On 1 January 2008, as we celebrated the New Year, the European Union's Authorised Economic Operator (AEO) system slipped quietly into international trade business practice. In the UK, there are potentially 140,000 traders eligible for AEO status. Yet by the implementation date HM Revenue & Customs had only received 60 applications out of the 2,000 expected by the end of 2008.
So is there a lack of interest from trade in applying for AEO status? A recent poll on the SITPRO website indicated that many traders were favouring a wait-and-see approach. However, HMRC say they are comfortable with the initial response and that it will ensure applications are not unduly held up during the huge learning curve that HMRC Audit staff is currently facing. No two applications will be the same and those received to date come from a wide cross-section of businesses, both large and small. However, the majority (70%) are from SMEs in the traditional freight forwarder, shipping agent sectors.
HMRC's relaxed attitude is supported by the experiences of their American colleagues in Customs and Border Protection Service who confirm that when the C-TPAT programme was launched only 7 traders applied. Following extensive consultation, which resulted in an increase in trader confidence, the membership has built up steadily year on year to 7,800, equating to approximately 50% of the US international trading population eligible for C-TPAT.
Other than continuing talks on mutual recognition between the EU and the US (and potentially China), tangible benefits from AEO status still appear to be sparse. However, the American experience demonstrates once again that patience is required. It is only now, five years after the creation of C-TPAT, that clear benefits from the scheme are starting to emerge. This is due to the ability of trade and US Customs to separate the "known" from the "unknown," dissecting the supply chain and making it more effective and efficient. This has resulted in C-TPAT traders being six times less likely to face examinations than non C-TPAT traders.
The AEO system will present the international trade community with a different culture through the formalisation of the traditional supply chain under a single European, WCO supported, standard. Within this standard also lies a golden opportunity for the establishment of creative trader-to-trader benefits, particularly those relating to "predictability" in key areas of the trading cycle, such as the supply chain, transportation, clearance and delivery.
The future benefits to be had from AEO lie both in the hands of Customs and traders.
Return to SITPRO News: Issue 63, Winter 2007/2008
