G/TFA/W/8  
 
21 September 2018  
(18-5874) Page: 1/4 
Committee on Trade Facilitation  Original:  English  
 
 
IMPLEMENTATION OF TH E AUTHORIZED ECONOMI C OPERATOR PROGRAMME  
IN HONG KONG, CHINA  
COMMUNICATION FROM H ONG KONG, CHINA  
The following communication, dated 19 September 2018, is being circulated at the request of the  
delegation of Hong Kong, China for Members' information.  
 
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1  INTRODUCTION  
1.1.  Customs plays a key role in the c onduct of international trade. With different stakeholders 
involved in different stages of the global supply chain, it is a challenge  for Customs to safeguard the 
security of the supply chain while facilitating the movement of legit imate goods across boundaries. 
In June 2005, the World Customs Organization (WCO) adopted the SAFE Framework of Standards 
(SAFE FoS) with a view to securing and facilitating global trade through closer partnership between 
Customs administrations an d between Customs and Business.  One of the core elements under the 
SAFE FoS is to provide benefits to businesses that meet pre -determined su pply chain security 
stand ards. In this regard, the SAFE FoS provides the instruments and guidelines for Customs to 
implement the Authorized Economic Operator (AEO) Programme.  
1.2.  This paper introduces the implementation of the AEO Programme in Hong Kong, China (HKC), 
and its ongoing e fforts in facilitating and securing international trade.  
2  HONG KONG AUTHORIZED  ECONOMIC OPERATOR P ROGRAMME  
2.1.  The Hong Kong Authorized Economic Operator (HKAEO) Programme, which is developed based 
on the SAFE FoS, was fo rmally launched in April 2012. It is adm inistered by the Customs and Excise 
Department (C&ED) under an open and v oluntary certification regime.  
2.2.  The HKAEO Programme aims to enhance international supply  chain security, foster 
Customs -to-Business partnership, facilitate movement of legitimate goods , and improve the 
competitiveness and marketability of HKAEOs in overseas market.  
2.3.  The HKAEO Programme is in full compliance with the SAFE FoS and also meets the 
requirements set out in Article 7.7 of the Agreement on Trade Facilitation (TFA) of the World T rade 
Organization (WTO).  
Eligibility  
2.4.  All registered companies in HKC, who are involved in the international supply chain, such as 
manufacturers, importers, exporters, freight forwarders, warehouse operators, carriers, are eligible 
to apply for the HKAEO st atus. No accreditation fee will be charged.  
Accreditation Process  
2.5.  The accreditation process involves the following four stages:  
(a) Application : Applicants are required to furnish information on their company background, 
business activities, organization and m anagement structure, operation sites, supply chain G/TFA/W/8  
 
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  cargo flo ws, and operational procedures.  They are also required to conduct a 
self-assessment on their capability of attaining the required security standards in relevant 
business processes before submittin g the application.  
 
C&ED will assign a designated Account Manager to follow up on each AEO application and 
assist the company in enhancing its internal controls and sharing the best practices in supply 
chain security.  
 
(b) Validation : The Account Manager will lead an Accredita tion Team to assess the company' s 
level of compliance wi th the pre -determined criteria.  The assessment includes process 
reviews, document checks, personal interviews, and on -site validation to inspect the 
reliability and effectiveness of key security measures therein.  
 
(c) Approval : Each application and findings in the assessment will be examined by an 
Accreditation Panel for granting of the HKAEO status.  
 
(d) Post-accreditation Management : The Account Manager will maintain ongoing communication 
with the accredited HKAEO to foster a closer Customs -Business cooperation.  
 
The HKAEO Certific ation is valid for three years.  HKAEOs are required to renew the ir 
certification before expiry.  In the renewal exercise, the Account Manager and his/her team 
will revisit operation sites of the company and check if they are in continuous compliance 
with the cri teria.  
 
Accreditation Criteria  
2.6.  The HKAEO Programme maintains a  two-tier certification system.  Both tiers are in full 
compliance with the security and safety requiremen ts prescribed in the SAFE FoS. Companies can 
decide which tier of certification they wish  to apply, taking into account their business mo dels and 
operating environment.  Companies will be accredited with either one of the tiers, subject to the level 
of compliance to the pre -determined criteria set out below:  
 Tier-1 Tier-2 
General Criteria    
 Customs Compliance  ✓ ✓ 
 Maintenance of Commercial Records  ✓ ✓ 
 Financial Soundness  ✓ ✓ 
Security & Safety Criteria    
 Premises Security & Access Control  ✓ ✓ 
 Personnel Security  ✓ ✓ 
 Cargo Security  ✓ ✓ 
 Conveyance Security  ✓ ✓ 
 Business Partner Security  ✓ ✓ 
 Security Education & Training  ✓ ✓ 
 Information Exchange, Access & Confidentiality  ✓ ✓ 
 Crisis Management & Incident Recovery   ✓ 
 Measurement, Analysis & Improvement   ✓ 
 
2.7.  As shown in the above table, a Tier -2 certification requires the company to fulfil two additional 
criteria. While the benefits enjoyed by HKAEOs of both tiers are essentially the same, the company 
with a Tier -2 status will be able to strengthen its management processes on risk assessment, crisis 
management, and internal control through the accreditation process, thereby helping it to identify 
vulnerability in its business, get prepared for emergency situations, and keep impr oving its business 
operations.  G/TFA/W/8  
 
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  Benefits  
2.8.  Through Customs -to-Business partnership, the HKAEO Programme enhances both the 
efficiency of legitimate trade and the security of international supply chains. Companies which met 
the pre -determined criteria will be awarded the HKAEO Certificate in recognition of their trusted 
partner status with C&ED. As of August 2018, there are  47 HKAEOs in HKC and 85% of which 
obtained a Tier -2 certification.  
2.9.  Being accredited as HKAEO is a manifestation of outstanding performance of a company in 
upholding supply chain security. The accreditation qualification represents a reliable and trustwort hy 
international brand, as an increasing number of customers see this as an important factor in choosing 
their business partners. More importantly, HKAEOs can enjoy the following benefits:  
(a) Reduced Customs inspection and examinations1; 
 
(b) Prioritized Customs clearance and rapid release time;  
 
(c) Clearance of goods at designated AEO Priority Service Counters at entry points2; 
 
(d) Strengthened competitiveness and marketability;  
 
(e) Enhanced goodwill as a secure trader; and  
 
(f) Privileged benefits under Mutual Recognition Arrangement (MRA);  
 
In addition to the following benefits e njoyed by all traders given HKC' s free port status:  
 
(g) Low documentary and data requirements; and  
 
(h) Deferred payment of duties on dutiable commodities.  
 
2.10.   C&ED introduced a specially designed HKAEO logo  in January 2014. All HKAEOs are entitled 
to use the logo in their business, such as applying on companies’ website, companies' vehicles, 
premises and business cards etc.  
3  MUTUAL RECOGNITION A RRANGEMENT  
3.1.  The development of AEO progra mmes has become a global trend.  Currently, over 70 Customs 
world -wide, including most of HKC’s key trading partners, have launched their AEO programmes. 
Through MRAs, AEOs of one economy may enjoy Customs facilitation provide d by the others.  Such 
seamless movement of goods through out the supply chain eventually benefits trade amo ng all 
economies on the chain.  
3.2.  MRAs can also benefit the law enforcement agenc ies, in particular the Customs.  First, the 
accreditation of AEOs provides an additional  indicator for risk profiling. This impro ves the efficiency 
of Customs in the administration of goods and the ability in det ecting high -risk consignments. 
Second, the MRA network facilitates Customs in communication and information exchange on 
boundary controls and cargo clearance matters, which strengthens cooperative ties between 
Customs administrations.  
3.3.  As of August 2018, HKC has concluded nine MRAs with China, India, Korea, Singapore, 
Thailand, Malaysia, Japan, Australia and New Zealand.  
3.4.  To enable foreign AEOs to enjoy Customs facilitation dur ing their import clearance at HKC, 
C&ED has upgraded its cargo clearance systems by incorporating an automated matching function 
to identify foreign AEOs in the Customs clearance process automat ically. This further enhances the 
Customs facilitation enjoyed  by foreign AEOs.  
                                                
1 The inspection rate for AEO cargoes is generally reduced by 80% w hen comparing with that for non -AEO 
cargoes.  
2 C&ED set up designated "AEO Priority Service Counter" and "AEO Priority Parking Space"  at various 
control points. Customs officers will give priority on handling the AEOs’ consignments and this will shorten the 
time required for Customs clearance.  G/TFA/W/8  
 
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  4  CHALLENGES AND SUCCE SS CASE  
Challenges  
4.1.  The challenge of an AEO programme rests on its design which needs to cater for differen t 
stakeholders in the economy. In this connection, a clear understanding of the composition of the 
economy and characteristics of different stakeholders therein is of vital importance to  the success 
of AEO programme. For instance, SMEs in HKC account for over 98% of the business units, and the 
most of them are involved in the import/export t rade and wholesale indus tries. 
4.2.  To meet these challenges, C&ED ad opted the following strategies:  
(a) Pilot run : Prior to the full implementation of the HKAEO Programme, a pilot run was 
conducted in 2010 to help C&ED to examine the feasibility of the programme design and 
collect feedba ck from the industry.  
(b) A tailored fit programme for the business environment : C&ED introduced a two -tier 
certification system in the HKAEO Programme. Companies in particular SMEs may start with 
applying for the Tier -1 certification first by fulfilling the 1 0 security criteria, and joining the 
AEO programme at an early stage to en joy the facilitation measures. Companies in larger 
scale and with more complicated operations may apply for Tier -2 certification directly t o 
achieve the highest standard.  This arrang ement effectively attracts more companies 
including SME s to join the HKAEO Programme.  
(c) Education and promotion : C&ED has devoted multiple efforts in promoting AEO certification 
to eligible traders and providing advice and guidan ce to them in AEO application . 
(d) Capacity enhancement : Helping companies, in particular SMEs, to fulfil the required 
standards is crucial to the s uccess of the HKAEO Programme. C&ED designates Account 
Managers to assist companies in the AEO accreditation process. The Account Manager 
advises the company on enhancements to its internal control process in respect of its 
business model and operating environment and guide the company throughout the 
accreditation process.  
Success Case  
4.3.  A local manufacturer of cooking sauces successfully obtained the Tier -1 certification in 
November 2017.  The company was found in Hong Kong in 1938 and has been operating as a family 
business.  According to the company, the accreditation process has enhanced  its cargo securi ty and 
supply chain processes. The widely recognised AEO status does not only help strengthen its 
competitiveness, but al so its marketability overseas. The company is now enjoying a smooth and 
streamlined logistical process for its movemen t of goods along the supply chain, with reduced 
clearance time for its imports into HKC’s MRA partner economies.  
5  FUTURE DEVELOPMENT  
5.1.  The AEO programme under the SAFE FoS is an effective approach in implementing trade 
facilitation  measures required in the TF A. It does not only facilitate legitimate trade but also benefit 
law enforcement agencies in risk manageme nt and operation efficiencies. HKC will continue to take 
steps to encourage more companies to join the HKAEO Programme and develop MRAs with other 
Customs administrations with a view to providing HKAEOs with more clearance benefits at the 
international level and further expanding these trade facilitation benefits beyond Customs 
boundaries.  
6  REFERENCE  
6.1.  More details on the HKAEO Programme as well as its lat est development can be found at the 
C&ED webpage: https://www.customs.gov.hk/en/trade_facilitation/aeo/index.html . 
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