Panorama

Perspective on AEO programmes in South America

By Sebastian Galindo-Cantor, Junior Researcher and Gloria Isabel Rodriguez-Lozano, Associate Professor, Universidad Nacional de Colombia

Embedded in the Framework of Standards to Secure and Facilitate Global Trade, which was adopted by the WCO in 2005, is the concept of an Authorized Economic Operator (AEO) that has been widely implemented by Customs administrations around the world. In the South American region, preparations for the implementation of AEO programmes began in early 2008 with the support of the Inter-American Development Bank (IADB) and the WCO, and today, 12 years later, nine of the 12 countries in the region have such programmes in operation, namely Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, and Uruguay.

About the programmes

Although all of them offer security-type certification as provisioned in the WCO SAFE Framework, the programmes are not totally alike and not all can be said to be successful yet. Brazil’s AEO programme is the most consolidated in the region: launched in 2014, it is open to a large variety of supply chain actors, and has the largest number of AEOs with 378 companies having been certified to date. In comparison, Paraguay’s programme was only implemented in 2018, and currently has two certified companies. As for Chile’s programme, although it was established in 2017, it did not have any certified companies at the end of the third quarter of 2019. Peru stands at 129, Colombia at 86, Uruguay at 63, Bolivia at 34, Ecuador at 5, and Argentina at 4.

These figures do not tell us much if not compared with the total number of importers. Let’s do an exercise with Colombia. In this country, 920 companies are recognized as big importers and are already benefitting from a facilitation scheme. Given that most existing and potential AEOs are and would come from this category of importers, we can deduct that only 9.34% of them have adopted the programme. Moreover, of the 177 Customs brokerage companies in Colombia, only 3, i.e. 2.25%, are AEOs.

All the AEO programmes were implemented in phases: once enabling legislation was put in place, the programmes were deployed gradually, with different categories of actors being able to join at different times, mainly due to changing certification requirements that depended on the role each actor played in the supply chain. Some countries also decided to involve other agencies in their programmes, such as health authorities and phytosanitary regulators, following the idea that a cross-government AEO status would bring more benefits to traders.

Colombia’s AEO programme is unique here as it was designed from the start as an inter-institutional programme involving all the authorities with direct control over foreign trade in the country, especially sanitary and phytosanitary agencies. However, to date, out of the 86 companies certified in Colombia, only five are involved in trading goods that are subject to phytosanitary and zoosanitary requirements.

Challenges faced

Countries in the region often face identical challenges. The first one is to provide companies that join the programme with tangible benefits, such as decreased transaction operating times and reduced trading costs. The existence of other facilitation schemes offering benefits to companies involved in foreign trade operations is also problematic. Some countries decided to remove some of the participation benefits associated with these programmes, such as deferred duty payment in Colombia, where the programme took time to gain traction until the national government decided to restrict the application of some benefits to AEOs only.

The second challenge is changing the mentality of entrepreneurs and other regulatory authorities, due to the fact that some entrepreneurs have a somewhat unfamiliar or even negative vision of the role of a Customs administration, and some regulatory authorities may not conceive the notion of risk management in the same manner as Customs.

Another challenge is enabling the exchange of information in an accurate and timely manner between countries in order to enforce Mutual Recognition Agreements (MRAs) properly. These MRAs take the form of “traditional” bilateral agreements as well as multilateral agreements. An MRA of this nature was concluded in 2018 by the Customs administrations of Colombia, Chile, Mexico and Peru, the four countries that form the Pacific Alliance trade bloc. In 2019, two more multilateral MRAs were signed between the Andean Community countries (Bolivia, Colombia, Ecuador and Peru), and between the countries of the Mercosur trade bloc (Argentina, Brazil, Paraguay and Uruguay).

To solve issues related to the use of emails to exchange data on AEO certificates and establish a secure data exchange mechanism, AEO programme officers and information technology (IT) specialists from the Customs administrations of Costa Rica, Mexico and Peru have been working together with Microsoft and the IADB to develop the business functionalities and the technological architecture of an application called CADENA, which is based on blockchain technology. The solution is still in test phase.

There is also clearly a need in Colombia, Chile, Ecuador, Paraguay and Peru to open their AEO programmes to more categories of operators as a means to further enhance supply chain security. Most programmes are open first to exporters. As the WCO highlighted in its Framework of Standards on Cross-Border E-Commerce, one of the ways forward could be to expand AEO programmes in the e-commerce environment. Currently, most AEO programmes, in South America and beyond, are not open to e-commerce platforms or marketplaces and to postal operators and express carriers.

In such a context, the expansion of AEO programmes in the region, in terms of the number and type of companies certified, regulatory authorities involved, and MRAs negotiated, is still work in progress. Consequently, there is a need to undertake studies aimed at measuring the efficiency of these programmes in the South American region and to share experiences on the challenges still faced in each country in order to come up with better provisions and practices, especially in those countries where the programme has not been very successful to date.

More information
sgalindo@unal.edu.co
girodriguezl@unal.edu.co