India’s Central Board of Excise and Customs (CBEC) last month announced a new ‘Authorised Economic Operator’ (AEO) program, with a view to give AEO-certified operators preferential treatment in terms of less Customs examination, relaxed procedural requirements, etc, subject to the operators maintaining prescribed security standards and compliance requirements.
The voluntary scheme is available to importers, exporters, warehouse owners, custom house agents, cargo forwarders, carriers, port operators and couriers, among others in the trade community. Companies can obtain an internationally recognized quality mark, which will indicate their secure role in the international supply chain and that their Customs procedures are efficient and compliant. Thereafter, they will be considered ‘secure’ traders and reliable trading partners.
The AEO program has been developed pursuant to guidelines of the World Customs Organization’s (WCO) adoption of SAFE FoS (Framework of Standard) in 2005. The objective was ensuring security in the global supply chain from the point of origin i.e., the point of export to the point of import in the receiving country, keeping in view national requirements of respective administrations. SAFE seeks to establish standards that provide supply chain security and facilitation at a global level to promote certainty and predictability, enable integrated supply chain management for all modes of transport, enhance the role, functions and capabilities of Customs to meet the challenges and opportunities of the 21st century, strengthen cooperation between Customs administrations to improve their capability to detect high-risk consignments, strengthen Customs/Business cooperation and promote the seamless movement of goods through secure international trade supply chains.
Core elements of the SAFE Framework include harmonization of advance electronic cargo information requirements on inbound, outbound and transit shipments, commitment to employing a consistent risk management approach to address security threats, performing an outbound inspection of high-risk containers and cargo, preferably using non-intrusive detection equipment such as large-scale X-ray machines and radiation detectors and defining the benefits that Customs will provide to businesses that meet minimal supply chain security standards and best practices. The two pillars of SAFE are Customs-to-Customs network arrangements and Customs-to-business partnerships.
SAFE details several Customs-to-Customs standards relating to integrated supply chain management, cargo inspection authority, modern technology in inspection equipment, risk management systems, high risk cargo or container, advance electronic information, targeting and communication, performance measures, security assessments, employee integrity, outbound security inspections etc. On Customs-to-business, SAFE details standards for partnership, security, authorization, technology, communication, facilitation etc.
SAFE lists several benefits for AEO such as measures to expedite cargo release, reduce transit time and lower storage costs, providing access to information of value to AEO participants, special measures relating to periods of trade disruption or elevated threat level and first consideration for participation in any new cargo processing programs. However, the CBEC is frugal in its dispensations and talks of only reduced examination and inspection and acceptance of pre-arrival declarations for importers and pre-shipment declarations for exporters. CBEC promises faster approvals and reduced audit for warehouse owners and transit of goods without customs escort or case to case permission for carriers, forwarders etc.
CBEC Circular number 37/2011, dated August 23, gives the criteria for AEO recognition, procedures for recognition, standards to be maintained, timelines etc. The entities that get AEO recognition can expect better treatment and quicker movement of their cargo not only from Indian Customs but also from other government administrations.
While Canada has no formalized AEO initiative, the Canada Border Services Agency (CBSA) “trusted trader strategy” includes the Partners in Protection (PIP) program, which is aligned with international standards such as those established for AEOs by the WTO. To raise and standardize the security level of the supply chain while enhancing cross-border trade, the CBSA’s PIP program has signed mutual recognition arrangements with equivalent programs in the United States, Japan, Singapore and South Korea. These countries use criteria similar to those used by Canada when granting companies membership to their respective cargo security programs.
Canada is currently in the midst of trade talks with India, the second round of discussions having concluded in July. It could be expected that a mutual recognition arrangement between the CBSA’s PIP program and the CBEC’s AEO may be part of a future trade agreement with Asia’s third largest economy.