Duty deferment Benefits of Authorized Economic Operator (AEO) programme

In this article author has tried to explain the duty deferment facility in Authorized Economic Operator (AEO) program. One of the biggest advantages for both importers and exporters is duty deferment, which lowers the immediate duty outflow and enhances working capital efficiency and cash flow management. While the AEO scheme also offers several additional benefits such as faster customs clearance, direct port entry and direct port delivery (DPD), quicker processing, reduced bank guarantee requirements, and enhanced client relationship management support, the primary focus of this discussion is on the duty deferment mechanism and its practical effect on international trade operations.

Strengthening Trade Facilitation through the AEO Programme (AEO Tier 2 and AEO Tier 3)

While the AEO programme encompasses a wide range of benefits, including expedited processing, accelerated cargo clearance, and direct port delivery or entry. This article, accords its special focus to one of its most consequential features, Deferred Duty Payment, which is conferred exclusively upon AEO Tier 2 and Tier 3 entities.

What is AEO?

The Authorised Economic Operator (AEO) is a programme established under the aegis of the World Customs Organization’s SAFE Framework of Standards, conceived to secure and facilitate global trade. Its primary objective is to strengthen international supply chain security while ensuring the smooth movement of legitimate goods. Encompassing diverse participants in the global supply chain, the programme enables entities engaged in international trade to be formally recognised by Customs as compliant with prescribed security standards and, in turn, granted AEO status along with corresponding benefits

The Authorised Economic Operator (AEO) represents a voluntary compliance framework designed to enable Indian Customs to reinforce and streamline cargo security. This is achieved through systematic collaboration with the principal stakeholders in the international supply chain, encompassing importers, exporters, logistics providers, custodians and terminal operators, customs brokers, as well as warehouse operators.

The proviso to sub-section (1) of Section 47 of the Customs Act, 1961 permits deferred payment of duty. Pursuant to this, the Government notified the Deferred Payment of Import Duty Rules, 2016 vide Notification No. 134/2016-Customs (N.T.) dated 2^nd November 2016, laying down the detailed procedures for implementation.

Circular No. 52/2016-Cus allows AEO (Tier-Two) and AEO (Tier-Three) certified importers to defer Customs duty payments and improves their cash flow and operational flexibility.

Key points for practical implementation:

1.Eligibility: Importers certified as AEO Tier-Two or Tier-Three and Authorised Public Undertaking (APUs) can avail of the deferred payment facility.

2. Process: Eligible importers must apply for AEO Tier Two/Three certification and then request deferred payment for each consignment. Customs will monitor the payment and compliance.

3. Benefits: Delaying duty payments helps businesses manage cash flow and reduce immediate financial pressure.

4. Conditions: Importers must maintain accurate records, comply with Customs requirements, and adhere to the deferred payment timelines. Failure to comply to the above-said requirement,  may result in penalties or revocation of AEO status.

6. Implementation: Importers need robust internal controls to manage the deferred payments and must ensure timely compliance to avoid penalties.

This facility supports businesses with strong compliance records, providing greater flexibility in duty payments while ensuring that, they follow Customs regulations.

The Circular No. 52/2016-Cus outlines the procedural steps for AEO-Tier-Two (AEO-T2) and AEO-Tier-Three (AEO-T3) certified importers to avail of the deferred payment of Customs duties.

 Below is a detailed breakdown from a practical implementation perspective:

ICEGATE Login:

• Every AEO-T2/T3 certified importer must obtain an ICEGATE login to avail the benefits of the AEO Programme.
• The AEO nodal person is designated by the importer and is required to authenticate all transactions on behalf of the AEO. This step ensures accountability and prevents misuse of the deferred payment facility as only Tier 2 and Tier 3 AEO can exercise this option.

Nodal Person:

• The nodal person is responsible for authenticating all Customs transactions. Their contact details must be registered in the ICEGATE login to ensure timely receipt of information for authentication.
• The nominated nodal person will authenticate the deferred payment requests and other Customs transactions via One-Time Password (OTP) sent to their registered email.

Flagging Deferred Payment in Bill of Entry:

• Importers must indicate their intent to avail the deferred payment facility by selecting the “D” flag in the Payment Method column of the Bill of Entry.
• The AEO nodal person will authenticate the intent and confirm the deferred payment using OTP sent to their email.

Due Dates and Payment:

Note1: In the event of a payment delay within any block of three consecutive months, the entitlement to avail deferred payment shall be suspended. The facility will be reinstated only upon settlement of the outstanding dues together with the applicable interest.

Note 2: Importers may, at their discretion, discharge the duty liability prior to the prescribed due date. In exceptional circumstances, the Central Government may permit an alternative payment date, subject to the submission of a written justification.

Conclusion:

The Deferred Duty Payment facility under the AEO programme reflects a progressive step in aligning India’s customs framework with global best practices. By extending this benefit exclusively to compliant and trusted entities, Customs ensures both facilitation and accountability within the international supply chain. The structured procedures, coupled with stringent monitoring, strike a balance between operational flexibility and regulatory oversight. This initiative not only strengthens trade facilitation but also reinforces the trust-based partnership between Customs and stakeholders. Overall, it is a commendable move by the Government towards promoting ease of doing business, particularly for enterprises with robust compliance and resilient supply chain systems in place.

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