Home » Across Borders » Authorized Economic Operator (AEO)

OF late, we have been hearing a lot about new programs on customs-business partnerships brought about by the continuing need to secure international trade and promote facilitation of trade. In a recent speech by Deputy Commissioner Rey Nicolas during the Aircargo Forwarders of the Phils Inc General Assembly, he introduced new customs programs to be implemented in the coming months and years — the Customs-Trade Alliance to Protect and Accelerate Trade (C-TAPAT) and the BOC Voluntary Program for Authorized Economic Operator (AEO).

These customs programs are part of the global initiatives initiated by the World Customs Organization (WCO) to secure and facilitate global trade.

WCO Framework of Standards

As early as April 2005, we wrote about the “WCO Framework of Standards to Secure and Facilitate Global Trade” in this column and the new paradigm to promote collaboration between customs administrations and the trading community. This new model and approach, if implemented, will impact specifically on the operations of manufacturers, logistics providers, exporters, customs brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.

Customs reforms as provided in the framework recognize the need to provide a seamless movement of goods across borders through secure international trade supply chains. And this can only happen if supported by risk management and modern technology. Ostensibly, various customs administrations cannot have different sets of criteria to secure and facilitate global trade. The framework thus provides for a single set of international standards which does not duplicate or contradict the unique requirements of each country. The framework specifically sets forth the principles and standards to be adopted by customs administration with the following core elements:

  1. It harmonizes the electronic cargo information requirements on inbound, outbound and transit shipments.
  2. It commits to employing a risk management approach to address security threats.
  3. It requires that at the reasonable request of the receiving nation, based upon a comparable risk targeting methodology, the sending nation’s customs administration will perform the outbound inspection of high-risk containers and cargo.
  4. It defines benefits that customs will provide to businesses that meet minimal supply chain security standards and best practices.

Standards and Best Practices

Based on the Revised Kyoto Convention, the WCO Supply Chain Management Guidelines and the various national best practices, the framework provides standards in the following areas:

  • Integrated Supply Chain Management
  • Cargo Inspection Authority
  • Modern Technology in Inspection Equipment
  • Risk Management Systems
  • High-risk Cargo or Container
  • Advance Electronic Information
  • Port Security Assessments
  • Outbound Security Inspections

Approved Customs Partner

To maximize scarce resources, the framework recognizes the need to involve the private sector to ensure safety and security in the supply chain and to provide benefits to businesses identified to have a high degree of security guarantees in the form of expedited processing and other measures. This customs-to-business pillar specifically provides the standards for the partnership resulting in facilitation for businesses that have undergone validation and quality accreditation procedures

More specifically, the customs administration will need to accredit the various stakeholders engaged in export and import activities — importers, customs brokers, truckers, forwarders, shippers, port operators and others in the gateway community.

Part of the accreditation process is the validation of the use of advanced information technologies and the application of standards in the operations of a company, particularly those activities relating to the documentation, handling, storage and transport of international cargo. Companies which qualify will be granted the status of an “Authorized Economic Operator” or “approved customs partner”. An AEO will be accorded with international recognition and reputation similar to that of having an ISO qualification. In addition, an AEO will qualify for trade facilitation programs (e.g. super green lane, special passes and online facilities) and other special benefits that are not available to regular entities dealing with customs.

The author is an international trade consultant, and a licensed customs broker. He is a lecturer on logistics, indirect tax and customs, and a lecturer of Ateneo and BayanTrade on Supply Chain Management. Please contact agatonuvero@yahoo.com for your comments.

(For additional details on the AEO, attend the AFPI 1st National Conference on Safe Trade and AEO on May 13-14, 2008 at the SMX Convention Center — ed)

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