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Authorized Economic Operator

Authorized Economic Operator

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 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 22^nd 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.

Scope Of Benefits Of Three Tier AEO Programme –

With the AEO status there are various benefits attached to it. Benefits vary as per the status of AEO, however, the basic feature of benefits are listed herein below –

1. Direct port delivery in case of import and direct port entry in case of export;
2. Small and medium scale entities would be given special focus. It must be noted that any entity handling upto 25 import and export documents annually can become part of the AEO programme;
3. Easy and fast disbursal of drawback amount;
4. Easy and fast disbursal of refunds and adjudications;
5. Paperless declaration with no supporting documents;
6. Site inspection or examination possible on request;
7. Recognition by partner Government agencies and other stake holders.

Different Certificate And Its Description –

The certificate being issued to the importer and exporters would be categorized into three tiers of certification namely AEO-T1, AEO-T2 and AEO-T3 depending on the criteria being fulfilled by the importers and the exporters, however, economic operator other than the importer and exporter would be issued AEO-LO certificate.

1. AEO- T1 – Certificate would be granted only to the importer or exporter on the basis of fulfilment of required criteria.
2. AEO- T2 – Certificate would be granted only to the importer or exporter on the basis of fulfillment of required criteria.
3. AEO- T3 – Certificate would be granted only to the importer or exporter on the basis of fulfilment of required criteria.
4. AEO- LO – Certificate would be granted to an economic operator, other than the importers and the exporters, like logistic providers, customs brokers, warehouse operators and custodians or terminal operators, however, issuance of the certificate would be based on fulfilment of required criteria.

Eligibility Criteria For AEO Certificate –

Business entities who are involved in the international supply chain that undertakes Customs related activity in India can apply for AEO status. The business entity can apply for AEO status irrespective of its size of the business.

Some of the examples of the business entities that can apply for AEO status are importers, exporters, Custom House Agent (CHA), Custodians or Terminal Operators, etc.

Basic requirements which are mandatory to be fulfilled in order to apply for AEO status are listed below –

1. Applicant must be established in India.
2. Applicant should have business activities for at least three financial years preceding the date of application.
3. The applicant should not have received any show cause notice during the last 3 financial years involving fraud, forgery, outright smuggling, and clandestine removal of goods or cases where tax has been collected from the customer but not deposited with the government.
4. The applicant should have maintained an accounting system consistent with GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards).
5. The applicant should have the satisfactory procedure for verifying the accuracy of Customs documents.
6. The applicant should be financially solvent during the last three financial years preceding the date of application.
7. The applicant should have appropriate internal controls and measures to ensure the safety and security of his business and the supply chain.
8. The building of the applicant must be secure against unlawful entry. Entry for only authorized persons, vehicles and goods must be permitted inside the building of the applicant. In order to keep proper access and safety, the number of entry gates should be minimized.

Validity Of AEO Certificate –

1. AEO-T1 – 2 years
2. AEO-T2 – 3 years
3. AEO-T3 – 5 years
4. AEO-LO – 5 years

Renewal Of AEO Certificate –

In order to renew the AEO certificate, an application needs to be submitted before the lapse of validity as detailed below –

1. AEO-T1 – application must be submitted at lease before 30 days of lapse of validity.
2. AEO-T2 – application must be submitted at lease before 60 days of lapse of validity.
3. AEO-T3 – application must be submitted at lease before 90 days of lapse of validity.
4. AEO-LO – application must be submitted at lease before 90 days of lapse of validity.

Revocation Of AEO Certificate / Status –

Following are the possible situations under which AEO certificate can be revoked –

1. In case the certificate of AEO status is already suspended and the AEO holder fails to take the appropriate steps within a period of 60 days for withdrawal of suspension;
2. In case there is a reason to believe that the AEO holder is liable to prosecution and / or is liable to arrest as per provisions of the Customs Act, 1962;
3. In case a show cause notice being issued to AEO holder involving fraud, forgery, clandestine removal of goods or AEO holder is involved in the case where tax has been collected but the same is not deposited with the Government; and
4. In case AEO holder himself requests the authority to revoke the certificate.