In a significant development, Department of Revenue has issued draft Authorized Economic Operator (AEO) Scheme for stakeholders engaged in international trade. Views/ comments of trade and industry are sought on the AEO Scheme by 15 December 2010
Background :- AEO Scheme, adopted by several countries across the globe, is a World Customs Organization initiative towards Standards to Secure and Facilitate Global Trade or SAFE Framework.
Under the Scheme, stakeholders approved by Customs as compliant with the supply chain security standards are given benefits such as simplified Customs procedures and reduced Customs intervention.
Highlights of the draft Scheme are summarised below:
Eligibility :- Anyone involved in the international supply chain that undertakes Customs related activity in India would be eligible to apply for AEO status (irrespective of the size of the business). These include manufactures, warehouse owners, exporters, importers, logistic providers, carriers, freight forwarders and Customs House Agents (including port operators, authorized couriers).
Benefits:- Key benefits proposed to be extended to an AEO interalia include:
• Reduced examination and inspection
• Acceptance of pre-arrival import declarations
• Clearance of cargo before duty payment Criteria for grant of AEO status
• No major non-compliances under Customs, Excise and Service tax laws and Income tax law (e.g. pending Show Cause or Demand Notices)
• Satisfactory system of managing commercial and, where appropriate, transport records
• Proven financial solvency
• Maintenance of approved security and safety standards Procedure and compliances – AEO status
• Application in prescribed format to be filed with the concerned administrative authority along with relevant information! details
• On site verification to be undertaken by the authorities and basis which AEO certificate and logo would be granted within 90 days of filing of a completed application
• AEO can use the logo on his business letter heads, signage on vehicles etc. AEO is also required to mention his certificate number on all Customs documents
• AEO status holder to adhere and periodically review their compliances. Same would also be reviewed periodically (initially one year from grant of status) by the authorities
Our comments :-As mentioned above, AEO status would be granted by the authorities’ on the basis of level of compliances and existence of processes! procedures, etc.
This would, therefore, necessitate the review of following:
• Contracts with third parties like Custom House Agents, transporters, etc.
• Level of compliances under Customs, Excise, Service tax laws, etc. in terms of declarations, disclosures and documentation, etc. in last three years
• Existence of processes and procedures in handling import and! or export transactions including security of cargo.
Further, after grant of AEO status, continuous monitoring of the key processes and necessary corrective measures (including training) would required to be taken to ensure effective and efficient compliances.
However, being a partnership programme with Customs, as a first step, it is essential that the views on the proposed Scheme are shared with authorities for effective implementation.
Source: File No 450/ 179/ 2009-Gus. IV dated 1 December 2010
