AEO Certification, or Authorized Economic Operator, is a voluntary program developed by the World Customs Organization (WCO) to provide a secure framework for global trade rules. It aims to improve global supply chain security and facilitate the transportation of lawful commodities. This article will throw light on the AEO Certification package for MSMEs in India.
Definition of AEO package
AEO is a program that takes into consideration a close collaboration between the business and customs agents. Consequently, it comes to be that the economic operator is granted specific privileges. The evaluation indicates the credibility and the strong side of the economic operator.
What follows next is a review of the factual bases to ascertain the trustworthiness of the defendant.
Accounting system
Compliance with Customs Legislation
appropriate security requirements.
Solvency standards.
It facilitates a firm’s straightforwardness concerning customs related control procedures as well as its compliance with the customs laws. It is designed to prevent the control of global supply systems from criminal groups, for legitimate movements to be easier.
It has the following objectives
The advantages of delinking payment and settlement are clearly more and among these are accepting mere electronic notifications, time-saving, self-certification, a refund in matter of hours and at your request, and also examination on request.
Enacted under government supervision and welfare organization support, the program which involves a diverse network of global supply chain players helps in streamlining poverty alleviation programs. It is just a facilitator process that allows the Indian Customs to build up their cargo security capability at sea, land, and air borders and to increase their cooperation with the main players in the international chain of maintenance (importers, exporters, custodians and others).
Some certificates provide different authorizations: –
AEO authorizes “Customs Simplifications” (AEOC).
AEO grants “Security” (AEOS).
AEO authorization “Customs Simplifications & Security” (AEOC & AEOS) (Combined Authorization).
Read this article: What is MSME Registration, and how do you obtain it?
Foundation Of AEO Package
AEO is a WCO-led effort that was acknowledged as a safe framework of standards to facilitate international trade in 2005. Following that, India’s authorities moved forward to use the same WCO framework, resulting in simplified Customs[1] compliance. In 2011, the CBIC (Central Board of Indirect Taxes and Customs) started the AEO program in our country.
Benefits of AEO
Entities holding AEO status can enjoy the following benefits: –
Recognized as secure and compliant business partners in global trade.
Prompt clearance
Delayed duty payments
MRA recognition.
The facility of Direct Port Entry (DPE)/Direct Port Delivery (DPD).
Abandonment of all or part of the Bank Guarantee obligations.
Relinquishment of Merchant Overtime Fees
Swift disbursement of drawback amount
Prompt tracking of refunds and adjudications.
Access the Client Relationship Manager.
Eligible Candidates For The AEO Package
Any company involved in the international supply chain that does customs-related activities can apply for AEO certification. Individuals listed below can apply for AEO certification.
Importer and Exporter
Warehouse operator
Custom Bankers
Logistic service provider (e.g., carriers, airlines)
Custom House Agents
Custodians or Terminal Operators
Port operators, stevedores, etc.
The Eligibility Criteria For AEO Package
Anyone seeking AEO certification consultant must ensure adherence with the eligibility criteria listed below.
To be eligible, individuals or entities must be involved in Customs activities, have dealt with at least 25 Customs documents (bills of entry or shipping bills), and have been active for at least three financial years.
The firm must have been in active phase for the previous three fiscal years prior to the application date. However, in some cases, AEO certification may be available to newly founded businesses based on the verification of internal controls by considering:
The company’s financial stability, compliance with safety and security standards, commercial management system, and transportation record (if applicable) are all important considerations.
|
AEO Status |
Applicability |
Validity |
Renewal |
|
AEO – T1 |
It is conferred to an importer or exporter only without on-site inspection of the premises. |
3 year |
30 days |
|
AEO – T2 |
It is conferred to an importer or exporter only after on-site inspection of the premises. |
3 Year |
60 days |
|
AEO – T3 |
It is conferred to an importer or exporter who has served under AEO T2 status for two years, preceding the application date; an importer or an exporter have AEO T2 or AEO LO certificates, & its other partners hold the AEO T2 or AEO LO certificates or other equivalent license granted by foreign customs. |
5 Year |
90 days |
|
AEO – LO |
It is granted to economic operators and not to the importer or an exporter only after on-site inspection of the premises. |
5 Year |
90 days |
Validity and Renewal Regarding AEO Package
AEO certificates are granted for a limited time, and after they expire, renewal is the only option to reactivate them. The same is emphasized in the table below. –
Relaxation for MSMEs under the AEO Package
MSME, or Micro, Small, and Medium Enterprises, is a vibrant segment of the Indian economy. Considering the important efforts made by the MSMEs to reduce the impact of Covid 19 on India’s economy, CBIC has provided a program, viz. ‘Liberalized MSME AEO Package’ for the MSMEs, The ‘Liberalized MSME AEO Package’ intends to simplify compliance and procedural requirements in order to streamline the trading process.
|
Procedural Requirements |
AEO T-1/ T-2 |
MSMEs AEO T-1/ T-2 |
|
Eligibility Requirement |
Handling mini.25 Customs documents during the erstwhile financial year |
Handling mini. 10 Customs documents, subject to holding mini of 5 documents in each half-year period of the past financial year |
|
Business Activities |
At least three financial years prior to the application date |
At least 2 financial years prior to the application date |
|
Qualifying Period for Legal and Financial Compliance |
The last three financial years |
Only the last two financial years |
|
Time Limit for Processing of Application |
AEO T1 -one month, AEO T2 application- six months |
Fifteen working days. |
|
Documents / Annexures |
AEO T1 – Annexure A, B, C, D, E.1-E.4AEO T2 – Annexure A, B, C, D, E.1-E.4, E.5.1-E.5.7 |
MSME AEO T1- Annexure 1 & 2 only MSME AEO T2- Annexure 1, 2, & 3 only |
Conclusion
The AEO initiative has two goals: to increase security measures in the global supply chain and to help importers, logistic operators, and exporters improve their trade practices. AEO is a globally recognized framework that seeks to simplify existing customs clearance norms.
