Why in news?
The World Trade Organization (WTO) recently praised India's liberalised Authorized Economic Operator (AEO) programme for boosting the participation of micro, small and medium enterprises (MSMEs) in global trade. The scheme, run by Indian Customs, designates compliant businesses as trusted partners and offers them simplified customs procedures.
Background
The AEO concept originated in the World Customs Organisation's SAFE Framework of Standards, adopted in 2005 after rising concerns about supply-chain security. Under this framework, customs authorities certify traders who meet specific compliance and security criteria. In return, these trusted traders receive faster clearance, fewer inspections and other benefits, allowing customs resources to focus on high-risk consignments.
India launched its AEO programme as a pilot in 2011. It was revised in 2016 to merge the earlier accredited client scheme and expand benefits. In January 2021, the Central Board of Indirect Taxes and Customs (CBIC) introduced a package tailored to MSMEs, reducing the minimum number of customs documents from 25 to 10 and shortening the operational history requirement from three years to two. These reforms lowered entry barriers and made certification faster for small businesses.
Key features
- Voluntary programme: Businesses engaged in international trade may apply for AEO status. They must demonstrate compliance with customs regulations, proper record-keeping and financial solvency.
- Benefits: Certified operators enjoy priority processing, deferred duty payments, reduced bank guarantees, fewer physical inspections and direct port entry or delivery of cargo. Dedicated client relationship managers assist them with customs formalities.
- MSME focus: The liberalised MSME package introduced in 2021 shortened processing times and simplified documentation. As a result, nearly half of India's AEO certificate holders are now micro, small or medium enterprises.
- Global recognition: India's AEO programme is built on internationally recognised standards. Mutual recognition agreements with other countries allow Indian AEOs to enjoy similar benefits abroad, facilitating seamless cross-border trade.
Significance
By rewarding compliant traders with faster clearance and lower costs, the AEO programme enhances supply-chain security and improves ease of doing business. For MSMEs, the scheme reduces red tape and frees up working capital, enabling them to compete globally. Recognition from the WTO underscores India's commitment to trade facilitation and may encourage other countries to adopt similar reforms.
Conclusion
The success of India's AEO programme illustrates how trust-based regulation can benefit both customs authorities and businesses. Continued outreach and capacity-building will be needed to ensure that more small exporters join the scheme and that compliance remains high. Over time, widespread adoption could shorten supply-chain delays and strengthen India's position in global trade.
Source: IBEF - WTO hails India's AEO Programme . Livemint - AEO programme and MSMEs