Paul Van den Brande
Associated Partner
Just in Time Management Group
Eddie de la Rivière
Member of the Expert
Team Just in Time
Just in Time Management Group
Content
Just in Time Management Group do for You?
A road-map towards a totally facilitated and secured supply chain!
Due to the European customs reformation, the concept Authorized Economic Operator or AEO was introduced in 2005. The customs philosophy behind the concept was not simply granting a preferential status to reliable customs traders, and offer them a tangible package of advantages. The real purpose for the need of a provision such as AEO is creating a totally facilitated and secured international supply chain from the manufacturer to the importer.
Reason behind the introduction of the AEO-concept
It all started with the terrorist attacks in New York 2001. Safety of the supply chain became a magic word in the US. They were, and still are, convinced unsecured supplies could harm the nation. A lot of initiatives were taken such as Container Security Initiative (CSI), and Customs-Trade Partnership Against Terrorism (C-TPAT). Apparently, the US wanted co- operation from their trade partners all over the world, and insisted to take necessary measurements in order to make the supply chains safer. The World Customs Organization (WCO), the only intergovernmental organization exclusively focused on customs matters, participated in this security program and created the SAFE-framework. In the meantime WCO also considered a trade facilitation, and already added it on the agenda in 1996.
Of course, the European Union, being member of the WCO, couldn’t ignore these safety policy, and made some important decisions to establish a secured trade. Europe added the ‘security amendment’ to the customs code. But, on the other hand, the Commission was aware about the fact these safety measurements may not lead to impediments for the supply of goods. The Commission connected the safety measurements with the concept trade facilitation, originally introduced by the WTO. Trade facilitation is of great importance, especially when related to the customs procedures. It creates opportunity for simplification of customs processes. Keeping a good balance between both : facilitation and security, became the goal! Provisions for a facilitated operator were adopted in the customs code.
The European AEO concept, fully or partly
As it is in general a concept of combined security and customs matters, the operator can opt for AEO customs procedures or AEO security, separately. Anyhow, the status or authorization is granted by the customs authorities.
Certified for AEO customs procedures offers the operator the opportunity using simplified customs procedures. Within this scoop he can enjoy several advantages related to his customs procedures, but of course not related to security matters. Such an operator has a risk to be restricted at security level.
Certified for AEO security only offers the opportunity to enjoy facilitation at security level. Regarding the customs procedures, it will be less easy, sometimes impossible, for the operator to get simplified procedures.
Before starting the application process, the operator should consider rather to go for a full authorization, maybe not for a single certificate. It certainly will create extra workload in case future full certification seems to be more appropriate. Besides, a single certificate doesn’t offer full advantages, and will injure the logistic partners in the supply chain.
Benefits AEO will offer and to whom?
At the start of AEO introduction, it was not very clear which benefits the AEO status could offer to the operator or traders. A lot of operators thought the cost and time for getting certified was not in balance with the outcome. Besides, they were focused too much on direct profit. Today, many of them are aware about the return on investment & benefits they may have when they choose for a supply chain with AEO certified co-partners.
Following main benefits may be distinguished:
1) Facilitated application procedure for simplified customs procedures
Only for operators certified for customs procedures, combined or not with security. Here two advantages are obvious:
2) Notification of physical visitation
Only for operators certified for security, combined or not with customs procedures.
Customs authorities will inform the operator about their selection of the cargo for visitation, only in case the operator has lodged previously his declaration, and the customs visitation is not influenced by this notification.
3) Minimum data set for summary declarations at entry and departure
Only for operators certified for security, combined or not with customs procedures. Remark, this benefit is valid in case the declaration has been lodged by an AEO. Customs agents and transporters who represent an AEO for customs are supposed to be AEO certified at identical level. One additional reason to choose for AEO-partners!
4) Less physical and administrative customs visitations
For all types of AEO. Remark, full AEO status offers the maximum benefit! Full AEO status opens the gate for ‘green lanes’ in the supply chain. Green lanes are exempted of custom visitation from departure to arrival, also between EU member states and third countries on condition international country to country agreements are available.
5) Priority visitations
For all types of AEO: planned visitations are handled with high priority. Selected cargoes are released within a short time. This offers minimum delay, and guarantees reliable delivery schedules.
6) Free place of visitation
For all types of AEO: free choice of location where goods must be presented for customs visitation is granted. The operator can opt for a place in or nearby his premises. This advantage also offers minimum delay for the delivery of goods.
7) Exemption or reduction for customs bails, bank guaranties
Only for operators certified for customs procedures, combined or not with security. Operators are exempted from securing for safeguarding the customs debts. It creates an important financial advantage, taking into account the customs and import VAT dept can be of considerable height. The use of economical customs procedures results in securing 10% of the average stock, while using the customs transit procedure a guaranty of 30, 50, even 100% of the average value of the transported goods can be imposed.
Impact on systems, employees, and the supply chain
Customs authorities only grant the AEO status to operators working with reliable and self controlling business systems. In particular regarding the preparation of the customs declarations, and the customs business control, authorities require systems which exclude any possibility for fiscal fraud at any time.
It is of great importance, operators have also decent associates and employees in place whom are of good morality, and well educated regarding the customs business. The customs processes must be completely under control and supervised by in-house specialists.
Last but not least, the timeline of supply chain is influenced by the AEO certification. The chain must be totally facilitated, and secured from the start to the end. Enjoying simplified customs procedures results in faster completion of customs formalities and a quick release of goods. As already explained one weak link will disturb the supply process.
But there is also the aspect of co-ordination between the supply chain partners. It is insufficient to set up a supply chain without taking care of the operators involved. One must know who is in charge at any moment. All partners should know the supply chain is supported by reliant co-partners, preferable by fully AEO certified partners! If not, they certainly will be hit directly or indirectly when the supply chain stops, and the final addressee claims his cargo. Any change should be reported and approved by all partners. Using (last minute) sub-contractors for example, must be evaluated very carefully.
Self assessment is the tool to fast certification
Getting certified AEO is a process which can take a lot of time. The customs code mentioned a period of 180 days! Remark, an audit, during which customs identifies some weak positions in the operators system or procedures, results in an larger timeline.
In order to prevent such delays, and keep the timeline as short as possible, it is recommended to complete the self assessment tool as provided by customs before starting the application process. This tool is an questionnaire, divided in sections. Depending on the kind of AEO certificate required, certain sections can be skipped or not.
Completing the questionnaire, the operator himself will find out what the weak points are, and decide first to improve his system and/or procedures. Customs authorities appreciate this very much. The operator will acquire his certificate faster. Besides, the self assessment tool is of great importance for the application of simplified customs procedures. Based on the customs part of the questionnaire the operator gets his authorizations without having any additional audit by customs. Yet another reason to become certified AEO as soon as possible!
Need for certification of the complete supply chain The entire goods supply chain is depending on the co-operation of several partners. Starting with the manufacturer we encounter the exporter in the country of export, the forwarder, the warehouse operator, the customs agent, the carrier and the importer in the country of destination. It goes without saying that one weak link in the supply chain, endangers its efficiency! A partner who is not well certified, or even not at all, will jeopardize the supply chain. Risks to missed opportunities are come into play. In particular just in time deliveries are most vulnerable! It is clear, each partner should be a full AEO in order to enjoy the benefits of a complete certified supply chain without any exceptional burden (frequent physical checks-scanning, etc.)
Therefor, the AEO-concept cannot, and will not be limited to the territory of the European Union. Besides, the WTO launched the trade facilitation! Within Europe we have the member states versus Switzerland, Norway, Iceland, and Liechtenstein. But also countries outside Europe are involved. Supply chains are passing through the continents. Currently, a lot of international agreements are made or under preparation. These agreements will extend the facilitation throughout the complete supply chain, including operations outside the Community. All AEO certified operators will enjoy a cross border benefit, while the supply chain remains secured.
WHAT CAN JUST IN TIME MANAGEMENT GROUP DO FOR YOU?
Whether you are Chairman of the Board, CEO, Managing Director or General Manager within your company, we know that, like all executives, you are alone in the decisions you have to take. Because even if you practice participatory management, there are certain elements of your decision making where it would be too sensitive to share with your board.
We know from experience, that many company heads would like to be able to challenge their ideas with someone who has an identical level of responsibility and comparable experience in company management.
We know that they would like to be able to confide specific assignments to consultants who speak the same language as themselves.
Just in Time Management Group gives you this opportunity.
Peer to Peer: you will not have in front of you consultants who simply carry out benchmarking and who will advise you to apply standardized solutions. We are a consultancy bureau exclusively composed of Partners who have proven experience in general management. Having occupied various positions as board members, captains of industry, CEO., CXO and heads of company , our Partners have chosen to share their know-how, to assist and advise other executives.
