Authorised Economic Operator – (AEO) – what is it and could your business benefit?
Most members of World Customs Organisation (WCO) have acceded to the SAFE framework and the majority of customs administrations will or have introduce AEO-programmes. Protecting the global supply chain is a priority for business and government, the Brexit trade negotiations will recognise this. However, once outside the single market VAT and customs duties will be an issue for UK/EU trade. Becoming an AEO will ease this burden. The AEO concept is the EU’s response to the WCO SAFE initiative to tackle terrorism, counterfeiting and fraud. It has been adopted and is recognised by all the major trading nations. All businesses involved in moving goods through the international supply chain are affected, irrespective of size or trade sector. Mutually recognised around the world, in fact the ultimate goal is to get all national programmes mutually recognized, meaning that AEO accreditations have the same value everywhere. As a result, secure supply chains can be established, as all parts of the chain from origin (place of stuffing of the container) to destination (place of unpacking of the container) are deemed to be safe, albeit under different AEO programmes including the UK, EU, USA, China and India to name a few. AEO status provides facilitation and benefits to reliable businesses that demonstrate themselves to be trusted and compliant members of the international supply chain.
On Brexit, the UK will be a Member of the WCO and the current EU AEO requirements are likely be adopted in full.
What is an AEO is a business that, following a detailed audit, is regarded as reliable and compliant by HM Revenue & Customs (HMRC). AEO status will be granted to businesses meeting the criteria for one of three possible certifications:
- Customs simplifications
- Security and safety
- A combination of the two
For most businesses, a customs simplification authorisation will be the most important accreditation
Is it compulsory and what are the benefits?
AEO status is not compulsory but unaccredited businesses are likely to see significant increases in import and export costs. Businesses holding AEO status will have several advantages over other businesses.
- As a ‘trusted participant’ in the supply chain, an AEO’s goods will be subject to fewer import examinations by customs authorities.
- Automatic granting and no financial guarantees for using customs simplified procedures such as inward/outward processing relief, customs warehousing and temporary storage.
- Mutual recognition with the EU will make it easier and simpler to import and export goods from/to the remaining 27 Member States.
The process of the AEO application has indirect or collateral benefits including taking an end-to-end review of the business, identifying strengths and weaknesses including:
- Increased security awareness within the business
- Streamline workflows and increase efficiency
- Provision of more timely and accurate data to customers and customs authorities
- Enhanced due diligence procedures
- Early identification of theft and fraud
- Enhanced customer relationships by reducing in delivery delays
Will non-AEO businesses be disadvantaged?
Current clearance times in respect of goods owned by non- AEO businesses will be maintained. However, goods being imported by AEOs will be prioritised over non-AEO goods if subject to customs examination.
Businesses who choose not to apply for AEO status will be able to retain existing authorisations and simplifications. However, they will be required to lodge guarantees with HMRC. Following the implementation of pre/arrival/departure summary declarations, non-AEO businesses are required to submit more data to HMRC.
What does the application process involve?
Applications to HMRC are voluntary and require a detailed examination of a company’s:
- Background – including details of the owners and shareholders of the business, sites and subsidiaries, the source of raw materials and destination of sales.
- Customs compliance record – including details of any existing customs authorisations held by the business, the methodology for determining the customs value of imports and exports, and the procedures for disclosing irregularities to the relevant government agencies.
- Accounting and logistical system – including the audit trail for fiscal and customs purposes, the internal control procedures of the business, and measures taken to protect computer systems against unauthorised access.
- Financial solvency, and, if applicable • Safety and security procedures
The Application Form, C117 and explanatory notes can be accessed at HMRC’s website.
Having considerable experience in assisting companies navigate the process and attain AEO status, International Trade Matters Ltd can work with you and advise how best to ensure a successful application.
What should businesses be doing now?
Prior to submitting an application for AEO status, applicants need to analyse their business to ensure that the required criteria and standards can be met and fully evidenced. International Trade Matters Ltd can carry out these pre-requirements if you do not have the expertise. We can become your Export Trade Desk.
This involves reviewing:
- Business processes, systems and controls
- Existing accreditations or authorisations which may satisfy part of the criteria for AEO status
- Areas of risk, to understand their potential impact on the business, customs matters and the AEO application
The AEO accreditation process can take several months, so getting the application right first time is key to achieving your export targets.
Looking for information on AE status?
Mike Court is International Trade Compliance Specialist for International Trade Matters Ltd.