Last reviewed 5 March 2018

Authorised Economic Operator (AEO) is an international supply chain quality mark. It demonstrates that the AEO’s place in the supply chain is secure and that customs controls and procedures are efficient and compliant. Being an AEO is not compulsory for imports or exports, but it gives access to simplified customs procedures and can fast track goods through customs and safety procedures. It is expected that this will be an increasingly important authorisation for importers and exporters. Business can apply for either customs simplification (AEOC) or security and safety status (AEOS) or both. John Davison describes the benefits and the application process.

Benefits

AEOC benefits are:

  • faster application process for customs simplifications and authorisations

  • reductions or waivers of guarantees.

AEOC status is required to enable the business to:

  • move goods in temporary storage between different member states of the EU

  • obtain a notification waiver when making an entry in a declarant’s records

  • benefit from a 70% reduction in the deferment account guarantee

  • centralise clearances (when available)

  • complete self-assessment when this process is introduced.

A further, more intangible, benefit is the improved status of the business. It will assist in the recognition of the business as a secure business partner and there can be improved recognition with HM Revenue & Customs (HMRC) and other customs authorities. But introducing the security standards required the business should also benefit from fewer delayed shipments, lower inspection costs and reduced theft. AEOs are entitled to use the AEO logo. This provides recognition of the status of the business. The logo is not available for downloading and is provided by HMRC (in the UK) or other relevant customs authorities.

Holders of AEOS benefit from arrangements of mutual recognition agreements with third countries. It is expected that there will be physical integrity and access controls, appropriate logistic processes, etc.

When the business has AEO status in one member state of the EU, this status is recognised throughout the EU. A business with AEOS status benefits from arrangements negotiated with the EU with third countries to enable faster clearances. AEO status will lead to:

  • reduced customs interventions

  • lower risk scores (leading to fewer physical and documentary checks by customs authorities)

  • fast tracking of goods through customs control

  • reduced requirements for Entry Summary Declarations and Exit Summary Declarations

  • reciprocal arrangements and mutual recognition with countries outside the EU.

Mutual recognition agreements have been made between the EU and:

  • USA

  • Japan

  • Norway (security declarations only)

  • Switzerland (security declarations only)

  • China.

While there is a mutual recognition agreement (MRA) with Canada in respect of many items, this does not extend yet to authorised economic operators, but it is expected that an expanded MRA with Canada will be agreed soon.

The Union Customs Code was introduced on 1 May 2016. This is to modernise customs procedures in the EU. As part of this, there is a standard of professional competence and the focus in the UK will be on evidence of practical competence in the previous three years.

Any person in the international supply chain can apply for AEO status. This includes manufacturers as well as importers and exporters, freight handlers, agents, carriers, port operators, etc.

Criteria for AEO status

To obtain AEO status it is necessary to demonstrate:

• compliance with customs and tax requirements for the past three years

• the maintenance of adequate records, audit trails and IT security measures and employment of trained staff

• solvency over the past three years

• either recognised customs qualifications or the demonstration and evidence of practical competence over the past three years.

The AEO is based upon the customs to business partnership introduced by the World Customs Organisation (WCO). The objective is to enhance the international supply chain security and facilitate trade. On the basis of Article 39 of the EU Customs Code, AEO status can be granted to businesses meeting the following criteria.

Conditions and criteria

AEOC

AEOS

Compliance with customs and taxation legislation with no criminal offences relating to economic activity

X

X

Appropriate record keeping

X

X

Solvent

X

X

Practical standards of competence or qualifications

X

Appropriate security and safety measures

X

Applying for AEO authorisation

To apply for AEO authorisation the business must have an EORI number and apply using form C117 and form C118. These are available at GOV.UK website and GOV.UK website.

Further information can be obtained by contacting HMRC on 0300 056 4556 or by email from AEOapplications@hmrc.gsi.gov.uk. Also, information can be obtained from the EU website.

HMRC Notice 117 provides greater detail concerning the requirements and benefits of being an AEO. This is available at GOV.UK website.

Post Brexit

The importance of being an AEO is further increased by Brexit. Anything that can be done to improve a business’s ability to trade with the EU and other countries has to be a positive benefit. There is currently a great deal of uncertainty regarding Brexit and the customs procedures that will be adopted. By being an AEO the customs authorities in the EU will be assured of the systems and security measures of business and this will help facilitate trade.

Being appointed an AEO will provide benefits of quicker and more secure trade including faster application processes and authorisations. This will apply to both EU and other countries that have adopted the WCO safe framework.

AEO also provides improved status and recognition of the procedures of the business and will assist in negotiations with trading partners, suppliers and customers.

What to do next

  • Investigate the potential of becoming an AEO via the links above.

  • When approved, add AEO logo to documentation.

  • Ensure benefits that are available are applied for and utilised.

  • Investigate whether other members of the supply chain can also become AEOs.