Authorized Economic Operator (AEO) Programme under Customs Act, 1962

1. Background:

1.1 Prior to adoption of the SAFE Framework by WCO in 2005, Customs administration all over the world including India, were already implementing various forms of Customs compliance programmes which focused on traditional areas of Customs requirements, and which can also be considered as trade facilitation programmes, based on the Revised Kyoto Convention’s “Authorised Persons” provisions. In India this programme was known as Accredited Client Programme (ACP). (Notification no. 42/2005-Cus Dated 24.11.2005) which provided facilitation to clients subject to their fulfillment of the prescribed eligibility criteria. As of March 2015, 168 out of 180 WCO members have signed letters of intent committing to implement the SAFE Framework. In India the AEO programme was launched in 2011 on Pilot basis vide circular no. 37/2011-Cus dated 23.08.2011 and rolled out in full fledged manner vide circular no. 28/2012-Cus dated 16.11.2012. In the light of these international developments, as well as in view of the focus of the Government of India on “Ease Of Doing Business”, Central Board Of Indirect Taxes and Customs has developed a comprehensive unified trade facilitation programme by incorporating the existing ACP scheme and ongoing AEO Programme into a revised AEO Programme vide circular no. 33/2016-Customs dated 22.07.2016 providing additional facilities to the legitimate trade who have demonstrated strong internal control system and willingness to comply with the laws administered by the Central Board of Indirect Taxes and Customs.

1.2 The objective of the revised AEO programme shall continue to remain same as earlier, that is, to provide businesses with an internationally recognized quality mark which will indicate their secure role in the international supply chain and that their customs procedures are efficient and compliant. An entity with an AEO status can, therefore, be considered a ‘secure’ trader and a reliable trading partner.

1.3 In 2005 the World Customs Organisation (WCO) adopted the SAFE Framework of Standards to secure and facilitate global trade, which later included the concept of an Authorized Economic Operator (AEO) whereby a party engaged in the international movement of goods is approved by Customs as compliant with the supply chain security standards, and given benefits, such as simplified Customs procedures and reduced Customs intervention. The AEO concept is being increasingly adopted by various Customs administrations with the objective of securing the supply chain with resultant benefits for the trading community. Consistent with the “SAFE Framework” developed by the WCO, the Indian Customs administration has developed an AEO Programme that encompasses various players in the international supply chain such as importers, exporters, warehouse owners, Custom House Agents, freight forwarders and custodians / terminal operators.

1.4 As aforestated, the AEO Programme seeks to secure the global supply chain in partnership with business entities that are fully legally compliant and provide with the Customs the confidence to validate their security features. Therefore, it is imperative that participating entities ensure they fulfill this fundamental requirement.

1.5 Customs organizations all over the world are tasked with the twin challenges of securing the borders from unlawful trade and at the same time facilitating the legitimate trade. Thus in light of the said objectives the AEO program was given strength vide Circular No. 33/2016-Customs dated

22.7.2016(herein after referred to as “said Circular’), Circular No. 03/2018 Customs dated 17.01.2018, 26/2018 Customs dated 10.08.2018, 51/2018-Customs dated 07.12.2018, and 54/2020-Customs dated 15.12.2020. This unique international instrument has ushered in modern supply chain security standards with the help of a closer partnership between Customs and business in the form of Authorized Economic Operator (AEO) programme, which constitutes one of the three pillars on which SAFE Framework sets. The AEO programme seeks to provide tangible benefits in the form of faster Customs clearances and simplified Customs procedures to those business entities who offer a high degree of security guarantees in respect of their role in the supply chain. The SAFE Framework sets forth the criteria by which businesses in the supply chain can obtain authorized status as a secure partner. Such criteria address issues such as threat assessment, a security plan adapted to the assessed threats, procedural measures to prevent illegitimate goods entering the supply chain, physical security of buildings and premises used as loading or warehousing sites, and security of cargo, means of transport, personnel and information system.

2 Three tier AEO programme for importers and exporters (AEO-T1, AEO-T2, and AEO-T3):

2.1 On the strength of Circular No. 33/2016-Customs dated 22.7.2016, the earlier existing ACP and AEO programmes were merged into the new AEO programme. For the economic operators other than importers and the exporters, the new programme offers only one tier of certification (i.e. AEO-LO) whereas for the importers and the exporters, there are three tiers of certification (i.e. AEO-T1, AEO-T2 and AEO-T3). Accordingly, henceforth the AEO Programme Manager may, following an application by an economic operator, issue the following Authorized Economic Operator Certificates (hereinafter referred to as AEO certificates) to which the applicant may be eligible as per the eligibility conditions and criteria laid down under paragraph 3 of the said circular:

2.2 AEO-T1 Certificate This certificate may be granted only to an importer or to an exporter. For the purpose of this certificate,

(i) The Importer/Exporter should fulfill the criteria mentioned in Circular No. 33/2016-Customs dated 22.7.2016 as amended, and Circular No. 26/2018-Cus., dated 10.08.2018.

(ii) All other requirements as stipulated in the said circular shall be considered to have been met if the information and documents submitted by the applicant prove the claims of the applicant to the satisfaction of the Zonal AEO Programme Manager.

Further, keeping in line with India’s Prime Minister’s vision of implementing ‘Digital India’ and ensuring ‘Ease of Doing Business,’ the first step towards digitization of the Indian AEO Programme was taken with the launching of an AEO Web Application <aeoindia.gov.in> on 30.11.2018. With the launch of the online portal and subsequent issuance of Circular 51/2018-Customs dated 07.12.2018, the entire process of AEO-T1 certification was digitized to allow the application filing, processing & digital signed delivery of AEO certification over an online platform. This digitization has provided wholesome support to the applicants by circumventing physical documentation requirements and submitting their application with the click of a button to ensure the highest degree of ease in doing business for the applicant. The processing of AEO T1 via the digital mode is faster as it’s completely online. At the same time, it also offers the benefit of tracking the status of application for the applicant and ease of supervision for the customs officials.

2.3 AEO-T2 Certificate This certificate may be granted only to an importer or to an exporter. For the purpose of this certificate,

(i) The economic operator should fulfill the criteria mentioned at para 3.1 of the said circular as amended; and

(ii) all other requirements as stipulated in paragraphs 3.2, 3.3, 3.4 and 3.5 of the said circular shall be considered to have been met if the claims made in this regard in information and documents submitted by the applicant have been physically verified by the AEO Programme Team by visiting the concerned places/premises of the applicant, on the dates decided by mutual consent by the team and the applicant, and found to be true to the satisfaction of the AEO Programme Manager.

2.4 AEO-T1 & AEO-T2 Certificate (for MSMEs)- Vide the Circular 54/2020-Customs dated 15.12.2020 customs has ensured procedural simplification for AEO accreditation of the MSMEs, ensuring increased facilitation through rationalized compliance requirements (MSME Annexure 1 & 2) and minimum but effective security requirements (MSME Annexure 3). These annexures have been designed to fulfill the aspirations of a simpler application procedure with reduced documentation requirements for MSMEs’ AEO accreditation.

2.4.1 This endeavour of CBIC is expected to aid MSMEs by way of the reduced burden of compliance to become an accredited AEO entity and avail benefits of reduced financial security/guarantee. This procedural simplification is expected to bring more MSMEs under the Authorised Economic Operator (AEO) Programme’s fold. Their increased share amongst accredited AEO entities is poised to contribute to the Aatma Nirbhar Bharat Abhiyan and ensure supply chain security.

2.5 AEO-T3 Certificate – This certificate may be granted only to an importer or to an exporter. For the purpose of this certificate,

(i) The economic operator must have continuously enjoyed the status of AEO-T2 for at-least a period of two years preceding the date of application for grant of AEO-T3 status; or

(ii) The economic operator must be an AEO-T2 certificate holder, and its other business partners namely importers or exporters, Logistics service providers, Custodians/Terminal operators, Customs Brokers and Warehouse operators are holders of AEO-T2 or AEO-LO certificate or any other equivalent AEO certificate granted by a foreign Customs.

3 Single Tier AEO Programme for Logistics Operators, i.e., Custodians or Terminal Operators, Customs Brokers and Warehouse Operators.

3.1 AEO-LO Certificate This certificate may be granted to categories of economic operators other than importers and exporters, namely Logistics Providers, Custodians or Terminal Operators, Customs Brokers and Warehouse Operators. For the purpose of this certificate,

(i) The economic operator should fulfill the criteria mentioned at para 3.1 of the said circular as amended; and

(ii) all other requirements as stipulated in paragraphs 3.2, 3.3, 3.4 and 3.5 of the said circular shall be considered to have been met if the claims made in this regard in information and documents submitted by the applicant have been physically verified by the AEO Programme Team by visiting the concerned places/premises of the applicant, on the dates decided by mutual consent by the team and the applicant, and found to be true to the satisfaction of the AEO Programme Manager.

4. Benefits of an AEO Certificate: A business authorized by the Customs as an AEO can enjoy benefits flowing from being a more compliant and secure company as well as favourable consideration in any Customs proceedings coupled with better relations with Customs. AEO status will also ensure a low-risk score is incorporated into Customs, Risk Management System” (RMS) and used to determine the frequency of Customs physical and documentary checks. The benefits may also include simplified Customs procedure, declarations, etc. besides faster Customs clearance of consignments of/for AEO status holders. The scope of the benefits to the AEOs based on their categories would be as mentioned below:

4.1 Benefits for AEO-T1:

i. They shall be accorded high level of facilitation in imports and export of their consignments, thereby ensuring shorter cargo release time.

ii. Facility of Direct Port Delivery (DPD) of their import Containers and/ or Direct

Port Entry (DPE) of their Export Containers would be available to them (depending on the

volume of their Import/ Export trade in terms of number of containers).

iii. ID cards to be granted to authorized personnel for hassle free entry to Custom Houses, CFSs and ICDs.

iv. Wherever feasible, they will get separate space earmarked in Custodian’s premises.

v. In case they are required to furnish a Bank Guarantee, the quantum of the Bank Guarantee would be 50% of that required to be furnished by an importer/ exporter who is not an AEO Certificate Holder. However, this exemption from Bank guarantee would not be applicable in cases where the Competent Authority orders furnishing of Bank Guarantee for provisional release of seized goods.

vi. Investigations, if any, in respect of GST, Customs, erstwhile Central Excise and Service Tax cases would be completed, as far as possible, in six to nine months.

vii. Dispute resolution at the level of Adjudicating Authorities in respect of GST, Customs, erstwhile Central Excise and Service Tax cases would be done preferably and as far as possible within six months.

viii. They will not be subjected to regular transactional PCA, instead of that onsite PCA will be conducted once in three years only.

ix. They will get an e-mail regarding arrival/ departure of the vessel carrying their consignments.

x. 24/7 clearances on request at all sea ports and airports No Merchant Overtime Fee (MOT) charges need to be paid.

xi. Where there is no SION/valid Ad-hoc Norms for an export product and where SION has been notified but exporter intends to use additional inputs in the manufacturing process, eligible exporter, who is an AEO, can apply for an Advance Authorization under this scheme on self-declaration and self-ratification basis” (added by Circular No. 3/2018- -Cus., dated 17.01.2018).

xii. Will be exempted from the requirements of drawal of samples for the purpose of grant of drawback, except in case of any specific information or intelligence(added by Circular No. 18/2017-Customs dated 29.05.2017).

4.2 Benefits for AEO-T2: The following benefits would be provided over and above the benefits offered in T1:

i. They shall be accorded higher level of facilitation (as compared to AEO-T1 in imports and export of their consignments.

ii. For Importers/Exporters not opting for DPD/DPE, seal verification/scrutiny of documents by Custom officers would be waived. Consignments would be given out of charge or let export order, as the case may be, without any scrutiny by the officers.

iii. The containers selected for scanning will be scanned on priority, by giving front line of treatment.

iv. Facility of deferred payment of duty will be provided, from a date to be notified

v. Faster disbursal of drawback amount within 72 hours of EGM submission, from a date to be notified

vi. The BEs/SBs selected for Assessment and/or Examination will be processed on priority by the Customs officers.

vii. Facility of self-sealing of export goods would be allowed without the requirement to seek case to case base permission from the authorities

viii. Faster completion of Special Branch (‘SVB’) proceedings in case of related party imports and monitoring of such cases for time bound disposal in terms of new guidelines

ix. In case they are required to furnish a Bank Guarantee, the quantum of the Bank Guarantee would be 25% of that required to be furnished by an importer/ exporter who is not an AEO Certificate Holder. However, this exemption from Bank guarantee would not be applicable in cases where the Competent Authority orders furnishing of Bank Guarantee for provisional release of seized goods.

x. They will be given facility to paste MRP stickers in their premises.

xi. They will not be subjected to regular transactional PCA instead of that onsite PCA will be conducted once in three years only.

xii. They will be given access to their consolidated import/export data through ICEGATE from a date that would be communicated separately.

xiii. They will be provided the facility of submitting paperless declarations with no supporting documents in physical form.

xiv. All Custom Houses will appoint a “Client Relationship Manger” (CRM) at the level of Deputy / Assistant Commissioner as a single point of interaction with them. The CRM would act as voice of the AEO within Customs in relation to legitimate concerns and issues of AEO and would assist in getting procedural and operational issues resolved by coordinating with different sections within Customs as well as other stakeholders.

xv. The refund/Rebate of Customs/Central Excise duty and Service Tax would be granted within 45 days of the submission of complete documents. xvi. They will get trade facilitation by a foreign Customs administration with whom India enters into a Mutual Recognition Agreement/Arrangement.

4.3 Additional Benefit for AEO T1 & AEO T2 (for MSME):

i. The benefit of relaxation in furnishing of Bank Guarantee for AEOs has been further relaxed to 25% from 50% and 10% from 25% of that required to be furnished by an importer/exporter who is not an AEO certificate holder, for MSME AEO T1 and MSME AEO T2 entities respectively.

4.4 Benefits for AEO-T3:

The following benefits would be provided over and above the benefits offered in T2:

i. They shall be accorded highest level of facilitation, as compared to AEO-T2, in imports and export of their consignments.

ii. Their containers will not be selected for scanning except on the basis of specific intelligence. Further when any container is selected for scanning, top most priority will be given for scanning.

iii. The assessing/examining custom officer will rely on the self-certified copies of documents submitted by them without insisting upon original documents. iv. They would not be required to furnish any Bank Guarantee. However, this exemption from Bank guarantee would not be applicable in cases where the Competent Authority orders furnishing of Bank Guarantee for provisional release of seized goods.

iv. An approach based on Risk based interventions, in case of requirements originating from the Acts administered by other Government Agencies/Departments, will be adopted for providing better facilitation in imports and export of their consignments.

v. On request, they will be provided on-site inspection /examination.

vi. The refund/Rebate of Customs/Central Excise duty and Service Tax would be granted within 30 days of the submission of complete documents.

The comparable benefits available to AEO-T1, AEO-T2 (including MSMEs) and AEO-T3 are summarized in Table 34.1 below:

Table 34.1: Comparable benefits available to AEO-T1, AEO-T2 (including MSMEs) and AEO-

S. No.	Facility to be provided	Benefits for AEO-T1	Benefits for AEO-T2	Benefits for AEO-T3
1	Accorded facilitation in import and export Consignments ensuring shorter cargo release time	High	Higher	Highest
2	Facility of DPD/ DPE	Available depending on volume	Available	Available
3	ID cards for hassle free entry to Custom Houses, CFSs and ICDs	Yes	Yes	Yes
4	Separate space earmarked in Custodians premises Custodians premises	Yes	Yes	Yes
5	BG required to be furnished	50% (25% for MSME)	25% (10% for MSME)	NIL
6	Investigations    to be completed	In 6-9 months	In 6-9 months	In months	6-9
7	Dispute resolution at AA level	Within 6 months	Within 6 months	Within months	6
9	Email intimating vessel arrival for their consignment	Yes	Yes	Yes
10	24X7 clearance at all sea ports and airports.	Yes	Yes	Yes
11	No merchant  overtime fees need to be paid	Yes	Yes	Yes
12	Exemption from the requirements of drawal of samples for the purpose of grant of drawback	Yes	Yes	Yes
13	Waiver  of seal verification / scrutiny of documents	—	For Non DPD / DPE option availed	Yes
14	OOC/ LEO without scrutiny by customs officer	—	Yes	Yes
15	Scanning on priority	—	Yes	Container will not be scanned except  on specific intelligence
16	Facility of deferred payment of duty	—	Yes	Yes
17	Faster   disbursal of drawback	—	Within 72 hours of EGM	Within 72 hours of EGM
18	Priority given to B/E or  S/B  selected for assessment/ examination	—	Yes	Yes
19	Facility of self sealing of consignments for export	—	Permitted on case to a case basis	Permitted
20	Faster completion of SVBProceedings	—	Time      bound manner	Time bound manner
21	Facility to paste MRP stickers in premises	—	Allowed	Allowed
22	Access to consolidated import export data on ICEGATE	—	Available	Available
23	Facility   of paperless declaration	—	Available	Available
24	Custom House Assistance	—	Through  Client Relationship Manager (CRM)	Through Client Relationship Manager (CRM)
25	Trade facilitation by foreign customs administration (MRA)	—	Yes	Yes
26	Assessing / examining officer will rely on self certified documents	—	—	Yes
27	Only Risk based intervention in case of other govt. agencies / departments	—	—	Yes
28	Onsiteinspection / examination	—	—	On request available

4. 5 Benefits for AEO-LO:

The benefits available to different entities eligible to be qualified as AEO-LO are summarized in Table 34.2 below:

Table 34.2: Benefits available to different entities eligible to be qualified as AEO-LO

Sr. No No.	Entity	Facilities to be provided
1	Logistic Service Providers	(a) Waiver of bank Guarantee in case of trans-shipment of goods under Goods imported (Condition of Trans-shipment) Regulations, 1995. (b) Facility of Execution of running bond. (c) Exemption from permission on case to case basis in case of transit of goods. In case of international transshipped cargo (Foreign to Foreign), for the pre-sorted containers wherein Cargo does not require segregation, ramp to ramp or tail to tail transfer of cargo can be effected without Customs escorts.
2	Custodians or Terminal Operators	(a) Waiver of bank Guarantee under Handling of cargo in Customs Area Regulations 2009. (b)Extension of approval for custodians under regulation 10(2) of the ‘Handling of cargo in Customs Area Regulation 2009 ‘for period of 10 years.
3	Customs Brokers	(a) Waiver of Bank Guarantee to be furnished under regulation 8 of the CBLR, 2013. (b)  Extended validity (till validity of AEO status) of licenses granted under regulation 9 of the CBLR 2018. System Manager to incorporate date of validity of AEO from time to time in the System Directory (c) Waiver from fee for renewal of license under sub regulation (2) of regulation 11 of CBLR,2013.
4	Warehouse Operators	(a) Faster approval for new warehouses within 7 days of submission of complete documents (b) Waiver of antecedent verification envisaged for grant of license for warehouse under circular 26/2016 (c) Waiver of solvency certificate requirement under circular 24/2016 (d) Waiver of security for obtaining extension in warehousing period under circular 21/2016 (e) Waiver of security required for warehousing of sensitive goods under circular 21/2016

4.6 With a view to promote an overall voluntary compliance framework, the selection of AEO’S for on-site post clearance audit (OSPCA) in respect of AEO-T1, AEO-T2 and AEO-T3 shall be based on risk assessment. Better and higher compliance level demonstrated by the AEO shall be taken into account for determining the frequency of audit. It is also clarified that AEOs undergoing OSPCA shall not be subjected to routine transactional PCA. Detailed guidelines on risk based OSPCA will be issued subsequently.

5. Application for an AEO Certificate:

The applicant for grant of AEO-T1, AEO-T2, AEO-T3 and AEO-LO should be made in duly filled annexures as mentioned in Circular No. 33/2016-Customs dated 22.7.2016 as amended. However, an applicant is required to fill-in and submit only those annexures which may be applicable to it. The application should be sent directly to jurisdictional Customs Chief Commissioner or to the AEO Programme Manager, Directorate of International Customs, 10th Floor, Tower II, Jeevan Bharti Building, Connaught Place, New Delhi 110001. For AEO T1, the application is to be filed online on www.aeoindia.gov.in.

[Refer Circular No. 51/2018- Customs dated 07.12.2018]

6. Eligibility conditions and Criteria for granting the AEO Certificate: The following eligibility criteria is relevant for the grant of AEO status:

6.1 Who can apply for AEO Certificate is prescribed in Circular No. 33/2016-Customs dated 22-7-2016 as amended. The important eligibility criteria are briefed herein as follows:

(i) Anyone involved in the international supply chain that undertakes Customs related activity in India can apply for AEO status. These may include exporters, importers, logistic providers (e.g. carriers, airlines, freight forwarders, etc.), Custodians or Terminal Operators, Customs House Agents and Warehouse Owners. Others who may qualify include port operators, authorized couriers, stevedores.

(ii) Businesses that are not involved in Customs related work / activities will not be entitled to apply.

(iii) Application for AEO status will only cover the legal entity of the applicant and will not automatically apply to a group of companies.

(iv) In order to apply for AEO status the applicant must be established in India.

(v) The applicant should have business activities for at least three financial years preceding the date of application. However, in exceptional cases, on the basis of physical verification of internal controls of a newly established business entity, the AEO Programme Manager may consider it for certification.

The requirement for the applicant to have “business activities for at least three financial years preceding the date of application” has been relaxed to two financial years for an MSME applicant.

(vi) Keeping the small and medium scale enterprises in mind it has been decided the AEO programme is made open to all Importers/Exporters whose threshold of import or export declarations is 25 documents i.e. either Bills of Entry or Shipping Bills during the last financial year. The other economic operators should have handled at least 25 documents i.e. Bills of Entry or Shipping bills during the last financial year.

The eligibility requirement of handling customs documents during the last financial year has been relaxed to 10 documents from earlier 25 for MSMEs, subject to handling at least 5 documents in each half-year period of the preceding financial year.

(vii) The AEO Programme Manager shall take into account such factors as the size of the MSMEs, the legal status (e.g. proprietorship, partnership etc), the structure, the key business partners and also the specific economic activity of the economic operator while applying these eligibility conditions and criteria.

The qualifying period for legal and financial compliance has been reduced from ‘the last three financial year’ to ‘the last two financial years’ for MSMEs.

(viii) Appropriate record of compliance of Customs and other relevant laws; There should be no case wherein prosecution has been launched or is being contemplated against the applicant or its senior management.

(ix) An applicant will also need to demonstrate that he has (i). procedures in place to identify and disclose any irregularities or errors to the Customs, authorities or, where appropriate, other regulatory bodies. (ii). taken appropriate remedial action when irregularities or errors are identified.

(x) Satisfactory system of managing commercial and, where appropriate, transport records;

(xi) An applicant must be financially solvent during the three financial years preceding the date of application.

(xii) An applicant must have in place appropriate internal control and measures to ensure, Premises security, cargo security, conveyance security, personnel security, security and safety standards for applicants’ business, and his supply chain and procedural security.

6.2 The various compliance required to be fulfilled by applicant and the manner of application and supportive documents to be submitted by the applicant are summarized under various headings under Section 3 in the Circular No. 33/2016-Customs dated 22-7-2016 as amended

For AEO T1 and T2 accreditation for MSMEs, the present annexures i.e., Annexure A, B, C, D, E.1-E.4 have been supplanted with two annexures viz. MSME Annexure 1 and 2 to reduce the compliance burden on MSMEs. For MSME entities applying for AEO-T2 certification, the present annexures i.e., Annexure E.5.1-E.5.7 for physical verification have been rationalized to a single annexure viz. MSME Annexure 3.

7. Procedure for issuing AEO Certificates:

7.1 An applicant for grant of AEO status should submit the following in the manner as prescribed in the Circular No. 33/2016-Customs dated 22.7.2016 as amended, 26/2018-Cus., dated 10.08.2018, 51/2018-Customs dated 07.12.2018 & Circular No. 54/2020-Customs dated 15.12.2020:

(i) Application for Authorized Economic Operator (AEO) Status

(ii) Appropriate Safety and Security plan as required and prescribed (wherever applicable).

(iii) Process map

(iv) Site plan

(v) Self-Assessment Form

(vi) Legal Compliance

(vii) Management of Appropriate Commercial and Transport Record Compliance

(viii) Financial Solvency Compliance

(ix) Security compliance and Business Partner Details (for AEO T2, T3, & LO).

7.2 The application should be sent directly to jurisdictional Customs Chief Commissioner or to the AEO Programme Manager, Directorate of International Customs, 10th Floor, Tower II, Jeevan Bharti Building, Connaught Place, New Delhi 110001.

7.3 From April 2019 onwards, the AEO-T1 application has to be compulsorily filed online at the url: <www.aeoindia.gov.in>.

7.4 Section 4 of Circular No. 33/2016-Customs dated 22.7.2016 dealt with the Procedure for issuing AEO certificates.

8. Acknowledgement of application:

Each application will be acknowledged (wherever applicable, shall be done digitally) and recorded in an AEO Programme database.

8.1 Return of application:

8.1.1 If application is incomplete or deficient, the applicant will be suitably informed within 30 days of the receipt.

8.1.2 AEO Programme Manager will not process the following applications until the deficiencies, as indicated, are rectified:

(a) Which is incomplete – This may be resubmitted with the complete information.

(b) Where the application has not been made by a legal person – This can only be resubmitted by the concerned legal entity.

(c) Where no responsible person is nominated – This can only be resubmitted when the applicant nominates a responsible person who will be the point of contact for the AEO Programme.

(d) Where the applicant is subject to bankruptcy proceedings at the time the application is made: This may be resubmitted when the applicant becomes solvent.

(e) Where a previously granted AEO status has been revoked -This may not be resubmitted until the period as prescribed in paragraph 5.7.3 of the said Circular No. 33/2016-Customs dated 22.7.2016 has elapsed after the date of revocation. Para 5.7.3 states that, “In case the AEO status is revoked, the AEO-T1 and AEO-T2 status holder will not be entitled to reapply for the AEO certificate for a period of one year from the date of revocation.”

9. Rejection of application:

9.1 Applications will be rejected in cases where the applicant is not eligible for grant of AEO status, or has been convicted of a serious criminal offence linked to the economic activity of his business in the past, or in cases where the deficiency noticed in the application cannot be remedied. The information regarding the rejection of such application will be given to the applicant within 30 days of the receipt of the application.

10. Processing of application:

10.1 On receipt of the complete application and after ensuring that the applicant is eligible to apply, the information and documents submitted by the applicant shall be scrutinized to assess whether or not the eligibility conditions and criteria for granting the AEO certificate as mentioned under the Section 3 of the said circular are met by the applicant.

10.2 If necessary, further information and/or documents in support of the claim of the applicant may be called for by the AEO Programme Manager or by an officer on his behalf. Such request shall be sent in writing.

10.3 The applicant shall submit such information and/or documents within a reasonable time.

10.4 In case of an application for grant of AEO-T1 status, once the eligibility conditions and criteria for granting the AEO certificate as mentioned under the Section 3 of this circular are found to have been met by the applicant to the satisfaction of the Zonal AEO Programme Manager, the applicant shall be issued the AEO-T1 certificate (wherever applicable, shall be done digitally) within 30 days of submission of the information and/or documents.

The time limit for processing of MSME AEO T1 & AEO T2 application has been reduced to fifteen working days and three months respectively, after the submission of complete documents for priority processing by customs zones.

10.5 In case of an application for grant of AEO-T2 or AEO-LO, the information and/or documents submitted by the applicant shall be scrutinized, and if they are found eligible to the satisfaction of the AEO Programme Manager, the applicant shall be duly intimated within 30 days of submission of the information and/or documents. Thereafter, the successful application will be assigned to a specific AEO Programme Team within 15 days to carry out physical verification of the information and documents. The date(s) for physical verification would be decided by the team in consultation with the applicant.

10.6 The AEO Programme Team will, within 90 days, visit the business premises for verification of the information and documents provided. Such visit shall be made on a convenient date after consulting the applicant.

10.7 If within 45 days of the date of intimation issued in terms of paragraph 4.4.5 of the said circular, the applicant has not been contacted by the AEO Programme Team, then the applicant should contact the Zonal AEO Programme Manager/ AEO Programme Manager immediately.

10.8 During the course of such verification, the applicant for AEO-T2 or AEO-LO status should be prepared to answer questions or provide additional information on all aspect of the application to the visiting AEO Programme Team.

10.9 Examination of the criteria laid down under Section 3 of the said circular shall be carried out for all the premises which are relevant to the customs related activities of the applicant for AEO-T2 or AEO LO status. The examination as well as its results shall be documented by the AEO Programme team.

10.10 In case several premises of the applicant are run in a similar way by standard systems of record keeping and security etc. there will be no need for the AEO Programme Team to visit all of them. However, if the business of the applicant covers a range of activities or different premises have different method of operating, then it may be necessary for more visits to be made.

10.11 The duration of visit/verification would depend on the size of business, number of premises, how they operate etc. The AEO Programme Team will give the applicant for AEO-T2 or AEO-LO status an estimate of time required, though this may have to be amended once the verification has commenced. The date(s) for physical verification would be decided by the team in consultation with the applicant.

10.12 Where appropriate, in addition to the other requirements detailed earlier, the AEO Programme Team may cover the following:

(i) Information on Customs matters.

(ii) Remedial action taken on previous Customs errors, if any.

(iii) Accounting and logistic systems.

(iv) Internal controls and procedures.

(v) Flow of cargo.

(vi) Use of Customs House Agents/Customs Broker

(vii) Security of Computers/IT and documents.

(viii) Financial solvency.

(ix) Safety and security assessment premises, cargo, personnel etc.

(x) Logistic processes.

(xi) Storage of goods.

10.13 During the course of physical visit/verification, the person who is nominated in the application form as point of contact must ordinarily be available unless unforeseeable situation arises. In addition, individuals responsible for specific business activities such as transport, recordkeeping and security should also be available.

10.14 On completion of verification, the AEO Programme Team will prepare their report and make a recommendation to the AEO Programme Manager within 60 days of completion of visits/verification. The contents of report and recommendation can be seen by applicant who will get the opportunity to sign the same, but this will not be a mandatory requirement.

10.15 Within 30 days of such recommendation by the AEO Programme Team, the applicant will be suitably informed, including issue of the appropriate AEO certificate for AEOT2 or AEO-LO status, by the AEO Programme Manager.

The time limit for processing of MSME AEO T2 application has been reduced to three months (presently six months) after the submission of complete documents for priority processing by customs zones.

10.16 Where the application for grant of AEO-T2 or AEO-LO status is not accepted by the AEO Programme Manager after the verification by the AEO Programme Team, the applicant will be advised of the criteria that have not been met and give the applicant time to adapt procedures to remedy the deficiency. If applicant is unable to make the required changes within the specified time limits, the AEO Programme Manager will issue a decision to reject applicant’s AEO application, explaining the reasons for rejection.

10.17 In exceptional cases, the physical verification may be stopped by consensus between the applicant for grant of AEO-T2 or AEO-LO status and the AEO Programme Manager in order for the applicant to provide additional information or to permit minor problems to be addressed. The period of stoppage will normally not be longer than six months and applicant will be informed in writing of the date when the AEO verification will recommence and the revised date by which applicant can expect a decision on his application.

10.18 In case an application for grant of AEO-T3 status is submitted by a holder of AEO-T2 status, who has been continuously enjoying the AEO-T2 status for a period of two years or more, the applicant shall be issued the AEO-T3 certificate within 30 days of submission of the application. However, in case of any significant changes in the business or the processes since the previous physical verification by an AEO Programme Team, the applicant may be subjected to physical verification as may be deemed necessary by the AEO Programme Manager by following the procedures as mentioned in the paragraph 4.4.5, 4.4.6 and 4.4.7 of the said circular as amended.

10.19 In case an application for grant of AEO-T3 status is submitted by a holder of AEO-T2 status, who has not been continuously enjoying the AEO-T2 status for a period of two years or more, but who satisfies the eligibility condition mentioned at paragraph 1.2.3 (ii) of the said circular as amended, the application will be assigned to a specific AEO Programme Team within 15 days to carry out physical verification of the information and documents submitted in Annexure-F only. The date(s) for physical verification would be decided by the team in consultation with the applicant. Thereafter, the procedures as mentioned in the paragraph 4.4.5, 4.4.6 and 4.4.7 of the said circular as amended above shall be followed. However, in case of any significant changes in the business or the processes since the previous physical verification by an AEO Programme Team, the applicant may be subjected to physical verification as may be deemed necessary by the AEO Programme Manager by following the procedures as mentioned in the paragraph 4.4.5, 4.4.6 and 4.4.7.

11 Web based filing, processing and digitized certification of AEO-T1 applications:

11.1 For AEO T1 application, the AEO accreditation process has been entirely digitized by way of the web-based application www.aeoindia.gov.in. The applicant can file its AEO application online either with its jurisdictional customs zone or with DIC (by selecting DIC as zone on the web application) This web-application requires registration of the applicant on its home page. Once the registration is completed, a confirmation communication is sent to the applicant. The registration is then verified by a customs’ official. Thereafter, the registered user applicant can proceed to file the application through its login credentials and follow the stepwise procedure for filing online AEO T1 application. At every stage of the process such as registration, submission of annexures, approval/rejection by zonal AEO Program Manager and issuance of digital certificate issuance, the applicant will receive SMS/e-mail for ease of information and transparency. The application for AEO T1 is processed online by customs officials and the digitally signed AEO certificate is relayed online to the certified entity.

11.2 For departmental officers, the access to this web application is through “Customs Official” tab with role specific login ID and password, which would be disseminated by the nodal AEO officer of the respective customs zone. There are 3 levels for online processing, i.e. Superintendent, AC/DC/JC/ADC and zonal Programme Manager (Commissioner/Pr. Commissioner level officer). Once the recommendation of the zonal AEO programme Manager is received, the DIC issues digitally signed AEO certificate over mail and subsequently issues a hard copy of the AEO certificate to the applicant.

12 Certification:

12.1 If AEO status is granted, the AEO Programme Manager shall send the Certificate of AEO Status to the applicant in hard copy along with an electronic copy (for AEO T1 only). The Certificate shall bear the AEO logo’ that may be used where it is appropriate to do so for the business, for example, company stationary, signage on vehicles or other publicity materials. The copyright for the logo is owned by the AEO Programme Manager on behalf of the Indian Customs Administration.

12.2 The AEO status will be activated within a week from the date of issue. Following this period, the applicant should enter the AEO certificate number on all Customs documentation to indicate their AEO Status.

12.3 It is highly recommended that the applicant should keep the Certificate of AEO status at a safe place and not release the AEO Certificate number to anyone unless required to do so for business purposes. Although the AEO status can be advertised by the applicant, the AEO Certificate number should not be part of their advertisement.

13. Post-Certification Provisions

13.1 The validity of AEO certificate shall be three years for AEO-T1, three years for AEOT2, five years for AEO-T3 and five years for AEO-LO.

13.2 Renewal of AEO certificate

The AEOs, if they so desire to continue their AEO status and avail the benefits, must submit their application as stipulated under Section 2 of the said circular as amended, before lapse of their validity as per the following Table 34.3:-

Table 34.3: Time limit for submission of application for renewal before lapse of validity of

AEO status	Time limit for submission of application for renewal before lapse of validity
AEO-T1	30 days
AEO-T2	60 days
AEO-T3	90 days
AEO-LO	90 days

13.3 While submitting the application for renewal, the applicant must clearly highlight the changes from the last application.

13.4 AEO Programme Manager will consider the renewal applications by following the procedure adopted while granting the fresh AEO status.

14. Maintenance of AEO Status:

14.1 After obtaining AEO status, the AEO status holder should maintain their eligibility by adhering to the appropriate standards.

14.2 The holder of a Certificate of AEO Status is required to notify any significant change in business and processes which may affect the AEO status to the AEO Programme Team. These changes may include the following:

(i) Change to the legal entity.

(ii) Change of business name and/or address.

(iii) Change in the nature of business i.e. manufacturer / exporter etc.

(iv) Changes to accounting and computer systems.

(v) Changes to the senior personnel responsible for Customs matters.

(vi) Addition or deletion of locations or branches involved in international supply chain.

14.3 The AEO status holder should notify the AEO Programme Team as soon as the change is known or, at least within 14 days of the change taking place.

14.4 If the legal entity changes, the AEO status holder needs to reapply for AEO in the name of new legal entity.

14.5 If the AEO status holder makes Customs related errors, they must be reported to the local “Client Relationship Manager” (CRM) as well as the AEO Programme Team. Errors that are voluntarily disclosed will not impact the AEO status provided that the AEO status holder has:

(i) Examined the reasons for the errors.

(ii) Taken appropriate remedial action to prevent recurrence.

15. Review of AEO Status:

15.1 The AEO Programme Team will review AEO status periodically to ensure continued adherence to the conditions and standards of grant of Certificate of AEO Status. Thus, it is recommended that the AEO status holder should continue to re-assess its compliance with the conditions of certification and act upon any identified problems as soon as they arise. The frequency of such review will be three years for AEO-T1 and AEO-T2, and five years in case of AEO-T3 and AEO-LO. As far as possible, the review and the onsite PCA, if applicable, will be conducted simultaneously.

16. Suspension or downgrading of AEO Status:

16.1 The AEO Programme Manager may suspend the Certificate of AEO Status in the following cases:

i. Where any non-compliance with the conditions or criteria for the Certificate of AEO Status has been detected; or

ii. In the case of a Custodian or Custom Broker or Warehouse Operator, where the basic license as a Custodian or Custom Broker or Warehouse Operator, as the case may be, has been suspended by the competent authority.

16.2 In the case of an AEO importer or an AEO exporter, if any show cause notice has been issued alleging infringement of Customs/GST/erstwhile Central Excise or Service Tax law, other than those covered under para 3.2.1 of the said circular as amended, AEO Programme Manager may downgrade the status of an AEO-T3 to AEO-T2 or AEO-T1, or downgrade the status of an AEO-T2 to AEO-T1, or suspend the status of the AEO, as deemed appropriate. The decision shall be taken after due diligence and on careful evaluation of the material evidence and arguments against the AEO of the case. The AEO Programme Manager may consult the jurisdictional Commissionerate before arriving at the final decision in this regard. The decision to downgrade the AEO status shall be purely an administrative decision.

17. Restoration of suspended/ downgraded AEO Status:

17.1 Where AEO status had been suspended on account of detection of any non-compliance with the conditions or criteria for the Certificate of AEO Status, and if the AEO holder takes the necessary remedial measures to the satisfaction of the AEO Programme Manager within 60 days of suspension, the AEO Programme Manager may restore the AEO status from a date to be notified by him.

17.2 Where AEO status had been suspended on account of suspension of the basic license as a Custodian or Custom Broker or Warehouse Operator or as the case may be, and subsequently such suspension of the basic license is revoked by the competent authority, the AEO Programme Manager may consider restoration of AEO status, and if deemed appropriate may restore the AEO status from a date to be notified by him.

17.3 Where AEO status had been suspended on account of issue of a show cause notice, and if the ratio of disputed duty demanded or drawback demanded or sought to be denied in SCNs issued under the Customs Act, 1962 during the last three years to the total duty paid and drawback claimed during the said period is not more than ten percent, the AEO Programme Manager may consider restoration of AEO status, and if deemed appropriate may restore the AEO status from a date to be notified by him.

17.4 In case an AEO status has been downgraded, it shall be open to the entity to apply again for higher status as and when the eligibility conditions and criterion are met by it. AEO Programme Manager will consider such applications by following the procedure adopted while granting the fresh AEO status.

18. Revocation of AEO Status:

18.1 In following circumstances, the Certificate of AEO Status will be revoked:

(i) Where the Certificate of AEO Status is already suspended and the AEO holder fails to take the remedial measure within 60 days to have the suspension withdrawn; or

(ii) Where there is a reasonable belief that an act has been perpetrated that is liable to lead to prosecution and /or is linked to an arrest of person under Customs Act, 1962 as mentioned in Para 3.2.2 of the said circular as amended; or

(iii) A show cause notice has been issued to them involving fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax has been collected from customers but not deposited to the Government as mentioned in Para 3.2.1 of the said circular as amended; or

(iv) Where the AEO status holder requests the authorization be revoked.

18.2 Prior to any decision to revoke authorization, the applicant will be notified. Revocation is applied from the day following the authorization holder being notified.

18.3 In case the AEO status is revoked, the AEO-T1 and AEO-T2 status holder will not be entitled to reapply for the AEO certificate for a period of one year from the date of revocation.

18.4 In case the AEO status is revoked, the AEO-T3 and AEO-LO status holder will not be entitled to reapply for the AEO certificate for a period of three years from the date of revocation.

19. Mutual Recognition

19.1 As part of Indian Customs’ efforts to enhance global supply chain security and facilitate the movement of legitimate goods, Indian Customs endeavours to sign Mutual Recognition Arrangements or Agreements (MRA) with its major trading partners.

19.2 Through MRAs, Indian Customs and its partner Customs administrations mutually recognize the security requirements, validation process and accredited entities of each other’s supply chain security programmes.

19.3 Under an MRA, the participating Customs administration recognizes certified companies (commonly known as Authorised Economic Operators, in short, AEOs) under each other’s supply chain security programme as secure entities. Goods imported from such companies can thus enjoy a higher level of facilitation at clearance domestically and overseas.

20. India’ MRA Partners

20.1 Indian Customs has signed four Mutual Recognition Agreements with the Customs administrations of South Korea, Hong Kong, Taiwan and USA. Joint Action Plan (JAP)/Joint Work Plan (JWP) has already been signed with USA, Uganda, UAE, Australia, South Africa and East African Community (EAC). The Joint Action Plan is a broad framework of timeline and actions that needs to be completed in a phased manner to conclude an MRA. Further, ‘letter of intent’ for signing of MRA has been relayed to India’s major trade partner countries and initial discussions with them are ongoing.

21. Modification in Benefits

21.1 Consequent to the mid-term review of Foreign Trade Policy (FTP) wherein certain additional benefits have been assigned to AEO Certified entities, some modifications were done in the existing CBEC’s Circular No. 33/2016-Customs dated 22.7.2016.2. Additionally, in order to maximize the reach of this programme, it was decided by the competent authority to decentralise the processing of AEO applications so as to meet the objective of trade facilitation and ease of doing business.

[Refer Circular No. 3/2018-customs dated 17/01/2018]

22. Extension of Deferred payment of Customs duty benefits to `Authorised Public Undertakings’

22.1 Notification No.78/2020-Customs (N.T.) dated19.08.2020 permitted ‘Authorised Public Undertakings’ (APU) to avail the facility of deferred payment of Customs import duty under proviso to sub-section (1) of section 47 of the Customs Act, 1962. This facility was made available to eligible APUs w.e.f. date of publication of Notification No.78/2020-Customs (N.T.) dated19.08.2020

[Refer Circular No. 37/2020-Customs dated 19/08/2020]

23. Special measures to facilitate MSME for AEO T1 & T2 accreditation:

23.1 The Board has decided to facilitate MSMEs by further relaxing the current accreditation process and reducing the compliance burden for their AEO accreditation. The procedural modifications/relaxations for AEO accreditation of MSMEs are as under:

(i) The eligibility requirement of handling a minimum of 25 documents during the last financial year has been relaxed to 10 documents, subject to handling at least 5 documents in each half- year period of the preceding financial year (Ref.: Para 3.1.7 of the Master Circular).

(ii) The requirement for the applicant to have “business activities for at least three financial years preceding the date of application” has been relaxed to two financial years. (Ref.: Para 3.1.6 of the Master Circular).

(iii) The qualifying period for legal and financial compliance has been reduced from ‘the last three financial years’ to ‘the last two financial years’. (Ref.: Paras 3.2 & 3.4 of the Master Circular).

(iv) For AEO TI and T2 accreditation, the present annexures i.e., Annexure A, B, C, D, E.1-E.4 have been supplanted with two annexures viz. MSME Annexure | and 2. Similar rationalized annexures | and 2 are presently being utilized for AEO TI accreditation only in accordance with the CBIC Circular No. 26/2018-Customs dated 10.08.2018.

(v) For AEO 72 certification, the present annexures i.e., Annexure E.5.1-E.5.7 for physical verification have been rationalized to a single annexure viz. MSME Annexure 3. The rationalization has been carried out to ensure that the security requirements for an MSME are objective and cover the minimum verifiable security criteria. (Ref.: Para 3.5 of the Master Circular).

(vi) The time limit for processing of MSME AEO T1 & AEO T2 application has been reduced to fifteen working days (presently one month) and three months (presently six months) respectively after the submission of complete documents for priority processing by customs zones.

(vii) The benefit of relaxation in furnishing of Bank Guarantee for AEOs has been further relaxed to 25% from 50% and 10% from 25% of that required to be furnished by an importer/exporter who is not an AEO certificate holder, for MSME AEO T1 and MSME AEO T2 entities respectively (Ref.: Para 3.5 of the Master Circular).

23.2 The aforestated relaxations shall apply only to an applicant who has a valid MSME certificate from the line-Ministry. Further, the approved MSME must ensure their continuous MSME status during the validity of its AEO certification, if granted.

[Refer Circular No.54/2020-Customs dated 15.12.2020]

Source – Custom Duty Manual 2023