Summary
Against a background of the technological human and physical infrastructure constraints faced by the UK government in implementing border controls under a ‘no deal’ outcome to the EU/UK Withdrawal negotiations it is recognized UK border controls will be ‘less than optimal’. It is recognized a range of significant issues will need to be addressed if the period of sub-optimal application of border controls is to be minimised. Against this background the UK revenue and customs service ‘plans to increase its use of ‘trusted trader’ schemes (1). This raises the questions: What is this UK Trusted Trader Scheme? How does it operate? Can ACP agro-food exporters benefit from making use of the UK’s Trusted Trader Scheme? This article seeks to explore these issues.
What is the UK’s Trusted Trader Scheme for Importing Products?
The Trusted Trader scheme which the UK government proposes to make greater use of in the post-Brexit period is better known in the EU and beyond as the authorised economic operator (AEO) scheme. The AEO scheme emerged in the post 9/11 era in order to address security concerns while still facilitating the smooth flow of legitimate trade. It was developed ‘to provide joined-up security and customs processes across the global supply chain’ (2).
It provides ‘quicker access to some simplified customs procedures and, in some cases, the right to ‘fast-track’ your shipments through some customs and safety and security procedures’ (3). It also allows AEOs to be authorised to use simplified customs procedures (AEOC), with this permitting ‘a faster application process for customs simplifications and authorisations’ and ‘reductions or waivers of comprehensive guarantees’ required for consignment to be landed. It also allows a process of self-assessment to be utilised (3).
However in the UK formal training for the attainment of certification as an AEO is limited. As a consequence in granting AEO status the UK system focusses on evidence of the exercise of practical competence in the preceding 3 years.
Benefits of AEO/Trusted Trader Status
A standard certified authorized economic operator (AEOS) will benefit from:
- ‘a faster application process for customs simplifications, authorisations’;
- ‘reductions or waivers of potential debt guarantees’;
- ‘a lower risk score – used to determine the frequency of customs physical and documentary checks’;
- ‘consignments being fast-tracked through customs control’;
- ‘reciprocal arrangements and mutual recognition with countries’ which operate recognised AEO schemes.
Criteria for Securing AEO status
Currently ‘anyone involved in the international supply chain that carries out customs related activities ….can apply for AEO status regardless of the size of their business’ (3). This includes: ‘manufacturers; exporters; freight forwarders; warehouse keepers; customs agents; carriers; importers’; and other concerned businesses ‘for example, port operators, secure freight parking operatives, airline loaders’ (3).
In the UK ‘AEOC status is issued to any business that fulfils the specified criteria of having:
- good tax and customs compliance history
- good commercial and transport record-keeping standards;
- financial solvency;
- professional qualifications or demonstrating practical standards of competence in the activity they’re involved in’ (3).
This will involve Her Majesty’s Revenue and Customs Service (HMRC) checking an applicant’s customs and tax records over the previous three years or all the latest available information if the business has been operating for less than 3 years. HMRC will look at ‘whether serious or repeated infringements of customs rules have been committed’ by your business, employees or legal representatives dealing with customs matters.
In addition and applicant needs to show they have ‘procedures in place to identify and disclose any irregularities or errors to HMRC’ and the capacity to take appropriate remedial actions where irregularities are identified. Applicants also need to demonstrate safety procedures are in place for handling agro-food products to meet food safety and SPS requirements. HMRC must also be certain a satisfactory system for handling commercial and transport records is in place.
Companies also need to have in place methods to allow HMRC access to heir customs records and have in place a range of other appropriate administrative systems linked to record keeping and documentation retrieval systems. In addition HMRC will further review the company’s security arrangements to ensure the integrity of cargoes is maintained throughout the supply process. This means company’s ensuring they have in place ‘appropriate security and safety standards to protect the international supply chain’. This requires demonstrating an ability to ensure the physical integrity of access points to cargoes and logistical processes in place for handling any specific agricultural cargoes. Security requirements will also extend to checks on personnel or rather ensuring the company itself has in place procedures for carrying out such security checks.
The UK’s AEO Experience to Date
Unfortunately given the Brexit related border control challenges which would be faced under a ‘no-deal’ outcome to the current Withdrawal Agreement negotiations (for the current state of play in the Withdrawal negotiations see companion epamonitoring.net article ‘UK Withdrawal Agreement Concluded At Negotiators’ Level’, 19 November 2018), the use of authorised economic operators is under-developed in the UK. Many UK companies have found the application process to administratively cumbersome relative to the benefits derived. As a consequence relatively few UK companies have completed the application process.
This needs to be seen in a context where it can take ‘upwards of six months’ and even up to two years to secure AEO status. It has been highlighted how while the application forms are relatively short they ‘require a significant body of detailed evidence’. In this context ‘applying for (and then maintaining) AEO status therefore represents a significant investment of cash and management time’ (2).
This has created a situation where while in Germany some 6,225 businesses have authorised economic operator status and in the Netherlands 1,563, in the UK by July 2018 there were just 630 businesses with authorised economic operator status. More than half of these registered UK AEOs were freight forwarders, with ‘very few small shippers having secured AEO certification’ (2).
In addition the Director General of the British International Freight Association (BIFA) Robert Keen has sought to lower expectations of what can be achieved through using the UK governments proposed Trusted Trader scheme. He has highlighted how it is not a ‘silver bullet’ to deal with post-Brexit customs challenges. He pointed out how ‘under trusted trader schemes, AEO trucks won’t go to the front of the queue’ (2).
Mr Keen noted a certain indifference to date towards the AEO scheme amongst shippers serving the UK market, with many believing this is not an issue they have to deal with since ‘it has been devolved to forwarders’. Yet AEO certified freight forwarders are likely to find themselves seriously overstretched in the post-Brexit period given increased demand. This could leave smaller suppliers serving the UK market struggling to find appropriately certified service providers (2).
While currently the UK uses the EU AEO scheme which has mutual recognition status in China, Japan, Norway, Switzerland and the US, were the UK’s Trusted Trader scheme to diverge from the EU’s authorised economic operator scheme, matters could get complicated. This needs to be seen in a context where the UK White Paper only makes reference to the Trusted Trader Scheme and not the more widely recognized authorised economic operator scheme. (2).
A further point to note is that ‘any end-to-end process for the import or export of goods works only if it works at both ends’. Any autonomously determined UK Trusted Trader scheme which deviated from standard AEO practices would provide no guarantee that the UK scheme would be recognized by the EU27. This could pose particular problems for ACP exports using the UK ‘land bridge’ to serve the Irish market (25).
This needs to be seen in a context where it has been estimated it could potentially take up to 3 years to ‘put new infrastructure in place because ports, airports and other border crossing point operators, which are responsible for funding infrastructure to deliver the border compliance regime, will need certainty about how the border will operate so that they can access the necessary finance and comply with local and national planning processes’ (1).
| Comment and Analysis Under a ‘no-deal’ Brexit outcome in the coming period the UK government is definitely looking to make far greater use of the trusted trade (AEO) scheme. However to encourage greater use of the AEO scheme in the context of border realities which would emerge under a ‘no-deal’ Brexit ,the UK government will need to demonstrate real benefits from participation in such schemes in terms of ease of customs clearance. This will be essential if private businesses are to be motivated to make the investments required to take more of the responsibilities for ensuring customs compliance which the UK government is currently envisaging within its immediate post-Brexit minimal border compliance regime.In this context the benefits derived from obtaining AEO status for customs clearance purposes could increase over time under a ‘no-deal’ Brexit scenario. If this were to be the case ACP exporters should consider giving priority to securing the services of an AEO and ensuring AEO procedures are successfully applied to their exports to the UK market.However given the limited number of registered AEOs in the UK securing such services may not be easy. Larger ACP exporters may therefore need to consider applying directly for AEO status. This would appear to be particularly important for ACP exporters who not only export to the UK but also serve the Irish market via the UK, since these products will have to cross the UK border both as imports and exports. |
Sources:
(1) National Audit Office, ‘The UK border: preparedness for EU exit’, HC 1619 Session 2017–2019, 24 October 2018
https://www.nao.org.uk/wp-content/uploads/2018/10/The-UK-border-preparedness-for-EU-exit.pdf
(2) theloadstar.co.uk, ‘Concerns over number of UK shippers signed up for ‘trusted trader’ status’, 17 July 2018
https://theloadstar.co.uk/concerns-lack-uk-shippers-signed-trusted-trader-status/
(3)Gov.uk, ‘Authorised Economic Operator’, 24 May 2018
https://www.gov.uk/guidance/authorised-economic-operator-certification
(4) theloadstar.co.uk, ‘HMRC can handle post-Brexit declarations, port infrastructure is the bottleneck’, 22 October 2018
https://theloadstar.co.uk/hmrc-can-handle-post-brexit-declarations-port-infrastructure-bottleneck/