Authorized Economic Operator Programs
In the Islamic Countries:
Enhancing Customs-Traders Partnership
3
1. CONCEPTUAL FRAMEWORK
This chapter aims to introduce the concept of authorized economic operator (AEO). The first
section discusses the AEO concept from a historical perspective followed by the guiding
principles of design and implementation procedures of an AEO program. The third and fourth
sections lay out the benefits of the AEO status and its contribution to more trade. The last two
sections discuss the benefits of mutual recognition agreements (MRAs) and the involvement of
small and medium sized enterprises (SMEs) in the AEO programs.
1.1. The Authorized Economic Operator Concept and Its Brief History
In the last three decades, the world has witnessed a whirlwind of technological progress in
information and communication technologies, globalization of the supply chains and an ever-
increasing number of stakeholders in international trade. Meanwhile, the resulting new ways
of doing business came under increasing threats and risks that require more resources,
knowledge, experience, skills and technology than a private company can alone possess
(Campos et al, 2017). As a result, along with these companies, Customs Authorities started to
search for ways to improve their processes and technologies to develop and sustain quicker,
smoother and safer movement of goods across borders.
Trade Facilitation (TF) has come up as the answer to the problem of increasing levels of
uncertainty in global supply chains. The principal objective of any TF measure is to increase
the flow of goods, services and people across countries without abandoning the security of
these flows or the ability of governments to collect border taxes (Moïsé, 2013). One such
measure is AEO program which is the subject matter of this report.
The AEO concept is built on the Customs-to-Business partnership model introduced by the
World Customs Organization (WCO). Accordingly, to guarantee the common objectives of trade
facilitation and supply chain security, traders voluntarily meet a broad range of criteria and
cooperate with Customs Authorities. The success of an AEO program, consequently, depends
on the nature of the relationship between Customs and the AEO which should be based on the
principles of mutual transparency, impartiality and accountability. In other words, the
Customs Authority expects the AEO to comply with Customs legislation and in return the AEO
expects Customs to provide support to achieve this.
1.1.1. Antecedents
The earliest AEO program in the world belongs to Canada, called as the Partners in Protection
(PIP). It is a cooperative program between private industry and the Canadian Customs to
enhance border and trade chain security. This program was launched in 1995 as a voluntary
program and will be discussed as a case study in the next chapter.
The second AEO program has been implemented by the US since 2002 a plethora of security
measures were put into use by the US government such as Container Security Initiative (CSI),
Customs-Trade Partnership against Terrorism (C-TPAT), Maritime Transportation Security Act
as well as Smart and Secure Trade Lane (SST).
To sum up, the main two duties of Customs Authorities all around the world were collecting
taxes and combating illegal trade before C-TPAT. However, after the 9/11 attacks, domestic
security has become another duty of Customs worldwide.