Beyond Time and Cost Savings: The True Value of Trusted Trader Programmes

CIPE’s Head of Trade Programs Aurelio García-Navarrete argues the transformative benefits of AEOs

Businesspeople constantly criticise government bureaucracy, but complaints reach a crescendo when it comes to Customs’ regulation. Successful supply chain management hinges on the ability of border agencies to keep pace with the ebb and flow of global trade.

Over the past 20 years or so, Trusted Trader Programmes (aka Authorised Economic Operators or AEOs), which are now available in more than 100 countries, are a potential game-changer. This proliferation reflects their promise of achieving the required balance between a country’s need to safeguard its territory while allowing goods to flow across its borders as quickly and cost-effectively as possible.

Risk management is the cornerstone of AEO programmes. Customs assess AEO applicant companies to ensure compliance with the security standards in that country. Once certified, a company will receive priority treatment at the border, typically translating to faster processing times, equivalent to fast lanes at many airports for pre-screened passengers.

There has been extensive analysis of AEO benefits in terms of time and cost reductions,1 but little attention has been paid to the transformational value.

The unsung value of AEO programmes lies in their slow but sure transformation of the mindset permeating Customs administrations, a world view based on control and monitoring access, rather than on easing trade. The acknowledgment that not all companies pose the same risk helps in streamlining the movement of safe, legally compliant goods while excluding those goods that pose security or safety risks. Border agencies have the unenviable task of trying to find the proverbial needles in a haystack: AEO programmes reduce the size of this haystack.

Another significant impact relates to the change in border agency perception of the private sector. Historically, the relationship between Customs and businesses has been fraught – this is not surprising when both sides appear to have different priorities. AEO programmes change this dynamic, committing companies to share the responsibility of securing supply chains by implementing various protocols to mitigate cargo contamination.

And, let’s face it, private sector involvement is the best option for making global trade as secure as possible for everyone’s benefit – it is simply unrealistic to expect a government agency and a small group of frontline officials to police the volumes of goods now entering and exiting every country daily.

AEO programmes change how governments control trade and interact with traders in many ways, including:

Previous Mindset   Emerging Mindset 
Private sector = adversary  Private sector = strategic partner + force multiplier 
Focus on control  Balance between facilitation and control 
Physical inspection by default  Intervention by exception 
Focus on goods  Focus on data 
Limited pre-arrival processing  Decisions before arrival of goods and post-clearance controls 
Focus on identifying non-compliance and punishment  Focus on incentivising  compliance 
Individual approach to security   Collaborative approach to security  

Finally, the success of AEO programmes is encouraging other border agencies to experiment along similar lines. Agricultural and health authorities in several countries, including Brazil, Colombia, the Dominican Republic, and Paraguay, have already begun the process of joining the AEO programmes established by their respective Customs administrations.

It is too early to assess how these inter-agency initiatives will pan out but there is no doubt that a ‘National AEO Programme’ encompassing all border agencies has tremendous potential to streamline trade, while also enhancing border security and consumer safety.

In the fast-moving world of trade, change is constant and AEO programmes must reflect this. They must be adaptable, and this requires ongoing private sector input.

The Global Alliance for Trade Facilitation has been supporting the strengthening of AEO programmes in 11 countries in Latin America, working through public private partnership to make trade less burdensome, more accessible, and inclusive.