Draft Customs rules on AEO

THE Bureau of Customs (BOC) and the private sector, led by the Aircargo Forwarders of the Philippines, Inc (AFPI), last week held a conference-workshop on, among others, the draft rules on the Authorized Economic Operator or AEO, otherwise known as ‘approved customs partner’.

During the workshop, some representatives of the private sector raised several concerns on the proposed customs program, specifically, on the additional compliance requirements and the costs involved in implementing the program.

Basic Concept of AEO

As part of the international efforts to secure the international supply, the Philippine AEO program is based on the following requirements:

• Implementation of a security management system based on international standards and best practices; and
• High-level of compliance with applicable customs laws and regulations.

In exchange, the successful applicant to the AEO program will enjoy the following trade benefits:

• Special facilities and additional trade facilitation program (e.g. online systems, exemption certain fees, etc.), and
• Mutual recognition of AEO status in other countries for exported goods, resulting in the application of similar special trade facilities not normally available to regular traders.

Philippine AEO program

In theory, a mature AEO program will involve all stakeholders dealing with the movement of goods across international borders – manufacturers, locators in free zone, logistics providers, exporters, customs brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.

Based on the draft rules, the Philippine AEO program will be a voluntary program to be implemented in phases – initially applicable to importers, then exporters, and later on, other economic operators in the international supply chain. Prior to full implementation of the rules, the BOC will first start with a pilot program for current SGL members.

The proposed rules also provide for third-parties to be accredited by customs and authorized to validate the security management systems of program applicants.

Security Standards

Part of the requirement for a prospective AEO is the provision and implementation of a security management system involving:

• Premise security and access controls
• Personnel security
• Business partner security
• Cargo security
• Conveyance security
• Information and IT security
• Incident management and investigations
• Crisis management and incident recovery

Obviously, not all of the proposed security measures will apply to each and every applicant of the AEO. The required measures will particularly relate to the activities undertaken by an applicant and to the risk associated with performing such activities.

To illustrate, logistics companies providing integrated service (forwarding, clearance, transport, warehousing, and distribution services) will most likely be required to provide a comprehensive and complete security management system. On the other hand, a customs broker merely providing clearance service will not be required to provide security measures on cargo and conveyance. The reason for this is that transport is not provided by the customs broker and there is no physical handling and control of the cargo.

SGL plus Other Benefits

Based on the draft rules, an approved applicant to the Philippine AEO program will avail of the following benefits:

• Super Green Lane privilege
• Importer’s accreditation for a longer period
• Recognition as a ‘low risk’ company
• Least priority for Post Entry Audit
• Other trade facilitation benefits

Some of the additional benefits being seriously considered are as follows: reduced data and supporting documents in entry declaration, exemption from inspections (and fees), reduced SGL fees, deferred duty payments, and exemption from fines except when there is fraud.

The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at agatonuvero@yahoo.com and agatonuvero@customstrade.asia