MSME participation in AEO programme grows but more awareness needed

A joint WCO-ICC-WTO report says awareness gaps, procedural complexity and uneven benefits still limit MSME participation despite recent improvements

A recent joint study by World Customs Organization (WCO), International Chamber of Commerce (ICC), and World Trade Organization (WTO) on integrating micro, small and medium enterprises (MSME) into Authorized Economic Operators (AEO) programme praises the Indian Customs for its initiatives but says that it increasingly needs to evolve from a large-enterprise focussed model into a truly inclusive framework — one that enables MSMEs to graduate from peripheral operators to trust-certified participants. 

 

The AEO programme developed by the WCO in 2005 under its SAFE (Security and Facilitation in a Global Environment) Framework urges all Customs administrations to certify businesses who meet compliance, security and operational reliability criteria as trusted partners and give them higher facilitations such as reduced levels of examination of cargo, priority clearances, reduced documentation, recognition with the Customs administrations in other countries through mutual recognition agreements (MRA), lower bank guarantees, assurance of supply chain security during cargo movement and faster access to refunds and drawback. The idea is to shift from universal checks to risk-based supervision, freeing resources for higher-risk consignments, while rewarding compliance, legitimacy and enabling trade efficiency.

 

India introduced the Accredited Clients Programme  in 2005 and the AEO programme in 2011. Later the two schemes were merged into a single AEO programme in 2016. Under this scheme, importers and exporters can get recognition in 3 tiers (AEO-T1, AEO-T2 and AEO-T3), with highest levels of facilitation for AEO-T3 category. The others such as logistics service providers, Customs brokers, warehouse operators, freight forwarders, custodians and terminal operators can get recognition as AEO-LO. So far, 6048 entities have got recognitions, with 3484 in AEO-T1 category, 1265 in AEO-T2 category, 260 in AEO-T3 category and 1039 in AEO-LO category. Those numbers are quite underwhelming. 

The Indian Customs have aligned the AEO programme with the SAFE framework of the WCO. Facilities such as advance electronic filing of Customs documents, risk based examination, MRAs with United States, South Korea and the United Arab Emirates, faceless assessment, single window filing of documents relating to partner government agencies, direct port delivery/entry facilities and so on have been extended to the trade. 

A survey by Indian Customs found that 64 per cent of the MSMEs surveyed were unaware of the scheme. Almost 95 per cent of the MSME-AEOs found the programme benefits useful, with only a small percentage believing the benefits needed improvement. So, the Customs organised 20 outreach programmes to raise awareness, streamlined and digitalised the application processes, lowered the qualification criteria by allowing even MSMEs filing only 10 Customs documents in a year to apply, reducing compliance history requirement and qualifying period from 3 years to 2 years and so on. MSME participation in India’s AEO programme increased by 82 per cent from 1,457 in 2023 to 2,663 in 2024, the percentage of MSMEs in the AEO base (T1 and T2) increased from 30.9 per cent in 2023 to 55 per cent in 2024 and over 1,200 MSMEs received AEO certification in the past year, benefiting from expedited Customs procedures and reduced operational costs, says the joint WCO-ICC-WTO report. Going forward, the Customs must continue to simplify procedures, rely more on data analytics for system-driven facilitation and ensure that AEO benefits are delivered consistently on the ground. The industry bodies and logistics associations should raise awareness about the AEO programme and help the MSMEs build compliance capabilities and treat AEO recognition as worthwhile investment. 

Email: tncrajagopalan@gmail.com