China’s AEO Joint Incentive ProgrammeBy Chen Jianping, Aeo Programme, General Administration Of China Customs
In October 2016, a pan-governmental initiative called the AEO Joint Incentive (AJI) Programme was launched in China. Under the new scheme, companies which have met pre-determined standards under the existing AEO programme and have been certified by China Customs as “Advanced Certified Enterprises” (ACE) will be entitled to enjoy as many as 49 facilitation measures provided by China Customs and other government departments. At present, there are about 3,000 ACEs, accounting for about 33.1% of national import and export volumes in China.
The AJI Programme involves some 40 government departments. These include border agencies such as Customs, quarantine, civil aviation and port authorities, and non-border agencies such as the National Development and Reform Commission (NDRC) and the Council for the Promotion of International Trade (CCPIT), as well as agencies in charge of taxation, finance, environmental protection, market supervision and banking supervision.
The AJI Programme comprises 49 facilitation measures, which can be divided into six major categories:
- Category 1 – “Green Lane” (includes measures for expedited licensing, registration, and release of goods: for example, the tax authority has set up a green channel for AEOs to expedite formalities such as duty declaration);
- Category 2 – “Less Inspection” (includes provisions to carry out fewer inspections at ports);
- Category 3 – “Priority Treatment” (includes measures giving priority to companies requiring intellectual property protection related services, such as patent application, trademark registration and litigation rights protection);
- Category 4 – “Simplified Procedure” (comprises measures reducing the number of documents required by participating agencies to the minimum);
- Category 5 – “Major Reference Benchmark ” (includes measures aimed at ensuring that the accredited AEO status of a company is taken into account when inspected by other participating AJI agencies);
- Category 6 – “Pilot Reform Project” (includes measures giving priority rights to AJI companies to participate in pilot projects implemented by Customs and other government departments).
Social Credit System
The AJI Programme is an important part of the Chinese government’s Social Credit System that is planned to be launched in 2020, and which aims at rating and ranking the behaviour of citizens and legal persons (which includes every company or other entity) in China as part of a wider vision to build a secure, compliant and credible society.
China’s State Council has established an inter-departmental joint conference mechanism to carry out research on crucial issues in constructing the Social Credit System, and to organize joint certification and monitoring programmes such as the AJI Programme. The mechanism includes almost all government departments. It is under this umbrella that the 40 government departments collectively designed the AJI Programme, specifying its main features and the benefits to be provided to participants.
Information-sharing and exchange
At the heart of the Social Credit System lies massive data collection on company activities by government agencies a nd aut horized rat ing entities. China Customs exchanges and shares information on AEOs with other government departments by connecting its AEO management system to a national platform for credit information-sharing established by the State Council as part of the System. China Customs sends real-time data on about 3,000 AEOs a day on average. Other government departments also share and exchange information on the platform, and this contributes to the elimination of credit information silos, while making supervision more intelligent and efficient.
“All the authorities conduct dynamic supervision and monitoring of AEOs to ensure that supply chain security rules are respected. Inspection results are shared, which decreases the duplication of supervision and saves administrative resources.”
Dynamic regulatory mechanism
All the authorities conduct dynamic supervision and monitoring of AEOs to ensure that supply chain security rules are respected. Inspection results are shared, which decreases the duplication of supervision and saves administrative resources. If an enterprise is found to have engaged in illegal or dishonest activities, or not to have respected its security and compliance obligations, the information is immediately sent to China Customs, which will suspend or revoke the AEO status of the enterprise.
The Social Credit System allows for close collaboration between agencies. The AJI Programme removes many of the administrative barriers which previously existed among China’s government departments, thereby creating a more unified approach.
Border authorities’ control is more harmonized. Based on the mutual recognition of different security and compliance programmes, such as mutual recognition of credit certificates, the AJI Programme reflects mutual trust among border authorities, and enables the different programmes and control measures to be coordinated, thereby making border clearance more streamlined and efficient.
As the AJI Programme is rather new, it is still being perfected. But companies are already getting benefits. For example, some have reduced transaction operating times and saved trading costs. The overall time for export tax rebates in the tax department has decreased from 15 days to five days, which cuts about 70% of the time for a tax refund. Moreover, because of enhanced credit ratings, an AEO’s proportion of direct financing based on the line of credit from banks increased from 60% in 2015 to 90% in 2017.
As more benefits are offered to Advanced Certified Enterprises, more and more companies are applying for AEO certification and strengthening their security standards and compliance management.