Authorised Economic Operator (AEO)

Definition, Relevance, and Application

In the last decades, economic development has shown an increasing tendency towards an interconnected and intertwined world. The volume of cross-border trade with goods and services has grown steadily. According to trade statistics from the World Trade Organization (WTO), global trade has risen from 6.2 trillion USD in 2001 to 22.4 trillion USD in 2021. This is a growth of 260%.

On the downside, international trade has become more vulnerable to disruptions caused by terrorism and international cross-border crime since 2001. Enhancing the security of international supply chains, from the manufacturer of a good to the end consumer, as well as increased compliance have therefore gained more importance. In response to the heightened security requirements and to make international trade more resilient and secure, the World Customs Organization (WCO) adopted the SAFE Framework of Standards in 2005. It is a set of recommendations targeting customs organisations to establish standards that provide supply chain security and facilitation. The SAFE Framework marks the global standard for the so called “Authorised Economic Operator” (AEO) programmes.

What is an “Authorised Economic Operator” (AEO)?

An AEO is defined by the SAFE Framework 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”.[1] AEOs are companies which fulfill the compliance and security criteria as defined by the WCO. Thereby, they present a lower risk to customs and other border authorities. By joining an AEO programme, companies benefit from reduced inspections on goods and quicker clearance times at borders.

This risk-based approach is also beneficial to customs and other border agencies. While the volume of trade increases continuously, the resources available to customs authorities have remained fairly the same. There is a high demand for a risk-based and targeted approach to facilitate legitimate trade and to reduce bureaucratic burdens at border crossing points. An AEO programme can support the customs officers to focus their limited resources on high-risk shipments instead of inspecting every single cargo. Advance electronic data, risk management techniques and security technology allow them to operate more efficiently and effectively while strengthening the supply chain security.

The AEO approach is anchored on Article 7.7 of the WTO Trade Facilitation Agreement, which establishes trade facilitation measures for authorised operators. Moreover, the Revised Kyoto Convention Standard 3.32 establishes special procedures for clearance and other customs procedures for authorized persons.

AEO programmes as a mutual trust environment

The main idea behind the AEO Programmes is to create customs-to-business partnerships that enhance security along the supply chain. This is approached by creating a mutual trust environment and facilitating legitimate low-risk trade. The programmes are open to all supply chain actors involved in the international movement of goods. Not only companies that manufacture, export or import goods and services can apply for the AEO status. Also, other operators, in particular intermediaries such as carriers, freight forwarders, clearance agents, warehouse-keepers, and ports, airports or terminal operators may receive benefits through the AEO status. Intermediaries may receive more benefits when handling cargo from exporters, importers and manufacturers that have such a status.

Customs authorities consider entities with AEO status as reliable and secure partners. The companies submit a self-assessment of the compliance and security criteria. Additionally, customs authorities verify through onsite visits of the premises and operations of the applicant that they comply with specific requirements.

Challenges in implementing AEO programmes

Despite the potential benefits of AEO programmes to both the public and the private sector, there are yet some obstacles that prevent a full implementation of the approach in many countries. These lead to a stagnating usage of AEO programmes and hinder the full realisation the benefits for all actors involved. Main challenges related to implementation include:

• Customs administrations don’t have enough resources to apply risk management practices and to train the staff in supply chain security.
• A lack of recognition of the AEO status by other border authorities.
• Insufficient clarity about programme design and purpose.
• Low flexibility in eligibility requirements.
• Missing stakeholder involvement and private sector development.
• Inconsistencies in the application of benefits at ports and border stations.
• Barriers to certification, and participation by SMEs.

Opportunities exist to realise greater benefits by fostering the cooperation within government agencies and between the public and private sector.

Implementing AEO programmes as a trade facilitation project

The German Alliance for Trade Facilitation supports partner countries to develop and strengthen risk management, e.g. through the support on implementing AEO programmes. The tailor-made projects address challenges with concrete solutions.

Read more about concrete measures in

• Indonesia (completed project)
• Serbia (in implementation)

Author: Alusha Talvar, Specialist for Monitoring and Evaluation, German Alliance for Trade Facilitation
Editor: Pia-Christine Binder, Specialist for Communication, German Alliance for Trade Facilitation

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[1] Source: https://tfig.unece.org/contents/authorized-economic-operators.htm

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