Key Issues - Authorised Economic Operators

Global Supply Chain Security:

Authorised Economic Operator (AEO) Status was introduced into the EU in 2008 with the intension of creating a system of “legitimate” traders identifiable within the international supply chain as safe and secure so that Customs can concentrate their time and effort on unknown shippers.

The EU AEO Scheme was, in essence, a spin-off from the earlier American supply chain security initiative introduced after 9/11 to secure the borders of the USA from potential terrorist attacks through the legitimate movement of goods.  If a plane could be hi-jacked and flown into a building what could be put in unchecked sea freight containers?  The USA scheme – known as Customs & Trade Partnership Against Terrorism (C-TPAT) was (and still does predominantly) concentrated on goods being shipped into the USA while the AEO scheme is both an import and export verification system for freight.

 AEO and similar countries schemes, eg C-TPAT, Canada “Partners in Protection”, Thailand “Gold Card” for compliant importers were brought together under the World Customs Organisation (WCO) banner of the SAFE Framework.  The aim, as mentioned above, is to ensure safe and fast environment for the movement of freight internationally while “unknown” shippers are targeted for checks, delays, extra administration and increased documentation requirement.

AEO in the EU, like C-TPAT, has been slow to take off with still only around 15,000 approved companies within the 28 member states of the EU (as of April 2017).  C-TPAT has around the same number of approved businesses but these are mainly import companies only so there is a drive to extend C-TPAT to USA exporters to ensure world-wide recognition and support Mutual Recognition Agreements.

It is worth noting that AEO is only relevant if you trade with countries based outside the EU – known as 3rd countries. Though it is applicable to intra-EU movements with the UK's exit from the EU on the horizon perhaps UK companies need to reassess their position.

Customs Compliance

A key area of AEO in the EU addresses is the use of “fast-track” customs clearance channels/ procedures and the permissions to use simplified customs procedures so reducing administration costs and unnecessary payment of duties and taxes.  This was supposed to be the carrot to the supply chain security measures but is now essential as the EU Union Customs Code (UCC) introduced in May 2015 brought into the law a clear requirement that only "compliant" businesses can use certain procedures or obtain concessions, such as guarantee waivers. 

Many countries around the world have relatively slow customs clearance times, eg 3 days (Italy) to 15 days (India), and being AEO, or the countries equivalent, will enable these companies to apply for quicker clearances, often with no additional checks at the time of export and/or arrival.  It will also mean companies can be approved for customs duty relief procedures, eg Inward Processing Relief, Customs Warehousing, and apply for a waiver on both deferment account guarantees and customs duty guarantees.  The link between AEO Compliance and the ability to function as a competent exporter has also been strengthen with the need to at the very least meet the AEO Criteria to hold Approved Exporter status to use with Free Trade Agreements (FTAs).

If you are based in the UK we have a slight problem with this side of AEO as our average customs clearance time for 75% of shipments is under a 1 hour and we never previously needed customs duty bonds as a norm.  Under the rewrite of the EU Customs Regulations this changed.  The Union Customs Code (UCC) introduced the idea of two types of import/export businesses – the known compliant businesses, who can have any simplification they require to enhance business, reduce costs and increase control and the unknown business to be subject to special checks, delays and unable to use customs facilitative schemes.  Which would you like to be?

There are three ways to be AEO approved:

1.      Safety and Security only – suitable for companies just exporting out of the EU

2.      Customs Simplification – suitable for companies just importing into the EU

3.      Full AEO approval – both of the above combined.

Conclusion

With a greater awareness of the need to know what is in our supply chain, the potential risk to companies’ reputations when things go into the press and the potential devastation is contaminated goods poison people; drugs not working; our telecommunication equipment found in an embargoed country being used against our troops; counterfeit aircraft parts goods bring an aircraft down and the UK striking it out on its own it is essential to treat AEO as important.

The five top products at risk from greater delay, check and paperwork requirements currently are said to be:

1.      Food and Drink industries

2.      Pharmaceutical Industries

3.      Chemical Industries

4.      Strategic goods – including military items but also high technology products

5.      Low weight, high value products – quick to move, easy to launder money

There is also a positive side of AEO – it gives your company a public Quality Badge that shows you care about what is going on in the world and being a responsible business, and it won’t harm your trade if you get a few “fast track” advantages from customs authorities around the world either!

 

Written April 2017 by Sandra Strong FIEX (CITA) Managing Partner Strong & Herd LLP

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