Tax & Accounting Blog

Singapore Authorized Economic Operator (AEO)

Blog, Global Trade October 30, 2015

Secure Trade Partnership (STP)

Singapore Authorized Economic Operator (AEO) was launched on 25 May 2007. The Secure Trade Partnership (STP) is a voluntary certification program administrated by Singapore Customs.[1] This program encourages companies to adopt robust security measures in their trading operations, contributing to the improvement in security of their global supply chain.

The need for an AEO program and the Evolving Role of Customs

Given Singapore’s strategic location and its excellent connectivity to major air and seaports, the country has transformed into a major trading port. With the introduction of complex supply chains as well as the newly agreed Trans-Pacific Partnership (TPP)[2], there is anticipation that there will be increased trade traffic along with increased vulnerability in the supply chain, ultimately requiring companies to implement a robust AEO program.[3]

Addressing these issues, Singapore Customs came up with a number of plans such as the enhancement of the transshipment and transit controls for the strategic goods control program.[4] This initiative increased collaboration between national agencies and international agencies on information sharing to profile container risk.[5]

Apart from enhancement of the transshipment and transit controls, Singapore has also implanted technologies such as a Flow-Through Container Gate system, a GPS-based Truck dispatching system and Container scanning (X-ray) machines in the ports.

The former Director General of Singapore Customs – Mr. Fong Yong Kian highlighted in his opening address at the PwC Customs and Trade Conference how the role of customs administrations has evolved in an increasingly complex trading environment. While they continue to focus on revenue protection and collection of fees, some agencies have shifted their priorities to include security and border protection. Singapore Customs, however, aims to balance multiple objectives including security, compliance and facilitation.[6]

Objectives of STP

The objectives of the STP include[7]:

  1. Profile Singapore as a secure trading hub
  2. Help Singapore companies gain in competitive advantage
  3. Enhance security of global supply chains and prevent disruptions to the flow of goods
  4. Create awareness on the importance of adopting a total supply chain approach

Secure Trade Partnership Plus (STP–Plus)

The STP-Plus is a higher tier status introduced by Singapore Customs whereby companies must meet all minimum criteria. The list of minimum criteria can be found inside the Handbook on STP (http://www.customs.gov.sg/NR/rdonlyres/97C1A7A5-00EC-43B4-80B8-DA36D3AA50C9/0/HB2STPhandbook.pdf. [8]

One of the reasons for the need for the STP-Plus is because Singapore Customs is in the process of discussing mutual recognition of programs with other customs administrations and some of these programs require meeting minimum criteria[9].

Countries with Mutual Recognition

The countries that have Mutual Recognition (MR) with Singapore Customs include[10]:

  • Jun 2010: Canada
  • Jun 2010: Republic of Korea
  • Jun 2011: Japan
  • Jun 2012: People’s Republic of China
  • Jul 2013: Taiwan
  • Jun 2014: Hong Kong
  • Dec 2014: United States of America

TradeFIRST

Companies that wish to apply for STP or STP-Plus would have to first undergo the TradeFIRST Self-Assessment Checklist. TradeFIRST is a one-stop assessment framework that makes trade easy, fair and secure. TradeFIRST supports Singapore Customs’ (SC) trade facilitation and compliance efforts by enabling SC to assess a company holistically, based on a single set of assessment criteria in the self-assessment checklist which are applied across all Singapore Customs special programs.[11]

Companies would be rated into one of the five categories under TradeFIRST, which determines all the programs and facilitation that they would enjoy, provided certain essential criteria for specific facilitation are met. A list of the companies with TradeFIRST premium branding can be located at:[12] http://www.customs.gov.sg/leftNav/trad/TradeFirst/Our+Premium+Partners.html

TradeFIRST Self-Assessment Checklist

The TradeFirst Self-Assessment Checklist is made up of the following components[13]:

  1. Company Profile
  2. Inventory Management and Controls
  3. Procedures and Processes
  4. Security
  5. Strategic Goods Control

The completed TradeFIRST Self-Assessment checklist has to be submitted to Singapore Customs along with supporting documents. After the submissions of the relevant supporting documents, Singapore Customs will conduct an on-site validation to assess the company’s application and eligibility.[14]

Benefits of the STP / STP (Plus)

Companies certified under the STP program will be recognized as trusted partners of Singapore Customs and enjoy the following benefits[15]:

  • Cargo less likely to be inspected;
  • Recognition as a low risk company i.e. enhanced branding;
  • Reduced inspection or expedited clearance should certified status be also recognized by overseas countries through Mutual Recognition Arrangement (MRA)
  • Designated account managers;
  • Other trade benefits such as Bank Guarantee reduction;
  • STP companies will automatically be recognized as a known consignor (KC) under the Regulated Air Cargo Agent Regime (RCAR) another Special programs regulated by the Singapore Police Force

Conclusion

In today’s globalized world, supply chains can be complex involving many different parties. These supply chains are vulnerable to theft, pilferage and in the worst case scenario, exploitation by terrorists to further their own ends. [16]

To prevent these types of exploitations, the world’s supply chains need to be secured and the entire length of a company’s supply chain can only be achieved by looking at supply chains as a whole and not just by focusing on the individual nodes and links. As the saying goes – “A chain is only as strong as its weakest link”[17]

To learn more about TPP, visit our Trans-Pacific Partnership Agreement page.

Sources

[1] Secure Trade Partnership – http://www.customs.gov.sg/leftNav/trad/Supply+Chain+Security.html

[2] Historic Pacific Trade deal faces skeptics in Congress – http://www.reuters.com/article/2015/10/05/us-trade-tpp-idUSKCN0RZ0ZV20151005

[3] Understanding Secure Trade Partnership – http://www.iesingapore.gov.sg/~/media/IE%20Singapore/Files/Events/iAdvisory%20Series/China%202013/520Understanding20Secure20Trade20Partnership20STP20and20its20benefits20for20Singapore20exportersSG20Customs.pdf

[4] FAQ on the Enhanced Transshipment and Transit controls – http://www.customs.gov.sg/NR/rdonlyres/PDF/FAQs%20on%20enhanced%20transhipment%20and%20transit%20controls%20(final).pdf

[5] Container Security and Singapore’s Role as a Hub – http://www.tliap.nus.edu.sg/tliap/Media_Events/E04Sep2002/Presentation%20-%20CE%20NUS.pdf

[6] Evolving Customs Role – http://www.customs.gov.sg/insync/Issue25/article6.html

[7] Objective of STP – http://www.customs.gov.sg/leftNav/trad/Supply+Chain+Security.html

[8] STP Handbook – http://www.customs.gov.sg/NR/rdonlyres/97C1A7A5-00EC-43B4-80B8-DA36D3AA50C9/0/HB2STPhandbook.pdf

[9] STP – Plus: http://www.customs.gov.sg/leftNav/trad/sup/STP-Plus.html

[10] Mutual Recognition – http://www.customs.gov.sg/leftNav/trad/sup/Mutual+Recognition.html

[11] TradeFIRST – http://www.customs.gov.sg/leftNav/trad/TradeFirst/TradeFIRST.html

[12] Companies with TradeFIRST Premium branding – http://www.customs.gov.sg/leftNav/trad/TradeFirst/Our+Premium+Partners.html

[13] TradeFIRST Self-Assessment Checklist – http://www.customs.gov.sg/NR/rdonlyres/XLS/TradeFIRST%20Self-Assesment%20Checklist.xls

 

[14] Application for STP – http://www.customs.gov.sg/leftNav/trad/sup/Application+for+Secure+Trade+Partnership+(STP).html

[15] Benefits of AEO – http://www.customs.gov.sg/leftNav/trad/sup/Benefits.html

[16] Supply Chain Security – http://www.customs.gov.sg/leftNav/trad/sup/Supply+Chain+Security.html

[17] Supply Chain Security – http://www.customs.gov.sg/leftNav/trad/sup/Supply+Chain+Security.html