What does AEO mean?

 

Indian AEO Programme

Key Points

• About:
  
  • AEO is a programme (2007) under the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate global trade.
  • It aims to enhance international supply chain security and facilitate the movement of goods.
  • Under this, an entity engaged in international trade is approved by WCO as compliant with supply chain security standards and granted AEO status.
  • An entity with an AEO status is considered a ‘secure’ trader and a reliable trading partner.
    
    • Benefits of AEO status include expedited clearance times, fewer examinations, improved security and communication between supply chain partners.
  • AEO is a voluntary programme.
• Indian AEO Programme:
  
  • The AEO Programme was introduced as a pilot project in 2011.
  • The security standards detailed in WCO SAFE Framework are the basis of the Indian AEO programme.
  • There is a three tier AEO Status for Exporters and Importers. The three tiers are AEO T1, AEO T2, AEO T3, where AEO T3 is the highest level of accreditation.
• Aim of Indian AEO Programme:
  • To provide business entities with an internationally recognized certification.
  • To recognize business entities as “secure and reliable” trading partners.
  • To incentivize business entities through defined benefits that translate into savings in time and cost.
  • Secure supply chain from point of export to import.
  • Enhanced border clearance.
  • Reduction in dwell time and related costs.
  • Customs advice/assistance if trade faces unexpected issues with Customs of countries.
• Benefits:
  
  • Safe and Compliant Business: Worldwide recognition as safe, secure and compliant business partners in international trade.
  • Reciprocal Recognition: India gets trade facilitation by a foreign country with whom India enters into a Mutual Recognition Agreement/Arrangement (MRA).
    
    • MRA is an international agreement by which two or more countries agree to recognize one another's conformity assessment results (for example certifications or test results).
  • Streamline Cargo security: 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.
  • Promote Ease of Doing Business: A liberalized, simplified and rationalized AEO accreditation process has potential to promote Ease of Doing Business and to emulate global best practices.
  • Facility of Direct Port Delivery of import Containers and/or Direct Port Entry of Export Containers.
    
    • It also fast tracking of refunds and adjudications.
  • The Indian AEO Programme is a game-changer. It will not only achieve ‘Make in India’ but also substantially add to the vision and lead India to become a manufacturing and exporting power-house.

World Customs Organisation

• The World Customs Organization (WCO), established in 1952 as the Customs Co-operation Council (CCC) is an independent intergovernmental body whose mission is to enhance the effectiveness and efficiency of Customs administrations.
• At present, it represents 183 Customs administrations across the globe that collectively process approximately 98% of world trade.
• India had become the vice-chair (regional head) of the Asia Pacific region of the WCO for a period of two years to June, 2020.
• It is the only international organization with competence in Customs matters and which can rightly call itself the voice of the international Customs community.
• It has its headquarters in Brussels, Belgium.

SAFE Framework

• In June 2005 the WCO Council adopted the Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework) that would act as a deterrent to international terrorism, to secure revenue collections and to promote trade facilitation worldwide.
• The SAFE Framework has emerged as the global Customs community’s concerted response to threats to supply chain security, equally supporting facilitation of legitimate and secure businesses.
• It prescribes baseline standards that have been tested and are working well around the globe.

Who is an AEO?

An AEO is a party involved in international movement of goods approved by or on behalf of a national Customs administration, complying with the WCO. This could include exporters, importers, suppliers, customs agents, manufacturers, carriers, ports, terminal operators, warehouses, distributors and freight forwarders.

What is an AEO certificate?

The Government of India developed a three-tier AEO Customs program where importers and exporters are presented with an AEO tier certificate based on their performance. These certificates can be obtained by organizations established in India and involved in international trade like importers, exporters, warehouse operators, cargo agents, carriers, port operators and Custom House Agents (CHAs).

These certificates are issued to the organization as a whole and are applicable irrespective of their location. For this, applicants have to provide their SOP (standard operating procedures) and additional details as required by the department.

What are the types of AEO certificates?

Three certification types are issued under the Customs AEO program:

1. AEO-T1 – Certificate is issued based on submitted document verification
2. AEO-T2 – Certificate is issued based on document and onsite verification
3. AEO-T3 – Certificate is only available to those who have had AEO-T2 status for at least two years based on document verification.

What is the eligibility for AEO program?

Below are some of the requirements to be a part of the AEO programme³:
• Applicants must be based in India.
• They should have conducted business activities for a minimum of three financial years preceding the date of application.
• Applicants should not have received any show-cause notice relating to forgery, fraud, smuggling, and clandestine goods removals or where goods have been collected but not deposited with the government.
• They should have appropriate internal controls and measures for ensuring business’s safety and security and for smooth management of supply chain.
• Applications should be financially solvent during the last three financial years preceding the application date.

What are the benefits of AEO programme?

• AEO-T1 status holders benefit from 24/7 cargo clearance, earmarked space for custodians’ premises, exemption from payment of merchant overtime fee and facility of Direct Port Delivery (DPD) for import and export purposes.
• As for T2 and T3 AEO custom certificate holders, they get additional benefits like timely grant of refund/rebate of indirect taxes facility for deferred customs duty payment, exemption from submission of bank guarantee and the ability to paste MRP stickers in their premises.

What are the documents required for AEO Programme registration?

Some of the mandatory documents required are:
• PAN
• IEC
• GST certificate
• MSME certificate
• Previous three years’ audit report
• List of import/export items with respective HSN codes
• Certificate of incorporation
• Standard Operating Procedures (SOP) for safety and security plans of the businesss

What is the AEO Programme registration process?

Following is the process to register with AEO Programme⁶:
1. Visit the AEO India website and click on registration.
2. Provide the necessary information and register on the website. This is verified basis your IEC on the DGFT portal, so you must use the same contact details.
3. Add the OTP you received.
4. Once you have registered, use your credentials to log in.
5. Click on the respective AEO tier form and fill out the application and annexures, along with the required documents.
6. Submit your application. In the Update Verification section, you can check the status of your AEO application.

Similar to the AEO programme, the Government of India and worldwide organizations have introduced many export incentive schemes and processes to make international trade simpler for exporters. With e-commerce exports gaining awareness and popularity, Indian exporters are now able to sell internationally and expand their businesses without setting up physical stores or warehouses abroad.

Circular no. 33/2016-Customs dated 22nd July, 2016 has merged two facilitation scheme namely ACP (Accredited Client Programme) and AEO (Authorized Economic Operator) into a combined three-tier AEO programme. Under the new AEO programme, the importer and exporter are being issued a certificate based on three-tier certification i.e. AEO-T1, AEO-T2 and AEO-T3, however, economic operator other than importer and exporters are given only one tier certification i.e. AEO-LO. In this article, we look at the various aspects of the Authorized Economic Operator (AEO) Certificate in detail.

Benefits Of AEO-T1 Certificate

The AEO-T1 certificate is granted only to the importer or the exporter on the fulfilment of the required criteria. Following are the list of benefits available to the importer or the exporter if an AEO-T1 certificate has been granted to them –

• The main benefit accrued with the AEO-T1 certificate is surety of shorter cargo release time. The consignment of the importer or exporter having AEO-T1 certificate would receive the high level of facilitation in imports and exports.
• There would be a grant of separate space, wherever possible, earmarked in the Custodian’s premises.
• Facility of direct port delivery (i.e. DPD) would be available in case of import containers based on the volume of their import trade in terms of the number of containers.
• Facility of direct port entry (i.e. DPE) would be available in case of export containers based on the volume of their export trade in terms of the number of containers.
• ID cards would be allotted to the authorized personnel of AEO-T1 holder in order to facilitate hassle-free entry to Customs House, CFS and ICD.
• The person holding AEO-T1 certificate would have the facility to provide 50% less bank guarantee as compared to others. However, it must be noted that the facility of less bank guarantee would not be available in case the competent authority has ordered furnishing of bank guarantee in case of provisional release of seized goods.
• Facility of fast completion, within a period of 6 to 9 months, of investigation relating to indirect tax cases would be available. Further even in case of dispute resolution cases would be taken up fast preferably within 6 months.
• The AEO-T1 holder will not be subjected to regular transactional PCA (i.e. post-clearance audit). Onsite PCA would be conducted once in two years only.
• Facility of 24/7 clearance at all the seaports and airports can be made available. Further, the holder of the AEO-T1 certificate is not required to pay Merchant Overtime Fee.
• Arrival and/or departure of the vessel carrying the consignment of AEO-T1 holder would be informed through an e-mail.

Benefits Of AEO-T2 Certificate

The AEO-T2 certificate is granted only to the importer or the exporter on the fulfilment of required criteria. Following are the list of benefits available to the importer or the exporter if the AEO-T2 certificate has been granted to them –

• The holder of the AEO-T2 certificate would be given a higher level of facilitation in the import and export of their consignments.
• At the time of seal, verification/scrutiny of documents by the customs officers would be waived. Further, consignment would be given out of charge or let export order without any scrutiny.
• In case the container of AEO-T2 certificate holder is selected for scanning, the same would be scanned by giving front-line priority treatment.
• The Bill of entry or shipping bill if selected by the officer the same would be processed on the priority basis.
• AEO-T2 certificate holder will have the facility of self-sealing of export goods without the requirement to seek case to case permission from the authority.
• The person holding AEO-T2 certificate would have the facility to provide only 25% of bank guarantee as compared to others. However, it must be noted that the facility of less bank guarantee would not be available in case the competent authority has ordered furnishing of bank guarantee in case of provisional release of seized goods.
• They have a facility that they can paste the MRP stickers at their premises.
• The AEO-T2 holder will not be subjected to regular transactional PCA (i.e. post-clearance audit). Onsite PCA would be conducted once in three years only.
• They have the facility of submitting a paperless declaration and there is no requirement of any supporting documents in physical form.
• The refund/rebate relating to indirect taxes of the AEO-T2 certificate holder would be granted within a period of 45 days.
• They have the opportunity of trade facilitation by a foreign customs administration with whom India enters into a Mutual Recognition Agreement.
• A Client Relationship Manager would be appointed by all the customs houses and they would act as a voice of AEO-T2 holder within the customs in relation to legitimate concerns and issues of AEO.

Benefits Of AEO-T3 Certificate

The AEO-T3 certificate is granted only to the importer or the exporter on the fulfilment of required criteria. Following are the list of benefits available to the importer or the exporter if an AEO-T3 certificate has been granted to them –

• The holder of an AEO-T3 certificate would be the given higher level of facilitation in import and export of their consignments, even more than AEO-T2 holder.
• AEO-T3 certificate holder will have the facility that their containers will not be selected for scanning except on the basis of specific intelligence. In case the container is selected for scanning, the topmost priority would be given for the same.
• Assessing/examination by the Customs officer would be done on the self-certified copy of documents and there will not be need of original documents.
• The person holding AEO-T3 certificate are not required to submit any bank guarantee. However, it must be noted that the facility of no bank guarantee would not be available in case the competent authority has ordered furnishing of bank guarantee in case of provisional release of seized goods.
• The refund/rebate relating to indirect taxes of the AEO-T3 certificate holder would be granted within a period of 30 days.
• On request, they will be provided on-site inspection/examination.

Benefits Of AEO-LO Certificate

The AEO-LO certificate is granted to all the economic operator other than the importer and the exporter on the fulfilment of required criteria. Following are the list of benefits available to the different economic operator if AEO-LO certificate has been granted to them –

Benefits available to Logistic Service Provider

1. Facility of waiver of bank guarantee in case of trans-shipment of goods under Goods Imported (Conditions of trans-shipment) Regulations, 1995;
2. Facility of exemption from the permission on case to case basis in case of transi of goods;
3. Facility of execution of running bond.

Benefits available to Custodians or Terminal Operators

1. Facility of wavier of bank guarantee under Handling of the cargo in Customs Area Regulations, 2009;
2. Facility of extension for the period of 10 years for approval of custodians under regulation 10 (2) of the Handling of cargo in Customs Area Regulations, 2009.

Benefits available to Customs Brokers

1. Facility of waiver of bank guarantee to be furnished under regulation 8 of the CBLR, 2013;
2. Facility of extension of validity of licenses, till the validity of AEO status, granted under regulation 9 of the CBLR, 2013;
3. Facility of waiver from the fee for renewal of license required under regulation 11 (2) of CBLR, 2013.

Benefits available to Warehouse Operators

1. Facility for faster approval of new warehouse within a period of 7 days;
2. Facility of waiver of antecedent verification envisaged for grant of license for warehouse;
3. Facility of waiver of solvency certificate;
4. Facility of waiver of security for obtaining an extension in the warehousing period;
5. Facility of waiver of security required for warehousing of sensitive goods.

FAQs

Q: Is it possible to revoke the AEO certification?

Ans:

Yes, the authorities can revoke the certificate when they do not follow all the regulations. And for the next two years, the firm will not be eligible to apply for AEO.

Q: What is the lifespan of the AEO certification?

Ans:

The AEO certification is valid for three years.

Q: Is it possible to take back AEO requests?

Ans:

Yes, firms can retract the AEO request while the procedure is going on, particularly when they need additional time to meet the requirements for AEO certification. Whenever the company is ready, they can resubmit the requests.

Q: What is an AEO certificate?

Ans:

According to the World Customs Organization (WCO), the Authorised Economic Operator is when a company or organisation is part of the global transportation of materials in any capacity and the certification by the NCA as abiding with WCO or similar supply chain safety standards.