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AEO is a voluntary program developed by the World Customs Organization (WCO) as a safe framework for global trade standards. It aims to boost the international supply chain security and to ease the movement of lawful goods. The article talks about the AEO Package and the relaxations given to MSME in relation to AEO.
AEO stands for Authorized Economic Operator. This program is based on the partnership between the business & customs, wherein the economic operator is granted such status. The program determines the reliability & trustworthiness of the economic operator.
The reliability of the operator is determined based on:
It allows simplified procedures to be followed by the company’s security-related custom control and simplifying compliance with the customs legislation.
It aims to boost the international supply chain security and to ease the movement of lawful goods.
It incorporates the following objectives:
AEO is a voluntary program and includes various international supply chain participants. It enables the Indian Customs to develop and restructure the cargo security via close co-operation with the principle stakeholders of the global supply chain (includes importers, exporters, custodians, etc).
Some certificates allow different permission:
AEO is a program developed by the World Customs Organization (WCO) as a safe framework of the standards to facilitate global trade in 2005. After that, India has started to adopt the framework developed by WCO, and it has brought ease in the Customs compliance.
In India, the AEO program was introduced by CBIC (Central Board of Indirect Taxes & Customs in 2011 and in 2012, the Government approached with rules and instructions to reference to AEO program.
Under the program, the entity that is granted the AEO status has certain benefits. It has the following advantages:
Anyone who is involved in global supply chain carrying custom related activities can apply for AEO certification notwithstanding of business size:
Anyone who wants to apply for AEO certification must be eligible to do so. The eligibility criterion is as follows:
It is a mandate for the company to be in place for the last 3 Financial Years preceding the financial year of the application date. However, in exceptional circumstances, the newly established business can be granted AEO certification, based on the physical verification of internal controls by considering:
AEO certificate is issued for a certain period and is to be renewed from time to time.
The same is explained in the tabular form below:
AEO Status | Applicability | Validity | Renewal |
AEO – T1 | It is granted to an importer or an exporter only without any physical verification of the place. | 3 year | 30 days |
AEO – T2 | It is granted to an importer or an exporter only after physical verification of the place. | 3 Year | 60 days |
AEO – T3 | It is granted to: an importer or an exporter, who enjoyed the AEO T2 status for 2 years, preceding the date of application;an importer or an exporter holds the AEO T2 certificate, and its other business partners are holders of AEO T2 or AEO LO certificates or any other equivalent certificate issued by foreign Customs. | 5 Year | 90 days |
AEO – LO | It is granted to economic operators other than an importer or an exporter only after physical verification of the place. | 5 Year | 90 days |
MSME stands for Micro, Small, and Medium Enterprises. It has come out as a dynamic sector of the Indian economy over the last few decades. Acknowledging the efforts of MSME in sustaining India’s economy in the difficult times of the Covid-19 pandemic, CBIC has introduced an initiative with the PM’s Aatma Nirbhar Bharat Abhiyaan to support the MSMEs and has designed a policy, ‘Liberalized MSME AEO Package’ especially for MSMEs.
The ‘Liberalized MSME AEO Package’ visualizes the easiness in the compliance & procedural requirements along with the additional benefits to streamline the procedure for trade.
Procedural requirements | AEO T-1/ T-2 | MSMEs AEO T-1/ T-2 |
Eligibility Requirement | Handling minimum 25 Customs documents during the last financial year | Handling minimum 10 Customs documents, subject to holding at least 5 documents in each half-year period of the preceding financial year |
Business Activities | At least three financial years preceding the date of application | At least two financial years preceding the date of application |
Qualifying Period for Legal and Financial Compliance | The last three financial years | Only the last two financial years |
Time Limit for Processing of Application | For the AEO T1 application- it is one month, and for the AEO T2 application- it is six months | For the MSME AEO T1 application- it is fifteen working days. |
Documents / Annexures | AEO T1 – Annexure A, B, C, D, E.1-E.4AEO T2 – Annexure A, B, C, D, E.1-E.4, E.5.1-E.5.7 | MSME AEO T1- Annexure 1 and 2 onlyMSME AEO T2- Annexure 1, 2, and 3 only |
AEO is a voluntary program developed by the World Customs Organization[1] (WCO) to boost international supply chain security and ease lawful goods’ movement.
It was difficult for MSME to cope up against the Covid-19 Pandemic; the CBIC (Central Board of Indirect Taxes & Customs) has introduced ‘Liberalized MSME AEO Package’ designed for MSME especially.
Read our article:Steps to protect MSMEs from getting liquidated under IBC during Covid-19
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