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AEO Overview

AEO Overview
AEO Authorization Consulting

What is
AEO?

AEO stands for ‘Authorized Economic Operator’, meaning a company that is recognized for its excellent import and export safety management.
Among those involved in trade, such as exporters, transporters, warehouses and customs companies, AEO is a company approved and authorized
by KCS for its excellence through review in compliance with regulations, internal control systems, financial solvency, and safety management.
In other words, customs authorities certify exporters and importers who are taking measures to enhance the safety and security of goods traded
between countries, through the establishment of an internal control system with good regulatory compliance.

AEO Authorization Criteria

Structure of the Authorization Criteria

The AEO authorization criteria consist of four areas:
legal compliance, internal control system, financial solvency and safety management.
The most critical and important criterion is the legal compliance and internal control system to enhance its legal compliance.

Among the four criteria, the standards of financial solvency, safety management and internal control system are essential and must be met basically.
In particular, the internal control system is evaluated separately for each applicant, and the result of the evaluation should be not less than 80 points.
For companies that meet the three criteria above, AEO certificate classes are determined by measuring the legal compliance points separately.
Companies with an assessment score of 80 or more points in legal compliance acquire "A“, companies with the assessment score of 90 or more
points get "AA" , and companies with the assessment score of 95 obtain "AAA“.

Criteria	Definition
Legal Compliance	Evaluation on the compliance level under import/export related laws such as Customs Act, Foreign Trade Act, Foreign Exchange Transaction Act, etc.
Financial Solvency	Evaluation on the financial solvency to enable the implementation of compliance with regulations (e.g. tax arrears, credit ratings, etc.)
Internal Control system	Evaluation on the inner-departmental communication and control system related to business activities, the flow of declaration-related documents, and accounting to maintain the adequacy of export and import declaration.
Safety Management	Evaluation on the safety of contractors, containers, access control, human resources, handling procedures, facilities, equipments, IT, education, training, etc.

Authorization Ratings

Criteria	Basic Requirements	Rating Criteria
A	① Satisfy financial Solvency ② Satisfy safety management ③ Score of 80 or more in internal control system	score of 80 or more in legal compliance
AA		score of 90 or more in legal compliance
AAA		among AA rated companies, the comprehensive audit shows that the company has: - a score of 95 or more in legal compliance - best practices

Benefits of AEO Authorization

01 Benefits in Customs Administration

Benefits in inspections such as downward adjustment of inspection rate or exemption from screening and inspection
Reduction of financial burden through monthly payment, omission of security, increase of credit security limit
Simplified procedures such as non-submission of price statement report, simplification of arrival notice, reduced rate of
document submission, etc.
Benefits of self-assessment, simplified bonded transportation, self-post management designation
Priority in customs procedures when an emergency related to import and export occurs
Other benefits in customs administration procedures established by the Commissioner of KCS

*In addition to the above benefits, additional benefits such as exemption from inspection for a certain
period of time are available.

02 Benefits through Mutual Recognition

When importing into AEO MRA counterpart countries, documents submission rate and inspection
rate will be reduced and swifter customs clearance will be possible

03 Benefits in Business

Maintain transactions with supply chain partners, particularly AEO authorized partners and create new clients Able to demand domestic trade partners of AEO authorized companies to strengthen safety management
Optimize the environment for new requirements of SCM at a corporate level through improvement of company's safety
management level
Certified by the KCS as the best reliable company Enhance business competitiveness

AEO Authorization Process

STEP 01

Submit Application

Internal preparation period
(3-4 months)
STEP 02

Document Evaluation

2 months
STEP 03

On-site Evaluation

2 months
STEP 04

Authorization
Decision
Deliberation
Committee
STEP 05

AEO Authorization

Ratings
(A~AA)

* Internal preparation – 7-8 months till close of audit * time schedule can vary due to applying companies’ status or KCS audit schedule

01 Document Evaluation

The applicant’s export & import management status whether it satisfies AEO criteria is evaluated
based on the documents submitted.

02 On-site Evaluation

Verify whether the submitted documents conform with the actual export & import management status
based on site examination.

03 Authorization Decision Deliberation Committee

After document evaluation and on-site evaluation, the results of the evaluation are submitted
to the decision deliberation committee to determine whether certifiable or not, and the ratings thereof.
The Authorization Decision Deliberation Committee evaluates on overall operation of AEO such as
1. 1. the Authorization of AEOs;
2. 2. adjustment of ratings of AEOs;
3. 3. assignment of authorized reserved companies;
4. 4. cancellation of AEOs.

04 What are AEO Ratings?

For AEO ratings, both legal compliance score and internal control system score should be 80 or more, and
financial solvency and safety management criteria should be met.
A ratings : score of 80 or more in legal compliance

AA ratings : score of 90 or more in legal compliance

AAA ratings : among AA rated companies, the comprehensive audit shows that the company has:
- a score of 95 or more in legal compliance
- best practices

AEO Authorization Evaluation Criteria

Formal Requirements		Actual Requirements
Legal Compliance	Financial Solvency	Internal Control System	Safety Management
(1)Compliance on Customs Act and related Law (2)Adequacy of System Analysis Result of Total Legal Compliance	(1)Corporate Scale (2)Adequacy of Financial Solvency	(1) Documentation and implementation system for legal compliance and safety management (2)Regular inspection and modification/correction (3)Internal/external audit and modification/correction	(1)Contractor management (2)Containers and trailers management (3)Physical access control (4)Human Resource management (5)Handling procedure management (6)Facility and equipment management (7)Information Technology management (8)Education and Trainings
80 or more	-	80 or more	70 or more

Formal Requirements

Area	Criterion	Details
Legal Compliance	(1)Compliance on Customs Act and related Law (2)Adequacy of System Analysis Result of Total Legal Compliance	No ground for disqualification in the legal aspects of the applicant and the applying company (limited to the customs statutes and applicable laws) The assessment score measured by integrated compliance system or on-site inspection is 80 or more points
Financial Solvency	(1)Corporate Scale (2)Adequacy of Financial Solvency ①Complete payment of National Tax and Local Tax ②Financial sustainability to enable sincere observance with law	Company Scale : More than 50 acceptances of import / export declaration annually in the last 3 years Financial Solvency ① Sincere National Tax and Local Tax Payment ② ‘Fair’ opinion from the accounting audit for the recent 2 years *For companies subject to the Act on External Audit of Stock Companies, one or more of the followings should satisfy 1.Debt-to-equity ratio less than 200% of the average debt-to-equity ratio of companies in identical industry 2.The credit rating level is above investment grade (within 12 months as of the application date) 3.Annual average sales growth of more than 10% over the last three years (based on amount)

Actual Requirements

Area	Criterion	Details
Internal Control System	(1)Preparing documentation and implementation system for Compliance and safety management (2)Regular inspection and modification/correction (3)Internal/external audits and modification/correction	(1)Promoting AEO and securing personnel & professionalism ①Establishing and sharing management policies (CEO) ②Organizing TF team and securing workforce 1. Overall Director(Executive level) 2. Director of import and export management (3 years) 3. The person in charge of business affairs (Manager / assistant manager of a department ) ③Securing professionalism 1. Recruit certified employees (certified customs broker, Bonded goods caretaker, Country of origin labelling officer, etc) 2. Employ experienced workers(5years) 3. Provide a training for compliance and safety management 4. Document all the procedures on customs legality and import /export management etc and keep them up-to-date
		(2)Compose a council with the internal, import and export supply chain and the KCS ①Share information between export and import departments 1. Documented export and import procedures such as a manual 2. Share of the legal registers 3. Share AEO related information ②Active participation in customs administration development program 1. A winning or a commendation 2. Committee member activities 3. Customs related activities ③A regular discussion with the export and import supply chain (6 months)
		(3)Internal Inspection ①Activation of an ethical management policy & (e.g. an internal accusation system) illegal behavior prevention program ②Risk evaluation 1. Identification of risk factors 2. Evaluation of the risk factors 3. A management solution for the risk evaluation results 4. Evaluation and amendment of the management solution ③Internal Control Activity 1. All control activity for legal compliance and safety management
		(4)Establishment of history management system and operation system and external audit ①Establishing information management system for the estimation of required amount and origin determination 1. Related system and detailed statement 2. History management of related information such as price, quantity, trading partners, purchase route for goods purchased in and out of the country ②Information system of the movement of the imported & exported goods and related payment and receipt history 1. Related system and detailed statement 2. Identification of the information history (imported and exported goods, payments, customs refund related materials)
Safety Management	(1)Contractor management (2)Containers and trailers management (3)Physical access control (4)Human Resource management (5)Handling procedure management (6)Facility and equipment management (7)Iformation Technology management (8)Education and Trainings	(1)Safety management in delivery phase of goods Management of all stages; contract - manufacturing - storage, transportation, customs clearance, loading/unloading (Cargo) – departure (2)Safety management in receiving phase of goods Management of all stages: arrival – unloading/loading (Cargo) - storage, transportation – warehousing (3)Safety management for import and export business EDI system activation, security and verification, product history management and human system management, management of cooperation situation between business partners

AEO Post Management Consulting

Self- Assessment	Since the company has been designated as AEO company with AEO authorization, the company will go through an annual self-assessment. This self-assessment is done through submitted documents and it aims to check if the AEO company’s export and import management status is operated and managed properly in accordance with AEO criteria.
Comprehensive Audit	This audit is conducted against AEO companies to ascertain the fulfillment of AEO authorization criteria, and especially as for importing/exporting companies, the areas include the legality of customs clearance.