How AEO Certification Enhances Supply Chain Security and Efficiency?
As more companies worldwide are willing to do business with people from other countries, the last decade saw a considerable increase in the demand for importers/exporters and logistics solution providers. With the boom in these industries, the customs law in several countries have evolved as well.
India’s import/export trajectory has significantly grown in the last few years, and with that, the customs law has become stricter and more vigilant.
To monitor these industries in parallel, the government of India introduced the ‘Authorized Economic Operator (AEO)’ accreditation. An AEO certification is given to businesses involved in the cross-border movement of goods in compliance with the Indian Customs Law. An AEO accredited business also operates in accordance with the World Customs Organization (WCO) supply chain security standards.
An AEO status enables custom authorities to focus less on compliant business and more on the risky or non-compliant ones. The businesses with an AEO accreditation operate in adherence with the customs law in India and share the government responsibilities. The government also rewards the compliant businesses with additional benefits.
Origin of the AEO Scheme
The Customs Law in India were not very strict in the past few decades. Some corrupt supply chains were being used for illegal and terror activities. The U.S. government introduced the AEO scheme on the 11th September, 2001, which alerted many other national governments to follow suit. Since supply chains are largely controlled and operated by private businesses, the custom authorities started partnering with them to ensure safer and more transparent global trade operations.
The CT-PAT (Customs Trade-Partnership Against Terrorism) program was launched by the U.S in 2001. Subsequently, the World Customs Organization (WCO) also adopted the SAFE Framework of Standards in 2005. This framework is inclusive of three primary partnerships: Customs-to-Customs, Customs-to-Business, and Customs-to-Other Government Stakeholders. The AEO program falls under the Customs-to-Business pillar.
Introduction of AEO India
India introduced the AEO program in 2011, aligning it with the SAFE Framework in 2012. Further in 2016, both the Accredited Client Program (ACP) and the AEO scheme were merged to create a unified facilitation system. This was further simplified in 2018 to ease processing and financial requirements. The AEO India scheme is not mandatory. The businesses voluntarily applying for the AEO accreditation are those that are involved in the supply chain and are willing to seek associated benefits (provided they meet the eligibility criteria).
Key Benefits of AEO Certification for Indian Businesses
Indian businesses involved in international trade can gain strategic and operational benefits from an AEO certification. This recognition not only enhances the efficiency and security of supply chains, but also ensures compliance with the customs laws.
The benefits can be listed as below:
- Faster customs clearances
- Lower transaction costs
- Reduced inspection times
- Direct Port Delivery (DPD)
- Direct Port Entry (DPE)
- Deferred Duty Payments
- Priority Processing at Customs Offices
All these benefits significantly reduce the Cargo Hold time, ensuring faster cash flow and quicker transportations.
Moreover, businesses with an AEO India tag gain recognition from the government as a trusted business partner in global trade. They get other potential benefits such as the Mutual Recognition Agreements (MRAs) with other countries. All these benefits collectively build a more secure, smooth and cost-effective logistics ecosystem.
How AEO Certification Strengthens Supply Chain Security and Boosts Efficiency
An AEO certification enforces businesses to comply with the regulations, thereby enhancing both the security and efficiency of supply chains. The supply chain regulations and security standards are set by the World Customs Organization (WCO) and AEO helps to establish a trusted network of reliable trade and logistics partners.
An AEO certification acts like a government-backed quality approval, allowing these businesses to operate without any restrictions with their global partners. For instance, companies with AEO certification report customs clearance times reduced by up to 50%, significantly boosting their operational efficiency. They also receive the goodwill of organizations like the WCO, as trustworthy and reliable.
This trust allows the authorities to carry out reduced inspections on these businesses and focus their resources on other non-compliant and high-risk businesses.
Final Thoughts
Receiving an AEO certificate including AEO T2 Certificate from the Indian government is not only honorable and a proof of operational excellence, but also helps businesses benefit from smoother customs processes and stronger international partnerships. Companies involved in international trade and supply chains should try getting this accreditation for better growth and excellence in their field.