A real aid to frictionless trade

Forth Ports' Grangemouth port in Scotland now has AEO status. Credit: Forth Ports
Forth Ports' Grangemouth port in Scotland now has AEO status. Credit: Forth Ports
AEO status was confirmed for Forth Ports' Scottish terminals in in March 2018. Credit: Forth Ports
AEO status was confirmed for Forth Ports' Scottish terminals in in March 2018. Credit: Forth Ports
In the Netherlands, port and terminal operators can profit from AEO benefits. Credit: WikiImages, pixabay, CC0
In the Netherlands, port and terminal operators can profit from AEO benefits. Credit: WikiImages, pixabay, CC0
Industry Database

Even though ports can benefit from Customs fast-tracking and priority treatment through AEO certification, it’s still not widely adopted. Felicity Landon finds out why.

From the electronic exchange of information to the establishment of ‘Single Windows’, trade facilitation was a major item on the agenda at the IMO’s recent special event on ports.

As part of the drive for reducing border delays, achieving smoother cargo flows, improving security and reducing logistics costs, the push for AEO — Authorised Economic Operator — status was highlighted.

Bill Gain, global lead, trade facilitation & border management at the World Bank Group, said 60% of the cost of an imported pineapple could be logistics related, including technology, border clearance and other issues. So, he urged ports and others in the supply chain to ‘leverage’ opportunities such as AEO and Safe Trader status.

As the UK prepares to leave the European Union, and with protracted uncertainty about Customs arrangements post-Brexit, AEO is now frequently being mentioned by British government ministers. Meanwhile, the UK Border Force and HM Revenue & Customs are actively encouraging ports and others to go for AEO certification, says Miles Vartan, managing director of Customs and AEO compliance specialist Vartan. “They are saying, ‘we need you to be trusted partners when we leave the EU’,” he says. “Regulatory authorities are often stretched, so they need ports to be authorised in order to manage the situation post-Brexit.”

He warns, for example, that 4.5m trailers arrive by ro-ro from Ireland into the UK mainland every year – all at present in free circulation within the EU. “You don't need much of a delay to potentially create a logjam; so if AEO can officially become a key element in the government's frictionless trade strategy, this certification can help to reduce the number of trailers to be stopped and inspected.

“At the same time, I know of at least one ferry operator which is training its own staff to do Customs clearance – because there is a lack of people in the UK who can do this, and many are nearing retirement age. And yet the demand on the industry is going to go through the roof.”

Next steps

Mr Vartan, who serves on the working party for AEO on the UK's joint customs consultative committee (JCCC), says there is the potential to increase AEOC's (AEO Customs Simplifications) status, linking it to the fast-tracking of applications for Customs simplifications such as Customs warehousing applications or the provision of other services which would require Customs approval. “If a port has AEO, they would then be able to put these solutions in place relatively quickly.”

AEO was created by the World Trade Organization (WTO), as part of its SAFE framework of standards, designed to secure and facilitate global trade. The framework is based on countries having mutual recognition to give priority clearance to AEO exporters and importers across borders. The WTO sees AEO as the future of international trade – through creating Customs-business partnerships, it can give approved, legitimate traders priority and deliver simplified procedures, so that Customs authorities can focus on targeting the 'unknown' and possibly illegal.

Early on, take-up was far greater from operators and ports in the rest of the EU, but British ports have been catching up and now most, if not all, major groups are either certificated or on the way there.

However, Holly Tonge, senior consultant at Vartan, suggests that Customs authorities at least in the UK would do well to focus on the partnership approach, working to achieve continued improvements in the AEO standard and application process, and ensuring it delivers more benefits. In short, she says: “We would call on Customs to increase the benefits of AEO to ports. Getting certification is a massive task – the scope of work is huge, and there needs to be more in it for ports. What could Customs do to make the running of an AEO port easier? What about speedier examination processes? Or could Customs, who are short of staff, train port workers to do X-ray examinations on their behalf? They should be helping ports fast-track items through the port.”

Perhaps companies are not going to specifically choose a port just because it has AEO; but if they have high value goods, for example, they might well try to cut out ports without AEO, she says – “and that is what Customs are looking for. As such, ports should become part of a green, fast-track route.”

Counting the benefits

Frank Heijmann, head of trade relations at the Customs Administration of The Netherlands, says it is important to distinguish between types of port operations when deciding on the benefits of AEO.

“Basically, port authorities in The Netherlands are not considered as 'economic operators' that are part of the international supply chain and AEO benefits are not applicable nor useful for them,” he says.

“Port and terminal operators, on the other hand, are 'economic operators' and can profit from AEO benefits, such as fewer controls, priority treatment and prior notification of controls.

“In some countries, port authorities are involved in managing warehouses or terminal premises. For these port authorities, it may be useful to apply for AEO authorisation, as they can be considered an integrated part of the international supply chain and are taking part in the supply chain as economic operators.”

However, he says the main benefit of AEO doesn't and shouldn't lie in receiving benefits from Customs. “An AEO licence provides a kind of independent quality/compliance level proof for a company, which it can use within its business relationships. We see an increasing number of companies who only do business with AEO-certified economic operators.”

From Dutch Customs' point of view, the more companies that are AEO certified, the better, says Mr Heijmann.

In the Netherlands Customs Enforcement Vision, the long-term vision is achieving an optimum balance between enforcement activities and trade facilitation, he says. “AEO companies are considered a low-risk category group with a good relationship with Customs and are given all AEO benefits, such as fewer controls and prior notification of controls, which increases the predictability of inspections – this is seen as one of the most valuable benefits.”

Meanwhile the main focus of Dutch Customs in the more traditional enforcement/risk management measures will be non-AEO certified companies, says Mr Heijmann. “In general, one cannot say that AEOs are controlled less than other companies – the total theoretical amount of supervision on them by Customs doesn't differ from other companies. However, the supervision is shaped in a different way. Non AEOs receive more traditional inspection measures as there are physical controls and verification of Customs declarations, whereas with AEOs their internal compliance measures are monitored, so the supervision is done more at company level, outside the logistics chain.”



BUILDING CONFIDENCE AND REDUCING RISK

AEO status gives customers confidence in a port's Customs procedures and security, while refreshing and re-emphasising processes within the port, according to Stuart Wallace, chief operating officer at Forth Ports.

Having achieved AEO initially for its London Container Terminal, the group expanded its AEO certification to cover the whole of the Port of Tilbury and then rolled it out across its Scottish ports, where AEO status was confirmed in March (2018). The certification is for both AEOC (Customs Simplifications) and AEOS (Security and Safety).

“I am starting to have different types of conversations with customers about our processes and exchange of information – AEO means we have a tick in the box already,” says Mr Wallace. “We have been through the process with Customs and this demonstrates that what we say we are doing is actually happening on the ground.

“We have to go through regular audits by HMRC – they take this very seriously and follow up with detailed checks, and that ensures we remain focused. This gives us, and our customers, comfort that we have discipline in our business.”

AEO has also helped to upskill some key people in the business, who are now much more informed, educated and aware of the Customs aspect, he says. “The whole process of gaining AEO accreditation was positive from a business point of view; it forces you to ask, ‘are we as efficient as we can be?’. It was a good internal look at what we do and how we do it.”

The group first embarked on AEO before Brexit entered the arena. “Part of the ethos of our business is how do we make things simpler and support customers' supply chains. It is also about recognising that everything is becoming more IT dependent and more about systems, processes and data exchange.

“None of us know just what the final outcome of the Brexit deal will be, but absolutely clarity with the exchange of data is going to become more important,” he says. “My view is that Customs will see supply chains that are made up of more approved AEO people as end-to-end trusted supply chains, and the risk profile is therefore substantially reduced for the goods being handled.”

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