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Navigate the red tape

11 September 2017

We are in the middle of a complicated negotiation to leave the EU. We don’t know what the trade relationship will be upon exit, but many say there could be an increase in paperwork to negotiate, and that the Authorised Economic Operators (AEO) scheme could be useful in helping firms streamline trade post-Brexit. This feature examines the AEO scheme.

The AEO scheme is a global concept promoted by the World Customs Organisation and is in the process of being adopted by all 174 member countries. The intention of the scheme is to improve security and compliance in the supply chain, and is therefore intended for any company in the supply chain regardless of size.

The Chartered Institute of Logistics & Transport says post-Brexit, the current AEO scheme is going to become much more important in order to ensure the UK trades with frictionless borders.

Kevin Richardson, Chief Executive, CILT says: “It’s vital that importers/exporters achieve AEO status, as without it they won’t experience frictionless borders and face getting left behind, especially as border processes get more complex post-Brexit.”

There are two types of scheme. You can apply for AEO status for customs simplification (AEOC), AEO status for security and safety (AEOS) or both.

If you hold AEOC status, you could benefit from a faster application process for customs simplifications and authorisations; and reductions or waivers of comprehensive guarantees, for example.

You’ll need to be a holder of an AEOS if you’d like to benefit from arrangements under mutual recognition agreements with third countries.

The Freight Transport Association (FTA) Head of Global Policy Alex Veitch adds: “AEOs could be absolutely vital, or could be ‘nice to have’. It depends on what is agreed. If there is no interim deal, then a lot of UK companies would be wise to look at it.

“A lot of forwarders, carriers and 3PLs are AEO Security registered. If we are in a world of 'no deal' with the EU, it is probably wise to get Security registered because it should allow faster border crossing and faster inspections once a MRA is agreed with the EU. Parties can also request to be notified of when they will be inspected."

The requirements for AEO Security are tight, including checks on staff and secure warehousing, so it is a challenge to comply. There is an equivalent scheme covering air freight, which is well established (known as Regulated Agent for intermediaries or Known Consignor for traders). If you have this, you can automatically get AEO status under EU law.

“However, while AEO Customs is an important scheme and we support the continuation of a scheme similar to this after Brexit, it is not yet clear how it will benefit international trade, as currently there are no specific MRAs for AEO Customs established by the EU,” says Alex.

FTA is confident the UK will have its own AEO scheme after Brexit. It will be brought over in the Customs Bill that will follow the Great Repeal Bill. The UK scheme will initially mirror the EU scheme.

Alex continues: “On the Security AEO side, my hunch is, it will be more or less the same. We are going to want quick compatibility with the EU, the USA, China etc. With Customs AEO, we could go further and be more business friendly.”

High fail rate

At the moment, the applications to achieve AEO statue differs from a high fail rate, said to be up to 95%. With the clock ticking on the UK’s exit from the EU, will there be time for sufficient companies to achieve AEO status?

Kevin Richardson explains: “Now really is the time to get started, as the application process takes months to complete. By delaying your application, you are running the risk of getting left behind, but by applying now you are ensuring that you complete the process in time.”

To get enough businesses with AEO status, companies need to know what they have to prepare, for the audit, documentation etc. Associations such as FTA and the CILT, can help with the education process here.

Kevin adds: “This is a complex, formal accreditation to achieve with a very low pass rate so far. Very few UK companies have it, but very many will need it. To ensure that your Institute is helping members in the best possible way, CILT is laying on specialist courses in partnership with experts at Morley Consulting to provide crucial insights and information to guide you through the process to booking your Brexit ticket. The application process takes months, not weeks, and companies need to prepare prior to submitting their applications. Those that have not yet chosen to be certified should be giving it serious consideration and by going to these specialist courses you are giving yourself the best possible chance of becoming accredited.”

FTA says if we as a nation want to get more companies through the AEO application process, it will have to be streamlined.

Alex Veitch explains: “Many applicants say the application form is clunky and the process is unhelpful. But on the other side, Customs say they see incomplete applications and don’t always see evidence that companies have done the necessary background checks. FTA would like to see a simpler application form and perhaps a 'Check & Send' style service, combined with briefings for business to ensure they understand the requirements.

“Certainly, it is hard to see how the Security scheme can be watered down to encourage greater take-up, it would defeat the purpose. For many companies, it may be simpler to employ a forwarder to take care of the extra aspects, at extra cost. Then if volumes rise, take on the responsibilities themselves.”

AEO - the basics

AEO status is an internationally recognised quality mark indicating that your role in the international supply chain is secure, and that your customs controls and procedures are efficient and compliant.

It isn’t mandatory, but it gives quicker access to certain simplified customs procedures and in some cases the right to ‘fast-track’ your shipments through some customs and safety and security procedures.

You can apply for AEO status for customs simplification (AEOC), AEO status for security and safety (AEOS) or both.

If you hold AEOC status, you could benefit from:

  • a faster application process for customs simplifications and authorisations
  • reductions or waivers of comprehensive guarantees

You’ll need to be a holder of an AEOC if you wish to qualify for:

  • moving goods in temporary storage between different member states
  • a notification waiver when making an entry in a declarant’s records (EIDR)
  • a 70% reduction in a business’s deferment account guarantee
  • undertaking centralised clearance (when available)
  • completing self assessment (when implemented)

You’ll need to be a holder of an AEOS if you’d like to benefit from arrangements under mutual recognition agreements with third countries.

AEO status is for businesses that are established in the EU, actively involved in customs operations and international trade and have an Economic Operator Registration and Identification (EORI) number. The EU AEOdatabase allows anyone to check who holds an AEO status, what type it is, and the date and country of issue.

Further information is available at https://www.gov.uk/guidance/authorised-economic-operator-certification