies should have access to valuable information.

- Provide contacts and company names of AEO companies with the consent of other participating companies

- Access to the list of all countries adopting SAFE Framework

- Viewing verified safety management standards and best practices

④ You must be able to take special measures in case of trade breaks and high threats, such as trade in emergency and crisis situation.

- Considering the highest priority in customs procedures even in crisis situations.

- If the port or airport is closed or resumed, it may be given priority.

- Priority in export resumption after the accident

■ Mutual Recognition Arrangement(MRA) of AEO

ㅇ AEO Mutual Recognition Arrangement (MRA) is an agreement whereby an AEO-authorized company in a country receives the same level of benefits as an AEO-authorized company in the other country.

ㅇ The procedure is concluded as follows: ① Comparison of Authorization criteria → ② Mutual visit joint examination → ③ Consultation on operating procedures → ④ Signature of the top decision maker.

ㅇ AEO mutual recognition agreement countries are as follows. (As of May 2019)

■ AEO System of Korea

☉ Outline

ㅇ Korea participated in the risk management system of the customs administration spreading around the world based on the 2005 WCO SAFE Framework, and In order to effectively manage increasing trade risks as trading transactions increase, we introduced the AEO system, an autonomous risk management system.

ㅇ The Korean AEO system was laid down in January 2008 as a legal basis for the Customs Act, and in 2009, the "Certification and Management of Authorized Economic Operator"(AEO Notice) was issued, and details of Authorization criteria, examination procedures, and operation of the system are provided.

ㅇ The characteristics of Korea AEO system are that the AEO system is operated as a system for the security of logistics in the USA and other countries, while Korea is operating the system that manages risks that can appear in all areas of customs administration such as customs clearance, examination, and investigation, and thus it differs slightly from other countries in operating and policy direction.

☉ Authorization subject

ㅇ AEO certificaion subjects of Korea are: ① an exporter, ② an importer, ③ a customs broker, ④ a freight forwarder, ⑤ a bonded carrier, ⑥ a bonded zone operator, ⑦ a shipping company ⑧ an airline company ⑨ a landing agent

☉ Authorization criteria

ㅇ Korea emphasizes not only trade safety but also risk management on tariff and trade and stipulates the AEO Authorization criteria for the purpose of strengthening internal control system standards and consists of the following four categories.

① Law Compliance

- Evaluate whether they are in compliance with the provisions of the Customs Act, the Foreign Trade Act, the Foreign Exchange Transactions Act, and other laws and regulations related to import and export.

- Integrated regulatory compliance operated by the AEO Authorization criteria are based on the standards of reporting accuracy, correction of tax, violation of important matters such as penalties and administrative sanctions, customs administration cooperation and comprehensive examination cooperation.

② Internal Control System

- Evaluate the business activities of the company, the flow of documents related to the declaration and the mutual communication and control system between the departments related to the accounting process to maintain the appropriateness of the import and export declaration.

- It is an assessment of whether an certified company has an internal control system that identifies and resolves tariff-related risks by themselves so that potential hazards can be eliminated in advance or structural errors can be prevented, and immediate and systematic responses to risks can be made.

③ Financial Solvency

- We assess the financial situation, such as the size of the corporation, the delinquency of the tax, and the credit rating, to the extent that implementation of sincere compliance is possible.

④ Security Management

- Authorization criteria are used to assess whether a company meets safety requirements, and they evaluate whether they are performing risk assessments for their trading partners, whether they are maintaining physical integrity of the cargo's storage facilities or means of transport, and whether they have a set of procedures regarding information security.

☉ Authorization benefits

ㅇ AEO certification of Korea divide companies into three types, A, AA, and AAA, depending on their compliance with regulations and best practices.

ㅇ An AEO-authorized company can receive various screening and tax payment benefits such as penalty reduction, expedited customs clearance, planning review, corporation examination and so on for 5 years.

- The rate of inspection of goods is reduced, the submission of documents is omitted and the flow of logistics becomes smooth. In addition, various benefits such as principle exemption of various customs duty investigation and reduction of the burden due to omission of collateral at the time of import declaration can speed up customs clearance and stable management .

ㅇ In Korea, due to the amendment of the VAT Law in 2013, the issuance of revised income tax invoices is restricted when the tax revenues are adjusted for customs duties. As AEO-authorized companies are regarded as sincere companies, autonomous revision reports are recommended, to alleviate the additional tax burden.

■ C-TPAT System of the United States

☉ Outline

ㅇ As part of the logistics safety supply program, the C-TPAT(Customs-Trade Partnership Against Terrorism) was created as a private partnership in April 2002.

ㅇ C-TPAT is an import and export logistics security system that enhances security by encouraging trade industry to voluntarily comply with legal and security standards in cooperation with CBP (Customs and Border Protection), while promoting trade flow for cargo and transportation means.

ㅇ C-TPAT started in November 2001 and began with an emphasis on security for imported cargo except for exporters, but in 2014 the exporters were also included in the certification subjects.

ㅇ C-TPAT now has a legal basis after the Security and Accountability for Every Port Act of 2006 (SAFE Port Act 40) was established on October 13, 2006.

☉ Authorization subject

ㅇ C-TPAT has 12 certification subjects, which apply to all supply chains.

① importer

    ② Exporter

    ③ Air carrier

④ Consolidator[Air transportation consolidator, Sea freight forwarder, Non-vessel Operating Common Carrier(NVOCC)]

⑤ Customs broker

⑥ Foreign manufacturer

⑦ Highway transporter

⑧ Long haul transporters in Mexico

⑨ Harbor Terminal Operator

⑩ Railway transporter

⑪ Sea carrier

⑫ Third-party logistics provider

☉ Authorization criteria

ㅇ The security standards that must be met for C-TPAT authorization are slightly different for the supply chain parties, but most of them contain similar content.

ㅇ The C-TPAT authorization subject can only be authorized if the subject has to implement the detailed security guidelines for each security item.

☉ Law Compliance

ㅇ CBP collects security information on US import-related companies through C-TPAT. Benefits of Tier 1, Tier 2, and Tier 3 are differentiated according to the level of safety management. Tier 3 offers the most benefits.

ㅇ Benefits granted to subscribers are as follows:

- Mitigation or exemption of customs inspection

- First release and reduce the cost of inspection

- penalty reduction

- Assigned SCSS (Logistics Security Personnel)

- Providing information through other seminars, education, etc.

■ Management of enterprise classification(AEO) System of China

☉ Outline

ㅇ As of April 1, 2008, we have abolished the 4th grade enterprise classification and the red or black system and implemented the 5th grade enterprise classification management system in order to introduce the SAFE Workframe of World Customs Organization (WCO).

- Through the establishment of the People's Republic of China Customs Enterprise Classification Management Method (February 1, 2008) of the General Administration of Customs Order No. 170, the autonomous compliance spirit of the enterprise is recommended, the efficiency of customs management is improved, and the safety and facilitation of import and export trade are ensured.

- AA and A-type companies were granted the convenience of customs clearance, B-type companies were performing daily management, and C-type and D-type companies were strictly supervised.

ㅇ As international trade has increased, China Customs has introduced a new corporate valuation standard that assesses the credit and risk management of Chinese companies based on the General Administration of Customs Order No. 225, which came into effect on December 1, 2014.

- We have abolished the existing authorization standards for corporate classification management system and proposed a new evaluation company that has collected C-TPAT of the US and other foreign AEO systems.

☉ Authorization subject

ㅇ As of December 1, 2014, the status of companies that have been classified according to the existing corporate classification management system has changed as follows.

- AA and A-type companies are changed into high-grade certified companies and general certified companies, respectively.

    - B company changed to general credit company

    - C and D companies can be reexamined and modified by the Chinese customs, but if they are judged as a bad credit company, they will be subject to the credit rating of Class C and D of the existing corporate classification management system.

☉ Authorization criteria

ㅇ There are four main criteria for evaluating AEO certification in China, which is similar to the AEO system in the EU and other countries.

- Internal controls(including IT systems)

- Proven financial solvency(financial conditions or status)

- Appropriate record of compliance with customs requirements(compliance)

- Appropriate security and safety standards(Trade security)

☉ Authorization benefits

ㅇ In addition to all the benefits provided to A-type companies, AEO-authorized companies (AA-type) are receiving benefits such as exemption from customs clearance inspection, releasing the cargo after providing the security prior to the expiry of the customs procedure, priority as a customs clearance pilot company, priority for classification and analysis process of items for import and export, etc.

ㅇ In case of A company, benefits are provided such as priority is given to processing clearance for outside office hours and public holidays, priority processing of processing trade (registration, change, settlement), priority processing of declaration of freight, inspection and customs clearance, dispatch inspection of customs officer in production process or unload, inland declaration, Permit clearance of port, etc.

ㅇ C and D companies are strengthening their inspections on evaluation, item classification, origin, and tax rates, Especially for D-type companies, full-scale inspections are carried out.

ㅇ Customs declaration and customs procedures can be handled by freely choosing one of the customs offices of receipt, shipper, and agent location of import and export goods.

ㅇ In addition to expediting customs clearance, we also provide customs agents to help resolve customs clearance problems of certified companies.

ㅇ For processing trade companies, the bank deposit system is not applied.

ㅇ Bad credit companies are subject to the following administrative measures:

- High inspection rate on import and export goods

- Careful review of the documents of import and export goods

    - Special supervision of processing trade and other procedures

    - Other administrative principles and measures specified by the Chinese Customs

■ AEO System of Japan

☉ Outline

ㅇ Japan participated in the revised Kyoto Protocol in 2001 and adopted the Acceleration of Customs Procedure to separate the import declaration from the tax assessment and have implemented a Simplified Declaration System to simplify the declaration of imports for a certain period of time to comply with certain regulatory requirements for the authorized operators authorized by customs.

ㅇ Japan adopted the WCO SAFE Framework system to ensure security and smoothness of international logistics and introduced the AEO system for exporters in March 2006 for the first time.

ㅇ After the implementation of the AEO system in 2007, AEO-authorized companies are able to benefit from benefits such as streamlining declaration documents that are larger than existing systems, accepting declarations at the warehouse, and alleviating inspection of goods so that they could promote fast customs clearance.

☉ Authorization subject

ㅇ AEO certified in Japan can apply for logistics in six categories: ① importer, ② exporter, ③ bonded area operator, ④ bonded transportation company, ⑤ authorized customs agent, ⑥ manufacturer and operated as an authorized or non-authorized system with no rating.

☉ Authorization criteria

ㅇ To qualify as an AEO in Japan, you must meet the following four standards:

① Law Compliance

- For three years, it should not be disqualified for disqualification under the trade laws such as customs law, trade relations law, etc.

② Operation of Nippon Air Cargo Clearing System (NACCS)

- It must possess the ability to use the electronic clearance system to perform customs clearance procedures, export and import duties in accordance with standards set by the Ministry of Finance.

③ Financial solvency(Capability to conduct related operations properly)

- We assess the financial solvency and the possibility of customs clearance, which can safely manage freight and operate customs procedures properly.

④ Establish Compliance Regulations (Compliance Program; CP)

- You must have an operating system that allows you to perform customs duties properly such as import and export general management department, trading company management, cargo security, customs legality documentation, customs cooperation, etc.

☉ Authorization benefits

ㅇ Japan benefits according to the parties rather than collectively dividing them into specific levels.

ㅇ Certain export declaration systems is a system that allows the specific export company authorized by the customs authorities to report and get an export license from the customs authorities having jurisdiction over the location where the cargo is placed or the port (airport) where the cargo is to be loaded (loading) without the goods delivered to the bonded area.

- It has the effect of reducing customs inspection and investigation rates because it reflects the security management and compliance of exporters.

ㅇ For special importers who have been approved by the head of customs and who have been in charge of cargo security management and compliance with laws and regulations, import declaration and tax declaration are separated and the special import declaration system that can receive the consignment before tax declaration is operated.

- It is possible to receive the import declaration before the cargo arrives in Japan, and it is possible to receive the permission for the import more quickly and smoothly.

- Decrease in the number of items to be reported at the time of import declaration, and tax declaration can be done collectively at a later date.

- In the case of import declaration, inspection and inspection for tax payment are omitted basically, and as a result, time for customs clearance can be calculated, making inventory management much easier.

- Except where deemed necessary for preservation, tax return can be filed at a later date without providing security.

■ AEO System of EU

☉ Outline

ㅇ The EU AEO related laws were enacted on January 1, 2008 and the AEO system was set up in the EU Customs Act (CCC) in the revision of the Enforcement Decree of the Customs Act, reflecting the safety and security amendment based on the EU CSP.

ㅇ The EU AEO system fully embraces the WCO SAFE Framework.

ㅇ The EU AEO is operated by the DG TAXUD under the EU Executive Committee. In accordance with the situation in each country, AEO in charge of customs affairs is in charge of customs in each member country.

ㅇ The EU AEO authorization does not have a separate official grade and is divided into authorized and non-authorized.

- Although there is no official grade, it is certified as a fast customs clearance(AEO-C type), security(AEO-S), and fast customs clearance/security integration(AEO-F type).

☉ Authorization subject

ㅇ The authorization subjects are ① export company, ② import company, ③ manufacturer, ④ forwarder, ⑤ bonded zone operator, ⑥ customs agent, ⑦ transportation company.

ㅇ For non-EU member companies, it is only possible to participate if the mutual recognition agreement of the AEO certification between the non-EU member countries and the EU is concluded. It is also possible to participate in the case of an airline or ship carrier who has an office in the EU and has completed customs clearance simplification procedures.

☉ Authorization criteria

ㅇ The authorization criteria of the EU AEO system consists of the following five categories.

① Total Company Information

- Information on business size, statistics on customs clearance, etc.

② Compliance with laws and standards

- Economic operators must comply with and maintain records of customs and tax requirements.

③ Corporate accounting and logistics systems

- Assessing whether commercial and transport records management systems are in place for proper customs control, and there must be a system that can manage such things as the existence of accounting audit records for tax/tariff purposes, information accessibility, inventory control, and product movement path tracking, etc.

④ Financial ability(Solvency)

- The economic operator must not be in any form of insolvency and, if necessary, must demonstrate financial solvency at the time of filing the AEO status of the parent company.

⑤ Safety and security requirements

- Ensure adequate security and safety standards, including physical security and access control measures, etc.

☉ Authorization benefits

ㅇ AEO expedited customs clearance type vendors benefit from streamlining Customs procedures between EU member states or simplifying customs clearance related to supply chain security.

ㅇ The AEO safety security certification type vendor benefits from a low risk score when analyzing risks for safety purposes and a reduction in the amount of data transferred prior departure or arrival of vehicle.

- In the case of control (inspection), consultation for priority inspection and place of inspection, prior notice at the time of selection of control target, guarantee of priority of resumption of trade in case of international supply delusion attack, minimization of customs interference in shipment process, convivial consideration for the results of customs crackdown are provided.

ㅇ In addition to the benefits of expedited customs clearance and security, AEO certified individuals can expect long-term business and sales growth benefits through enhanced corporate image and process improvements.

ㅇ Increased investment in safety management to acquire AEO authorization will lead to improvements in business processes, reduction in safety accidents due to safety management, reduction in supplier inspection costs and increase in cooperation, reduction in safety issues through improved employee awareness of safety, and improvement of communication on safety with supply chain partners.