Customs chief says Authorized Economic Operator program will boost national competitiveness


Korea’s top customs official said the nation will play a leading role in spreading the new trade initiative of the Authorized Economic Operator program and encourage countries to seek mutual partnerships for better efficient customs procedures.

Korea Customs Service Commissioner Joo Yung-sup revealed the plan during an interview with The Korea Herald ahead of the opening of the first global conference on the AEO program in Seoul on Tuesday.

About 800 senior customs officials, businesspeople and academicians from around the world will attend the three-day conference co-organized by the World Customs Organization and the KCS, officials said.

“Korea’s hosting of the first international conference on the AEO program will pave the way for the nation to lead the global customs trend,” Joo said.

“Through this opportunity, we will promote the superiority and safety of our AEO program.”

An Authorized Economic Operator, or AEO, refers to a party involved in the international movement of goods that has been approved by a national customs administration as complying with WCO or equivalent supply chain security standards.

They include all stake-holder groups such as importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.

Aimed at improving the efficiency of customs administration and increasing the safety of trade goods, the program offers AEOs diverse benefits such as quicker customs clearance and exemption from customs check-ups, while tightening surveillance on unauthorized products or companies for potential security threats.

Since the U.S. introduced the program in 2002, right after the 9/11 terrorist attacks, 54 countries including Korea have adopted it. They make up about 77 percent of the world’s trade volume.

“An FTA is aimed at expanding trade by opening markets, while an AEO is a system that improves the international trade flow by securing trade security,” Joo said. 

To earn AEO approval, companies are required to meet four standards such as law observance, internal management, financial stability and safety control under the WCO Framework of Standards to Secure and Facilitate global trade.

Specific requirements would increase up to 60-80 depending on the role the applicant company is involved in.

Once they become an AEO after undergoing a strict approval process, companies are to receive special preferential treatment compared to those that have yet to be approved.

In the U.S., the inspection rate of trade goods is 3 percent but the figure decreases to 0.7 percent for AEOs. In Korea, the rate is further lowered at 0.3 percent.

Under the mutual recognition arrangement between the U.S. and Korea signed in 2010, AEOs in both countries are given benefits by each customs administration.

“Authorized companies enjoy diverse benefits such as quicker customs clearance. And invisible benefits are much bigger as their AEO status is recognized anywhere in the world,” Joo said.

He cited a recent case in which a local company failed to earn a business contract with a foreign buyer due to its non-AEO status.

Countries adopt the AEO program for different reasons according to their individual situations.

The U.S. focuses more on supply chain security, while countries like Japan and New Zealand prioritize supporting their exporting countries. Others including Korea, China and EU seek both purposes.

“Our ultimate goal is seeking coordinated and similar programs so that all national systems are mutually recognized and their accreditations have the same value everywhere,” Joo said.

That is why AEO nations are more recently stepping up efforts to seek a Mutual Recognition Arrangement, under which their companies can receive AEO benefits anywhere in the world.

Currently, there are 17 MRAs that have been signed around the world. Japan leads with six, followed by Korea and U.S. with five each, the EU with four and Canada three.

Korea has signed the MRA with the U.S., Canada, Singapore, Japan and New Zealand. It also plans to reach the agreement with China, its largest trade partner, by 2013. Other pending regions include the EU, Hong Kong, India, Malaysia, Israel, Mexico and Switzerland.

“Several working-level meetings will be arranged for participating countries in Seoul this week. That will be led to the expansion of MRAs,” Joo said.

During the Seoul conference, the customs chief said he is also scheduled to meet his Israeli counterpart for a potential MRA between the two countries.

Another important purpose of the Seoul gathering is further spreading the AEO program to developing countries where trade barriers remain high.

“Developing countries like Mongolia and Vietnam are requesting that we teach them about our AEO program. We would be able to strengthen the competitiveness of our companies as well as increase our national brand power,” he said.

Since the Korean adoption in 2009, Joo said that the AEO system has been settled and stabilized here with 292 companies getting the AEO approval thus far.

This year the Korea Customs Service will focus more on strengthening the actual effects of the system, he said.

To do that, the KCS will extend the number of firms subject to its related support programs so that competitive smaller- and medium-sized companies can prevent and deal with problems in exporting and importing their products.

By Lee Ji-yoon (jylee@heraldcorp.com)