Authorized Economic Operator Programs in APEC Economies...

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2019/SOM3/SCCP/WKSP/002

Authorized Economic Operator Programs in APEC Economies AEO As a Facilitation Measure

Submitted by: IDB

Workshop on Integrating SMEs in Authorized Economic Operators Programs in Asia Pacific

Region: Improving SMEs’ Participation in APEC Secure Trade

Puerto Varas, Chile16 August 2019

Financed by the IDB, Integration and Trade Sector (INT)

APEC WORKSHOP“Integrating SMEs in Authorized Economic Operators Programs in Asia Pacific Region: Improving SMEs Participation in APEC Secure Trade”

Puerto Varas, ChileAugust 16th, 2019

AEO Programs in APEC EconomiesAEO as a Facilitation Measure

2181218 - Potencial de Yacimien ...MEX

Objective and Scope of the Study• Assess convergence of AEO programs in APEC member Economies.

• Identify opportunities and challenges on the implementation of MRAs.

• Analyze the current level of participation of small and medium enterprises (SMEs)and barriers for their inclusion into AEO programs.

The team used survey responses and the resulting analysis to determine best practices and suggestrecommendations based on the results that, if implemented, could increase AEO program convergenceand regional economic integration.


The study aims at analyzing the evolution of AEO programs, explore and recommend:

Ways to expand the APEC AEO network and increase their

interoperability as a trade facilitation measure.

Suggestions to increase MRAs between Economies and

optimize its implementation.

Measures for the inclusion of SMEs within the AEO programs.

1

2

3


Approach and Methodology

The most current literature on AEO programs, such as the APEC Authorized Economic Operator

(AEO) Compendium assembled in 2010, the APEC Best Practices in AEO Programs published in

May 2016, and the WCO AEO Compendium published in 2018, were closely examined to identify

status of the programs in APEC Economies.

In parallel, a survey was developed to enable comparisons of the different programs, allowing an

assessment of the overall advancement, convergence variables, MRA’s and the participation of

SMEs as well as to determine areas of future opportunity and collaboration.

15 out of 21 Economies responded the survey: Australia, Chile, China, Hong Kong-China,

Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Chinese Taipei, Thailand, Papua New

Guinea, the United States and VietNam.

For the rest of the Economies, information was obtained from public sources.


A G E N D A

AEO as a trade facilitation measure

• Milestones

• SAFE and TFA

• State of the Programs in APEC Economies

The team used survey responses from 15 Economies, and the resulting analysis to determine bestpractices and suggest recommendations based on the results that, if implemented, could increase AEOprogram convergence and regional economic integration.


Important milestones have been achieved since the beginning of the negotiation of the SAFE framework in 2005A E O M I L E S T O N E S

2005SAFE introduced the concept of AEO

2011APEC adopted the consolidated Counter- Terrorism and Secure Trade Strategy

2014Hong Kong -China first APEC economy to ratify the TFA

83 economies have

operational AEO programs

worldwide and, 19

are under

development.

75 bilateral MRAs

have been signed, and4 plurilateral

covering 16

economies.

Sources: • 2019 AEO Study for

APEC Economies for IDB.

• WCO 2019 AEO Compendium.

2007First MRA signed. New Zealand - USA

20121st WCO AEO Conference (Korea/WCO)

2001First Security Program in APEC region (CTPAT-USA)

2017TFA entered into force

2018Technical Standards for an AEO TIN number

2009APEC established an AEO WG

2017CADENA. Blockchain for information exchange

2018First Multilateral MRA signed (Pacific Alliance)

2019First Action Plan for an MRA between blocks (Pacific Alliance / Mercosur)


APEC defines “trade facilitation” in the Trade Facilitation Action Plan (TFAP)

“the simplification and rationalisation of customs

and other administrative procedures that hinder,

delay, or increase, the cost of moving goods

across international borders.

Or, to put it simply, it refers to the process of

cutting red tape at the border for importers and

exporters so that goods are delivered in the most

efficient and cost effective manner”.

A E O A S A T R A D E F A C I L I T A T I O N M E A S U R E

The AEO Program is crucial

to achieve trade facilitation, as

it promotes secure trade,

eases customs proceduresand reduces time at theborder.


All APEC Economies have ratified the TFA vs an 88.4 % ratification rate by WTO members

145 WTO members have ratified the Agreement.

Source WTO: https://www.tfadatabase.org/ratifications

July 2019

A E O A S A T R A D E F A C I L I A T T I O N M E A S U R ET F A R A T I F I C A T I O N D A T E S . A P E C E C O N O M I E S

08/12/1408/01/1523/01/15

26/05/1501/06/1509/06/15

30/07/1517/08/1504/09/1529/09/1505/10/15

15/12/1515/12/15

22/04/1626/07/1627/07/16

27/10/1621/11/1616/12/16

05/12/1707/03/18

Hong Kong, ChinaSingapore

The United StatesMalaysia

JapanAustralia

Korea, Republic ofChinese Taipei

ChinaNew Zealand

ThailandBrunei Darussalam

Viet NamRussian Federation

MexicoPeru

PhilippinesChile

CanadaIndonesia

Papua New Guinea

https://www.tfadatabase.org/ratifications


The average TFA implementation rate in APEC Economies is 91 percent

TFA implemen-tation rate 7.7 AO TFA implemen-

tation rate 7.7 AO

Australia 100% New Zealand 100%

Brunei 91.6% B Feb 2022 Papua New Guinea 34% C Feb 2021

Canada 100% Peru 87%

Chile 100% The Philippines 93.3%

China 94.5% Russia 100%

Hong Kong-China 100% Singapore 100%

Indonesia 88.7% Chinese Taipei 100%

Japan 100% Thailand 94.1%

Korea 100% United States 100%

Malaysia 94.1% Vietnam 26.5% B Dec 2023

Mexico 100%

EconomiesEconomies• The 5 developed

Economies and

Russia have fully

implemented all the

TFA commitments.

• 6 developing

Economies have

notified all their

measures under

category A.

• All but 3 have fully implemented Article 7.7, related to the

Authorized Operator.

T F A I M P L E M E N T A T I O N D A T E S . A P E C E C O N O M I E S

Source: WTO, July 2019


All programs have adhered to the SAFE framework, which results in a high level of convergence regarding security requirements

20 APEC member Economies have operational AEO programs and 1 underway.

AustraliaTrusted Trader Program

JapanAEO

PhilippinesAEO

BruneiAEO

KoreaAEO

RussiaAEO

CanadaPartners in Protection

MalaysiaAEO

SingaporeSecure Trade Partnership

ChileAEO

MexicoAEO

Chinese TaipeiAEO

ChinaAEO

New ZealandSecure Exports Scheme (SES)

ThailandAEO

HK-ChinaAEO

Papau New GuineaTrusted Trader Program (not yet launched)

The United StatesC-TPAT

IndonesiaAEO

PeruAEO

VietnamAEO

A E O P R O G R A M S I N T H E A P E C R E G I O N

Sources: WCO 2019 AEO Compendium and 2019 AEO Study for APEC Economies for IDB.

20012004

20062007

20082008

20092009

2010201120112011

201220122012

20152015

20162017

1990 1995 2000 2005 2010 2015 2020

USNew Zealand

JapanSingapore

CanadaChina

Chinese TaipeiKorea

MalaysiaVietnam

PeruRussiaMexico

Hong Kong - ChinaThailand

IndonesiaPhillipinesAustralia

Chile

Year Launched


A G E N D A


Survey Results

• AEO legal framework

• Distribution by type of operators and AEOs share on regional trade

• Customs resources, staff, capacity building, outreach programs, and technology innovations


Out of all APEC Economies, 16 have the AEO figure included in a Customs Law, Act, Order or Ruling1

• The inclusion of AEO programs in

Customs Laws, gives certainty to

traders and strengthens the

program, even more, its inclusion in

Free Trade Agreements.

• In particular, the recent negotiation

of the USMCA2, included a specific

provision for AEO programs.

1. Information was obtained from survey and the 2018 AEO Compendium.

2. USMCA. United States, Mexico, Canada Free Trade Agreement

AustraliaCustoms ActCustoms Rule 2015

JapanCustoms LawCabinet OrderMinisterial Ordinance / DG order

PhilippinesCustoms Administrative Order (CAO) 1-2012

Brunei n/a

KoreaCustoms Act 259 Enforcement Decree of Customs Act AEO Enforcement Rule

RussiaArticles 38-41 of the Customs Code of the Customs Union; Chapter 6 of the Federal Law

CanadaNo specific AEOlegislation.

MalaysiaCustoms Act 1967 Section 88

SingaporeNo specific, consistent with SAFE

ChileModification of Resolution Num. 0849/2009 2 Modification of Art. 23 of Customs law

MexicoCustoms Law and Trade Rules

Chinese TaipeiCustoms Act – Article 19.

ChinaCustoms Act 1901

New ZealandCustoms Law / Decree / Resolution

ThailandCustoms Notification

Hong Kong, Chinan/a Voluntary participation

Papua New GuineaProgram to be launched

The United StatesThe Security and Accountability for Every (SAFE) Port Act of 2006

IndonesiaMinister of Finance Regulation number 227/PMK.04/2014

PeruCustoms Law / Decree / Resolution

VietNam Law/ Decree / Circulars Decision

A E O P R O G R A M S L E G A L F R A M E W O R K


9 out of the 15 Economies surveyed, offer AEO for more than one type of operator

Source: 2019 AEO Study for APEC Economies for IDB and 2019 WCO AEO Compendium.

N ª O F O P E R A T O R S W I T H A C C E S S T O A E O C E R T I F I C A T I O N

• A variety of actors are represented in AEO

programs:

– All open to importers and exporters.

– 7 have Custom Brokers and Warehouses certified.

– 4 have highway carriers already certified.

– All the other type of operators identified (logistics

operators, terminal operators, couriers, and other)

were represented in less than half of the

Economies.

• Chinese Taipei and Mexico are open to a higher

number of actors along the supply chain. 1

1

1

1

1

2

3

4

4

5

5

5

7

8

ChinaMalaysia

New ZealandUS

VietnamThailand

ChileJapan

PeruAustralia

Hong KongSingapore

MexicoChinese Taipei

Total number of actors included in the program

Hong Kong,China


Considering the 15 Economies participating in the survey, U.S., China, Mexico, Japan and Chinese Taipei, have the most number of AEOs in the region

Sources: WCO 2019 AEO Compendium and 2019 AEO Study for APEC Economies for IDB.

A E O I N T H E A P E C R E G I O N . 2 0 1 9

Economy Total AEOsChile 2HK-China 54Malaysia 70VietNam 69Peru 120New Zealand 125

Ho…

Mala…

Viet…

Peru

New Zealand

ThailandSingapore

Australia

Chinese Taipei

Japan

MexicoChina

US

AEOs per Economy

11,579

3,200 1,010

761

360604

389

444

• The number of AEOs or

potential AEOs is proportional

to the size of the Economy and

number of enterprises.

• Out of the 15 Economies, the

U.S., China, Japan and Hong

Kong-China, report the

highest annual total trade in

2017. (WTO Database

Inventory. Trade Figures from

2017)


Three Economies out of the 15 surveyed, represent 94 percent of the AEO importers and exporters certified in the region

Source: 2019 AEO Study for APEC Economies for IDB and 2018 WCO AEO Compendium.

A E O A N D I T S P A R T I C I P A T I O N O N T R A D E

• The U.S., China and Mexico account for 94 per cent of all the importers andexporters certified as AEOs in the region. (Important to note that Canada has a relevant

number of AEOs, but was not considered since they did not complete the survey).

• Mexico, New Zealand, VietNam and Chinese Taipei AEOs, account for more than 25

percent of their total trade.1

EconomyNumber of AEOs

importer and exporters

Chile 2HK-China 38Malaysia 70Japan 60VietNam 69Australia 80Peru 85Chinese Taipei 122

New Zealand 125

Thailand 182Singapore 193Mexico 631China 3200U.S. 11,579

0.02% 5.32% 9.07% 11.40%17.00%

26.17%34.40%

45.00%

60.00%

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%

Chile

Hong K

ong

Singap

ore

Austra

lia Peru

Chines

e Taip

ei

Vietna

m

New Ze

aland

Mexico

AEOs share of Trade

1. The U.S., Japan, Thailand and China did not provide data on AEOs percentage of total trade

Hong K

ong,C

hina


A U T H O R I Z A T I O N T I M E F R A M E

In general APEC economies grant AEO certifications indefinitely, with the exception of Mexico and Malaysia (2 years), Singapore,

VietNam and Hong Kong, China (3 years).

But the application processes are still burdensome for the trader, considering the preparation time and resources invested.

The AEO application processes are similar among Economies, but in most it still is done in paper and timeframes for authorizations can be burdensome

Japan is the only Economy from the survey who indicated to have two other agencies involved in the AEO certification process.

455860909090120120120120150165180300365

VietnamAustralia

New ZealandPhillipines

RussiaUS

ChileChina

Hong KongPeru

Singapore Thailand

MexicoTaiwanJapan

Length of authorization process

Chinese Taipei

Hong Kong, China

Economy Authorization timeframe

Singapore 2 and 3 years

Mexico 2 yearsMalaysia 2 years

Chile 3 yearsChina 3 yearsHong Kong, China 3 years

South Korea 3 yearsVietnam 3 yearsAustralia Indefinately

Economy Authorization timeframe

Chinese Taipei IndefinatelyJapan IndefinatelyNew Zealand IndefinatelyPeru IndefinatelyThailand Indefinately

US Revalidated every four years


• 11 economies indicated to have

a dedicated account manager

for AEOs*, one did not specify.

• AEO specialists have to

undergo onsite validations in all

Economies surveyed.

• Hence its is important to use

technology to expedite

processes.

• It is also relevant to periodically

review administrative

requirements, in order to

facilitate the admission process.

As the program continues to grow, it is necessary to optimize processes in order to better manage resources and have realistic expectations for expansion plansA U T H O R I Z A T I O N V A L I D I T YA U T H O R I Z A T I O N P R O C E S S A N D S T A F F

Important to note that not all customs staff is an AEO specialist.

China has 1000 people part of

their AEO staff

Chile, 0.08

Hong Kong,China

3.18

China, 3.2

Vietnam, 3.45

Peru, 6.00New

Zealand, 7.81

Australia , 8.07

Japan, 10.57

Thailand, 15.65Mexico,

24.63

Chinese Taipei, 43.14

Number of AEOs per person (staff)AEO staff per Economy

5

14

16

17

20 20

23

24

2741

55

72

150

US

Japan

Australia

Mexico

Chile

Thailand

VietNam

Singapore

Peru

NZ

HK CT

Malaysia


The use of technology is imperative in Customs, many have gone paperless and are developing IT pilots to do more with equal or less resources

• Only three Economies have the AEO certification included in the SW: Mexico, Thailand and Chinese Taipei.

• The U.S. and Thailand have an operational AEO portal for traders.

• Chile, Mexico and Peru, are part of an IDB initiative, CADENA, which uses Blockchain technology to develop

an AEO information exchange platform under the MRAs signed between these Economies, including Costa

Rica.

• All Economies identify AEOs as trusted traders and should recognize them as such in the riskassessment.

• Since border management involves more agencies besides Customs, it should promote the recognition of

AEOs within other agencies, using technology to share information.

U S E O F T E C H N O L O G Y F O R A N E F F I C I E N T A E O P R O G R A M


In order to identify AEOs within Customs, each Economy has granted a trading number

Economy Trader NumberAustralia Australian Business Number (ABN) . 11-digit number issued by the Australian Business RegisterChile Economy ID numberChina AEO Code for enterpriseHong Kong, China “AEOHK” + 4 digits (year of accreditation) + 2 digits (month of accreditation) + 4 digits (serial numbers).

Japan Corporate NumberMalaysia Generated by the AEO systemMexico Tax ID Number

New ZealandCertified AEOs are given a unique number linked to the company’s exporter code, also unique and issued by Customs. Each certified site is assigned an ID site number. Where certified sites are already approved food/bio security by the Ministry ofPrimary Industries the original ID site is retained.

Peru Federal Tax IDSingapore Unique Entity Number (UEN)Chinese Taipei TWAEOXXXXXXXXX: prefix “TWAEO” followed by 9 alphanumeric character

Thailand10 digit number, the first two are TH which stands for Thailand, positions 3 and 4 are the AEO categories (IE is Importer/Exporter and CB is Customs Brokers). Positions 5 and 6 are the last two numbers of the calendar year in Thailand and positions 7 to 10 are the running numbers. An example is THIE600008.

U.S. Importer of record (IOR) number, Manufacturer identification (MID) number, Standard Carrier Alphanumeric Code (SCAC),Exporter identity number (EIN) and CTPAT Account number (USXXXXXXXX)

VietNam Identification number is according to the tax code of the business.

U S E O F A N A E O T R A D E I D E N T I F I C A T I O N N U M B E R

The WCO has published technical standards for the AEO TIN, to standardize and ease the recognition of AEOs whencrossing borders, much work needs to be done to promote its implementation.


Promotion and outreach programs are crucial to the growth of the AEO program, and offer a platform for AEOs to network

• Six Economies indicated to have a budget forcapacity building and outreach programs (Australia,

Hong Kong-China, Malaysia, Peru, Singapore and

Thailand).

• Seven have AEO periodic events for traders

(Australia, Hong Kong-China, Japan, Mexico, Malaysia,

Thailand and USA).

O U T R E A C H A N D C A P A C I T Y B U I L D I N G E V E N T S

• Ten have an AEO logo for traders to use

(Australia, Chinese Taipei, Hong Kong-China,

Japan, Malaysia, Mexico, Peru, Singapore,

Thailand and USA) 1 in process (New Zealand)

and all with simple policies on its use.


Does the AEO program benefit foreign trade for certified companies? The IDB developed a study for Mexico.

To learn more about this issue, see chapter 3 of Out Of the Border Labyrinth, a report published by the IDB’s Integration and Trade Sector, and IDB Working Paper series no. IDB-WP-703, “Trust No One?: Security and International Trade.”

• The answer is yes. AEO certification was associated with an increase of between 1.8 and 2.8 percentage pointsin the growth rate of exports by certified firms in comparison with their noncertified counterparts between 2012 and

2014.

• This positive impact on exports is fundamentally due to the reduction in the frequency of physical inspections

and faster dispatch times.

• The findings reflect the ease of trading abroad through the AEO program, flexible enough to enable firms to meet

the needs of destination markets even under just-in-time conditions.

• It also found that the AEO program enables companies to expand as they receive more favorable treatment in

the corresponding administrative processes.

These based on an Inter-American Development Bank study of Mexico’s AEO program.

I D B A E O I M P A C T S T U D Y

1. Source: The Authorized Economic Operator Program: Firm Steps toward Exporting to More and More Markets. November 7, 2017 by Sandra Corcuera-Santamaria | Christian Volper Martincus

https://publications.iadb.org/handle/11319/7994

https://publications.iadb.org/handle/11319/7684


A G E N D AObjective and Scope


Survey Results

Best Practices


Best Practices

Australia’s AEO goal:

1000 Trusted Traders by 2020, representing 50% of

Australia’s two-way trade by value and 30% of Australia’s

two-way trade by volume.

Setting a Mid and Long term Plan, allows a better

managment of resources, gives KPIs to monitor

progress and re-define the strategy if needed,

strengthening the program within Customs and with

Traders.

M I D A N D L O N G T E R M P L A N N I N G F O R B E T T E R M A N A G E M E N T

In 2016, 5 new actors were included in the AEO Program

of Mexico: Railway Carriers, Bonded Warehouses,

Strategic Bonded, Warehouses, Couriers, and Industrial

Parks.

In 2018 AEO was open to a new entity (Third Party

Logistics, 3PL).

Also, in 2018 the application was included in the Single

Window.

Encouraging periodic reviews to legal andoperational framework of AEOs seeking to become

more administrative efficient and expand the coverage of

the program.


Set a specific AEO number, according to the new

WCO technical standards. It allows a better

identification, provides relevant information.

Thailand AEO 10 digit Reference Number

T E C H N O L O G Y U S E

Best Practices

Canada, the U.S. and Thailand, have set up an AEO portal.

Malaysia indicated that for AEO they have a separate front end

system to submit their declaration

Mexico, China and Chinese Taipei have the application process

included in the Single Window.

Develop an AEO portal and include the certificationprocess in the Single Window. This expedites the process,

can minimize application mistakes, reduces process and

evaluation timeframes, has data captured for better Customs

analysis for monitoring and planning. It allows traders to

monitor application process and status of their certification.


Best practices

Encouraging operators interested in becoming AEOs to

seek prior consultation with Customs in order to properly

fulfill the requirements and succeed in obtaining the

certification.

In Japan, based on request, any traders or operators can

contact an AEO Unit to obtain information on the application

and authorization procedures.

Customs explains AEO requirements and Self-assessment

Check Sheet and supports applicants on identifying points to be

reviewed. Finally, if necessary, it provides assistance on how to

draft the Compliance Program to meet the AEO requirements.

If Customs resources are limited, encouragecertification with Private sector associations.

In Mexico, the application process considers

companies certified previously by BASC or similar

associations; for Customs Brokers their National

Confederation offers a pre-certification and aids them

on their AEO application process, this services is

extended to traders and highway carriers.

C O N S U L T A T I O N A N D O T H E R C E R T I F I C A T I O N S


Best practices

In Chinese Taipei, to apply for AEO, an

applicant must have at least two staff

members who have passed the AEO Supply

Chain Security training conducted by Customs

who will then be designated to take charge of the

company’s Supply Chain Security operations.

Providing capacity building to AEO operators in an effort to ensure an efficient,

safe and correct functioning of the

company’s supply chain.

Setting a budget for outreach programs and capacity building as well

as organizing trainings and AEO Forums on a regular basis.

Peru holds an AEO Conference yearly, and an Annual Training Plan for AEO.

Thailand organizes an annual seminar for private sector, one program for

existing AEOs and one for interested businesses.

Hong Kong also co-organizes promotion seminars with local and foreign

trade associations.

U.S., CBP holds the CTPAT annual conference with a fee / cost for traders.

Malaysia has an assigned budget of 1,500 USD annually for outreach

programs.

C A P A C I T Y B U I L D I N G A D O U T R E A C H P R O G R A M S


Best practices

In the U.S. within the Commercial Customs

Operations Advisory Committee, (COAC) the AEO

Private Sector Group has periodic meetings along the

year.

Establish and maintain a Private Sector AEO Group in an effort to have a sense of how the

program is developing, the ease of the application

process, how the benefits are being granted and

used by traders, among others. Its is relevant to

maintain constant communication with AEOs

through associations.

Monitor the correct granting of benefits and AEOs risks analysis within Customs. Its is important to

maintain constant communication with other areas in

Customs, considering the program is transversal.

All Economies indicated to have AEOs considered on

their Risk Analysis Systems, used also as a tool to grant

several benefits.

C O M M U N I C A T I O N W I T H P R I V A T E S E C T O R A N D W I T H I N C U S T O M S


A G E N D A

Objective and Scope


Survey Results

Best Practices

Recommendations


Develop a Business Plan and KPIs in order to better manage resources, and strategize the

expansion of the Program accordingly.

Include the AEO application process in the Single Window.

Include in the application process, data requirements to identify SMEs, such as: annual revenue,

number of employees, etc.

Make sure the AEOs are considered in the Risk Analysis process and identified as Trusted

Traders.

Set up and maintain the public-private sector group, to have access to day to day insight on

possible new benefits and delays on the application process.

Several recommendations are identified from best practices and comments form Economies surveyed.

1

2

3

R E C O M M E N D A T I O N S

4

5


Set a budget for outreach programs for potential AEOs, and capacity building programs for existing onesand AEO personnel. If the program is facing budget constraints, develop a partnership with the private sector to

organize them.

Considering most programs give an indefinite certification, set up a monitoring program with revalidation

visits, in order to secure compliance.

Keep an open mind for possible new benefits, taking into account the constant changing environment.

Promote AEO recognition within other border agencies, specifically in terms of risk management, as an

Integrated Border Management, and possibly via a staged program with additional benefits and requirements.

MRAs allow shipments to be fast-tracked through both sides of the border, instead of just one, and hence are the

obvious next step in the process of expanding the initiative.

Allow, when possible, for traders consultation, prior to submitting the application.

Cont…

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R E C O M M E N D A T I O N SR E C O M M E N D A T I O N S

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Thank you for your kind attention

Maria Elena SierraIDB Consultant

[email protected]

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