Authorized Traders

Definition/Scope

Authorized traders are defined, according to Transitional Standard 3.32 of the Revised Kyoto Convention (RKC), as persons (natural and legal) who meet criteria specified by the Customs, including having an appropriate record of compliance with Customs requirements and a satisfactory system for managing their commercial records. The status of “authorized trader” provides access to simplified procedures, where Customs reduces the level of controls and relies more on internal controls applied by the trader to ensure compliance with all relevant laws and regulations.
It is important to differentiate between Authorized traders as defined in the Revised Kyoto Convention and the Authorized Economic Operator (AEO) as defined by the WCO SAFE Framework of Standards. The focus with Authorized Traders is on trade compliance while AEOs also have to comply with a range of (mostly physical) security standards as laid out in the WCO SAFE Framework of Standards to ensure supply chain security. AEOs receive additional benefits from their voluntary participation in an AEO programme, such as reduced physical inspections, lower risk scoring and participation in mutual recognition programs. However, in order to obtain access to simplified procedures, traders do not have to become an AEO, but it is sufficient to comply with the requirements laid down for authorized traders. Customs can combine both programmes in order to ensure consistency and clarity in these programmes. For example, the AEO programme of the European Union consists of distinct AEO statuses : “AEO – Simplification” (corresponding to an “authorized trader” and provides access to simplified procedures), and “AEO – Simplification and Security” (in addition to simplified procedures provides better risk scoring, lower inspection rates and participation for example in the mutual recognition program of the EU with the United States).

Problem statement

If traders who regularly import or export cargo and who have a good compliance record and book-keeping system in place are treated in the same manner as traders who do not comply, they are penalized rather than rewarded for their compliance and corporate citizenship behaviour. This has a negative impact on the cost of trading as well as on the cost of administration, as Customs allocates too many resources to low-risk traders. Instead, such low-risk traders have to be offered special and simplified treatment as incentives for compliance.

Implementation guidance

Authorized trader programmes require a supporting environment that defines the conditions under which a company can qualify for authorized trader status and the privileges that are granted by the Customs administration. One such pre-condition is the existence and proper application of accounting standards (e.g. based on the International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board) based on which companies keep their records. In following such accounting standards, Customs will be in a position to introduce audit-based controls that are essential for any authorized trader programme. Customs will also require a risk management programme to be in place based on which the trustworthiness of traders can be weighted and a specific risk-scoring assigned. This risk scoring will assist in selectivity, for example, at import and for audit-based controls. Depending on the degree and maturity of implementation of accounting standards and audit-based controls, authorized trader regimes as defined in Transitional Standards 3.32 of the Revised Kyoto Convention can relate to:

• release of goods on the provision of minimum information,
• clearance of goods at the declarant’s premises,
• periodic declarations,
• trader self-assessment, or
• local clearance.

These simplified procedures are explained in great detail in the Guidelines to TS 3.32 of the RKC

Additional information (references, examples, etc.)

More practical and business-oriented information is contained in ICC Customs Guideline #19.