Module 2 Hong Kong Authorized Economic Operator Programme

Upon globalization, the development of economy all over the world relies heavily on interregional trades, and the security of the international supply chain has ever become more crucial. As such, the World Customs Organization (WCO) introduced the SAFE Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework). The SAFE Framework sets guidelines for international supply chain security standards, as well as advocates Customs Authorities to provide clearance benefits for accredited companies. Not only improves the security of international supply chain, it also facilitates legitimate trade. With reference to the SAFE Framework, Customs and Excise Department (C&ED) rolled out the Hong Kong Authorized Economic Operator (HKAEO) Programme in 2012 to accredit local companies.

The unique business environment in Hong Kong consists not only of major multinational corporations, but also a large number of small and medium-sized enterprises. Having regard to the needs of the local business environment, C&ED divided the HKAEO status into two tiers, requiring the compliance of 10 and 12 pre-determined criteria respectively. This aims to grant companies with security measures fulfilled the requirements of the Programme Tier 1 HKAEO status initially, and assist them in enhancing their internal risk management, crisis management and incident recovery abilities to achieve Tier 2 standard.

The Programme is opened to all local companies engaging in the international supply chain activities, such as manufacturers, importers, cargo terminal operators, freight forwarders, warehouse operators, exporters, carriers, etc.

Companies must first submit basic documents to C&ED for initial evaluation, such as an introduction of the company, a completed self-assessment questionnaire with relevant supporting documents, site plans of the premises, a list of business partners, process maps of major cargo flows, etc.

Subsequently, Customs officers will conduct visits to the company to learn about the operations and verify the accuracy of the information submitted in the application, such as the actual implementation of security measures, whether employees are knowledgeable about the company’s security policies, if the records are intact and properly stored, etc.

Accredited companies will be granted HKAEO certificates and immediately enjoy multiple trade facilitations and advantages, such as less Customs inspection, prioritized Customs clearance, enhanced goodwill as a secure trader with industry “kitemark” strengthening competitiveness and marketability, reduced stock loss, theft and pilferage and privileged benefits under Mutual Recognition Arrangements (MRAs).

The different management systems laid out in the HKAEO accreditation criteria could be viewed as a security management cycle. Firstly, companies must identify different kinds of potential security flaws or areas not yet meeting the HKAEO requirements and plan appropriate remedial measures. Secondly, companies have to implement these measures and improve their internal management through setting up relevant security policies and guidelines, modifying work flows, updating security or information systems, creating inspection mechanism, having regular employee training, etc. Thirdly, companies shall monitor the security standards of their daily operations and the effectiveness of the improvement measures implemented by continuously performing internal audits, work-site visits, random record checks, etc.

At last, companies shall identify potential security flaws through routine reviewing of incident reports or internal audit reports and restart the security management cycle. This assures the management systems are updated in a timely manner and can cope with the ever-changing business environment sufficiently and effectively.