This article co-authored by Mr. Pranay Maloo (Manager) and Mr. Samarth Bhargava (Dy. Manager)

Customs authorities have been at the forefront in controlling and administering international movement of goods to and from India. With the objective to secure and facilitate international trade, the measures undertaken by Customs have always been designed to ensure that proper duties are charged and unlawful import or export of goods are checked. Evolving requirements for a secure international trade have always further been served by the cross border clearance procedure adopted by Customs. 

Traditionally, nearly every consignment imported into or exported out of India had to pa ss through the procedure of physical inspection, appraisal, assessment, and evaluation. Such a method of verification had a bearing on the document processing and border compliance time and led to increased cargo dwell time. 

However, the traditional approach could not keep pace with the exponential growth in trade volumes and posed a challenge for the Customs authority. Also, increasing complexity of international trade and a strong focus on maintaining global security standards made it difficult for authorities to continue with physical examination and verification of import and export consignments. 

Introduction of Risk Management System 

The aforementioned lacunae in the existing process led to the introduction of the Risk Management System (RMS). RMS was introduced as a measure of trade facilitation to overcome existing problems faced by both Customs and businesses, and to bring the Customs process on par with international best practices. RMS focused on the use of technology to assist the Customs authority in undertaking clearance processes hitherto undertaken manually. 

An important component of RMS was to provide for special Customs clearance procedure for a certain class of persons who demonstrated a good track record in terms of Customs compliance and in meeting specific criteria laid down by Customs. This led to the introduction of the Accredited Clients Programme (ACP). Under this programme, accredited importers/exporters were allowed clearance of their consignments on self-assessment basis with limited scrutiny by Customs, based on random verification. Such facility was made available to importers across all ports in the country. Thus, accredited clients formed a special category of persons who had the privilege of simplified Customs clearances. 

The Step towards AEO Programme 

In 2005, the World Customs Organisation (WCO), of which India is a founding member, adopted the SAFE Framework of Standards to Secure and Facilitate Global Trade. Recognising the need to shift from inspection of every consignment to selective but effective inspection, these framework focused on the development of a set of international Customs standards developed by WCO which can be used by all members to ensure that the international supply chain is not burdened with varying requirements under different jurisdictions. 

In line with the SAFE framework, India introduced the Authorised Economic Operator (AEO) programme in 2011 which later subsumed the erstwhile ACP programme. AEO accreditation is a voluntary programme for all Importers, Exporters and other persons involved in the international supply chain such as Customs House Agent, Warehouse Operator, etc. In the context of an Importer and Exporter, the programme provides various tangible benefits such as faster Customs clearance, simplified Customs procedure, duty deferral, paperless declaration, etc. 

AEO - A Game Changer with a Win-Win move 

The AEO programme becomes important from a business perspective as well. AEO as a concept has been adopted by counties such as China, Japan, Malaysia, Thailand etc. Further, the execution of MRA (Mutual Recognition Agreement) by the Indian Customs Authority with several foreign customs administration, helps Indian AEO-accredited businesses to get a recognition of a ‘safe and secure business partner’ outside India, with the added benefit of seamless movement of goods across borders. Similarly, consignments of an overseas vendor, who is AEO-accredited in his country, would be seen as more reliable and secure than others. Further, with Indian importer also being AEO-accredited, it would be an ideal supply chain from both the importers’ and Customs’ perspectives. 

True benefits of this scheme were visible in the latest Time Release Study – 2019 conducted by CBEC - Jawaharlal Nehru Customs House, where the average release time for AEO bills of entry was recorded at 75.31 hours as against the average release time of 123.24 hours for normal bills of entry. Needless to mention, a 35-40% decrease in dwell time adds to the efficiency of the supply chain and provides necessary comfort to the operations team of a business. 

With recent changes aimed at simplifying and rationalising the AEO programme, the Customs authority is promoting ease of doing business and encouraging business entities to apply for AEO by organising workshops and establishing specific AEO cells at various locations. The efforts of the Customs can be seen in a recent circular. Indian Customs has launched an ambitious programme, Turant Customs, - considered as a comprehensive package of various elements implemented time-to-time and aimed at improving the Ease of Doing Business and overall customs clearance process. 

The AEO programme is currently at a nascent stage and slowly gathering steam across the businesses in India. With a focus on trade facilitation and on benefits for entities for maintaining assured standards of security coupled with international recognition, the AEO programme could be a game changer for the international supply chain.