The Authorised Economic Operator (AEO) Programme, introduced by the World Customs Organisation (WCO) under the SAFE Framework of Standards, aims to secure efficient international trade. This programme ensures that importing, exporting, and logistics businesses meet strict international compliance and security requirements.
Companies that qualify gain recognition as trusted trade partners, simplifying their customs processes and fostering smoother operations. In India, this scheme is administered by the CBIC, that is Central Board of Indirect Taxes and Customs.
By meeting the eligibility criteria, companies position themselves as reliable operators in the global supply chain. The following sections will cover the types of AEO certifications, their advantages, who can apply, and how to start the application process.
Defining the Role of an AEO
An Authorised Economic Operator (AEO) is a business entity involved in international trade that complies with customs laws and global security standards. National customs administrations approve these entities based on guidelines set by the WCO.
AEO status is granted to parties involved in the global movement of goods, including exporters, importers, freight forwarders, customs agents, and others in the supply chain. This certification demonstrates their reliability and adherence to customs regulations and simplifies their interactions with authorities responsible for trade-related controls.
By meeting the requirements of the AEO programme, these entities enhance supply chain security while ensuring compliance with national and international regulations. The program’s scope includes manufacturers, carriers, terminal operators, and warehouses, all of whom contribute to the seamless flow of goods across borders.
What’s Included in the AEO Certification?
AEO (Authorised Economic Operator) Certification includes several elements focused on compliance and security in international trade. It covers implementing robust security measures throughout the supply chain, ensuring the protection of goods during transportation and storage.
Customs authorities evaluate how the business secures its operations, including access controls, cargo integrity, and staff vetting processes. The certification also includes a review of customs compliance practices. This ensures that businesses follow regulations, maintain accurate records, and submit declarations correctly.
Financial solvency is another aspect of the certification. Companies need to prove their ability to meet customs duties, taxes, and other obligations without risk of default.
Risk management practices are also assessed to confirm the company has effective strategies for identifying and addressing potential threats in its operations. Companies must demonstrate reliable coordination with partners, suppliers, and customs authorities.
Different Types of AEO Certificates
The Authorised Economic Operator (AEO) certificate is granted to businesses based on their ability to meet specific criteria. These certificates are divided into different categories to reflect the level of compliance and operations.
AEO-T1 Certificate
The AEO-T1 certificate is issued to importers or exporters who meet the required criteria. This certification allows them to benefit from simplified customs procedures and increased security. It is the first step for businesses looking to establish themselves as trusted economic operators in international trade.
AEO-T2 Certificate
The AEO-T2 certificate is a step up from the T1 certification. It is granted to importers or exporters who have met additional criteria and demonstrate higher security and compliance in their operations. The T2 certification provides further privileges in customs processes.
AEO-T3 Certificate
Applicants for this certificate must have at least two years of AEO-T2 status. This certification requires thorough document verification to ensure the business maintains high security and compliance standards. It also grants even more benefits, such as faster customs clearance.
AEO-LO Certificate
The AEO-LO certificate is designed for economic operators other than importers and exporters, such as logistics providers, customs brokers, warehouse operators, and terminal operators. This certificate is issued based on the fulfilment of specific criteria that ensure these businesses contribute to secure and efficient supply chains.
Are You Eligible for the AEO Programme?
Some eligibility conditions must be fulfilled regardless of the business size to qualify for AEO status.
- Business Entity Type: Any business entity engaged in customs activities in India can apply. This includes importers, exporters, Custom House Agents (CHA), terminal operators, and custodians.
- Establishment in India: The applicant must be an established entity within India. The business should have been operating for a minimum of three financial years before applying.
- No Pending Legal Issues: Applicants must not have received any show-cause notices in the past three years for serious offences such as fraud, smuggling, or failing to deposit taxes collected from customers.
- Accounting Standards: A solid accounting system must be in place. It might comply with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP).
- Customs Documentation: The business should have procedures in place to verify that its customs documents are accurate. This ensures compliance with regulations.
- Financial Stability: Financial solvency is a key requirement. The applicant must demonstrate financial stability over the past three financial years.
- Security and Internal Controls: The business should have effective internal controls to secure both the business and its supply chain. Security precautions against unauthorised access are part of this.
How Can the AEO Programme Benefit You
The AEO programme offers numerous advantages to businesses engaged in international trade. Below are the key benefits of being an AEO.
- Global Recognition: AEO-certified businesses are recognised as secure, compliant, and trustworthy partners in international trade. This recognition often leads to smoother transactions with foreign Customs administrations that have Mutual Recognition Agreements with India.
- Simplified Port Operations: AEO-certified businesses can benefit from faster processing times with facilities such as Direct Port Delivery (DPD) for imports and Direct Port Entry (DPE) for exports. This ensures quicker and more efficient handling of cargo.
- Reduced Financial Burdens: AEO status may waive certain fees, such as bank guarantee requirements and merchant overtime fees. Additionally, businesses may enjoy the benefit of deferred customs duty payments, which can provide greater financial flexibility.
- Easy Customs Processes: AEO certification allows businesses to skip some routine procedures. For example, they can avoid the full Transactional Pre-Compliance Audit (PCA) process and opt instead for an on-site audit based on risk assessment.
- Lower Risk Profile: AEO-certified businesses often face a lower risk score in customs risk analysis systems. This can result in fewer inspections and delays, saving time and reducing the chance of disruptions.
AEO Registration: Process and Required Documents
AEO programme registration is a structured process that businesses must follow to obtain it. Here’s an overview of the steps involved and the required documents for AEO registration.
Step 1: Preparation Before Application
First, the business must understand the requirements for AEO status and decide whether to apply for ECAO or EASO authority. It’s essential to appoint a dedicated person to oversee the application process and handle communication with customs authorities.
Step 2: Submitting the Application
The next step is to submit the formal request. The business must provide the customs authorities with the completed QAE (Qualification and Evaluation Form) and other necessary paperwork. This application must show that the company complies with all the AEO criteria. To prevent delays or rejections, it’s essential to ensure that all information is accurate and complete.
Step 3: Initial Review by Customs
After the application is submitted, customs authorities conduct a preliminary review. They check whether all necessary documents are included and whether the application is correctly formulated. This step determines whether the application is ready for further inspection or needs additional adjustments before proceeding.
Step 4: Assessment and Customs Valuation
At this stage, customs authorities evaluate the submitted documents in detail. They verify that the company complies with the AEO criteria, including financial stability and security measures. If the company operates in multiple countries, customs officials from various member states may collaborate to assess compliance across the European Union.
Step 5: Final Report and Decision
After the detailed evaluation, a final report is prepared. Based on this report, customs authorities decide whether to grant AEO status or reject the application. The company is informed about the decision, and if it is refused, the reasons for rejection are explained, along with guidance on how to proceed.
Step 6: Monitoring and Reassessment
After receiving AEO status, businesses must maintain the required standards. Customs authorities will conduct regular audits to ensure ongoing compliance. If a company fails to meet the AEO criteria during audits, its status may be reassessed, suspended, or revoked.
Conclusion
The AEO Programme is a key initiative for businesses looking to strengthen their global trade processes. Achieving AEO certification helps companies meet international standards, leading to fewer delays, cost reductions, and a stronger market image.
This certification can greatly improve trade efficiency and support long-term business growth for logistics providers and exporters. Partnering with a reliable international freight forwarder like ShiprocketX further boosts trade operations by offering simplified import and export processes. This collaboration ensures your business stays competitive in the global market.
