Posted on 11 Jul 2018
AEO status - also known as trusted trader - has been thrust into the limelight for its steadfastness in a sea of Brexit uncertainty. Customs expert David Hesketh looks at its origins and weighs up the pros and cons.
As the Government thrashes out a Brexit withdrawal deal on future UK-EU trade rules, it's interesting to see how the role of customs has evolved in the last 20 years.
The 9/11 terrorist attacks in the US played a huge role in moving customs away from its traditional role of revenue collections and compliance through formal stoppage to a much greater focus on supply chain security. In the US, it changed from being under the authority of the treasury department to the security department.
In simple terms knowing 'who was doing what' was the key focus and the World Customs Organization created a task force to look at areas vulnerable to attack from criminals and terrorists.
Its Safe Framework of Standards called on companies to get a better handle on their supply chains - knowing who they were buying from and what was happening to goods in the supply chain. Out of this came Authorised Economic Operator Status (AEO) which is the European Union version of a security-oriented, trusted trader compliance policy.
This internationally recognised quality mark indicates that a company's role in the international supply chain is secure, and that their customs controls and procedures are efficient and compliant.
There are a wide range of benefits from consignments being fast-tracked through customs controls and priority over non AEOs to reduced data elements in EU pre-arrival/pre-departure summary declarations, mutual recognition of trusted trader programmes by different countries plus improved risk management, cost efficiencies, better communication and customer confidence.
Perhaps not surprisingly, it's the pro-Brexit politicians who have latched onto AEO.
Under the "maximum facilitation" or a "highly streamlined customs arrangement" favoured by Brexiteers, customs checks would be as friction free as possible through the better use of technology and trusted trader status.
A pilot project to create a 'single window' electronic data pipeline conforming to a set of international standards has already demonstrated new ways to deliver supply chain visibility and security.
By capturing consignment data on UK trade through the Port of Felixstowe, the four year project, known as CORE which finally came to a conclusion in June 2018, has proved how major advances in data quality with true end-to-end visibility from purchase order placement through to distribution centre arrival, minimises risk and saves time and money.
The project has been made possible by working with commercial operators including AEO accredited supply chain specialist Warrant Group which uses its own bespoke technology platform, known as the Ingot Portal, to deliver consistent and accurate flows of logistics data in complex supply chain environments.
Working closely with Warrant Group's Managing Director Ian Jones we are now looking at ways to confer the freight forwarder's trusted trader benefits to its client base.
The combination of trusted trader status and smart digital technologies could play a vital role in managing the UK's new customs landscape, especially in view of predictions that the annual number of customs declarations is set to increase by 200m after the UK exits the EU.
The financial incentives of becoming a trusted trader however are closely aligned with the EU's Union Customs Code. Trusted trader status gives businesses a reduction or waiver in duty guarantee liability because their supply chains are already proven to be safe and secure.
A business without AEO status that allocates £10,000 in customs duty a week by operating Inwards Processing Relief might face a potential annual guarantee of more than £500,000.
So, the question to ask is will the UK's Customs Code offer the same benefits?
Applying for AEO status is a commercial decision. On the one hand it gives quicker access to certain simplified customs procedures and in some cases the right to 'fast-track' shipments through certain HMRC safety and security procedures.
On the other hand it is a complicated and testing, top to bottom, side-to-side assessment of a company with a 90-point check-list. This demands time and resources and commitment. It is a management decision if the costs outweigh the benefits.
The audit process carried out by Customs as a consequence of the AEO application is complex and comprehensive. The self-assessment can confront many internal, well-established practices that may need to change.
What is Authorised Economic Operator status (AEO)?
An Authorised Economic Operator can be defined as a person who, in the course of his business, is involved in activities covered by customs legislation and who is deemed reliable in the context of his customs related operations, and, therefore, is entitled to enjoy benefits throughout the European Union such as:
* Consignments being fast-tracked through customs controls and priority over non AEOs;
* Reduced data elements in European Union pre-arrival/pre-departure summary declarations;
* An internationally recognised trusted security and compliance status for companies;
* An industry 'kite mark' and useful marketing tool;
* Mutual recognition of trusted trader programmes by different countries who then afford these benefits.
By improving internal security and compliance systems and procedures there are proven benefits from;
* Better risk management;
* Reduced incidents of theft or loss in transit;
* More efficient costs from supply chain visibility;
* Improved cargo and internal security;
* Improved communication and relationship with commercial and supply chain partners and
* Improved customer confidence.
There are two types of authorised economic operator: customs simplifications, (AEOC) which enables the holder to benefit from certain legal customs simplifications or security and safety (AEOS) which entitles the holder to facilitations relating to security and safety. A company can hold both accreditations.
The goal is to make it easier for buyers and sellers to move goods between countries.
David Hesketh spent 42 years working for the HM Revenue and Customs. From 2008-2018 he was also working for British Maritime Technology as Work Package 10 Leader within the EU funded CORE Project. The work included contributions from commercial operators including supply chain and freight forwarding specialists, Warrant Group. David also works with the KGH Customs and Trade Academy in Antwerp to develop and deliver the ÉCLAT Programme (European Customs Law Accredited Training), UCC Navigator and Brexit. In 2017 he formed Hesketh Consultancy to provide education, training and innovation opportunities in light of developments with the UCC and Brexit.
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