AEO Certification
An AEO (Authorised Economic Operator) is a company that participates in the international movement of goods and is authorized by or on behalf of the national administration to do so in accordance with the World Customs Organization (WCO) or comparable supply chain security standards. It must also comply with the requirements of the National Customs Law.
The World Customs Organization Safe Framework of Standards [WCO SAFE FoS], the foundation for the Indian AEO Registration, has a full description of the security standards. The new AEO certification program offers three levels of certification.
There are three tiers for businesses involved in importing and exporting that offer differing degrees of benefits:
- AEO T1 – It is confirmed only based on submitted documents
- Together with T1 Compliance, onsite verification, and document verification are also performed by AEO T2.
- AEO T3 – The applicant is subject to physical verification if they are an AEO (Authorised Economic Operator) T2 holder who has not been in their position for two years or who has made significant modifications to their business.
- AEO LO – In order to be evaluated for logistics providers, custodians or terminal operators, customs brokers, and warehouse operators, there is document verification and on-site verification.
Customs administration may identify the secure and law-abiding commercial organization using the AEO Certification, which enables them to offer them a better level of assured facilitation. Customs resources might concentrate their efforts for control on less risky or non-compliant enterprises using this segmentation technique. As a result, the AEO certification aims to protect the global supply chain by recognizing reliable operators and promoting best practices throughout the whole global supply chain. With this program, Customs shares its duty with the companies while also providing them with a variety of additional advantages, some of which are described below.
- Internationally acknowledged as trustworthy, law-abiding, and compliant trading partners who receive trade facilitation from a foreign customs department with which India has a mutual recognition agreement or arrangement.
- The capability of Direct Port Entry (DPE) and/or Direct Port Delivery (DPD) for their export containers.
- Remission of all or some of the terms of the Bank Agreement
- Merchant overtime expenses are waived.
- Duty payments that are delayed.
- Transactional PCA is waived.
- Faster distribution of duty drawback funds via streamlined procedures pursuant to Customs Circular 18/2017 of May 29, 2017.
- Encouraging prompt returns and payments
- Self-certified copies of FTA/PTA origin-related certificates and any other documents needed for clearance will be accepted.
- As part of the AEO Registration, recognition by partner governmental organizations and other stakeholders.
Benefits of obtaining AEO Certification
- For AEO Exporters where the SION is not declared, self-declaration of Standard Input Output Norms (SION) is included under Para 4.07A of FTP 2015-20.
- Including the Direct Port Distribution of the imports ensures that manufacturers seeking clearance from the wharf to the warehouse for AEO Certification T1, T2, and T3 can manage their inventories in a timely manner.
- Adding a direct port entry for factory-filled containers that AEOs are planning to export
- Provision for postponed customs duty payment. For AEO T2 and AEO T3, it ensures the separation of duty payment and customs clearance.
- AEO T2 and AEO T3 have MRAs (mutual recognition agreements) with customs administrations. To ensure smooth benefits for the flow of goods across borders for the domestic AEO-accredited firms, MRA serves as an equalizer to complement the slight discrepancies.
- IGST refunds as well as the distribution of disadvantages can be processed quickly.
AEO Registration -Eligibility Criteria for an entity
- In the most recent Financial Year, the Company must have handled a minimum of 25 papers (Shipping Bills or Bills of Entry).
- The Firm ought to have expertise working with customs.
- The Firm needs to be a component of the global supply chain.
- The Company must have been in operation throughout the previous three fiscal years.
Note: Moreover, organizations like banks, NBFCs, insurance companies, etc. that are not involved in customs-related operations would not be qualified to apply for AEO registration.
How SalahKaro Help?
The document and standard operating procedures (SOP) for safety and security plans, as well as the process map for the transportation of goods in international trade, serve as a starting point for an AEO certification process. As the initial stage in an organizational attempt to formally register as an AEO, SalahKaro can assist in documenting the procedure of global commerce in the form of SOPs.
From the planning and readiness assessment stage through receiving the final approval of AEO Registration status, SalahKaro follows an end-to-end methodology in the following ways:
- Examining the level of security measures currently in place and other areas necessary for obtaining AEO License status
- Assistance with creating the Standards needed for AEO Registration and helping to prepare SOPs
- Help to organise the data and documentation needed to submit the AEO License application
- AEO License Authorities demand that the application is prepared, submitted, and that support be occasionally provided.
- Before physical verification by AEO Certification Authorities, an independent internal assessment will assess the Security Standards and compliance level with other requirements for AEO Registration and suggest improvement areas.
- Assistance provided by AEO Registration Authorities for physical verification
- Maintaining contact with AEO authorities until the AEO certification assistance is completed and in compliance with the requirements of the AEO registration status.
FREQUENTLY ASKED QUESTIONS
No. the AEO scheme is an optional scheme. However, acquiring AEO status helps avail multiple benefits to the AEO status entity.
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.
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.
Facilitation benefits can be availed of by Indian AEOs in countries with which India has signed Mutual Recognition Agreement (MRA).
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.
. 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.
Yes. Once an entity obtains AEO registration, it shall be entitled to all the AEO benefits across all the airports, customs ports, and land customs stations.
Any business entity that is engaged in international trade and involved in the international supply chain including the cross-border movement of goods and is required to comply with and fulfill obligations of customs law in India can apply for the AEO license. This can include importers, exporters, custodians, logistics providers, terminal operators, customs house agents, port operators, warehouse owners, etc.
In order to obtain AEO registration, you need to fulfill the following eligibility criteria:
- The entity should be established in India
- It should be involved in customs-related activity
- It should be in business for the last 3 years
- It should have dealt with a minimum of 25 customs-related documents in the last financial year (either bill of entry or shipping bill)
- It should not have been issued a show cause notice during the last 3 financial years in relation to forgery, fraud, clandestine removal of excisable goods, outright smuggling, or any case where the service tax was collected but was not deposited with the government
- It should be solvent during the last 3 financial years
- It must have adequate internal controls and measures to ensure the safety and security of the business and supply chain
- It must have a sound system for managing transport and commercial records
No, AEO registration is not granted for a specific division, site, or branch of a legal entity.
