Traders should opt for AEO recognition

Last Wednesday, the World Customs Organisation (WCO) began a three-day global conference on  Authorised Economic Operators (AEO) programme in Shanghai, China to deliberate on the theme ‘Harnessing the Power of AEO Programmes for Inclusive and Sustainable Global Trade.” It is the sixth such conference in the last ten years that has this year attracted over 1,200 delegates, mostly the Customs administrators from 108 countries.
 

For the discussions during the conference, the International Chamber of Commerce (ICC) has released its updated recommendations on how to improve the AEO programme globally so that it becomes a powerful tool to drive supply chain security and trade facilitation. Its key recommendations include driving the implementation of WCO’s SAFE framework of standards to secure and facilitate global trade (SAFE Framework), leveraging digitalisation to make the AEO processes more efficient and transparent, strengthening public-private partnership, ensuring a minimum set of benefits for AEOs, improving inter-agency recognition of AEO status, unlocking the potential of mutual recognition arrangements (MRA) between Customs administrations and fostering inclusivity in AEO programmes.
 

The ‘SAFE Framework’, launched in 2005, rests on three pillars viz. Customs-to-Customs network arrangements (Pillar 1), Customs-to-Business partnerships (Pillar 2) and Customs-to-other Government agencies cooperation (Pillar 3) – each setting out specific sets of standards.  Pillar 2 includes the framework for AEO programmes in which businesses that meet specific security requirements can obtain AEO certification, which is intended to lead to tangible trade facilitation benefits. While the WCO provides global standards, there are now more than 80 AEO programmes globally of different Customs administrations. 
 

Even before adoption of the ‘SAFE Framework’ by the WCO in 2005, Indian Customs were already implementing various forms of Customs compliance and trade facilitation programmes based on the Revised Kyoto Convention’s “Authorised Persons” provisions. The Accredited Client Programme (ACP) provided facilitation to importers/exporters subject to their fulfillment of the prescribed eligibility criteria. The AEO programme was launched on a pilot basis in 2011 and merged with ACP in 2016 giving additional facilitations to importers/exporters who could demonstrate strong internal control systems and willingness to comply with the laws.
 

The Indian Customs give to AEO recognized entities, facilitations that include secure supply chain from point of export to point of import, demonstration of compliance with security standards when contracting to supply to overseas buyers, enhanced border clearance privileges in MRA partner countries, minimal disruption to flow of cargo after any security related disruption, reduction in dwell time and related costs and Customs advice/assistance if any importer/exporter faces unexpected issues with Customs of countries with which India have MRA.
 

The Indian Customs have given AEO-LO certification to 858 entities, mostly logistics service providers, custodians, terminal operators, customs brokers and warehouse operators. 3,656 importers/exporters have got AEO-T1 recognition, which is given after least scrutiny but also gives least trade facilitation. 1,115 importers/exporters have got AEO-T2 recognition, which involves stringent scrutiny of the systems and procedures of the importers/exporters but gives much higher trade facilitation.

Only 151 importers/exporters have got AEO-T3 recognition that is given after two years as AEO-T2 and gives highest levels of trade facilitation. Indian Customs have MRA with only four countries – USA, South Korea, Hong Kong and Taiwan. The Customs can do better in spreading awareness about the benefits of AEO recognition and entering into MRA with more countries. More importers/exporters should opt for AEO recognition.

Email: tncrajagopalan@gmail.com