Minutes of Meeting – 9th Webinar – 18th March 2021, 10h00 to 11h30 (CAT; UCT +02:00)

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Introduction

Given the current economic climate across the world, and especially in Africa, it is increasingly vital that customs and business find a way to work together to facilitate trade and improve the current trading environment across the region. Authorised Economic Operators (AEO) provide such an opportunity for a customs and business partnership to improve cross-border times and reduce costs.

Although there are several AEO programs across the region, their uptake and employment have been slow. This WCO-ESA-RPSG webinar – the 9th of its kind – aims to encourage a more extensive roll-out of AEOs across the region while providing guidance on how AEO uptake can be achieved inclusively.

The webinar was chaired by Dr Juanita Maree (WCO ESA-RPSG and SAAFF Director) and joined by five leading customs panellists:

  1. Trudi HartzenbergExecutive Director, t r a l a c – Trade Law Centre
  2. Hong Nguyen Technical Officer in the compliance and facilitation directorate Attaché – World Customs Organization
  3. Rae Vivier – Head of Accreditation and Licensing – South African Revenue Service
  4. Larry LizaDirector – Regional Office for Capacity Building, World Customs Organization East & Southern Africa Region
  5. Jacob van RensburgExecutive Coordinator –World Customs Organization East & Southern Africa Regional Private Sector Group.

Outline of the agenda:

  1. Welcome & rules of engagement: Dr Juanita Maree
  2. Panellist discussions:
    1. Trudi Hartzenberg
    1. Hong Nguyen
    1. Rae Vivier
  3. Comfort break
  4. Panellist discussions:
    1. Larry Liza & Jacob van Rensburg
  5. Closure: Larry Liza

1.     Welcome and rules of engagement

A warm note of welcome was extended to the distinguished panellists and all participants with a stake in customs and trade-related matters in the ESA region. Participants were encouraged to mute their microphones and use the chatbox that was monitored throughout the discussion. Panellists switched on their videos when presenting. It was noted that the presentations with all relevant information and the video concerning the webinar would be made available on the WCO ESA RPSG’s website. Attendees were encouraged to visit the website and read through the information.

Dr Maree highlighted three themes that have stood out regarding the webinar:

(1) Gratitude for the panellists making themselves available.

(2) Appreciation for the time and effort by all attendees.

(3) Finally, a vote of thanks for the valuable information offered by panellists and shared by attendees.

Hopefully, we will see a silver lining concerning growing our economy in the African region with the promotion of inter-connectivity in trade facilitation to ensure that it moves forward in a safe, secure, and compliant environment.”

2.     Panellists’ discussions

a.      Authorised Economic Operators What is in the AfCFTA? – Trudi Hartzenberg

The recent big news has been the launch of trade under the AfCFTA on 1 January 2021. To put the discussion of AEO in the broader context of the AfCFTA, there are a couple of important points to note. The AfCFTA is an ambitious, complicated, and integrated project. The 55 States of the African Union are at different development levels, of different economic sizes, and diverse, which poses challenges in negotiations and implementation.

When it came into force (30 May 2019), the agreement’s negotiations had not yet been complete. The COVID-19 pandemic provided a setback for the negotiation process. However, political support has been running high, and Heads of State decided on 5 December 2020 that trade under the AfCFTA should begin 1 January 2021. This decision was an extremely important one; however, negotiations on key issues have not yet been completed. An example is tariff concession negotiations, and some of the Rules of Origin on goods with potential for intra-regional growth are not yet finalised.

The launch of trade requires that customs procedures, processes, and documentation all be in place. In the context of the AfCFTA, AEOs fall under Phase 1: Protocol on Trade in Goods, in the Annexes. There are several relevant annexes from a trade facilitation perspective, such as customs cooperation and mutual administrative assistance, trade facilitation, transit, etc. The real benefits from the AfCFTA will come from the effective implementation of this range of trade facilitation initiative, and this includes the AEO programs. Provision is made for a Committee for Trade in Goods that has already met, along with several ad hoc technical bodies or sub-committees. A sub-committee known as the Sub-committee on Trade Facilitation, Customs Cooperation and Transit (SCTFCCT) has been established, and a committee of Directors-General of Customs Administrations set up. In this sub-committee, matters related to the AEO program, customs and border management, and broader trade facilitation issues will be discussed.

The African Union has developed a draft trade facilitation strategy, which has not yet been finalised. At this stage, it does not include a firm plan on AEOs. There are also ongoing discussions on digital trade, which are worth monitoring.

There are two references to note: “Authorised Operators” and “Authorised Exporters”. The latter is referenced in the Rules of Origin Annex. An AEO is a much broader concept than an Authorised Exporter because it looks at the entire value chain of trade facilitation, including manufacturers, importers, exporters, brokers, distributors, and freight forwarders. The rationale for an AEO program is clear and in sync with the broader improvement of trade governance and supply chain security, transparency, and predictability. The importance of trade facilitation and an AEO program is that it has a multiplier effect. As governance is improved, efficiency and competitiveness are also improved. In terms of AEO, this multiplier effect can be further enhanced by Mutual Recognition Agreements, both on the continent and with global trade partners.

There are several AEO initiatives across the continent, some of which are still a work in progress. It is vital to note what exists on the continent. The AfCFTA principle of the ‘acquis’ requires that we build on what exists already at the regional economic community and at national levels. We also need to build on international best practices, and the work of the WTO and the WCO can be used to support our initiatives across the continent.

  ii.            What does the AfCFTA provide for?

Trade facilitation (Annex 4): Article 13 has some crucial details. Transparency is essential for a program such as AEOs. The criteria for AEO include an appropriate record of compliance with Customs and other related laws and regulations, a system of managing records to allow for necessary internal controls, and so on. To be an AEO requires certain levels of governance.

There are also references to how an AEO program must be implemented and how to ensure administrative justice and transparency. The trade facilitation measures that need to form part of the AEO will also translate into tangible benefits, including rapid release time, low physical inspection rate, low documentary requirements, etc.

Article 26 recognises the complementary initiatives that are connected to what is being done under the AfCFTA. These include the WCO and the WTO-TFA. All of which offers best practices that can be adapted and tailored to suit the needs of the AfCFTA.

Article 28 refers to establishing a National Committee on trade facilitation, which will be an institutional anchor, on AfCFTA matters at the national level. This committee is where the engagement between government and business finds articulation. The benefits of the AfCFTA will only be realised if traders can take advantage of the opportunities that the AfCFTA offers.

Annex 2: Rules of Origin Article 20 relates to Approved Exporters. There are also related provisions in other Annexes and instruments of the AfCFTA, which will support the AEO program and ultimately add up to facilitating trade among State Parties that have ratified the AfCFTA.

b.      Update from the WCO AEO – Hong Nguyen

    i.            Overview of the SAFE Framework of Standards and AEO Compendium

The SAFE Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework) and its three pillars are not new. However, it is essential to highlight that it entered into force due to the terrorist attack in the United States on 11 September 2001. Nineteen years later, the world encountered another disruption of the supply chain under the COVID-19 pandemic. It is clear that the scope of disruption in 2020 was much larger than that of 2001. Thus, the SAFE Framework should reinvent some core elements to make it more relevant to the current situation and support businesses in overcoming this disruption’s challenges.

An overview of global AEO Programmes: 171 WCO members have signed a letter of intent to implement an AEO programme prescribed in the SAFE Framework. Currently, there are 97 Operational AEO Programmes (many are from the ESA region), 20 AEO Programmes are under development, 33 Operational Customs Compliance Programmes and 4 Customs Compliance Programmes set to be launched. Furthermore, there are also 87 Bilateral MRAs, 4 Plurilateral/Regional MRRAs and 78 more MRAs are being negotiated. It is important to consider signing an MRA for the ESA region to standardise AEO Programmes’ implementation and increase business benefits.

According to the SAFE Framework, any participant in the supply chain can be certified as an AEO, not just selected service providers. However, there are only a few AEO Programmes that are open to all operators. South Africa, for example, is available to a variety of different operators. However, across the region, there is still some room for improvement in opening the benefits. Of the 97 operational AEOs worldwide, 24% have less than 10 AEOs, 18% have between 11 and 100 AEOs, 19% have between 101 and 500 AEOs, and 39% have more than 500 AEOs. The larger inclusiveness is, however, concentrated around developed countries.

  ii.            COVID-19 pandemic and AEOs

The pandemic disrupted value chains. Customs and border measures were necessary for collecting different notes from different countries to determine the simplest way to move goods across borders during the pandemic. For the WCO, one of the priorities for countries to recover from the pandemic is their need to speed up their vaccine programmes. To assist with the vaccination process, the WCO notes that the SAFE Framework is the key instrument to provide cooperation, partnerships, and trust to speed up the shipments of COVID-19 vaccines.

In December 2020, the WCO Council adopted a Resolution on the Role of Customs in facilitating cross-border situationally critical medicines and vaccines. Based on that, the WCO developed the Secretariat note to guide Customs administrations in facilitating the movement of vaccines into a country. The COVID-19 pandemic impacted the e-commerce business model, and the WCO is further promoting the cross-border e-Commerce Framework. And in connection with the AEO programme, the WCO also developed a Secretariat note to encourage members to extend the scope of AEO to cover more e-commerce stakeholders.

Technology has been a critical measure in overcoming social distancing through paperless procedures and intelligent security devices in the pandemic context.

Finally, advanced cargo information submitted by businesses helped support customs to run risk-based control and to ensure the safety and security of the supply chain, helping avoid the clearance of counterfeited vaccines and medical equipment, for example. The advance information risk analysis accompanying compliance assessment will allow customs to clear shipments in advance if they pose low risks.

The SAFE Framework and other procedures the WCO provided, such as Coordinated Border Compendium, Single Window Compendium, could be utilised to facilitate and clear vaccine shipments as a matter of high priority. These include enhancing relationships and partnerships between customs and business and aligning security programmes, harmonising control measures by different government agencies.

“Expanding the concept of AEO to Cross-border E-commerce” is Standard 6 specified in the WCO Framework of Standards on Cross-border E-commerce. Customs administrations should explore the possibilities of applying for AEO Programmes and MRAs in the context of Cross-border E-commerce, including leveraging the role of intermediaries to enable Micro-, Small and Medium-sized Enterprises and individuals to benefit from the opportunity entirely.

The Secretariat note suggested three options that can be considered to extend AEO partnerships to e-commerce stakeholders.

Option 1: Expand AEO partnerships through fulfilment centres.

Option 2: Use of Customs Mutual Administrative Assistance Agreements and AEO’s Mutual Recognition Agreements/Arrangements.

Option 3: Registration system. Combining options 2 and 3 can be considered the way forward for including foreign e-commerce stakeholders as AEOs.

iii.            SAFE Framework of Standards 2021: A new core element is added

A fifth core element will be added to the SAFE Framework of Standards 2021. It promotes close cooperation with other governmental agencies representing different regulatory areas to keep societies safe and secure while facilitating goods’ movement. The 2021 version of the SAFE Framework of Standards is to be endorsed by the 25th SAFE Working Group Meeting on 14-16 April 2021

An additional provision to Pillar 3, Standard 2, promotes Cooperative arrangements/procedures between Customs and Other Government Agencies. For this purpose, the update refers to Article 8 of the WTO-TFA to promote better coordination between different government agencies. This update is essential in the pandemic context where various agencies operating at borders need to work together to secure and control the supply chains without duplicating control measures.

The new edition of the SAFE FoS also encourages regional and plurilateral mutual recognition approaches to reduce the number of bilateral MRAs, standardise AEO criteria, ensure benefits for AEO in the regions and at the global level. Further details are provided in the new tool being developed by the WCO’s SAFE Working group, namely the “Regional Customs Union AEO Programme and plurilateral MRA”.

The new edition of the Framework of Standards also promotes technology and the use of Smart Security Devices.

A reference to the ICAO-WCO Guiding principles for preloading advance cargo information (PLACI) is also included to support Members with more information on the additional security measure. PLACI is very relevant to e-commerce to ensure security before goods are loaded onto aircraft. The EU just launched the biggest PLACI system in the world, with the ICS2 rolling out just a few days ago.

Finally, the “AEO Implementation and Validation Guidance” is an effective tool to simplify the AEO implementation process and clarify the AEO requirements. It could also help Customs in enhancing the AEO validation process and providing lessons learned for virtual revalidations.

c.       AEO and the SACU region – Rae Vivier

When looking at the latest economic growth projections for Africa, post the worst economic crisis in half a century, it is only 3.4%, on top of a contraction last year of 2.1%. The consequences are – according to the experts – that average living standards have been set back in Africa, particularly Sub-Saharan Africa, by at least a decade.

In response to the consequence, how do Customs Administrations, in partnership with traders, start developing tools to improve economic growth? The AEO Program is the tool to help mitigate the economic damage caused by the pandemic. AEO and Trusted Trader Partnerships are the most significant trade facilitation trends in today’s Customs and border management from a South African perspective. This drive includes other government agencies’ involvement, negotiation and agreement of MRAs and extending the criteria, particularly if you start bringing in OGAs, and additional benefits to compliant traders.

As a matter of interest, the AEO programs fit very well within the current SARS strategic intent by working towards a system of voluntary compliance. It also requires us to place more reliance on taxpayers who choose to be compliant. Customs Administrations must acknowledge that they cannot manage this alone. Cooperation with stakeholders is necessary to achieve the intent.

An update on SACU’s Single Regional AEO Program, which has been a long time in development, was also provided. There are now 145 AEO Custom compliant equivalents in the SACU region. In November 2020, an agreement from all Commissioner-Generals of Member States was secured to develop a Single Region AEO Program with a safety and security component, moving towards CUSTOMS AEOS. The SACU Secretariate has contracted a consultancy group to review the Preferred Trader Program and provide an approach and model for upgrading the program. It is important to simplify processes and to design a program that meets the needs of traders. For example, one of the findings was that SACU needs to move away from the control and identification of mistakes and instead move towards supporting compliance improvements. This change will extend the overall benefits.

There is also quite a large bar to meet in terms of process efficiencies. Global best practices take about 200-man hours allocated for the entire process from application to certification, whereas SACU’s averages 640 hours. There needs to be a more risk-based approach with a focus on high-risk areas. The monitoring of a certified company requires an individual plan per company with regular individual monitoring. There should be a particular section that manages the entire AEO process by applying validation, certification, monitoring, and evaluation.

In South Africa, 129 companies are certified, and the program for MSMEs is in design for finalisation in March 2021. There is also a Stakeholder Consultative Forum that has been established with Terms of Reference. In the future, we want to see work on the AEO e-commerce program ensuing, including how we can bring female AEOs into the country. South Africa launched an AEO-Security pilot in 2019. However, the initial COVID-19 lockdown negatively impacted SARS’ ability to deliver the pilot. They are now back on track, and the legislation is almost ready to go out for comment.

Additionally, several bilateral and multilateral MRA negotiations are underway within the African context with China and India. From a trade facilitation perspective, 80% of AEOs indicate that they have experienced improved trade facilitation with an 88% Customer Satisfaction Score. On a Single Government AEO, several workshops were conducted in March with OGAs involved in cross-border trade at the border. There has been resounding support from all these agencies.

The goal is to have one certification process, cross-accreditation benefits granted by all agencies and MRAs. There needs to be a reduction of border agencies at the border that intervene in cargo flow. This requirement is linked to the necessity for joint development with OGAs and give additional benefits to traders.

Finally, a regional AEO and MRA is required so that there is a single program and cross-accreditation of MRA benefits. There is an excellent opportunity to create a Regional AEO trade lane within Africa, which considers the ESA regional AEO Program, the SACU AEO Program, to explore how we extend benefits between those two programs within these two regions. A great opportunity is to develop African AEO trade lanes, using the AfCFTA as a basis for developing them within Africa for AEOs. Finally, African Trusted Traders’ perspective means that each country will equally recognise all programs within the continent.

d.      AEO Training and Capacity Building – Larry Liza and Jacob van Rensburg

Heartfelt condolences were sent to the people of Tanzania and the family of the late President John Pombe Magufuli. A moment of silence was taken to share messages of sympathy with the people of Tanzania. Condolences were also given to the families who lost loved ones due to the pandemic, especially in Customs offices and the private sector.

    i.            AEO Background

The definition of an AEO, according to the WCO, gives particular emphasis to compliance, safety, and security. Interestingly, the AEO concept celebrates its 14th anniversary this year, with this flagship program having been introduced in 2007. Incidentally, the AEO concept is one of the Regional Private Sector Group’s driving themes for 2021.

Several AEO benefits have already been divulged; however, the focus of the benefits of AEO correlates to expedited cargo release with less time spent at border procedures. Time and cost are the underlying concerns of supply chain management. More time incurred due to border delays results in additional cost. Other benefits include facilitating trade with post-release processes and trade disruption measures, which have become evident in the COVID era. In a nutshell, successful implementation of AEO results in trade facilitation while at the same time securing the supply chain by knowing and trusting the traders involved. In effect, with Customs and business collectively sharing the risk-pool in the extended supply chain.

  ii.            AEO in the ESA Region

An updated version of the AEO compendium has been released for 2020 and was published by the WCO in December 2020. According to the compendium, there are 15 active AEO programs with a total of 713 accredited operators in the ESA region, functioning at various maturity levels. The ESA region’s AEO program is one of the most celebrated globally, mainly due to what has been done in the EAC (East African Community). It has been used as a point of reference for different AEO programs, including the SACU program.

The global AEO conferences continue to give the ESA region prominence. These engagements have created a greater interest among members of ESA. Applications for AEO programs from different countries are gaining momentum. program

In the ESA region program, most countries have less than 100 members in their programs, while developed countries have up to 500 members. Less than 100 000 traders are importing and exporting in the ESA region. The fact that there are so few accredited traders show a lot of potential in the region. Different general blocks such as SACU and the EAC give certifications under the AEO portal and framework. These programs are encouraged to continue Including at a COMESA and continental level, considering the AfCFTA that has been rolled out., There are several MRAs within the region that are under negotiations at different levels. However, most of the AEO program operators include importers, exports, transporters, etc. Drivers are expected to have specific training and be aware of certain security features and processes that they need to adhere to and compliance and expertise in their work to be in the program.

While there are many different types of AEOs in ESA, more than 50% of AEOs are importers because the region is overall a net importer. There are, however, some registered importers, customs brokers, and manufacturers. AEOs are mainly legislated in two ways – either through the relevant customs block, such as the EAC block or national legislation and regulations developed under national customs and excise acts. Over 50% of the region are in the AEO program in any form of preferred trader or recognition program.

The accreditation process is varied nationally per the different blocks in the region. Most nations or members have different ways, mainly compliance history and self-regulation. The national revenue authority will have the necessary information for each country’s requirements and processes to join the national AEO program. A survey among members revealed that the top 4 benefits of AEOs are: priority clearance, waiver of bond requirements, guaranteed renewal of licences, and self-management of bonded warehouses.

In the ESA-Regional Office for Capacity Building, there has not been a very active capacity building program in AEO, mainly due to a lack of staffing and technical expertise. The WCO’s support has, however, been leveraged to a great extent in this context. The WCO is always prepared to offer the necessary support. The regional strategy has four focus areas: (1) trade facilitation, (2) revenue mobilisation, (3) human capital development, and (4) the need to strengthen intra-regional compliance and enforcement. Within this framework, the ROCB aims to implement Coordinated Border Management principles and support members to implement AEO programs. The WCO provided a training curriculum and skillset for the AEO, which members have been encouraged to use. 

iii.            AEO Validation Guide

The WCO created an AEO Validation Guide to increase the program’s uptake and help both customs administrations and prospective operators secure the international supply chain. The guide is divided into three chapters. In essence, Chapter I looks into creating some uniformity to develop an AEO program and follows a typical four-stage project life cycle. The chapter is guided by the SAFE Framework and Article 7.7 of the WTO-TFA. Chapter II contains a self-assessment questionnaire to help prospective AEOs ascertain their compliance, safety, and security levels. Chapter III assists the AEO validator in assessing an AEO applicant in the accreditation program. Chapter III also comments on various types of accreditation.

The following are the questionnaire categories, which also doubles as the validation guide, divided into 13 different criteria. The following gives an overview of what a validator would look for in each category:

A – Demonstrated compliance with Customs requirements: the validator needs to identify whether the applicant has committed any infringements or offences and whether these were serious, repeated, or minor infringements.

B – Satisfactory systems for management of commercial records: this would entail procedures against the loss of information and physical access to accounting systems and commercial and transport records. In other words, compliance ensures that there is an internal train in the records capable of tracing all transactions in the applicant’s international supply chain.

C – Financial viability: ascertaining, among other things, whether the applicant has fulfilled their financial obligations regarding payments of customs duties, taxes, or charges related to importing and exporting goods.

D – Consultation, cooperation, and communication: verifying whether the applicant has a formally designated point of contact at customs for customs compliance and enforcement matters. Verification will include assessing whether the point of contact is thoroughly knowledgeable about the entity’s practices and procedures and the AEO program requirements. In essence, is the applicant capacitated to ensure customs compliance. The point of contact can and should assist the AEO application process.

E – Education, training, and awareness: written procedures should be requested to ensure that the personnel responsible for security has been appointed and that security programs and threat awareness are in place. They maintain a security training and threat awareness program and identify security risks such as suspicious goods and internal threats, including practices in protecting access control.

F – Information exchange, access, and confidentiality: verifying policies concerned with security systems, account access, the extent of duties, and different user profiles connected to various tasks. Other examples include firewall, spyware, encryption, and monitoring software and policies revolving around password changes.

G – Cargo security: the validator needs to verify that the information related to cargo is complete, accurate and protected against unauthorised exchange or loss of information. Verification would include, at the point of loading and stuffing, and procedures such as the seven-point container inspection process. Also, importantly affixing the containers with ISO high-security seals. The WCO encourages validators to witness a live container inspection to visually verify the secure storage of goods and the use of high-security seals.

H – Conveyance security: the validator will again request procedures, and this procedure is during the various handover points, coupled with well-defined reconciliation procedures as control measures. It is to ascertain that there is an escalation protocol for when there is a breach. Also, this concerns real-time tracking of goods.

I – Premise’s security: this entails verifying access to buildings, fences, locking devices, inspections, lighting, video surveillance (such as CCTV), alarm systems and any other access control measures. It also includes verifying the procedures of identifying staff and contractors and access control and producers where a breach has occurred.

J – Personnel security: this entails the AEO company’s code of conduct and their recruitment policies and background checks to ensure their personnel are secure. Further critical in this day and age is confirmation that the operator has procedures to remove identification, especially IT system access of employees whose employment has been terminated.

K – Trading partner security: This ensures that checks and balances are in place in the selection of business partners and external service providers and whether these business partners can meet and accept an acceptable level of security and safety standards.

L – Crisis management and incident recovery: this is basically to assist the validator in investigating, analysing, and if the necessary corrections are implemented.

M – Measurement, analysis, and improvement: here, the validator will request evidence that the operator has established and conducted regularly in house or external assessments of its internal and external supply chain security. These reports must be made available to the validator.

In summary, the validation guide shows that an AEO application is not a blind leap of faith but rather a standardised process with several guidelines along the way to assist both a perspective AEO applicant in being accredited and an AEO validator in verifying the AEO accreditation. Ultimately, although the AEO programs are country-specific and might differ to some degree, the AEO validation guide ensures that a standard is created, and evolution continually occurs in securing the supply chain through global compliance, safety, and security.

3.     Closing remarks

Firstly, to answer a question on bonded warehouses’ issues and what is meant by the benefits. Briefly, they are procedures and regulations that govern the operations of bonded warehouses. Such as entry requirements, procedures into those warehouses, examinations of goods, etc. traditionally, most bonded warehouses needed to have a customs officer, usually referred to as a proper officer licensed by a commissioner. It requires that any time goods entered the warehouse, that customs officer must be present to validate the goods and monitor goods’ removal. So, some of these, depending on different administrations, AEOs can operate their bonded warehouses in a sort of a self-regulating mechanism where you do not have to have a customs officer to monitor. Still, they do come to do regular audits. You may also continue operating as you wait for the renewal of licenses.

In conclusion, all the panellists were thanked for their participation, noting that the region has grown in leaps and bounds. Larry finished off by reiterating what Rae Vivier pointed out in her presentation, that we need to continue working together towards an ESA-AEO program. We know that the AfCFTA is here and that the AEO will bolster the benefits of the AfCFTA if we begin looking beyond our nations and look at a regional framework and program. This approach will help us recover as people from the effects of the pandemic.

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