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backEUROtalk February, 2012
AEO and C-TPAT to be mutually recognizable beginning June 2012
The European Commission announced on 30 November 2011 that the EU and US authorities have agreed to mutual recognition of each others' "secure traders" standards beginning June 2012.
I. Implications for EU/US traders
According to the announcement, businesses certified in either the EU (provided they hold an AEOS or AEOF certificate[1]) or the US (provided they hold C-TPAT status[2]) will benefit from quicker and simpler customs procedures. The EU and US expect mutual recognition to reduce costs and time delays, result in less red tape and provide greater ease and predictability in the movement of goods across EU and US borders. The details of precisely how mutual recognition will operate have not yet been unveiled.
II. Improving supply chain security: an overview of AEO and C-TPAT
The Authorised Economic Operator ("AEO") program was launched by the EU in January 2008, and the Customs-Trade Partnership against Terrorism ("C-TPAT") program by the US in November 2001. Both programs provide businesses with a way of reducing delays for their goods crossing borders due to security concerns.
Whilst voluntary, AEO and C-TPAT standards are fast becoming a de facto benchmark used by customs agencies, customers and suppliers to test how companies treat the issue of supply chain security.
Any legal entity established in the EU involved in activities covered by customs legislation and forming part of the international supply chain can apply for AEO status. The C-TPAT program is open to any business types related to the US import supply chain, cargo handling and movement (e.g. US importers of record, licensed customs brokers, carriers, certain foreign manufacturers, etc.).
A company which goes through the AEO or C-TPAT authorization/ validation process and obtains this certification will have conducted a thorough review of its customs and security procedures and strengthened any areas of potential weakness. This is important for the company from a risk control perspective and fits into a company's larger compliance framework.
III. Wider EU/US initiative to boost economic partnership
Mutual recognition of "secure traders" standards is part of a wider initiative to boost economic partnership between the EU and the US. The authorities are expected to expand the partnership over the next few months to other areas, including a potential comprehensive Free Trade Agreement ("FTA").
Please click here to view the full European Commission press release.
IV. Mutual recognition with other countries
Mutual recognition has been operational for EU/Japan international trade supply chains that involve AEO businesses (who hold an AEOS or AEOF certificate) since 24 May 2011.
Prior to this development, CBP has signed five Mutual Recognition Arrangements ("MRAs") with Japan, New Zealand, Canada, Jordan and South Korea.
V. Actions to consider
Companies wishing to benefit from mutual recognition from June 2012 and which are not yet AEO or C-TPAT participants should consider now whether they wish to apply for one of these standards.
Most businesses will need several months to prepare their AEO application. The approval process itself, which includes an audit by the national EU customs authority where the business has applied, can take 3 to 4 months (the official timescale is up to 120 days but there are opportunities for both parties to extend this deadline). Experience has shown that companies applying for AEO have to implement or upgrade new policies and deal with issues found while reviewing their business. Where businesses are applying for AEOC or AEOF status, this will include a thorough review of its customs compliance record and procedures.
The C-TPAT application process may also take several months. In applying to become a C-TPAT member, businesses will need to prepare a security profile, conduct a comprehensive self-assessment of their supply chain security procedures and implement or upgrade their security policies and processes, including risk assessment processes. C-TPAT participants may then be subjected to CBP validations and revalidations to ensure that they have implemented and are following the security measures contained in their security profile. We will have to wait for the details to find out how mutual recognition will be implemented by CBP and whether all AEO and C-TPAT members will benefit.
Source: Baker McKenzie - GAI
For more information or to contact Baker & McKenzie, please click here.
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