Why everyone is talking about the AEO (Authorised Economic Operator)

What is it? Developed by EU customs agencies, with significant input from UK officers, AEO is a kitemark awarded to a trader or intermediary who has demonstrated they meet one or both of two groups of standards – customs and security.

Compliance with customs procedures is key alongside a necessity for security - ie anti-terrorism, smuggling and people trafficking procedures have to be in place.

If a company can prove it satisfies certain essential criteria, that company is deemed to be reliable in all its customs processes and related operations and can move those goods more easily through places where mutual recognition is agreed, including potentially the European Union, depending upon the trading relationship agreed between the two.

These standards are set to comply with the SAFE Framework, first adopted by the World Customs Organisation (WCO) in 2005, and updated in 2018.

Standard one – customs.

This allows a business to obtain AEO C which is centred on the customs obligations. It focuses on responsible management of import/export activity and asks the applicant to demonstrate the company  takes reasonable steps to ensure its obligations are met - training relevant team members, and implementing checks and balances to ensure compliance.

Holders of the AEO C standard are able to benefit from increased trust from their customs authority, which in UK terms means reduced levels of guarantees required when import duty is being deferred using a customs procedure. 

Standard two - Safety and Security AEO S

This asks the applicant to demonstrate its company takes reasonable steps to ensure its goods and components are made and stored in a secure environment. They must also take reasonable steps to check on the working practices of key suppliers in their international operations, not least the transport companies involved in moving their consignments.

The main benefit to businesses which have achieved the Safety and Security aspect of AEO is that they are able to benefit from mutual recognition, meaning authorities in countries which recognise the AEO standard treat goods from AEO companies as trusted. In practice this means they’re far less likely to incur physical checks than those without the status, entering the fast track queue at the port customs point.  At present the EU has mutual recognition agreed with the USA, China and Japan, and is close to finalising with Canada while negotiating with numerous others.  

 

Brexit Implications

There is significant discussion as to whether UK companies will be able to access the mutual recognition aspects of AEO post Brexit, particularly if the UK  leaves without a deal, however given the standard achieved by UK companies is that set across the EU and meets the standard of the SAFE Framework, UK companies could expect to continue benefitting whenever the UK finalises its exit.

At present, over 160 countries have indicated a desire to adopt the standards outlined in the SAFE Framework, and there are 70+ AEO or equivalent systems in existence, of which the EU’s version is one, covering the 28 member states. There are also a number in development.

Knowledge of AEO and its benefits has increased exponentially since the referendum result. While the direct benefits post Brexit are still to be absolutely defined in some areas it is clear that customs authorities believe in the idea of allocating trusted trader status as a way of focussing their efforts more effectively.

 

Next Steps

Further reading – HMRC notice

Self-assessment questionnaire – C118

Keep checking for further blog posts, which will outline the process and some of the key aspects in more detail. If you have any questions in relation to AEO in the meantime, please email Brexit@eef.org.uk.

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