The events of 11th September 2011 and the growth of global trade shifted the focus of Customs Administration to the increasing security threats away from the traditional task of collection customs duties. In this respect, the WCO formulated a set of measures to ensure constant flow in the supply chain. The downside of this was that these measures were bound to slow down traffic due to customs controls. With this in mind, the European Union devised the concept of AEO to minimise the impact of the new controls. The intention is that AEO's will be given benefits that will lessen the impact of the new security measures compared to other non-AEO approved businesses.
What is an AEO?
An Authorised Economic Operator (AEO) status is a standard issued by a Customs Administration. The issue of either one of the two authorisations means that a player in the supply chain has met certain criteria in relation to management systems, compliance with customs rules, ongoing solvency, is competent and is safe and secure. An AEO authorisation issued by any of the Member States Customs Administration is recognised throughout the EU. Currently, AEOS certificates are also recognised by Japan and the United States of America.
Types of AEO authorisations There are two types of authorisations:
• AEO - Customs simplifications (AEOC)
– can be issued to any business that fulfils the criteria of customs compliance and taxation rules, appropriate record keeping standards, proven financial solvency and practical standards of competence or professional qualifications directly related to the activity in which the economic operator is involved.
• AEO - Security and safety (AEOS)
- issued to any business that fulfils the criteria of customs compliance and taxation rules, appropriate record keeping standards, proven financial solvency, and maintains appropriate security and safety standards.
Unlike AEOC, AEOS is not required to have a logical system which distinguishes between Union and non-Union goods within their records.
An economic operator can hold both types of authorisations, in which case the operator has to fulfil the criteria for both AEOC and AEOS and receives the benefits relating to both. According to Article 33 UCC Implementing Act *UCC 1A), where an applicant is entitled to be granted both an AEOC and AEOS authorisation, the competent Customs authority shall issue one combined authorisation. For better electronic management of AEOC and AEOS authorisation held at the same time, pursuant to Article 16 (1) UCC, the structure of a unique AEO number is presently the country code followed by the letters AEOF and the national authorisation number.
There is no charge for the processing of applications or the issue of authorisations.
Benefits of AEO
An AEOC can benefit from;
• Specific types of simplifications on the basis of the recognition of the authorisation as long as the requirements related to a specific type of simplification provided for the customs legislation are satisfied.
• More favourable treatment than other economic operators in respect of customs controls including fewer physical and document-based controls with the exception of controls related to security and safety measures.
An AEOS can benefit from
• Facilitation regarding pre-departure declarations
• More favourable treatment than other economic operators in respect of customs controls including fewer physical and document-based controls related to security and safety measures.
Both AEOC and AEOS benefit from;
• Prior notification in case of selection for control
• Prior treatment if selected for control
• Possibility to request a specific place for such control.
As a consequence of increasing their safety and security standards, traders may also benefit from the following:
• reduced theft and losses;
• fewer delayed shipments;
• improved planning;
• improved customer loyalty;
• reduced security and safety incidents;
• reduced crime and vandalism;
• improved security and communication between supply chain partners
Who can apply for AEO status?
((Article 38 (1) UCC). Application for AEO status is open to all economic operators established within the customs territory of the EU and meets the criteria as set in Article 39. Article 5 (5) UCC defines an economic operator as "a person who in the course of his or her business, is involved in activities covered by customs legislation".
In accordance with Article 5 (4) UCC, the definition of a 'person' is:
• a natural person;
• a legal person;
• where the possibility is provided for under the rules in force, an association of persons recognised as having the legal capacity to perform legal acts but lacking the legal status of a legal person.
Whoever carries out customs related activities in EU can apply for AEO status irrespective of the size of their business. These include inter alia manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors.
The following categories of traders can apply:
• Manufacturers - ensure a safe and secure manufacturing process for their products and supply of those products to their clients.
• Exporters - the person on whose behalf the export declaration is made and who is the owner of the goods or has similar right of disposal over them at the time the declaration is accepted. For persons established outside the Community, the exporter shall be considered to be the contracting party established in the Community.
• Freight forwarders - organising the transport of goods on behalf of an exporter, importer or other party
• Warehouse keepers or other storage facility operators - a person authorised to operate a customs warehouse.
• Customs agents or representatives - a customs representative acting on behalf of a person who is involved in customs related business activities (direct representative) or in his own name (indirect representative).
• Carriers - person who actually transports the goods or is in charge of or responsible for the operation of the means of transport.
• Importers - an operator on whose behalf an import declaration is made and who at the time the declaration was accepted is the owner/consignee of non-community goods or if not the owner is responsible for the control of the goods.
On the basis of the definition where an economic operator has to be involved in an economic activity covered by customs legislation, the following would not be able to apply;
• An EU based supplier who distributes only goods already in free circulation to an EU based economic operator
• A transport operator that moves only goods in free circulation and which are not under any other customs procedure within the customs territory of the Union
• A manufacturer producing goods only for the EU internal market and using raw materials already in free circulation
• A consultant who only provides opinion in customs matters.
On the other hand, a manufacturer who produces goods to be exported can apply for an AEO authorisation even if the export formalities are performed by another person.
For more in-depth explanations of the above, please consult the AEO Guidelines.
The regulation introducing the AEO programme states that "the customs authorities shall take due account of the specific characteristics of economic operators, in particular of small and medium-sized companies."
The conditions and criteria for AEO authorisation relevant to each category of business will apply to all businesses regardless of their size. However, the means to achieve compliance will vary and be in direct relation to the size and complexity of the business, type of goods handled etc.
Applying for AEO status
It is advisable to contact the Customs Department of Malta for further information, before you submit the Self Assessment Questionnaire (SAQ)
eLearning course on AEO
Further information in the form of a short eLearning tool is available to download from the European Commission website
Click here to learn more about the Authorised Economic Operator Program