If your business involves the shipment of goods internationally then there is a new process that you should be aware of that will affect you and requires significant input to become compliant.
In essence, Authorised Economic Operator (AEO) is an internationally recognised procedure, created by The World Customs Organsiation, which shows that the supply chain you’re involved in is secure and compliant and that you can be regarded as a Trusted Trader. It’s a non-mandatory ‘fast track’ that simplifies certain customs procedures.
The business value of Authorised Economic Operator status
If a business holds AEO status for customs (AEOC) then it could benefit from a faster application process and reductions or waivers of comprehensive guarantees. A business will need to be a holder of an AEOC for the following if it wishes to qualify for the ‘fast track’ procedure:
- Moving goods in temporary storage between different member states
- A notification waiver when making an entry in a declarant’s records (EIDR)
- A 70% reduction in a business’s deferment account guarantee
- Potentially being able to participate in a centralised clearance system
- Completing self assessment.
The Authorised Economic Operator status relates to businesses within the EU, although following the Brexit vote this is now a potential uncertainty until negotiations (if any) on this subject have been concluded. Some may say that as the system is already in place whereby the AEO status of a business can be checked, why would it suddenly become unavailable? This would ultimately benefit the safe carriage of goods throughout the world so to remove its availability would, on the face of it, make no sense and could affect UK PLC’s competitive status.
There are certain criteria that a business will need to meet to qualify for application which include record keeping, compliance, solvency of the business and standards of competence and professional qualifications. All this could be time consuming and bureaucratic to the small operator which in these uncertain times will drain already limited resources. However, it’s a catch 22 situation as without the AEOC accreditation any operator will be at a disadvantage against its rivals.
Union Customs Code
As from 1 May 2016, EU legislation changed the way in which businesses operated. The introduction of new standards of practice, competence and professional qualification around Union Customs Codes (UCC) should, it’s believed, ensure that compliance in this area is tightened.
Certain customs legislation and taxation rules relating to different types of economic activity have also been amended which will mean the new requirements will become a fact of life for any business that wishes to move goods around the world.
There is a period of transition for AEO authorisations issued before the 1 May 2016 and will run until 1 May 2019, giving businesses time to implement new procedures, but following this end date all future customs activities will need to meet the new requirements if the ‘fast track’ procedure is to be available.
This raises the question of a business that decides not to pursue AEO status. Will it materially suffer due to perceived delays in clearance? As mentioned above, the uncertainty of the Brexit vote may lead to a renegotiated system if a business is involved in the international supply chain. It’s hard to perceive the UK not retaining the same procedures already in place but more to the point, will other EU nations take a hard line stance on how the UK can fully participate within the new world of the UCC?
About Menzies Transport & Logistics Sector Advice Services
We advise transport and logistics companies, from air and sea freight forwarders and hauliers, to domestic and international couriers. We work closely to find solutions to industry issues, utilising our expertise in everything from business strategy and corporate finance, to audit and tax advice.