mangalore customs welcomes

you all
to
the Workshop on authorised
economic operator scheme
 सीमा शुल्क आयुक्त का कायाालय
नव सीमा शुल्क भवन, पणंबूर, मंगलूर – ५७५०१०
OFFICE OF THE COMMISSIONER OF CUSTOMS
NEW CUSTOMS HOUSE, PANAMBUR, MANGALORE –
575 010
दू रभाष सं. 0824-2408164 फैक्स सं. 0824-2407100
 Welcomes all
to
the Workshop on authorised
economic operator scheme
BACKGROUND…..
 …..BACKGROUND

SAFE Framework –
• a deterrent to international terrorism
• safety to revenue collections
• promotion of trade facilitation worldwide.
 …..BACKGROUND

Kyoto (place in Japan) Convention elaborates several key governing

principles. Chief among these are the principles of:

• transparency and predictability of Customs actions;

• standardization and simplification of the goods declaration and
supporting documents;
• simplified procedures for authorized persons;
• maximum use of information technology;
• minimum necessary Customs control to ensure compliance with
regulations;
• use of risk management and audit based controls;
• coordinated interventions with other border agencies;
• partnership with the trade.
 …..BACKGROUND
• AEO Scheme, adopted by many countries across the globe - a WCO
initiative towards SAFE Framework.
• Under the Scheme, Customs approved stakeholders as compliant
with the supply chain security standards to get benefits like
simplified Customs procedures and reduced Customs intervention.
• Draft Guidelines on Authorised Economic Operator Scheme
formulated by Indian Customs - during December 2010.
• Formal Notification of AEO Scheme for implementation – on 23
August 2011.
• Focus of the GOI on “Ease of Doing Business” led to development of
comprehensive unified trade facilitation programme - the existing
ACP scheme and AEO is merged.
 Global Experience

All the major economies have a robust AEO

programme
Countries enter into MRAs (Mutual Recognition
Agreements for AEOs) and extend mutual benefit
Traders with proven track record get facilitation

WTO-TFA has increased focus on trade facilitation

 Need for a new AEO programme
Limitations of the extant ACP/AEO scheme – like lesser benefits and
lesser options to trade
In-line with the Government’s impetus on ease of doing business

Reduced transaction and logistics costs

Faster clearances and reduced paperwork

Provide Indian traders an internationally accepted certification and

benefits
Increase in business opportunities
 NEW AEO PROGRAMME
• Vide Circular No. 33/2016-Customs dated 22/07/2016,
two facilitation schemes namely ACP (Accredited Client
Programme) and existing AEO have been merged.
• NEW AEO - A single tier AEO programme for economic
operators like Customs Brokers, Warehouse keepers etc.
• Enhancement of the scope of the programme to
provide further benefits to the entities demonstrating
strong internal control systems and willing to comply
with the various laws.
 PROMINENT FEATURES
1. Inclusion of Direct Port Delivery (DPD) of imports to ensure just-in-time inventory
management by manufacturers – clearance from wharf to warehouse
2. Inclusion of Direct Port Entry (DPE) for factory stuffed containers meant for export by AEOs
3. Special focus on small and medium scale entities – any entity handling 25 import or export
documents annually can become part of this programme
4. Provision of Deferred Payment of duties – delinking duty payment and Customs clearance
5. Mutual Recognition Agreements with other Customs Administrations
6. Faster disbursal of drawback amount
7. Fast tracking of refunds and adjudications
8. Extension of facilitation to exports in addition to imports
9. Self-certified copies of FTA / PTA origin related or any other certificates required for clearance
would be accepted
10. Request based on-site inspection /examination
11. Paperless declarations with no supporting documents
12. Recognition by Participating Government Agencies (PGAs) and other Stakeholders as a part of
this programme
 What is AEO ?

Authorised Economic Operator

 an organization or a company involved in the movement of

goods certified by Customs of each country that such
organizations or companies have complied with WCO or
equivalent supply chain security standards.

includes manufacturers, importers, exporters, customs

clearance agents, carriers, consolidators, port owners, airport
owners, port or airport operators, warehouse owners and
goods distribution agents.
 AEO Programme
• The following are two types of AEO programmes:-

• Three tier AEO programme for importers and exporters -

AEO-T1, AEO-T2 and AEO-T3.

• Single tier AEO programme for others (other than importers

and exporters) – AEO-LO.

• Businesses not involved in Customs related work / activities

NOT ENTITLED. eg. banks, insurance companies, consultants
etc.
 Eligibility criteria at Macro level

Maintain
Established in Systemic record approved
India maintenance security and
safety standards

Proven
compliance with
Customs &
other laws
Proven financial
solvency AEO
14
Dimensions of AEO Security
Procedural Security

Premises Security

Cargo Security

Conveyance Security

Personnel Security

Business Partner Security

Security Training and Threat Awareness

 AEO-LO CERTIFICATE
• Who can apply ?
i. economic operators other than importers and exporters viz., Logistics
Providers, Custodians or Terminal Operators, Customs Brokers and
Warehouse Operators.
ii. Must be an Indian Establishment. (Doc evidence like certificate of
registration issued by the Registrar of Companies or Bank account etc. to
be provided)
iii. Applicant should have business activities for at least 3 FYs preceding the
date of application. (exceptional cases – on the basis of physical verification
of internal controls)
iv. Threshold of handling of 25 documents i.e. either Bills of Entry or Shipping
Bills during the last financial year.
v. The applicant should comply with the conditions – legal compliance,
commercial / transport records and financial security, and conditions
relating to safety and security.
 …..AEO – LO Certificate
• POINTS TO BE REMEMBERED

• AEO status covers the legal entity. Does not automatically apply to group
companies.

• AEO status will not be granted to specific site, division or branch of legal
entity but covers all its activities and locations.

• The applicant should comply with the conditions – legal compliance,

commercial / transport records and financial security.

• AEO granted to customs broker – does not imply that status is extended
to the clients.
 LEGAL COMPLIANCE…..
• No show cause notice during last three financial years
involving fraud, forgery, outright smuggling, clandestine
removal or cases where ST has been collected but not
remitted.
• No case wherein prosecution has been launched or is
being contemplated against the applicant or its senior
management.
• In the following case, application may be considered.
 LEGAL COMPLIANCE…..
• No show cause notice during last three financial years
involving fraud, forgery, outright smuggling, clandestine
removal or cases where ST has been collected but not
remitted.
• No case wherein prosecution has been launched or is
being contemplated against the applicant or its senior
management.
• In the following case, application may be reviewed.
 …..LEGAL COMPLIANCE
• An applicant should demonstrate that he has:
i. procedures in place to identify and disclose any
irregularities or errors to the Customs authorities
or other regulatory bodies.
ii. taken appropriate remedial action when
irregularities or errors are identified.
iii. to ensure that the errors identified are resolved
immediately and do not recur.
 Commercial / Transport Records
• Maintenance of an accounting system consistent with GAAP / IFRS which
facilitate audit-based Customs control;
• Have an administrative set up that has internal controls capable of detecting
illegal or irregular transactions;
• Have satisfactory procedures in place for the handling of licenses and
authorizations connected to export/import;
• Have satisfactory procedures in place for archiving of the company’s records and
information and for protection against the loss of information;
• Keep the employees aware of the need to inform the Customs authorities about
the compliance difficulties discovered and to inform the Customs authorities of
such occurrences;
• Have satisfactory procedures for verifying the accuracy of Customs declarations.
• Have appropriate IT security measures to protect their computer systems from
unauthorized intrusion and to secure their documentation.
 FINANCIAL SECURITY
• An applicant must be financially solvent during the
three financial years preceding the date of
application. He should not be listed currently as
insolvent, or in liquidation or bankruptcy.
• Should not have the instances of default in payment
of Customs duties during the past three years.
• Submission of an undertaking regarding their solvency
and a Solvency Certificate issued by the Statutory
Auditor of the applicant.
 SAFETY AND SECURITY

• Must have in place internal controls and measures

to ensure safety and security of applicant’s
business and his supply chain – viz., security of
procedures, premises, cargo, conveyances,
personnel and business partners.
 SECURITY OF PROCEDURES…..
I. To keep in place appropriate internal controls and measures to ensure
safety and security of procedures relating to business / its supply chain.
II. Develop and maintain a security policy and procedure manual containing
detailed guidelines on procedures to be followed to preserve the integrity of
the cargo (during its custody, loading and unloading from transport
conveyance and transport).
III. Policy should stipulate how seals are to be controlled and affixed to cargo
and transport conveyances.
IV. Keeping in place the security measures to ensure the integrity and security
of processes relevant to the transportation, handling, and storage of cargo.
V. Keep in place proper documentation management procedure to ensure that
a document is legible, complete, accurate and protected against the
exchange, loss of information and erroneous information.
 …..SECURITY OF PROCEDURES
i. Keep in place a system to ensure that information received
from business partners is reported accurately and in the
time limit prescribed.

ii. Procedure should be in place to ensure :

a) Reconciliation of Import / Export cargo vis-à-vis the
information on the bill of lading.
b) Accurate indication of the weights, labels, marks and numbers
of the import/export cargo.
c) Verification of import/export cargo with the purchase/delivery
orders.
d) Identification of drivers delivering or receiving cargo before its
release or receipt.
e) All shortages, overages, and other significant discrepancies or
anomalies must be resolved and/or investigated appropriately.
 SECURITY OF PREMISES…..
i. To ensure security of premises, construction of the buildings should be
with the materials, which resist unlawful entry and provide protection
against unlawful intrusion. Inspection of integrity of structures and
systems to be done periodically.
ii. Identification of Restricted areas - To keep in place appropriate access
control measures to prevent unauthorized access to shipping areas,
loading places and cargo areas.
iii. Securing the gates, fences and windows with locking devices or
alternative access monitoring or control measures.
iv. Proper control with the authorized personnel for issuance of locks and
keys.
v. Clear demarcation within a cargo handling structure to segregate
domestic, international, high value and hazardous cargo.
 …..SECURITY OF PREMISES
v. Provision of adequate internal and external lighting for entrances
and exits, cargo handling and storage areas, fence lines and
parking areas.
vi. Manning and monitoring and control of Gates through which
vehicles and/or personnel enter/exit. Minimum number of gates
for proper access and safety.
vii. Access only by the properly identified and authorized persons and
vehicles and goods. Parking of the vehicles accessing restricted
areas in approved area. Prohibition of unauthorized vehicles from
parking in or adjacent to cargo handling and storage areas.
viii. Restriction of access to document or cargo storage areas.
Appropriate security systems for access control.
 CARGO SECURITY…..
i. To keep in place appropriate measures for the
handling of goods include protection against the
introduction, exchange or loss of any material and
tampering with cargo units.
ii. Access to the cargo only by the properly identified
and authorized persons .
iii. Integrity of cargo should be ensured by permanent
monitoring or keeping in a safe, locked area.
iv. Usage of high security seals.
 …..CARGO SECURITY

v. Checking the integrity of container seals by the authorized person (as

per the procedure prescribed in the security policy).
vi. Distribution of container seals only to authorized personnel to
safeguard their appropriate and legitimate use.
vii. Laying down of appropriate procedures on measures to be taken
when an unauthorized access or tampering is discovered.
viii. Uniform marking of Goods or storing in designated areas and to keep
in place appropriate procedures to weigh / tally them and compare
them against transport documents, purchase/sales orders and
Customs papers.
ix. Internal control procedures should exist when discrepancies and/or
irregularities are discovered.
 CONVEYANCE SECURITY…..

The applicant must:

i. ensure to the extent possible that all conveyances are capable of being
effectively secured.

ii. ensure to the extent possible that all operators of conveyances used for
transport of cargo are trained to maintain the security of the conveyance
and the cargo at all times while in its custody.

iii. require operators, to report actual or suspicious incident to designated

security department staff of the applicant company as well as to maintain
records of these reports, which should be available to the AEO Programme
Team and Customs.
 …..CONVEYANCE SECURITY
iv. ensure that potential places of concealment of illegal goods on conveyances
are regularly inspected.

v. ensure that transporters make sure that conveyance integrity is maintained

while the conveyance is en route transporting cargo to export/import points
or import/transit containers by utilizing a tracking and monitoring activity log
or records.

vi. ensure that pre-determined routes are identified by the dispatcher, and
procedures must consist of random route checks along with documenting
and verifying the length of time between the loading point/trailer pickup and
the delivery destinations.

vii. ensure that drivers must notify the dispatcher of any route delays due to
weather, traffic and/or rerouting.

viii.ensure that the management of transporters must perform a documented,

periodic, and random verification process to ensure the logs are maintained
and conveyance tracking and monitoring procedures are being followed and
enforced.
 PERSONNEL SECURITY
i. As far as possible, carrying out security screening of prospective employees
to be employed in security sensitive positions.
ii. Taking all reasonable precautions when recruiting new staff to verify that
they are not previously convicted of security-related, Customs or other
criminal offences.
iii. Periodic background checks must be conducted on employees working in
security sensitive positions.
iv. Employee identification procedures should require all employees to carry
proper identification that uniquely identifies the employee and organization.
v. Procedures to be in place to identify, record and deal with unauthorized or
unidentified persons, such as photo identification and sign-in registers for
visitors etc. at all points of entry.
vi. Expeditious removal of identification and access to premises and information
for employees whose employment is terminated.
 BUSINESS PARTNER SECURITY…..

i. Implementation of measures to ensure a clear identification of business

partners.

ii. To maintain written and verifiable process about the capability of

financial soundness and compliance with the safety requirement set by
the contracts including the capability of detection and correction of
safety defects, for the selection of business partners.

iii. If business partners have AEO certification, obtain the business partners’
copies of certification.
 …..BUSINESS PARTNER SECURITY
iv. For non-AEO partners, obtain the written confirmation of meeting AEO
equivalent security criteria. Such business partners must have one of
the following written documents demonstrating their compliance with
security criteria:
a) Contractual document
b) A completed self-assessment security questionnaire from the applicant.
c) A written statement from the business partner demonstrating their
compliance with AEO security criteria.
d) Senior business partner officer attesting to compliance.
e) Documents from the business partners demonstrating their compliance
with an equivalent and accredited security program administered by a
foreign Customs authority.
v. Carrying out the periodic reviews of business partner’s processes and
facilities based on risk and maintenance of the security standards
required by the applicant.
 SECURITY TRAINING AND THREAT
AWARENESS…..
i. To ensure that the concerned employees actively
participate in security awareness programmes.
ii. To establish and maintain a threat awareness program for
employees to foster awareness of the threat at each point in
the supply chain.
iii. To make the employees aware of the procedures the
company has in place to address a situation and report.
iv. Offering specific training to assist employees in maintaining
cargo integrity, recognizing internal conspiracies and
protecting access controls.
 …..SECURITY TRAINING AND THREAT
AWARENESS
v. Supply chain security training must include the following items:
a) Security policy of the company.
b) Potential risk to internal security of the company.
c) Maintaining cargo security.
d) Access control measures of the company.
e) Identifying and reporting suspicious cargo and personnel.
f) Conveyance management and cargo security for conveyance
management personnel.

vi. Maintain records of security training and make available for

verification by the AEO Programme Team and the Customs.
BENEFITS OF AEO-LO
BENEFITS OF AEO-LO
TREATMENT OF EXISTING AEOs AND ACPs

• Existing AEOs holding valid certificates will be granted either AEO-T2 or

AEO-LO certificates. (Time limit – 15 days from the date of circular)
• The AEO-T2 or AEO-LO certificates are valid till the date mentioned in old
AEO certificates.
• For renewal, new procedure prescribed under the present circular is to be
followed.
• If eligible, they can opt for AEO-T3 certificate during renewal.
• Existing ACP clients holding valid certificates will be granted AEO-T1
certificates. (Time limit – 15 days from the date of circular)
• The AEO-T1 certificates are valid till the date mentioned in ACP granting /
renewal letter. Thereafter, renewal procedure is to be followed.
 TREATMENT OF EXISTING ACPs
• ACP clients are given an opportunity to submit application for
grant of AEO Certificates within 90 days. If not submitted, case
will be taken up for review.
• If submitted, they continue to avail the benefits of AEO-T1
certificate till a decision is taken by AEO Programme Manager. If
AEO certificate is not given, benefits will be discontinued.
• ACP clients can apply for AEO-T2 or AEO-T3 Certificates. But
certificates will be granted after necessary verification of
requirements like Legal Compliance, Financial Solvency,
Managing records, Safety and security etc.
• If ACP or AEO status is denied earlier, they can file afresh as per
present circular.
 APPLICATION FORM
Sl. Application for
Annexure Subject
No. grant of AEO-LO
1Annexure - A Application Form YES
2Annexure - B Security Plan YES
3Annexure - C Process Map YES
4Annexure - D Site Plan YES
Annexure - E Self-Assessment Form YES
5Annexure - E.1 General Compliance YES
6Annexure - E.2 Legal Compliance YES
Managing Commercial and (Where
7Annexure - E.3 YES
Appropriate) Transport Records
8Annexure - E.4 Financial Solvency YES
9Annexure - E.5 Safety and Security YES
10Annexure - F Business Partner Details NO
 APPLICATION SUBMISSION

• TO: The jurisdictional Custom Chief Commissioner’s office with a

copy to the AEO Programme Manager, Directorate of
International Customs or in case of any doubt, to the AEO
Programme Manager, Directorate of International Customs,
10th Floor, Tower II, Jeevan Bharti Building, Connaught Place,
New Delhi – 110001.

• The Commissioner, Directorate of International Customs, 10th

Floor, Tower II, Jeevan Bharti Building, Connaught Place, New
Delhi – 110001 will be the AEO Programme Manager and AEO
Programme Team will comprise officers from the Directorate of
International Customs or jurisdictional Custom Zones. [Vide Circular No.
3/2018-Customs dated 17/01/2018]
 VALIDITY OF CERTIFICATES

• AEO - T1 and AEO - T2 : 3 years

• AEO – T3 and AEO – LO : 5 years
• RENEWAL – Time limit
 MAINTENANCE OF AEO STATUS
• Should maintain their eligibility by adhering to the
standards. If not, AEO status can be suspended,
downgraded or revoked. If revoked, AEO-T1 and AEO-
T2 status holders cannot reapply for a period of one
year. For AEO-T3 and AEO-LO, the period is 3 years.
• Change in legal entity, change of business name /
address, change of nature of business, changes in
accounting and computer systems, changes in senior
personnel responsible for customs matters, addition /
deletion of locations etc., should be brought to the
notice of AEO programme team. (within 14 days)
• If legal entity changes, re-application to be made.
Customs - Business Partnership:
AEO Benefits

Other
Companies