AEO - Everything you need to know

What are the basics? 

Authorised Economic Operator (AEO) standards are an internationally recognised kitemark, which are awarded by Customs once a business is deemed to be a safe and secure link within the global supply chain.

AEO status came about as a step to protect the global supply chain after the 9/11 and 7/7 terrorist attacks. Benefiting businesses and international governments alike, the move is also beneficial for combating counterfeiting, fraud and the illegal trafficking of goods and people.

In May 2016, AEO will form the cornerstone of the new EU Customs Legislation – The Union Customs Code or ‘UCC’. Although AEO will not be mandatory, the effect of the UCC is that there are significant changes to current Customs Legislation where not holding AEO accreditation may affect current operations of those within the International Supply Chain.

There are currently three types of AEO certification:

• AEO S - deals with examining and improving a business’s security vulnerabilities
• AEO C - directed at customs simplifications
• AEO F - a combination of S and C

AEO will impact any business that owns or takes custody of goods that move across international borders, including:

• Manufacturers
• Importers
• Exporters
• Transport companies
• Warehousing and logistics providers
• Freight forwarders

What are the advantages of AEO status?

Changes set to be brought in on 1st May 2016 will see AEO status become important for all those businesses involved in an international supply chain.

There are many benefits associated with obtaining this status, which have been outlined below.

Advantages with Customs

A major change within the UCC is that any business that operates a ‘Special Procedure’ such as Customs Warehousing, Inward Processing, Outward Processing, End-Use and Temporary Admission where duty and VAT is suspended or deferred will be required to lodge a guarantee which is equivalent to one months’ potential duty and import VAT unless at the point that either their authorisation expires or (in the case of open-ended authorisations such as Customs Warehousing) HMRC reassess their ongoing authorisation they:-

• Have AEO (C) accreditation; or
• Can demonstrate that they meet the AEO (C) criteria.

On a practical level AEO status means items pass through customs as quickly as possible as well as:

• It will be quicker and easier to obtain Customs simplifications
• Businesses will be subjected to fewer physical and document checks at borders
• If you are selected at controls, you will be given priority as an AEO consignment
• You can request that a control is held at a different place

Advantages for business

AEO is internationally recognised. Therefore, as a “preferred supplier”, business opportunities will likely rise, giving you the chance to expand within a network of accredited, vetted suppliers and transporters.

Other advantages for businesses include:

• More efficient transporting through borders
• Less risk and more effective checks on the reliability of third parties
• Potentially lower insurance premiums in the future
• More efficient import/export system, logistically for those involved

Global advantage

AEO standards are not restricted to the EU, and this status will ensure your business enjoys the associated benefits in a number of international markets.

• More than 70 countries are included in the AEO, or a similar initiative
• There are opportunities for your business to expand into new territories with the benefit of a mutual “approved supplier” framework
• A more efficient approach to international Customs

Financial advantage

The advantages brought about by AEO have efficiency, productivity and profits at their core. Of course, faster Customs checks, a global network of improved suppliers and a certificate of reliability and safety will have considerable benefits for any business.

To become an AEO operator, you must meet strict requirements, many of which are financial and must be checked by HMRC.

Other financial advantages include:

• More efficient logistics, increasing profit
• Less risk when working with third parties
• A quicker, more efficient approach to Customs reliefs and applications
• Preferential treatment from other businesses and Customs itself

Do I need external advice to apply for AEO status?

If you are considering seeking AEO status for your business, you will need to take some time to research the process and what to expect. It is also advisable to put some thought into whether you will hire a company to help you achieve the status, or whether you can do so alone.

The benefits of using an external company have been outlined below:

Creating a stress-free process

Enlisting a customs consultancy takes the pressure off you as a business owner, leaving you free to concentrate on your day-to-day operations. The onus is on the company to ensure problems are rectified promptly. After all, that is what you are paying them for.

Expert advice

A professional body is on hand to manage the process, and their knowledge of this area will be invaluable. HMRC experts know this process inside out, and know exactly what companies look for when granting AEO.

Enhanced business processes

The complex nature of AEO, and the thoroughness of the application, means that many financial and logistical aspects of your business will be closely analysed. An AEO consultancy will know just what they’re looking for, and can advise on areas of improvement, assist with document trails or advise on processes to ensure every aspect of your business is AEO-ready.

What does applying for AEO status mean?

The decision to apply for Authorised Economic Operator (AEO) status should be based on whether doing so would benefit the business when compared to the costs of applying for, and maintaining, the standard.

Changes introduced in 2016 mean that a guarantee has to be lodged if a business wants to use any Customs’ facilitation schemes, unless the business can demonstrate it operates to AEO standard.

Changes imposed as part of the Union Customs Code mean that businesses holding or wishing to apply for Customs simplifications need to consider whether to seek AEO status. These circumstances include:

• Businesses looking to apply for a Customs special procedure, such as inward processing, Customs warehouse and temporary storage
• A business wishing to apply for a single authorisation across more than one member state
• Any business that wants self-assessment and centralised clearance

Having AEO standards in place means the following for businesses:

• The ability to fast track through Customs controls, meaning you will be prioritised over non-AEOs if selected for examination
• Permission to use a reduced data set when supplying entry or exit or entry summary declarations, and includes carriers and freight forwarders
• Worldwide recognition - over 70 countries are included in the AEO initiative, which would give your business the chance to expand into new territories