AEO is a programme under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The programme aims to enhance international supply chain security and facilitate movement of legitimate goods.AEO encompasses various players in the International supply chain. Under this programme
an entity engaged in international trade is approved by Customs as compliant with supply chain security standards and granted AEO status & certain benefits. India’s AEO Programme is in sync with the commitments made under Article 7.7 of WTO TFA.
AEO is a voluntary compliance programme. It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principle stakeholders of the international supply chain viz. importers, exporters, logistics providers, custodians or terminal operators, custom brokers and warehouse operators.
The Indian AEO Programme is implemented vide CBIC Circular 33/2016 – Customs dated 22.07.2016, as amended & Circular 26/2018- Cus dated 10.08.2018, which provides the statutory framework for the AEO programme. The circular is in line with the WCO’s SAFE Framework. The circular provides for a three tier AEO Status for Exporters and Importers. The three tiers are AEO T1, AEO T2, AEO T3, where AEO T3 is the highest level of accreditation. All three tiersprovide for varying and incrementally increasing level of facilitation to the status holder. There is one more category of AEO- LO that covers all other entities in the supply chain other than the importers and exporters. The Circular 33/2016 – Customs was amended by the Circular 03/2018 – Customs dated 17.01.2018. Amendment Circular 03/2018 – Customs has further liberalized, simplified and rationalized the AEO accreditation process so as to promote Ease of Doing Business and to emulate global best practices.
Recently, the AEO T1 processing was rationalized via new circular 26/2018 - cus. The present circular has cut down on the Annexure required for AEO T1 certification from earlier 7 to the present 2. The present circular has not just rationalized the AEO T1 processing by taking away redundancy in earlier processing but it has also made more thorough certain key compliance requirements. For that, the new circular has relied upon the latest SAFE framework 2018 edition and best practices from domestic AEO Programme of different customs administrations.
Apart from the above changes, the new circular has completely decentralised the processing of AEO T1. In the present the setup, the AEO T1 file can be approved at the Customs Zonal level. This has completely eliminated the time that was wasted in transit of application from zonal offices to DIC (AEO HQ).
In effect, the present AEO processing has not just been simplified but is also comprehensively aligned to security requirements as provided in the latest SAFE Framework.
The vision is to have 3500 AEOs in foreseeable future. For which, the process for AEO accreditation for AEO T1 has been completely decentralized. Earlier, the AEO T1 applications were processed by AEO Headquarter assisted by 5 AEO Regional Units. But now, the same process &accredited by Custom Zones spread across the country.
Major Benefits of the AEO certification are:
Self-declaration of SION under Para 4.07A of FTP 2015-20 for AEO Exporters in cases where SION is not notified.
Inclusion of Direct Port Delivery of imports to ensure just-in-time inventory management by manufacturers – clearance from wharf to warehouse for AEO T1, T2 and T3.
Inclusion of Direct Port Entry for factory stuffed containers meant for export by AEOs for AEO T1, T2 AND T3.
Provision of Deferred Payment of duties – delinking duty payment and Customs clearance for AEO T2 and AEO T3
Benefits of Mutual Recognition Agreements with other Customs Administrations for AEO T2 andAEO T3.
Fast tracking of adjudications and refunds including IGST refunds and disbursal of drawback.
Mutual Recognition Agreements are the international face and connecting link of the domestic AEO Programme of various countries. It acts as an equalizer that harmonize the minor difference 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 key element of the WCO SAFE Framework to strengthen end-to-end security of supply chains and to multiply benefits for traders at a global level.
By mutual recognition of AEOs two customs administrations agree to:
recognise the AEO authorisation issued under the other countries programme and
provide reciprocal benefits to AEOs of the other countries AEO entity.
Indian Customs has collaborated with several foreign customs administrations to align with their Authorized Economic Operator Programmes, which effectively allows Indian Customs to internationalize the core principles of the program and provide benefits to Indian trade at the international level. Indian Customs has signed two Mutual Recognition Agreements with the Customs Administrations of South Korea and Hong Kong. Couple of MRAs are in final stages of conclusion, they include MRA(s) with United States of America and Taiwan. Apart from this, India is constantly looking for partners abroad to enhance its MRA partners so as to contribute positively to the global trade. To that effect, Indian Customs is already in process of discussions with UAE, Uganda and Philippines, to finalize the draft Joint Action Plan (JAP). JAP acts the broad framework of timeline and actions that needs to be completed in phased manner to conclude an MRA. Indian Customs has already conveyed the draft JAP to these three Customs Administration for their comments. Lastly, Indian Customs has also taken up a proactive approach to MRA and hence sent ‘Expression of Interest’ to major South East Asian Country with which India has gradually increasing trade relations.