Simplifying International Trade
What is AEO?
Authorised Economic Operator (AEO) is an EU accreditation which is granted to traders who display to the authorities that they have robust customs procedures in place.
Following the success of the C-TPAT (Customs-Trade Partnership against Terrorism) initiative in the USA, AEO was introduced in the EU in 2008 with the objective of increasing the security of the supply chain while facilitating trade for compliant businesses.
There are currently 139 AEO holders in Ireland compared to other Member States such as Germany that have over 6000 AEO-accredited traders.
Who can apply?
Anyone established in the EU involved in international trade in goods liable to customs duties can apply for AEO. This includes:
- warehouse keepers
- port operator
- airline loaders
Special consideration should be given to the areas of your business which are most likely to be affected by legislation changes or a Brexit border.
What are the types of authorisation?
There are two types of authorisation, AEOC (Customs simplifications) and AEOS (Security simplifications). Traders may apply for one or both types of authorisation.
AEOC benefits – up to 70% reduction in customs duty guarantee, notification waiver for EIDR (Entry in Declarants Records), self-assessment and centralised clearance (when implemented).
AEOS benefits – faster clearance at the border, priority treatment, mutual recognition by other countries such as USA and Japan.
A trader should consider which benefits are the priority when deciding which type of authorisation to apply for.
What are the application criteria?
The application process involves completion of a detailed self-assessment questionnaire around the procedures the trader has in place for all areas of the business relating to customs matters.
In order to meet the conditions for application, traders must fulfil the following criteria:
- Compliance with customs and tax requirements for the past three years with no significant irregularities
- Financial solvency for the past three years
- Appropriate standards of record-keeping including internal controls and written procedures relating to the movement of goods in the supply chain.
- Evidence of practical standards of competence in relation to customs matters for the past three years (AEOC only)
- Safety and security standards (AEOS only)
Why should traders apply?
Under the Union Customs Code (UCC) legislation introduced in 2016, holding an AEO certificate entitles traders to reduced guarantees for potential and actual customs duties. If the business currently holds a customs warehousing authorisation or operates inward processing, the UCC dictates that the potential duties of all the goods held under the customs regime must be covered by a comprehensive guarantee. For businesses that currently have a complex supply chain, the level of guarantee for all goods held in duty suspension status could be substantial. However for traders that hold an AEO authorisation (or meet AEO criteria) the requirement to guarantee the potential duty can be reduced or waived completely.
A further benefit of holding an AEO accreditation is that in the eyes of the authorities, the business is a ‘trusted trader’. This means that they are subject to less inspections, less customs audits and priority treatment. This will become more important post Brexit when traders will want to lessen the impact of the customs border. The recent HM Government ‘Future customs arrangements’ paper proposes:
‘…negotiating mutual recognition of AEOs, enabling faster clearance of AEO goods at the border’
Finally for those traders who deal with US and Japan, AEO provides a status of mutual recognition enabling faster clearance and less delays when trading with those markets.
What is the process and who should be involved from the business?
Before applying for AEO, traders should ensure that they have completed a full analysis of all areas of the business that are impacted by customs and security. Written procedures should be completed for all customs areas and staff should be aware of their responsibilities in each area. All stakeholders should be involved from the outset of the project including those from IT, HR, Security, warehousing, shipping and ultimately those in charge of customs formalities. When the business is audited, the authorities will look for evidence that everything is documented and compliant.
How long will it take?
The process is likely to take between 6-12 months depending on what internal procedures are already in place. Once the application has been accepted, the authorities have 120 days to audit the trader and this will involve audits of the customs processes and systems as well as security of premises and cargo handling. When making the decision to apply, the trader should consider the cost of resource required to complete written procedures and ensuring that the business is compliant with customs processes.
AEO accreditation is useful for many traders due to the benefits it provides. It improve the trader’s relationship with the authorities and provides reassurance both internally and to external partners that the supply chain processes are secure and compliant.
If you think your business would benefit from gaining ‘trusted trader’ status, we have Global Trade experts who can help analyse your business and assist with the application process. For more information on AEO or other customs matters, contact Donna Hemphill.