As UK firms face more complex rules around moving goods to and from the European Union after 31 December this year – when the UK completes is transition from the EU bloc – imagine a scheme that gives those firms special status to allow their goods to pass through customs as quickly as possible.
The good news is that such a system exists already, in the shape of the Authorised Economic Operator (AEO) scheme, an internationally-recognised mark of quality that gives firms 'trusted trader' status.
Q1: What is AEO?
Put simply, AEO certification demonstrates that your role within the international supply chain is secure and that your customs controls and procedures are efficient and compliant.
It is a globally-recognised status that is increasingly being demanded by clients, particularly in the US and China.
There are two types of AEO currently available, with different criteria and benefits associated with each status:
- AEO-C Customs Simplifications focuses on establishing internal quality management controls for customs compliance
- AEO-S Safety & Security focuses on supply chain security measures
Q2: What are the benefits?
Even now, with British traders still following EU Customs Union rules until the end of 2020, companies holding AEO certification have a clear advantage when exporting, especially to the United States and the world's largest economies, through Mutual Recognition Agreements.
After the transition period ends, AEO certification will become even more desirable as an internationally-recognised tool to keep cargo moving.
The EU and UK are expected to recognise each other’s AEO schemes in the post-Brexit trading environment.
The overall process of applying for AEO status will boost the profile of customs compliance within your company’s culture and is a good preparation for the UK’s more liberalised trading environment after December 2020.
Though achieving AEO status is a time consuming and often daunting exercise (a process with which the IOE&IT can help – see Q10 below), the commercial benefits can be immense and include:
- greater access to priority clearance
- reduced administration
- reductions or waivers of deferment and comprehensive guarantees
- increased transport security
- fewer delays in despatch
- improved security between supply chain partners
- quicker access to other customs authorisations
Priority clearance for AEO-S certificated businesses will, by default, mean that non-certificated organisations will be dealt with as a secondary concern. When time is of the essence, such delays in delivery could prove ever more costly.
Q3: What sort of firms can gain AEO status?
Registration is open to all businesses in the EU that are involved in the international trade of goods with non-EU countries, including logistics operators, carriers, freight forwarders, customs agents, importers, exporters and manufacturers.
To qualify a business must:
- be a legal entity established in the UK or an EU member state
- be actively involved in customs operations and international trade
- have an Economic Operator Registration and Identification (EORI) number
- have a good history of compliance with government authorities
Q4: How many UK firms are AEO-accredited?
Although the initiative has been in place for several years, the UK lags behind some EU countries, with just 1073 approved AEO registrations compared with Germany, which has 6512, the Netherlands with 1595 and France who have 1770 approved registrations (figures correct as at July 2020).
The reasons behind this vast disparity may be attributable to the respective sizes of the logistics sector in Germany and Netherlands compared with the UK.
However, there is a growing concern that UK firms trading internationally may lose traction if the scheme gains widespread popularity and they are not part of that development.
Q5: How long does the AEO application process take and what does it cost?
While there is no fee for applying to HMRC for AEO accreditation, the application process takes time and can be overwhelming.
Application preparation and submission typically take between three to 12 months, followed by 120 days for customs to assess your submission, including site visits.
The IOE&IT provides a consultancy service to support firms through to application process.
Once achieved, AEO status is indefinite but your firm will be reassessed every three years, through an on-site visit from HMRC.
Q6: What are the criteria for achieving AEO status?
As part of the application process, HMRC officials will stringently assess your firm’s…
- finances
- shipping procedures
- compliance with customs requirements
- quality management including documented procedures and the customs knowledge within the firm
If a company applies for AEO-S, the assessment will include site security, HR vetting and supply chain security measures.
Companies that have achieved an established quality management system, such as ISO9001 accreditation, are half-way to attaining AEO status, a status that verifies a company’s secure systems around the movement of goods across borders.
Q7: What causes an AEO application to be rejected?
We understand the main reasons for application rejection by HMRC include:
- insufficient responses on the initial application forms
- a lack of evidence during the assessment stage
- a general lack of understanding of the criteria that expects a comprehensive understanding of UK customs legislation and customs entry auditing
Fortunately, the IOE&IT has a proven track record of project managing AEO applications through to successful outcomes.
Q8: How different will the UK’s future AEO scheme be to that of the EU?
This is a vital question and suggestions have been put forward for a UK scheme with increased AEO status benefits to ease border movements. However, at the time of this guide's publication (10 July 2020), we are awaiting more detail from government on this.
Q9: Where can my firm get help with the AEO application?
Depending on your level of interest, the IOE&IT provides training courses and consultancy packages that will help.
(i) Initial discussion
institute@export.org.uk putting ‘AEO status’ in the subject line.
(ii) Training course
If you’re keen to learn more about AEO requirements and benefits, the IOE&IT offers a one-day course as an introduction to all aspects of the process.
You will be guided through the application process to enable your organisation to achieve and crucially, maintain AEO status.
The course will also highlight the pitfalls that companies typically experience and explain how to avoid delays and mistakes. Find out more here.
(iii) AEO consultancy
Once you’ve decided to apply for AEO status, the Institute can help take you through every step towards acquiring and maintaining AEO status.
We offer three tiers of service ranging from an initial 'readiness review', through to application completion.
Following the initial review, we will be able to advise on the cost of helping you to prepare and submit your application if you decide to progress. Find out more here.