Introduction
Background
Benefits for traders
How can operators access benefits?
Comment


Introduction

On January 31 2013 the European Commission Directorate-General for Taxation and Customs Union and the US Customs and Border Protection (CBP) implemented their mutual recognition arrangement.(1) The arrangement between the European Union and the United States is designed to facilitate and secure trade flows between the two markets, as well as the global supply chain more generally, by linking their respective industry partnership programmes.(2)

Background

The entry into force of the EU-US agreement on May 4 2012 allows for streamlined procedures for economic operators which are recognised and validated by each other's trade partnership programme – that is, the EU Authorised Economic Operator (AEO) programme and the US Customs-Trade Partnership Against Terrorism (C-TPAT) programme. The May 4 agreement – a decision of the EU-US Joint Customs Cooperation Committee – recognised the two programmes and is designed to provide favourable treatment, such as lower costs and simple customs procedures, and ultimately to enhance predictability for business across the Atlantic.

The AEO and C-TPAT programmes serve similar purposes. They have been established to facilitate customs and other enforcement procedures to ensure that companies can trade internationally and through their global supply chains. The AEO programme has been in operation since January 1 2008. Companies with a record of customs compliance, good record keeping and conformity with financial and security standards can benefit from simplified customs rules and favourable compliance with security requirements across EU member states. Likewise, the C-TPAT was established in November 2001 by the CBP and its participant companies have grown in number from seven initial participants to over 9,000 economic operators. Participant benefits include reduced numbers and priority processing for CBP inspections and access to government training programmes. These two successful programmes have benefited many involved in international trade in the two respective markets. The mutual recognition arrangement is now set to grant such customs facilitation to approved participants in each other's programme. Essentially, the EU and US programmes will treat the operator-members of each programme in a comparable manner, to the furthest extent possible.

Benefits for traders

A January 31 2013 factsheet, jointly produced by the directorate general and CBP, provides an overview of:

  • how the mutual recognition arrangement functions;
  • the host of benefits that it provides; and
  • how the validated economic operators in either market may take advantage of the arrangement.

The arrangement is a risk-assessment tool that provides less redundancy and duplication by creating a common standard for trade facilitation. It will allow the directorate general and the CBP to focus limited budgetary and human resources on more pressing customs security matters. The mutual recognition arrangement will:

  • reduce the number of validations necessary;
  • speed up the validation process;
  • require fewer controls; and
  • increase efficiency, transparency and marketability.

How can operators access benefits?

To gain access to the benefits of the mutual recognition arrangement, the trusted users of both the EU and US customs programmes must ensure that their status is recognised by the counterpart programme. To benefit from customs facilitation in the United States, the EU operator must provide written consent to a member state's AEO point of contact to allow company information to be shared with the CBP. The arrangement applies to those operators holding security and safety certificates and customs simplifications and security and safety (full) certificates. AEO customs simplification certificate holders must obtain and comply with security and safety and full certificates certificate requirements to benefit. Equally, US operators must provide consent to the CBP to participate in the mutual recognition arrangement by following the procedures to consent electronically through the C-TPAT portal. In the United States, benefits such as reduction in risk scores accrue to Tier 2 and 3 operators but not to Tier 1 operators.

Comment

Ahead of the initiation by the European Union and United States of bilateral negotiations on a comprehensive free trade agreement, the mutual recognition arrangement will contribute to global economic integration between the two partners by facilitating trade across the Atlantic.

For further information on this topic please contact Charles Julien at King & Spalding LLP by telephone (+41 22 591 0800), fax (+41 22 591 0880) or email (cjulien@kslaw.com).

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