AEO and Trusted Trader Status
A lot of the discussion around alternative arrangements and simplifications post-Brexit has been about there being further degrees of trusted trader status which might be recognised both by the Irish and UK Revenue. Such developments are possible and would be likely to be much more widely available than the AEO status.
As Brexit unfolds it would be worth following whether there are other categories of trusted trader status, that emerge in the future which would be worth applying for. We cannot anticipate what these might be like. The general understanding is that they would be considerably easier to obtain than AEO status.
Having formal status from Revenue for simplifications or AEO may be impracticable and unnecessary in the short to medium term but traders could have effective trusted trader status if HMRC and Revenue’s systems show that traders are low risk. It is good that traders have a track record and if traders have been compliant to date traders will have an effective type of trusted trader status in that traders would be likely to be subject to less random interventions
Authorised Economic Operators
The (EU) Community Customs Code provides for Authorised Economic Operators. They are traders who are deemed low risk and compliant with customs obligations. As AEOs they may qualify for and may enjoy certain relaxations from standard customs controls.
Persons may be approved as AEOs at all levels in the international supply chain. They may include exporters, freight forwarders, warehouse keepers, customs agents, importers, carriers and manufacturers. They must be engaged in the course of their business, in an activity covered by customs legislation.
An AEO certificate may be given to an operator with
- an appropriate record of compliance with customs requirements,
- satisfactory systems of managing commercial and transport records where applicable which allow customs controls;
- financial solvency requirements;
- appropriate security and safety standards.
Group companies must each apply and obtain their own certificate.
Getting AEO status
We have set out below the benefits and obligations that apply to be an authorised economic operator. A significant advantage is that authorised economic operators are recognised throughout the European Union. They automatically qualify for certain simplifications.
It is possible to check online with revenue and HMRC complete a self-assessment checklist should traders wish to consider the matter further. Both the Irish Revenue and UK HMRC under EU criteria publish a checklist for consideration of whether AEO status is achievable. Basically, it is a self-assessment exercise and traders could visit the respective websites if traders considered worthwhile. Technically, traders need a few years’ experience with customs in the first place to qualify.
There are three types of AEO certificates. An AEO Customs Simplification certificate entitles the holder to easier admission to customs simplifications procedures; fewer physical and document-based controls; priority treatment, if selected for controls; greater choice in the place where physical controls may be carried out.
An AEO Security and Safety Certificate may be issued to any operator established within the EU who complies with criteria regarding Customs compliance, record-keeping, solvency and maintains security and safety standards. The holder of the certificate is entitled to certain customs privileges. They enjoy reduced documentary control and may choose the place of physical controls and use certain convenient procedures.
The AEO Customs Simplifications / Security and Safety Certificate is issued to economic operators established within the EU who fulfill customs compliance criteria including solvency, appropriate records and who maintain security and safety standards. This combines the benefits of both the above certificates.
AEOs are responsible for goods in their custody and for the facilities they operate. The certificate may cover multiple premises under their control.
Benefits of AEO Status
The holder of an AEO certificate is subject to fewer physical and document-based controls than others. An application for approval is made to the Revenue Commissioners.
AEO status allows easier admission to customs simplification approval. It is not necessary to be an AEO operator to obtain customs simplifications, but the status facilitates more ready approval. Many of the conditions will have been examined and certified, by the AEO certificate.
An AEO Safety and Security Certificate or an AEO Customs Simplifications/Security and Safety Certificate qualify for prior notifications. When a summary declaration has been lodged by an AEO, the customs office, may before the arrival or departure of the goods in or out of the EU, notify the AEO when and if a consignment has been selected for physical control.
An AEO importer and exporter is entitled to submit summary declarations with reduced data requirements. AEO carriers and freight forwarders may use the benefit of this simplification for their clients who themselves hold AEO certificates.
The requirements under various customs procedures to give financial security as a condition of authorisation may be waived in respect of AEOs.
Trusted Trader Status in Effect
It is distinctly possible that authorised economic operator status will be developed more broadly for use in the Brexit context. Some other similar analogous status may evolve. In this event, it may very well make sense for either or both of traders’ Republic of Ireland and UK counterparty to do so customs declarations and to obtain the status.
The Revenue allows a significant number of de facto and effective simplications across a wide variety of instances in the customs code. This may be achieved without formal designation. This status would not be formal and would not be immediately recognisable by other revenue authorities.
More generally the appraisal by Irish Revenue and UK HMRC of traders’ businesses as low risk enhances traders’ de facto trusted trader status in that traders will be less prone to interventions.
Application for AEO Status
An application for an AEO certificate requires proof of compliance with the requisite criteria in relation to logistical management, financial solvency, and safety. An independent expert may supply or support the requisite competence and capability.
The application must generally be processed within 120 days. When an accepted application is uploaded to a central EU database, other Member State authorities have 35 days to convey prejudicial information. Separately, the Revenue may consult other Member States’ authorities to evaluate the applicant’s standards under the qualification criteria. There are periods in which other EU states must respond, in the context of the application.
The applicant must generally have a good compliance record. There must be no serious or repeated infringements of Customs rules by the applicant or persons connected, managing or responsible for the applicant, in relation to Customs matters. An application may succeed, notwithstanding minor infringements, provided that there is no deliberate fraud and they are infrequent.
The applicant must generally furnish proof of solvency for the last three years. It must be of good financial standing, sufficient to fulfill its commitments with due regard to the characteristics of the type of business activity. Where it is established for less than three years, it is judged on the basis of records available. The applicant’s taxation compliance status is checked with other Revenue branches.
AEO Systems Requirements
The applicant must have appropriate accounting and logistical capacity. It must maintain an accounting system which is consistent with Generally Accepted Accounting Principles and which facilitates audit-based customs control. It must allow the customs authority, physical and electronic access to its customs and transport records.
The applicant must have a logistical system which distinguishes between Community and non-Community goods. It must have an administrative organisation which corresponds to the type and size of business and which is suitable for the management of the flow of goods. It must have internal controls capable of detecting illegal or irregular transactions.
It must have satisfactory procedures in place for the handling of licenses and authorisations connected with commercial policy or trade in agriculture products, where applicable. It must have satisfactory procedures in place for archiving the company’s records and information and protecting against loss of information.
AEO Organisational Requirements
The AEO must ensure that employees are aware of the need to inform customs authorities when compliance issues are discovered. There must be appropriate information technology security measures to protect the IT system from unauthorised intrusion and secure documentation.
There must be an administrative organisation, which corresponds to the type and size of business and which is suitable for the management of the flow of goods. It must have internal controls capable of detecting illegal and irregular transactions.
Buildings used in connection with operations must be constructed so that they can resist unlawful entry and provide protection against unlawful intrusion. Appropriate access control measures must be in place to prevent unauthorised access to shipping areas, loading docks, and cargo units.
Procedures must be in place for handling import and export licenses connected to prohibitions and restrictions and to distinguish such goods from other goods. The applicant must implement measures allowing for a clear identification of its partners in order to secure the international supply chain.
The applicant must conduct insofar as legislation permits, security screening of prospective employees in security-sensitive positions and carry out periodic background checks. The applicant must ensure that its staff actively participates in security awareness programmes.
If an applicant has regulated agent status under the air cargo security programme managed by the Department of Transport, safety and security criteria are deemed to be met in relation to the premises for which the status exists.
The Transport Asset Protection Association is an association of security professionals and related business partners, shippers and logistics service providers who have come together to deal with supply chain security threats, that are particular risks in “high tech” industries and high-value consumer product sectors.
Some Irish operators have certification from TAPA. The certificates may demonstrate compliance with safety and security criteria.
Review and Suspension
Where an AEO certificate is issued, it is entered on a central EU database. The qualifying conditions and criteria are re-evaluated when there are major changes to EU legislation, or there are reasonable grounds for believing that the relevant conditions and criteria are no longer met by the authorisation holder.
An AEO authorisation may be suspended
- if it is discovered that the AEO no longer meets the qualifying criteria;
- if there is sufficient reason to believe that an act which gives rise to criminal proceedings linked to an infringement has been perpetrated by a certificate holder. An AEO certificate must be revoked where the position is not rectified within a suspension period.;
- where serious infringements related to Custom rules have been committed, and there is no further right of appeal,
- where the revocation is requested.
A person who is aggrieved by the decision of the Revenue may appeal the decision