Tedious application processes that take long without sufficient guarantee that a company will be accredited has been cited as one of the major obstacles in the implementation of the AEO programme.
SMMEs have over the years complained of being cost-disadvantaged and have not been able to keep up with the high standards and stringent measures adopted by customs.
Regional revenue authorities will now focus on Small and Medium Micro Enterprises (SMMEs) to improve uptake of Authorised Economic Operators (AEO) initiative, which has remained low since it was implemented in 2006.
Tedious application processes that take long without sufficient guarantee that a company will be accredited has been cited as one of the major obstacles in the implementation of the AEO programme run by the customs authorities in East Africa, the latest report on logistics has revealed.
SMMEs have over the years complained of being cost-disadvantaged and have not been able to keep up with the high standards and stringent measures adopted by customs in vetting the companies for AEOs accreditation.
AEOs are compliant and trusted traders who are allowed to operate with minimal customs controls. The scheme significantly reduces the physical and document-based controls, offers priority treatment in customs, and guarantees easy access to customs by businesses, among other benefits.
A study by the Federation of East African Freight Forwarders Associations (FEAFFA) supported by the Commonwealth Secretariat (COMSEC), revealed that low uptake of the AEO scheme by SMMEs is due to low level of awareness, the complexity of the programme, and the insufficient capacity of most businesses to meet requirements.
Importers and exporters registered for AEO in Kenya, for instance, stood at 182 since the programme was fully rolled out in 2015 after two years of piloting between 2007 and-2009.
With only 99 registered under the programme, customs clearing agents take the second position. However, this number is low considering that Kenya has over 1,000 clearing agents registered with the Kenya International Freight and Warehousing Association (KIFWA).
There are only eight transporters enrolled in the programme. The 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 the Kenya Revenue Authority (KRA). This means that the importers cannot enjoy services from AEOs across the entire logistics chain.
“Despite being in existence for over 10 years, the uptake remains too low to positively impact trade. Besides, of the current AEOs, only a handful are SMMEs. This means the benefits of the programme are being enjoyed by only large and more established operators,” said FEAFFA vice president Edward Urio.
Kenya International and Warehousing Association (Kifwa) chairman Roy Mwanthi said there is “a clear lack of motivation” and the application process is very complex with the AEO programme not recognised by other Partner Government Agencies (PGAs) save for customs and the Kenya Bureau of Standards.
Focusing AEOs on small and medium businesses by revenue authorities is in line with the resolutions of the 39th meeting of the East Africa Community Sectoral Council on Trade, Industry, Finance, and Investment (SCTIFI) that adopted the simplified AEO accreditation criteria to suit SMEs to enhance the programme’s uptake.
Stephen Analo, principal customs officer, capacity building, directorate of customs at East African Community (EAC), told a recent AEO sensitisation meeting held in Nairobi that the Council also directed the secretariat to undertake analysis for purposes of developing a harmonised framework on the thresholds for accrediting regional AEOs “to determine the classification of MSMEs in the region”.
“Processing of our entries through customs at the port has dropped to an average of five hours from four days to six days since Farmers Choice became an AEO in 2012,” said customs, tax and compliance manager at Farmers Choice Limited Daniel Mugwe.
To be enrolled, companies go through a rigorous vetting process by customs.
In 2005, the World Customs Organization (WCO) Council adopted the SAFE Framework of Standards to secure and facilitate global trade.
The AEO programme was among the protocols that were borne out of this decision, and, as a result, the EAC revenue administrations, through their respective commissioners of customs, conceived the regional AEO programme in 2006.
A meeting held last week by FEAFFA to sensitise clearing and forwarding agents on the AEO scheme recommended the need to fast-track bringing on board all other PGAs involved in cargo clearing to break the existing bottlenecks and continued awareness creation in the private sector.
“FEAFFA’s intention is, therefore, to supplement the efforts of the EAC and the Revenue authorities in strengthening the capacity of the private sector players especially the SMEs, to meet the threshold for AEO accreditation so that the number of AEOs can increase and have much more cargo moving across borders with minimal customs intervention,” Urio said.
There is also a 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.
