Evolving Authorized Economic Operator (AEO) program in South Korea

Posted by Kim SeungMahn
Blog originally posted on 25/04/2024 07:45 AM

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AEO is a well-known regime in many countries, and not something new. But this program is continuously evolving to attract more potential participators.

The evolution is not only in regards to the benefits you can enjoy in South Korea, but also occurs in terms of the procedural aspects of obtaining and maintaining AEO accreditation and Mutual Recognition Agreements/Arrangements(MRAs).

What is AEO in South Korea?

Authorized Economic Operator (AEO) refers to an entity that Customs authorities validate and authorize as a trusted and secured trader involved in supply chain, such as exporters, importers, certified Customs brokers, bonded area operators, bonded transportation companies, stevedores, forwarders, shipping companies, or airlines.

AEO is a program established on the basis of Customs-private partnership under the international SAFE Framework, which was unanimously adopted at the Council Session of the World Customs Organization (WCO) in June 2005.

Benefits of AEO

Businesses accredited as AEO enjoy various benefits, including streamlined inspections and clearance procedures, reduced financial burdens, among other advantages. Preferential risk management is also granted to AEOs.

AEO is a voluntary cooperation between Customs and the private sector to enhance global supply chain security. In return, Customs provides appropriate benefits to the participants, as detailed below:

  • Fast Clearance: Reduced inspection rates, ERP-based import/export declarations, and priority clearance when selected for inspection.
  • Voluntary Management: Exemption from Customs audits and foreign currency transaction audits.
  • Reputation: Recognition as a reliable business partner and mutual benefits through the MRA program.
  • Convenience: Exemption from the obligation to deposit collateral, increased monthly deferred payment of duties, and preferential treatment for AEOs, such as priority inspections at the airport.

Status and Benefits of MRA

Mutual Recognition Agreement/Arrangement (MRA) is a bilateral understanding between Korea Customs Service (KCS) and a foreign Customs Administration that recognizes the compatibility of the respective AEO programs and provides reciprocal, comparable, and substantial benefits for members of the counterpart program.

To strengthen trade facilitation, the WCO highly recommends AEO MRAs between countries that have introduced AEOs. AEOs receive trade facilitation benefits, such as reduced inspection rates during import clearance in foreign customs territories. As a result, many AEO MRAs have been signed between partner countries.

Currently, Korea has signed AEO MRAs with 22 countries, including the United States, Singapore, Canada, New Zealand, Japan, China, Mexico, Turkey, Hong Kong, Taiwan, the Dominican Republic, Israel, India, Thailand, Malaysia, the United Arab Emirates, Uruguay, Peru, Australia, Mongolia, Kazakhstan, and Indonesia.

The benefits of MRAs include the following:

  • Reduced Import Inspection Rate: Reduced inspection by Customs in the partner country for AEO cargo.
  • Priority Clearance and Inspection: AEO cargo is subject to priority inspection by Customs in the partner country during actual inspections.
  • Simplified Document Review: Omission of submitted documents or a reduced document review rate when declaring imports in the partner country.
  • Priority Measures in Emergencies: Priority treatment for AEO cargo during emergencies, such as natural disasters or border closures.
  • Continuous Customs support: Establishment and utilization of continuous support from Customs in the contracting country to solve Customs-related issues and facilitate clearance.
In other words, obtaining AEO in South Korea means that you can not only enjoy benefits within South Korea but also similar benefits in the 22 countries in accordance with the MRA.

AEO Guidelines Version 5.0

Recently, KCS announced the release of application guidelines version 5.0 for AEO accreditation. This update aims to support small and medium-sized domestic export companies facing challenges due to the recent economic downturn. It is the first revision in six years since the 2017 update and is designed to reduce the burdens around the accreditation procedures for small and medium-sized export companies and align with the revised international standards for AEO.

Notably, this update replaces the burden of the tremendous preparation of documents with simpler physical on-site reviews and also simplifies the mandatory documentation requirements for similar accreditation criteria, which should significantly reduce the burden for small and medium-sized export companies.

Furthermore, it relaxes accreditation standards in the financial soundness sector, such as the debt-to-equity ratio, and limits mandatory CCTV areas to reduce the burden of video recordkeeping. These changes will be implemented for applications filed in 2024.

Please join the evolution and enjoy the benefits. Tradewin Korea is here to support you in the process.

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Topics: Asia, AEO

Blog originally posted on 25/04/2024 07:45 AM

Kim SeungMahn

Written by Kim SeungMahn

General Manager of Tradewin Korea, Professional Trade Compliance Consulting Services