AEO Certification – Where ease of doing Business turns to Bureaucratic Nightmare
The Authorised Economic Operator (AEO) programme was launched in India with the promise of making cross-border trade smoother, faster, and more predictable. It was meant to be a flagship initiative for Ease of Doing Business (EoDB) — rewarding compliant businesses with expedited customs clearance, fewer inspections, and greater facilitation.
However, the ground reality today is far from that vision. For many applicants, the AEO process has become lengthy, repetitive, and unpredictable, eroding the very advantages it was designed to deliver. Various files are getting cleared beyond the period of 8 months -12 months or even more than that.
1. Misuse of Circular No. 33/2016-Cus – SCN Clause
Paragraph 3.2.1 of Circular No. 33/2016-Cus states that an applicant should not have been issued an SCN in the last three financial years involving fraud, forgery, outright smuggling, clandestine removal of excisable goods, or non-deposit of collected Service Tax.
The Department’s view that any SCN issued under Section 28(4) of the Customs Act or Section 74(1) of the CGST Act ipso facto disqualifies an applicant is misplaced.
While this clause is intended to exclude only the most serious offences, in practice it is misused. If an SCN invokes the extended period of limitation, even for far less serious reasons such as suppression of facts or misrepresentation or interpretation issues, it is often treated as if it were one of the listed grave offences.
If such a literal and overbroad reading is adopted, the scheme stands reduced to absurdity. Virtually every large or mid-sized enterprise engaged in complex import-export operations will, at some stage, face an extended period SCN. In fact, it is well-known that the extended period is the “default mode” for most SCNs. On the other hand, small-time traders operating in markets like Chandni Chowk or Chawri Bazar — who may never come under serious audit scrutiny — would become the only “eligible” beneficiaries. Surely, the AEO programme was not designed to exclude established, large-scale, and compliant trade participants.
To the best of my knowledge and based on discussions with departmental officers, several representations have already been made to the Directorate of International Customs (‘DIC’). Unfortunately, despite these representations, no clarification has been issued till date, and field officers continue to apply this clause in the most restrictive manner possible. This is the most misused law.
This makes it extremely difficult to convince authorities of the true nature of the case, and in many instances, applications for AEO T-2 are rejected on this ground alone.
2. An Overly Layered and Inefficient Approval Process-Multiple Hierarchy
The current application process is a bureaucratic maze. An application is first submitted to the Zone, which simply forwards it to a designated port. The port conducts the audit and sends the file back to the Zone, which then forwards it to the DIC. At DIC, the entire file is re-examined from scratch, moving through multiple desks — Inspector, Superintendent, Deputy Commissioner, Joint/Additional Commissioner, and finally the Commissioner.
This process routinely takes 8-10 months, and that is when the file progresses smoothly without bureaucratic delays at any stage.
The Zone’s role is purely intermediary; files should go directly from auditors to the DIC. Similarly, clarifications should be addressed directly to auditors instead of being routed back through the Zone.
Alternatively, if the DIC is going to verify every aspect afresh, then applications for AEO should be submitted directly to the DIC, and the role of the port/zone should be discontinued entirely.
3. No Standardised CA Certificate Format
A major procedural gap is the absence of a prescribed format for the Chartered Accountant’s (CA) certificate. This leads to inconsistent demands from auditors, with each one asking for different details.
For AEO T-3, the certificate must be issued by the statutory auditor which are often a Big 4 or multinational audit firm. Without an official format, these firms are reluctant to sign the certificate exactly as worded by the department, preferring their own templates. This creates unnecessary delays.
Issuing a uniform, DIC-approved certificate format would eliminate this problem entirely.
4. Repetitive Questions in Application Forms
The application forms themselves are a source of inefficiency. Many questions are repetitive, requiring the same information to be submitted in multiple sections. The forms should be revised to capture only the essential information needed to assess eligibility and compliance.
5. Outdated and Over-Reliant DIGIT Software Checks
The DIC now relies heavily on DIGIT software to check a company’s background for pending or past SCNs. However, DIGIT is often outdated and inaccurate.
In some cases, summons issued to the party was appearing in DIGIT records for which clarification was asked. No SCN was ever issued on summon issued by the department. Similarly, DIGIT records shows SCN issued in last three years but in actual the said SCN was issued beyond the period of three years.
When such discrepancies arise, instead of DIC directly seeking clarification from the applicant (which it is empowered to do), the file is sent back to the port — triggering yet another round of delays.
The Way Forward
If the AEO programme is to reclaim its role as a genuine Ease of Doing Business initiative, it must undergo urgent process reforms:
- CBIC in consultation with DIC should immediately issue the clarification on para 3.2 of Circular 33/2016-Cus
- Remove the Zone as an intermediary and allow direct file movement from auditors to DIC;
- Prescribe a uniform CA certificate format.
- Streamline application forms to eliminate repetition.
- Keep DIGIT software updated and allow DIC to directly seek clarifications.
- Apply SCN disqualification criteria only for serious offences as originally intended.
Without such changes, AEO certification risks becoming a prolonged, procedural hurdle rather than a facilitation tool.
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