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EDEN BUILDING TO STOCK EXCHANGE

Published: 15 July 2018

AEO system for self-assessment of customs duty

M S Siddiqui

In this globalized and free economy trade facilitation, and seamless movement of goods, mutual
recognition and international best practices are important for secured trade partnership.

The market demands an appropriate record of compliance customs and other relevant laws, satisfactory
system of managing commercial and transport records, maintenance of approved security and safety
standards in supply chain.

These are required for best practice in transaction and without much control but self-compliant and ethical
practice. Authorised Economic Operator (AEO) is one such self-compliant economic actor.

In this program, consignments passing from origin to destination within such a chain would benefit from
an integrated cross-border simplified procedure, where only one simplified declaration with minimum
information would be required for both export and import purposes.

AEO scheme has been created to facilitate the supply chain without significantly disrupting the global flow
of goods. It can also divide the complaint and non-compliant traders particularly focusing on revenue
collection and to focus on high risk trade whilst facilitating legitimate trade.

World Customs Organization (WCO) definition of an AEO is 'a party involved in the international
movement of goods in whatever function that has been approved by or on behalf of a national Customs
administration as complying with WCO or equivalent supply chain security standards.

AEOs may include manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries,
ports, airports, terminal operators, integrated operators, warehouses, distributors and freight forwarders'.

AEO is new measures of safety and security have been introduced around the world based on the
framework developed by the WCO and introducing to many countries by Trade Facilitation Agreement of
World Trade Organization's (WTO).
The WCO Council adopted the SAFE Framework of Standards to Secure and Facilitate Global Trade
(SAFE Framework) in June 2005 to help deter terrorism, secure revenue collection, and promote trade
facilitation.

The SAFE Framework defines an AEO as "a party involved in the international movement of goods in
whatever function that has been approved by or on behalf of a national Customs Administration as
complying with WCO or equivalent supply chain security standards".The WCO's SAFE Framework sets
out six standards and technical specifications for implementation under Pillar II (Customs-to-Business),

which include: (1) Partnership - AEOs in the supply chain will complete a self-assessment to measure
their existing security standards and best practices to ensure there are adequate safeguard measures in
place. (2) Security - AEOs will incorporate pre-determined security best practices into their business
practices.

(3) Authorisation - The Customs administration and representatives from the traders' community will
design a validation process that incentivizes operators to gain AEO status.

(4) Technology - All users will maintain cargo and container integrity through the use of modern
technology.

(5) Communication - Customs administrations will keep the Customs-Business partnership program up to
date to promote supply chain security best practices. (6) Facilitation - Customs administrations will work
together with AEOs to maximize security and the facilitation of the international supply chain.

This program supports the decision of WTO 9th Ministerial Conference, where WTO finally reached
consensus on a text for a new Agreement on Trade Facilitation (TF).

According to WTO, trade facilitation as, "the simplification and harmonization of international trade
procedures for both import and export procedures including transit, transport formalities, payments,
insurance, and other financial requirements.

Trade procedures are activities, practices and formalities involved in collecting, presenting,
communicating and processing data required for the movement of goods in international trade."

A global standard of trade facilitation should combine the AEO as defined in the WCO Framework of
SAFE, with the "authorized person" as defined in Transitional Standard 3.32 of the WCO Revised Kyoto
Convention, and the "Authorized Operator" as defined in Article 7.7 the WTO Trade Facilitation
Agreement (TFA).

A Person (natural or legal) who meets criteria specified by Customs including: - having an appropriate
record of compliance with Customs requirements and - having a satisfactory system of managing their
commercial records.

The benefits of accredited AEO status should, at a minimum, include:

(a) Immediate release procedures: Shipments involving consignor and consignee with AEO status as well
as shipments carried and controlled by a transport and logistics service provider with AEO status - for
which declaration data has been submitted prior to the arrival and determined to be low-risk - should be
released immediately upon arrival by customs and other government agencies.

(b) Self-assessment: AEOs should be controlled on an account basis rather than on a transactional basis
and should be provided the option to self-assess duties and taxes for shipments over a given period,
including the possibility of deferred payment of duties and taxes.

(3) Relief from guarantee/bond requirements: AEOs that have demonstrated financial viability and a high
compliance level should be relieved from costly guarantees and/or bond requirements for conducting
suspension regimes.

(4) Enforcement priorities: Governments should adopt a policy of assisted compliance in AEO
programmes. The identified gaps in compliance processes should be remedied by increased business-
customs collaboration to strengthen security and create greater awareness and participation rather than
by immediately leading to penalties.

The TF agreements shall provide a forum for trade negotiations, handle trade disputes, monitor changes
in national trade policies, provide technical assistance for developing countries, and facilitate cooperation
and dialogue with other international organizations. The decision of TF was finally adopted on 27
November 2014 to insert this Agreement into Annex 1A of the WTO Agreement.

The TF measures provided at least 3 of the measures: (a) low documentary and data requirements as
appropriate; (b) low rate of physical inspections and examinations as appropriate; (c) rapid release time
as appropriate; (d) deferred payment of duties, taxes, fees and charges; (e) use of comprehensive
guarantees or reduced guarantees; (f) a single customs declaration for all imports or exports in a given
period; and (g) clearance of goods at the premises of the authorized operator or another place authorized
by customs.

WTO has been supportive of the AEO concept through its trade facilitation agenda. Each Member of
WTO shall provide additional trade facilitation measures related to import, export or transit formalities and
procedures, pursuant to paragraph 7.3, to operators who meet specified criteria of AEO.

The policy and agreement of both WTO and WCO are promoting TF and AEO. The international trade
and transport communities have experience and knowledge that can benefit Customs administrations in
the management of their facilitation and security responsibilities.

The European Union (EU) was the first to adopt the broader definition espoused by the WCO by requiring
an AEO to demonstrate: (1) an appropriate record of compliance with customs requirements, (2) a
satisfactory system of managing commercial and, where appropriate, transport records, which allows
appropriate customs controls, (3) where appropriate, proven financial solvency, (4) where applicable,
appropriate security and safety standards (EC 2007).
The EU legally established the AEO program through security amendments to the Community Customs
Code 6 in 2008.So far, a total of 69 AEO programs have been established across 79 countries and there
are 16 programs in the development stage.

The traditional customs departments in country like Bangladesh are a controlling authority. They work for
prevention of tax evasion and other risks. They have system of manual inspection and assessment
methods.

The modern customs under the AEO and TF adapt modern customs control processes of scoring
operators based on set criteria has moved customs administrations further from physical controls as the
primary source of identifying risky shipments, to administrative and document based controls.

It is more transparent for the economic operator. The customs will support and facilitate the AEOs for
calculation of risk-assessment for particular shipments helps economic operators to identify weaknesses
in their own supply chains and procedures.

The AOEs can then make any necessary changes to improve their own systems and procedures and
therefore decrease their risk score. This can result in many positive consequences for both the AEO by
decreasing probability of physical checks and for the customs authorities to focus on other high risk non-
compliant economic operators (without license of AEO).

Bangladesh has given accent to Trade facilitation agreement. It is also working to formulate policy of AEO
under financial and technical assistance of USAID. The traditional mind-set of customs department in
Bangladesh is to control everything related to trade and to maximise revenue collection but the TF and
AEO are designed to facilitate self-assessment of the economic operators.

This is a challenging reform for customs department in Bangladesh. By this time government inserted
Section 83E was inserted by section 3 of Finance act 2017 to allow AEO under customs act, 1969.

The private sector should take advantage of this opportunity to forge new and appropriate alliances with
Customs, to assist Customs administrations with their security-related mandates.

The system will help country branding, build Customs-Business trust, bring international recognition and
will reduce multiple and complex reporting requirements. AEO companies having their internal security
will automatically improve marketability to potential clients across the world.

The writer is a legal economist. Email: mssiddiqui2035@gmail.com