AEO for fast clearance: Compliance & mutual understanding is the key
In India, the CBEC released its first circular about AEO (Authorised Economic Operator) programme introducing it as a pilot project on August 23, 2011. At the end of the pilot project on July 18, 2012; the AEO status was awarded to three companies. On Nov
What is AEO?
AEO (Authorised Economic Operator) is a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a National Customs administration as complying with WCO or an equivalent supply chain security standards. AEO may include manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors and freight forwarders.
The AEO certification finds its origin in the terrorist attacks in US on September 11, 2001. The risk of terrorist attack does not only concern the transportation of passengers, but also the transport of goods. Therefore, the US also wanted to secure the flow of the goods.
Upon consultation with the American trade and industry, the Customs created C-TPAT (Customs and Trade Pact Against Terrorism). The C-TPAT is a certification for companies allowing them to prove to Customs that the company is ‘safe and reliable’.
SAFE Framework of Standards
At the June 2005 annual sessions of the WCO Council in Brussels, Directors General of Customs representing the members of WCO adopted the ‘SAFE Framework’ of standards to secure and facilitate global trade by unanimous acclamation.
The implementation of SAFE Framework will be carried out on a phased approach by national customs authorities in accordance with its administration capacity and legislative authority. The WCO Compendium of AEO programmes (AEO Compendium) is updated annually to track the development of existing AEO programmes, those in the process of being launched, and the customs compliance programmes. Meanwhile, more than 170 countries have expressed their intention to implement the SAFE Framework.
The Framework aims to:
Establish standards that provide supply-chain security and facilitation to goods being traded internationally Enable integrated and harmonised supply-chain management for all modes of transport Enhance the role, functions and capabilities of Customs to meet the challenges and opportunities of the 21st century Strengthen networking arrangements between Customs to improve their capability to detect high-risk consignments Promote cooperation between the Customs and business communities Champion the seamless movement of goods through secure international trade supply chains
Mutual Recognition Arrangement
Mutual Recognition is a broad concept (by maintaining certain compliances) whereby an action or decision taken or an authorisation that has been properly granted by one customs administration is recognised and accepted by another customs administration.
There is a need of mutual recognition efforts between national customs authorities, which will lead to an international recognition of AEO status. National customs authorities are expected to cooperate with each other and to achieve mutual recognition of national AEO programmes and customs control standards.
Challenges if you are Non-AEO
Increasing barriers for international trade Limitations/delays within supply chain Increase of customs interventions and customs controls Loss of reputation as a Non-AEO More Audits
The Way Ahead
Voluntary AEO participation will be the precondition for maintaining an efficient customs-related supply chain process in the future. Other countries specially in APEC, EU, and even in Africa, has taken the lead in AEO approvals. India’s logistics cost are already high compare with developed countries. In the absence of AEO, it will further increase. Indian suppliers/ service providers will be non preferred. Higher participation in AEO programme will bring pressure on Govt. to make AEO approvals on time and work on Mutual Recognition Arrangements ( MRA).
Pramod Sant Vice President, Supply Chain