Trade facilitation takes another step forward in Thailand

The AEO scheme is based on the World Customs Organization (WCO) Framework of Standards to Secure and Facilitate global trade (SAFE). Security and trade facilitation programs based on the SAFE Framework have been introduced under various names in different countries. For example, the US has “C-TPAT” (Customs Trade Partnership against Terrorism), Canada has “PIP” (Partners in Protection), and the EU has the AEO scheme. In Asia, the AEO scheme has been introduced in Japan, Korea, Malaysia whereas China has the “Classified Management of Enterprises” and Singapore has the “STP” (Secure Trade Partnership). Despite the different names and nuances in the various programs, they all share the common element, which is to secure and facilitate trade.

Thailand introduced its own AEO scheme in 2011, initially for exporters and the scheme was subsequently expanded to include importers and customs brokers on 1 January 2013. Companies that want to be certified as an AEO company need to submit an application to Customs as well as meet certain specific conditions (e.g. import/export transactions for at least 3 years, no record of smuggling offences or criminal records for the past 3 years, proper security management system in place etc). The new AEO scheme includes many trade privileges including exemption from inspections upon import/export, waiver of placing guarantees for certain shipments, waiver of sampling, special timelines in relation to certain customs privileges (e.g. related to bonded warehouse or Free Zone) and a limited customs post clearance audit review period to 2 years only. 

For Gold Card holders (Thailand’s previous trade facilitation scheme), these benefits may look very similar to the privileges that they currently receive under the “Gold Card Privilege Scheme” and they may not see a reason to apply for the new AEO scheme. However, this might not be the case as the Gold Card scheme will be terminated by 1 October 2013. Gold Card holders who have not applied for the AEO scheme before 1 October will lose their privileges after this date. There will be a transition period during which these companies can keep their Gold Card privileges pending the application approval for the AEO scheme but their application for the AEO scheme must be submitted to Customs before 1 October 2013. 

Companies that are considering applying for the AEO scheme should also bear in mind that the application procedure and approval process under the AEO scheme may be more time consuming and different from the Gold Card scheme. Where the application procedure for the Gold Card scheme was relatively straightforward and without a prior onsite audit by Customs, under the AEO scheme, there will be an onsite audit prior to the approval and there will be other assessment criteria and requirements related to “security standards” (e.g. review on the company’s internal control related to premise security management, personnel security, trading partner security, cargo security, IT security, crisis management etc.). Therefore, a proper self assessment on the relevant criteria and requirements prior to applying for the AEO scheme (especially related to the security standards) is essential to ensure a smooth application process.

Despite the various trade facilitation privileges, we understand that the uptake for the AEO scheme has not been significant in Thailand to date (around 60 pending applications and approximately 20 companies have been issued the AEO importer/exporter status and only 3 companies have been issued the AEO customs broker status). This seems odd, especially as we understand that there are more than 200 plus Gold Card status companies in Thailand who will lose their privileges after 1 October 2013. Is this because companies do not see the benefits, are the conditions related to the security standards too stringent, or are they simply not aware that their benefits will cease to exist by 1 October 2013? 

Whatever the reason is for the low uptake, in our view, the benefits of the AEO scheme would ultimately outweigh the costs of applying for the scheme. Furthermore, future benefits of the AEO could include having trade facilitation privileges in other countries, especially where Thailand would be able to conclude Mutual Recognition Agreements (MRA) with other countries who have implemented similar schemes. Once in place, this would mean that AEO certified companies in Thailand would have the same or similar level of trade facilitation privileges (e.g. expedited import /export clearance) which would increase their competiveness across their supply chain. In addition, companies are also starting to list AEO status as an important factor when selecting suppliers, partners and service providers. Consequently, accredited companies will be preferred over non-accredited companies in the future.

With only less than four months to go, it is now time for companies (especially Gold Card companies) to have a closer look as to whether or not to apply for the AEO scheme. In deciding whether or not to apply, company might want to consider the costs of not being certified as an AEO company (e.g. more border controls, less predictability, denial special procedures etc.) and whether in the long run not having the AEO certification is actually a practical option. 

 

_ Nu To Van is Senior Manager at PwC