FEBRUARY 2017 ABOUT THE AUTHORS PRANVERA KASTRATI is the Head of the Trade Walking the Last Mile: Facilitation Unit within the Ministry of Economic Develop- ment, Tourism, Trade and Operationalization of Albania’s Entrepreneurship and the Albanian CEFTA Contact Point. Authorized Economic Operators Program She provides technical expertise in all trade policymaking and monitoring aspects. Albania’s Authorized Economic Operators (AEO) program is not yet MIRELA MEKO operational, even though the country has adopted the necessary is the Deputy General Director of Customs. She leads some of the EU legal and regulatory frameworks. This SmartLesson outlines main reforms undertaken within Albanian Customs Service and shortcomings in the adoption of AEO provisions under the European provides wide technical and managerial support. Community Customs Code (CCC) as well as the obstacles the national PERIKLIS SARAGIOTIS government has faced putting in place the complementary reform is a Private Sector Specialist working at the Trade and measures necessary to ensure practical effectiveness. Lessons learned Competitiveness Global Practice of the World Bank Group. He provides technical leadership to from the Albanian experience may be instructive for other countries lending and advisory projects in the trade facilitation and in the Central European Free Trade Agreement region as they look logistics domain. to operationalize their AEO programs without diverting from AEO Guidelines as set out in the EU acquis. APPROVING MANAGERS Jose Guilherme Reis, Practice Manager, Trade and Competitive- ness Global Practice; William John BACKGROUND In Albania, as in the entire Western Gain, Global Trade Facilitation and Balkans, the AEO system has gained Border Management Lead, Trade Simplifying cargo clearance proce- momentum and is considered one of and Competitiveness Global Practice. dures is a way of rewarding traders the most effective measures to facili- for long-term compliance and, at the tate intraregional trade. In 2014, the same time, facilitating low-risk cargo Albanian government amended the flows across borders. Certified-trad- Customs Code1 to incorporate AEO er programs are an elaborated form provisions and, later that same year, adopted the program’s implementa- of simplified procedures that have tion provisions.2 been applied successfully in many countries around the world under However, no domestic companies different names. Within the EU the have been awarded an AEO certifi- scheme is called the Authorized cate to date. Reasons for this situa- Economic Operators program. The tion include the following: AEO concept in the EU is based on • Albania’s AEO framework re- the World Customs Organization’s mains incomplete. Traders and Customs-Business partnership and aims to enhance supply-chain secu- 1 Article 40-42 of the Customs Code (Law No. 102/ 2014). rity and facilitate trade by simplify- 2 Decision of the Council of Ministers (DCM) ing customs. 919/29.12.2014. SMARTLESSONS — FEBRUARY 2017 1 logistics firms must meet numerous rigorous criteria, and this constrains the number of Box 1: What is the EU Acquis? qualifying companies. Instead, interested The acquis is the body of common rights and companies have been instructed to apply to obligations that is binding on all the EU mem- a local clearance program, which allows the ber states. It is constantly evolving and com- completion of the clearance procedures on prises: the operator’s premises. • the content, principles and political ob- jectives of the Treaties; • A number of simplified procedures were de- fined only after the adoption of AEO regula- • legislation adopted pursuant to the tions, and some benefits have not yet been Treaties and the case law of the Court of defined. Despite these glitches, private sec- Justice; tor interest in participating in the AEO pro- • declarations and resolutions adopted by gram remains strong. the Union; • instruments under the Common Foreign Under the ongoing Albania Competitiveness De- and Security Policy; velopment Policy Operation, the Albanian Customs Service (ACS) is working closely with the World • international agreements concluded by the Union and those entered into by the Bank and IFC to operationalize the local clearance member states among themselves with- procedures for authorized traders. In this context, in the sphere of the Union’s activities. the adoption of the Instruction on Local Clearance by the Customs Director General (Instruction No. 6 Candidate countries have to accept the acquis of April 22, 2016) has been inserted as a prior ac- before they can join the EU and make EU law part of their own national legislation. Adoption tion for the disbursement of the IBRD loan. and implementation of the acquis are the basis Albania has followed a path of gradual har- of the accession negotiations. monization to the EU acquis.3 (See Box 1.) This Source: European Neighbourhood Policy and Enlargement careful approach has enabled the government Negotiations webpage: http://ec.europa.eu/enlargement/policy/ glossary/terms/acquis_en.htm. to achieve not only compliance with the EU ac- quis but also the necessary customization for the country’s economic circumstances. In effect, harmonization. By that view the ACS’s current the government has acknowledged a need to interpretation of criteria is overly stringent. For go beyond mere legislative compliance with the instance, minor infringements automatically European Customs Code and to take additional lead traders to be classified as noncompliant and practical measures toward operationalization. to be liable to disqualification from the evalua- This will allow the private sector to reap the eco- tion process. Such a strict approach increases the nomic benefits of the program. possibility that interested companies, especially small and medium enterprises (SMEs), will fail to meet the required standards. LESSONS LEARNED A preliminary assessment of the ability of Albania’s Lesson 1: Be selective about applying economic operators to comply with AEO criteria would be invaluable in developing projections of the rules. the program’s success. ACS is working to develop While Albania has already complied in full with instructions specifically focusing on the application the legislative and regulatory requirements of of AEO eligibility criteria, and with the objective the EU acquis, there is a need go beyond mere of removing barriers to entry for Albania’s SMEs, legislation and to take the nature and structure which constitute the vast majority of its private of the market into account in seeking to achieve sector entities. This will require striking a fine bal- ance between compliance with the EU regulations 3 Article 97, point 2. and customization to the Albanian market. 2 SMARTLESSONS — FEBRUARY 2017 Lesson 2: Ensure that benefits are in place prior to the establishment of the AEO program. Introduction of AEO will re- quire a benefits framework for certified economic opera- tors to be in place and ready. If no enterprises are able to take advantage of benefits, the program will fail. There have been four appli- cations for AEO certificates, all of which have been un- successful in the absence of a robust benefits frame- in particular those criteria that define the risk in work. For instance, lack of clear instructions accordance with the type of activity and the rel- and guidelines prevented customs officers from evant operator. implementing local clearance procedures. In ad- dition, it is still unclear which documents are ex- AEO status should be aligned in all phases with empt from submission. risk management efforts to enable ongoing monitoring of compliance, allowing permanent Recently, ACS adopted a Customs Director Gen- monitoring of conditionality fulfillment. This eral Instruction4 and a manual on local customs alignment, during the application phase and af- clearance that offer clear implementation guid- ter, consists of prior checks of any economic op- ance to customs officers. Subsequently, ACS has erator risk profile and its potential to comply at approved five applications for local clearance all stages. Thus the alignment of the AEO pro- procedures. Yet steps need to be taken to fur- gram with the existing risk management can in- ther clarify benefits. (See Figure 1.) crease the efficiency of the program itself. Lesson 3: Align requirements with Lesson 4: Develop a clear existing risk management programs. communication and outreach strategy. Effective implementation of the program will re- quire a balanced approach to risk profiles and Communication and outreach are vital compo- risk management. Albania’s AEO status is con- nents in the successful implementation of an ini- tingent on certain eligibility criteria being met, tiative such as AEO. To date, efforts have been Figure 1: Albanian AEO Framework Development 4 Customs Director General (DG) Instruction No 6/22.4.2016. SMARTLESSONS — FEBRUARY 2017 3 undertaken to educate stakeholders, including corporations and customs officers, through face-to-face meet- ings or trainings. However, there is no systematic approach in place and this has likely affected the results. Media campaigns, workshops, and other communication tools may be effective means of communication about the AEO program. CONCLUSION The operationalization of the AEO program presents a challenge for Al- bania, as it does for other Western Balkan countries. The government has come to realize that the develop- ment of a functional AEO program requires—in addition to legislative harmonization with the EU acquis— customization and adjustment of eligibility criteria to the local market and conditions. Introduction of an AEO Strategic Action Plan and the development of a pilot project to test feasibility would be good preliminary steps going forward. Taking a similar approach elsewhere in the Western Balkans might also open the door for complete harmonization of national AEO programs and the strengthen- ing of intraregional trade. DISCLAIMER SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. The findings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please see the terms and conditions at www.ifc.org/ smartlessons or contact the program at smartlessons@ifc.org. 4 SMARTLESSONS — FEBRUARY 2017