Authorized Economic Operator (AEO) - An Overview

AEO is a programme under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The programme aims to enhance international supply chain security and facilitate movement of legitimate goods. AEO encompasses various players in the International supply chain. Under this programme, an entity engaged in international trade is approved by Customs as compliant with supply chain security standards and granted AEO status & certain benefits.

Major players in supply chain

AEO is a voluntary programme. It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principle stakeholders of the international supply chain viz. importers, exporters, logistics providers, custodians or terminal operators, custom brokers and warehouse operators. The Circular 33/2016 – Customs dated 22.07.2016 provides the statutory framework for the AEO programme.

The Circular 33/2016 – Customs was amended by the Circular 03/2018 – Customs dated 17.01.2018. Amendment Circular 03/2018 – Customs had further liberalized simplified and rationalized the AEO accreditation process so as to promote Ease of Doing Business and to emulate global best practices. The Central Board of Indirect Taxes & Customs (CBIC) has inaugurated the online filing of Authorized Economic Operators (AEO) applications. The web application is designed to ensure continuous realtime and digital monitoring of physically filed AEO applications for timely intervention and expedience.

AEO is a programme (2007) under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate global trade.

It aims to enhance international supply chain security and facilitate the movement of goods.

Under this, an entity engaged in international trade is approved by WCO as compliant with supply chain security standards and granted AEO status.

An entity with an AEO status is considered a ‘secure’ trader and a reliable trading partner.

Benefits of AEO status include expedited clearance times, fewer examinations, improved security and communication between supply chain partners.

AEO is a voluntary programme.

The Background of AEO

Prior to adoption of the SAFE Framework by WCO in 2005, Customs administrations all over the world, including India, were already implementing various forms of Customs compliance programmes which focused on compliance with traditional areas of Customs requirements, and which can also be considered as trade facilitation programmes, based on the Revised Kyoto Convention’s “authorized persons” provisions. In India, this programme was known as Accredited Client Programme (ACP) vide Notification No.42/2005- Custom dated 24.11.2005 to provide facilitation to ACP clients subject to their fulfillment of the prescribed eligibility criteria.

Over the years, AEO has become a flagship programme for WCO Members as it offers an opportunity for Customs to share its responsibilities with the businesses, while at the same time rewarding them with a number of additional benefits. As of March, 2015, 168 out of 180 WCO Members have signed Letters of Intent committing to implement the SAFE Framework. In India, the AEO programme was launched in 2011 on pilot basis.

Next Step

In accordance with the World Customs Organization Framework of Standards to Secure and Facilitate Global Trade, Indian Customs has collaborated with several foreign customs administrations to align with their Authorized Economic Operator Programmes, which effectively allows Indian Customs to internationalize the core principles of the program and provide benefits to Indian trade at theinternational level. Indian Customs has signed two Mutual Recognition Agreements with the Customs Administrations of South Korea and Hongkong. Future MRAs are in negotiation with United States of America and Taiwan. MRA initiating proposals have been forwarded to major trade countries in South East Asia like Malaysia, Singapore, Thailand, Philippines & Indonesia. Additionally, few major regional economic blocks like East African Community have proposed MRA with India. These proposals are being earnestly studied and actively pursued.

Indian Customs is regularly working with other Indian Government agencies involved in import/export to enhance the scope of benefits for AEO members. They also continue to identify opportunities to increase efficiency and reduce redundancy within the programme to bring it in line with the international best practices

The process for AEO accreditation has been systematically decentralized. This will result in faster and more streamlined processing of AEO applications. This vision is in sync with the Indian Prime Minister’s vision of ‘Under 50’ rank in World Bank’s Ease of Doing Business Report. Indian Customs is intently committed to this vision and all the major Custom Houses are organizing extensive outreach programs and regular awareness dialogue with the trade to make them aware about this program and the benefits associated with it. For any query regarding the AEO Programme, the AEO Cell in the jurisdictional Custom Chief Commissioner’s office can be approached. The AEO cell will be the nodal agency to take the applicant through the complete AEO accreditation process and help the applicant as and when the support is required for fling of AEO application.

The Indian AEO Programme is a game-changer. It will not only achieve ‘Make in India’ but also substantially add to the vision and lead India to become a manufacturing and exporting power-house. Indian Customs is fully committed to make this vision a reality by playing its mandated role in India’s growth story through its AEO initiative.

SAFE Framework

In June 2005 the World Customs Organization (WCO) Council adopted the Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework) that would act as a deterrent to international terrorism, to secure revenue collections and to promote trade facilitation worldwide.
The SAFE Framework has emerged as the global Customs community’s concerted response to threats to supply chain security, equally supporting facilitation of legitimate and secure businesses.
It prescribes baseline standards that have been tested and are working well around the globe.

SAFE (Security and Facilitation in global Environment) Framework of Standards (FoS) by WCO in 2005

Growth of global trade and increasing security threats to international cargo
Shift in Customs focus to secure international trade flow and facilitation.
To secure and facilitate global trade
To act as deterrent to international terrorism
To promote trade facilitations world wide
To secure revenue collections

The SAFE Framework aims to:

Establish standards that provide supply chain security and facilitation at a global level to promote certainty and predictability.
Enable integrated and harmonized supply chain management for all modes of transport.
Enhance the role, functions and capabilities of Customs to meet the challenges and opportunities of the 21^st Century
Strengthen co-operation between Customs administrations to improve their capability to detect high-risk consignments.
Strengthen Customs/Business co-operation.
Promote the seamless movement of goods through secure international trade supply chains.

SAFE FoS and AEO
SAFE FoS consists 3 Pillars

AEO is core part of Pillar-II of SAFE FoS.

The SAFE Framework sets forth the criteria by which businesses in the supply chain can obtain authorized status as a secure partner. Criteria / Requirement incorporated in CBEC Cir. 33/2016 dated 22.07.2016

Aims & Objectives of Indian Customs AEO Programme

To provide business entities an internationally recognized certification
To recognize business entities as “secure and reliable” trading partners
To incentivize business entities through defined benefits that translate into savings in time andcost

Need for a new AEO program

Limitations of the existing ACP/AOE Scheme

In-line with the Government 's impetus on ease of doing business

Reduced transaction and logistics costs

Faster clearances and reduced paperwork

Provide Indian traders an internallionally accepted certification and benefits

Increase in business opportunities

Four Core principles, Three Pillars and Seventeen Standards of SAFE Framework of Standards

Four Core principles
Advance Electronic Information	Risk Management	Outbound Inspection	Custom Business Partnership
Harmonize the advance information requirement on inbound, outbound and transit shipments	Commit to employing a consistent risk management approach to address security threats.	Outbound inspection of high risk consignment being exported, preferably using non-intrusive inspection method and implementing best practices.	Customs to provide benefits to businesses that meet minimal supply chain security standards and best practices.

Three Pillars
Customs to Custom Pillar [Standards]	Custom-to Business Pillar [Standards]	Customs to Other Government and Inter-Government Agencies Pillar [Standards]
Integrated Supply Chain Management Cargo Inspection Authority Modern Technology in Inspection Equipment Risk-Management Systems Selectivity, profiling and targeting Advance Electronic Information Targeting and Communication Performance Measures Security Assessments Employee Integrity Outbound Security Inspections	Partnership Security Authorization Technology Communication Facilitation	Cooperation within Government Mutual Cooperation Cooperative Arrangements/ Procedures Alignment of security programmes Harmonization of national control measures Development of continuity and resumptions measures Cooperation between and amongst Governments Mutual Cooperation Development of Cooperative Arrangements or Protocols Harmonization of security programmes Harmonization of cross-border control measures Multinational cooperation Establishment of Mutual Cooperation Development of cooperative arrangements or protocols

Standards under Customs to Business Pillar

Standard No.	Subject	Standard Statement
1	Partnership	AEOs involved in the international trade supply chain will engage in a self-assessment process measured against pre-determined security standards and best practices to ensure that their internal policies and procedures provide adequate safeguards against compromise of their supply chains until cargo is released from Customs control at destination
2	Security	AEOs will incorporate pre-determined security best practices into their existing business practices.
3	Authorization	The Customs administration, together with representatives from the trade community, will design validation processes or quality accreditation procedures that offer incentives to businesses through their status as AEOs.
4	Technology	All parties will maintain cargo and container integrity by facilitating the use of modern technology.
5	Communication	The Customs administration will regularly update Customs Business partnership programmes to promote minimum security standards and supply chain security best practices
6	Facilitation	The Customs administration will work co-operatively with AEOs to maximize security and facilitation of the international trade supply chain originating in or moving through its Customs territory.

The program uses a ‘trust but verify’ approach with the trade community. To apply to the programme, a prospective AEO certificate holder submits basic company information and a security profile as per the annexure in the circular. The AEO team checks on the company in its general compliance, legal compliance, management of commercial and transport records, financial solvency, safety and evaluates safety and security with respect to procedural security, premises security, cargo security, conveyance security, personnel security, business partner security and security training and threat awareness. The AEO specialists conduct onsite visit of domestic facilities to confirm the security practices are in place and operational in case of higher certification levels. The efficient and compliant businesses are certified into the programme.
The Circular 33/2016-Customs, dated 22.07.2016 codifies the AEO Programme and establishes certain time sensitive mandates such as reviewing and certifying AEO T1 within 30 days of submission of information and/ or documents; conducting on site verification for AEO T2 and AEO LO within 90 days of the information and documents provided; preparation of reports with recommendation to the AEO Programme Manager within 60 days of completion of onsite verifications.

Attractions of the new AEO Schemes

Deferred duty payment scheme

Direct Port deliveries for import and export

Fast tracking of refunds and drawbacks

Fast tracking of adjudications

Request based on-site inspection/ examination

Recognition by partner Government Agencies

Mutual Recognition with other countries

Legal Compliance forms rationalized

Substantial benefits have been provided

Open to all Economic operators, low threshold

Three Tier Scheme as opposed to one earlier

Special conditions of SME/ MSME's to be taken into account

Objective criteria for any down gradation

Proven compliance trusted and rewarded

Anyone handling 25 documents per annum

Should undertake customs related work

Anyone in international supply chain

Only to legal entity and not group company covered

Will not be site/ branch / division specific

Business activities for three financial years (can be waived in deserving cases)

Authorized Economic Operator (AEO) - An Introduction

An AEO is a business entity involved in international movement of goods requiring compliance with provisions of the national Customs law and is approved by or on behalf of national administration in compliance with World Customs Organization (WCO) or equivalent supply chain security standards. The security standards are detailed in World Customs Organization Safe framework of standards [WCO SAFE FoS], which is the basis of the Indian AEO programme.

The AEO programme enables Customs administration to identify the safe and compliant business entity in order to provide them a higher degree of assured facilitation. This segmentation approach enables Customs resources to focus on less or non-compliant or risky businesses for control. Thus, the aim of AEO programme is to secure the international supply chain by granting recognition to reliable operators and encouraging best practices at all levels in the international supply chain. Through this programme, the Customs shares its responsibility with the businesses, while at the same time rewarding them with a number of additional benefits.

The genesis of AEO scheme dates back to September 11, 2001 event in US which made all the governments to realize that the supply chain itself could be used for terror activities and a need was felt to make the supply chain secure. Since the supply chain is controlled by the trade, the Customs administration is partnering the trade in order to secure the supply chain. The US started CT-PAT (Customs Trade – Partnership against terrorism) programme. Later WCO adopted SAFE Framework of Standards in 2005 in order to secure and facilitate the trade. The SAFE framework has three pillars comprising of Customs to Customs partnership, Customs to Business partnership and Customs to other Govt. stake holders. AEO programme is the core part of Pillar-II i.e. - Customs to Business partnership.

The SAFE FoS sets forth criteria by which businesses in supply chain can obtain authorized status as a secure partner. The criteria are incorporated in CBEC Circular No. 28/2012 dated 16.11.2012. Thereafter a Revised AEO Program was launched vide Circular No. 33/2016-Customs dated 22.07.2016 as amended by Circular No. 03/2018 dated 17.02.2018, 26/2018 dated10.08.2018 and Circular No. 51/2018 dated 07.12.2018.

The AEO Programme was introduced as pilot project in 2011 vide Circular No. 37/2011- Customs dated 23^rd August, 2011. The same was amended and the revised final AEO programme was introduced vide Circular No. 28/2012 dated 16.11.2012. With international developments such as Trade Facilitation Agreement (TFA) on securing and facilitating the International Trade and focus of Government of India on Ease of Doing Business, a comprehensive, unified trade facilitation initiative was launched by merging the existing Accredited Client Programme (ACP) and the ongoing AEO scheme of 2012 in the form of revised AEO Programme vide Circular No. 33/2016-Customs dated 22^nd July, 2016. The ACP scheme was abolished by rescinding the Circular No. 42/2005-Customs dated 24.11.2005.

Further simplification for financial solvency and decentralization of AEO application processing was done vide Circular No. 03/2018 dated. 17.01.2018. The application process for AEO-T1 accreditation was further simplified to two Annexures form only by Circular No. 26/2018 dated 10.08.2018 from five Annexure form as was stipulated in Circular No. 33/2016 dated 22.07.2016. Web based On-line application filing and processing for AEO-T1 status started from December 2018 vide Circular 51/2018 dated 07.12.2018.

The AEO (Authorized Economic Operator) concept was launched under the SAFE Framework of Standards for granting the status/certificate to the business entity which is involved in the international supply chain by fulfilling certain criteria under AEO Programme. Several businesses in India are opting for an AEO Registration/Certification Over the years, the AEO status has established itself as the benchmark for legitimacy in international trade. The AEO Certification has numerous tiers, viz. AEO T1, AEO T2, AEO T3, and AEO LO. Each of these confers benefits like:

Faster trade facilitation.
Shorter Cargo Release Time.
Reduction in bank guarantee.
The facility of 24/7 clearance at all seaports/airports on request.

Indian AEO Programme:

The AEO Programme was introduced as a pilot project in 2011.
The security standards detailed in WCO SAFE Framework are the basis of the Indian AEO programme.
There is a three tier AEO Status for Exporters and Importers. The three tiers are AEO T1, AEO T2, AEO T3, where AEO T3 is the highest level of accreditation.

Objective of the AEO Program

Apart from revenue collection, Trade Security and Trade Facilitation are important areas for customs agencies around the world. In order to secure and facilitate the trade, the World Customs Organization (WCO) has adopted the SAFE framework of standards in 2005, which includes the Authorized Economic Operator Program (AEO Program) as one of three key pillars. India, as a member of the WCO, has adopted the AEO Program through the Customs Act, 1962.

India launched a revised AEO Program in July 2016 and incorporated the AEO and Accredited Clients Program into the current AEO Program. This program aims to enhance the international supply chain security and facilitate movement of legitimate goods in India. It offers an opportunity to the customs to share the responsibilities with the businesses and reward them with additional benefits.

Who can apply for AEO Status?

Any business entity involved in the international supply chain carrying out custom related activities can apply for AEO status under the AEO Programme, including:

The businesses not involved in customs-related activities or work, are not eligible to apply for AEO status. In general, insurance companies, banks, consultants, etc., are ineligible for AEO status.

AEO status holders

Sr. No.	Categories of Business Entity	Benefit Available
1.	Importers:	Higher level of facilitation than for an ACP importer. Reduced bank guarantee wherever applicable. In any case, the amounts of bank guarantee not to exceed 5% of the bond amount.
2.	Exporters:	Reduced percentage of examination. In cases where normal examination percentage is prescribed as 10%, for AEO exporters this percentage shall be 5%. In cases of export under claim of drawback / Reward Schemes examination percentage for AEO exporters shall be 10% as against 25% fixed. Similarly, in case of examination to sensitive destinations, examination of 20% consignments shall be done as against 50% for other exporters. Further the value limit is raised from 1 lakh to 5 lakhs for drawback shipping bills and from 5 lakhs to 10 lakhs in case of EPCG/ DEEC shipping bills for AEO exporters.
3.	Logistic Service Providers	Waiver of bank Guarantee in case of transshipment of goods under Goods imported (Condition of Transshipment) Regulations, 1995. Facility of execution of running bond. Facility of not taking permission on case to case basis in case of transit of goods. In case of international transshipped cargo (Foreign to Foreign), for the pre-sorted containers wherein Cargo does not require segregation, ramp to ramp or tail to tail transfer of cargo allowed without Customs escorts.
4.	Custodians or Terminal Operators	Waiver of bank Guarantee under Handling of cargo in Customs Area Regulations 2009. Facility of extension of approval under regulation 10(2) of the Handling of cargo in Customs Area Regulation 2009 for longer period provided that AEO Customs House Agent has valid authorization. For AEO status Custodians, the approval to be extended for a period of ten years at a time in terms of regulation 10(2) of Handling of cargo in Customs Area Regulations 2009.
5.	Customs House Agents (CHA)	Extended validity period of licenses granted under regulation 9 of the CHALR 2004. License granted under regulation 9 to be valid till validity of their AEO authorization. Exemption from payment of further fee for renewal of a license under sub regulation (2) of regulation 11.
6.	Warehouse Operators:	To be accorded faster approval for new warehouses. Benefits of reduced bank guarantee to the extent of 5% of the duty liability in respect of individual consignments of sensitive goods to be warehoused. In case of non-perishable goods, the Chief Commissioner of Customs may grant extension upto a period of six months at a time in deserving cases.

Export under Drawback by AEO exporters:

Documents covered	Category of Exports	Scale of Examination
Documents covered	Category of Exports	Export consignments shipped to sensitive places viz. Dubai, Sharjah, Singapore, Hong Kong and Colombo	Others
1.	Consignments where the amount involved is 5 lakh or less	10%	2%
2.	Consignments where the amount of drawback involved is more than 5 lakh	25%	5%
3.	Consignments where the FOB value is under EPCG / DEEC is 10 lakh or less	10%	2%
4.	Consignments where the FOB value is under EPCG / DEEC is more than 10 lakh	20%	5%

What does procedure in place to identify and disclose irregularities means?

It means that the applicant must have tools in the form of Customized software or manual checks to identify risks and detect error in Customs documents (B/L, invoice and Packing list), for self-assessment of goods imported i.e. proper check of classification, valuation etc and after clearance of goods from Custom control, they must have the process to reconcile the goods with duty paid invoice and packing list.

Further they may have documented processes/SOPs/escalation matrix for communicating the error noticed to Customs on real time basis and maintain record of such errors for viewing of their employees so that such mistakes do not recur.

Ratio between duty demanded and duty paid listed at serial number d (ii) of annexure E-2

The ratio is calculated by dividing duty amount involved in Show Cause Notice (SCN) issued under the Customs Act divided by total duty paid & drawback claimed during the last three financial years. For example, the amount involved in SCN/disputed demand (includes demand of duty and denial of drawback) is 500/- and total duty paid is 20,000/-, drawback claimed is 5,000/-, the ratio shall be 500/(20000+5000)*100 = 2%

Features of AEO Programme

Direct port delivery in case of import and direct port entry in case of export; Direct Port Delivery of imports for ensuring just-in-time inventory management by manufacturers regarding clearance from the wharf to the warehouse & Direct Port Entry for factory stuffed containers intended for export by AEOs.

Small and medium scale entities would be given special focus. It must be noted that any entity handling upto 25 import and export documents annually can become part of the AEO programme;

Easy and fast disbursal of drawback amount;

Easy and fast disbursal of refunds and adjudications;

Paperless declaration with no supporting documents;

Site inspection or examination possible on request;

Recognition by partner Government agencies and other stake holders.

Providing deferred payment of duties by delinking customs clearance and duty payment.

Mutual recognition agreements with different customs administrations.

Extending facilitation to exports in addition to imports

Acceptance of self-certified copies of PTA/FTA origin related or any other required certificates for clearance.

The AEO scheme is purely an optional scheme. Applying for AEO status is a business decision de - pending on the role of the business entity in the supply chain and its willingness to acquire the benefit flowing by acquiring AEO status.

What is AEO (Authorized Economic Operator

AEO is a program under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The programs aim is to enhance international supply chain security and facilitate movement of legitimate goods. AEO is a voluntary compliance program. It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principal stakeholders of the international supply chain viz. importers, exporters, logistics providers, custodians or terminal operators, custom brokers and warehouse operators. In the light of recent international developments, as well as in view of the focus of the Government of India on “Ease of Doing Business”, it is imperative to develop a comprehensive program on AEO providing with additional facilities to the legitimate trade who have demonstrated strong internal control system and willingness to comply with the laws administered by the Central Board of Indirect Taxes and Customs. The objective of the revised AEO Program shall continue to remain same as earlier that is to provide businesses with an internationally recognized quality mark which will indicate their secure role in the international supply chain and that their Customs procedures are efficient and compliant. An entity with an AEO status can, therefore, be considered a ‘secure’ trader and a reliable trading partner.

AEO is a trade facilitation scheme for ease of doing business in light of international development; holder of this certificate is entitled for privilege, benefits, exemption and relaxation on account of import and export. This certificate is issued for particular period after that to be renewed.
This scheme is based on principle of sharing role and responsibility of customs with trade and industry and objective is to delink payment and clearance, to accept paperless declaration, increases efficiency, self certification, earliest refund and drawback, request based examination/inspection etc.
ACP (accredited client program) and old AEO (authorized economic operator) is merged together and resulted into three certifications namely AEO-T1, AEO-T2, AEO-T3, and AEO-LO.

This three tier certification is launched by Customs Circular No. 33/2016 dated 22^th July, 2016 (in suppression of Circulars No. 42/2005 dated 24.11.2005– old ACP scheme and Circulars No. 28/2012-Customs dated 16.11.2012– old AEO programme).
AEO Certificate/Status is a globally recognized quality indicator that helps in improving the security of the supply chain.
The Companies which have the AEO certification are considered as a safe and secure trading partner.

Three tier AEO program for importers and exporters (AEO-T1, AEO-T2, and AEO-T3)

It has been decided that the existing ACP (“Accredited Client Program”) and AEO programs will be merged into this new AEO program. For the economic operators other than importers and the exporters, the new program offers only one tier of certification (i.e. AEO-LO) whereas for the importers and the exporters, there will be three tiers of certification (i.e. AEO-T1, AEO-T2 and AEO-T3). For importers and exporters there are three tiers providing various levels of benefits

AEO-T1

Phase 1: Verified on the basis of document submission only

AEO-T2

Phase 2: In addition to the document verification, onsite verification is done

AEO-T3

Phase 3: For AEO-T2 holders who have enjoyed the status for 2 years only on the basis of document verification & for AEO-T2 holders who have not enjoyed the status continuously or has introduced major changes in business, the applicant is subjected to physical verification

AEO-T4

Phase 4: For logistics providers, custodians or terminal operators, custom brokers and warehouse operators there is only one tier.
In addition to document verification, onsite verification is done

Benefits of certificate under AEO scheme for all (AEO-T1, T2, and T3)

Benefits	AEO- T1	AEO- T2	AEO- T3
Shorter cargo release time	Yes	Yes	Yes
Direct Port Delivery (DPD) / or Direct Port Entry (DPE)	Yes	Yes	Yes
ID to authorized personnel	Yes	Yes	Yes
Separate space earmarked in Custodian’s premises.	Yes	Yes	Yes
Bank Guarantee only to extent	50%	25%	0.00%
Investigations	in six to nine months	Six month	Six month
e-mail regarding arrival/ departure of the vessel	Yes	Yes	Yes
24/7 clearances on request at all sea ports and airports	Yes	Yes	Yes
No Merchant Overtime Fee (MOT) charges need to be paid	Yes	Yes	Yes
Waiver of seal verification/scrutiny of documents	No	Yes	Yes
Out of charge/let export order without any scrutiny by the officers	No	Yes	Yes
Front line of treatment for container scanning	No	Yes	No selection for scanning
Facility of deferred payment of duty	No	Yes	Yes
Disbursal of drawback amount	-	within 72 hours of EGM submission	faster
Assessment and/or Examination on priority	Yes	Yes	Yes
Faster completion of Special Valuation Branch (‘SVB’) proceedings	No	Yes, in time bound manner	Yes
Facility to paste MRP stickers in their premises	No	Yes	Yes
Post clearance audit	Yes	Onsite PCA will be conducted once in three years only, no regular PCA.	On Intelligence information
Access to their consolidated import/export data through ICEGATE	No	Yes	Yes
Facility of submitting paperless declarations with no supporting documents in physical form	No	Yes	Yes
Client Relationship Manager”(CRM) at AC/DC level at all port	No	Yes	Yes

Benefits for AEO under Advance Authorization scheme of under Foreign Trade Policy

AEO status holder shall be issued advance authorization on self certification and declaration basis without ratification by the Norms Committee.

The AEO-LO certificate is granted to all the economic operator other than the importer and the exporter on the fulfillment of required criteria. Following are the list of benefits available to the different economic operator if AEO-LO certificate has been granted to them –

Benefits for AEO-LO certificate

Logistic Service Providers	Customs Brokers
Waiver of bank Guarantee in case of transshipment of goods under Goods Imported (Conditions of trans-shipment) Regulations, 1995; Facility of Execution of running bond. Exemption from permission in case of transit of goods. In case of international transshipped cargo (Foreign to Foreign), for the pre-sorted containers wherein Cargo does not require segregation, ramp to ramp or tail to tail transfer of cargo can be affected without Customs escorts.	Waiver of Bank Guarantee to be furnished under regulation 8 of the CBLR, 2013 Extended validity (till validity of AEO status) of licenses System Manager to incorporate date of validity of AEO from time to time in the System Directory Waiver from fee for renewal of license.
Warehouse Operators	Custodians or Terminal Operators
Faster approval for new warehouses within 7 days of submission of complete documents Waiver of antecedent verification envisaged for grant of license for warehouse under circular 26/2016 Waiver of solvency certificate requirement under circular 24/2016 Waiver of security for obtaining extension in warehousing period under circular 21/2016 Waiver of security required for warehousing of sensitive goods under circular 21/2016	Waiver of bank Guarantee under Handling of the cargo in Customs Area Regulations, 2009 Extension of approval for custodians under regulation 10(2) of the ‘Handling of cargo in Customs Area Regulation 2009 ‘for period of 10 years.

Goals of Indian Customs

Ease of doing business: In 2016, India’s ranking for ease of doing business as per World Bank’s Ease of Doing Business Index was 130 out of 190. By 2020, India has improved its rank to 63. The Government, through various agencies (including Customs), looks to continue improving this number. The Digitization of Customs processes (introduction of SWIFT) and the AEO Program are some of the measures that Indian Customs has introduced to continue to progress.
Reducing congestion at port: The clearance of goods takes substantial time and leads to congestion at the ports. The Indian Government has stated that they are working to reduce the congestion by 80%. To accomplish this, benefits such as direct port deliver (i.e. DPD) and direct port entries (i.e. DPE) are offered via the AEO Program.
Ensuring increased compliance from a Customs perspective: As per Indian Customs, approximately 80% of companies operating in India are not compliant from a Customs standpoint. Through the AEO program, customs aims to reverse this percentage and achieve a target where 80% of the companies are compliant.

In the AEO Program, the economic operators need to ensure robustness of international supply chain procedures. They need to ensure that business processes follow high standards, as well as secure. Ensuring supply chain security is a major component of AEO program.

AEO is a tier-based program in India. In order for economic operators to receive optimum incentives, officials need to evaluate how robust and secure business processes are. For AEO tier-1, economic operators are verified through documented SOPs and for AEO tier-2; the customs authorities will conduct a physical verification of the processes.

Major Benefits of Indian AEO Program

Some major benefits are discussed below which can be availed by different types of organizations involved in international trade.

Reduced examination and inspection on import-export, acceptance of import declarations before import arrival.
Acceptance of export declarations before bringing export goods into Customs premises.
Warehouse Operators can get faster approval to set up a new warehouse.
CHA’s Pre-arrival import declarations are accepted for the client import.
Logistics Providers can transit goods without case-by-case permissions.
Priority in processing and clearance of goods.
Fast tracking of adjudications and refunds including IGST refunds and disbursal of drawback.
Facility of Direct Port Delivery (DPD) of their import Containers and/ or
Direct Port Entry (DPE) of their Export Containers would be available to them.
ID cards to be granted to authorized personnel for hassle free entry to Custom Houses, CFSs and ICDs.
Wherever feasible, they will get separate space earmarked in Custodian’s premises.
24/7 clearances on request at all sea ports and airports – No Merchant Overtime Fee (MOT) charges need to be paid.
Expedited investigation-dispute resolution
They will get an e-mail regarding arrival/ departure of the vessel carrying their consignments.
Facility of deferred payment of duty will be provided, from a date to be notified
Facility of deferred payment of duty will be provided, from a date to be notified
The refund/Rebate of Customs/Goods and service tax would be granted within 45 days of the submission of complete documents etc.
All the above mentioned benefits are applicable to all three tiers with varying and incrementally increasing level of facilitation to the status holder.

Aim of Indian Authorized Economic Operator (AEO) Programme

To provide business entities with an internationally recognized certification.

To recognize business entities as “secure and reliable” trading partners.

To incentivize business entities through defined benefits that translates into savings in time and cost.

Secure supply chain from point of export to import.

Enhanced border clearance.

Reduction in dwell time and related costs.

Customs advice/assistance if trade faces unexpected issues with Customs of countries.

Advantages of Authorized Economic Operator (AEO) Programme

Safe and Compliant Business: Worldwide recognition as safe, secure and compliant business partners in international trade.

Reciprocal Recognition: India gets trade facilitation by a foreign country with whom India enters into a Mutual Recognition Agreement/Arrangement (MRA). MRA is an international agreement by which two or more countries agree to recognize one another's conformity assessment results (for example certifications or test results).

Streamline Cargo security: It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principal stakeholders of the international supply chain viz. importers, exporters, logistics providers, custodians or terminal operators, custom brokers and warehouse operators.

Promote Ease of Doing Business: A liberalized, simplified and rationalized AEO accreditation process has potential to promote Ease of Doing Business and to emulate global best practices.

Facility of Direct Port Delivery of import Containers and/ or Direct Port Entry of Export Containers.

It also fast tracking of refunds and adjudications.

The Indian AEO Programme is a game-changer. It will not only achieve ‘Make in India’ but also substantially add to the vision and lead India to become a manufacturing and exporting powerhouse.

What are the Benefits of each AEO tier?

Benefits of AEO-T1 Certificate

The AEO-T1 certificate is granted only to the importer or the exporter on the fulfillment of the required criteria. Following are the list of benefits available to the importer or the exporter if an AEO-T1 certificate has been granted to them –

The main benefit accrued with the AEO-T1 certificate is surety of shorter cargo release time. The consignment of the importer or exporter having AEO-T1 certificate would receive the high level of facilitation in imports and exports.
There would be a grant of separate space, wherever possible, earmarked in the Custodian’s premises.
Facility of direct port delivery (i.e. DPD) would be available in case of import containers based on the volume of their import trade in terms of the number of containers.
Facility of direct port entry (i.e. DPE) would be available in case of export containers based on the volume of their export trade in terms of the number of containers.
ID cards would be allotted to the authorized personnel of AEO-T1 holder in order to facilitate hassle-free entry to Customs House, CFS and ICD.
The person holding AEO-T1 certificate would have the facility to provide 50% less bank guarantee as compared to others. However, it must be noted that the facility of less bank guarantee would not be available in case the competent authority has ordered furnishing of bank guarantee in case of provisional release of seized goods.
Facility of fast completion, within a period of 6 to 9 months, of investigation relating to indirect tax cases would be available. Further even in case of dispute resolution cases would be taken up fast preferably within 6 months.
The AEO-T1 holder will not be subjected to regular transactional PCA (i.e. post-clearance audit). Onsite PCA would be conducted once in two years only.
Facility of 24/7 clearance at all the seaports and airports can be made available. Further, the holder of the AEO-T1 certificate is not required to pay Merchant Overtime Fee.
Arrival and/or departure of the vessel carrying the consignment of AEO-T1 holder would be informed through an e-mail.

Benefits of AEO-T2 Certificate

The AEO-T2 certificate is granted only to the importer or the exporter on the fulfillment of required criteria. Following are the list of benefits available to the importer or the exporter if the AEO-T2 certificate has been granted to them –

The holder of the AEO-T2 certificate would be given a higher level of facilitation in the import and export of their consignments.
At the time of seal, verification/scrutiny of documents by the customs officers would be waived. Further, consignment would be given out of charge or let export order without any scrutiny.
In case the container of AEO-T2 certificate holder is selected for scanning, the same would be scanned by giving front-line priority treatment.
The Bill of entry or shipping bill if selected by the officer the same would be processed on the priority basis.
AEO-T2 certificate holder will have the facility of self-sealing of export goods without the requirement to seek case to case permission from the authority.
The person holding AEO-T2 certificate would have the facility to provide only 25% of bank guarantee as compared to others. However, it must be noted that the facility of less bank guarantee would not be available in case the competent authority has ordered furnishing of bank guarantee in case of provisional release of seized goods.
They have a facility that they can paste the MRP stickers at their premises.
The AEO-T2 holder will not be subjected to regular transactional PCA (i.e. post-clearance audit). Onsite PCA would be conducted once in three years only.
They have the facility of submitting a paperless declaration and there is no requirement of any supporting documents in physical form.
The refund/rebate relating to indirect taxes of the AEO-T2 certificate holder would be granted within a period of 45 days.
They have the opportunity of trade facilitation by a foreign customs administration with whom India enters into a Mutual Recognition Agreement.
A Client Relationship Manager would be appointed by all the customs houses and they would act as a voice of AEO-T2 holder within the customs in relation to legitimate concerns and issues of AEO.

Benefits of AEO-T3 Certificate

The AEO-T3 certificate is granted only to the importer or the exporter on the fulfillment of required criteria. Following are the list of benefits available to the importer or the exporter if an AEO-T3 certificate has been granted to them –

The holder of an AEO-T3 certificate would be the given higher level of facilitation in import and export of their consignments, even more than AEO-T2 holder.
AEO-T3 certificate holder will have the facility that their containers will not be selected for scanning except on the basis of specific intelligence. In case the container is selected for scanning, the topmost priority would be given for the same.
Assessing/examination by the Customs officer would be done on the self-certified copy of documents and there will not be need of original documents.
The person holding AEO-T3 certificate is not required to submit any bank guarantee. However, it must be noted that the facility of no bank guarantee would not be available in case the competent authority has ordered furnishing of bank guarantee in case of provisional release of seized goods
The refund/rebate relating to indirect taxes of the AEO-T3 certificate holder would be granted within a period of 30 days.
On request, they will be provided on-site inspection/examination.

Benefits of AEO Certification to get Advance License under Self-Ratification Advance Authorization Scheme

An important benefit for AEO status Holders is the Self-Ratification Advance Authorization Scheme.This Scheme is only available to AEO Status Holders. Under this Scheme, Exporters who are availing benefits of Advance Authorization can get Advance License on Self Declaration and Self Ratification basis.

Therefore in cases where SION (Standard Input Output Norms) / valid ad-hoc Norms for an Export Product are not fixed or where SION has been notified but the exporter intends to use additional inputs in the manufacturing process, there is no need to approach the Norms Committee for Fixation of Norms. Exporters can redeem the Advance License on Self Ratification basis. The above Scheme is as per para 4.07 A of FTP 2015-20.

Authorized Economic Operator (AEO) Process

AEO provides businesses with an internationally recognized security standard and certifies an entity as a “secure” and “reliable” trade partner. AEO offers a number of benefits, including lower rate of physical inspections of imported/exported goods, faster release of shipments, preferential treatment by Customs Authorities, and deferred payment of duties, to the companies that meet compliance criteria and demonstrate the security of supply chain.

Customs organizations all over the world are tasked with the twin challenge of securing the borders from unlawful trade and simultaneously facilitating legitimate trade. AEO works towards achieving these objectives.

Starting point for an AEO process is document and standard operating procedures (SOP) with respect to safety and security plans, and process map for movement of goods in international trade.

Reviewing the current level of security standards and other required areas for obtaining AEO status

Preparation of SOPs and establishing the required Standards

Collating the information and documents for filing AEO application

Preparation, filing of application, and providing clarifications from time to time required by AEO Authorities

Independent internal review to check the Security Standards and compliance level with other requirements for AEO and suggesting improvement areas before physical verification by AEO Authorities

Physical verification by AEO Authorities

Following up with AEO Authorities till obtaining the AEO Certificate

Compliance with AEO Status Requirements AEO status is likely to be an integral part of language of global trade and compliance.

AEO program in India – Current status

Globally, AEO certification is gradually evolving into an industry standard for claiming eligibility to any administrative and governmental discretions, priority and facilitation. The Central Board of Excise and Customs has re-launched a more effective and reworked three-tier AEO programme merging the ongoing Accredited Clients Programme (ACP) & AEO programme, as under:

The Board has decided to merge the two facilitation schemes namely ACP (Accredited Client Programme Scheme) and AEO into a combined three-tier AEO programme, and also enhance the scope of these programmes so as to provide further benefits to the entities who have demonstrated strong internal control system and willingness to comply with the laws administered by the Central Board of Excise and Customs. The prominent features of the new programme are:

Inclusion of Direct Port Delivery of imports to ensure just-in-time inventory management by manufacturers – clearance from wharf to warehouse
Inclusion of Direct Port Entry for factory stuffed containers meant for export by AEOs
Special focus on small and medium scale entities – any entity handling 25 import or export documents annually can become part of this programme
Provision of Deferred Payment of duties – delinking duty payment and Customs clearance
Mutual Recognition Agreements with other Customs Administrations
Faster disbursal of drawback amount
Fast tracking of refunds and adjudications
Extension of facilitation to exports in addition to imports
Self-certified copies of FTA / PTA origin related or any other certificates required for clearance would be accepted
Request based on-site inspection /examination
Paperless declarations with no supporting documents
Recognition by Partner Government Agencies and other Stakeholders as part of this programme

Note:

Accredited Client Programme (Scheme) - is a special facilitation Scheme introduced vide CBEC Circular No. 42/2005-Customs, dated 24/11/2005, as amended by Circular No. 29/2010- Customs dated 20.08.2010 wherein facility of assured trade facilitation in respect of clearance of import and export cargo is provided for certain accredited importers/Exporters in India, who have good compliance record and fulfill specified criterion.

Authorized Economic Operator- Under this programme, an entity engaged in international trade is approved by national Custom authorities as being compliant with supply chain security standards and granted AEO status and certain procedural benefits resulting in preferential treatment in clearance of import/export cargo. Once certified to be AEO, the business entity is treated as reliable and secure trade partner in the global supply chain.

CHALR: Custom House Agents Licensing Regulation, 2004
Custom House Agents Licensing Regulation, 2004 has now been superseded by Customs Brokers Licensing Regulations, 2013 and has been notified vide notification No. 65/2013-Customs (NT), dated 21.06.2013

DGICCE: Directorate General of Inspection (Customs and Central Excise)
It is a nodal agency for implementation of AEO Programme in India. It was first set up in 1939 and its mandate is to conduct periodical inspections of the Customs and Central Excise field formations. It also advises the CBEC on technical issues and standardization of organization and procedure in Custom Houses and Central Excise Commissionerates. It is headed by the Director General and its head office is located at Delhi and. It also has several regional units in India.

PAS/ISO: 17712: Publicly Available Specifications/International Standard ISO 17712
International Standard ISO 17712 establishes “uniform procedures for the classification, acceptance, and withdrawal of acceptance of mechanical freight container seals”. The standard product type as well as details of testing specifications. International Standard ISO 17712 has replaced ISO's Publicly Available Specification (ISO/PAS) 17712 in September 2010.

MRA: Mutual Recognition Agreement/Arrangements
A mutual recognition agreement/arrangement (MRA) is an international agreement /arrangement by which two or more countries agree to recognize one another's conformity assessments (of AEO). After signing of MRA, AEO certification granted by one country is recognized by other agreeing country on reciprocal basis. India has signed MRA with Hong-Kong in November, 2013.

SAFE FoS: SAFE framework of Standards
It basically consists of set of seventeen standards that provide supply chain security and facilitation at a global level to promote certainty and predictability and have been devised by World Customs Organization. These standards are based on four core principles and follow three pillars approach - one Customs-to Customs Pillar consisting of 11 Standards, second Custom-to-Business Pillar having 6 standards and third Customs to Other Government and Inter-Government Agencies pillar having 11 standards.

AEO-Eligibility Criteria for an entity

Anyone involved in the international supply chain that undertakes Customs related activity in India can apply for AEO status irrespective of size of the business. These may include exporters, importers, logistic providers (e.g. carriers, airlines, freight forwarders, etc.), Custodians or Terminal Operators, Customs House Agents and Warehouse Owners. The list is not exhaustive. Businesses that are not involved in Customs related work / activities will not be entitled to apply. This means that in general, banks, insurance companies, consultants and the like categories of businesses will not be eligible for AEO status.

Application for AEO status will only cover the legal entity of the applicant and will not automatically apply to a group of companies. In order to apply for AEO status the applicant must be established in India. For this purpose, the applicant should provide evidence which may include:

A certificate of registration issued by the Registrar of Companies.
Details of places/locations where goods are being handled, e.g. loading, unloading, storage etc., in the course of supply to/from international supply chain.
Proof that the business has its own accounts.

The applicant should have business activities for at least three financial years preceding the date of application. However in exceptional cases, on the basis of physical verification of internal controls of a newly established business entity, the AEO Program Manager may consider it for certification.

AEO program is made open to all Importers/Exporters whose threshold of import or export declarations is 25 documents i.e. either Bills of Entry or Shipping Bills during the last financial year. The other economic operators should have handled at least 25 documents i.e. Bills of Entry or Shipping bills during the last financial year.

Eligibility requirement for AEO Certifications

Who is entitled for AEO Certification?	Eligibility
Anyone involved in the international supply chain that undertakes Customs related activity in India can apply for AEO status irrespective of size of the business.	These may include exporters, importers, logistic providers (e.g. carriers, airlines, freight forwarders, etc.), Custodians or Terminal Operators, Customs House Agents and Warehouse Owners. Others who may qualify include port operators, authorized couriers, stevedores. The list is not exhaustive.
AEO for SME Enterprises	A small and medium scale enterprise who has filed 25 documents i.e. either Bills of Entry or Shipping Bills during the last financial year is also entitled for AEO.
AEO is applicable to OLD Company or new company	The applicant should have business activities for at least three financial years preceding the date of application.

While submitting the application for renewal, the applicant must clearly highlight the changes from the last application.

Who is not entitled for AEO certification?

Businesses that are not engaged in Customs related work / activities will not be entitled to apply, in general, banks, insurance companies, consultants and the like categories of businesses will not be eligible for AEO status.

AEO is branch wise or entity wise

AEO certification is entity wise not branch/location/group wise. If a group of company has 5 companies then all company will have to apply separately.

AEO status of Customs Broker and AEO status of Importer/Exporter is Independent

AEO status can be granted to a Customs Broker, but this will not confer similar status on its client importers / exporters who will need to apply separately for that status.

AEO Is Applicable To OLD Company or New Company

The applicant should have business activities for at least three financial years preceding the date of application in exceptional circumstances on physical verification of control and premises may be allowed to new entity.

Communication between AEO programme

Manager and Importer/ Exporter All communication between AEO/AEO applicants and Programme Manager shall be through e-mail at Aeo .India@icegate.gov.in.

To sum up

Business entities who are involved in the international supply chain that undertakes Customs related activity in India can apply for AEO status. The business entity can apply for AEO status irrespective of its size of the business. Some of the examples of the business entities that can apply for AEO status are importers, exporters, Custom House Agent (CHA), Custodians or Terminal Operators, etc. Basic requirements which are mandatory to be fulfilled in order to apply for AEO status are listed below –

Applicant must be established in India
The business must be involved in customs-related activities.
The business must have handled a minimum of 25 customs documents, i.e. either shipping bills or bills of entry in the last financial year
Applicant should have business carrying out the customs-related activities for at least three financial years preceding the date of application.
The applicant should not have received any show cause notice during the last 3 financial years involving fraud, forgery, outright smuggling, and clandestine removal of goods or cases where tax has been collected from the customer but not deposited with the government
The applicant should have maintained an accounting system consistent with GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards).
The applicant should have the satisfactory procedure for verifying the accuracy of Customs documents.

The applicant should be financially solvent during the last three financial years preceding the date of application.
The applicant should have appropriate internal controls and measures to ensure the safety and security of his business and the supply chain.
The building of the applicant must be secure against unlawful entry. Entry for only authorized persons, vehicles and goods must be permitted inside the building of the applicant. In order to keep proper access and safety, the number of entry gates should be minimized.
The business must have a system of managing commercial and transport records.

Treatment of existing AEOs and ACPs

(i). Existing AEOs (Authorized Economic Operator)

Existing AEOs shall be granted either AEO- T2 or AEO-LO Certificate depending upon their category by the AEO Programme Manager within 15 days of issue of this circular.
They shall remain AEO-T2 or AEO-LO certificate holders till the validity period mentioned in their AEO certificate issued under Circular 28/2012 –Custom dated 16-11-2012. Thereafter, they will have to follow renewal procedure.

(ii). Existing ACPs (Accredited Client Programme)

Existing ACP shall be PROVISIONALLY granted AEO- T1 Certificate by the AEO Programme Manager within 15 days of issue of this circular.
All such ACP clients shall have an opportunity to submit applications for regularization of AEO Certificates in terms of this circular within 90 days of issue of this circular. Who fail to submit application within 90 days shall be taken up for review.
They shall remain AEO-T1 certificate holders till the validity period mentioned in their ACP renewal /granting letter. Thereafter, they will have to follow renewal procedure as prescribed in this circular.

Why Get Your Business AEO-Certified?

Acquiring an AEO Certification can allow you to perform trade without many restrictions or hindrances. Apart from these trade benefits, there are also other practical reasons why you should consider getting your business AEO-Certified.

Getting an AEO Certification is relatively simple. You can get your business AEO T1 Certified just through the submission of some documents; no on-site verification is required for this basic AEO Certification.

The restriction-free trade made possible by an AEO certification can help your business boom; lesser restrictions equal faster trade, which can translate into accelerated business growth.

Regardless of the size of your business, you can get your business AEO Certified. You just need to be involved in Customs Related Activity in India and fulfill some other basic criteria to be eligible.

Getting an AEO status can help you build better relations with international businesses, mostly because there’s a sense of legitimacy & authenticity linked to trading with organizations that bear this certification.

If you want to experience faster and hassle-free international trade, getting an AEO Certification i.e. (Authorized Economic Operator Certification) can be of immense help to you. AEO benefits include several import/export privileges and it can also help your business to gain a reputable position in its niche.

Documents Required for AEO Application - Application form and other supporting documents

It consists of a common set of documents and a list of Additional documents which would be the same for each tier. Application forms would be different for AEO T1 from the other remaining three tiers. Common Document Set and additional documents are used to fill out the application forms and need to be attached in the application submission. Find below all three sets of documents.

In cases where the statute exempts the applicant from statutory audit, the applicant can submit balance sheet certified by both the proprietor/partner/MD and any chartered accountant (CA) stating the profit /loss and net worth for the purpose of AEO application.

Reduced Documentation for MSMEs

In line with the Government’s Aatma Nirbhar Bharat Yojana to support all MSMEs against the challenges of Corona virus Pandemic the Custom has simplified the eligibility criteria and reduced the required documents and processing time for MSMEs to get the AEO T1 & AEO T2 Certificate as per the latest Notification. Find the tabular differentiation between the required documents for the company having the MSME certificate with the company which does not have the MSME certificate.

Reduced Documentation for MSMEs

Document Requirement	Company having MSME Certificate (for AEO T1 & T2 only)	Company not having MSME Certificate
Import- Export Document	10	25
Balance Sheet	Last 2 Financial Years	Last 3 Financial Years
Audit Report	Last 2 Financial Years	Last 3 Financial Years
Solvency Certificate	Last 2 Financial Years	Last 3 Financial Years
Application Form	MSME Annexure 1 & 2 with the reduced documentation.	MSME Annexure 1, 2 and 3 with the reduced documentation.

Application for an AEO certificate

Sl. No	Annexure	Subject	Application for grant of
1.	Annexure-A	Application Form	Yes	Yes	Yes	Yes
2.	Annexure-B	Security Plan	Yes	Yes	Yes	Yes
3.	Annexure-C	Process Map	Yes	Yes	Yes	Yes
4.	Annexure-D	Site Plan	Yes	Yes	Yes	Yes
5.	Annexure-E	Site Plan
	Annexure- E.1	General Compliance	Yes	Yes	Yes	Yes
	Annexure- E.2	Legal Compliance	Yes	Yes	Yes	Yes
	Annexure- E.3	Managing commercial and (where appropriate) transport records	Yes	Yes	Yes	Yes
	Annexure- E.4	Financial Solvency	Yes	Yes	Yes	Yes
	Annexure- E.5	Safety and Security	No	Yes	Yes	Yes
6.	Annexure-F	Business Partner Details	Yes	Yes	Yes	Yes

Relaxation provided to MSMEs

Under the circular dated 22 July 2016, the MSMEs could not avail AEO Programme due to various conditions. To support the MSMEs against the challenges of the COVID-19 pandemic, the CBIC introduced the ‘Liberalized MSME AEO Package’ for MSMEs in line with the Prime Minister’s Aatmanirbhar Bharat Abhiyan.
The CBIC examined the difficulties faced by the MSMEs (Micro, Small and Medium Enterprises) while applying for ACO certificate and relaxed various compliances and security requirements for MSMEs under the ‘Liberalized MSME AEO Package’, which are as follows:

The condition that the business must have handled a minimum of 25 customs documents in the last financial year was relaxed. The MSMEs handling ten documents (five documents each half-year) are eligible and can apply for an AEO certificate.

The condition of business carrying out customs-related activities for the last three financial years was reduced to the last two financial years for MSMEs to obtain AEO status.

The condition of not receiving a show-cause notice during the last three financial years involving forgery, fraud, clandestine removal of excisable goods, etc during the last three financial years was reduced to the last two financial years for MSMEs.

The condition of the business being financially solvent during the last three financial years was relaxed to last two financial years for the MSMEs to avail AEO status.

The various annexures required to be filed for AEO T1 and AEO T2 accreditation, i.e. annexure A, B, C, D, E.1 to E.4 have been supplanted with two annexures, i.e. MSME annexure 1 and 2.

The annexures required to be filed for AEO T2 accreditation, i.e. annexure E.5.1 and E.5.7 for physical verification has been rationalised with one annexure of MSME annexure 3.

The time limit for processing the MSME AEO T1 and T2 applications was reduced to fifteen working days (usually one month) and three months (usually six months), respectively.

The benefit of relaxation in furnishing a bank guarantee for the AEOs for MSME AEO T1 and MSME T2 was further relaxed to 25% from 50% and 10% from 25% required to be furnished by an exporter or importer who is not an AEO certificate holder, respectively

Application Form: (applicable for grant of AEO-T1, AEO-T2, AEO-T3 and AEO-LO)

Annexure-A: Application Form	Name/Address of all location/site of applicant. Name/Designation/Email/Mobile/Fax/Phone of central point of contact person. PAN of the applicant. Major items /Country of Import/Export with Tariff Code. No. of BE/SB field during the Previous FY. Copy of MSME certificate (if any) Board resolution for authorized signatory.
Annexure – B: Security Plan	Procedural security. Document security. Physical security. Access controls. Personnel security. Training and skill up gradation. Compliance with other Government security related requirements, if any.
Annexure – C: Process Map	Process map for flow of goods/ documentation/ information from receipt of order to the point of export/delivery/ receipt of the product describing all the activities/ operations and role of the applicant and other business partners (e.g. CHA, Logistics provider etc.)
Annexure – D: Site Plan	Site plan with respect to all the sites of the entity describing (External perimeter/ all access point/ Lighting/ Office/ storage/ CCTV/ Container storage/ Parking etc.)
Annexure- E.1 General Compliance	Copy of AEO/ACP if any. Copy of all statutory registration(e.g. GST/ IEC/ Factory License/ PAN) Certificate of incorporation (in case of company/LLP)/ Partnership agreement Detail of Director/ Company Secretary/Partner.(Name/Father/PAN/DIN/Mobile/address) Details of Place/Location where goods are handled (e.g. loading/storage) (address/responsible person/GSTN/Phone). Cross Cheque/ Bank statement. Details of minimum 25 Bills of entry or shipping bill for preceding FY. Details of conviction (if any)
Annexure-E.2 Legal Compliance	Detail of infringement of Customs Laws(if any) Detail of SCN for removal of Excisable Goods (Fraud/Forgery/Clandestine removal) for 3 FY. Detail of SCN of Service Tax collected from customers but not deposited to the Government Detail of prosecution launched (if any) Disputed duty/Disputed Drawback/Total Duty Paid/Total Drawback claimed for 3 FY. Notes on Internal control to identify and disclose any irregularities or errors to the Customs authorities and to take remedial action.(SOPS on Internal Control)
Annexure E.3 Managing commercial and (where appropriate) transport records	Snap shot of record room where documentary file is stored. Organizational chart (if any) SOPs of person handling license/authorization/ Data recovery policy/ Training to employee for change in customs laws/Cargo handling/ IT security policy.
Annexure E.4 Financial Solvency	Audited Balance sheet for 3 FY. Compliance certificate for filling of annual account with register of company for 3 FY. Solvency certificate issued by the Statutory Auditor in case of AEO- T3/LO otherwise from Chartered Accountant. Declaration of solvency.
Annexure E.5 Safety and Security	Security policy and procedure manual to preserve the integrity of the cargo. Security policy and procedure manual to preserve the integrity of the cargo. Notes on Documentation on clearing of cargo. Premises Security. Cargo Security: Conveyance Security Personnel security: Business Partner Security Security Training and Threat Awareness

Process flow chart

Applications for AEO

The AEO Cell under the jurisdictional Chief Commissioner of Customs, headed by nodal officer of the rank of Additional /Joint Commissioner is responsible for processing AEO applications as per provisions contained in Circular No. 33/2016-Customs as amended by Circular Nos. 03/2018- Customs, 26/2018 and 51/2018 -Customs.

The nodal officer of the jurisdictional Chief Commissioner forwards the processed application of AEOT2/T3 and AEO-LO with recommendation to programme manager of Indian AEO Programme having office at Delhi for taking final decision on AEO accreditation. The process of AEO-T1 accreditation has been further simplified and decentralized by Circular No. 26/2018 dated 10.08.2018. Officers in the Rank of Principal Commissioner/ Commissioner have been appointed as the Zonal AEO Programme Manager in each Zone headed by Principal Chief Commissioner or Chief Commissioner of Customs and are responsible for final acceptance or rejection of the AEO application. Thus, the AEO-T1 application is processed by AEO Cell and eligibility thereto is decided at Zonal level only. The decision is conveyed to Directorate of International Customs for generation of AEO Certificate. Such approved applications are sent online by the zones to DIC Delhi for generation of digitally signed certificate.

The application should be sent to the office of the jurisdictional Chief Commissioner of Customs with copy to AEO Programme Manager, Directorate of International Customs or in case of any doubt, to the AEO Programme Manager, Directorate of International Customs, 10th Floor, Tower II, Jeevan Bharti Building, Connaught Place, New Delhi – 110001.

The jurisdictional Chief Commissioner of Customs is the one from where the Importer/Exporter/Logistic operator is doing majority of business in international supply chain. An on-line website (Domain name: aeoindia.gov.in) has been created for filing and processing of AEOT1 application. The applicant can login to the website and file the AEO- T1 application. As of now, the following Chief Commissioner of Customs offices has been designated for processing of AEO application:

Delhi
Mumbai Zone-I
Mumbai Zone-II
Mumbai Zone-III
Ahmedabad
Vishakhapatnam
Bhubaneswar
Bangalore

Chennai
Hyderabad
Kolkata
Tiruchirappalli
Patna
Pune
Nagpur
Bhopal

An existing AEO certificate holder can apply for higher AEO status. There is no time limit for filing higher status application except in case of AEO-T3. In case of AEO-T3, either the entity should have had AEO-T2 status continuously for two years or when all its business partners in international supply chain have acquired either AEO-T2 or AEO-LO status.

The applicant has to nominate the contact person/ authorized representative from company’s own administration only (Para 2.3 of Circular No. 33/2016-Customs). AEO should apply separately for any of the three tier AEO programme of importer/exporter (AEO T1/T2/T3) or single tier AEO LO status.

How to apply for AEO Certification/AEO Registration in India?

There are the following two modes for AEO registration/certification in India –

AEO T1 Certification

The Government of India has launched an online portal to apply for the AEO T1 where the applicants are only required to fill up two application forms - Annexure 1 & Annexure 2. The process of the AEO T2, AEO T3, and AEO-LO registration is still offline.

Online application steps for getting an AEO T1 Certificate:

AEO T1 Registration

First, the applicant has to register themselves at the AEO website www.aeoindia.gov.in by providing all the information asked in the registration window to create a user ID and Password for logging into the portal for the application.
The registration details are verified as per the online IEC (Import-Export Code) on the DGFT portal,
Hence it is mandatory to do the registration on the AEO portal using the Mobile Number and Email id of the company which is already there in the IEC.

After filling out the above details you will receive a 4 digit OTP which you have to enter. For the first-timer, you will have to create your username and password. Once it is created login with it.

After logging in you can see that on the left-hand side there are 4 sections (Profile, Application form, Application view, and Update verification). On selecting the profile you will see the previously filled up details like Company Name, IEC No, Mobile No, Zone, and email.

Online Filing of Annexure 1

Now proceed to the "Application form” section which is divided into Annexure–1 & Annexure -2. In Annexure -1 you will have to submit/upload the following documents:

First enter your Company's name.
Rejection Letter (If the AEO application ever got rejected).

Select the relevant option for the question "Has your application ever been rejected?", if yes, fill in the relevant details and upload the rejection letter. If no, skip to the next step.

Enter the IEC and GST certificate details

IEC Certificate - Enter the IEC number and upload the certificate.
GSTN Certificate - Enter the GSTN number and upload the certificate

Enter the Registered Address/Branch Address
The next step consists of entering your address details in which you have to fill in the following details.

Address type
Address (number and street)
State

District/City
Zip Code
Upload Site plan

Now you have to enter details specifying the nature of your business i.e. Manufacturer, Trader, Importer, or Exporter and the details of the contact person with whom the AEO Manager will contact.

AEO Annexure form part 1

Contact Person's name, designation, contact number/alternative number, email id shall be filled in the fifth option.
Now, proceed towards Sr. No. 6 of the Application form. Here, fill in your company registration number, PAN and upload the respective documents.
Enter the PAN number of the company and upload the Pan Card copy.

Import Countries - You have to select from which countries you will be importing your items from along with the item's HSN Code.

Export Countries - Select the Export country where you will be exporting your product and then enter the name + HSN code of the items you will be exporting.

Import-Export Documents - Next, You need to fill No of documents (shipping bills + bills of entry of the previous FY),In simple words, it means that you should have handled more than 25 Import and Export shipments combined in the last FY to be eligible to obtain AEO Certification. This is a very basic and Important Eligibility Criterion. Fill the Duration of business in Months (For obtaining an AEO Certificate you should have conducted the business for at least 36 months)

Process Map Details - Upload Import-Export process Map details.
To make a business map you can use different kinds of formats like a word document, PowerPoint file, etc.

Online Filing of Annexure 2

Now in Annexure - 2 you will see this field wherein you will have to declare if there is any case of violation of customs & allied laws then you need to mention who is responsible for it.
You need to mention if you’ve been issued any SCN (Show Cause Notice) by customs or GST authorities, if yes then you have to specify the reason behind it. Also, specify the brief of the breach including the provision in the SCN. Bring out the decision in the order if any and whether any prosecution has been launched.
After that, you need to provide the break-up of Contingent liability in your Audit Report for the last 3 financial years. After that you have to provide details like the procedure for administering the license, the procedure for administering the commercial records connected to exports/imports, and if you deal in goods subject to anti-dumping duties or safeguard duties.

AEO Annexure 2 form part 1

On this page upload details of goods and provide procedures for verifying the accuracy of customs declaration.
Provide the procedure to ensure the protection of your computerized record system from unauthorized access.
Provide the procedure for back-up and recovery of your business records (Please state for how long this data is archived).
You need to provide the Net Worth of your company for the last 3 financial years. Uploading document for the same is optional.
Provide Net Current Assets as per the Balance Sheet of the Audit Report for the Last Three Financial Year
Please provide details of any insolvency, bankruptcy, or liquidation proceedings taken against your company in the last 3 financial years.

AEO Annexure 2 form part 2

After applying you can view your application in the “Application view” section. After you have viewed and checked your Application form, you can go ahead and submit the same. In the “Update Verification” section you can check the verification process status of your AEO application.

AEO Registration - Update verification section

After submission of your application, it will be processed by the AEO Authorities, and if the provided information/documents are found to be valid and considered to be eligible by the AEO Programme Manager, then the AEO T1 Certificate would be issued to the applicant within 30 days of the submission of the information and/or documents.

AEO T2 & AEO-LO Certification:

The manual application is done for AEO T2 and AEO LO and the applicant will have to undergo onsite verification with documentary verification of all the business premises that have relevant customs-related activities.
The duration of the visit/verification would vary depending on the business’s size, nature, number of premises, etc.

The AEO Programme Team would provide an estimate of the time required to complete the verification, which may have to be modified once the verification has commenced.
If several of the business premises of the applicant operate similarly through standard systems of record keeping and security, etc., it won’t be necessary for the AEO Programme Team to visit all of the premises. However, if different premises of the applicant run varying activities with dissimilar modes of operation, then it may be necessary for the team to make more visits
The AEO Programme Manager would inform the applicant about the AEO T2 or AEO LO certification status.
If the application is not accepted, the applicant would be advised of the criteria that haven’t been fulfilled and provide him time to adopt procedures to rectify it.
If the applicant is unable to make the necessary amendments within the allotted time period, the AEO Programme Manager would reject the application and enlist the reasons for doing so.

AEO T2 Certificate processing time

Activity Type	Number of days
Intimation upon submission of documents	Within 30 days
Physical verification of the documents	Within 15 days
Onsite verification of the business premises	Within 90 days
Timer after which the applicant is supposed to contact the AEO Programme Manager if not reverted by the AEO Programme team.	Within 45 days
Time taken by the AEO Programme Team to prepare a report and make application.	Within 60 days

Note: - As per the latest update, the processing time period for AEO T1 has been reduced to 15 days from one month, and for AEO T2 it has been reduced to three months from six months for all the MSMEs as the Government has simplified the criteria and reduced the document requirement & processing time to support MSMEs against the challenges of the Covid- 19 Pandemic.

AEO T3 Certification

There are the following criteria to get the AEO T3 Certification -

The business entity must have continuously enjoyed the AEO T2 status for at least 2 years before the application to get the AEO T3.
The entity must be an AEO-T2 certificate holder, and its other business partners must have AEO-T2 or AEO-LO certificate, the business partners include exporters/importers, logistics service providers, custodians/terminal operators, customs brokers, warehouse operators.
If the applicant has continuously held an AEO T2 Status for two or more years, he will be issued an AEO T3 Certificate within 30 days of applying.

However, if there are any significant changes like operations of the business since the previous physical verification by an AEO Programme Team, the applicant might have to undergo physical verification if considered necessary by the AEO Programme Manager. If the applicant has not continuously held an AEO T2 Status for two or more years but satisfies the given eligibility criteria, a specific AEO Programme Team would conduct physical verification of the information and documents submitted in Annexure F only, within a period of 15 days. In case of any significant business changes since the last AEO Certification, physical verification of the information/documents would be conducted if deemed necessary by the AEO Programme Manager.

AEO Certification

After completing the AEO registration procedure, the AEO Programme Manager shall send the AEO Certificate to the applicant in hard copy along with an electronic copy. The certificate shall bear an ‘AEO logo’ that shall be representative of the status provided to the applicant. The applicant will have their AEO Status activated within a week from the date of issue. Upon activation, the applicant would be required to mention the given AEO Certification Number to signify their AEO Status.

How Much Time Would It Take To Obtain the AEO Certificate?

Time period for obtaining AEO certificate

Certification	AEO-T1	AEO-T2	AEO-T3	AEO-LO
Time limit	Within 30 days after submission of application and required documents	Between a period of 90-180 days after submission of application and	Between a period of 90-180 days after submission of application and required documents	Between a period of 90-180 days after submission of application and required documents
Time limit foe MSMEs	Within 15 days after submission of application and required documents	For MSMEs 90 days after submission of application and required documents

The time period denotes the time taken cumulatively for onsite verification, approval by the AEO Programme Manager, and the certification's delivery to the applicant.

Reasons that prevents further processing of the AEO Application

Due to the incompleteness of the application or certain other shortcomings of the business entity, the application would not be processed until these issues are corrected. Here are the cases wherein this could occur:

Reasons That Prevents Further Processing of the AEO Application

Incomplete filing of information

No responsible person is nominated as a Point of Contact (POC)

The applicant is undergoing bankruptcy

The application is not made by a legal person

Applicant does not fulfill the eligibility criteria

Processing of AEO Application

The application for AEO accreditation is not processed in following cases:

a) When application is incomplete. The application may be resubmitted with the complete information

b) Where the application has not been made by a legal person. The same can be resubmitted by the concerned legal entity.

c) Where no responsible person is nominated as the Point of Contact. The application can only be resubmitted when the applicant nominates a responsible person from his/her organization only, who will be the point of contact for the AEO Programme.

d) Where the applicant is subject to bankruptcy proceedings at the time the application is made. The application can be resubmitted when the applicant becomes solvent.

e) Where a previously granted AEO status has been revoked -The application can be submitted only after one year, in case of AEO T-1 & T-2 and after three years in case of AEO T-3 and LO, from the date of revocation.

The AEO application can be rejected in following two cases:

Examination of Application

The application for grant of AEO status is examined by the AEO team on the following aspects:-

Sr.No.	Particulars	Detailed description
1.	Compliance Requirements
1.	Applicant’s record of compliance over the last three years is to be examined to ensure adherence to Customs/Central Excise/Service Tax laws/allied laws administered by the Department. Technical offences not to disqualify grant of AEO Status	Applicant should have record of compliance over the last three years preceding the date of application. The company should have business activities for at least three years from the date of application. Assessment to be made whether a serious infringement or repeat infringements of Customs, Central Excise and Service Tax laws has been committed by any of the following persons: (i). the applicant, and, (ii). any other responsible person involved in the running of the business. An applicant to demonstrate that (1). procedures in place to identify and disclose any irregularities or errors to the Customs authorities or, where appropriate, other regulatory bodies. (2). having taken appropriate remedial action when irregularities or errors are identified. Once an error has been identified, the applicant is expected to take steps to ensure that they do not happen again or, at least, to ensure that they are immediately remedied if they do arise. The previous compliance records of the following persons are also to be looked at: (i).Company Directors; (ii). Company Secretary; (iii). Employees directly responsible for the import/export of goods Any errors made by third parties acting on applicant’s behalf would reflect upon the applicant’s compliance. Thus, the applicant should make such third parties aware of the standards that he operates to and that systems are in place to immediately identify any problem.
GSTR2B	GSTR 2B is an auto-drafted document that will act as an Input Tax Credit (ITC) statement for taxpayers. The GST Council states that GSTR 2B will help in cutting down the time taken to file returns, minimize errors, ease reconciliation and simplify compliance.
2.	Managing Commercial and (where appropriate) Transport Records
2.	For the purpose of AEO status, the applicant must have a satisfactory system of managing commercial and, where appropriate, transport records	Applicant is required to have following:- An accounting system consistent with Generally Accepted Accounting Principles (GAAP) / International Financial Reporting Standards (IFRS) which facilitates audit-based Customs control. Allowing the Programme Team physical or electronic access to Customs and, where appropriate, transport records. An administrative set up and documented procedures to control and manage the movement of goods. Internal controls capable of detecting illegal or irregular transactions. Satisfactory procedures for the handling of licenses, authorizations and documents connected to export/import. Satisfactory procedures to archive and retrieve records and information, and also for protection against the loss of information. Ensure that employees are made aware of the need to inform the Customs authorities whenever compliance difficulties are discovered and establish suitable contacts for this. Satisfactory procedures for verifying the accuracy of Customs declarations. Appropriate information technology security to protect against unauthorized intrusion.
3.	Financial solvency
3.	An applicant must be financially solvent for the three years preceding the date of application. The applicant should not be listed currently as insolvent, or in liquidation or bankruptcy and should not have an outstanding claim against any guarantee in the last three years. Further, the applicant should not have delayed in payment of due taxes.	Programme Team will rely on the applicants annual accounts due in the last three years to establish solvency. In particular, the following will be taken into account: Where required, the accounts have been filed with Registrar of Companies within the time limits laid down by law. Where applicable, audit qualifications or comments in the annual accounts about the continuation of the business as a going concern. Any contingent liabilities or provisions. Net current assets are positive. Net assets position and the extent of intangible assets. Due consideration where in some circumstances, it may be normal practice for a company to have negative net assets. Where applicants are a newly established business or have just started trading, his financial solvency to be judged on the basis of records and information. This will include the latest: Cash flow figures Balance sheet. Profit and loss forecasts approved by directors/partners/sole proprietor.
4.	Safety and security - Internal controls and measures to secure the safety of applicant’s business and his supply chain will be considered in addition to any specific legal requirements that may be applicable to the business. The various aspects covered under this heading are:
(a).	Cargo Security	In order to ensure Cargo Security following steps should be taken: Only properly identified and authorized persons should have access to the cargo. Integrity of cargo should be ensured by permanent monitoring or keeping in a safe, locked area. All seals must meet the current PAS / ISO 17712 standards for high security seals. In cases it is not possible to procure and use PAS / ISO 17712 seals for air consignments / courier consignments any international seal -compatible with standards of PAS / ISO 17712 shall be used. However in case of maritime containerized cargo only PAS / ISO 17712 seals shall be used. The integrity of container seals should be checked and appropriate procedure should exist for the fixing of seals. Only designated personnel should distribute container seals and safeguard their appropriate and legitimate use. When appropriate to the type of cargo container used, a seven-point inspection process is recommended: Front wall, Left side, Right side, Floor, Ceiling/Roof, Inside/outside doors, Outside/undercarriage. Appropriate procedures should be laid down on measures to be taken when an unauthorized access or tampering is discovered. It should not be possible to deliver goods to an unsupervised area. Goods should be uniformly marked or stored in designated areas and procedures should exist to weigh / tally them and compare them against transport documents, purchase/sales orders and Customs papers. Internal control procedures should exist when discrepancies and/or irregularities are discovered.
(b).	Procedural Security	In order to ensure procedural security following measures / steps should be taken. Security measures should be in place to ensure the integrity and security of processes relevant to the transportation, handling, and storage of cargo in the supply chain. Proper documentation management procedure should be in place to ensure that all documentation used in the clearing of cargo is legible, complete, accurate and protected against the exchange, loss of introduction of erroneous information Procedure should be in place to ensure that information received from business partners is reported accurately and timely as well as declared in the time limit regulated by Customs. Procedure should be in place to ensure that: Import / Export cargo are reconciled against the information on the bill of lading. The weights, labels, marks and piece count of the import/export cargo are accurately indicated. Import/export cargo are verified against purchase/delivery orders. Drivers delivering or receiving cargo are positively identified before cargo is received or released. All shortages, overages, and other significant discrepancies or anomalies must be resolved and/or investigated appropriately.
(c).	Conveyance Security	For conveyance security the applicant seeking authorization under AEO must ensure that: all conveyances used for the transportation of cargo within the supply chain are capable of being effectively secured (to the extent possible). (To the extent possible) that all operators of conveyances used for transport of cargo are trained to maintain the security of the conveyance and the cargo at all times while in its custody. To require operators to report actual or suspicious incident to designated security department staff of both the AEO Programme Team and Customs, as well as to maintain records of these reports, which should be available to Customs. potential places of concealment of illegal goods on conveyances and ensure these are regularly inspected, Conveyance integrity is maintained while the conveyance is en route transporting cargo to export /import points or import/transit containers by utilizing a tracking and monitoring activity log or records. Pre-determined routes are identified by the dispatcher, and procedures must consist of random route checks along with documenting and verifying the length of time between the loading point/trailer pickup and the delivery destinations. Drivers must notify the dispatcher of any route delays due to weather, traffic and/or rerouting. The management of transporters must perform a documented, periodic, and random verification process to ensure the logs are maintained and conveyance tracking and monitoring procedures are being followed and enforced.
(d).	Premises Security	In order to ensure premises security following measures steps should be taken. Buildings must be secure against unlawful entry. External and internal windows, gates and fences must be secured with locking devices or alternative access monitoring or control measures. Management or security personnel must control the issuance of locks and keys. Adequate internal and external lighting must be provided especially for entrances and exits, cargo handling and storage areas, fence lines and parking areas. Gates through which vehicles and/or personnel enter/exit must be manned, monitored or otherwise controlled. Vehicles accessing restricted areas must be parked in approved area and their license plate numbers furnished to Customs upon request. Only properly identified and authorized persons, vehicles and goods may be permitted access. Access to document or cargo storage areas may be restricted. There should be appropriate security systems for theft and/or access control. Restricted areas should be clearly identified. Integrity of structures and systems must be periodically inspected. Perimeter fencing should enclose the areas around cargo handling and storage facilities. Interior fencing within a cargo handling structure should be used to segregate domestic, international, high value and hazardous cargo. All fencing must be regularly inspected for integrity and damage The number of gates should be kept to the minimum necessary for proper access and safety Private passenger vehicles should be prohibited from parking in or adjacent to cargo handling and storage areas.
(e).	Personnel Security	To ensure personnel security following measures are required :- All reasonable precautions must be taken when recruiting new staff to verify that they are not previously convicted of security-related, Customs or other criminal offences. Periodic background checks must be conducted on employees working in security sensitive positions. Employee identification procedures should require all employees to carry proper identification that uniquely identifies the employee and organization. Procedures to identify, record and deal with unauthorized or unidentified persons, such as photo identification and sign-in registers for visitors etc. must be ensured at all points of entry. Procedures must be in place to expeditiously remove identification and access to premises and information for employees whose employment is terminated.
(f).	Business Partner Security	The applicant must have written and verifiable process, including the capability of financial soundness and compliance with the safety requirement set by the contracts as well as the capability of detection and correction of safety defects, for the selection of business partners. For those business partners having AEO certification, the applicant must get those business partners‟ copies of certification For non-AEO partners, the applicant must get written confirmation of meeting AEO equivalent security criteria. Such business partners must have one of the following written documents demonstrating their compliance with security criteria: Contractual document A completed self-assessment security questionnaire from the applicant. A written statement from the business partner demonstrating their compliance with AEO security criteria. Senior business partner officer attesting to compliance. Documents from the business partners demonstrating their compliance with and equivalent and accredited security program administered by a foreign Customs authority. Periodic reviews of business partner’s processes and facilities must be conducted based on risk, and must maintain the security standards required by the applicant.
(g).	Security Training and Threat Awareness	(i). The applicant to ensure that: A threat awareness program is established and maintained for employees to foster awareness of the threat at each point in the supply chain. Employees are aware of the procedures the company has in place to address a situation and how to report it. Specific training is offered to assist employees in maintaining cargo integrity, recognizing internal conspiracies and protecting access controls. (ii). Supply chain security training of employees must include the following items: Security policy of the company Potential risk to internal security of the company Maintaining cargo security. Access control measures of the company. Identifying and reporting suspicious cargo and personnel. Conveyance management and cargo security for conveyance management personnel. (iii). Educational methods of security training and keeping records of security training for the checks conducted by the Customs are established.

Pre-certification verification

Once the application is accepted and validated by the AEO Programme Manager, the AEO Programme Team will visit the business premises and carry out checks to verify the information provided is accurate. Such visit shall be made on a convenient date after consulting the applicant.

The AEO Programme Team will examine the size and nature of business, the record keeping system, and strength of internal control system. The applicant should be prepared to answer questions or provide additional information on all aspect of the application to the visiting AEO Programme Team. Where appropriate, in addition to the other requirements detailed earlier, the AEO Programme Team will cover the following:

Information on Customs matters.
Remedial action taken on previous Customs errors, if any.
Accounting and logistic systems.
Internal controls and procedures.
Flow of cargo.
Use of Customs House Agents.
Security of Computers/IT and documents.
Financial solvency.
Safety and security assessment – premises, cargo, personnel etc.
Logistic processes.
Storage of goods.

On completion of verification, the AEO Programme Team will prepare their report and make a recommendation to the AEO Programme Manager. The contents of report and recommendation can be seen by applicant who will get the opportunity to sign the same, but this will not be a mandatory requirement.

Where the application is not accepted after the AEO verification, the applicant is informed suitably within 60 days and advised of the criteria that have not been met and give the applicant time to adapt procedures to remedy the deficiency. If applicant is unable to make the required changes within the specified time limits, the AEO Programme Manager will issue a decision to reject applicant’s AEO application, explaining the reasons for rejection. This decision will be subject to the applicant’s right of appeal.

Certification:

The AEO Programme Manager will inform the applicant of the outcome of his application, which should ordinarily be done within 90 days of the date on acceptance of the completed application. If AEO status is granted, then-

AEO Programme Manager is required to send the Certificate of AEO Status to the applicant in hard copy along with an electronic copy.
The Certificate to bear the „AEO logo‟ that may be used where it is appropriate to do so for the business, for example, company stationary, signage on vehicles or other publicity materials.
Certificate of AEO Status to be activated within 10 days from the date of issue.
After AEO Status, applicant is required to enter the certificate number on all Customs documentation to indicate their AEO Status.
the applicant is required to keep the Certificate of AEO status at a safe place and not release the Certificate number to anyone unless required to do so for business purposes.
Certificate of AEO status to have validity for three years.

Maintaining AEO Status:

After obtaining AEO status, the AEO status holder is required to maintain their eligibility by adhering to the appropriate standards and is required to notify AEO Programme Team, any significant change in business and processes as soon as the change is known or, at least within 14 days of the change taking place. These changes may include the following:

Change to the legal entity (in this case, applicant is required to reapply in the name of new legal entity).
Change of business name and/or address
Change in the nature of business i.e. manufacturer / exporter etc
Changes to accounting and computer systems.
Changes to the senior personnel responsible for Customs matters.
Addition or deletion of locations or branches involved in international supply chain.

Review of AEO Status:

The AEO Programme Team will review AEO status periodically to ensure continued adherence to the conditions and standards of grant of Certificate of AEO Status. Thus, it is recommended that the AEO status holder should continue to re-assess it‟s compliance with the conditions of certification and act upon any identified problems as soon as they arise. To begin with, the frequency of such review will be one year.

Return of Application

Application submitted by the Applicant will not be processed in following situations:-

Situation	Action required to be taken
If application submitted by the applicant is found to be incomplete or deficient	The applicant will be suitably informed within 30 days of the receipt.
No processing of the application until rectified, in following situations.
Where the Application submitted is incomplete	To be resubmitted with complete information
Where the application has not been made by a legal person	To be resubmitted by the concerned legal entity.
Where no responsible person is nominated	To be resubmitted with applicant nominating a responsible person who will be the point of contact for the AEO Programme.
Where the applicant is subject to bankruptcy proceedings at the time when the application is made	To be resubmitted when the applicant becomes solvent.
Where a previously granted AEO status has been revoked	Not be resubmitted until three years after the date of revocation.

Rejection of application:

Applications will be rejected in cases, where the applicant,-

is not eligible for grant of AEO status, or
has been convicted of a serious criminal offence linked to the economic activity of his business in the past, or
in cases where the deficiency noticed in the application cannot be remedied.

The information regarding the rejection of such application will be given to the applicant within 30 days of the receipt of the application.

Time limit for grant of Certificate of AEO Status:

Applications meeting the identified criteria are granted the certificates of AEO status ordinarily within 90 days of receipt of the completed application containing full information except in cases where validation of AEO applications cannot be concluded on genuine ground.

Withdrawal/ Suspension/ Restoration

Suspension of AEO Status:

The AEO Programme Manager may suspend the Certificate of AEO Status in the following cases:

Where any non-compliance with the conditions or criteria for the Certificate of AEO Status has been detected and no remedial steps have been taken within 30 days thereof.; or
In the case of a Custodian or Custom Broker or Warehouse Operator, where the basic license as a Custodian or Custom Broker or Warehouse Operator, as the case may be, has been suspended by the competent authority.
Where there is a reasonable belief that an act has been perpetrated that is liable to lead to prosecution and /or is linked to a serious infringement of Customs law.

On suspension of AEO authorization, all Customs formations are required to be intimated immediately by AEO Programme Team.

There is also provision for downgrading of the status of an AEO-T3 to AEO-T2 or to AEO-T1, or downgrade the status of an AEO-T2 to AEO-T1, in the case of issue of any show cause notice (other than on issue listed in 3.2.1 of the AEO Circular) for contravention of Customs/Central Excise/GST law or suspend the status of the AEO, as deemed appropriate. The above decision is taken after due examination of the Show Cause Notice, in consultation with the jurisdictional Commissioner.

Note:

Ordinarily, prior to any decision to suspend the authorization, the applicant will be contacted and asked to explain why such action should not be taken. Any decision taken in this regard will be subject to right of appeal of the applicant.
Suspension of Authorization can also be done on the request of AEO in case he has detected some irregularities and needs some time to correct the situation. In this case, if necessary, this time period can be extended.
Suspension can be revoked if the problems affecting certification have been satisfactorily resolved.

Suspension or Downgrading of AEO Status
For

Non compliance with condition or criteria of AEO detected
Basic licence of CBA, Custodian or Warehouse has been suspended by customs authority.
Downgrade in case of I/E if SCN (other than 3.2.1) issued with consultation of jurisdictional Commissioner

Restored if Remedial action taken, Licence restored, Ratio of Show Cause Notice to total duty is less than 10%. Downgraded AEO can apply for higher status.

Can appeal be filed against the decision of AEO Programme manager suspending or downgrading the AEO status?

There is no provision for appeal under the AEO scheme. However, there is provision of restoration of suspended/downgraded AEO status.

Revocation of AEO Status:

In following circumstances, the Certificate of AEO Status is revoked:

Where the Certificate of AEO Status is already suspended and the AEO holder fails to take the remedial measure to have the suspension withdrawn.
Where the AEO status holder has committed serious infringement of Customs law and has no further right to appeal.
Where the AEO status holder requests the authorization be revoked.

Note:

Prior to any decision to revoke authorization, the applicant should be contacted. Any decision will be subject to right of appeal of applicant. Revocation is applied from the day following the authorization holder being notified.
In case of revocation of authorization, the applicant will not be entitled to reapply for another certificate for a period of three years from the date of revocation.

Revocation of AEO Status

Suspended AEO holder fails to take remedial measure within 60 days of suspension.
On reasonable belief of commitment of an Act liable to arrest or prosecution under the Customs ct.
Issuance of Show Cause Notice on issues listed in para 3.2.1 of Cir. 33/2016
On request of AEO status holder

Revocation can be done after issuance of notice only.
T1, T2 cannot re apply within one year of revocation.
T3 and LO cannot reapply for 3 yrs from revocation.

Right to Appeal:

In case of suspension or revocation of the Certificate of AEO Status, the AEO status holder can, within thirty days of the decision, file an appeal before the Director General of Inspection, New Delhi for review of the said order. The Director General of Inspection, after considering the case of the applicant, shall dispose of the appeal within a period of thirty days.

Requirements for restoration of suspended/ downgraded AEO status

The requirements in various situations are as under:

In case of non-compliance with the condition of AEO status, if the AEO status holder takes the necessary remedial measures to the satisfaction of the AEO Programme Manager within 60 days of suspension, the AEO Programme Manager may restore the AEO status.
In case of suspension on account of some action under Customs Act like issue of SCN, cancellation of Customs Broker’s license etc, an AEO Programme manager may consider restoration of AEO status if the action under the Customs Act is dropped/ suspension of license is revoked.
In case AEO status has been suspended/downgraded on account of SCN and if the ratio of disputed duty demanded or drawback demanded or sought to be denied in SCN under Customs Act in the last three years to the total duty paid and drawback claimed is not more than ten percent, the AEO programme manager may consider for restoration of AEO status.
In case an AEO status has been downgraded, the entity can apply again for higher status as and when the eligibility conditions and criterion are met by it. Such applications will be treated as a fresh application.

Circumstances under which the AEO Status can be revoked

The Certificate of AEO Status will be revoked in following circumstances:

Where the Certificate of AEO Status is already suspended and the AEO holder fails to take the remedial measure within 60 days of withdrawal for the suspension; or
Where there is a reasonable belief that an act has been perpetrated that is liable to lead to prosecution and /or is linked to an arrest of person under Customs Act, 1962 or
A show cause notice has been issued to them involving fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax has been collected from customers but not deposited to the Government; or d) Where the AEO status holder requests the authorization be revoked.

The AEO-T1 and T2 status holders can re-apply only after a period of one year from the date of revocation. The AEO-T3 and LO status holders can re-apply only after a period of three years from the date of revocation.

Validity and Renewal of AEO

AEO status	Applicability	Validity	Time limit for submission of application for renewal before lapse of validity
AEOT1	Granted only to an importer or to an exporter without physical verification of places/premises	3 Years	30 Years
AEOT2	Granted only to an importer or to an exporter after physical verification of premises/places.	3 Years	60 Years
AEOT3	Granted to an importer or to an exporter who continuously enjoyed the status of AEO-T2 for a period of two years preceding the date of application or The importer/exporter holding AEO-T2 certificate, and its other business partners namely importers or exporters, Logistics service providers, Custodians/Terminal operators, Customs Brokers and Warehouse operators are holders of AEO-T2or AEO-LO certificate or any other equivalent AEO certificate granted by a foreign Customs.	5 Years	90 Years
AEOLO	Granted to economic operators other than importers and exporters, (e.g. Logistics Providers, Custodians or Terminal Operators, Customs Brokers, Warehouse Operators) after physical verification of premises/places.	5 Years	90 Years

Revocation of AEO Certificate / Status –

Following are the possible situations under which AEO certificate can be revoked –

In case the certificate of AEO status is already suspended and the AEO holder fails to take the appropriate steps within a period of 60 days for withdrawal of suspension;
In case there is a reason to believe that the AEO holder is liable to prosecution and / or is liable to arrest as per provisions of the Customs Act, 1962;
In case a show cause notice being issued to AEO holder involving fraud, forgery, clandestine removal of goods or AEO holder is involved in the case where tax has been collected but the same is not deposited with the Government; and
In case AEO holder himself requests the authority to revoke the certificate.

What Is Deferred Duty Payment under Customs (Delinking duty payment and Customs clearance)

In terms of customs Notification No. 135/2016-Customs, Importers certified under Authorized Economic Operator programme as AEO (Tier-Two) and AEO (Tier-Three) are entitled for payment of duty under deferred payment scheme, means option of deferred payment is extended only to AEO-T2 and AEO-T3 certificate holder.

Date of bill of entry	Duty shall be paid
1^st day to 15^th day of any month.	By the 16^th day of that month
16^th day till the last day of any month except March	By the 1^st day of the following month.
16^th day till the 31^st day of March	By the 31^st March.

Notification No. 134/2016-Customs (N.T.) dated 2^nd November, 2016 read with Circular No. 52/2016 The eligible importer who intends to make deferred payment shall indicate the same using flag “D” in the Payment Method column of Bill of Entry filed.

Legal Compliance

There should be:

No show cause notice issued to applicant during last three financial years involving fraud, forgery, outright smuggling, clandestine removal of excisable goods OR cases where Service Tax has been collected from customers but not deposited to the Government. However if issued detail shall be furnished. Show Cause Notice issued involves only technical issues like classification, valuation etc., they are entitled to get benefit of AEO.
No case wherein prosecution has been launched/completed against the applicant or its senior management.
Ratio of disputed duty during the last three financial years to the total duty paid during the said period is not more than ten percent.
Ratio of disputed drawback during the last three financial years to the total drawback claimed during the said period is not more than ten percent.

Managing commercial and (where appropriate) transport records:

The applicant should have a satisfactory

System of managing commercial, transport records,
Procedures for verifying the accuracy of Customs declarations,
Aware of the need to inform the Customs authorities whenever compliance difficulties are discovered.
Administrative set up which corresponds to the type and size of business

Financial solvency

The applicants must be financially solvent during the three financial years preceding the date of application and submit an undertaking regarding its solvency and a Solvency Certificate issued by the independent Chartered Accountants or Statutory Auditor of the applicant for AEO-T1 and AEOT-T2, but for AETO-T3 and AEO-LO only certificate from Statutory Auditor of the applicant.

To whom application to be made for certification and renewal

The application should be sent directly to the respective jurisdictional Custom Chief Commissioner’s office, in case of any doubt with a copy to the AEO Programme Manager, Directorate of International Customs.
The Commissioner, Directorate of International Customs, 10th Floor, Tower II, Jeevan Bharti Building, Connaught Place, New Delhi –110001 will be the AEO Programme Manager.
“AEO officer at New Customs House, Near IGI Airport Delhi “are as under:

AEO Programme Team (New Customs House, Delhi)

Mr. Anurag Sehgal Joint Commissioner	Ms. Komila Punia DC-Air Cargo(Import)	Mr. Radhe Tallo AC-Genera
AEO Cell- Head	CRM	CRM

Mandatory Compliance under AEO registration process

Show Cause Notice must not have been issued to the applicant during the preceding three financial years regarding fraud, forgery, outright smuggling, and clandestine removal of excisable goods. However, if any show-cause notice involving technical issues has been issued in the previous three years, such detail must be furnished otherwise AEO Certification will not be furnished.
No cases wherein prosecution could have been launched or was completed against the entity or its senior management.
The ratio of disputed duty during the preceding three financial years to the total duty paid during the said period is not more than ten percent.
The ratio of disputed drawbacks during the last 3 financial years to the total drawback claimed during the said period is not more than ten (10) percent.
The applicant should have a satisfactory system of managing commercial, transport records, procedures for verifying the accuracy of customs declarations. There must be an administrative setup that corresponds to the type and size of the business.
The applicants of the AEO registration must be financially solvent in the preceding three financial years from the date of application. The entity must submit an undertaking in relation to solvency and a Solvency Certificate must be issued by an independent Chartered Accountant or Statutory Auditor of the applicant for AEO-T1 and AEO-T2. However, for AEOT3 and AEO-LO, only a certificate from the Statutory Auditor of the applicant is required.

Various Other Factors

To fulfill required criteria for AEO certificate, the applicant will need to ensure that different security protocols are met as per the requirement. The applicant’s security standards are considered fulfilled, if the following conditions are fulfilled.

Procedural Security

It is necessary that the applicant should have in place, appropriate internal controls and measures to ensure safety and security of his business and supply chain.
He should have detailed guidelines on procedures to be followed to take care of the cargo, when it is in his custody and during transport.
There should be proper documentation of management procedure.

Premises Security

Buildings that are used in operations must be free from unlawful entry. The important gates and doorways should be secured with locking devices or control measures. Authorized security officers should control the issuance of locks and keys. There must be adequate lighting arrangements for entrance, exits, cargo handling, storage areas, fence lines and parking areas. There should be proper monitoring of vehicles coming in and going out and they must be parked in specified areas.

Cargo Security

The applicant must follow appropriate measures for the handling of goods, protection against loss and also tampering with cargo units.

Conveyance Security

The applicant should ensure that the conveyances to be used in connection are handled in a manner, that it will ensure the cargo is safe and secured.

Personnel Security

The applicant must conduct, as far as possible screening of employees posted in sensitive areas and carry out periodic background checks.

Business Partner Security

The applicant should have a well-defined method to ensure a clear identification of his business partners.

Security Training and Threat Awareness

Supply chain security training of employees include the following items:
Security policy of the company
Potential risk to internal security of the company
Maintaining cargo security
Access control measures of the company
Records of the security training must be maintained

The applicant should fulfill all the eligibility Criteria for the issuance of AEO certificate.

Areas covered by AEO Programme team during physical verification of applicant premise

For AEO T-2 and AEO LO certification, examination of the criteria laid down under Section 3 of AEO Circular shall be carried out for all the premises which are relevant to the Customs related activities of the applicant for AEO-T2 or AEO-LO status.

In case, more than one premises of applicant are run in similar way by standard systems of record keeping and security etc., the AEO programme team can choose to visit any one of such similarly run premises as per the provision contained in Para 4.4.5.5 of AEO Circular. In such situation, the applicant has to make declaration to this effect in the form of Undertaking.

However, if the applicant has a range of activities or different premises are run using different methods of operation, the AEO Programme team has to visit those premises. The purpose of Physical verification by AEO team is to check whether the claims made in application regarding requirement and fulfillment of criteria as listed in Section 3 of AEO Circular exists or are in place. The AEO programme team may cover following areas during visit:

The above list is not exhaustive. The team can decide to cover more areas during visit as per the requirements.

In exceptional cases the verification process can be stopped with mutual consent. The applicant is given time to submit additional documents and rectify the minor issues. The applicant has to inform AEO team regarding rectification within 6 months so that the verification process recommences. The applicant in such cases will get decision on application by the revised date to be informed by the AEO team. The AEO status holder should report Customs related errors and its compliance to the CRM as well as AEO cell of the jurisdictional Chief Commissioner.

Circumstances where the AEO status holder need to notify about changes in their business and processes

The AEO status holder must notify the changes as soon as it is known or at least within fourteen days of the change taking place. The AEO status holder must notify AEO cell or the client relationship manager of the jurisdictional chief commissioner in following cases of changes:

The AEO status holder needs to re-apply for the AEO certification in the name of new legal entity. For instance, if a legal entity changes from proprietorship to LLP or Private Limited Company, then it has to file a fresh application. The AEO team is mandated to review the AEO status periodically to ensure that the AEO client continues to adhere to the condition of AEO accreditation.

The frequency of review of AEO status are same for AEO T-1 and AEO T-2 i.e. once in three years. The same is five years for AEO T-3 /LO status. However, the Directorate of International Customs, entrusted to implement and monitor AEO Programme in India, can initiate review at any point of time, if there is reason to believe that the conditions of AEO Programme or standard of AEO status have been compromised.

AEO – T1 Certificate Norms

Importers/exporters fulfilling the eligibility criteria may apply with Documents/information pertaining to

General compliance
Legal compliance
Records Maintenance compliance &
Financial solvency

If it is found that the records are maintained to the satisfaction of AEO Program Manager then the entity may be awarded the AEO Tier-1 certificate.

AEO – T2 Certificate Norms

In addition to the criteria of AEO- T1, the AEO – T2 applicant should fulfill the following 7 aspects of Safety & Security:

Certificate will be awarded to the applicant after: -

Claims made in regard to the 7 aspects of security being physically verified by AEO Team.
On verification report that the assessment made by the applicant & the documents filed along with application is true and to the satisfaction of the AEO program manager
Dates of visit to the places/premises to be decided by mutual consent.

AEO – T3 Certificate Norms

The economic operator should have continuously enjoyed the status of AEO – T2 for at least two years preceding the date of application for AEO – T3 status. Or The economic operator must be an AEO – T2 certificate holder and all its Business Partners have to be holders of AEO – T2 or AEO – LO certificates or equivalent granted by a foreign Customs

Single Tier AEO – LO
This certification is for Logistics Service Providers, Custodians or Terminal Operators, Customs Brokers & Warehouse Operators.

Norms are same as AEO – T2 norms.
Validity for the AEO – LO is 5 years.

Benefits associated with AEO three Tiers in a nutshell

Benefits associated with AEO Tier T1

Benefits associated with AEO Tier T2

Benefits associated with AEO Tier T3

Migration Process

Current AEOs Importer/Exporter

Granted AEO T2 within 15 days
Valid till date as already present on certificate

Current AEOs Others

Granted AEO – LO status within 15 days
Valid till date as already present on certificate

Current ACPs

Provisional status of Tier T1 within 15 days
Apply within 90 days
Will enjoy benefits of Tier T1 till decision taken on their application

New Applicants

Application can be made by any Importer/ Exporter with threshold documents 25 in last financial year

Benefits accorded to AEOs in mid - term review of Foreign Trade Policy 2015-2016

A new scheme of Self-assessment based duty free procurement of inputs required for exports has been introduced. There will be no need of Standard Input Output Norms in such cases and this will eliminate delays. It is based on trust. Exporters will self-certify the requirement of duty free materials/inputs. The scheme will be available to AEOs and will get expanded as more and more AEOs join the program. The scheme will improve ease of doing business.

Major changes in the AEO Programme

Inclusion of stringent requirements in regard to Business partner security, procedural security, etc.
Inclusion of authorised couriers and custodians in the AEO Programme.
Automatic disqualification on non-furnishing of the information by the applicant.
Non-requirement of the compliance records of advocates directly employed by the applicant.
Outreach of AEO Programme by organizing workshops etc.
The time limit of 90 days should be reckoned from the date of furnishing of complete information.
In regard to security seals, in case it is not possible to procure and use PAS / ISO17712 seals for air consignments/courier consignments any international seal compatible with standards of PAS / ISO 17712 may be used. However in case of maritime containerized cargo only PAS / ISO 17712 seals shall be used. The officers carrying out validations under AEO Programme should carefully ascertain this aspect.

Maintenance of AEO Status

To notify significant change in business like name, change in business, change in accounting and computer system etc.
To notify within 14 days of change.
If legal entity changes, need to reapply for AEO.
Custom Related error must be reported to CRM and AEO Team.
Error voluntarily disclosed shall not impact AEO status provided:-

Examined the reasons of error
Taken appropriate remedial step

Sample AEO Certificate

Management of Commercial & Transport Records (E-3)

An accounting system consistent with GAAP / IFRS which facilitates audit based Customs control.
An administrative set up and documented procedures to control business and manage the movement of goods.
Internal controls capable of detecting illegal or irregular transactions.
Satisfactory procedures to archive and retrieve records and information, and also for protection against the loss of information
Satisfactory procedure for handling Licenses and authorisations connected to Export/Import.
Satisfactory Procedure for verifying accuracy of Customs Declaration.
Employees must be made aware to contact Customs authorities whenever compliance difficulties are discovered.
Appropriate information technology security to protect against unauthorized intrusion.

Documented Process/ Evidence/Standard operating Procedures for above

Pre-certification audit

In particular, AEO Programme Team will cover the following:

Information on Customs matters
Remedial action taken on previous Customs errors, if any
Accounting and logistic systems
Internal controls and procedures
Flow of cargo movement
Use of Customs brokers
Security of computers/IT and documents
Financial solvency
Safety & security assessment-premises, cargo, personnel, etc
Logistic processes
Storage of goods

Challenges and opportunities: Mutual Recognition Arrangement/ Agreement (MRA)

Mutual Recognition is a broad concept whereby an action or decision taken or an authorization that has been properly granted by one Customs administration is recognized and accepted by another Customs administration.
The objective of Mutual Recognition of AEOs – one Customs administration recognizes the Validation findings and AEO authorizations by other Customs administration.
Agrees to provide substantial – reciprocal benefits/facilitations to the mutually recognizedAEOs.

Grievance Redressal

The Customs Administration is bound to extend all the benefits and facilitation measures to AEO status holders listed in the AEO Circular. There is provision for appointment of Client Relationship Manager (CRM) at the level of AC/DC as a single point of interaction with AEO Status holder at the office of each Chief Commissioner of Customs. The appointment of CRM is notified by way of public notice by all jurisdictional Customs station. The CRM is entrusted with the responsibility to attend to the legitimate concerns and issues of AEO clients. The details of CRMs are also provided online at CBIC website.

All Jurisdictional Client Relationship Manager (CRM) are responsible for:

Extending facilitation / benefits listed in the AEO Circular to the AEO status holders.
Assisting in filing AEO applications.
Assisting in getting procedural and operational issues resolved by co-ordinating with different sections within Customs as well as other stakeholders.

The AEO team, headed by nodal officer in respective Chief Commissioner of Customs, acts as help desk for all queries related to filing of AEO applications. The contact details of nodal officers and CRM are available on the CBIC website. For any query regarding online filing of AEO T-1 application, a separate help desk with following details has been created: Ph-011-23310013. E-mail: diccbec.dor@gov.in.

An on-line website (domain name: aeoindia.gov.in) has been created for filing and processing of AEO application. The online facility for filing of AEO-T1 application was launched vide CBIC Circular No. 51/2018 Customs dated 07.12.2018. The filing and processing of remaining three type of AEO accreditation namely AEO T2, AEO T3 and AEO LO is manual as of now.

CBIC Circular No. 51/2018 Customs dated 07.12.2018 de - tailing the process of the on-line filing of AEO T1 application is available at website www.cbic.gov.in. The field formations have issued Public Notices about the web based on-line application for AEO T1 status. For illustration, Jawaharlal Nehru Custom House Mumbai has issued Public Notice No. 158/2018 dated 21.12.2018 explaining the process of filing AEO T-1 application in detail with screen shots of relevant web page of the Online AEO website. The above Public Notice is available at JNCH Mumbai website http://www.jawa - harCustoms.gov.in/ under the Public Notice tab.

The applicant has to first register themselves at the AEO website www.aeoindia.gov.in by furnishing the information asked for in the Registration window and to create user id and password for logging into the website to file AEO T1 application.

The Registration particulars are verified vis-à-vis the details from applicant’s IEC by the Customs officer before processing the AEO T1 application on-line. If the registration particulars filed are not verifiable, the on-line application is not processed. Hence it is important to file correct detail, as per IEC, during Registration.

The applicants are advised to select Customs Zone which is being used by them for import or export activity. In case they are using more than one Customs Zone, then the Zone in which the number of Import/Export activity is higher may be selected. The mobile number and/or e-mail address should be the one which is registered with DGFT and matches with the IEC certificate. In case the present mobile number and e-mail address of the applicant has changed, the same should also be updated in the DGFT issued IEC Certificate.

Conclusion

AEO has fundamentally changed the conventional idea of secure trade

The facilitation measures implemented through the Indian AEO Programme has ensured a significantly faster movement of goods at Indian ports, which in turn has translated in substantial savings in time and cost for the Indian Trade. To ensure that the processes and benefits of the programme are at par with the International best standards, CBIC has thoroughly digitized the application filing, processing and digitallysigned delivery of AEO certification for AEO T1 applications by way of this website.

AEO-T1 status holder are eligible for 24/7 cargo clearance, exemption from payment of merchant overtime fee, separate earmarked space in custodian’s premises, and facility of Direct Port Delivery (DPD) for import and export consignments. Further, T2 and T3 AEO holders are eligible for additional benefits such as facility for deferred payment of customs duty, facility to paste MRP stickers in their premises, timely grant of refund/rebate of indirect taxes, exemption from submission of bank guarantee and many more.

Frequently Asked Questions

1. Who is an authorized economic operator (AEO)?
An AEO is a business entity involved in international movement of goods requiring compliance with provisions of the national Customs law and is approved by or on behalf of national administration in compliance with World Customs Organization (WCO) or equivalent supply chain security standards. The security standards are detailed in World Customs Organization Safe framework of standards [WCO SAFE FoS], which is the basis of the Indian AEO programme.
2. What is the AEO programme?
The AEO programme enables Customs administration to identify the safe and compliant business entity in order to provide them a higher degree of assured facilitation. This segmentation approach enables Customs resources to focus on less or non-compliant or risky businesses for control.

Thus, the aim of AEO programme is to secure the international supply chain by granting recognition to reliable operators and encouraging best practices at all levels in the international supply chain. Through this programme, the Customs shares its responsibility with the businesses, while at the same time rewarding them with a number of additional benefits.
3. What is the background of AEO Scheme of the WCO?
The genesis of AEO scheme dates back to September 11, 2001 event in US which made all the governments to realize that the supply chain itself could be used for terror activities and a need was felt to make the supply chain secure. Since the supply chain is controlled by the trade, the Customs administration is partnering the trade in order to secure the supply chain.

The US started CT-PAT (Customs Trade – Partnership against terrorism) programme. Later WCO adopted SAFE Framework of Standards in 2005 in order to secure and facilitate the trade. The SAFE framework has three pillars comprising of Customs to Customs partnership, Customs to Business partnership and Customs to other Govt. stake holders. AEO programme is the core part of Pillar-II i.e. - Customs to Business partnership.
4. How has SAFE framework of Standards (FoS) been implemented in India?
The SAFE FoS sets forth criteria by which businesses in supply chain can obtain authorized status as a secure partner. The criteria are incorporated in CBEC Circular No. 28/2012 dated 16.11.2012.

Thereafter a Revised AEO Program was launched vide Circular No. 33/2016-Customs dated 22.07.2016 as amended by Circular No. 03/2018 dated 17.02.2018, 26/2018 dated10.08.2018 and Circular No. 51/2018 dated 07.12.2018.
5. What is the history of AEO programme in India?
The AEO Programme was introduced as pilot project in 2011 vide Circular No. 37/2011- Customs dated 23rd August, 2011. The same was amended and the revised final AEO programme was introduced vide Circular No. 28/2012 dated 16.11.2012. With international developments such as Trade Facilitation Agreement (TFA) on securing and facilitating the International Trade and focus of Government of India on Ease of Doing Business, a comprehensive, unified trade facilitation initiative was launched by merging the existing Accredited Client Programme (ACP) and the ongoing AEO scheme of 2012 in the form of revised AEO Programme vide Circular No. 33/2016-Customs dated 22nd July, 2016. The ACP scheme was abolished by rescinding the Circular No. 42/2005-Customs dated 24.11.2005. Further simplification for financial solvency and decentralisation of AEO application processing was done vide Circular No. 03/2018 dated. 17.01.2018. The application process for AEO-T1 accreditation was further simplified to two Annexures form only by Circular No. 26/2018 dated 10.08.2018 from five Annexure form as was stipulated in Circular No. 33/2016 dated 22.07.2016. Web based On-line application filing and processing for AEOT1 status started from December 2018 vide Circular 51/2018 dated 07.12.2018.
6. What is the aim of the Indian Customs AEO Programme?
The AEO programme has the following objectives:
- To provide business entities with an internationally recognized certification
- To recognize business entities as “secure and reliable” trading partners
- To incentivize business entities through defined benefits that translate into savings in time and cost
- Secure supply chain from point of export to import
- Ability to demonstrate compliance with security standards when contracting to supply overseas importers/exporters
- Enhanced border clearance privileges in Mutual Recognition Agreement (MRA) partner countries
- Minimal security related disruption to flow of cargo
- Reduction in dwell time and related costs and
- Customs advice / assistance if trade faces unexpected issues with Customs of countries with which India has MRAs.
7. Is AEO mandatory for businesses involved in the supply chain?
No. The AEO scheme is purely an optional scheme. Applying for AEO status is a business decision depending on the role of the business entity in the supply chain and its willingness to acquire the benefit flowing by acquiring AEO status.
8. What is the structure of Indian AEO programme?
There is a three-tier programme for importers and exporters i.e. AEO-T1, AEO-T2 and AEO-T3 in the increasing degree of benefits accorded and compliance requirements. Furthermore, there is single Tier AEO Programme for Logistics Providers, Custodians or Terminal Operators, Customs Brokers and Warehouse Operators who are granted AEO-LO certificate.
9. What is the validity period of AEO status?
The validity of AEO certificate is three years for AEO-T1 and AEO-T2, and five years for AEO-T3 and AEOLO.
10. Whether AEO certificate is valid at all Customs stations across India?
Yes, it is valid at all Customs stations in India. In other words, an AEO status holder shall get the AEO benefits at all Customs ports/ airports/ Land Customs stations.
11. What are the benefits of AEO status?
There are a host of benefits for all three categories of AEOs- T1, T2, T3 and LOs. These are listed in paras 1.5.1 to 1.5.4 for AEO T1, T2,T3 and LO respectively of Circular No. 33/2016-Customs dated 22^nd July, 2016. Some of the major benefits are listed below:
- Recognition worldwide as safe, secure and compliant business partners in international trade and get trade facilitation by a foreign Customs administration with whom India enters into a Mutual Recognition Agreement/ Arrangement
- Facility of Direct Port Delivery (DPD) of their import Containers and/ or Direct Port Entry (DPE) of their Export Containers
- Waiver of full or part of the Bank Guarantee requirements, Waiver of Merchant overtime fees
- Deferred payment of duties
- Waiver from transactional PCA. Instead Onsite PCA has been provided, the selection of the same shall be based on risk assessment of AEOs
- Waiver of solvency certification for Customs Brokers
- A lower risk score in risk analysis systems when profiling
- Faster disbursal of drawback amount through process eased out vide Circular 18/2017 Customs dated 29.05.2017
- Fast tracking of refunds and adjudications
- Self-certified copies of FTA / PTA origin related or any other certificates required for clearance would be accepted
- Recognition by Partner Government Agencies and other Stakeholders as part of AEO programme
12. Whether all AE operators are entitled for DPD /DPE facility?
Yes, all AEO T1/T2/T3 status holders are entitled for DPD/ DPE facility.However, they have to apply for the Direct Port Delivery permission to the concerned Chief Commissioner and also register themselves with the port authority for DPD facility.

13. Whether the amount of Bank Guarantee in case of T1, T2 and T3 is reduced to 50%, 25% and Nil respectively in all cases of dispute between Customs and AEO status holder?
No. The CBIC Circular No. 38/2016 dated 22.08.2016, list out the situations where amount of Bank Guarantee is reduced to 50%, 25% and Nil. Further it is not applicable for cases where competent authority orders furnishing of bank guarantee for provisional release of seized goods.
14. What is deferred payment of duty scheme?
It is a mechanism for delinking duty payment from Customs clearance. It is based on the principle ‘Clear First-Pay later’. Deferred Payment of Import Duty Rules, 2016 vide notification no 134/2016-Customs (NT) and 135/2016-Customs (NT) both dated 02nd Nov 2016 have been notified and the same have come into effect from 16.11.2016. The AEO-T2 and AEO-T3 certified importers can avail the benefit of these Rules.
15. How can an AEO avail the facility of deferred payment of duty?
As per Rule 4 of the Deferred Payment of Import Duty Rules, 2016 an eligible importer who intends to avail the benefit of deferred payment has to intimate his intent to the jurisdictional Principal Commissioner of Customs or the Commissioner of Customs and get registered on the ICEGATE website www.icegate.gov.in.
16. What are the due dates for payment in respect of deferred payment of duty

As per Notification No. 134/2016 Customs (NT) dated 02.11.2016 as amended by Notification No. 28/2017 –Cus(NT) dated 31.03.2017,the Deferred Payment of Import Duty time lines are as below:

Date of return of BE for payment of Duty	Date of deferred payment of duty
Date of return of BE for payment of Duty B/E from 1-15^th day of any month	16^th of the month
B/E from 16^th-last day of month except March	1^st day of the following month
B/E from 16-31 March	31^st March

NOTE: The duty under deferred payment scheme has to be paid electronically.

17. Whether facilitation benefits will be available to Indian AEOs in foreign countries?
Yes, the facilitation benefits will be available in countries with whom India has signed Mutual Recognition Agreement (MRA). Indian Customs has signed Mutual Recognition Agreement (MRA) with South Korea, Taiwan and Hong Kong Customs to enable trade to get benefits on reciprocal basis.
18. What exactly is a mutual recognition agreement/arrangement (MRA)?
Mutual Recognition Arrangements/Agreements (MRA) are bilateral understandings between two Customs Administrations which allow one business partnership program to recognize the AEO validations of the other country’s program and extend reciprocal benefits to each other’s AEO. The benefits are generally in nature of enhanced system-based facilitation & reduced interdiction, lower risk score for Indian exporter’s consignments at foreign port.
19. Whether benefit of AEO LO status granted to a Customs Broker will also be given to its clients i.e., importers or exporters?
No. The AEO LO status will only be valid and applicable for the applicant and not for his importers or exporters. They need to apply separately for AEO status.
20. Where should the applications for AEO be submitted?
The application should be sent to the office of the jurisdictional Chief Commissioner of Customs with copy to AEO Programme Manager, Directorate of International Customs or in case of any doubt, to the AEO Programme Manager, Directorate of International Customs, 10^th Floor, Tower II, Jeevan Bharti Building, Connaught Place, New Delhi – 110001.

The jurisdictional Chief Commissioner of Customs is the one from where the Importer/Exporter/Logistic operator is doing majority of business in international supply chain. An on-line website (Domain name: aeoindia.gov.in) has been created for filing and processing of AEO-T1 application. The applicant can login to the website and file the AEO- T1 application.
21. Which jurisdictional Chief Commissioner offices are designated for processing of AEO applications?
As of now, the following Chief Commissioner of Customs offices has been designated for processing of AEO application:
- Delhi
- Mumbai Zone-I
- Mumbai Zone-II
- Mumbai Zone-III
- Ahmedabad
- Vishakhapatnam
- Bhubaneswar
- Bangalore
- Chennai
- Hyderabad
- Kolkata
- Tiruchirappalli
- Patna
- Pune
- Nagpur
- Bhopal

22. Who is AEO programme manager for Indian AEO Programme?
The Principal Commissioner, Directorate of International Customs, having office at 10^th floor, Tower-2, Jeevan Bharati Building, Connaught Place, New Delhi-01 is the AEO Programme Manager for Indian AEO programme. For AEO-T1 accreditation, the Zonal AEO Programme Manager is treated as AEO Programme Manager for all purposes.
23. Who is responsible for processing AEO application and taking decision on grant of AEO status?
The AEO Cell under the jurisdictional Chief Commissioner of Customs, headed by nodal officer of the rank of Additional /Joint Commissioner is responsible for processing AEO applications as per provisions contained in Circular No. 33/2016-Customs as amended by Circular Nos. 03/2018-Customs, 26/2018 and 51/2018 -Customs. The nodal officer of the jurisdictional Chief Commissioner forwards the processed application of AEO-T2/T3 and AEO-LO with recommendation to programme manager of Indian AEO Programme having office at Delhi for taking final decision on AEO accreditation.

The process of AEO-T1 accreditation has been further simplified and decentralised by Circular No. 26/2018 dt.10.08.2018. Officers in the Rank of Principal Commissioner/Commissioner have been appointed as the Zonal AEO Programme Manager in each Zone headed by Principal Chief Commissioner or Chief Commissioner of Customs and are responsible for final acceptance or rejection of the AEO application.

Thus, the AEO-T1 application is processed by AEO Cell and eligibility thereto is decided at Zonal level only. The decision is conveyed to Directorate of International Customs for generation of AEO Certificate. Such approved applications are sent online by the zones to DIC Delhi for generation of digitally signed certificate.
24. Whether an economic operator whose application is once rejected under the current scheme, can apply again for AEO status?
Yes, the application can be filed again if grounds on which the application was rejected are no longer valid and the applicant is otherwise eligible for AEO status.
25. What are the requirements for filing AEO T1/T2/T3/LO application?

An applicant for AEO-T1 status is to file application online (Domain name: aeoindia.gov.in) in prescribed proforma along with a Declaration as indicated in Annexure A- 1, Annexure A-2 to CBEC Circular No. 26/2018 dated 10.08.2018. After introduction of web- based module for filing online applications vide Circular 51/2018 dated 07.12.2018, it is mandatory to file online application only.

An applicant for grant of any of the remaining three AEO statuses, namely AEO-T2, AEO-T3 and AEO-LO, should submit the application in the proforma specified in Table below. The application form as specified in the Circular No. 33/2016-Customs contains ten annexures. However, an applicant is required to fill in and submit only those annexures which may be applicable to it, as mentioned below:

S.No.	Annexure	Subject	AEO T2	AEO T3	AEO LO
1	AnnexureA	Application Form	Yes	Yes	Yes
2	AnnexureB	Security Plan	Yes	Yes	Yes
3	AnnexureC	Process Map	Yes	Yes	Yes
4	AnnexureD	Site Plan	Yes	Yes	Yes
5	AnnexureE1	General Compliance	Yes	Yes	Yes
6	AnnexureE2	Legal Compliance	Yes	Yes	Yes
7	AnnexureE3	Managing commercial and (where appropriate) transport records	Yes	Yes	Yes
8	AnnexureE4	Financial Solvency	Yes	Yes	Yes
9	AnnexureE5	Safety & Security	Yes	Yes	Yes
10	Annexure-F	Business Partner Detail	No	Yes	Yes

26. Can an existing AEO status holder file application for higher AEO status? If yes, what is the time limit for filing such application?
An existing AEO certificate holder can apply for higher AEO status. There is no time limit for filing higher status application except in case of AEO-T3. In case of AEO-T3, either the entity should have had AEO-T2 status continuously for two years or when all its business partners in international supply chain have acquired either AEO-T2 or AEO-LO status.
27. Can a consultant be appointed as the contact person or the authorized person for filing application?
No. The applicant has to nominate the contact person/ authorized representative from company’s own administration only (Para 2.3 of Circular No. 33/2016-Customs).
28. Who can apply for AEO status?
Any business entity that is part of the international supply chain; involved in the cross- border movement of goods and required to fulfill obligations under the Customs law in India, only can apply for AEO status. These may include exporters, importers, logistic providers (e.g. carriers, airlines, freight forwarders, etc.), Custodians or Terminal Operators, Customs House Agents and Warehouse Owners, Port operators, authorized couriers, Stevedores etc. The list is not exhaustive.
29. What is the eligibility criterion for a business entity to apply for Indian AEO status?
The eligibility conditions and criteria for granting AEO Status has been listed in the Section 3 of the AEO Circular No. 33/2016 –Customs dated 22^nd July, 2016 as amended by Circular No. 3/2018-Customs dated 17^th January, 2018. An entity should fulfill the following criteria:
- Established in India
- Business should be involved in Customs related activity
- Should have dealt with minimum 25 Customs documents (either Bill of Entry or Shipping Bill) in the last fiscal year
- Should have been in business activity for last 3 Financial Years
30. Whether a branch of a legal entity can apply for a separate AEO Status?
No. There is no provision to grant AEO status to specific site, division or branch of legal entity of the applicant.
31. Whether a newly established company can apply for AEO Status?
As per the Indian AEO requirements, the applicant should have business activities for at least three financial years preceding the financial year of date of application. However, in exceptional cases, on the basis of physical verification of internal controls of a newly established business entity, the AEO Programme Manager can consider it for certification.
32. Whether a legal entity falling under three tier AEO programme as an importer/ exporter and single tier AEO programme as a logistics provider can apply for single accreditation of AEO T1/T2/T3 or AEO LO?
No, such economic operator should apply separately for any of the three tier AEO programme of importer/exporter (AEO T1/T2/T3) or single tier AEO LO status.

33. Whether AEO programme is open to micro, small and medium enterprises?
Yes, the AEO programme includes MSMEs and the eligibility conditions and criteria for granting AEO status are same regardless of size. The only requirement is that the entity should have handled at least 25 Customs documents in preceding Financial Year.
34. What are the legal requirements for applying for AEO status? What are the documents to be submitted?
The Legal requirement for applying for AEO status, as prescribed in para 3.2 and annexure E.2, to Circular No. 33/2016-Customs dated 22.7.2016.
35. What are the documents to be submitted as proof of having business activity for the last three financial years preceding the date of application?
The documents /evidence include Certificate of Incorporation, ImportExport Code (IEC), balance sheets for three-years etc.
36. In case where applicant does not have audited balance sheet, what documents are to be submitted in its place?
In cases where the statute exempts the applicant from statutory audit, the applicant can submit balance sheet certified by both the proprietor/partner/MD and any chartered accountant (CA) stating the profit /loss and net worth for the purpose of AEO application.
37. What documents are needed to be submitted by a business as proof of having its own accounts?
The documents/ evidence required as a proof about the business of a company having its own accounts include cancelled cheque, account statement, audited balance sheets.
38. What does procedure in place to identify and disclose irregularities means?
It means that the applicant must have tools in the form of Customized software or manual checks to identify risks and detect error in Customs documents (B/L, invoice and Packing list), for selfassessment of goods imported i.e., proper check of classification, valuation etc and after clearance of goods from Custom control, they must have the process to reconcile the goods with duty paid invoice and packing list. Further they may have documented processes/SOPs/escalation matrix for communicating the error noticed to Customs on real time basis and maintain record of such errors for viewing of their employees so that such mistakes do not recur.
39. How the ratio between duty demanded and duty is paid, listed at serial number d (ii) of annexure E-2, calculated?
The ratio is calculated by dividing duty amount involved in SCN issued under the Customs Act divided by total duty paid & drawback claimed during the last three financial years. For example, the amount involved in SCN/disputed demand (includes demand of duty and denial of drawback) is 500/- and total duty paid is 20,000/-, drawback claimed is 5,000/-, the ratio shall be 500/(20000+5000)*100 = 2%.
40. Whether the applicant having ratio of duty demanded and total duty paid/drawback claimed more than 10% are not eligible for AEO accreditation?
Yes. In case the ratio is above 10%, the AEO programme envisages examination of the nature of cases of duty demand. The decision for issue or continuance of AEO status is at the discretion of AEO programme manager based on examination of the Show Cause Notices issued.
41. What are the documents required to be maintained for ensuring compliance of Annexure E.3 – Managing Commercial and Transport Records?
The AEO applicant should:
- Maintain records which permit Customs to conduct any required audit of cargo movement relating both to import and export;
- Give Customs full access to necessary records;
- Have internal records access and control systems;
- Appropriately maintain and make available to Customs any authorizations, powers of attorney and licenses relevant to the importation or exportation of merchandise;
- Properly archive records for later production to Customs. For instance, for Customs purpose, the records should be maintained at least for five years.
- Employ adequate information technology security measures which will protect against access by unauthorized persons.
42. What accounting system is required to be followed by an AEO [Annexure E.3 (a)]?
Any accounting system consistent with Generally Accepted Accounting Principles (GAAP) / International Financial Reporting Standards (IFRS) which facilitates audit-based Customs control can be adopted. The audited balance sheet by Auditor contains remark about the Accounting system adopted by applicant.

43. What are the documentary evidences in support of claim of compliance required as per annexure E.3 (b) i.e.adequate administrative set up and internal controls for detecting illegal or irregular transactions?
Generally, the audited financial statement/balance sheet contains comments as to whether administrative set up corresponds to size of business. Other requirements for internal controls are satisfactory organizational setup to handle goods and documents related to same in the international supply chain.
44. What are the documentary evidences in support of claim of compliance required for storage and archiving of documents as per annexure E.3 (d)?
The applicant must have documented processes/ Standard Operating Procedures (SOPs) for storage and archiving of records and information. The SOP may contain the process of storing with the responsibility of concerned person, period of storing / archiving, process of taking suitable measures like back up for protection against loss of information. If the applicant has outsourced the storage and archiving of records, then the above requirements should be covered in the agreement with the agency storing the records and such agreements should be presented along with the application.
45. What are the requirements for Annexure E.3 (v) i.e.,needed for employee to inform Customs about compliance difficulty?
The applicant may submit their practice /processes of educating/ training their employees on Customs compliances. The process must include procedure to convey compliance difficulties, if any, to the designated Customs officer. The applicant may designate a person in their organization for above purpose.
46. Is there any format for the undertaking regarding solvency and for the solvency certificate?
No, there is no format in AEO Circular No. 33/2016-Customs. The only requirement is that the certificate should be for last three financial years (Each year) based on books of accounts and financial statements, tax returns etc.
47. Who are required to submit Security Plan (Annexure B) and fulfill requirement listed in Annexure E.5 of AEO Circular 33/2016?
The applicant for AEO T-2, T-3 and AEO-LO are required to submit Security plan and documents/evidence in support of fulfillment of requirements for safety and security listed in Annexure E.5.1 to E.5.7.
48. What are the requirements of Safety and Security for AEO applicant?
The safety and security criteria are listed in Para 3.5 and Annexure E.5.1 to E.5.7 of Circular No.33/2016. It has seven components.
- Procedural Security [refer para 3.5.2]
- Premises Security [refer para 3.5.3]
- Cargo Security [refer para 3.5.4]
- Conveyance Security [refer para 3.5.5]
- Personnel Security [refer para 3.5.6]
- Business Partner Security [refer para 3.5.7]
- Security Training & Threat Awareness [refer para 3.5.8]
49. What is the additional requirement for AEO T-3 applicant?
In addition to submission of documents and fulfillment of requirements prescribed for AEO T-2 applicant, the applicant for AEO T-3 has to submit details prescribed in Annexure F of Circular No. 33/ 2016 dated 22.07.2016. In Annexure F, the applicant has to give details of all his business partner(s) in International Supply chain which includes their accreditation under Indian AEO Programme. The declaration is to be given in format of Annexure “F”. The AEO T3 applicants who are not AEO T-2 certificate holders for last two preceding financial years must have all business partners (CB, Freight forwarder, liner etc) AEO T-2 or AEO-LO certificate holder.
50. What are the documents to be filed along with declaration made in Annexure A of the AEO?
The following documents are required to be submitted along with the application:
- Certification of incorporation from registrar of companies (ROC)
- Declaration about ACP/AEO status (Self)
- Address/Sites/Locations of places where goods are handled in the international supply chain and administrative offices
- Previous three years audited financial accounts;
- Previous three years bank accounts
- GSTIN, IEC, PAN, Company incorporation certificate
- List of bills of entry and shipping bills handled during the last financial year
- Places of business and its addresses and phone numbers
- List of directors with DIN numbers.
- Evidence/ Certificate issued under MSME Act, if the applicant claims to be MSME
- Authorization letter for contact person of applicant from proprietor/ partner/ board of directors/ managing director
51. Whether Annexure B (security plan) is to be given for all premises belonging to applicant?
Yes. However, if the company’s written and verifiable policies, processes, procedures, access control and other security policies, training and skill upgradation and compliance with government are same for all locations, the applicant can submit security plan of any one premise which is valid for all its premises used in International Supply Chain.
52. What is Annexure C (Process Map)? Whether it is related to premises belonging to applicant?
The process map should illustrate the flow of goods, documentation/ information from receipt of order to export/ delivery/ receipt of goods. The same has to be separate for each activity such as exports, imports,providing service for logistics operators etc. Hence, Annexure-C shall be for each individual activity of the applicant. The Process-Map must include role of applicant and its business partners in the supply chain.
53. Whether Annexure D (Site Plan) is to be given for all premises belonging to applicant?
Yes, the site plan as prescribed in Annexure D of Circular should be for all locations/sites.

54. What are the documents required for General compliance (Annexure E.1)?
The following documents are require for general compliance
- Copy of AEO certificate, if any;
- Copy of IEC, GSTIN;
- Declaration on type of business entity with copy of registration. For instance, in case of public or private limited, certificate of incorporation issued by ROC; in case of partnership, registered partnership deed; in case of
- Small proprietorship firm, a license issued by local shop and establishment Act etc. ;
- List of places/location where goods are being handled (For example loading, unloading, storage etc);
- Cancelled bank cheque or certificate from Bank evidencing account of applicant, account statement from bank etc as a proof of business having own account;
- List of documents (Bill of entry, shipping bills) handled in the last Financial Year;
- Declaration on conviction in criminal offence, if any, with details.
55. In what cases is the application for AEO accreditation not processed or returned for rectification?
The application for AEO accreditation is not processed in following cases:
- When application is incomplete. The application may be resubmitted with the complete information.
- Where the application has not been made by a legal person.The same can be resubmitted by the concerned legal entity.
- Where no responsible person is nominated as the Point of Contact. The application can only be resubmitted when the applicant nominates a responsible person from his/her organization only, who will be the point of contact for the AEO Programme.
- Where the applicant is subject to bankruptcy proceedings at the time the application is made. The application can be resubmitted when the applicant becomes solvent.
- Where a previously granted AEO status has been revoked -The application can be submitted only after one
- Year, in case of AEO T-1 & T-2 and after three years in case of AEO T-3 and LO, from the date of revocation.
56. In what cases the AEO application is rejected?
The AEO application can be rejected in following two cases:
1. Where the applicant is not eligible for grant of AEO status, or
2. Where the deficiency noticed in the application is not remedied.
57. What are the timelines and procedure for processing AEO applications?
In case of AEO T-1 application, if the eligibility conditions and criteria for grant of certificate, as mentioned in Section 3 of Circular No. 33/2016-Customs, are found to have been met to the satisfaction of AEO programme manager, the AEO T-1 certificate shall be granted within 30 days of submission of information/documents.

The mode of application for AEO T-1 and its processing has been made online since December 2018. In case of AEO T-2 and LO application, on submission of all required information/documents, the applicant is informed about the receipt of the same within 30 days. The application is assigned to AEO team within 15 days to carry out physical verification in consultation with applicant. The AEO programme team visits the premises of applicant within 90 days. The applicant can contact programme manager if visit is not planned within 45 days. The AEO programme team prepares the report and makes recommendation within 60 days of completion of visit. The AEO programme manager informs about AEO T-2/LO status to applicant within 30 days of the recommendation of AEO team. Thus, the total time taken from submission of application till the issuance of the certificate, work out to maximum 180 days. In case of AEO T-3 application by an AEO T-2 status holder, the application is assigned to AEO programme team within 15 days. The timelines for further activities are same as in above para for AEO T-2 and LO certifications.
58. Whether all premises of applicant involved in Customs related activity are to be visited for physical Verification by AEO team?
For AEO T-2 and AEO LO certification, examination of the criteria laid down under Section 3 of AEO Circular shall be carried out for all the premises which are relevant to the Customs related activities of the applicant for AEO-T2 or AEO-LO status. In case, more than one premises of applicant are run in similar way by standard systems of record keeping and security etc., the AEO programme team can choose to visit any one of such similarly run premises as per the provision contained in Para 4.4.5.5 of AEO Circular. In such situation, the applicant has to make declaration to this effect in the form of Undertaking. However, if the applicant has a range of activities or different premises are run using different methods of operation, the AEO Programme team has to visit those premises.
59. What are the areas covered by AEO Programme team during physical verification of applicant premise?
The purpose of Physical verification by AEO team is to check whether the claims made in application regarding requirement and fulfillment of criteria as listed in Section 3 of AEO Circular exists or are in place.
The AEO programme team may cover following areas during visit:
1. Information on Customs matters including about the contravention of Customs Act.
2. Remedial action taken on previous Customs errors, if any.
3. Accounting and logistic systems.
4. Internal controls and procedures.
5. Flow of cargo.
6. Use of Customs House Agents and selection of other business partners.
7. Use of Customs House Agents and selection of other business partners.
8. Financial solvency.
9. Safety and security assessment – premises, cargo, personnel etc.
10. Logistic processes.
11. Storage of goods
The above list is not exhaustive. The team can decide to cover more areas during visit as per the requirements.
60. Can physical verification be stopped if the applicant for AEO T-2 or AEO LO fails to provide certain documents to the team or there are problems with the system/processes/ requirements?
Yes, in exceptional cases the verification process can be stopped with mutual consent. The applicant is given time to submit additional documents and rectify the minor issues. The applicant has to inform AEO team regarding rectification within 6 months so that the verification process recommences. The applicant in such cases will get decision on application by the revised date to be informed by the AEO team
61. To whom the AEO status holder should inform about Customs related errors and regarding its compliance?
The AEO status holder should report Customs related errors and its compliance to the CRM as well as AEO cell of the jurisdictional Chief Commissioner.
62. How will the AEO status be renewed?

The AEO status is renewed against application for the same made before lapse of their validity as stated below:

AEO status	Time limit for submission of application for renewal before lapse of validity
AEO-T1	30 days
AEO-T2	60 days
AEO-T3	90 days
AEO-LO	90 days

The applicant must highlight the changes made from the last application in their renewal application. The AEO Programme Manager will consider the renewal applications by following the procedure adopted while granting the fresh AEO status.

63. In what circumstances, does the AEO status holder need to notify about changes in their business and processes?
The AEO status holder must notify AEO cell or the client relationship manager of the jurisdictional chief commissioner in following cases of changes:
1. Change in its legal entity.
2. Change of business name and/or address.
3. Change in the nature of business i.e., manufacturer / exporteretc.
4. Changes in accounting and computer systems.
5. Changes to the senior personnel responsible for Customs matters.
6. Addition or deletion of locations or branches involved in international supply chain.
64. What is the time limit to notify significant change in business and processes by AEO status holders?
The AEO status holder must notify the changes as soon as it is known or at least within fourteen days of the change taking place.

65. What happens to the AEO accreditation if the legal status of the entity changes?
The AEO status holder needs to re-apply for the AEO certification in the name of new legal entity. For instance, if a legal entity changes from proprietorship to LLP or Private Limited Company, then it has to file a fresh application.
66. Whether the AEO status is subject to Review?
Yes. The AEO team is mandated to review the AEO status periodically to ensure that the AEO client continues to adhere to the condition of AEO accreditation.
67. What are the timelines for review of AEO status?
The frequency of review of AEO status are same for AEO T-1 and AEO T-2 i.e., once in three years. The same is five years for AEO T-3 /LO status. However, the Directorate of International Customs, entrusted to implement and monitor AEO Programme in India, can initiate review at any point of time, if there is reason to believe that the conditions of AEO Programme or standard of AEO status have been compromised.
68. Under what circumstances, can the AEO status be suspended or downgraded?
The AEO Programme Manager may suspend the Certificate of AEO Status in the following cases:
- Where any non-compliance with the conditions or criteria for the Certificate of AEO Status has been detected or
- In the case of a Custodian or Custom Broker or Warehouse Operator, where the basic license as a Custodian or Custom Broker or Warehouse Operator, as the case may be, has been suspended by the competent authority. There is also provision for downgrading of the status of an AEO-T3 to AEO-T2 or to AEO-T1, or downgrade the status of an AEOT2 to AEO-T1, in the case of issue of any show cause notice (other than on issue listed in 3.2.1 of the AEO Circular) for contravention of Customs/Central Excise/GST law or suspend the status of the AEO, as deemed appropriate.
Withdrawal/ Suspension/ Restoration

The above decision is taken after due examination of the SCN, in consultation with the jurisdictional Commissioner.
69. Can appeal be filed against the decision of AEO Programme manager suspending or downgrading the AEO status?
No, there is no provision for appeal under the AEO scheme. However, there is provision of restoration of suspended/downgraded AEO status.
70. What are the requirements for restoration of suspended/downgraded AEO status?
The requirements in various situations are as under:
- In case of non-compliance with the condition of AEO status, if the AEO status holder takes the necessary remedial measures to the satisfaction of the AEO Programme Manager within 60 days of suspension, the AEO Programme Manager may restore the AEO status.
- In case of suspension on account of some action under Customs Act like issue of SCN, cancellation of Customs Broker’s license etc, an AEO Programme manager may consider restoration of AEO status if the action under the Customs Act is dropped/ suspension of license is revoked.
- account of SCN and if the ratio of disputed duty demanded or drawback demanded or sought to be denied in SCN under Customs Act in the last three years to the total duty paid and drawback claimed is not more than ten percent, the AEO programme manager may consider for restoration of AEO status.
- In case an AEO status has been downgraded, the entity can apply again for higher status as and when the eligibility conditions and criterion are met by it. Such applications will be treated as a fresh application.
71. Under what circumstances, can the AEO Status be revoked?
The Certificate of AEO Status will be revoked in following circumstances:
- Where the Certificate of AEO Status is already suspended and the AEO holder fails to take the remedial measure within 60 days of withdrawal for the suspension or
- Where there is a reasonable belief that an act has been perpetrated that is liable to lead to prosecution and /or is linked to an arrest of person under Customs Act, 1962 or
- A show cause notice has been issued to them involving fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax has been collected from customers but not deposited to the Government or
- Where the AEO status holder requests the authorization be revoked.
72. Can an AEO status holder re-apply for AEO status after the same is revoked?
The AEO-T1 and T2 status holders can re-apply only after a period of one year from the date of revocation. The AEO-T3 and LO status holders can re-apply only after a period of three years from the date of revocation.
73. How are the legitimate concerns and issues of AEO status holders regarding their benefits and facilitation resolved by Customs?
The Customs Administration is bound to extend all the benefits and facilitation measures to AEO status holders listed in the AEO Circular. There is provision for appointment of Client Relationship Manager (CRM) at the level of AC/DC as a single point of interaction with AEO Status holder at the office of each Chief Commissioner of Customs. The appointment of CRM is notified by way of public notice by all jurisdictional Customs station. The CRM is entrusted with the responsibility to attend to the legitimate concerns and issues of AEO clients. The details of CRMs are also provided online at CBIC website.
74. What are the other responsibilities of Client Relationship Manager?
All Jurisdictional Client Relationship Manager (CRM) are responsible for:
- Extending facilitation / benefits listed in the AEO Circular to the AEO status holders.
- Assisting in filing AEO applications.
- Assisting in getting procedural and operational issues resolved by co-ordinating with different sections within Customs as well as other stakeholders.
75. Is there a cost for submitting the AEO application and if so how much?
No, AEO applications and subsequent audits by customs are free of charge. However, some companies choose to use consultants to guide them through the process as preparation can be time consuming.
76. Is there an AEO Helpdesk?
The AEO team, headed by nodal officer in respective Chief Commissioner of Customs, acts as help desk for all queries related to filing of AEO applications. The contact details of nodal officers and CRM are available on the CBIC website. For any query regarding online filing of AEO T-1 application, a separate help desk with following details has been created: Ph-011-23310013. E-mail: diccbec.dor@gov.in.
77. Can the AEO application be filed on-Line?
Yes. An on-line website (domain name: aeoindia.gov.in) has been created for filing and processing of AEO application. The on-line facilities for filing of AEO-T1 application was launched vide CBIC Circular No. 51/2018 Custom dated 07.12.2018. The filing and processing of remaining three type of AEO accreditation namely AEO T2, AEO T3 and AEO LO is manual as of now.

78. Where one can find the detailed guidelines for filing Online AEO T-1 application?
CBIC Circular No. 51/2018 Custom dated 07.12.2018 detailing the process of the on-line filing of AEO T1 application is available at website www.cbic.gov.in. The field formations have issued Public Notices about the web based on-line application for AEO T1 status. For illustration, Jawaharlal Nehru Custom House Mumbai has issued Public Notice No. 158/2018 dated 21.12.2018 explaining the process of filing AEO T-1 application in detail with screen shots of relevant web page of the On-line AEO website. The above Public Notice is available at JNCH Mumbai website http://www.jawa - harCustoms.gov.in/ under the Public Notice tab.
79.What is the first step of filing on-line application for AEO T-1 status? What is its importance?
The applicant has to first register themselves at the AEO website www.aeoindia.gov.in by furnishing the information asked for in the Registration window and to create user id and password for logging into the website to file AEO T1 application. The Registration particulars are verified vis-à-vis the details from applicant’s IEC by the Customs officer before processing the AEO T1 application on-line. If the registration particulars filed are not verifiable, the on-line application is not processed. Hence it is important to file correct detail, as per IEC, during Registration.
80. What applicant has to select in the field “Zone” while registering for filing on-line AEO T-1 application?
The applicants are advised to select Customs Zone which is being used by them for import or export activity. In case they are using more than one Customs Zone, then the Zone in which the number of Import/Export activity is higher may be selected.
81. Which mobile number and e-mail address the applicant should furnish while registering for filing On-line AEO T1 application?
The mobile number and/or e-mail address should be the one which is registered with DGFT and matches with the IEC certificate. In case the present mobile number and e-mail address of the applicant has changed, the same should also be updated in the DGFT issued IEC Certificate.
82. What are the mandatory documents to be uploaded with the online AEO application?
The online AEO application has two Annexure with information/ declarations to be filed numbered serially. The upload option along with help sign (information button) to guide applicant about the document to be uploaded has been created against some query points of the two Annexure. The applicant has to upload documents/ evidences against all such query points/serial number to make the application complete for processing.
83. Site Plan of which locations/ addresses is to be uploaded at Sl. No. 4 of Annexure -1 of online application?
Applicant has to upload site plan of registered office and branch addresses mentioned in The IEC certificate issued by the DGFT. Google maps of locations should not be uploaded as site plan.
84. What document is required to be uploaded at Sl. No. 8 and 9 of Annexure A2 of online application in support of Net worth and net current asset?
Applicant has to upload the concerned page containing Net Worth and Net Current asset from the audited balance sheet of last three Financial Years. The uploaded page should bear the verification/authentication of statutory auditor or the Chartered Accountant.
85. What is to be done by applicant when he receives mail on the deficiencies in his online application?
The applicant can re-submit the application online after rectification of deficiency pointed out by the AEO team and uploading of documents listed in the deficiency. Such application shall again come to the Nodal Officer AEO of the concerned Zone for processing.
86. Is there any help desk to answer the queries of prospective applicants of online application?
Yes. For any query regarding online filing of AEO T1 application, a separate help desk with following details has been created: Ph-011- 23310013. E-mail: diccbec.dor@ gov.in. Further, the applicant can contact Nodal Officer AEO or the Client Relationship manager of the concerned office of Zonal Chief Commissioner of Customs. The details of above are available at the CBIC website www.cbic.gov.in or the website of the concerned Zone. For example, the detail of CRM of Mumbai Zone-II is available at website www.jawa - harcustoms.gov.in