Japans AEO Program Shinji TANIGUCHI Director Japan Customs

Japan’s AEO Program Shinji TANIGUCHI Director, Japan Customs May，2008

Japan Customs: Outline of Japan Customs Role of the Customs and Tariff Bureau (CTB) CTB and 9 Customs Nagasaki Hakodate Moji Kobe CTB, MOF - Planning the policies of customs and tariff (including preparing national legislation) - Administering the operation of 9 Customs (HQ of Japan Customs) ・ 118 Customs Ports ・ 27 Customs Airports Okinawa Regional Osaka Nagoya Yokohama Tokyo Covered by 9 Regional Customs Houses ・ 210 Customs offices （Branches, Sub-branches, Guard posts） ・ 8, 620 Customs officials -１ -

Japan Customs: Three Missions of Trade Facilitation Security and Safety Further facilitating trade procedures Realizing a safe and secure society To furthe r fa cilita te cus toms p ro c e d u re s wh ile e n s u rin g s e c u r it y in in t e r n a t io n a l d is t r ib u t io n. To build a “J a pa n tha t is the s a fe s t c o u n try in th e wo rld ” setting blocking of smuggling of guns , ille ga l drugs a nd othe r goods harmful to the society as the most importa nt ta sk a nd by preventing terrorist acts in Japan AEO Program -２ - Japan Customs Fiscal Role Co lle c ting c us to ms dutie s a nd do me s tic c o n s u m p tio n ta x e s a p p ro p ria te ly a n d f a i r l y To Colle ct cus toms dutie s a nd dome s tic cons umption ta xe s a ppropria te ly a nd fa irly a s a re ve n u e a g e n c y th a t c o lle c ts a b o u t 5 , 4 0 0 , 0 0 0 million representing about 10% o f t h e t o t a l n a t io n a l t a x r e v e n u e

Security Measures and AEO Programs -３ -

Establishment of Japan’s AEO Program (Apr. 2007) Establishment of AEO Programs Further Development Fundamental Reform Customs - Business Partnership Customs － Businesses Partnership Promote participation in AEO programs －more than 50% of exports in value be conducted by authorized exporters by end CY 2008 Reform on AEO programs for importers/exporters International Partnership ・Consistency with WCO guidelines ・Increased benefits for traders Promote mutual recognition with major trading partners with equivalent AEO programs Introduction of AEO program for warehouse operators -４ -

Expansion of Scope of AEO Program 〔Before〕 Importers and Exporters International Logistic Operators Transportation company Forwarder s Warehouse Operators Customs Brokers Shipping Company and Airline Importers and Exporters abroad 〔From April, 2008〕 International Logistic Operators Importers and Exporters Transportation company Forwarder s Warehouse Operators Customs Brokers -５ - Shipping Company and Airline Importers and Exporters abroad

Japan’s AEO Program: Requirements & Benefits Authorized Importers - Compliance-reflected reduced examination and inspection - Pre-arrival lodgement of import declaration and permission - Release of cargo before duty/tax payment declaration and duty/tax payment - Periodical lodgement of duty/tax payment declaration Requirements (Consistent with WCO SAFE) ○Compliance Record ○e-system for Customs Procedures ○Compliance Program - Waive the requirement to deposit cargoes into the Customs area - Compliance-reflected reduced examination and inspection Ben efits ・Organizational Set-up ・ Contracting Parties Requirement ・ Cargo/Conveyance/Premises Security ・ Consultation, Co-operation and Communication with Customs and Other Relevant Authorities ・ Crisis Management ・ Education/Training ・ Internal Audit for Measurement, Analyses and Improvement Authorized Exporters Authorized Warehouse Operator - Establishment of a new Customs warehouse only by notification - Comprehensive permit is provided to each Operator - Compliance reflected reduced audit - Free monthly fee Authorized Customs Brokers - Release of cargoes before duty/tax payment and its declaration in case an import declaration is conducted by an ACB - Lodgment of export declaration at the exporter’s premises and other facilities in case an ACB and an Authorized Logistics Operator control cargoes of their client exporter ○Financial Integrity Authorized Logistics Operators (Carriers/Forwarders) -６ - - Waive the requirement to get permission for Customs transit from Customs

Requirements Compliance records ⇒ Proper records of Compliance. No Commitment over a designated period to any violation against Customs related laws and regulations. ⇒ Business experiences no less than 3 years (International logistics operators) e-system for Customs Procedures ⇒ Eligibility for usage of e-system for Customs Procedures. Financial Integrity Compliance Program ⇒ Organizational Set Up Contracting Parties Requirement Cargo/Conveyance/Premises Security Due Customs Procedures Consultation, Cooperation and Communication with Customs and Other Relevant Authorities Crisis Management Education/Training Internal Audit -７ -

Requirements : Internal Compliance Program for Customs Requirements Organizational Set-Up ⇒ Establishment of center office to manage CP and CP units in each department. ⇒ Ensuring the properation at each department. Contracting (Business) Parties Requirement ⇒ Ensuring the adequacy of business partners in relation to the performance of the CP including security aspects. ⇒ Establishment of a framework to ensure properations by business partners. Cargo/Conveyance/Premises Security (in the case of Importers / Exporters) ⇒ Appropriate management of the cargoes. ⇒ Establishment of a framework to check the route and the mode of transportation, as well as to properly track the movement of the cargoes. ⇒ Locking devices, barrier, fencing and lighting, including setup of video surveillance cameras, and periodic patrolling. ⇒ Checking of traffic both persons and vehicles Due Customs Procedures ⇒ A list of cargoes (including descriptions, marks, tariff classification, tariff rate, application of trade control laws and regulations and other relevant information) ⇒ Timely updates of the list of cargoes based on the revision of relevant laws and regulations. ⇒ Establishment of a framework and appropriate management of Customs procedures. -８ -

Requirements : Internal Compliance Program for Customs Requirements Consultation, Cooperation and Communication with Customs and Other relevant authorities ⇒ Establishment of a route of report to Customs on any accident or misconduct in implementing the CP. ⇒ Establishment of a route of report to Customs on the changes of the CP, if such changes are related to Customs procedures, cargoes and/or logistics Crisis Management ⇒ Establishment of a framework to ensure route of report in case of emergency and taking remedial and preventative measures. Education/Training ⇒ Establishment of a framework to plan education and training programs and to implement those programs in a periodic and continuing manner. Internal Audit ⇒ Establishment of a framework for internal audit to ensure proper implementation of the CP. -９ -

Benefits for Authorized Importers/Exporters Authorized Importers ○Compliance-reflected reduced examination and inspection ○Pre-arrival lodgement of import declaration and permission ○Release of cargo before duty/tax payment declaration and duty/tax payment ○Periodical lodgement of duty/tax payment declaration Authorized Exporters ○Waive the requirement to deposit cargoes into the Customs area ○Compliance-reflected reduced examination and inspection - １０ -

Procedure for Authorized Importers 〔Normal Procedure〕 Cargo Release Procedure Aircraft’s arrival Import/Duty Payment Declaration Examination Inspection Duty Payment Import Permit Cargo Release 〔Procedure for Authorized Importers 〕 Cargo Release Procedure Import Declaration Aircraft’ s. Aircraft’ arrival s arrival Import Declaration Import Permit (Optional) Cargo Release Duty Payment Declaration (Periodical) Examination Inspection - １１ - Duty Payment

Procedure for Authorized Exporters 〔Normal Procedure〕 Forwarders’ warehouse （Customs Area） Customs Clearance Premises of Exporters Export Declaration 〔Procedure for Authorized Exporters 〕 Premises of Exporters Exam. Inspection Export Permit Forwarders’ warehouse （Customs Area） Customs Clearance Export Declaration Exam. Inspection Export Permit - １２ -

Benefits for Authorized Warehouse Operators, Customs Brokers, Carriers and Forwarders, etc Warehouse Operator - Establishment of a new Customs warehouse only by notification to Customs Comprehensive permit is provided to each Operator Compliance reflected reduced audit Free monthly fee Customs Brokers - Import Procedure ⇒ In case an import declaration is conducted by an Authorized Customs Broker, release of cargoes are allowed before duty/tax payment declaration and duty/tax payment - Export Procedure ⇒ In case an Authorized Customs Broker checks cargoes of its client exporter and those cargoes are brought into container yard for loading by an authorized transportation company, it is allowed to lodge an export declaration at the exporter’s premises and other facilities. etc. Carriers and Forwarders etc. - Simplification of Customs transit procedure (Normal Procedure) A permission is required to each transit, followed by the submission of manifest data. (Procedure for AEO) Only submission of manifest data is required for the route covered by NACCS system - １３ -

AEO Challenges: Program for Authorized Transportation Companies Benefits Customs Area A Customs Transit 〔Current Procedure〕 Normal Procedure Every transit Confirmation of Arrival Every transit ×× × Permit Confirmation of Shipment Customs Area B 〔New Procedure for AEO/TC〕 Unnecessary - １４ -

AEO : Legal Structure 【Law (Customs Law) 】 - Stipulate the rights and obligations of citizens. Examples: benefits, requirement for authorization (reasons for disqualification), expiry and revocation of approvals 【Cabinet Order 】(Cabinet Order for Enforcement of the Customs Law) -Stipulate specific procedures. Examples: procedures for customs clearance with benefits, application procedures for authorization 【Ministerial Ordinance】 (Enforcement Regulation of the Customs Law) -Stipulate details for the implementation of the specific procedures. Example: Particulars to be set forth in the compliance program. 【Order of Director General of CTB】 (Basic Orders regarding Customs Law; Guidelines in reviewing the approval requirements of authorized importers) - Stipulate details for the implementation of the specific procedures. Examples: specific customs clearance procedures, exemplification on the particulars of compliance program, guidelines for reviewing the applications at Customs -１５ -

Process of Authorization 【Application Process】 【Authorization Process】 Prior Consultation with Customs Examination of application - Explanation of AEO requirements including checking list - Support for stock-taking the present operational flow and identifying the points to be reviewed - Application form, Check List, The Compliance Program & Supporting Documents including protocols and contracts with business partners - Support for drafting the Compliance Program (if requested) On-site inspection Applicants’ exercises - Reviewing the operational flow and contracts with business partners - Checking the security measures of cargo storage facilities, including surroundings of the facilities, lighting, locking devices, access control, cargo segregation and computer system - Preparation for submitting the application forms and supporting documents - Checking whether the export procedures are conducted in accordance with the compliance program and protocols - Conducting self-assessment according to check points Consultation with AEO center Submission of Application Authorization 【Post Audit Process】 For Quality Assurance - １６ -

Administrative Order for Improvement and Revocation Administrative Order for Improvement When Customs identifies the operations of an AEO exporter are not compliant with the requirements of AEO authorization, the administrative order for improvement will be issued to the AEO from Customs. Revocation When Customs identifies at least one of the following facts, the authorization will be revoked 1. An authorized exporter has committed Customs laws and/or some other laws 2. There is a false description on the book/records 3. An authorized operator does not take remedial actions to comply with administrative order for improvement - １７ -

AEO Operation : Ensuring Consistency Hakodate Customs AEO Unit Yokohama Customs AEO Unit Kobe Customs AEO Unit Tokyo Customs AEO Center Moji Customs AEO Unit (Ensuring consistency) Nagoya Customs AEO Unit Nagasaki Customs AEO Unit Okinawa Regional Customs AEO Unit - １８ - Osaka Customs AEO Unit

AEO Challenges - Process of Mutual Recognition Mutual Understanding - Improved Understanding of Customs procedure of each party - Comparability Study of both Programs Pilot Program - Define & Planning of Pilot Program - Implementation of Pilot Program - Analysis / Evaluation Declaration of Mutual Recognition - Discussion with regard to benefits of Mutual Recognition - Arrangement of Mutual Recognition and Operational protocols as necessary - １９ -

Mutual Recognition Under Consultation/Study Canada EU Korea China USA Malaysia Singapore Australia - ２０ - NZ

Thank you for your attention.