Ensuring the security of the global supply chain while facilitating trade is a challenge both for customs authorities and economic operators. To meet this challenge, many countries have introduced additional security measures to reinforce risk management in accordance with the WCO SAFE Framework of Standards.

In risk management, the reliability of traders is of crucial importance. Established authorised economic operators (AEOs) that adhere to security and compliance criteria allow customs to focus on risky trade flows.

In exchange, AEOs receive benefits in form of trade facilitation. Mutual recognition of AEOs provides reliable operators additional trade facilitation benefits in partner countries; it also allows customs to target high risk shipments more effectively.

Mutual Recognition of AEOs with Japan

The implementation of mutual recognition of AEOs between the EU and Japan will begin on 24th May 2011. From this date, AEOs in the EU and Japan will start to benefit from this mutual recognition.

Mutual recognition benefits for EU AEOs in Japan

The implementation of mutual recognition with Japan means that the AEO status of EU importers and exporters will be taken into account during the security risk assessment procedures by Japanese Customs in Japan, if the procedure utlined below is followed. In order to benefit from the mutual recognition in Japan, EU AEO importers and exporters are required to inform their Japanese business partners of their 12 character code for mutual recognition purposes with Japan. These codes have been issued by Japan Customs for all EU AEOs who gave their consent to be included in mutual recognition of AEOs. The European Commission will inform the EU AEOs of these Japanese identification codes by letter. Please note that the code for the purpose of Mutual Recognition with Japan is different from the EORI number of EU companies.

Trade that is coming from EU AEO exporters or going to EU AEO importers will benefit at the stage of the Japanese import / export declaration. The Japanese importers/exporters (or their representatives) will enter the notified 12 character code issued for EU AEOs by Japan Customs for mutual recognition purposes in the relevant electronic declaration field for foreign importers/exporters.

Mutual recognition benefits for Japanese AEOs in the EU

For Japanese companies to receive benefits in the EU, in relation to the security risk assessment at entry or exit, EU traders may be approached by their Japanese AEO business partners and informed of the 14 character mutual recognition code assigned to Japanese AEOs. Alternatively, EU traders may proactively ask their Japanese AEO business partners for their 14 character mutual recognition code. This code should be entered in the declaration form in the field entitled “Documents produced, certificates and authorisations”. In addition, the TARIC code “Y031″ needs to be completed in order to indicate that the cargo is coming from or going to AEOs of a country with which the EU has concluded a mutual recognition agreement regarding AEO programmes. At entry in the EU, the TARIC code “Y031″ and the 14 character mutual recognition code of Japanese AEOs needs to be used in the Entry Summary Declaration, or alternatively in the customs declaration if this declaration replaces the Entry Summary Declaration. At export, the TARIC code “Y031″ and the 14 character mutual recognition code of Japanese AEOs needs to be used in the customs declaration, or alternatively if no customs declaration is required, in the Exit Summary Declaration.

Source: Press release of the European Commission Taxation and Customs Union, 16 May 2011

The benefits and advantages related to the AEO status of economic operators have been widely spread. The most important being the reduced guarantee, quick change to emergency procedures and the good reputation of the AEO company with respect to security in their supply chain. But do you know that the status can be withdrawn, revoked or suspended?

In principle the AEO certificate is not time-limited. However, situations may arise which require the certificate to be reviewed. Customs administrations have two working methods to verify whether the conditions for AEO status are satisfactory, i.e. reassessment and monitoring.

Reassessment has been regulated by the CCIP and serves to verify that the AEO still meets the conditions at a certain point of time. It will usually be carried out if the legal situation changes or if there is evidence that the holder of the certificate does not meet or no longer meets the AEO criteria. In addition, the customs administration can perform monitoring. This possibility is also provided by the CCIP which permits checks to be carried out on an on-going basis and in the absence of a special event.

Withdrawal: It is possible to cancel or withdraw an AEO certificate when:
1/ it has been issued by an authority without requisite jurisdiction over the subject-matter; 2/ it has been obtained by unfair means such as deceit, threats or bribery; 3/ the beneficiary has obtained the status by providing information which was essentially incorrect or incomplete; 4/ the beneficiary was aware of its illegality, or was unaware thereof due to gross negligence.

Revocation: An AEO status may be revoked in whole or in part:
1/ if the economic operator has failed to take the necessary remedial measures to comply with the requirements of the relevant AEO certificate and therefore does not meet the certification requirements; 2/ when serious infringements related to customs rules have been committed by the AEO and there is no further right of appeal 3/ upon request of the AEO.

Suspension: The AEO status can be suspended for three different reasons:
1/ non-compliance with the conditions or criteria for AEO certification, where the customs authority established that the operator does not comply with the conditions or criteria for the AEO certificate. This covers cases where the conditions did not exist at the time of the certification. 2/ Sufficient reasons to believe that a criminal act took place such as fraud, money laundry or the forgery of documents. 3/ upon request of the AEO.

Customs authorities are to communicate their findings to the concerned economic operator before taking a decision. The economic operator is entitled to correct the situation and/or express his point of view within 30 calendar days, starting from the date of communication. In the event of non-compliance with the conditions for an AEO certificate, the operator may take measures such as remedying safety deficiencies, improving customs processes, reorganising his accounts or restoring solvency. However, such measures are not possible in the event of the second reason for suspension, that is, where the customs authorities have sufficient reason to believe that an AEO has committed an offence.

A field research on this topic on the Belgian territory learns that 19 companies have revoked their application and 8 applications have been refused so far. Reasons for revocation or refusal of application are often solvency or safety deficiencies.

The agreement between the EU and Japan as part of secure AEO certification was signed June 24,2010. From April 1, 2011 starts the assigning of advantages. This means that certified companies in both the EU and Japan can expect fewer controls on their shipments.

This advantage is granted to holders of a European AEO certificate upon the Import procedure which possess the AEO certificate Safety (AEO-S) or the certificate simplified customs procedures/safety (AEO-F) and which gave consent regarding the exchange of AEO-data between the EU and partner countries.

Shipments from Japan: A temporary solution has been found to identify the Japanese certified companies in the customs systems. The Entry Summary Declaration should mention the code Y031 together with the data element ‘Transport document’ and the unique identifier of the Japanese holder of the AEO-certificate. Member States will gradually implement this solution or may use intermediate solutions to identify Japanese AEO certificate holders.

Shipments to Japan: Once you have granted the authorization for the exchange of information, you receive a specific identification number for Japan. This number should be used in the customs declaration which is presented to the Japanese Customs.

In contacts with the EU Customs Authorities you should always use the EORI number which is assigned to your company.

The EU Commission recently published specific guidelines on Authorised Economic Operator status (AEO) for multinational or large businesses (EU established or not). Most of the time they consist of a parent company and subsidiary companies and/or Permanent Business Establishments/branches. In these guidelines the Commission clearly defines:

• Subsidiary = an incorporated entity created in the host EU country (national business legal forms! ), its capital is fully owned by the parent company or it is controlled by a company in collaboration with minority local partners (a joint subsidiary). Subsidiairies are legally independent from their mother company.
• Branch = is not an individual legal entity and has no legal personality. A branch is an office/premise/another location of the company itself. A branch forms part of the company’s total assets.
• Permanent Business Establishment  = is a fixed place of business through which the business of an enterprise is wholly/partly carried out.

Regarding AEO application for the multinational or large business of an enterprise, the following scenarios are now foreseen:

• all subsidiairies/PBEs being separate legal entities shall apply separately for an AEO status.
• all branches/PBEs which are not individual legal entities cannot apply separately for an AEO status and one single application covering all of them shall be submitted by the parent company considered as a person according to the EU legislation.

Customs4trade assisted and assists several large and multinational companies with their AEO certification process in different Member States. Our own developped C4T AEO tool makes complex situations manageable:

• many different stakeholders
• stakeholders in different locations
• different legal entities
• different sites or business units
• different member states
• different languages

The C4T AEO tool is designed to reduce your project time for getting the AEO status and reduces efforts for your internal and external ressources. With the easy status reporting, you are in control of the process.

Click here to read more on these specific guidelines !

The introduction of AEO in Switzerland grants certified entities customs privileges with companies located in EU-member states as well as in relation to non EU-countries, such as preferential treatment of cross-border shipments, reduced waiting time for customs clearance and less physical and documentary controls at customs borders. AEO is not obligatory, but offers many benefits for parties involved in the international supply chain.

 Switzerland decided first to test the AEO certification process with four selected pilot companies. The audit results and information from the four pilot companies are still being examined. The full launch of the AEO certification in Switzerland is expected in January 2011.

One of the results from the test phase is that companies that hire business locations/facilities from Logistics Service Providers, that are not interested in applying for the AEO status require special attention. In this case, well defined contracts, procedures, tasks, competences and responsilities need to be provided to customs.

The structure of the self-assessment questionnaire has been revised. After the completion of the pilot phase, which took  longer than expected, the self assessment questionnaire will be finalized. The Swiss questionnaire has been compared with the new updated uniform version of the self assessment agreed between the EU Member States and the European Commission, and completed accordingly. The Swiss questionnaire -and guidelines which are still under review- are available on the internet site in the three official languages. In order to have an efficient assessment and evaluation, the questionnaire needs to be sent electronically and on paper with the requested accompanying documents to the Swiss Federal Customs Administration. Further instructions on how to proceed will be provided by the SFCA in the near future.

Furthermore, a list of Frequently Asked Questions has been restructured in September and has been completed, in co-operation with the AEO contact partners in the Swiss customs districts. The FAQ’s can be consulted on the website of the Swiss customs: www.ezv.admin.ch

For more information, contact info@customs4trade.com

Source: website Swiss Federal Customs Administration