Authorised Economic Operator (AEO) – Make Certain Your Questions are Answered

Integration Point recently hosted a webcast, featuring Bart De Rybel, Senior Manager of Global Strategic Indirect Tax at Ernst & Young, Brussels, as he provided a better understanding of the tangible benefits behind becoming AEO certified, along with tips on applying for the EU AEO programme and maintaining AEO certification once achieved. Due to time constraints, there were several questions that were not answered during the live event. Bart De Rybel agreed to answer those remaining questions, over a series of posts. This first post contains questions and answers regarding mutual recognition and shared service centers.

If you missed the live webcast, you can register for the on-demand playback here.

Q: Where do I start when a Luxembourg company – with a shared service center in Ireland – is importing and exporting in several airports and seaports within the EU?

A: The most difficult thing about an AEO accreditation project is the scoping of the project.

The vision of Customs is that in the end the full supply chain would be AEO certified, meaning that importer, exporter, manufacturer, forwarder, broker etc. are all AEO certified businesses. However, the AEO applicant should only certify his transactions and activities. This means that it is not up to the Applicant to assess the processes of the boroker, nor of the forwarder, etc. In practice, this means that the Applicant should defend towards Customs that he has proper contracts and standard operating procedures in place with the broker, for example. This may include that the instructions for clearance provided to the broker are formalized and standardized. In other words, without really conducting an assessment of the internal procedures operated by the broker, the Applicant shall conduct two things: provide clear instructions to the broker; and after clearance perform a sample based check of the import and export declarations prepared and lodged by the broker.
In practice, when we assist companies to become AEO certified, we will query the broker in function of his certifications such as ISO, AEO, etc. and include this information in the AEO application file.

When the scope has been agreed upon, the Applicant shall determine the EU Member State of Application. In principle, the country of application would be the Member States where the Customs bookkeeping is maintained and where Customs can actually audit Customs transactions. In other words, transactions should be taking place in the country of Application. For example, a Luxembourg company not importing or exporting in Luxembourg, would not qualify as the Member State of this application.  As no Customs transactions take place in Ireland, they would not qualify either. The country application needs to come from the Member States where there are actual imports or exports. If the applicant has, for example, five Member States with Customs transactions taking place, then the key parameters would be:
(1) Can the Customs bookkeeping be made available to the Customs officers for audit?

(2) Is there logistical management taking place in the specific Member State? For example, where a Distribution Center would be located in Germany and the Customs bookkeeping could be made availabel and there is logistical/Customs management taking place in Germany, this Member State would qualify as Member State of application

In the end,  and for complex companies, the Customs administrations may agree upon one another to decide on the most feasible Member State of Application.


Q: How does mutual recognition work in practice? What is in it for me, the AEO certified importer?

A: Basically, up untill now, the EU has only concluded MRAs with Norway, Switzerland, Japan and the US. For the US, as mentioned, the MRA is unilateral. This means, that today imports of US originating consignments into EU will not benefit from the fact that the US exporter is C-TPAT certified.
On the other hand, where the EU importer would be importing Japanese consignments exported by Japanese AEO certified companies, the EU importer is able to code the AEO status of the exporter in his import declaration. This should reduce the risk score in the Customs targetting system of the EU Member State of import. Where we know that this is possible, I must say that indeed in practice, we do not see a lot of difference in view of inspection rates at our EU borders.
In this view, it is also important to highlight that several Member States are still working on their targetting systems and how these need to assess AEO certifications of the parties to the transactions involved. So, in practice, you as an importer are able to indicate your AEO status, also to indicate the AEO status of the Customs broker and also the AEO status of the Japanese exporter. Still in practice, it would be the AEO status of the importer that would result in a benefit, and only to a less extent the AEO status of the Japanese exporter.

So, in practice MRAs are still not mature models but where the number of concluded MRAs is growing, Customs should give more attention to there impact on the risk score of a specific consignment being imported into the EU.

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