AEO after 4 years of

implementation - Towards a necessity in International Trade?

OCEAN Board meeting – 27.05.2012

Cadiz, Spain

Contents Part 1: AEO in 2012 – Where are we? Part 2: The “Carrot and Stick” approach to more AEO certification Part 3: AEO - a strategic management decision Conclusion

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What is the AEO scheme?

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• AEO is an EU wide accepted certificated standard / certification scheme

administered and monitored in the UK by customs authorities that businesses involved in the international trade supply chain may apply for.

AEO

Indirect Tax (Customs

Duty)

Risk Management and Customs compliance

Security and Safety

Who?

• Manufacturer

• Importer

• Exporter

• Freight Forwarder

• Warehouse keeper

• Customs Agent

• Carrier

• Ship supplier

•Types

• AEOC – Customs Simplifications

• AEOS – Safely and Security

• AEOF – Both

AEO in 2012 – Where are we?

AEO 2012: Key figures

• AEO applications on Jan 2012 12828

• AEO applications in May 2012 12989

• Increase first half of 2012 161

• Total AEO Certificates issued (Jan) 9452

• Total AEO Certificated issued (May) 10410

• We surpassed the 10.000 AEO certificates in February 2012.

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AEO in 2012 – Where are we?

AEO 2012: Key figures

• AEO applications in May 2012 12989

• AEOC (Customs Simplifications) 5989

• AEOS (Security only) 390

• AEOF (Customs Compliance + Security) 6610

• EU rejections: 1180 (~9%)

• In the EU, only 1 in every 10 AEO applications has been rejected.

• To obtain or maintain simplifications, AEOC is becoming a popular choice.

• Full AEO status (combining both simplifications + security) is the most popular authorisation businesses are looking for.

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AEO in 2012 – Where are we?

AEO Certificates: Large EU Member States

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1000

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United Kingdom

France Italy Spain Germany Poland

296603 502

358

4852

499297

634538

385

5139

516

313 662

571

5448

541

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Blue – Jan 2012 Red – March 2012 Green – May 2012

AEO in 2012 – Where are we?

AEO Certificates: Other EU Member States

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100

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Au

stri

a

Be

lgiu

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Bu

lari

a

Cyp

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Cze

ch R

epu

blic

Den

mar

k

Esto

nia

Fin

lan

d

Gre

ece

Hu

nga

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Irel

and

Lith

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ia

Luxe

mb

ou

rg

Lati

va

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ta

The

Net

her

lan

ds

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rtu

gal

Ro

man

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Slo

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Slo

vaki

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Swed

en

Jan-12

Mar-12

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AEO in 2012 – Where are we?

Analysis

• Almost 5000 business in Germany and 750 business in The Netherlands have become certified with AEO since the AEO scheme into operations.

• Of the large TOP 6 EU countries, UK business has the slowest take-up rate :

• over ten times more German businesses became AEO than UK businesses;

• by the end of 2012, it is likely that 3 times as many Dutch companies are AEO than UK companies.

• For the “smaller” Member States, The Netherlands leads before Sweden, Austria and Belgium.

• From the new Member States, Hungary is leading AEO certification.

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AEO in 2012 – Where are we?

AEO in 2012 Selected voices from legislators and industry

EU COMMISSION

“The European Union and the United States of America formally agreed to recognise each other's safe traders, thereby allowing these companies to benefit from faster controls and reduced administration for customs clearance.

EU and U.S. certified trusted traders will enjoy lower costs, simplified procedures and greater predictability in their transatlantic activities, as a result of a mutual recognition decision signed today. Source: Press release, EU Commission, 04.05.2012

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SHIPSUPPLY

• For clients and suppliers the AEO is, just like the ISO, prove that certain processes in the organization are regulated well.

• The AEO status can produce financial advantages and a faster logistic handling.

Advantages:

• To be able to follow the goods and capital in a controlled way

• A better protection against theft

• A more responsible employers policy

• Improved work processes The largest advantage for AEO-companies is to have lesser disadvantages!

Source: Neko Webpage

PORT TERMINAL Today, the ECT Delta Terminal and the Euromax Terminal Rotterdam were

officially awarded the status of Authorised Economic Operator (AEO) by Customs. [...] can count on significantly simplified customs formalities, allowing them to even better fulfil their roles in global logistics chains Source: Europe Container Terminals BV, 30 June 2011

AEO in 2012 – The Carrot and Stick Approach

AEO in 2012: The Carrot Approach Voices from the European Parliament

REPORT of the European Parliament on the modernisation of customs

• calls on the Commission to consider simplifying the procedure for

applying for AEO status;

• Calls on the Commission and the Member States to propose additional concrete benefits which could be granted to traders holding AEO certificates and which would encourage businesses to apply;

• believes that such tangible benefits could primarily entail significant reductions in administrative burdens or costs, for example by relieving AEOs, as a rule, from the requirement to lodge a security of customs debt, and facilitating the payment of customs duties and VAT

• Source: EU Parliament, 05.12.2011

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AEO in 2012 – The Carrot and Stick Approach

AEO in 2012: The Stick Approach

1. Customs authorities “require” AEO !

• Linking the granting of authorisations to AEO

(example Germany, UK, Spain)

• Linking of compliance requirements / law to AEO (example SAO in the UK)

• EU Wide: All authorisations will reauire guarantees if company is not AEO => cash-flow considerations

2. Commercial pressures increase.

• More and more a factor in bidding situations

• AEO as a marketing tool

• AEO becoming a real international standard (Mutual recognition)

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AEO in 2012 – The Carrot and Stick Approach

What result? A renewed interest in AEO certification

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An increased focus and emphasis on corporate compliance with customs rules.

AEO certification is being more and more exploited for marketing purposes.

AEO is becoming increasingly prominent when issuing tenders for contracts across the EU.

Companies are recognising the commercial and regulatory benefits that AEO brings and we have recently seen a surge of interest across industry.

AEO in 2012 – The Carrot and Stick Approach

AEO - A Strategic Management Decision AEO certification has a profound impact on your business

• AEO status is not obtained overnight.

• Obtaining AEO status has important cost, time and resource implications.

• Maintaining AEO status will add annual costs and require resource investment.

• Requires commitment from many parts of the business.

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Local & regional management

R&D Sourcing Logistics

Legal Human

Resources Manufacturing Sales

Technical Customer Service

Customs/Export Manager

Finance Information Technology

AEO - A Strategic Management Decision

3 Phases of AEO certification: Trigger questions

PREPARATION

• Did you understand the AEO certification process ?

• Did you perform a cost-benefit analysis?

• Is now the right time to become AEO?

• Do you have senior management support?

• Do you have enough staff?

• Do you know customs rules?

• Can you put the time and financial resources aside?

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IMPLEMENTATION

• What’s your plan / methodology to become AEO?

• What are the milestones and key phases?

• Will you do them in-house or outsource?

• Have you considered these extra costs?

• Do you verify progress with KPIs?

• Do you have access to a helpline in case you have questions or get stuck?

FOLLOW-UP

• Once you have obtained AEO status, what is your monitoring plan?

• Will you perform random AEO audits?

• Do you keep up to date with legislative changes?

• What other support tools can you use?

AEO - A Strategic Management Decision

• The popularity of the AEO programme is slowly increasing – businesses in Germany and the Netherlands are front-runners in certification.

• UK companies are lagging behind in becoming AEOs – are they loosing out on important business opportunities that would offset their AEO certification costs?

• Legislators and authorities are applying a “carrot and stick” approach as regards AEO. How long can business ignore the “stick” aspect?

• Becoming AEO is an important strategic business decision with important cost, time and resource implications.

• Can you make the “AEO business case” for your company?

• Becoming and maintaining AEO status require high-quality planning and well organised project management.

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Conclusion

AEO after 4 years of

implementation - Towards a necessity in International Trade?

OCEAN Board meeting – 27.05.2012

Cadiz, Spain