raders from the East African Community (EAC) stand to benefit from faster clearance of their goods and lower costs of running their business following the signing of a Joint Action Plan between the EAC and the Government of India.
The Joint Action Plan will pave the way for a full Mutual Recognition Agreement (MRA) between the two parties.
The MRA, once realised, will benefit companies under the Authorised Economic Operators (AEO) Programme run by the EAC Partner States under the coordination of the EAC Secretariat since 2008.
Speaking on behalf of the Government of India recently, the Chairman of the Central Board of Indirect Taxes and Customs (CBIC), Mr. M. Ajit Kumar, emphasized the crucial role of having in place a robust, safe, and largely digitized system, on one hand, and a pool of trusted and validated trading entities on the other hand.
Mr. Kumar said that a fully digitized system and valid trading entities would guarantee security in the entire supply chain in trading across borders, adding that an AEO-MRA agreement was one such endeavour.
The selection of India as an MRA partner was based on the principle of mutual recognition and the steady trade between the EAC and India over the past five years (2014 – 2018), before Covid-19 disruptions, which cumulatively amounted to over $30 billion.
The AEO programme is a concept derived from the World Customs Organisation (WCO) SAFE Framework of Standards, an instrument that was adopted by the WCO Council in 2005 to enhance facilitation and security of global trade.
It works on the principle of compliance, trust and partnership whereby, economic operators that demonstrate compliance with Customs supply chain security standards, are recognised as low-risk clients with whom Customs enters into a partnership arrangement.
However, the AEO programme has failed to record a good uptake since some of the benefits it has outlined are not available according to a recent study.
The Federation of the East African Freight Forwarders Associations (FEAFFA) with the support of the Commonwealth Secretariat conducted a study that associated slow uptake lack of adequate sensitization among the industry stakeholders and tedious application processes that take long without sufficient guarantee that one will finally get accreditation.
Small and Medium Micro Enterprises (SMME) are cost disadvantaged and are not able to keep the high standards and stringent measures that are employed by customs in vetting the AEOs, the study revealed.
There is also lack of harmony and standard application and accreditation procedures, which affects the regional AEOs uptake. Other factors include fear of exposure and a perception that the process is not transparent.
The uptake has been averaging 27 economic operators authorized each year between 2015 and 2019. Majority of the operators currently reporting benefits from the AEO program are by default relatively large operators. Smaller operators expressed feelings of exclusion and low value for money, the study revealed.
Threshold to bring SMME on AEOs programme is very high, according to Stephen Analo, a Customs expert at the East African Community (EAC).
There has been a consistent lack of enthusiasm by both the private sector and regulators. This has resulted in the programme being affected by small administrative challenges such as staff reshuffle that moves the AEO programme to ground zero when new staff not trained on it take over.
“There is a clear lack of motivation. The application process is very complex and the AEOs programmes are not known or recognized by other agencies save for customs and Bureau of Standards,” Roy Mwanthi, Kenya International and Warehousing Association (KIFWA) Chairman said in an earlier interview.
Importers and exporters registered for AEO in Kenya, for instance, stood at 155 importers since the programme started in 2006. With only 83 registered in the programme, clearing agents take the second position. However, this number is low considering that the KIFWA has registered over 560 and 780 clearing agents in Mombasa and Nairobi respectively.
There are only 7 transporters enrolled in the programme. Kenya Transporters Association (KTA) has over 200 registered members with a significantly huge proportion of transporters, especially those with few trucks not being members. There is only one ship agent enrolled in the programme, according to KRA. Therefore, this means that the importers cannot enjoy services by AEOs in the entire logistics chain.