Korean AEO Program Overview - October 2019
The Korean AEO (Authorized Economic Operator) Program, launched in 2009, provides benefits for companies involved in global supply chains. The program aims to enhance trade facilitation, secure supply chains, and streamline customs clearance processes. Through partnerships, criteria fulfillment, risk management, and compliance, AEOs enjoy faster clearance, reduced inspections, and other advantages. The program has broadened with more Mutual Recognition Agreements signed globally, certifying over 800 entities in Korea by June 2019. AEOs receive informed compliance support, leading to higher customs-to-business partnership compliance and various benefits such as reduced inspections, simplified clearance procedures, and monthly duty payments.
- Korean AEO Program
- Supply Chain Security
- Trade Facilitation
- Customs Clearance
- Mutual Recognition Agreements
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Korean AEO Program October 2019
1 1 AEO program provides clearance benefits for those involved in global supply chains who have met security requirements. Trusted, reliable companies Bonded transporter Sea carrier Freight forwarder CRITERIA Fast clearance broker air carrier Reduced inspection rate Partnership Voluntary Bonded warehouse operator AEO KCS Customs partner <Certificate> importer Terminal operator exporter Trade compliance + Secure Supply Chain Trade facilitation 1. Speedier, more secure Customs clearance 2. Risk management based on companies 3. Broader Customs Territory 4. Holistic approach to cargo management
2 2 Since official launch of AEO program in 2009, Korean AEO program has broaden and deepened, with more MRA being signed. Global AEO Conference(Apr12) Monitoring AEO status, like self-assessment, etc Signed MRA (2010, 2011) with US, Canada, Singapore, Japan, New Zealand Legal Basis(Jan 2008) Article255.2 of Customs Act More MRA partners China ( 13), HK, TK( 14) Israel( 15), Thailand( 16) Pilot program(Oct 2008) Samsung Electronics and other 10 pilot companies Commissioned Documentary requirement check (Sep 2010) Matured Program in full swing (Apr2009) Enforcement Decree and Enforcement Rule ( 12~) Expanded ( 10~ 11) Launched (~ 09)
3 3 Type of AEOs includes im/exporters, brokers, bonded transporter, freight forwarder, warehouse operator, sea carrier, air carrier, ground handler. As of Jun 2019, Korea certifies as AEO 832 entities in aggregate. Up-to-date number of AEOs Up-to-date number of AEOs (unit : entity, accumulated) Brokers 105 12% 832 815 50% 37% 700 Im/exporters 418 728 Logistics 309 624 600 533 500 400 TYPE Exporter Importer Logistics Broker No. 275 143 309 105 2013 2014 2015 2016 2019.6
4 4 Two-track Customs Audit on AEOs and non-AEOs AEO Non-AEO VS Comprehensive Audit Informed Compliance Special Audit Enforced Compliance Higher compliance based on customs- to-business partnership Consulting service Periodic check Under direct, enforceable Customs Control Penalties and sanctions imposed Enforced Audit Different Features Reduced or non-inspection Customs clearance without bond, Monthly duty payment Import tax invoice issued Self Management Benefit No Benefits Direct Customs Control
4 4 Customs assigns account manager to inform AEOs of what they should know about dealing with trade law, which leads AEOs to voluntarily fulfill informed compliance responsibility Customs AEO Partnership Informed Compliance Trade related matters, consulting service Account Manager Account Manager Dedicated Customs Officer helps AEOs to increase law compliance and enhance their internal control system
5 5 AEOs enjoy speedier, streamlined clearance benefits, (figuratively likened to dedicated bus lane) thereby reducing trade cost Reduced Inspection rate Priority inspection AEO Non-AEO BENEFITS Simplified customs procedure Reduced Trade Cost
5 5 Audit exempted, reduced inspection rate, etc (different depending on AEO Grade) Financial Solvency + Security Management+ Internal Control VALIDITY PERIOD system with 80 points or more GRADE A : 80 points or more in law compliance score 5 YEARS AA : 90 points or more in law compliance score AAA : 95 points or more in law compliance + Best Practices Exemption from Customs audit, foreign currency transaction audit Im/export declaration via ERP system, e-clearance audit BENEFIT Reduced inspection rate or priority inspection when selected for inspection Monthly duty payment, reduced payment in penalties/noticed disposition Prolonged licensing period, relaxed periodic check, package declaration of bonded transport Speedier Immigration clearance via fast track, CIP lounge available
6 6 To validate AEO applicant, 4 major criteria and 60-80 sub-criteria apply. Internal Control System 1. CEO will , Organization and Budget Security Management Law Compliance Financial Solvency 1. Disqualification 1. Biz partner Mgmt 1. Audit report 2. Cooperation with Customs 2. Credit ratings 2. False Declaration 2. Containers and Trailers 3. Violation of Regulation 3. Access Control 3. Records Mgmt 4. Law Compliance 4. Personnel Mgmt 4. Manual on Customs - related Affairs 5. Procedural Mgmt 5. Management and Improvement of Risk Factors 6. Facilities and Equipment 6. Information Sharing 7. IT Mgmt 8. Education and Training 13. Integrity Maintenance Korea takes into account criteria of WCO, EU AEO, C-TPAT* for mutual recognition
7 7 Korea s MRA Partners : 20 economies Key Point USA( 10) Canada( 10) Singapore( 10) Japan( 11) New Zealand( 11) China( 13) Hong Kong( 14) Mexico( 14) Turkey( 14) Israel( 15) Dominican Republic( 15) India( 15) Taiwan( 15) Thailand( 16) Australia( 17) UAE ( 17) Malaysia( 17) Peru ( 17) Uruguay( 17) Kazakhstan( 19
8 8 357.7 million US dollars(for 300 im/exporters in 2018) Key Point < Importers > < Exporters > Direct Impact: faster clearance - the number of exempted cargo physical inspection x daily warehouse fee + Direct Impact: lower inspection fee in overseas customs territory - the number of exportation x reduced inspection rate x inspection fee + Direct Impact: Direct Impact: Duty payment - Issuance of revised tax invoice - Reduced guarantee insurance of tax payment -Non-AEO importers abroad enjoy benefits without any cost incurred, arising from AEO exporters paying to obtain and maintain AEO status(paid money estimated against overseas price ) + + Unmeasured impact - streamlined procedure in entry into/from bonded factory and in claiming drawback, etc. Indirect impact -rising operating profit due to increased export; less dwell-time in customs clearance facilitates more trade, thereby driving up operating profits.
