Today in Dubai at the Global Trade and Development Week we in KGH presents our new AEO and Trusted Trader Support tool, AEO360. As the father of AEO this is a proud moment for me.
AEO360 takes the AEO instrument, that today is fundamental for world trade, to a new level. There are AEO sceptics and naturally, there are AEO programmes in some countries and regions that for many reasons are not delivering to their potential. However we have also over the last five years seen the opposite, the design, development and implementation of a new paradigm of holistic AEO and Trusted Trader Programmes that includes the original ideas and the practical philosophy that works on the ground. We have seen excellent examples like Australian Trusted Trader, AEO Brazil and UAEO piloted in Dubai for the United Arab Emirates.
The World Customs Journal published an academic article about the new AEO paradigm earlier this year and in this article I summarize how the AEO instrument now is moving into becoming the fundamental control strategy and trade facilitation platform for modern Customs administrations, and for other Government agencies involved in global trade.
Back to the future of Customs: A new AEO paradigm will transform the global supply chain for the better: http://worldcustomsjournal.org/archive/volume-11-number-1-march-2017/
One of the challenges areas that has been discussed over the years is how to make sure that a company is compliant and maintains or improves the compliance status over time. Another challenge has been how AEO companies, and Governments can, ensure that the intended benefits of an investment in a compliance management model are met. We now have an answer to those questions and a solution for the challenges. It is called AEO360.
About fifteen years ago, we started to design, develop and implement compliance management programs for customs and trade. These programs were based on scientific and academic research about how we can treat low risk operators. A decade before that, advanced customs administrations had changed control strategies into risk management. We started to know how to detect high-risk and how to target and treat those risks. What we did not know was how to treat those companies that in the same model identified as low risk. We needed a new complementary model for that since risk management in itself is a way to address resources to the most prioritized areas.
In the Customs world, compliance management was introduced as Authorized Economic Operators, AEO. Under the AEO banner, Governments started to identify the indicators and areas that makes a compliant trader compliant. What are the different processes, competences, procedures, capacities and systems that makes company more compliant in relation to national and international law, policies, regulations and procedures? The idea was simple, if a compliant trader can be supported to maintain or even improve the compliance level, then Customs can direct more of its resources to high-risk areas like tax fraud, terrorism and organized cross-border crime.
The first program for compliance management in customs was the Swedish Stairway Concept introduced in 1999, still considered as one of the best AEO programmes in the world. When the Stairway was introduced, all Key Performance Indicators in Customs improved and at the same time independent research studies proved that, the AEO companies saved between 42-63% of their costs. At the time, Sweden ranked at the top of World Bank Doing Business Review, Trading Across Borders.
Compliant traders are more profitable and Government became more efficient at the same time.
It was all done by introducing a model to measure compliance levels and to maintain or even improve the compliance level over time, while at the same time making the process faster, more predictable and less costly for all stakeholders involved. AEO is about voluntary self-assessment, validation of competence, capacity, processes and systems, risk mapping of common risks – and how to manage and monitor the compliance and risks over time.
The history of AEO has been documented many times and today more than 70 countries have AEO programmes and another 30 countries that are developing programs right now. A big part of international trade is handled by AEO operators. There are more than 50,000 AEO companies in the world and I predict that there will be twice that many in just a few years’ time. If we adopt the new paradigm of AEO. It is not only that these new AEO programmes are more efficient and deliver more benefits to both Government and Private Sector, also the Mutual Recognition Agreement instrument (AEO MRA) becomes more productive when two modern AEO programmes are linked together, especially if they include more than one agency in both ends of the supply chain.
We have also seen development of new Key Performance Indicators for AEO measuring speed, predictability, costs and services. This is a necessary change to build and ensure faith in the new paradigm of AEO. Every country with an AEO programme should introduce these performance measurement mechanisms as soon as possible to establish transparency and effective results.
For many years, there has been a focus on the first part of an AEO programme, mainly the authorization process. For me a certification is a starting point. It is really what happens in the process after certification that is important. How in partnership, Customs and Business, can ensure compliance over time and how to introduce early warning systems to detect errors as well as deliberate attempts from organized crime infiltrate and use legal and compliant supply chains.
The crucial key success criteria for an AEO programme is the management, monitoring and re-evaluation of an AEO companies, ensuring that companies with AEO status stay compliant and improve their compliance, while at the same time making sure that they receive the benefits they were offered. So far, we have had poor support for the second vital part of the process, which has caused problems and challenges for AEO programmes around the world.
That is why it why we are very happy to introduce AEO360.
AEO360 is a new open source tool, compatible with all systems, that is specifically designed and developed to support AEO and Trusted Trader programmes. AEO360 supports all parts of the process for all stakeholders.
It has been designed and developed by people who have validated, managed, monitored re-evaluated thousands of AEO companies around the world. AEO360 is also designed to manage and monitor the AEO status of a company, by the company – on local, regional or multinational level, ensuring that agreed compliance levels and benefit levels are maintained.
AEO360 make the new paradigm of AEO go from being a win-win initiative to a win win-win-win program for the greater good.
KGH is global market leader on AEO programmes and has delivered AEO and Trusted Trader programmes to Customs administrations all around the world. We have supported many hundreds of companies to become and maintain their status as trusted traders.
When we are now introducing a new interactive digital service and system to support Government agencies in operating AEO programmes and to support AEO companies ensuring their compliance and benefit levels, we are are offering a systema nd services that supports all steps of the AEO process, also management and monitoring of AEO status. It is the first tool and service of this kind in the world designed and developed based on our extensive knowledge of global AEO best practices.
As our KGH group CEO Lars Börjesson said in the Press Release for AEO360:
“KGH is a company focusing on innovation in all our businesses; consulting, operations and digital. The new AEO360 solution is an important addition in our digital offering. Global Trade is developing rapidly and we are in the center of that development support both Government and Private Sector with new advanced services and systems solutions. AEO360 is another building block in our support for companies to become more compliant and efficient. AEO 360 As part of KGH new digital agenda, supporting our mission to facilitating trade for sustainable growth”.
If you want to know more about AEO, you can contact me or anybody in KGH. I will end this blogpost article with another quote.
Jon Landau once said, “I have seen the future of rock’n roll and its name is Bruce Springsteen”. Today we have seen the future of global trade, and its name is AEO360.
Dr. Lars Karlsson
Reference: World Customs Journal, Volume 11, Number 1, March 2017, Back to the future of Customs: A new AEO paradigm will transform the global supply chain for the better