Things you need to know about AEO
China and Israel have signed a mutual recognition agreement regarding customs Authorized Economic Operators (AEOs) in Beijing on Nov. 9. It marks a step forward in trade facilitation along the Belt and Road given that Israel is an important trade partner with China.
In the first 10 months of this year, trade between China and Israel totaled 88.67 billion yuan (US$13.36 billion), up 69.59 percent year-on-year.
The AEO program, a project initiated by the World Customs Organization in 2005, allows governments to appoint specific “trusted” companies and agents that are vetted for their ability to adhere to all international labeling and shipping measures. The benefit for participants is a fast-track customs policy between the participating countries, which allows exporters to get their products to market in the partner country without customs checks or delays.
According to the World Customs Organization (WCO), an authorized economic operator (AEO) is “a party involved in the international movement of goods in whatever function that has been approved by, or on behalf of a national Customs administration as complying with WCO or equivalent supply chain security standards. Authorized Economic Operators include inter alia manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors”.
The General Administration of Customs of China (GACC) established the AEO system in 2008. China has reached AEO mutual recognition agreements with 34 countries and regions, including the European Union, New Zealand, Singapore and the Republic of Korea.
Statistics show that inspection rates dropped by 60 to 80 percent, with customs clearance costs having decreased by over 50 percent on average for goods exported by Chinese AEO enterprises to China’s AEO partners.
According to GACC, the enterprises should meet certain standards regarding five aspects— internal controls, financial conditions, law and rule abiding, trade security and additional requirements— to become an AEO, which is divided into high-level AEOs and general AEOs.
The companies can apply to local customs to become an AEO enterprise. Only when they score above 95 out of a maximum of 100, can they obtain the high-level AEO status.
Because an AEO identity is related to the departments of industry and commerce administration, taxation, foreign exchange administration, public security, and inspection and quarantine, the customs department must always work together with these departments in AEO authentication, instead of only focusing on their export and import duties.
AEO enterprises have an AEO code, useful in international trade. China’s AEO code starts with AEOCN, plus a 10-digit registration code of the AEO enterprise in Chinese Customs, while other countries that take part in the AEO program have their own codes.
The implementation guideline of mutual recognition for AEO of the World Customs Organization (WCO), drafted by China Customs, was approved by the WCO on Nov. 2, according to the GACC.
China is now engaged in AEO negotiations with Russia, Kazakhstan, Malaysia, Turkey and Mongolia, all important countries on the Silk Road Economic Belt or the 21st Century Maritime Silk Road, as well as the United States and Japan, China’s major trade partners. China plans to become AEO partners with all countries along the Belt and Road routes by 2020.
