AEO, green policies, climate change and compliance

The AEO status is an accidental and non-mandatory element of the customs obligation. This is given by the authorization which is the unique customs decision able to “defining and qualifying” its owner. Indeed, in this way, the economic operator becomes reliable within the context of a participatory cooperation relationship with the customs administration.

The AEO authorization is an administrative deed released by the national customs entity/bodies in accordance with the EU regulations. This is valid throughout the EU customs territory and, if a mutual recognition agreement is valid, also with third countries; furthermore, despite being regulated in customs regulatory acts, it is important to highlight that it constitutes an authorization based on an overall evaluation of the structure and functioning of the object being requested. It therefore has an all-encompassing nature of the business complexity; the “complexity” covers all the processes which directly or indirectly impact on the compliance of the customs obligation.

Specifically, the AEO requires a number of checks, centered on the audit, including, as above mentioned, not only the purely customs aspects (such as the management of the symptomatic elements of the customs debt) but also the structural and subjective aspects of the applicant  which are substantiated in the possession of certain criteria in terms of the ability to control, monitor and react to the corporate structure in relation to the occurrence of harmful or potentially harmful events; in other words, the holder of the aforementioned authorization must demonstrate an adequate ability to control and correct his activities together with other requirements indicated by EU legislation and, in any case, attributable to the criterion of qualified care.

It is interesting to underline that, in the light of the new European environmental compliance (customs-based) like CBAM and deforestation due diligence and multilateral environmental agreements,  AEO  can be the right tool to develop and improve a green customs compliance. It means a customs compliance able to meet the environmental policy needs and give a contribution to the climate change fight.

At this regards,  we can mention  policy report“Green is Gold: Creating a Gold Standard AEO Program through Green Initiatives” of Jamie Ferrill  Allanah O’Hanlon who “recommend incorporating a ‘green trader’ certification within the AEO framework. Traders who request to be accredited as a ‘green’ trader would need to verify their claims” and “ Climate change and environmental degradation are at the forefront of international and domestic politics and public discourse. Yet, little empirical work has been done on Customs1 administrations’ adaptive capacity to respond and adapt to climate change. It is this intersection that continues to vex Customs and supranational agencies, with the question of how the management of borders can adapt to and contribute to mitigating climate change risks. There are, however, mechanisms already employed by Customs administrations that can, and should, contribute to climate change mitigation efforts and adaptation. One such mechanism is the Authorized Economic Operator  (AEO) program. In this article, we contend that AEO programs can be adapted to develop and sustain green trade practices to meet that end”  Indeed, in their opinion “ “The incentive for traders to obtain AEO accreditation is a lighter touch at the border. In turn, Customs administrations can focus on ‘shrinking the haystack’ for higher risk traders. Reaching an agreement on the addendum would alleviate tensions arising from different maturity levels of AEO programs and enhance the motivation for proactive climate action among Customs administrations that are willing to meet the supplementary criteria. However, some may argue that when ‘countries have different levels of climate ambition, free riders will benefit at the expense of committed countries’ (Clausing & Wolfram 2023). In the case of AEO programs, moving to exclude aspirational members who seek to implement higher levels of supply chain security in the pursuit of climate-related initiatives is detrimental to the program’s intent. There needs to be a balance between the necessity of secure trade and appropriate encouragement and guidance to members on the implementation of environmental frameworks and upward harmonisation through inclusivity.

Moreover, in order to complete our check of the relationships between the reporting declarant for CBAM and AEO we would recall that M.L. Schippers  & W. de Wit in “Proposal for a Carbon Border Adjustment Mechanism” underlined that an AEO status helps and improves the CBAM fullfilment.

Indeed, they wrote: “…As well as the establishment requirement, parties wanting to qualify as authorized declarants have to meet various other conditions, as shown by the information to be included with requests for registration (Article 5(3)). These include having an Economic Operators Registration and Identification (EORI) number and complying with conditions reminiscent of some of the conditions applying to parties wanting to be classified as an Authorized Economic Operator (AEO). These include evidence of their proper compliance with tax and customs requirements and of being operationally and financially able to meet their obligations under the CBAM proposal…” and again “…In order to reduce the administrative burden for competent authorities and authorized declarants alike we would be in favour of allowing certain conditions to be regarded as being met if the customs authorities have already designated the applicant as an AEO. Under Article 16(1), successful applications for the status of authorized declarant result in declarants being assigned a unique CBAM account number. Authorized declarants are granted access to the national database in which their details are registered…”.