An Indian Perspective of the Authorized Economic Operator (AEO) Program

India launched its pilot of the Authorized Economic Operators Program (AEO) in August 2011 in harmony with the “SAFE Framework” developed by the World Customs Organization (WCO). India’s Customs administration developed an AEO Program that includes various members in the international supply chain such as importers, exporters, warehouse owners, customs brokers, forwarders and carriers. The objective of the AEO Program is to provide businesses with an internationally recognized ‘quality mark’ indicating their commitment to security in the international supply chain. These players are also required to certify that their Customs procedures are efficient and compliant. Entities that receive an AEO status are considered a ‘secure’ trader and a reliable trading partner.

Following are some brief details of the program:

Indian AEO Program Eligibility criteria

  1. AEO is available for any organization established in India involved in global trade like Importers, Exporters, Cargo Agents, Warehouse Operators, Port Operators, Carriers and Customs House Agents irrespective of size of its business.
  2. Organizations not involved in customs related work (e.g. general banks, insurance companies, consultants, etc.) do not qualify for participation in AEO.
  3. AEO status to a particular entity is not applicable to its group company. Each entity has to apply for AEO separately.

Indian AEO Program Benefits

Similar to the other AEO Programs around the world, there are various benefits to AEO status holders. Following are some major benefits which can be availed by different types of organizations involved in global trade:

  1. Importers: Reduced examination and inspection, higher facilitation than ACP[1] clients, and acceptance of pre-arrival import declarations
  2. Exporters: Reduced examination and inspection, acceptance of export declarations without bringing goods into Customs area
  3. Warehouse Operators: Faster approvals for a new warehouse, reduced audits
  4. Custom House Agents: Acceptance of pre-arrival import declarations for client importers.
  5. Logistics Providers (Carriers / Forwarders / etc.): Transit of goods without case by case permissions, and without customs escort

Compliance is the most important aspect of AEO Programs and organizations are required to maintain them to avail the AEO benefits. The Indian AEO Program requires:

  1. Organizations applying for AEO status must demonstrate an adherence to customs, central excise and service tax laws, as well as allied laws for the preceding three years.
  2. Technical and procedural errors in records that have no significant impact on revenue, or compliance, may not be considered for disqualification.
  3. Applicant organizations must demonstrate they have procedures in place to identify and disclose any irregularities/errors to the Customs authorities or, where appropriate, other regulatory bodies. They must also demonstrate they have in place appropriate remedial actions when irregularities/errors are identified.
  4. Applicant organizations must have a satisfactory system for managing commercial and transport records. Such a system may include the following:
  5. Applicant organizations must demonstrate they have all proper arrangements in place to ensure safety and security of import/export cargo, conveyances, premises, etc. compliant to global standards.

Developments: In its first release for AEO certification (July 2012), Directorate General of Inspection Government of India awarded AEO certificates to three entities with a validity of 3 years. Since, November 2012 when the government launched AEO on a full scale, there have been a total of 18 entities who have received their AEO certification.

To achieve full utilization of the AEO Program, one AEO Program operating country or region should have MRA with other AEO Program operating countries or regions. The Indian government has already signed MRA with Hong Kong and is currently negotiating with Korea as an extension to its MRA list.

Although the AEO Program is capable of providing a safe and secure international supply chain with various benefits, it still has a long way to go in achieving its full objectives worldwide. There is an expectation that the benefits are instantly realized by the organizations already working within AEO compliant standards in countries or regions where AEO is operational. For organizations not compliant with AEO standards, this program may require additional investments to be compliant. Considering the benefits of the AEO Program, and proven success stories, this additional investment appears to be one that inevitably provides a competitive advantage in this rapidly growing global trade environment.

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References

Indian Foreign Trade Policy https://agriexchange.apeda.gov.in/FTP/ftp2015-20E.pdf
Indian Customs Circular regarding AEO http://www.cbec.gov.in/customs/cs-circulars/cs-circ12/circ28-2012-cs.htm
India AEO status holders list http://dgicce.nic.in/sevottam.htm

[1] Accredited Clients Program launched by Indian customs which provides preferential treatments to its participant: http://www.cbec.gov.in/customs/cs-circulars/cs-circulars05/42-2005-cus.htm