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FAQ: Authorised Economic Operator (AEO)

 

Contents

What is an AEO?

When did the law come into force?

What is the legal basis for AEO?

What were the reasons for introducing AEO?

Is AEO mandatory for businesses involved in the supply chain?

Is my business eligible?

Applications

The approval process

What are the benefits for my company of a security and safety AEO certificate?

Recognised status across the EU

What are the benefits for my company of a customs simplification AEO certificate?

What happens if I decide not to apply?

What happens if everyone involved in the supply chain is not authorised for the security and safety AEO status?

What is my responsibility as an AEO?

What happens once I am granted AEO status?

What happens if I don’t advise you of any changes?

What if I have any further questions?

 

What is an AEO?

An AEO is a business involved in the international supply chain which has proved themselves to be compliant and trustworthy, and where applicable, safe and secure.

When did the law come into force?

AEO status entered into force on 1 January 2008 across the EU.

What is the legal basis for AEO?

AEO was introduced by an amendment to the Community Customs Code in April 2005 - Council Regulation 648/2005, The Security Amendment. The detailed implementing provisions are contained in Commission Regulation 1875/2006 which was published in December 2006 - Commission Guidelines.

What were the reasons for introducing AEO?

The introduction of AEO status is the EU response to the need to secure international supply chains and the introduction of Customs-Trade Partnership Against Terrorism (C-TPAT) in the USA.

Is AEO mandatory for businesses involved in the supply chain?

AEO is not mandatory. The decision on whether you should apply or not is a commercial one that you need to take once you have assessed the benefits for your business against the costs of applying for, and maintaining, the AEO standard.

Is my business eligible?

Who can apply?

A legal entity established in the EU, whatever the size of their business, involved in activities covered by customs legislation and forming part of the international (outside of the EU) supply chain can apply for AEO status. This could include logistics operators, carriers, freight forwarders, customs agents, importers, exporters, manufacturers, ports and many more.

What about group applications?

A group may apply for a UK AEO as long as all the legal entities are based in the UK.

Any legal entity based in another Member State must apply in that country. Each legal entity must complete the C117 (one page application form) but need only supply one completed C118 (questionnaire). However, the systems, records and methods of assurance must all be similar. If the business is made up of a mix of operations, for example warehousing, manufacture and distribution if may be simpler to complete a questionnaire for each operation.

UK groups with businesses in other Member States should submit applications to the UK unless your main accounts related to the customs arrangements, and part of the operations to be covered by the AEO status, are held in a different Member State.

See below for information on VAT groups.

What is the definition of a legal entity?

The following are acceptable status in the UK, sole proprietor, partnership, limited company, and unlimited company. A VAT group registration is not a legal entity.

Can I apply if my company is not established in the EU?

No, unless you are an airline or shipping company who are authorised to use simplified transit procedures.

Are there any AEO systems that are mutually recognised?

It is hoped that mutual recognition of similar systems, across other third countries, will take place in the future. At this time we expect agreement with the USA to be concluded late 2009. Negotiations with China and Japan are expected to conclude mid 2010.

From 1 July 2009 agreements were put in place to recognise AEOs in Switzerland and Norway.

Can I apply for AEO status on behalf of other parties involved in the supply chain?

No. You are only entitled to apply and receive the benefits of AEO status for your role in the supply chain - it will not cover activities carried out by a third party.

I am a business in the Isle of Man - can I apply?

Yes - your application can be sent to the AEO Central Site in Nottingham, who will carry out the checks on behalf of Isle of Man Customs. The audit will be conducted by Isle of Man Customs.

I am a business in the Channel Islands - can I apply?

Yes - your application can be sent to the AEO central site in Nottingham, who will conduct a basic vet of the application. Detailed vetting and audits will be conducted by Jersey or Guernsey Customs.

Applications

How do I apply?

You will need to apply using the C117 and C118 forms which are available from the HM Revenue & Customs (HMRC) website together with the Explanatory Notes (C117 notes and C118 notes). An online interactive application form is available via the Business Link website and offers the most secure method of application.

Where should I send my application?

If you are applying in the UK you can email your application, or alternatively it may be posted to:

HMRC
AEO Central Site
Fitz Roy House
Castle Meadow Road
Nottingham
NG2 1AB

Tel: 0845 0010089

Please be aware that the HM Revenue & Customs (HMRC) email route has normal levels of security and has not been enhanced for AEO applications.

What can I apply for?

There are three certificates available:

  • security and safety
  • customs simplifications
  • full

Which type of certificate should I choose to apply for?

HMRC advises businesses interested in applying for AEO to apply for the full certificate. The full certificate will allow a business to receive the maximum benefits potentially available under the AEO scheme. However, the final decision must be taken by the business making the application.

The customs simplification certificate will not be accepted under any mutual recognition agreements. Businesses holding the customs simplification AEO status, wishing to take advantage of any mutual recognition benefits, would have to reapply at a later date for the security and safety certificate as well. Some businesses may only need to apply for the safety and security certificate. If you are unsure which best suits your business you can discuss this with the AEO central site.

How do I know which type of authorisation has been granted?

Applicants should be aware that the type of AEO status granted will be indicated by the authorisation number and businesses wishing to operate within a secure supply chain should check the type of status held by AEO trading partners.

What will HMRC expect from the applicant?

Operators intending to apply must be:

  • financially solvent (have the ability to pay their legal debts)
  • compliant
  • able to demonstrate satisfactory management systems

and, if applying for the security status:

  • compliant in respect of security and safety standards

Supplying directors’ details - do I have to?

We understand that some businesses may have issues with supplying the names and addresses of their directors. This could be due to issues with animal rights, terrorism or security. The web application is the most secure method of making an AEO application.

If you hold an exemption or can demonstrate just cause we will allow a business to leave question 1 on the C118 blank. However, the information must be supplied separately eg sealed envelope delivered by courier or by quoting the relevant National Insurance numbers of the directors. The AEO central site team have been security vetted to a higher than normal level and can then check the information, note the file that it has been received and the outcome of the check and then securely destroy it.

If the information is not supplied the application is considered as incomplete and will be returned to the business.

When will I get my certificate?

The legislation requires a decision to be issued within 300 calendar days from date of acceptance of a full and complete application. As from 1 January 2010 this will change to 120 calendar days. However, there are exceptions to these timings where either HMRC or the applicant can stop the clock to allow for certain work to be carried out by one of the parties. Details are in Notice 117 Authorised Economic Operator.

The approval process

What will the approval process consist of?

HMRC will examine the application and conduct an audit of the company. We will also liaise with other Member States if the request for AEO includes elements of the company which are operating elsewhere within the EU.

Will I need to send all the supporting evidence to HMRC with my application?

No. The supporting evidence should be retained with your records and be available for inspection by HMRC as part of the authorisation process.

Will existing regulatory or trade accreditation schemes be taken into account by HMRC?

Our aim is to strike the right balance between minimising burdens on business and ensuring the authorisation process is sufficiently rigorous to stand up to scrutiny. To achieve this HMRC takes account of existing regulatory and accreditation schemes where these schemes meet the requirements of the AEO questionnaire. However, HMRC are aware that these schemes may only be an indicator that the business may be compliant to that standard, and that standards do not necessarily cover the whole of the business operation applying for AEO.

What advice can you offer about the HR requirements for the safety and security section?

Standard requirements for Regulated Agent status are employment history for the last five years. Although this is not a legal requirement for AEO there is an expectation that a business, serious in its commitment to safety and security, will have a recruitment policy that is robust and stands up to scrutiny. Employees, in security sensitive positions or high risk areas should have received appropriate security screening. Business using agencies for temporary/casual staff should be aware of the legal requirements to ensure that those staff are fully checked.

The Conduct of Employment Agencies and Employment Businesses Regulations 2003 (Statutory Instrument 2003 No 3319).

What are the benefits for my company of a security and safety AEO certificate?

Recognition will enable businesses to have their consignments fast-tracked through customs controls. If a consignment is selected for examination they may receive priority over non-AEOs.

The requirement to make pre-arrival/departure summary declarations was introduced from July 2009 allowing AEOs to omit certain data elements from the declaration.

Recognised status across the EU

Trade consider AEO status an industry 'kite mark' and useful marketing tool.

Potential, in the future, to have reciprocal arrangements and mutual recognition with countries outside the EU, for example USA.

What are the benefits for my company of a customs simplification AEO certificate?

The main benefits of AEO status will not be realised until the requirements for pre-arrival and pre-departure are introduced in July 2009 and the changes linked to the Modernised Customs Code are introduced, probably some time in 2013. When considering whether or not to apply traders should be aware that access to certain simplifications in customs procedures such as guarantee waivers and centralised clearance may be restricted to AEOs, the recognised status across the EU should make it easier for businesses to apply to use simplifications across the EU.

Trade considers AEO status an industry ‘kite mark’ and useful marketing tool.

What happens if I decide not to apply?

There will be no loss of existing authorisations or simplifications for traders who do not apply. Current clearance times in the UK for businesses that do not have AEO status will not be affected. However, current authorisations eg CFSP, LCP, IPR etc will be reviewed over the next three years to ensure that they meet the authorisation holder meets the basic AEO criteria (or the holder has attained AEO status):

  • financial solvency
  • compliance
  • records management

What happens if everyone involved in the supply chain is not authorised for the security and safety AEO status?

At the current time it is uncertain what impact this will have, although it is likely that in these circumstances the supply chain may have a higher risk rating and therefore a higher probability of customs intervention than a supply chain where all parties are authorised for the security and safety AEO status.

What is my responsibility as an AEO?

Business can only be held responsible for their part of the supply chain and for the goods which are under their custody. Contractual arrangements with trading partners should demonstrate arrangements for assuring trading partners are aware of the requirements.

What happens once I am granted AEO status?

HMRC will regularly monitor your status and contact you with information about legislative changes that might have an impact on your business. The business is required to contact HMRC to advise any changes to their operations which may impact on their AEO status however small they may appear to be.

What happens if I don’t advise you of any changes?

The law requires you to advise us of changes that might affect your AEO status. If you do not and our monitoring or audit activity determines that any of the AEO criteria have failed to be maintained we may suspend or even revoke your certificate. If your status is revoked you are not able to reapply for AEO within three years of the revocation.

What if I have any further questions?

Further questions concerning AEO can be sent to HMRC via their dedicated email (contact name - Andrea Head).

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