The Authorized Economic Operator (AEO) Scheme is a program under the guidance of the World Customs Organization (WCO), SAFE Framework of Standards to secure and facilitate trade globally. An AEO (Authorised Economic Operator) is a business entity involved in the international movement of goods requiring compliance with provisions of the National Customs law and is approved by or on behalf of the national administration in compliance with World Customs Organization (WCO) or equivalent supply chain security standards.
The security standards are detailed in the World Customs Organization Safe framework of standards [WCO SAFE FoS], which is the basis of the Indian AEO Registration. There are 3 tiers of certification in the new AEO certification program. For businesses in importing & exporting there are three tiers providing varying levels of benefits:
AEO T1 – It is verified based on document submission only
AEO T2 – Along with T1 Compliance, document verification, and onsite verification is also done
AEO T3 – For AEO T2 owner who has enjoyed the position for 2 years only based on document verification & for AEO (Authorised Economic Operator) T2 holders who have not enjoyed the status or have introduced major business changes, the applicant is subjected to physical verification.
AEO LO – There is document verification and onsite verification which is done considered for logistics providers, custodians or terminal operators, customs brokers, & warehouse operators there
The AEO Certification enables Customs administration to identify the safe and compliant business entity to provide them a higher degree of assured facilitation. This segmentation method enables Customs resources to focus on less non-compliant or risky businesses for control. Thus, the AEO certification intends to secure the international supply chain by permitting recognition to trustworthy operators and encouraging best practices at all levels in the international supply chain. Through this program, the Customs shares its responsibility with the businesses, while at the same time rewarding them with numerous additional benefits listed below:
Recognized worldwide as safe, secure, and compliant business partners in international trade and get trade facilitation by a foreign Customs administration with whom India enters into a Mutual Recognition Agreement/Arrangement.
The Facility of Direct Port Delivery (DPD) of their import Containers and/ or Direct Port Entry (DPE) of their Export Containers.
Remission of complete or partial the Bank agreement requirements,
Waiver of Merchant overtime fees.
Deferred payment of duties.
Waiver from transactional PCA.
Faster disbursement of duty drawback amount through procedure eased out vide Circular 18/2017 Customs dated 29.05.2017
Promoting timely refunds and settlements
Self-certified copies of FTA / PTA origin related or any other certificates required for clearance would be acknowledged
Recognition by Partner Government Agencies and other stakeholders as part of the AEO Registration.
Benefits of obtaining AEO Certification
Self-declaration of Standard Input Output Norms (SION) is included under Para 4.07A of FTP 2015-20 for the AEO Exporters where the SION is not notified.
Addition of the Direct Port Delivery of the imports safeguards timely inventory management by the manufacturers wanting to seek clearance from the wharf to the warehouse for AEO T1, T2, and T3.
Addition of the Direct Port Entry for the factory stuffed containers meant for export by AEOs
Provision of deferred payment in customs duties. It guarantees delinking duty payment and customs clearance for AEO T2 and AEO T3.
Mutual Recognition Agreements (MRA) with Customs Administrations for AEO T2 and AEO T3. MRA functions as an equalizer to complement the minor differences to safeguard seamless facilitation of benefits for the movement of goods across borders for the domestic AEO-accredited entities.
Fast-tracking of adjudications and refunds, including disbursal of drawbacks and IGST refunds.
AEO Registration -Eligibility Criteria for an entity
The Company must have handled a minimum of 25 documents (Shipping Bills or Bills of Entry) in the last Financial Year.
The Company should have experience in Customs related work.
The Company must be a part of the international supply chain.
The Company must have had business activity in the last three Financial Years.
Note: Businesses that are not involved in customs-related work will not be eligible to apply for AEO registration as banks, NBFCs, insurance companies, etc.
How ASC can help:
A Starting point for an AEO certification process is the document and standard operating procedures (SOP) for safety and security plans, and the process map for the movement of goods in international trade. ASC can help in documenting the process of international trade in the form of SOPs as the first step toward an organizational effort to formalize an AEO Registration.
ASC follows end to end approach for obtaining AEO License Status right from the planning and readiness assessment stage till getting the final approval of AEO Registration status in the following ways:
Analyzing the existing level of security standards and other required areas for gaining AEO License status
Assistance in preparations of SOPs and establishing the Standards required for AEO Registration
Assistance in organizing the information and documents for filing the AEO License application
Preparation, filing of the application, and providing support from time to time are required by AEO License Authorities
Independent internal review to check the Security Standards and compliance level with other requirements for AEO Registration and propose improvement areas before physical verification by AEO License Authorities
Support during physical verification by AEO Registration Authorities
Following up with AEO Authorities till done the AEO certification
Assistance in Compliance with AEO Registration Status Requirements.
Frequently Asked Questions
Whether AEO License is mandatory for businesses involved in the supply chain?
No. the AEO scheme is an optional scheme. However, acquiring AEO status helps avail multiple benefits to the AEO status entity.
What is the validity of the AEO Registration status?
For AEO-T1 and AEO-T2 entities, the validity of AEO certification is 3 years whereas, for AEO-T3 and AEO-LO entities, the validity period is 5 years. However, from 1st August 2019, CBIC has done away with the renewal requirements of AEO certification for T1 entities. From 1st August 2021, all the entities certified on or after 1st April, 2019 shall get auto-renewed without any end date by the system.
How can the AEO avail of the facility for deferred payment of duty?
As per Rule 4 of Deferred Payment of Import Duty Rules, 2016, for availing of the deferred payment of duty facility, an eligible importer shall intimate its intent to the jurisdictional Principal Commissioner of Customs and get itself registered on the ICEGATE. This shall also be applicable for AEO.
Whether facilitation benefits can be availed of by Indian AEOs in foreign countries?
Facilitation benefits can be availed of by Indian AEOs in countries with which India has signed Mutual Recognition Agreement (MRA).
Whether all AEOs are entitled for Direct Port Delivery / Direct Port Entry facilities?
Yes. AEO T1 / T2 / T3 entities are entitled for DPD / DPE facilities by applying for DPD permission to the concerned Chief Commissioner and registering themselves with the port authorities for the DPD facility.
What are Mutual Recognition Agreements Under AEO Registration?
Mutual Recognition Agreements / Arrangements (MRA) are bilateral agreements entered between two or more Customs Administrations. MRAs facilitate one business partnership program to recognise the AEO validations of other countries’ programs. It allows extending reciprocal benefits to each other’s AEOs.