The Costs and Benefits of Being an AEO Professor David Widdowson Charles Sturt University
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Authorized Economic Operator Mutual Recognition
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Over 160 countries Supply chain security Trade compliance Imports Exports
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Trusted Traders “are 3.5 times less likely to be held up for examination”
Secure Exports Scheme
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The following “Benefits” were originally identified: – – – – – – – –
Quicker clearance of low-risk cargo Improved security levels Security cost efficiencies Enhanced reputation Increased business opportunities Improved understanding of Customs requirements Better communication between AEO & Customs Mutual recognition of AEO status
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Tangible benefits identified by Industry: – – – – – – – – –
Reduced regulatory scrutiny Priority inspection if examination required Reduction of processing fees and charges Appointment of an Account Manager Priority response to requests for advance rulings Removal of nexus between clearance and duty liability Deferred duty payment Periodic reporting arrangements Genuine Mutual Recognition
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Self-Assessment and verification process – Onerous/bureaucratic processes – Failure by Customs to adopt risk-based verification – Poorly considered questionnaires
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Duplication of above at multiple sites Duplication of above in multiple countries Duplication of above by multiple agencies
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Questionnaire example: Financial Viability Please provide the following ratios for your business from audited accounts of the previous two financial years: – Current liquidity ratio (cash flow test) = current assets / current liabilities – Quick ratio = (Current assets – Inventories) /Current liabilities – Days sales outstanding = (Accounts receivable / Total credit sales) x Number of days in sales – Debt to equity = Total debt / Total equity – Debt to assets = Total debt / Total assets – Interest coverage ratio = Operating income / Interest expense
Alternative:
Please provide a letter from your auditor attesting to the financial viability of your company
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Wasted effort if tangible benefits fail to materialize Wasted effort if MRAs are ineffective: – A trader is more likely to face delays and costs associated with inspections if its goods are not recognised as ‘low risk’ by the destination country – Under SAFE, the definition of high risk cargo is that “for which there is inadequate information or reason to deem it as low risk” – Movement of cargo within a secure supply chain is emerging as a prime reason for deeming it ‘low risk’ – The concept of the ‘Authorized Supply Chain’ is therefore a reality
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Competitive costs – –
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Loss of business to ‘trusted’ operators This is also a timing issue
AEO accreditation is becoming a commercial imperative – Tender processes for new suppliers or service providers include reference to AEO status – Accredited companies do not wish to include non-AEO companies in their supply chain as it may jeopardise their AEO status, or simply create additional regulatory costs
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Scenario 1: unknown shipper and forwarder Source: ICAO/WCO 2013
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Scenario 2: unknown shipper, regulated agent Source: ICAO/WCO 2013
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Scenario 3: known shipper and regulated agent Source: ICAO/WCO 2013
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• Accredited status should be available to service providers as well as traders • Accredited service providers may provide a conduit for SMEs to access a secure supply chain
ICAO Model: unknown shipper, regulated agent
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Agriculture
Transport Security
Customs
Registered Food Shipper
Known Shipper/Regulated Agent
Authorised Economic Operator
Interagency coordination, including cross-agency recognition of ‘Authorised Operator’ schemes
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• Additional elements required to minimise the regulatory burden on traders – Self-assessment supported by Customs verification – Customs should adopt a risk management approach to verifying industry self-assessed compliance statements – Need for interagency coordination, including cross-agency recognition of ‘Authorised Operator’ schemes – Multinational approach to AEO accreditation
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“The Parties will make all reasonable efforts and aim to reach an agreement on mutual recognition of their respective AEO programmes ideally after one year, but no later than two years, from the entry into force of this Agreement”
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dwiddowson@csu.edu.au www.customscentre.com
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