Eligibility Criteria for Authorized Economic Operator (AEO) Certification – Complete Guide (2020)

Authorized Economic Operator (AEO) program is one of the basic pillars of the SAFE framework of standards which was adopted by the World Customs Organization (WCO) in 2005, to secure and facilitate global trade. The AEO program offers important benefits like faster customs clearances, simple customs processes and also security guarantees. The SAFE framework helps the businesses to acquire the status of a secured partner. AEO has become a flagship program for the WCO members. In India, the AEO program was launched in 2011. Let’s see some key issues associated with the Eligibility for AEO.

Who can apply for AEO? AEO Eligibility Criteria.

Generally, those businesses that are involved in the International supply chain and happens to undertake customs related activity in the country are eligible for AEO Certification.

The size of the business does not matter. The industries that are eligible for AEO Certification include exporters, importers, logistics providers, custodians or terminal operators, warehouse owners and customs house agents. AEO certification is not required for organizations that are not involved in customs-related work.

The application of AEO does not cover a group of companies but only the legal entity of the applicant. The business should be based in India. The applicant should have business activities for at least three financial years preceding the date of application (This condition can be waived off by the AEO Programme Manager). AEO status applies only to the legal entity in its personal capacity. Not on its client importers and exporters who will need to apply separately for the status. The AEO certification is open to small and medium enterprises as well; whose shipping bill or bill of entry is minimum 25 during the last financial year.

In order to apply for AEO certificate, the following documents will be required:

1. A certificate of registration issued by the Registrar of the company.
2. Details of places or locations, where goods are being handled.
3. Proof of business that it has its own accounts.

Other Important Aspects of AEO Eligibility Criteria.

Legal Compliance

The most important legal requirement is that the business must not have been issued any show cause notice in the last three financial years. The firm shouldn’t be involved in fraud, forgery, outright smuggling, clandestine removable of excisable goods. There must not be any case of prosecution launched or being contemplated against the applicant or its senior management.

In case of a show cause notice of an active legal matter, if the ratio of the disputed duty demanded or drawback demanded with respect to the total duty paid and drawback claimed during the said period is more than 10%. A review would be taken for the cases and the decision would be taken on issuance by the AEO Program Manager.

Financial Solvency

It is necessary that the applicant should be financially solvent during at least three financial years, preceding the date of application. It is also very necessary that the applicant should not have defaulted in payment of customs duties during the past three years. It is mandatory that the applicant should submit a solvency certificate duly issued by the statutory auditor of the applicant.

Various Other Factors

To fulfil 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.

1.  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.
2.  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.
3.  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.

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

Who are not entitled?

Businesses that are not engaged in customs-related work/activities may not apply for AEO certification. Thus Banks, insurance companies, consultants and the rest other business organization may not apply for AEO certification, as it is not of any use to them.

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