Building the AEO Business Case: Spotlight on Return on ...

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Building the AEO Business Case: Spotlight on Return on Investment

WCO Global AEO Conference 2014 Madrid, Spain, 29 April 2014


Costs Benefits

What we Invest What we Gain Return on

Investment


Costs Benefits


Investment

Projected

ROI for

2017


Costs Benefits


Investment

Actual

ROI in

2017

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AEO ROI


• AEO acceptance among traders is predicated on benefits, but those on offer are often not easily quantifiable for anticipated ROI analysis

• SAFE Framework: “Benefits should be meaningful, measurable, and reportable” (Annex III)

Studies have now begun to come back with statistics on business ROI over time in existing programs—with decidedly mixed results

AEO & ROI


WCO SAFE Package on Business ROI

“It is imperative to establish a

core set of internationally

accepted trade facilitation

benefits that….should be

transparent and meaningful to

the extent that they not only

justify the additional costs

sustained by economic

operators in meeting

prescribed AEO requirements

but also bring those operators

real improvements and

facilitation gains, above and

beyond the normal

procedures enjoyed by non-

Authorized Economic

Operators”

“Gaining compliance

and support from [large

traders] …can also

serve as positive

reinforcement within the

trade community.

Equally so, if their

experience is a negative

one, they can give the

[AEO] programme a

bad reputation”


US CBP: 2011 C-TPAT Cost Savings Study

“…there is an overarching theme in the Cost

Savings Study: The value of C-TPAT

membership cannot be measured adequately in

terms of dollars and cents. On the one hand,

there are indeed implementation costs and

maintenance costs, which are offset by savings

in only a minority of cases. Many respondents

report that they do not see the expected

improvements in processes that impact their

profitability such as faster border crossings,

front-of-the-line programs and less frequent

inspections”


KAA AEO Research Study Findings

“The level of satisfaction is lower than the level of

expectation on all criteria”


Benefits & ROI: EU AEO

Source: TAXUD AEO Database (checked 27 April 2014; last update 26.04.2014)

Total AEO AEO C AEO S AEO F

EU 12.296 5.465 429 6.402

SPAIN 581 183 27 371

In 2012 AEO’s were involved in 61% of imports and 38% of export declarations



Source: Study on the Evaluation of the Customs Union (Specific Contract No.

13 implementing Framework Contract No. TAXUD/2010/CC/101) Final report



“Apparently, businesses have understood the aim

of the AEO programme (regardless of its origin) as

being a facilitation instrument for companies that

fulfil the relevant criteria. If, and in so far as, the

programme was indeed promoted based on the

benefits it would bring, no such benefits are

perceived by businesses in their daily

routines. The fact that business expectations are

not always met is consequently a result of the fact

that businesses have a different perception of the

benefits of the AEO programme” (p. 131)



“A significant number of companies reported that

they have more than one EORI number as a

single legal entity. Taking this finding together with

the reported non-uniform application of uniform

risk selection criteria for controls and the

perceived lack of real advantages of being AEO

certified, the overall response on the evaluation

of the Safety and Security Amendment to the

Community Customs Code is that the

measures and changes are not meeting the

expectations of businesses” (p. 131)


Governments need to focus on quantifiable business ROI factors in developing new programs, and demonstrate actual ROI over time

Source documentation with recommendations for ROI-friendly benefits exists, but each country needs to consult its own business community to determine priorities.

Governments need to take care to give continuing benefits to AEOs, and avoid changing the terms of the equation

AEOs should be given proper recognition and credit in new programs to minimize additional costs

Making the ROI Work for AEO


Identify Quantifiable Benefits


• México's Industry learned about AEO programs from C-TPAT and started implementation without the support of Mexican Customs Administration.

• Finally in 2012, Mexico enacted NEEC as the Mexican AEO and includes customs compliance standards into it.

• Four stages of implementation:

1) Manufacturers (in particular IMMEX companies

2) Carriers and forwarders in general.

3) Customs brokers

4) Trading companies and other Importers.

Mexico & AEO


• NEEC benefits are mainly adapted from the former scheme of Empresas Certificadas, so

ROI is justified on maintaining existing benefits and avoiding the loss of position already achieved. Lack of new incentives.

• New pilot programs extend a range of incentives such as ones already granted to IMMEX companies, such as export clearance from company premises, that today only apply for IMMEX companies.

• New compliance-based certifications focused on VAT and excise are eclipsing the attractiveness of NEEC, due to more ROI from VAT certification than in NEEC.

• Need to incorporate acknowledgement of AEO status with other agencies than customs, such as police, military and security authorities, with benefits from economic and labor authorities,

• Credits from public financing institutions may be attractive to bring more players to the AEO field in Mexico

• AEO must be the Most Favorable Program among all benefits granted by different programs addressed to the import- export community, including those related with taxation such as VAT and Excise for temporary importers.

• AEO companies must be seen as allied and partners of Customs authorities, not as a challenge.

Mexico & AEO


Discussion


Contact Details:

Bryce Blegen

CEO, Trusted Trade Alliance LLC

4400 NE 77th Avenue, Suite 208

Vancouver, WA 98662 USA

Tel: +1 (360) 567-1213

Rogelio Cruz Vernet

Partner

Basham, Ringe y Correa, S.C.

Paseo de los Tamarindos 400-A 9° Piso

Bosques de Las Lomas, México D.F.

Mexico

+52 (55) 526 10452

Omar Rached

CCS

Rua Serra Negra, 77

Jardim São Cristóvão |

Valinhos/SP

CEP: 13276-530

Brazil

+55 (19) 3327-6459

Santiago Ibáñez Marsilla

Profesor Titular de Universidad

Área de Derecho Financiero y Tributario

Facultad de Derecho

Edificio Departamental Central.

Avda. Los Naranjos s/n

46022 Valencia

Spain

+34 96382 8580

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