There has been much talk in the media, often from politicians, of the benefits of a trusted trader scheme called Authorised Economic Operator (AEO). This post looks at the status and it’s origins, in light of increased prominence as part of Brexit related focus on trade operations. While it is a stretch to think any accreditation will allow completely frictionless movements, it is certainly true that AEO can be used to mitigate against some of the eventualities Brexit might bring.
In Theresa May’s Mansion House speech of March of 2018, specific reference was made to AEO: “For example, recognising each other’s “trusted traders” schemes and drawing on the most advanced IT solutions so that vehicles do not need to stop at the border.”
While on trend at present, supply chain security has been high on the agenda globally for over a decade. This piece intends to give some of the context, and lead in to later pieces which will cover different aspects of the standard.
There has long been a desire by customs authorities to develop a trusted trader status. Put simply, this will enable authorities to prioritise their efforts elsewhere in the aim of reducing the opportunity for bad people to use goods shipments as a method of terrorism. The US customs authorities were one of the first to adopt the practice, when they launched their own supply chain standard, known as Customs Trade Partnership Against Terrorism (CTPAT). This version was launched in 2001, and has gained traction in recent years, with over 11,000 accredited companies at the time of writing.
Standards set comply with the SAFE Framework, which was adopted by the World Customs Organisation (WCO) in 2005.
At present, over 160 countries have indicated a desire to adopt the standards outlined in the SAFE Framework, and there are 70+ AEO or equivalent systems in existence, of which the EU’s version is one, covering the 28 member states. There are also a number in development.
One of the key drivers for the implementation of AEO or equivalent schemes has been to enable Customs authorities to focus their efforts, and recognise entities who have demonstrated their business is conducted responsibly, within the parameters set by their own customs authority. To aide this, a mechanism has been developed in which authorities can agree to provide mutual recognition to their respective operators. To date, over forty such Mutual Recognition Agreements have been signed into practice, involving some of the worlds biggest trading nations, including the USA, China, India and Canada. The EU has signed a number, including China, Japan and the US.
Mutual recognition is a key driver for some applicant businesses, as it effectively allows for businesses to ensure their cargo is treated as trusted when it arrives at the border of a country, providing that country has joined the growing list recognising the AEO system applied by HMRC in the UK. While it’s not the silver bullet some claim, and won’t bring frictionless trade, it’s a lubricant of growing importance, and something a growing number of businesses will benefit from.
Future posts on this blog will look at AEO from different angles, including the benefits involved, and the process applicants must undergo. Keep checking back for these, and let us know if you have any questions or comments on this or other posts.