1. SAFE Trade and AEO in the EU The 1st National Conference on SAFE Trade and AEO Manila 13-14 May 2008

2. The actual challenges Ensuring our security in a context of globalisation of trade but also of crime, Ensuring our security in a context of globalisation of trade but also of crime, Facing increasing threats of terrorism and violent activities throughout the world, Facing increasing threats of terrorism and violent activities throughout the world, Managing the increasing interdependency of societies/countries (goes far beyond security), Managing the increasing interdependency of societies/countries (goes far beyond security), Absolute need to avoid any disruption in the international trade supply chain, Absolute need to avoid any disruption in the international trade supply chain, Need to continue improving trade facilitation. Need to continue improving trade facilitation.

3. In Customs terms, this means: Adjusting (and modernising) our customs systems and projects with new parameters (data requirements, risk management, controls, procedures, relations with economic operators), Adjusting (and modernising) our customs systems and projects with new parameters (data requirements, risk management, controls, procedures, relations with economic operators), Seeking to set up worldwide security standards and requirements, for: Seeking to set up worldwide security standards and requirements, for: - More efficient and targeted controls (on all sensitive issues), - More efficient international customs cooperation, - An acceptable administrative burden for the trade Community, Starting from a constraint (security requirements), trying to end-up in benefits for legitimate trade and for the public sector. Starting from a constraint (security requirements), trying to end-up in benefits for legitimate trade and for the public sector.

4. The concept of security Identifying high risk consignments at the earliest possible point in the supply chain, in time for timely controls (and subsequent quicker release of other consignments) Identifying high risk consignments at the earliest possible point in the supply chain, in time for timely controls (and subsequent quicker release of other consignments) Involving the private sector and identifying traders that offer a high degree of security guarantees in respect of their role in the supply chain (AEO concept), Involving the private sector and identifying traders that offer a high degree of security guarantees in respect of their role in the supply chain (AEO concept), Requiring increased security at the point of origin and as the consignment moves throughout the supply chain, Requiring increased security at the point of origin and as the consignment moves throughout the supply chain, Developing international cooperation and modernising customs systems and practices in order to make them more efficient. Developing international cooperation and modernising customs systems and practices in order to make them more efficient.

5. The control of the supply chain (1) A key element which covers a global process from manufacturing goods destined for export until delivery to the party to whom goods are destined, A key element which covers a global process from manufacturing goods destined for export until delivery to the party to whom goods are destined, Covers operators representing various manufacturing, trade, distribution and transport segments, Covers operators representing various manufacturing, trade, distribution and transport segments, A management tool for both public and private sectors. A management tool for both public and private sectors.

6. Control of the supply chain (2) - use for/by the private sector - A critical tool already used by managers in a number of industry, trade and transport sectors in order to : A critical tool already used by managers in a number of industry, trade and transport sectors in order to : - better understand and manage the risks for their business, - have a better visibility of what is happening on their supply chain and for faster access to accurate data, - secure their supplies and trade flows (ensuring the right stock reach the right place at the right time in the right conditions), But also…

7. Control of the supply chain (3) - use for/by the private sector - Need to respond to Consumers who are increasingly demanding on the products they buy: origins, ingredients or materials, how it has been shipped, impact on the environment, traceability,… Need to respond to Consumers who are increasingly demanding on the products they buy: origins, ingredients or materials, how it has been shipped, impact on the environment, traceability,… protection of firms’ brand images, quality and safety of products, checking compliance with laws, matching public opinion concerns (IPR, forced labour,…). protection of firms’ brand images, quality and safety of products, checking compliance with laws, matching public opinion concerns (IPR, forced labour,…).

8. Consulting the Business Community - Key conclusions – (1) - Everybody has an interest in balanced measures that would help avoiding disruption of trade and would allow the fatest resumption of trade, - Nobody wants to get involved in possible problems associated with terrorist activities and/or organised crime, - Strong interest for the business community in dealing with responsible and reliable partners and administrations, this going beyond security issues, - Those who make efforts and cooperate must be rewarded (cf. AEO).

9. Consulting the Business Community - Key conclusions - (2) - The private sector has information and a knowledge of key aspects of the supply chain that the public sector has not, - Most of the relevant information are already available in the records of different actors in the private sector, - Computerisation is essential to ease gathering and collecting such information, - Reciprocity and Mutual recognition of AEOs and of controls with reliable and willing partners are definitely an objective (the best workable solution).

10. The new EU legislation - issues addressed - Setting up the list of information required to identify high risk shipments, Setting up the list of information required to identify high risk shipments, Development of common standards for risk management, Development of common standards for risk management, Development of appropriate partnerships with the Business Community, taking into account existing best practices Development of appropriate partnerships with the Business Community, taking into account existing best practices Speeding up some aspects of the EU reform on e- Customs, Speeding up some aspects of the EU reform on e- Customs, Considering our objectives vis-à-vis our partner countries (reinforced cooperation, mutual recognition ) Considering our objectives vis-à-vis our partner countries (reinforced cooperation, mutual recognition )

11. The new EC security legislation A package to increase security and facilitate legitimate trade. A package to increase security and facilitate legitimate trade. 3 main elements : 3 main elements : –setting up uniform Community risk-selection criteria for controls, supported by computerised systems (implementation started, full computerisation by 2009), –Improving security and providing reliable traders with trade facilitation measures (AEO-concept) (implemented 1 January 2008), –requiring trade to provide customs authorities with information on goods prior to import to AND to export from the European Union (applicable 1 July 2009).

12. AEO AEO is a status granted to reliable economic operators, established in the EU, who are involved in activities covered by customs legislation and complies with objective criteria. AEO is a status granted to reliable economic operators, established in the EU, who are involved in activities covered by customs legislation and complies with objective criteria. Concept open to importers, exporters, brokers, forwarders, carriers and other service providers that are established in the EC (* except 2 cases, including agreements on mutual recognition of AEO and of controls) and that qualify. Concept open to importers, exporters, brokers, forwarders, carriers and other service providers that are established in the EC (* except 2 cases, including agreements on mutual recognition of AEO and of controls) and that qualify. This status is granted to the holder of the relevant AEO certificate, but not to his clients. This status is granted to the holder of the relevant AEO certificate, but not to his clients. The status gives access to: Simplifications provided for under the customs rules Simplifications provided for under the customs rules Facilitation with regard to customs controls relating to security and safety Facilitation with regard to customs controls relating to security and safety

13. Types of AEO in the EU (1) Three Types of AEO Certificates: a) C ustoms simplifications, a) C ustoms simplifications, b) Security and safety (facilitation of the related customs controls), b) Security and safety (facilitation of the related customs controls), c) combination of a) and b) – recommended for companies regularly using customs simplifications and wanting to benefit from facilitations c) combination of a) and b) – recommended for companies regularly using customs simplifications and wanting to benefit from facilitations

14. Types of AEO in the EU (2) EU combines new security compliance with traditional simplifications for reliable traders (e.g. deferred payment, guarantee waiver) EU combines new security compliance with traditional simplifications for reliable traders (e.g. deferred payment, guarantee waiver) AEO can choose whether or not they want to benefit from lower risk score and/or from simplifications like guarantee waiver - depending on their choice, they have to comply with appropriate criteria - EU didn’t want to take away simplifications from normal traders but aims at additional benefits for secure AEOs.

15. Authorised Economic Operator Legislation focuses on 3 majors areas: Criteria to be complied with Criteria to be complied with Authorisation procedure Authorisation procedure Benefits in the area of facilitation and simplifications for customs procedures Benefits in the area of facilitation and simplifications for customs procedures

16. Criteria (1) (like WCO AEO): appropriate record of compliance=no customs offence in past 3 years appropriate record of compliance=no customs offence in past 3 years satisfactory system of managing commercial and where appropriate, transport records, which allow appropriate Customs controls satisfactory system of managing commercial and where appropriate, transport records, which allow appropriate Customs controls proven financial solvency=ability to pay customs debt proven financial solvency=ability to pay customs debt NEW: for the secure AEO, additional appropriate security standards NEW: for the secure AEO, additional appropriate security standards

17. Criteria (2) Security criteria : threat assessment threat assessment security plan security plan procedural measures to prevent irregular goods entering the supply chain procedural measures to prevent irregular goods entering the supply chain procedural measures for handling/storage of goods procedural measures for handling/storage of goods employee screening and awareness raising employee screening and awareness raising physical security of buildings/access control physical security of buildings/access control....as laid down in legislation that is interpreted in uniform manner in all 27 Member States, and as further explained in AEO guidelines

18. Criteria (3) Criteria are the same for all economic operators Criteria are the same for all economic operators Implementation measures will however differ depending on the sector and the size of the AEO: Implementation measures will however differ depending on the sector and the size of the AEO: * A small company implements same measures but in a different way than a big company (f.ex. possibly no need for surveillance camera if staff can see what happens and who enters and leaves the building); Rail different from Air or Maritime – specificities are taken into account. SIZE IS NOT A DECISIVE FACTOR!

19. Criteria (4) Criteria If the applicant is the holder of an internationally recognised security certificate issued on the basis of international conventions or of an International or European organisation for standardisation, the certificate is taken into account to the extent that the criteria are comparable (e.g. ISPS, ISO) If the applicant is the holder of an internationally recognised security certificate issued on the basis of international conventions or of an International or European organisation for standardisation, the certificate is taken into account to the extent that the criteria are comparable (e.g. ISPS, ISO) The authority that decides is always customs ! The authority that decides is always customs !

20. Authorisation process (1) Status is attributed according to uniform criteria in all Member States and thus recognised in all MS : Status is attributed according to uniform criteria in all Member States and thus recognised in all MS : -All applicants use the same form in the EU to apply/fill in a questionnaire as to whether or not criteria are fulfilled: importance of self-assessment! -request to be presented in the Member State where the applicant's main accounts related to the customs arrangements are held, and where at least part of the operations to be covered by the certificate are conducted -legal entity has to apply -mother company cannot apply on behalf of all daughter companies, individual applications needed

21. Authorisation process (2) Close consultation C2C and also C2B - Partnership approach Close consultation C2C and also C2B - Partnership approach Increased self-policing and self-assessment and less direct customs involvement Increased self-policing and self-assessment and less direct customs involvement Customs has to evaluate application form and has to audit (including visits to company) before attributing AEO status Customs has to evaluate application form and has to audit (including visits to company) before attributing AEO status Customs in Member States exchange information/consult where necessary Customs in Member States exchange information/consult where necessary compulsory consultation on criteria that cannot be assessed by one Member State alone (for example warehouses in other MS). compulsory consultation on criteria that cannot be assessed by one Member State alone (for example warehouses in other MS). Customs has to take a decision within 90/120 days Customs has to take a decision within 90/120 days

22. Authorisation process (3) request available to all Member States through a data base and open for comments request available to all Member States through a data base and open for comments Appeal and hearing in case of negative decision Appeal and hearing in case of negative decision Regular monitoring by customs authorities Regular monitoring by customs authorities Re-assessment if doubts on continued compliance Re-assessment if doubts on continued compliance Suspension and revocation in case of non- compliance. Suspension and revocation in case of non- compliance.

23. Management of the system SUSPENSION OF CERTIFICATE If conditions are not any longer fully respected If conditions are not any longer fully respected 30 days to redress situation 30 days to redress situation WITHDRAWAL OF CERTIFICATE If continued non-respect of conditions or AEO fails to redress situation If continued non-respect of conditions or AEO fails to redress situation AEO HAS THE RIGHT TO BE HEARD BEFORE CUSTOMS TAKES THE DECISION TO SUSPEND/WITHDRAW! In cases of revocation, no new application allowed within the next three years ! In cases of revocation, no new application allowed within the next three years !

24. Benefits for AEO (1) Recognition as safe and secure partner in international trade – status as quality criterion + better market position, Recognition as safe and secure partner in international trade – status as quality criterion + better market position, Lower risk score for risk analysis for safety and security purposes, i.e fewer controls, Lower risk score for risk analysis for safety and security purposes, i.e fewer controls, Less data to be provided for pre- arrival/pre-departure declarations, Less data to be provided for pre- arrival/pre-departure declarations, Advanced notice that selected for inspection, Advanced notice that selected for inspection, Priority treatment for controls, Priority treatment for controls,

25. Benefits for AEO (2) Less direct customs interventions in the shipment process + more predictability, Less direct customs interventions in the shipment process + more predictability, Increased self-policing with enhanced overall security of goods, with less theft and accordingly lower insurance premiums, safer work and trade, environment, and better use of resources Increased self-policing with enhanced overall security of goods, with less theft and accordingly lower insurance premiums, safer work and trade, environment, and better use of resources More streamlined internal processes and better relations C2B, More streamlined internal processes and better relations C2B, Possible mutual recognition with third countries leading to reciprocal benefits. Possible mutual recognition with third countries leading to reciprocal benefits.

26. Advantages for Customs Allow Customs to focus on suspicious or risky (i.e. outside the secure chain) shipments and on unreliable or unknown operators, hence better revenue collection and better fight against frauds, Allow Customs to focus on suspicious or risky (i.e. outside the secure chain) shipments and on unreliable or unknown operators, hence better revenue collection and better fight against frauds, Better use of resources, more streamlined and also modernised internal processes, more accurate and timely information, Better use of resources, more streamlined and also modernised internal processes, more accurate and timely information, Improved Customs capacities to address new challenges and to create favourable conditions for their country’s external trade (reliable partner), Improved Customs capacities to address new challenges and to create favourable conditions for their country’s external trade (reliable partner), Less congestion of traffic at points of entry, Less congestion of traffic at points of entry, Improved relationship between business and customs. Improved relationship between business and customs.

27. Global impact on trade Some constraints, but also obvious benefits: Some constraints, but also obvious benefits: - An incentive for Customs administrations to modernize their systems and practices (Revised Kyoto Convention) and use computerised risk analysis targetting only suspicious operators, - Mechanisms also applicable for addressing other major challenges (IPR, fair trade,product safety…), - Legitimate business recognised as a partner, - Will favour (reorientate ?) trade between responsible and reliable partners in both private and public sectors.

28. Preparation of implementation of AEO in the EU –AEO pilot projects in MS in 2006 –Close cooperation with trade as from beginning –Training of customs officials and economic operators in MS –Self assessment tool on TAXUD Homepage + AEO guidelines –Exchange of information/best practice –e-learning tool available on TAXUD Homepage –Helpdesk in TAXUD for customs

29. Findings of 2006 AEO Pilot Action Importance of partnership approach Importance of partnership approach Customs to have client co-ordinator or service centre and company to have contact point for customs Customs to have client co-ordinator or service centre and company to have contact point for customs Company to prepare and carry out self- assessment to facilitate and fasten authorisation/audit by customs Company to prepare and carry out self- assessment to facilitate and fasten authorisation/audit by customs The better a company is prepared, the quicker the authorisation process can be finalised/status obtained The better a company is prepared, the quicker the authorisation process can be finalised/status obtained Importance of risk management on AEOs Importance of risk management on AEOs Take into account existing authorisations Take into account existing authorisations Trade to use security declarations or contractual agreements vis-à-vis non-AEO business partners Trade to use security declarations or contractual agreements vis-à-vis non-AEO business partners Importance of mutual recognition and reciprocity Importance of mutual recognition and reciprocity

30. Implementation; state of play –Mid April 1.400 applications in all MS –6.000 to 20.000 applications expected for 2008 –mutual recognition and trend to AEO status (security of business partner) could multiply, –80% seek combination security-simplifications –70% of applications from SMEs, –Customs needs on average 100 days, –Monitoring through TAXUD/MS as of May 2008 in all MS to ensure uniform implementation and have a first assessment of the reform.

31. International end to end supply chain Overall objective is international end-to-end supply chain security through mutual recognition. This means: equivalent security measures that lead to equivalent levels of control and security, equivalent security measures that lead to equivalent levels of control and security, agreement on minimum control standards, joint risk rules and exchange of risk related information and control results, agreement on minimum control standards, joint risk rules and exchange of risk related information and control results, trust and close cooperation among customs authorities, including on AEO matters, and trust and close cooperation among customs authorities, including on AEO matters, and equivalent AEO concepts. equivalent AEO concepts.

32. The EU Approach On Security - international impact - CONTROL STANDARDS TRADE FACILITATION Commonly agreed control standards and risk indicators Close cooperation with other services and customs administrations of third countries Authorised Economic Operator (AEO) Programme Simplified customs procedures Facilitation on security requirements Objective: Mutual recognition of AEO status (benefits in the global supply chain) Objective: Mutual recognition of security standards and control results

33. Legislation and documentation Reg. 648/2005 – Amendment to Customs Code (EUOJ L.117 of 4.5.2005, p.13 to 19) Reg. 648/2005 – Amendment to Customs Code (EUOJ L.117 of 4.5.2005, p.13 to 19) Detailed Implementing Provisions to CC - Reg 1875/2006 (EUOJ L.360 of 19.12.2006, p.64 to 125) Detailed Implementing Provisions to CC - Reg 1875/2006 (EUOJ L.360 of 19.12.2006, p.64 to 125) Guidelines for AEO (Part I: Explanations + examples; Part II: questionnaire for assessment by customs and for self- assessment by trade) jointly worked out by Customs and business. Guidelines for AEO (Part I: Explanations + examples; Part II: questionnaire for assessment by customs and for self- assessment by trade) jointly worked out by Customs and business. AEO-Database to allow for consultation among Member States customs authorities AEO-Database to allow for consultation among Member States customs authorities

34. Thank you for your attention Thank you for your attention For further information visit the following website: For further information visit the following website: http://ec.europa.eu/taxation_customs /customs/index_en.htm http://ec.europa.eu/taxation_customs /customs/index_en.htmPierre.faucherand@ec.europa.eu