Japan’s AEO Program May ， 2008 Shinji TANIGUCHI Director, Japan Customs

Role of the Customs and Tariff Bureau (CTB) - Planning the policies of customs and tariff (including preparing national legislation) - Administering the operation of 9 Customs (HQ of Japan Customs) ・ 118 Customs Ports ・ 27 Customs Airports Covered by 9 Regional Customs Houses ・ 210 Customs offices （ Branches, Sub-branches, Guard posts ） ・ 8,620 Customs officials CTB and 9 Customs Hakodate Okinawa Regional Tokyo Yokohama Nagoya Osaka Kobe Moji Nagasaki CTB, MOF Outline of Japan Customs Japan Customs: Outline - １ -

Japan Customs: Japan Customs: Three Missions of Japan Customs Collecting customs duties and domestic consumption taxes appropriately and fairly To Collect customs duties and domestic consumption taxes appropriately and fairly as a revenue agency that collects about \5,400,000 million representing about 10% of the total national tax revenue Further facilitating trade procedures To further facilitate customs procedures while ensuring security in international distribution. Realizing a safe and secure society To build a “ Japan that is the safest country in the world ” setting blocking of smuggling of guns, illegal drugs and other goods harmful to the society as the most important task and by preventing terrorist acts in Japan Trade FacilitationFiscal RoleSecurity and Safety AEO Program - ２ -

Security Measures and AEO Programs - ３ -

Reform on AEO programs for importers/exporters ・ Consistency with WCO guidelines ・ Increased benefits for traders Introduction of AEO program for warehouse operators Customs － Businesses Partnership Fundamental Reform Establishment of AEO Programs Promote mutual recognition with major trading partners with equivalent AEO programs International Partnership Promote participation in AEO programs － more than 50% of exports in value be conducted by authorized exporters by end CY 2008 Customs - Business Partnership Further Development Establishment of Japan’s AEO Program (Apr. 2007) - ４ -

Importers and Exporters Transportation company Forwarders Warehouse Operators Customs Brokers Shipping Company and Airline Importers and Exporters abroad International Logistic Operators Expansion of Scope of AEO Program 〔 Before 〕 〔 From April, 2008 〕 Importers and Exporters Transportation company Forwarders Warehouse Operators Customs Brokers Shipping Company and Airline International Logistic Operators Importers and Exporters abroad - ５ -

(Consistent with WCO SAFE) (Consistent with WCO SAFE) ○ Compliance Record ○ e-system for Customs Procedures ○ Compliance Program ・ Organizational Set-up ・ Contracting Parties Requirement ・ Cargo/Conveyance/Premises Security ・ Consultation, Co-operation and Communication with Customs and Other Relevant Authorities ・ Crisis Management ・ Education/Training ・ Internal Audit for Measurement, Analyses and Improvement ○ Financial Integrity Authorized Importers - Compliance-reflected reduced examination and inspection - Pre-arrival lodgement of import declaration and permission - Release of cargo before duty/tax payment declaration and duty/tax payment - Periodical lodgement of duty/tax payment declaration Authorized Exporters - Waive the requirement to deposit cargoes into the Customs area - Compliance-reflected reduced examination and inspection Authorized Warehouse Operator - Establishment of a new Customs warehouse only by notification - Comprehensive permit is provided to each Operator - Compliance reflected reduced audit - Free monthly fee Japan ’ s AEO Program: Requirements & BenefitsRequirements Authorized Customs Brokers - Release of cargoes before duty/tax payment and its declaration in case an import declaration is conducted by an ACB - Lodgment of export declaration at the exporter ’ s premises and other facilities in case an ACB and an Authorized Logistics Operator control cargoes of their client exporter Authorized Logistics Operators (Carriers/Forwarders) - Waive the requirement to get permission for Customs transit from Customs Benefits - ６ -

Requirements Compliance records ⇒ Proper records of Compliance. No Commitment over a designated period to any violation against Customs related laws and regulations. ⇒ Business experiences no less than 3 years (International logistics operators) e-system for Customs Procedures ⇒ Eligibility for usage of e-system for Customs Procedures. Financial Integrity Compliance Program ⇒ Organizational Set Up Contracting Parties Requirement Cargo/Conveyance/Premises Security Due Customs Procedures Consultation, Cooperation and Communication with Customs and Other Relevant Authorities Crisis Management Education/Training Internal Audit - ７ -

Requirements : Internal Compliance Program for Customs Requirements Organizational Set-Up ⇒ Establishment of center office to manage CP and CP units in each department. ⇒ Ensuring the proper operation at each department. Contracting (Business) Parties Requirement ⇒ Ensuring the adequacy of business partners in relation to the performance of the CP including security aspects. ⇒ Establishment of a framework to ensure proper operations by business partners. Cargo/Conveyance/Premises Security (in the case of Importers / Exporters) ⇒ Appropriate management of the cargoes. ⇒ Establishment of a framework to check the route and the mode of transportation, as well as to properly track the movement of the cargoes. ⇒ Locking devices, barrier, fencing and lighting, including setup of video surveillance cameras, and periodic patrolling. ⇒ Checking of traffic both persons and vehicles Due Customs Procedures ⇒ A list of cargoes (including descriptions, marks, tariff classification, tariff rate, application of trade control laws and regulations and other relevant information) ⇒ Timely updates of the list of cargoes based on the revision of relevant laws and regulations. ⇒ Establishment of a framework and appropriate management of Customs procedures. - ８ -

Requirements : Internal Compliance Program for Customs Requirements Consultation, Cooperation and Communication with Customs and Other relevant authorities ⇒ Establishment of a route of report to Customs on any accident or misconduct in implementing the CP. ⇒ Establishment of a route of report to Customs on the changes of the CP, if such changes are related to Customs procedures, cargoes and/or logistics Crisis Management ⇒ Establishment of a framework to ensure route of report in case of emergency and taking remedial and preventative measures.Education/Training ⇒ Establishment of a framework to plan education and training programs and to implement those programs in a periodic and continuing manner. Internal Audit ⇒ Establishment of a framework for internal audit to ensure proper implementation of the CP. - ９ -

○ Compliance-reflected reduced examination and inspection ○ Pre-arrival lodgement of import declaration and permission ○ Release of cargo before duty/tax payment declaration and duty/tax payment ○ Periodical lodgement of duty/tax payment declaration ○ Waive the requirement to deposit cargoes into the Customs area ○ Compliance-reflected reduced examination and inspection Authorized Importers Authorized Exporters Benefits for Authorized Importers/Exporters - １０ -

〔 Procedure for Authorized Importers 〕 〔 Normal Procedure 〕 Procedure for Authorized Importers Cargo Release Procedure Aircraft’s arrival Duty Payment Import/Duty Payment Declaration Import Declaration Duty Payment Declaration Cargo Release Import Declaration Import Permit Cargo Release Procedure Import Permit Examination Inspection Cargo Release Examination Inspection Import Declaration (Optional)(Periodical) Aircraft’s arrival - １１ -

Premises of Exporters Forwarders’ warehouse （ Customs Area ） Premises of Exporters Customs Clearance 〔 Procedure for Authorized Exporters 〕 〔 Normal Procedure 〕 Procedure for Authorized Exporters Customs Clearance Export Permit Exam. Inspection Export Declaration Exam. Inspection Export Permit Forwarders’ warehouse （ Customs Area ） - １２ -

Benefits for Authorized Warehouse Operators, Customs Brokers, Carriers and Forwarders, etc - Establishment of a new Customs warehouse only by notification to Customs - Comprehensive permit is provided to each Operator - Compliance reflected reduced audit - Free monthly fee Warehouse Operator - Import Procedure ⇒ In case an import declaration is conducted by an Authorized Customs Broker, release of cargoes are allowed before duty/tax payment declaration and duty/tax payment - Export Procedure ⇒ In case an Authorized Customs Broker checks cargoes of its client exporter and those cargoes are brought into container yard for loading by an authorized transportation company, it is allowed to lodge an export declaration at the exporter’s premises and other facilities. etc. Customs Brokers - Simplification of Customs transit procedure (Normal Procedure) A permission is required to each transit, followed by the submission of manifest data. (Procedure for AEO) Only submission of manifest data is required for the route covered by NACCS system Carriers and Forwarders etc. - １３ -

Customs Area B Customs Transit Normal Procedure Permit Confirmation of Shipment Confirmation of Arrival Every transit Customs Area A Unnecessary × 〔 New Procedure for AEO/TC 〕 × 〔 Current Procedure 〕 AEO Challenges: AEO Challenges: Program for Authorized Transportation Companies Unnecessary Every transit × Benefits - １４ -

-Stipulate specific procedures. Examples: procedures for customs clearance with benefits, application procedures for authorization 【 Cabinet Order 】 (Cabinet Order for Enforcement of the Customs Law) - Stipulate the rights and obligations of citizens. Examples: benefits, requirement for authorization (reasons for disqualification), expiry and revocation of approvals 【 Law (Customs Law) 】 -Stipulate details for the implementation of the specific procedures. Example: Particulars to be set forth in the compliance program. 【 Ministerial Ordinance 】 (Enforcement Regulation of the Customs Law) - Stipulate details for the implementation of the specific procedures. Examples: specific customs clearance procedures, exemplification on the particulars of compliance program, guidelines for reviewing the applications at Customs 【 Order of Director General of CTB 】 (Basic Orders regarding Customs Law; Guidelines in reviewing the approval requirements of authorized importers) AEO : Legal Structure - １５ -

Submission of Application - Conducting self-assessment according to check points - Reviewing the operational flow and contracts with business partners - Preparation for submitting the application forms and supporting documents - Explanation of AEO requirements including checking list - Support for stock-taking the present operational flow and identifying the points to be reviewed - Support for drafting the Compliance Program - Application form, Check List, The Compliance Program & Supporting Documents including protocols and contracts with business partners (if requested) - Checking the security measures of cargo storage facilities, including surroundings of the facilities, lighting, locking devices, access control, cargo segregation and computer system - Checking whether the export procedures are conducted in accordance with the compliance program and protocols Authorization 【 Application Process 】 【 Authorization Process 】 Process of Authorization 【 Post Audit Process 】 Prior Consultation with Customs For Quality Assurance Applicants’ exercises On-site inspection Examination of application Consultation with AEO center - １６ -

Administrative Order for Improvement and Revocation When Customs identifies at least one of the following facts, the authorization will be revoked 1. An authorized exporter has committed Customs laws and/or some other laws 2. There is a false description on the book/records 3. An authorized operator does not take remedial actions to comply with administrative order for improvement When Customs identifies the operations of an AEO exporter are not compliant with the requirements of AEO authorization, the administrative order for improvement will be issued to the AEO from Customs. Administrative Order for Improvement Revocation - １７ -

Hakodate Customs Tokyo Customs Yokohama Customs Nagoya Customs Osaka Customs Kobe Customs Moji Customs Nagasaki Customs Okinawa Regional Customs AEO Operation : Ensuring Consistency AEO Unit AEO Center (Ensuring consistency) - １８ -

- Define & Planning of Pilot Program - Implementation of Pilot Program - Analysis / Evaluation Pilot Program - Improved Understanding of Customs procedure of each party - Comparability Study of both Programs Mutual Understanding - Discussion with regard to benefits of Mutual Recognition - Arrangement of Mutual Recognition and Operational protocols as necessary Declaration of Mutual Recognition AEO Challenges - Process of Mutual Recognition - １９ -

Mutual Recognition Under Consultation/Study Malaysia USA Korea EU China Australia NZ Singapore Canada - ２０ -

Thank you for your attention.