AUTHORIZED ECONOMIC OPERATORS

1. AUTHORIZED ECONOMIC OPERATORS The Trade Community and the WCO SAFE Framework of Standards Larry L. Burton Senior Technical Officer World Customs Organization, Brussels

2. THE THREE AEO COMPONENTS; I. Conditions, Requirements, Benefits; II. Validation and Authorization; III. Mutual Recognition

3. SOME GUIDING PRINCIPLES • These Core International Standards form a Baseline for Participation; Clear and Tangible Benefits to AEO are a Necessity; • Implementation of Mutual Recognition Programs Require a Phased Approach;

4. DEFINITIONS PROVIDED • Authorized Economic Operator (AEO); • Shipment or Transport Conveyance; • Third Party Validator; • Authorization; • Phased Approach; • Validation.

5. I. CONDITIONS AND REQUIREMENTS: CUSTOMS AND THE AEO This, the First of the Three SAFE AEO Components, Contains: • Thirteen Detailed Requirements Sections (Lettered A-M); • Section Listing Benefits to the AEO.

6. DETAILED REQUIREMENT SECTION “A” Demonstrated Compliance with CustomsRequirements: Requirements Specified for the AEO, and Taken into Account When Customs Considers Qualifications of an AEO Applicant.

7. DETAILED REQUIREMENT SECTION “B” Satisfactory System for Management of Commercial Records: Recognizes the Importance of the Maintenance of Accurate Commercial Records by an AEO, and their ready Availability to Customs.

8. DETAILED REQUIREMENT SECTION “C” Financial Viability: Recognizes the Critical Role to be filled by Good Financial Standing in Allowing an AEO to Fulfill its Commitments under the SAFE Framework.

9. DETAILED REQUIREMENT SECTION “D” Consultation, Cooperation and Communication: Establishes Measures for Both Customs and the AEO, aimed at Fostering Mutually Beneficial Working Relationships.

10. DETAILED REQUIREMENT SECTION “E” Education, Training and Awareness: This Section Recognizes the Importance of Reinforcing in Employees (both Customs and AEO), the Necessity of Learning Proper Procedures and Dealing with Anomalous Situations.

11. DETAILED REQUIREMENT SECTION “F” Information Exchange, Access and Confidentiality: This Section has Provisions Which Apply to the AEO, to Customs, and also to the Parties Jointly. The Thrust of the Section is to Secure Information and to Prevent its Misuse or Unauthorized Alteration.

12. DETAILED REQUIREMENT SECTION “G” Cargo Security: The Section Seeks to Ensure that Cargo Integrity and Access Controls are Maintained at the Highest Levels by Providing Elements both for Customs and the AEO.

13. DETAILED REQUIREMENT SECTION “H” Conveyance Security: Elements Within the Section Apply to Customs and to the AEO, With the Aspiration that they Work Together to Secure and Maintain Transport Conveyances.

14. DETAILED REQUIREMENT SECTION ”I” Premises Security: Requirements to Implement Enhanced Protocols to Secure Buildings, and to Control and Monitor Perimeters. There are Elements Which Apply to Customs, and Those Which Apply to the AEO.

15. DETAILED REQUIREMENT SECTION “J” Personnel Security: Elements for both Customs and the AEO Regarding Recruitment Matters, Security Checks, and Personnel Procedures. The Section also Includes Removal of Premises Access.

16. DETAILED REQUIREMENT SECTION “K” Trading Partner Security: Section Applies to the AEO Only, and Encourages the AEO to Conclude Contractual Provisions with Partners in the Supply Chain to Bolster their Level of Security Commitment.

17. DETAILED REQUIREMENT SECTION “L” Crisis Management and Incident Recovery: Section Applies Jointly to AEO and Customs, and Encourages Advance Contingency Planning for Recovery from Adverse Incidents.

18. DETAILED REQUIREMENT SECTION “M” Measurement, Analysis and Improvement: The Section Seeks to Foster Consistency, Security Integrity, and Identification of Security System Improvements by Applying Certain Requirements to AEO Activities.

19. BENEFITS TO THE AEO • Benefits to an AEO are Additional to those Given Others in Trade Community. Normal Services and Benefits are Not Withdrawn from Non-AEO Traders; • AEO Benefits are Specific and Tangible and are Grouped in Four Categories Listed (A-D); • The Benefits List is Indicative and May Be Supplemented at a National Level.

20. AEO BENEFITS, GROUP “A” Measures to Expedite Cargo Release, Reduce Transit Time and Lower Storage Costs

21. AEO BENEFITS, GROUP “B” Providing Access to Information of Value to AEO Participants

22. AEO BENEFITS, GROUP “C” Special Measures Relating to Periods of Trade Disruption or Elevated Threat Level

23. AEO BENEFITS, GROUP “D” First Consideration for Participation in Any New Cargo Processing Programs

24. II. VALIDATION AND AUTHORIZATION The Second of the Three SAFE AEO Components: • Provides Discussion Regarding Application for and Authorization of, AEO Status; • Contains General Information on the Process of Validating AEO Qualifications; • Discusses the Need for Communication and Review Concerning Levels of AEO Compliance; • Provides a Process Outline for AEO and Customs Use in Validation and Authorization Activities;

25. THE MANDATE FROM ”SAFE” “The Customs administration, together with representatives from the trade community, will design validation processes or quality accreditation [authorization] procedures that offer incentives to businesses through their status as Authorized Economic Operators.” ( SAFE, Pillar 2, Standard 3)

26. DESIGN AND IMPLEMENTATION OF VALIDATION PROCEDURES • WCO SAFE Document Offers Guidance Only; • Design Obligation Lies with Members; • Procedures Should Conform to SAFE; • Incentive Based Benefits Should be Included; • Risk Rating Tied to Supply Chain Role;

27. APPLICATION AND AUTHORIZATION • SAFE Standards to be Incorporated into AEO Practices and Procedures; • AEO Must Have Self-Assessment Process and Manager; • Authorization Granted by National Customs, not by WCO; • Non-AEO Companies May Not be Required by Customs to Participate

28. VALIDATION PROCEDURE • A ”Third Party Validator” May be Used for Validation Assessment Processing; • Customs, Not the Third Party, Actually Authorizes an AEO; • AEO May Request Processing by Customs Directly; • All Information Elicited is Confidential;

29. REVIEW AND MAINTENANCE • Joint Customs and AEO Reviews to Maintain and Enhance Compliance Levels; • Customs May Require Periodic Reports on Required Information from an AEO; • Customs Members May Hold Regular Seminars to Discuss Common Problems and Share Best AEO Practices

30. FUTURE DEVELOPMENTS Standardized AEO Accreditation Provides a Platform for Mutual Recognition of AEO Status at Bilateral, Sub-Regional, Regional and Global Levels. Such Systems will Involve One WCO Member Recognizing AEO Authorization in Another WCO Member as Equivalent to its Own. AEO would Realize Same Benefits, Improve Predictability, and Enhance Efficiency in All Countries Applying the AEO Standards.

31. VALIDATION AND AUTHORIZATION ANNEX • Provides an Authorization Process Outline for the Prospective AEO; • Lists Indicative Authorization Criteria to Become an AEO, for Use by Customs; • AEO Must First Meet all SAFE Criteria; • Authorization Valid Unless Revoked, Withdrawn or Suspended; • Customs Members May Adjust Process

32. III. MUTUAL RECOGNITION Third and Last of the Three SAFE AEO Components: • Recognition that Mutual Recognition will Evolve Over Time (Phase-In Approach); • Mutual Recognition Relates to SAFE Under: 1. Pillar 2, Std. 3, Authorization; 2. Pillar 1, Std. 6, Advance Elec. Info.; 3. Pillar 1, Std. 7, Targeting/Communication

33. THE TWO SIDES OF THE MUTUAL RECOGNITION COIN • Customs Recognizing AEO Authorizations Granted by Other Customs Members; • Customs Recognizing and Relying Upon Security and Control Regimes Employed by Other Customs Members

34. AND FINALLY ! A Summary of the Essential AEO Concepts and Realities: • Implementation Key: Capacity Building; • AEO & SAFE Key: Mutual Recognition; • SAFE Cornerstone: Global Standards; • Sustaining Factor: Partnership

35. MANY THANKS LARRY L. BURTON Senior Technical Officer World Customs Organization, Brussels