In today’s globalized economy, international trade plays a critical role in the growth and prosperity of nations. However, the cross-border movement of goods and services involves various risks, including security threats, illicit activities, and inefficient customs procedures. To address these challenges, the concept of the Authorised Economic Operator (AEO) has been introduced, providing a framework for protecting the international supply chain while promoting legitimate trade.
What is Authorised Economic Operator(AEO)?
The Authorised Economic Operator (AEO) system was developed by the World Customs Organization (WCO) in 2006. The WCO is an independent multinational organization founded in 1952, with headquarters in Brussels, Belgium. It has 176 member countries, whose trade represents over 98% of global trade. The primary objective of the WCO is to improve the efficiency of customs management, promote the development of legitimate international trade, and take effective action against illicit trade. Following the terrorist attacks of September 11, 2001, the WCO recognized the vulnerability of the global trade system to terrorist attacks and the critical role that customs play in ensuring trade security and facilitation. To ensure that all customs administrations follow the same standards, the WCO developed the Framework of Standards to Secure and Facilitate Global Trade (SAFE) framework. The SAFE framework has two important core concepts: Customs-to-Customs network arrangements and Customs-to-Business partnership arrangements. The AEO system is part of the Customs-to-Business partnership concept. It requires exporters to obtain certification from their own customs administration to confirm the security of their goods throughout the entire production, transportation, and storage process. The AEO system originated from the WCO’s efforts to improve global trade security and facilitation in response to the 9/11 terrorist attacks. It is not a standard invented by any individual country or region.
After years of development and implementation by EU customs, the AEO program was officially launched in 2008. Today, this program has become an extremely important factor in international trade, helping businesses reduce costs, increase efficiency, simplify procedures, and enhance reputation. The AEO program has also been mutually recognized with similar programs in other countries, further promoting the flow of global trade.
What are the requirements for a company to obtain AEO?
AEO is a certification standard authorized by the administrative customs authorities of the European Union, which recognizes economic operators that have achieved certain standards.
1.Security standards
Companies that obtain AEO certification must meet security standards. This means that the company must establish and implement appropriate security measures to ensure the safety of goods and equipment during its business operations.
2.System for managing commercial records
Companies need to have a systematic approach to managing commercial records. This includes keeping clear records and tracking of trade transactions, logistics transport, and the import and export of goods.
3.Compliance with customs regulations
Economic operators that obtain AEO certification must also comply with customs regulations, including compliance with all tariffs, taxes, and other related regulations. This means that the economic operator needs to maintain transparency in its business operations and ensure the legitimacy of trade processes.
4.Financial stability
AEO certification requires companies to have financial stability. This means that companies need to be able to adapt to various trade conditions and risks and have a stable financial foundation.
5.Professional qualification standards
Companies that obtain AEO certification must have practical abilities or professional qualification standards. This includes knowledge of trade operations processes and relevant regulations, as well as skills to manage and handle all trade documents and messages.
In addition to the above standards, any company within the EU can apply for AEO certification as long as it meets the following three conditions:
1.Part of an international supply chain
Companies must be part of an international supply chain, which means they need to engage in cross-border trade activities. This means that companies need to engage in import and export trade on the international market or play other related roles in international trade processes. Companies need to have experience and abilities related to international trade, such as familiarity with international freight transport, international trade documents, cargo insurance, and international trade risk management.
2.Participate in customs activities
Companies must participate in customs activities such as import and export trade and customs declarations. Companies need to be able to comply with all relevant customs regulations and requirements to ensure the legal entry and exit of their goods. In addition, companies need to maintain close contact with customs to resolve any possible issues in a timely manner.
3.Have an Enterprise Registration and Identification Number (EORI)
Companies must have an Enterprise Registration and Identification Number (EORI), which is a unique identification number used to identify all goods entering and leaving the EU. Companies need to apply for an EORI number from the local customs department to use in their import and export trade activities within the EU. The EORI number can help companies more easily navigate trade processes and customs procedures.
Why become an AEO?
Economic operators that obtain AEO certification can enjoy multiple benefits. Firstly, these companies are recognized globally as secure, reliable, and compliant business partners, which enhances their reputation and competitiveness in international trade. Secondly, AEO companies have lower risk assessments in risk analysis systems, and therefore can benefit from priority treatment during physical inspections, reducing inspection time and costs. Additionally, mutual recognition of AEO programs under cooperative customs agreements can expedite the movement of goods across third-country borders, further reducing transaction time and cost. Moreover, AEO companies are more likely to obtain simplified procedures, further reducing the complexity and time cost of transactions. Finally, AEO companies can enjoy guarantee waivers or reductions, reducing the amount and cost of guarantees required for importing and exporting goods. In summary, the benefits of AEO certification for companies include improved reputation and competitiveness, reduced risk assessments and inspection times, faster clearance times, simplified procedures, and lower guarantee costs.
| Benefits |
|---|
| 1.Recognized as a secure, reliable, and compliant trading partner worldwide |
| 2.Lower risk assessment score in the risk analysis system |
| 3.Priority treatment during physical inspections |
| 4.Mutual recognition of AEO programs under cooperative customs agreements to expedite goods through third country borders |
| 5.Easier access to simplified procedures |
| 6.Eligibility for guarantees reduction or waiver, reducing the amount and cost of security required for imports and exports |
How to become AEO
Before applying for AEO certification, companies must meet some basic requirements, such as having an Economic Operator Registration and Identification (EORI) number, participating in international supply chains, and engaging in customs activities. Manufacturers, exporters, freight forwarders, warehouse managers, customs brokers, transporters, and importers of any size can apply for AEO certification.
Applying for AEO certification involves completing a self-assessment questionnaire and an AEO certificate application form. In the self-assessment questionnaire, companies need to assess whether their processes meet AEO certification standards. In the AEO certificate application form, companies need to provide relevant information and submit an electronic application. AEO certification assessment will be conducted by customs departments, including on-site inspections of the applying company’s location.
Challenges and opportunities of AEO
While becoming AEO provides many benefits, it also brings some challenges. One major challenge is keeping up with constantly changing customs regulations and security requirements. AEOs must continuously monitor their legal status and adapt to new regulations to maintain their AEO status. Another challenge is cybersecurity, as AEOs may be vulnerable to network attacks that could jeopardize their supply chain security. However, becoming AEO also offers opportunities, such as expanding their global supply chain network, attracting new customers, and leveraging their AEO status for a competitive advantage.
Conclusion
The AEO program provides a basic framework for enhancing the security and efficiency of supply chains in international trade. By meeting certain standards of legality, security, and financial solvency, AEO can benefit from faster customs clearance times, fewer inspections, and higher supply chain security. However, being an AEO also comes with challenges that require continuous monitoring and adaptation. Despite this, the benefits of becoming an AEO outweigh the challenges, making it a valuable tool for businesses engaged in international trade. With the continued growth of global trade, AEO will play an increasingly important role in promoting safe and efficient international supply chains.
References
Authorised Economic Operator (AEO) https://www.revenue.ie/en/customs/businesses/authorised-economic-operators/index.aspx
AEO https://www.isoleader.com.tw/home/iso-coaching-detail/AEO
