Authorized Economic Operator (AEO) Programme under Customs Act, 1962

The World Customs Organization in June, 2005, with a view to secure the international supply chain, has adopted the SAFE framework of Standards. Authorized Economic Operator (AEO) is one of the three pillars on which the SAFE framework is formed. AEO helps to build a closer partnership between the customs department and the trade industry.

The Authorized Economic Operator (AEO) programme provides the benefits of easy customs clearances and easy customs procedure to those business entities which offers a high degree of security guarantees in respect of their roles in the supply chain.

Vide circular no. 33/2016-Customs dated 22nd July, 2016, the Central Board of Excise & Customs have merged the two-facilitation scheme namely ACP (Accredited Client Programme) and AEO (Authorized Economic Operator) into new three tier AEO programme. The current article provides the complete guide relating to new three tier AEO programme.

Introduction

AEO is a programme under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The programme aims to enhance international supply chain security and facilitate movement of legitimate goods. AEO encompasses various players in the international supply chain. Under this programme, an entity engaged in international trade is approved by Customs as compliant with supply chain security standards and granted AEO status & certain benefits. AEO is a voluntary programme. It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principal stakeholders of the international supply chain viz. importers, exporters, logistics providers, custodians or terminal operators, custom brokers and warehouse operators. The Circular 33/2016 – Customs dated 22.07.2016 provides the statutory framework for the AEO programme.

Background

Prior to adoption of the SAFE Framework by WCO in 2005, Customs administrations all over the world, including India, were already implementing various forms of Customs compliance programmes which focused on compliance with traditional areas of Customs requirements, and which can also be considered as trade facilitation programmes, based on the Revised Kyoto Convention’s “authorized persons” provisions. In India, this programme was known as Accredited Client Programme (ACP) vide Notification No.42/2005 dated 24.11.2005 to provide facilitation to ACP clients subject to their fulfilment of the prescribed eligibility criteria.

AEO has become a flagship programme for WCO Members as it offers an opportunity for Customs to share its responsibilities with the businesses, while at the same time rewarding them with a number of additional benefits.

Advantages

Through this initiative, Indian Customs asks businesses to ensure the integrity of their security practices, and communicate and verify the security guidelines of their business partners within the supply chain. In exchange, Indian Customs affords its AEO members with certain benefits, including:

• Self-declaration of SION for AEO status holder Exporters in cases where SION is not notified. 
• Inclusion of Direct Port Delivery of imports to ensure just-in-time inventory management by manufacturers – clearance from wharf to warehouse.
• ID cards to be issued to AEO’s personnel for allowing entry to Customs House, CFS and ICD. 
• Investigation related to AEO status holder shall be fast tracked within 6-9 months.
• Dispute resolution related to AEO status holder shall be completed/ adjudicated within 6 months. 
• AEO status holder will get a e-mail regarding arrival/ departure of vessel carrying their consignment. 
• Faster disbursal of drawback amount within 72 hours of EGM submission.
• The assessment/examination shall be done processed on priority basis. 
• Faster disbursal of refund, including IGST refund and rebate for AEO status holder within 45 days of submission of complete documents. 
• Benefits of Mutual Recognition Agreements with other Customs Administrations for AEO T2 and AEO T3. 

Eligibility

• Any legal entity that undertakes Customs related work can apply for the AEO Programme if they fulfil the following conditions: 
• They have handled 25 Import or Export document in last Financial Year. 
• They have had their business activity for last 3 Financial Year (This condition can be waived of by the AEO Programme Manager). 
• The applicant must have been Financially Solvent for the last 3 Financial Years. 
• The applicant must not be issued a Show Cause Notice involving ‘fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax has been collected from customers but not deposited to the Government’ during last 3 Financial Years.

Process

The program uses a trust but verify approach with the trade community. To apply to the programme, a prospective AEO certificate holder submits basic company information and a security profile as per the annexure in the circular. The AEO team checks on the company in its general compliance, legal compliance, management of commercial and transport records, financial solvency, safety and evaluates safety and security with respect to procedural security, premises security, cargo security, conveyance security, personnel security, business partner security and security training and threat awareness. The AEO specialists conduct onsite visit of domestic facilities to confirm the security practices are in place and operational in case of higher certification levels. The efficient and compliant businesses are certified into the programme.

Certification

If AEO status is granted, the AEO Programme Manager shall send the Certificate of AEO Status to the applicant in hard copy along with an electronic copy (for AEO T1 only). The Certificate shall bear the AEO logo’ that may be used where it is appropriate to do so for the business, for example, company stationary, signage on vehicles or other publicity materials. The copyright for the logo is owned by the AEO Programme Manager on behalf of the Indian Customs Administration. AEO status will be activated within a week from the date of issue. Following this period, the applicant should enter the AEO certificate number on all Customs documentation to indicate their AEO Status. 

Maintenance of AEO Status

• After obtaining AEO status, the AEO status holder should maintain their eligibility by adhering to the appropriate standards. 
• The holder of a Certificate of AEO Status is required to notify any significant change in business and processes which may affect the AEO status to the AEO Programme Team. These changes may include the following: 
• Change to the legal entity. 
• Change of business name and/or address.
• Change in the nature of business i.e. manufacturer / exporter etc. 
• Changes to accounting and computer systems.
• Changes to the senior personnel responsible for Customs matters. 
• Addition or deletion of locations or branches involved in international supply chain. 14.3 The AEO status holder should notify the AEO Programme Team as soon as the change is known or, at least within 14 days of the change taking place.
• If the legal entity changes, the AEO status holder needs to reapply for AEO in the name of new legal entity.

Review of AEO Status

The AEO Programme Team will review AEO status periodically to ensure continued adherence to the conditions and standards of grant of Certificate of AEO Status. Thus, it is recommended that the AEO status holder should continue to re-assess its compliance with the conditions of certification and act upon any identified problems as soon as they arise. 

Conclusion

The AEO programme provides the benefits of easy customs clearances and easy customs procedure to those business entities which offers a high degree of security guarantees in respect of their roles in the supply chain. Vide circular no. 33/2016-Customs dated 22nd July, 2016, the Central Board of Excise & Customs have merged the two-facilitation scheme namely ACP (Accredited Client Programme) and AEO (Authorized Economic Operator) into new three tier AEO programme. The current article provides the complete guide relating to new three tier AEO programme.