SIMON WHITAKERCOMMERCIAL HEAD OF SALES UK, IE & INTERNATIONAL MARKETS

Mobile : +44 7912 295702

Email :swhitaker@premierfarnell.com

ABOUT PREMIER FARNELL

Key Facts:

•FTSE 250 listed company

•£968Million revenue with operating profit of £93Million

•Operations in 35 different countries on all major continents

•Supplying over 150 global industry types

•Over 2 million customer contacts

•70% trade with us via on-line solutions

•4,400+ employees

•500,000+ electrical and electronic products stocked

•Same day despatch

•Global leader in legislation RoHS, WEEE, REACH

•Main European distribution based in Leeds, UK (1 of 11 globally)

A Premier Farnell Company

Authorised Economic Operator (AEO)An introduction to AEO

AEO – What is it?

• Authorised Economic Operator (AEO) is aimed at providing safety and

security into the Supply Chain.

• To become an AEO, Customs assess a wide range of company activities

(e.g. Finance, Site Security, Compliance, Goods In, Picking, Shipping

etc.)

• The main aim of AEO is to stop items that could be used for terrorism

getting into the supply chain. Conventional security controls focus on

stopping unauthorised goods leaving warehouses.

• AEO is linked to the Known Shipper programme that concentrates on Air

Safety to stop bombs etc being introduced into air cargo.

The Vision for AEO

• The European Union aim to get the majority of organisations who export

outside of the EU to sign up AEO.

• AEO is linked to a World Customs initiative to create chains of safe and

secure organisations around the world.

• The vision is to create world wide chains of Manufacturers, Distributors

and Shippers, where goods can be safely sent from a supplier in one

country to a customer in another.

AEO – What progress is being made across Europe?

• The AEO standard was introduced in 2008 and by October 2009, 1600 EU

companies have been accredited. The majority of these are Freight

Forwarders and Shippers.

• In the UK, 107 companies were AEO accredited and around 200 had

applied by October 2009.

• Customs takes about 3 months to complete the assessment, which will

include a site visit.

• Premier Farnell (UK) Ltd has made a full assessment of our strengths and

weaknesses against the AEO criteria prior to applying.

AEO – What difference will it make to us

• Customs benefits – As an AEO, we can expect our shipments to be

subject to less scrutiny and we will have to provide less data to Customs

on our shipments.

• Trust Agenda – Being a safe and secure operator will add to the trust we

earn with customers and suppliers.

• Future benefits are likely to accrue from changes to related EU legislation

that favour AEO’s.

AEO – What changes will there be in how we work?

• Some operational changes for AEO

– Wearing Badges

– Challenging anyone you don’t know

– More checks at the gatehouse

– Rejecting Suppliers who turn up unannounced

– Checks on infrequent despatch carriers

– Incident reporting on anything unusual

STATE OF THE NATION

• What’s in it for YOU?

• Substantial amount of business process / work

instruction development

• Benefits for IPR/OPR

• Goods stopped even with AEO approval

• Alternatives?

• Known Consignor Scheme

• Many of the same benefits as AEO

• Pre-requisites

• HR – Recruitment processes

• All staff through aviation training

• Controlled access to production areas

• Minimal cost (£200)

• 6 week application process

SIMON WHITAKERCOMMERCIAL HEAD OF SALES UK, IE & INTERNATIONAL MARKETS

Mobile : +44 7912 295702

Email :swhitaker@premierfarnell.com

Union Customs Code

AEO and it’s impact

A Presentation by Keith Robe

International Trade Development Liaison Officer (ITDLO) HM

Revenue & Customs

Protective marking – Unclassified

Authorised Economic Operator

AEO is EU’s response to WCO SAFE Framework

global standards for Security and Safety in the International Trade Supply Chain.

Protective marking – Unclassified

Authorised Economic Operator (AEO)

AEO is increasingly being seen as the standard operating

criteria for all customs operators and its criteria reaches

across the UCC

• It’s aimed at compliant and trustworthy businesses only…who we regard as low risk customers

• AEO is not a regime, it’s a status

• It’s an internationally recognised quality mark which indicates that a business operates within a secure supply chain and their internal controls and procedures are efficient and compliant

Protective marking – Unclassified

AEO – who can apply?

• Anyone involved in the international supply chain & carrying out customs related activities in the EC

• Includes logistics operators, carriers, freight forwarders and customs agents

• Normally must be EU established but

• Airlines/Shipping Companies not established in the EC may apply.

Protective marking – Unclassified

Applicants Responsibilities

• The applicant should ensure that they meet the criteria prior to applying for AEO.

• They should ensure that adequate resources are available to facilitate the audit process.

• Once a certificate is issued, they are responsible for informing HMRC of all factors arising that may influence it’s continuation.

Protective marking – Unclassified

Compliance…

we need to consider…

compliance over the past 3 years…

• any non-compliance is viewed in context

• size and complexity of the business

• type of irregularity

• serious or repeated infringements

• remedial actions taken

Protective marking – Unclassified

Records…

we need to check…

systems of managing records are satisfactory…

• systems facilitate audit-based customs controls

• can distinguish customs status of goods

• size and complexity of business taken into account

• internal controls in place

• process for reporting irregular or illegal transactions

Protective marking – Unclassified

Financial solvency…

we need to check…

a good financial standing sufficient to fulfil commitments…

• not been subject to insolvency proceedings

• financial history for past 3 years is good

• sufficient financial resources to meet liabilities

• has no negative assets except where it can be proved they can be covered

Protective marking – Unclassified

Security & Safety…

we need to check…

appropriate security and safety standards are met…

• focus on the integrity of the sites and building/s

• their access controls

• measures for handling goods, information and documentation

• their business partners

• screening of prospective employees

• security training and awareness

Protective marking – Unclassified

• Initially limited to streamlining authorisation process for simplifications etc.

• Enhanced reputation & image

The Union Customs Code (UCC)

Regulation (EU) 952/2013 30th October 2013

Trade benefits of AEO Customs Simplifications

Protective marking – Unclassified

Trade benefits of an AEO certificate

Benefits AEOC AEOS AEOF

a) Fewer physical and document-based

controls

���� ���� ����

b) Priority treatment of consignments if

selected for control

���� ���� ����

c) Choice of the place of controls ���� ���� ����

d) Easier admittance to customs

simplifications

���� ����

e) Reduced data set for summary

declarations

���� ����

f) Prior notification ���� ����

g) Mutual recognition ���� ����

Protective marking – Unclassified

Other benefits

• logistical systems - identify efficiency savings from review of procedures

• Recognised as secure and Improved corporate governance – development of

audit culture

• Improved management of business partners

• A more cohesive relationship forged with Customs

Protective marking – Unclassified

AEO – so what’s changing?

• Two types outlined in UCC:

• AEO standards linked throughout the UCC

• New criteria for practical standards of competence or

professional qualifications

• Provides many benefits including financial

• Scope expands to include taxation rules

Customs

Simplifications

Security &

Safety

Protective marking – Unclassified Union Customs Code | 05/08/2015 | 28

AEO interaction across UCC

Union Customs Code

• Duty deferment

guarantee reduction

• Movements within a

TS authorisation

between different MS

• Centralised

Clearance

• Self Assessment

• EIDR – presentation

waiver

AEO(c)

Mandatory

• Comprehensive guarantee

• Guarantee

reductions/waivers

• Simplified Customs

Declarations

• Entry in declarant’s

records

• Valuation simplifications

• Regular shipping services

• Temporary storage

• Authorised weigher

• Transit simplifications

• Special procedures

Certain AEO(c)

criteria must

be met

AEO(c)

MandatoryCertain AEO(c)

criteria must

be met

Protective marking – Unclassified

AEO update

UK –

628 applications received

Certificates issued = 373

• AEO(F) = 305

• AEO(C) = 57

• AEO(S) = 11

EU – (includes UK figs)

17,707 Applications received

Certificates issued = 13910

• Germany 6325

• Netherlands 1448

• France 1179

• Italy 916

• Poland 746

• Spain 629

• Sweden 321*Figures correct at May 2015

AEO database available on Europa website at

www.ec.europa.eu/taxation_customs/dds/cgi-

bin/aeoaeoquery?Lang=EN

Thank you

Keith Robe

International Trade Development Liaison Officer

BP4002

Chillingham House

Benton Park View

Newcastle Upon Tyne

NE98 1ZZ

Tel: 03000 556 961

Mob: 07899 061 748

keith.robe@hmrc.gsi.gov.uk

AEO – Trade Compliance

July 30 2015

Authorized Economic Operator (AEO)

� AEO legislation – Voluntary – 2007 / 2008

� In simple terms required that:

� Traders evidenced compliance with existing EU Customs legislation, and� Across their supply chains� Generally through written procedures addressing specific questions� Evidencing compliance with mandatory, existing EU Customs (security export control)

legislation� Customs Assumption – Traders already complying with existing laws

� Is this fully documented ?� Raised the standard for demonstrable compliance (and real compliance practice)� Customs auditing / verification is simpler

� Union Customs Code (1st May, 2016):

� Numerous changes� AEO – Mandatory guarantee requirement for all non AEO traders wishing to use

customs processes such as PCC, IPR, Customs Warehousing, End Use, etc.– Guarantee level for non AEO’s equal to what would normally be saved...– AEO – partial exemption / exempt...

� Professional Standards for employees� All business taxation review – not just EU Customs

32

Driving Behaviour...� HMRC approvals/renewals of saving programs delayed – examples have seen up to 6

months and increasing

� Anticipate initial submission returned – time period starts again / plan...

� Gain AEO and fail audit – non – compliant – can’t re-apply for 3 yrs

� HMRC expect AEO (c) Standard now – not when UCC is law in May 2016

� Client realization of fiscal implications and potential for delay

� AEO still about benefits – Think about continued improvement & management. Control of audits.

� Client recognition of level of complexity in customs, security, export control legislation and requirement for experienced personnel / professional competency

� Part of UCC

� Client sourcing supply chain partners that can provide:� AEO status

� AEO support for Client to achieve

� Professional competency in the subject matter

� Commitment to engage

� Consistency in supply chain / long term support / maintain AEO credibility for HMRC33

Kuehne + Nagel – Confidential Page 34

Functional Roles and Trade Compliance

35Functional Roles and Trade Compliance

Awareness Subject Areas� Trade Compliance Requirements in Functional Roles

� Functions – All

� Incoterms

� Functions – Engineering, Product Mgrs, Purchasing, Sales, Contracts, Operations, Supply Chain, Logistics, Legal

� Import / Export Classification

� Functions – Engineering, Product Mgrs, Purchasing, Sales, Contracts, Operations, Supply Chain, Logistics,

� Customs Valuation

� Functions – Purchasing, Contracts, Operations, Supply Chain, Logistics

� Country of Origin and Origin Marking for Customs

� Functions – Engineering, Product Mgrs, Purchasing, Sales, Contracts, Operations, Supply Chain, Logistics,

� End-Use & End-User Identification

� Functions – Purchasing, Sakes, Contracts, Operations, Legal

� Restricted Party Screening

� Functions – Purchasing, Sales, Contracts, Operations, Supply Chain, Logistics, Finance, HR, Legal

� Sanctions & Embargoes

� Functions – All

� Restrictive Trade Practices or Boycotts

� Functions – Purchasing, Sales, Contracts, Operations, Supply Chain, Logistics, Finance, Legal

� International Trade Transaction Recordkeeping

� Functions – Purchasing, Sales, Contracts, Operations, Supply Chain, Logistics, Finance, Legal

36

International Trade Compliance – Suite of Services

� KN Healthcheck

� An in-depth review of the client’s activity focusing on

processes and compliance , to mitigate risk

� From discussions in-house with the client key stakeholders

the KN Healthcheck delivers an expansive report for action.

� The report sets out a timetable with timelines that allows

the client to demonstrate progress.

� The KN Healthcheck provides KN support where our

services can provide further assistance, such as training,

process delivery.

� Provides full business compliance awareness

� Classification of Items � Required to determine admissibility, duty rate, preference

program eligibility and licensing requirements

� Import items must be classified according to the Harmonized

Tariff System (HTS or HS)

� Export classification applies in numerous jurisdictions to

military and dual use items

� KN Footprint � A single slide view of the client’s compliance world.

� Based on client information

� Recognises risk and how to control & improve.

� Can be provided for multi site clients

� Offers evidence of how a client plans to develop markets &

opportunity within compliant processes

� Market Entry Information.

� Designed to provide market information at the earliest point to

ensure smooth progress in transit

� Ensures duties, taxes and documentation requirements are

known in advance

� Action plan to meet local challenges avoid delay & cost

� AEO Gap Analysis

� Supports clients with Customs processing benefits (Duty & tax

relief)

� Provides detailed report on HMRC AEO self assessment

questionnaire with gap analysis risk assessed feedback

� Offers support through the accreditation process

� Customs Processing Application Support

� KN will provide help & support to ensure application for Customs

processing reliefs is completed in line with timelines.

� Training

� Provision of training support on all compliance aspects

� KN Processes

� The ability to provide proven business processes to help

manage the client’s business.

• KN Retention

� KN is able to provide a hot-line support service for clients who

need professional assistance on transactions & regulations

37Trade Compliance

AEO – Trade ComplianceThank you.

July 2015