Authorized Economic Operator - a Brief Note

International Trade: A Background

Traditionally in the Import Export Trade – each country had its own set of standardization and grading allocated to Exporters and Importers which used to be recognized specifically to one’s own Country.

As the global trade continued to flourish and the world became far more connected, industry across the world started pushing for enhanced facilitation and smoother trade.  The challenges being faced on a country to country basis were hampering smooth and free-flowing movement of goods thereby elongating the time being invested in trade, thus leading to increase in cost. Another huge challenge facing the world was the growing terrorism which was taking its shape in varied forms and avenues, one of them being vide international trade.

The International Community was faced with a huge challenge to balance the needs of Industry in terms of facilitating faster and easier trade, and at the same time ensuring utmost security and countering the growing menace of terrorism. Under this background, the World Customs Organization drafted the WCO Framework of Standards to Secure and Facilitate global trade (SAFE). Within this – the Authorized Economic Operator is a core part of SAFE. The aim of this certification is to have a uniform global recognition as against the country-specific one.  

U M Khona & Co: A Background

Our organization has been part of the Logistics Business for over 75 years. Having started from the simple good transport services to now being among the oldest and respected Customs Brokers based out of Mumbai, we have been party to the International Trade Environment for several decades now.

AEO: Our Journey

Originally Indian Customs had recognition and accreditation only for Importers and Exporters. Post the advent of AEO, every single entity in the Supply Chain Network, including Importers, Exporters, Customs Brokers, Shipping Lines, CFS etc are eligible to apply for and qualify for AEO Certification.

We were among the first few Customs Brokers to approach Customs and make an application for AEO in 2016. At that time, AEO was not aggressively introduced in India with barely a handful of organizations applying for and receiving the certification. Post our interaction with Customs Officers who had come for an Inspection – we were educated on and made to realize the true potential, extent, and purpose of AEO.

The focus of AEO is Security and Integrity. Security of data, personnel, premises, processes. Having defined processes for every single activity such that the activities in any organization become process driven and not personnel dependent. For us, being a traditional family run business – initially the scale of requirements under AEO was huge, however, we realized that complying with all the requirements will only help us scale up our business and we did not look back. AEO Certificate contains a unique alphanumeric sequence which is entered into the ICE-Gate systems to ensure the trust based facilitation is extended on PAN India basis.

Post AEO Application Scenario:

Post AEO Application, below elaborated are few cases on how we as an organization set systems in place and made an effort to scale up: (safe to say, none of the below measures were prevalent in pre-AEO application era)

1. Organization Chart with Dedicated Roles & Responsibilities clearly defined
2. Employee ID Cards
3. Access Control Systems vide Fingerprint Security
4. 24 X 7 CCTV recording including Night Vision Cameras
5. Entry of Visitors not permitted inside working areas of office
6. Obtaining ID & Address Proof of All Employees for Police Verification Purposes
7. Secure servers for data storage and retrieval (to name a few)

AEO in 2018:

The Indian Government has moved ahead with an aggressive AEO Programme and Certification and has started extending a host of benefits to AEO Status Holders. Granting AEO status means that the government has a strong level of trust in your organization and the level of checks and stoppage for any import or export transaction is minimal.

We can say with pride that a few years back normal dry container shipments would take anywhere from 3-5 days for clearance post arrival at the port. Today we are able to achieve the same within 10-12 hours of the container landing at the port and attempt Direct Port Delivery across India for our AEO Certified Customers. This has resulted in huge time and cost savings as well as removed the unpredictability about Import Export transactions and instilled a sense of certainty.

AEO benefits and facilitation measures are many, however, despite the same – the feedback from Indian Industry was lukewarm towards embracing this certification. So much so that many among the trade started evaluating whether it was necessary or worth it to go for this certification.

I vividly remember one of our dynamic Additional Commissioners telling a large gathering the below words:

“Do not look at any benefits under AEO. If you are following clean practices, if your organization is doing ethical business - it is your duty to apply for AEO and obtain the status. Benefits will be incidental but it is important for India as a nation to show our serious commitment to the AEO Certification.”

AEO: Our Contribution

Ever since we received our AEO certification in June 2017, it was our constant endeavour to educate our clients on the significance and importance of AEO and have them directly apply to the Customs Department AEO Cell for the same. After all, as Customs Brokers, benefits of AEO are extremely minimal in comparison to that of an Importer or an Exporter. Having gone through the rigorous application and inspection process, and having participated in several governmental outreach programmes on AEO, we truly understood the significance and importance of India ensuring most of its genuine trade partners are AEO certified.

AEO Certification for us as well as our clients is a matter of immense pride and serious responsibility.  It is aimed at a bringing about a wholesome change in the attitude towards EXIM trade of any organization and to awaken each ones’ consciousness on the seriousness of Security & Integrity in doing business. AEO creates a benchmark for companies to know the type of service providers and vendors they wish to work with, for global suppliers to know the type of Importers to do business with and for global buyers to be assured of the security of their transaction whilst dealing with Indian AEO Exporter.

Till date, we have guided and advised all of our clients to aggressively get into the AEO Certification programme and each month a few of them are receiving their certifications. It now has become a Certificate of Pride to be qualified as an AEO.

Being qualified as AEO is simply the start of a journey of serious responsibility and commitment in International Trade.