Sunday, June 30, 2019

Promoting Authorized Economic Operator (AEO) programs in Asia-Pacific Region

Yu, Mu-Hsiang
    Promoting participation in Authorized Economic Operator (AEO) programs is the priority issue of Integration 4.0 in APEC 2019. Under the leadership of hosting economy Chile, the main purpose of AEO programs is to actively incorporate Small and Medium Enterprises (SMEs) into the Asia-Pacific market by reducing trade risks as a result of safe and convenient customs declarations.

    AEO has been of great significance to Taiwan, especially SMEs can improve their access to international supply chains through the mutual recognition arrangements (MRAs) of AEOs. Therefore, Chile and Taiwan jointly proposed in March to hold a workshop for 2 days in the second half of 2019. This proposal has been supported by APEC economies. For example, Philippine considers that it's highly satisfactory to the spirit of “APEC Cebu Action Plan” to assist SMEs
developing international market. Meanwhile, both Indonesia and Vietnam want to learn from more experiences sharing of AEOs best examples in APEC and to encourage more SMEs to understand and participate in AEOs. As such, these SMEs can develop their business opportunities by AEOs program, especially by utilizing the APEC-wide AEO network across the Asia-Pacific efficiently.

Background of AEO

    An Authorized Economic Operator (AEO) is defined by the WCO SAFE Framework of Standards1 as a party involved in the international movement of goods and approved as complying with WCO or equivalent supply chain security standards. In other words, AEO Programs create customs-to-business partnerships aimed at securing the supply chain and facilitating trade. After the 9/11 terrorist attack, the U.S. hopes to ensure logistic safety as well as trade convenience through
AEO system. To those SMEs, they can save dispensable time and costs from procrastination due to the certification of AEO.

Current AEO conditions in the world and Asia Pacific region

    There are 57 member countries signing AEO MRAs worldwide according to 2018 WCO AEO Compendium, Among them, 36 AEO MRAs have been completed among member economies of APEC following the AEO MRA was reached between Japan and China in late October last year.

    Among 21 member economies of APEC, 17 member economies have implemented AEO system. All member economies mainly refer the AEO favorable items provided in WCO SAFE Framework 2018. Most member economies have the ability to share their AEO implementation experiences, while few member economies which have not yet implemented AEO expect to implement AEO system as early as possible through capacity building and experiences learning from other
economies. It’s noticed that all of the formal agreements are almost concluded

(1)Bilateral agreement

    The AEO mutual recognition agreements are almost concluded bilaterally among all member economies of APEC. In such atmosphere, it is very difficult practically to reach bilateral AEO MRAs with specific member economies through multilateral fora, such as APEC. Moreover, APEC adopts consensus decision and the standards of AEO is formulated in accordance with on different conditions in all member economies. The bilateral AEO MRAs, therefore, could be only concluded through negotiation between two member economies separately. In other words, the purposes of all APEC member economies participating in APEC Sub-Committee on Customs Procedures (SCCP) are to extensively understand the newest developments and future plans of AEOs or AEO MRAS in this region.

(2)Overview of AEO MRAs concluded recently

    Advanced APEC member economies are most aggressive to the promotion of AEO. For example, there were 7 mutual recognition agreements reached by Australia in the last two years, including New Zealand, China, Singapore, Hong Kang, Korea, Canada and Taiwan. Among them, we may take the AEO MRA between customs of China and Australia as an example. Since they initiated the
consultation and negotiation of AEO MRA in 2016, they have completed the AEO system comparison, field certification, observation and assessment, convenient measures and e-data exchange in August 2017. Meanwhile, they reached consensus towards the main contents and article arrangements for mutual recognition.

    Japan signed AEO MRA with China in late October last year to facilitate certified enterprises enjoying convenient custom declaration measures. From the beginning of this year, it dramatically reduced the inspection samples of Japan’s AEO certified traders when their goods are shipping through the customs of China. And it’s anticipated that time of custom declaration will be reduced to one-third more than before, which is the most favorable to fresh foods.

    Meanwhile, Japan has been discussing AEO MRA with Australia since 2017. It needs more room to find a good resolution because the AEO status is corresponded to different conditions of each applicant in Australia and Japan. There are more than 680 enterprises are awarded AEO status in Japan, including large companies and suppliers. Japan further encourages small to midsize enterprises for participating in AEO system to enjoy the same benefit of facilitation for their good in condition of safety standards and relevant regulations are complied.

    On the other hand, it’s observed that Korea has engaged in international custom cooperation with non-WCO member OCO after the AEO mutual recognition agreements are concluded with Canada, Singapore, USA, Japan, New Zealand, Hong Kong, Mexico and China. Korea’s action would facilitate external trade development of 300 SMEs economic operators in Korea. It is worthy to learn from this successful model.

Current conditions of AEOs and AEO MRAs promoted in Taiwan

    Taiwan Customs has implemented its AEO program since December 2009 and 717 AEOs have been granted as of today, including 362 general AEOs and 355 Safety and Security AEOs, whose import/export value accounts for 46% of its total trade volume.

    To maximize the advantage of its AEO program, Taiwan Customs has signed AEO MRAs with the United States, Singapore, Israel, Korea, and Australia in November 2012, July 2013, December 2013, December 2015, and September 2018 respectively. In addition, the signing of Japan-Taiwan AEO MRA during the 43rd Taiwan-Japan Economic and Trade Conference was made in December 2018 just after the Agreement on Cooperation and Mutual Assistance in Customs Matters (CMAA) was concluded during the 42nd Conference held in 2017. Through the Japan-Taiwan AEO MRA, the Customs administrations of Taiwan and Japan are able to mutually recognize each other’s AEO programs. Exporters awarded AEO status from both counties can enjoy facilitated Customs clearances at borders.


    In view of the fact that Japan is the 3rd largest trading partner of Taiwan and the trade volume between Taiwan and Japan in 2017 amounted to $62.7 billion, the MRA will bring substantial economic benefits to both sides. It is expected that, through working closely in a consistent manner, the two Customs administrations will further strengthen their cooperation on trade facilitation and supply chain security issues.

    Taiwan has consulted the feasibility of AEO mutual recognition with New Zealand and Vietnam, respectively. Among them, the custom representative of New Zealand expressed that he will pass the information to their AEO window. In Vietnam, the Department of Trade and Industry and Ministry of Legal Affairs consider that this agreement should be signed through ministerial level and Vietnam’s President.2 We expect that it will bring a new vision for promoting AEOs and AEO mutual recognition in the AEO workshop held in the latter half of this year.
 (The author is assistant researcher of Taiwan Institute of Economic Research)


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