Worldwide: "New" Rules For Obtaining Authorized Economic Operator Status

Last Updated: April 6 2017
Article by Dzhangar Dzhalchinov

An authorized economic operator (AEO) is a legal entity established in accordance with the law of a Eurasian Economic Union member state that meets a number of requirements and is included in a special registry.

AEO status may be assigned to a broad range of entities, namely, to manufacturers, importers, exporters, customs representatives (brokers), customs carriers, intermediaries, distributors and other entities that are involved in one way or another in foreign trade.

AEO status is assigned by the customs authorities to a legal entity by including the legal entity in the Registry of Authorized Economic Operators. One of the conditions for being included in the Registry is to provide security for payment of customs charges in the amount of at least €1 million (for manufacturing companies and exporters the amount is €150,000). In addition, AEOs sign an agreement with the customs authorities stating how they will exchange information and how they will interact, and become entitled to certain simplifications in the customs clearance of goods.

There are now about 186 companies registered in Russia's Registry of Authorized Economic Operators.

The advantages of AEO status are:

  • Customs declaration of goods with any Russian customs authority, in other words, the limitations established by the Federal Customs Service of Russia on where certain goods can be declared do not apply to the AEO.
  • It is possible to not provide security for payment of customs charges when claiming the customs transit procedure.
  • The goods release period is decreased to four hours.
  • Goods are released before filing the declaration for the goods without estimating security amounts for a specific consignment of goods.
  • The availability of using customs simplification (which generates the most interest), making it possible to deliver imported goods to the AEO's warehouse, bypassing the internal customs authority. This simplification essentially means that when foreign goods being taken to the AEO's address are imported, according to the usual procedure the goods are placed under the customs transit procedure with the customs authority at the border. What is special here is that the carrier can deliver those goods right to the warehouses and other sites of the AEO without first delivering the goods to the internal customs authority completing the customs transit procedure. After the goods are unloaded at the AEO's warehouse the carrier goes to the internal customs authority, files the necessary documents and this is how the customs transit procedure is completed.
  • There is potential for the time spent and shipping costs to deliver goods from the border of the Eurasian Economic Union to the company's warehouse (by vehicle) to be reduced.
  • No time is spent on placing the goods at a temporary storage warehouse while going through the customs transit procedure.
  • The goods can be freely disposed of immediately after completing the customs transit procedure at the company's warehouse.
  • The customs authorities notify the company in advance (in some cases) of the possible conduct of a customs inspection.
  • Customs control of goods is generally on-site at the company (at the warehouse).
  • The general risk profiles for imported goods do not apply, which results in fewer customs inspections.
  • The entity can enjoy the reputation of a conscientious foreign trade participant.
  • Increasing available cash. The company may take advantage of interest-free deferred payment of customs payments for almost 40 days.

The Eurasian Economic Commission has developed an "improved" AEO concept and has included that concept in the Eurasian Economic Union Customs Code that is about to go into force (the planned effective date is July 2017). The "improved" concept envisions making a number of fundamental changes to the existing concept. For example, there is now a financial solvency and security (reliability) requirement for companies wanting to get AEO status. Confirmation of a company's financial solvency is based on a point system where the company earns points for achieving one or another financial solvency indicator (for example, equity ratio, profitability ratio, amount of net assets, etc.). These indicators are calculated not only when the application for AEO status is filed, but are recalculated annually, and their current values are forwarded to the Federal Customs Service of Russia (for legal entities registered in the Russian Federation). Requirements to structures, premises and open areas in which goods will temporarily be stored and customs control will be carried out have also been specified.

We believe that currently the most favorable conditions have been created for companies considering the possibility of getting AEO status to carry out those plans. This is because the requirements to applicants will become considerably more involved if the "improved" concept enters into force.

The lawyers of Dentons' Tax and Customs practice have considerable experience advising companies on obtaining AEO status. Among other things, we will develop a step-by-step plan to obtain status; advise a company on the conditions, requirements and obligations, as well as the simplifications the company may enjoy once it obtains AEO status; we will assist in obtaining AEO status (drafting documents, filing the documents with the Federal Customs Service of Russia, monitoring the Federal Customs Service's decision-making process, and getting a certificate of the company's inclusion in the AEO registry) and in preparing the company for the first delivery (including on matters of entering into an agreement with the customs authorities). We would be happy to help you get AEO status and to assist with other matters of the application of customs law.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

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.

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