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Procedure of obtaining AEO Certification - Guide to Authorized Economic Operator

Authorised Economic Operator (AEO) was a programme introduced under the World Customs Organization's (WCO) SAFe Framework of Standards. It was introduced to secure and facilitate global trade. The objective of the program is to enhance the international supply chain security and facilitate the movement of legitimate goods. 

Under the AEO programme, an entity involved in international trade must be approved as compliant with supply chain security standards and granted AEO status & certain benefits. 

The AEO Programme in India is in accordance with the commitments made under Article 7.7 of WTO TFA. Even though AEO is not a mandatory programme, it is a voluntary compliance programme. It ensures enhancement and streamlining in cargo security through close cooperation with the persons involved in international trade including importers, exporters, logistics providers, custodians, customs brokers or warehouse operators.

Benefits of AEO Certification
 

  • Self-declaration of Standard Input Output Norms (SION) under Para 4.07A of FTP 2015-20 for the AEO Exporters in cases where the SION is not notified.
  • Inclusion of the Direct Port Delivery of the imports ensures just-in-time inventory management by the manufacturers who want to seek clearance from the wharf to the warehouse for AEO T1, T2 and T3.
  • Inclusion of the Direct Port Entry for the factory stuffed containers meant for export by AEOs 
  • Provision of deferred payment in customs duties. It ensures delinking duty payment and customs clearance for AEO T2 and AEO T3.
  • Benefits of Mutual Recognition Agreements (MRA) with other Customs Administrations for AEO T2 and AEO T3. Mutual Recognition Agreements (MRA) acts as an equalizer to harmonize the minor differences to ensure seamless facilitation of benefits and processes for movement of goods across borders for the domestic AEO accredited entities.
  • Fast-tracking of adjudications and refunds, including IGST refunds and disbursal of drawbacks.

AEO-Eligibility Criteria for an entity

  • The entity must have handled a minimum of twenty-five documents (Shipping Bills or Bills of Entry) in the last Financial Year.
  • The entity should have experience in Customs related work.
  • The entity must be a part of the international supply chain.
  • The entity must have had business activity in the last three Financial Years.

Note: Businesses that are not engaged in customs-related work/activities will not be entitled to apply for AEO registration. In general, banks, NBFCs, insurance companies, etc.

How to apply for AEO certification?

You must note that AEO certification can only be given to the legal entity and not any group company. An entity can apply for AEO Certification through:

  • Online Application
  • Manual Application

The key documents to be furnished for grant of AEO-T1, AEO-T2, AEO-T3 and AEO-LO):

  1. Application Form which must include business details such as name and address of all the sites of the applicant along with the contact details of the point of contact. The applicant must share Board Resolution along with any MSME Certificate as well. The applicant has to furnish ME/SB fields related to the previous Financial Year as well.
  2. Security Plan which must include details relating to compliances associated with Government mandate.
  3. Process Map that must inform the flow of goods or documentation or information from receipt of order to the point of export of the product describing all activities and roles of all business partners.
  4. Site Plan
  5. All documents associated with general compliance including factory  licence, certificate of incorporation, to name a few.
  6. Documents associated with compliance procedures such as a copy of any show-cause notices received related to Customs Act, comments on internal control, details on any infringement of customs law etc.
  7. Documents related to the management of commercial and transport records including a snapshot of the record room.
  8. Documents to validate financial solvency of the business such as financial statements of the past three financial years, solvency certificate issued by the statutory auditor, etc.
  9. Documents validating safety and security of the cargo including procedure manual to ensure the integrity of the cargo, premises security, cargo security, etc.

The applicant may provide these annexures on their own but to save time and effort, in a practical scenario, an entity must take assistance from a firm dealing in AEO registration 

Mandatory Compliance under AEO registration process

  • Show Cause Notice must not have been issued to the applicant during the preceding three financial years regarding fraud, forgery, outright smuggling, and clandestine removal of excisable goods. However, if any show-cause notice involving technical issues has been issued in the previous three years, such detail must be furnished otherwise AEO Certification will not be furnished.
  • No cases wherein prosecution could have been launched or was completed against the entity or its senior management.
  • The ratio of disputed duty during the preceding three financial years to the total duty paid during the said period is not more than ten percent.
  • The ratio of disputed drawbacks during the last 3 financial years to the total drawback claimed during the said period is not more than ten (10) percent.
  • The applicant should have a satisfactory system of managing commercial, transport records, procedures for verifying the accuracy of customs declarations. There must be an administrative setup that corresponds to the type and size of the business.
  • The applicants of the AEO registration must be financially solvent in the preceding three financial years from the date of application. The entity must submit an undertaking in relation to solvency and a Solvency Certificate must be issued by an independent Chartered Accountant or Statutory Auditor of the applicant for AEO-T1 and AEO-T2. However, for AEO-T3 and AEO-LO, only a certificate from the Statutory Auditor of the applicant is required.

 

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