A new report is underlining the need to integrate micro, small and medium enterprises (MSMEs) into Authorized Economic Operator (AEO) programs as a way to internationalize small businesses, advance global trade facilitation, and promote inclusive economic growth.
The report, launched jointly this month by the World Customs Organization, World Trade Organization, and International Chamber of Commerce (ICC), provides an overview of what AEO programs are, an analysis of the current participation levels of MSMEs in AEO programs, and case studies of how select countries have integrated MSMEs into the AEO program.
Authorized Economic Operator or AEO programs allow certified businesses to benefit from simplified procedures such as periodic declaration, comprehensive guarantees, fewer physical inspections at Customs, and reduced documentation and data requirements.
In turn, these operators must comply with specific requirements, such as a demonstrated compliance record, good management of commercial records, financial viability, or, for security purposes, records of securing transport conveyances, premises and personnel movement across logistics partners.
The joint publication urges Customs administrations to adapt their AEO programs to be more inclusive and flexible to ensure MSMEs fully benefit from trade facilitation.
“95% of companies across the globe are MSMEs and they account for 60 percent of the world’s total employment, yet they often face barriers to participating in global trade,” the paper observed.
MSMEs—recognized as the backbone of global economies—also contribute up to 40 percent of gross domestic product (GDP) with a similar share of GDP from informal businesses. MSMEs likewise account for a significant share of international trade: 36 percent of exports and 41 percent of imports in developed economies. Additionally MSMEs participate in global value chains (GVCs) as suppliers.
But despite their significance, MSMEs still face substantial challenges in integrating into GVCs and participating in international trade, which hinders their growth potential and the inclusivity of the global economy.
Among the study’s key findings is that despite representing a large portion of global trade, MSMEs remain underrepresented in AEO programs. Many smaller businesses lack awareness of these programs or perceive them as too complex and costly.
Moreover, MSMEs face challenges in navigating complex AEO application processes, meeting financial and security requirements, and understanding compliance obligations.
It was also found that few Customs administrations offer specific benefits to MSMEs, although some have started implementing flexible approaches such as reduced security criteria, simplified application processes, and tiered certification systems.
The study titled “Study Report on Integration of MSMEs into Authorized Economic Operator (AEO) Programmes” also discovered that many MSMEs are unaware of the advantages of AEO certification.
To address these issues and raise MSME participation, the joint study emphasizes the need for Customs to communicate with MSMEs to understand what MSMEs want or what holds them back from applying. More targeted outreach efforts, combined with training and capacity-building programs, are critical.
Further, the research paper called for more tangible benefits, such as priority Customs clearance or cost reductions for inspections as well as flexible compliance options that consider MSMEs’ limited resources such as offering different certification categories at various compliance levels.
It is also necessary to strengthen inter-agency collaboration to hasten the recognition of AEO certification across government agencies.
In essence, this study points out that a one-size-fits-all approach to AEO programs does not adequately address the unique challenges faced by MSMEs. “To unlock their potential, Customs administrations should consider adopting more flexible and inclusive AEO models, enhance outreach efforts, and provide tailored support that accounts for the financial and operational constraints of smaller businesses,” the report concluded.
