What is the AEO code and why is it important for your supply chain?

By David Noah, President, Shipping Solutions

I sometimes get calls from exporters who have been asked by their international customers for their AEO number for import customs clearance. So, what is an AEO code, and how do I find out what yours is?

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In short: AEO stands for Authorized Economic Operator. Different countries have different versions of this program. Here in the US, it's called the Customs Trade Partnership Against Terrorism (CTPAT). Unless your company has signed up and has been approved for CTPAT or you have participated in a foreign customs authority's AEO program, you probably don't have one.

The Expansion of AEO

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In 2005, the World Customs Organization (WCO) created the SAFE Framework of Standards to Secure and Facilitate Global Trade, which includes the Authorized Economic Operator Program (AEO).

As defined by the WCO, “the 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.”

Those standards relate to the following areas:

• Demonstrated compliance with customs requirements

• Satisfactory system for management of commercial records

• Financial viability

• Consultation, cooperation and communication

• Education, training and awareness

• Information exchange, access and confidentiality

• Cargo security

• Conveyance security

• Premises security

• Personnel security

• Trading partner security

• Crisis management and incident recovery

• Measurement, analysis and improvement

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This partnership allows all the parties in a supply chain to be vetted and approved by the import country's customs authority. If an exporter has supply chain partners (carriers, forwarders, or anyone touching their freight) that have been prescreened, the assumption is that it’s more likely to be a safe import, versus one where more/all of the parties are not prescreened. Ultimately, it allows items deemed safe to enter into the country of import more quickly.

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AEO participants involved in global trade, including importers, exporters, shipping agents, customs brokers and warehouse operators, benefit from preferential treatment from customs authorities. Benefits include expedited clearance times, fewer examinations, improved security and communication between supply chain partners, and more.

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Mutual Recognition of AEOs

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In order for AEOs to be effective, customs authorities in the United States and other countries need to be confident in and mutually recognize the AEOs of other nations. This is done through Mutual Recognition Agreements (MRA), which, according to the US Customs and Border Protection (CBP), indicates that the security requirements or standards of the foreign industry partnership program, as well as its verification procedures, are the same or similar with those of the CTPAT.

So far, CBP has signed 12 MRAs with foreign customs authorities:

• Canada—Canada Border Services Agency’s Partners in Protection Program (PIP)

• Dominican Republic—Authorized Economic Operator Program (AEO)

• European Union—EU’s Taxation and Customs Union Directorate’s (TAXUD) Authorized Economic Operator Program (AEO)

• Israel—Israel Tax Authority’s Authorized Economic Operator Program (AEO)

• Japan—Japan Customs and Tariff Bureau’s Authorized Economic Operator Program (AEO)

• Jordan—Jordan Customs Department’s Golden List Program (GLP)

• Korea—Korea Customs Service’s (KCS) Authorized Economic Operator Program (AEO)

• Mexico—New Scheme of Certified Companies (Nuevo Esquema de Empresas Certificadas or NEEC)

• New Zealand—New Zealand Customs Service’s Secure Export Scheme Program (SES)

• Peru—Authorized Economic Operator Program (AEO)

• Singapore—Singapore Customs’ Secure Trade Partnership Program (STP)

• Taiwan—Directorate General of Customs, Taiwan Ministry of Finance’s Authorized Economic Operator Program (AEO)

Participating In an AEO Program

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Participation in CTPAT is voluntary and there are no costs associated with joining the program. A company can apply here. (Highlight first then click to open)

According to the CBP website, the application process is easy:

• The first step is for the company to review the CTPAT Minimum Security Criteria for their business entity to determine eligibility for the program.

• The second step is for the company to submit a basic application via the CTPAT Portal system and to agree to voluntarily participate.

• The third step is for the company to complete a supply chain security profile. The security profile explains how the company is meeting CTPAT’s minimum security criteria. In order to do this, the company should have already conducted a risk assessment.

Upon satisfactory completion of the application and supply chain security profile, the applicant company is assigned a CTPAT Supply Chain Security Specialist to review the submitted materials and to provide program guidance on an on-going basis.

The CTPAT program will then have up to 90 days to certify the company into the program or to reject the application. If certified, the company will be validated within a year of certification.

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What's Your AEO Code?

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So, how do you respond to your international customer looking for your AEO code? As I said before, unless your company has signed up and has been approved by U.S. Customs and Border Protection for the CTPAT program or you have participated in a foreign customs authority's AEO program, you probably don't have one.

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There are advantages to participating in such a program, whether you are an exporter, importer or both. Making it faster and easier for your foreign customers to import your goods into their countries is always a benefit. But I've also heard from U.S. companies who have questioned the benefits of participating in CTPAT versus the time and expense of getting approved by and complying with the program. If your company hasn't yet looked at participating in the CTPAT program, it may be worth a review.