AEO Certification

Overview of AEO Certification:

The Authorized Economic Operator (AEO) program, initiated by Indian Customs department aims to facilitate trade and strengthen the security of the global supply chain. It aligns with the World Customs Organization (WCO) SAFE Framework of Standards and offers businesses involved in International Trade such as Importers and Exporters various benefits including expedited customs processing. In exchange, businesses must meet stringent compliance, safety and security requirements. The program provides a three-tier certification system for Exporters and Importers, comprising AEO T1, AEO T2 and AEO T3 with AEO T3 being the highest level of accreditation. Each tier offers increasing levels of facilitation to status holders.

The Key benefit of AEO is Mutual Recognition Agreements (MRAs). These agreements serve as the International extension and connecting link between the domestic AEO programs of various countries. MRAs acts as an equalizer that harmonize the minor differences to allow for seamless facilitation in terms of benefits and processes for movement of goods across borders for the domestic AEO accredited entities. Mutual recognition of AEOs is a major element of the WCO SAFE framework to strengthen end-to-end security of supply chain and to multiply benefits for traders at a global level.

Under MRAs, two customs administrations agree to:

1. To recognize the AEO issued by other countries.
2. To provide reciprocal benefits to AEOs of the other countries entity.

Indian Customs has collaborated with several foreign customs administrations to align with their Authorized Economic Operator Programs, which effectively allows Indian Customs to Internationalize the core principles of the program and provide benefits to Indian trade at the International level.

The benefits of Mutual Recognition Agreements (MRAs)

1. Lower Risk Score:
   All the AEO certified companies and customs authorities are trusted members of the trade community as they have passed the verified security standards. This makes the AEO Exporters and Importers get a lower risk score from partner customs, leading to fewer checks pointers during Import process.
2. Better Risk Assessment:
   AEO certification from one country is recognized by the other, this helps the customs to assess risk more effectively and quickly.
3. Less Repetition of Checks:
   The AEO traders are not required to go through multiple security checks in different countries. Once a company is validated by it’s home customs authority that validation is accepted by other partner countries, reducing extra work.
4. Common Security Standards:
   MRAs ensure countries follow similar security standards. If a company meets the security rules in one country, it also meets the rules in other MRA partner countries. This makes it easier for businesses to follow and document security practices.
5. More Transparency:
   MRAs create clear and consistent rules for security checks, making trade processes more open and trustworthy.

Key Features and Benefits of AEO Certification:​​​

1. Self-declaration of SION: Self-declaration of SION under Para 4.07A of FTP 2015-20 for AEO Exporters in cases where SION is not notified.
2. Direct Port Delivery: Inclusion of Direct Port Delivery of Imports to ensure just-in-time inventory management by manufacturers – clearance from wharf to warehouse for AEOs.
3. Direct Port Entry: Inclusion of Direct Port Entry for factory stuffed containers meant for Export by AEOs.
4. Deferred Payment: Provision of Deferred Payment of duties, delinking duty payment and Customs clearance for AEOs.
5. Mutual Recognition Agreements: Benefits of Mutual Recognition Agreements with other Customs Administrations for AEOs.
6. Fast Tracking: The adjudications are fast tracked, and refunds processes are also faster for IGST and disbursal of drawback.

Categories of AEO Certification:

The program offers different levels of certification based on the role of entity in the supply chain and it’s compliance history:

• AEO-T1: For businesses meeting basic compliance standards and seeking entry-level certification.
• AEO-T2: Provides additional benefits with stricter customs and security requirements.
• AEO-T3: The highest certification, offering maximum benefits to businesses with a long history of compliance.

Who can apply for AEO status?

Any business entity that is part of the International Supply Chain; involved in the cross- border movement of goods and required to fulfill obligations under the Customs law in India, only can apply for AEO status. These may include Exporters, Importers, Logistic Providers (e.g. carriers, airlines, freight forwarders, etc.), Custodians or Terminal Operators, Customs House Agents and Warehouse Owners, Port Operators, Authorized Couriers, Stevedores etc. The list is not exhaustive.

Benefits associated with AEO Tiers:

a) Recognition worldwide as safe, secure and compliant business partners in International Trade and access to trade facilitation by foreign customs administrations under Mutual Recognition Agreements (MRA).

b) Facility of Direct Port Delivery (DPD) for import containers and Direct Port Entry (DPE) for export containers, ensuring faster cargo clearance.

c) Waiver of full or part of the Bank Guarantee requirements and Merchant Overtime Fees (MOT).

d) Deferred Payment of Duties, improving cash flow management for certified businesses.

e) Waiver from Transactional Post Clearance Audit (PCA). Instead, Onsite PCA is provided based on risk assessment of AEOs.

f) Waiver of Solvency Certification for Customs Brokers.

g) Lower Risk Scores in customs risk management systems, resulting in reduced inspections and faster clearances.

h) Faster disbursal of drawback amounts, streamlined through Circular 18/2017-Customs dated 29th May 2017.

i) Fast-tracking of refunds and adjudications, ensuring quicker resolution of claims.

j) Acceptance of Self-Certified Copies of FTA/PTA origin certificates and other documents required for customs clearance.

k) Recognition by Partner Government Agencies (PGAs) and other stakeholders under the AEO program, facilitating smoother cross-agency clearances.

AEO-Eligibility Criteria for an entity:

1. Minimum Document Handling:
   The entity must have managed at least 25 shipping bills (S/B) or Bills of Entry during the last financial year. This ensures the applicant has a consistent track record of International trade activity and experience in handling customs documentation.
2. Involvement in Customs-Related Work:
   The entity should be actively involved in customs-related activities such as filing Import/Export declarations, customs clearance, and compliance with customs regulations. This ensures familiarity with customs procedures and adherence to legal trade practices.
3. Part of the International Supply Chain:
   The applicant must be a part of the global supply chain directly involved in the movement of goods across borders. This includes Manufacturers, Importers, Exporters, Logistics Providers and Warehouse Operators who contribute to the secure and efficient flow of goods internationally.
4. Legal Entity Requirement:
   AEO certification is granted only to a single legal entity and not to a group of companies. Each company within a group must apply individually ensuring that the certification process focuses on the specific compliance standards of a single entity rather than a corporate group as a whole.
5. Minimum Business Activity Duration:
   The entity should have been engaged in business activities for at least three financial years. However, this requirement can be waived in exceptional cases where the applicant demonstrates significant compliance and security standards despite a shorter operational history.

Validity Period of AEO Status:

The validity of the AEO certificate varies depending on the certification tier:

1. AEO-T1: The validity of the AEO-T1 certificate is three years from the date of issuance.
2. AEO-T2: The validity of the AEO-T2 certificate is also three years from the date of issuance.
3. AEO-T3: The validity of the AEO-T3 certificate extends up to five years from the date of issuance due to it’s higher compliance standards.

Renewal:

The AEO status is renewed against application for the same made before

lapse of their validity as stated below:

1. AEO-T1 -30 days.
2. AEO-T2 -60 days.
3. AEO-T3 -90 days.

Fees:

For a customized and attractive quotation, please contact with your product details to Rekha Atri (+91 98118 03136) or Manju Laur (+91 9711994042).