1. Who can Become an AEO?
The abbreviation AEO stands for Authorized Economic Operator. In Germany, the term used is "Zugelassener Wirtschaftsbeteiligter." In principle, any company that is based in the EU and is involved in customs procedures can apply for the status of an AEO. On the basis of certain security criteria, which every AEO must fulfill, it should be guaranteed that a supply chain of goods is formed by economic operators deemed to be reliable. The AEO status can be awarded through various AEO certificates (AEO C – Customs Simplifications; AEO S – Security and Safety; AEO F – Customs Simplifications/Security and Safety), whereby the certificates differ in terms of the conditions for approval and the thereby associated benefits.
2. What Advantages does an AEO have?
Advantages particularly exist for an AEO due to facilitations with regards to customs controls and customs simplifications. Additionally, there are benefits from the mutual recognition in countries outside of the EU as well as various indirect benefits.
2.1. Benefits Under Customs Law
- The competent customs office may notify the AEO prior to the arrival of goods into the customs territory that the goods will be inspected. Advantage: better planning for business processes.
- Approval criteria for certain customs simplifications do not have to be reexamined.
- Entry and exit summary declarations can be filed with reduced data requirements.
- AEO shall be subject to fewer physical and document-based controls.
- Necessary inspections of a consignment are processed on a priority basis.
- An AEO can request that the inspections be conducted at a different place than the place of the customs office involved.
2.2. Mutual Recognition
There are treaties with several countries outside of the EU – e. g. Switzerland, Norway, Japan and the US – where AEO status is also recognized. The benefits granted to an AEO are thereby regulated in the respective treaties. Such benefits regularly include fewer inspections of the AEO and consideration of the AEO status in the case of other security-related measures.
2.3. Indirect Benefits
The controls required for receiving an AEO certificate also have a positive effect on the business operations of the AEO. Due to the improved security standards, this can, for example, lead to:
- Less theft and fewer losses.
- Fewer delays in shipping.
- Better planning.
- Better co-operation with business partners.
A further significant advantage for the managing director of an AEO is that he generally cannot be held liable for organizational fault in the case of any mistakes in the customs clearance of goods due to the AEO certification.
3. What are the Requirements for Becoming an AEO?
The criteria for receiving of an AEO certificate include:
- Appropriate compliance with customs regulations to date.
- A satisfactory accounting system.
- Proven financial solvency.
- Appropriate security standards.
3.1. Compliance with Customs Regulations
An economic operator has appropriately complied with customs regulations to date if all of the following persons have not committed any serious infringements or repeated infringements of customs rules within three years prior to the date of application:
i) The economic operator.
ii) Persons responsible for the economic operator or have control of its management.
iii) Economic operator´s representatives in customs matters, and
iv) Persons responsible for customs matters at the company.
The customs authority has a margin of discretion in the case of minor infringements and applicants not based in the EU.
3.2. Satisfactory Accounting System
The accounting system of the AEO must be designed in such a way that reasonable customs controls are possible. The accounting system must therefore fulfill the following requirements, amongst others:
- Maintain of an accounting system, which is consistent with the generally recognized accounting principles of the respective Member State.
- Possibility of physical or electronic access to customs and transport records.
- Existence of an administrative organization appropriate for the type and size of the company.
- Internal control system for detecting illegal or improper transactions.
- Archiving process for records and information of the company as well as protection against information loss.
3.3. Proven Financial Solvency
The criterion of the company's financial solvency is considered fulfilled if the company can prove its solvency for the last three years. A company is solvent if a secure financial situation exists through which the company can fulfil any assumed liabilities.
3.4. Appropriate Security Standards
An AEO must fulfill certain security criteria geographically, organizationally and personally. The security standards are considered to be appropriate if the following requirements are fulfilled, amongst other things:
- Company building is composed of materials, which resist unlawful entry.
- Existence of access control measures, which prevent unauthorized access.
- Protection against the introduction, exchange and loss of goods and against manipulation of cargo units.
- Procedure exists for identifying prohibitions on imports and exports as well as restrictions of goods.
- Clear identification of business partners through certain measures possible.
- Security and background checks of applicant's staff members working in security sensitive positions.
- Applicant's staff members participate in programs for promoting safety awareness.
Special requirements apply in addition for airline and shipping companies.
4. Where and How is the Application for an AEO Certificate to be Submitted?
Applications for an AEO certificate are to be submitted in writing or electronically using a standardized form of the customs authorities. In Germany, any application which has been completed online must currently still be printed out and signed by the company's representative. The application must then be submitted together with a completed self-assessment questionnaire to the competent customs authority. This is the respective main customs office where the applicant's main accounts are held. The information in the application can be corrected within 30 calendar days following a request of the customs authority.
5. What are the Legal Consequences of an AEO Certificate?
An AEO certificate becomes effective ten working days after the date of issuance and is recognized in all EU Member States. The period of validity of the AEO certificate is unlimited.
The customs authorities monitor whether the AEO continues to fulfill the requirements and criteria after being issued an AEO certificate.
6. Future Prospects
The requirements for acquiring the AEO status are currently still regulated in the Customs Code and Customs Code Ordinance. Both legal regulations are expected to be replaced by a new "EU-Customs Code" and so-called Delegated Acts and Implementing Acts. The EU-Customs Code should apply as of 1 May 2016.
With regards to the approval of the AEO status, slightly more stringent requirements must be fulfilled in the future. In addition to the previous advantages for an AEO, addition benefits are intended. Amongst other things, centralized customs clearance in only one EU Member State is planned.
In consideration of the described benefits, every company should assess to what extent it makes sense to obtain the status of an AEO for its cross-border activities. If this is the case, it is advisable to submit an application for approval of the AEO status before the new EU-Customs Code becomes effective because lower requirements currently still apply for obtaining the AEO status.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.