Note: This article is published in FTCCI Review magazine dated 17 November 2021 which can be read at the below link
https://www.ftcci.in/source/ftapcci/FR%202021/FR%202021%2011%2017.pdf
AEO (Authorised Economic Operator) is a programme under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade which was introduced in 2011 by Central Board of Indirect Taxes & Customs (CBIC) in India. AEO is a trade facilitation move wherein benefits are extended to the entities who have demonstrated strong internal control systems and willingness to comply with the laws administered by the CBIC.
The objective of AEO is to provide businesses with an internationally recognized quality mark which will indicate their secure role in the international supply chain and that their Customs procedures are efficient and compliant.
Currently, AEO certified entities as on 1 November 2021 is 4,640 (T1 – 3,147 , T2 – 582, T3 – 44, LO – 867) which are growing day to day even when the same is a voluntarily programme. To avail various tangible benefits from Indian Customs authorities, following options are available:
- AEO for non MSME (Micro, Small and Medium Enterprises)
- AEO for MSME (Liberalised MSME AEO Package)
- Authorised Public Undertaking (APU) for PSU (Public Sector Undertakings) to avail only ‘Clear First-Pay Later’ i.e., deferred payment of Customs duty benefit.
We have discussed in detail in this article on AEO Scheme, which is common for non MSME and MSME, apart from certain relaxations under the application and approval process as ‘Liberalised MSME AEO package’.
Types of AEO
There is a three-tier programme for importers and exporters in the increasing degree of benefits accorded and compliance requirements. Furthermore, there is single Tier AEO Programme for other than importers and/or exporters. The following types of AEO status can be availed based on the requirement of the organisation and its eligibility:
| AEO Tiers (I, II, III) | AEO LO (Logistic Operator) |
| Importer Exporter | All categories of economic operators (other than importers and exporters) • Logistics providers, • Custodians or terminal operators, • Customs Brokers and • Warehouse Operators • Port Operators, authorised couriers, Stevedores, etc. |
Who can apply?
Any organisation having IEC (Import Export Code) engaged in manufacturing, trading and/or services can apply for single AEO Status for all its branch/ site/ division/factories/warehouse to CBIC on satisfying the following eligibility criteria:
- Established in India.
- Business should be involved in Customs related activities.
- Handled 25 documents (Shipping Bills or Bills of Entry) in last Financial Year (FY) for non-MSME. For MSME, 10 documents in last FY, subject to handling at least 5 documents in each half year period.
- Have had business activity for 3 Financial Years (FYs) for non-MSME and 2 FYs for MSME (can be waived in deserving cases).
Additional Eligibility conditions for AEO Tier III
| The economic operator should have continuously enjoyed the status of AEO Tier II for at least a period of two years preceding the date of application for grant of Tier III status | OR | The economic operator must be holder of AEO Tier II Certificate and its other business partners in the supply chain shall be the holders of AEO-Tier-II or AEO-LO or any other equivalent AEO certificate granted by a foreign Customs |
Why to apply?
Importers/Exporters
The AEO schemes provides numerous benefits to importer and/or exporters as mentioned below:
- Deferred payment of Customs duty for Tier II and onwards
| Bill of Entry from 1-15th day of any month | 17th of the month |
| Bill of Entry from 16th-last day of month except March | 2nd day of the following month |
| Bill of Entry from 16-29 March | 31 March |
| Bill of Entry from 30-31 March | 02 April |
- Direct Port Delivery (DPD)/Direct Port Entry (DPE)
- Self-declaration of SION (Standard Input Output Norms) under Para 4.07A of FTP 2015-20
- Paperless declarations with no supporting documents.
- Benefits of Mutual Recognition Agreements (MRAs) with other Customs Administrations for AEO T2 and AEO T3
- Faster dispute resolutions, refunds, investigations, drawback and others.
We have enumerated below the said benefits in detail with comparison based on which AEO Tier is applied by Importer and Exporters:
| Benefits | Availability to | ||
| Tier I | Tier II | Tier III | |
| Deferred payment of duty Deferred duty payment is a mechanism for delinking duty payment and Customs clearance. It is to be paid fortnightly. It is based on the principle ‘Clear First-Pay later’. | Not Available | Available | Available |
| Faster disbursal of drawback amount Drawback amount will be disbursed within 72 hours of Export General Manifest (EGM) submission. | Not Available | Available | Available |
| Self-declaration of SION Self-declaration of SION under Para 4.07A of FTP 2015-20 for AEO status holder Exporters in cases where SION is not notified | Available | Available | Available |
| Access to ICEGATE AEO Operator will be given access to their consolidated import/export data through ICEGATE (from a notified date) | Not Available | Available | Available |
| Faster completion of SVB proceedings Faster completion of Special Valuation Branch (‘SVB’) proceedings in case of related party imports and monitoring of such cases | Not Available | Available | Available |
| Faster disbursal of refund The refund/Rebate of Customs/Central Excise duty and Service/GST Tax would be granted within 45 days of the submission of complete documents | Not Available | Available (within 45 days) | Refund to be granted within 30 days |
| DPD/DPE Facility DPD of import Containers thereby entailing the delivery of a shipment from the port to the consignee instead of initially holding it at a container freight station (CFS)and/or DPE of Export Containers which ensures direct entry into the port terminal prior to granting Let Export Order (LEO) (Implementation of Turrant Customs from CBIC) | Available | Available | Available |
| Trade facilitation AEO operator will get trade facilitation by a foreign Customs administration with whom India enters into a Mutual Recognition Agreement/Arrangement (MRA) | Not Available | Available | Available |
| Facilitation in import /export High level of facilitation in imports and export of consignments, thereby ensuring shorter cargo release time | Available | Higher level of facilitation compared to Tier I | Higher level of facilitation compared to Tier II |
| CRM level resolving of issues Customs Houses will appoint Customer Relationship Manager (CRM) at the level of Deputy / Assistant Commissioner to resolve the procedural and operational issues | Not Available | Available | Available |
| Paperless Declarations and MRP stickers AEO operator will be provided the facility of submitting paperless declarations with no supporting documents in physical form and facility of affixing MRP stickers in their premises | Not Available | Available | The assesssing/examining officer will rely on self certified copies of documents by them without insisting on original copies of documents |
| Bank Guarantee Bank Guarantee to be furnished by the AEO operator that their liabilities will be met which is guaranteed by the bank. | Quantum of the Bank Guarantee to be 50% (25% for MSMEs) of that required to be furnished wherever required | Quantum of the Bank Guarantee to be 25% (10% for MSMEs) of that required to be furnished wherever required | They are not required to furnish any Bank Guarantee. Not applicable when Competent Authority orders for bank guarantee for Provisional release of seized goods |
| No regular Post Clearance Audit (PCA) PCA allows Customs to reduce border controls by shifting compliance checks from the clearance stage to the post clearance stage | Onsite PCA will be conducted once in two years only | Onsite PCA will be conducted once in three years only | On request inspection/examination will be provided. Onsite PCA once in 5 years |
| 24/7 clearances on request at all seaports and airports As well as there is no need to pay Merchant Overtime Fee (MOT) charges which are charged when the services of Customs Officers’ services are used beyond office hours | 24/7 clearances and no Merchant Overtime Fee (MOT) charges (For every AEO entity) | ||
| Receipt of an e-mail Receipt of an e-mail regarding arrival/ departure of the vessel carrying consignments | Available | Available | Available |
Other than Importers/Exporters (AEO-LO)
| Benefits | Availability to | |||
| Logistic service providers | Warehouse operators | Custodian operators | Custodian operators | |
| Waiver of bank Guarantee | Waiver of Bank Guarantee to be furnished under regulation 8 of the CBLR,2013 | Waiver of bank Guarantee in case of trans-shipment of goods under Goods imported (Condition of Trans-shipment) Regulations, 1995 | Not Available | Waiver of bank Guarantee under Handling of cargo in Customs Area Regulations 2009 |
| Execution of running Bond | Not Available | Available | Not Available | Not Available |
| Faster/ Extension of approval/ validity | Extended validity (till validity of AEO status) of licenses granted under regulation 9 of the CBLR 2013 | Not Available | Faster approval for new warehouses within 7 days of submission of complete documents | Extension of approval under regulation 10(2) of Handling of Cargo in customs area regulation 2009 for 10 years |
| Waiver of fees/ Certificates | Waiver from fee for renewal of license under sub regulation (II) of regulation II of CBLR,2013 | (a)Waiver of solvency certificate requirement (b) Waiver of security for obtaining extension in warehousing period (c) Waiver of security required for warehousing of sensitive goods (d)antecedent verification for grant of license for warehouse |
How to apply?
The program uses a ‘trust but verify’ approach with the trade community. To apply to the programme, a prospective AEO certificate holder submits basic company information and a security profile as per the annexure in the circular. The AEO team checks on the company in its general compliance, legal compliance, management of commercial and transport records, financial solvency, safety and evaluates safety and security with respect to procedural security, premises security, cargo security, conveyance security, personnel security, business partner security and security training and threat awareness. The AEO specialists conduct onsite visit of domestic facilities to confirm the security practices are in place and operational in case of higher certification levels. The efficient and compliant businesses are certified into the programme. There are certain relaxations on submission of Annexure by MSMEs.
The applicant has to apply online on www.aeoindia.gov.in along with physical submission (except for AEO Tier I) and following is the timeline for approval based on submission of application:
| Type of AEO | MSME | Non-MSME |
| AEO Tier I | 15 days | 1 month |
| AEO Tier II | 3 months | 6 months |
| AEO Tier III | 6 months | 6 months |
| AEO LO | 6 months | 6 months |
Validify of AEO
The AEO certificate is valid for relevant period and need to be renewed based on type of Tier certificate:
| Type of AEO | Validity and renewal requirement | Due date for submission of renewal application |
| AEO Tier I (including MSME) | Auto Renewal, subject to submission of annual self-declaration and review thereof | Annual Self-declaration to be filed between 1 October 2021- 31 December 2021 |
| AEO Tier II | 3 years, to be renewed after validity | 60 days before lapse of validity |
| AEO Tier III | 5 years, to be renewed after validity | 90 days before lapse of validity |
| AEO LO | 5 years, to be renewed after validity | 90 days before lapse of validity |
Over the years, AEO has become a flagship programme for WCO Members as it offers an opportunity for Customs to share its responsibilities with the businesses, while at the same time rewarding them with a number of additional benefits.
The Indian AEO Programme is a game-changer. It will not only achieve ‘Make in India’ but also substantially add to the vision and lead India to become a manufacturing and exporting powerhouse.
Author:
Vineet Suman Darda (FCA, ACS, CMA(I)), Co-Founder and Managing Partner, Darda Advisors LLP
