This On the Subject focuses on amendments to the European Union (EU) Customs Code introducing the Authorised Economic Operator (AEO), an EU harmonised accreditation regime for importers and exporters.
As of 1 January 2008, the EU will commence the AEO scheme, an EU-wide regime with significant benefits for both importers and exporters. The introduction of AEO status aims at increasing security for shipments entering or leaving the European Union. It will also provide holders of an AEO certificate with trade facilitation benefits, such as fewer physical customs inspections at EU borders and easier reporting, resulting in lower costs.
Authorised Economic Operator
The EU’s AEO is comparable to the US Customs Trade Partnership Against Terrorism (C-TPAT) programme, and follows an initiative in the World Customs Organisation encouraging customs authorities in all member countries to adopt supply chain security measures. Both aim to increase supply chain security whilst offering advantages in terms of improved efficiency, resulting in lower costs.
Unfortunately, C-TPAT-registered companies will not benefit from mutual recognition in the European Union. If they wish to have the benefits of AEO status they will have to make a separate application in the European Union, nothwithstanding their C-TPAT registration. Nevertheless, since certain requirements of the EU’s AEO scheme are similar to the US C-TPAT programme, companies registered under the C-TPAT programme will benefit from the fact that they have already implemented the required procedures and thus the application process will be less burdensome.
The AEO legislative framework introduces three types of AEO certificates:
- AEO Certificate—Customs Simplification
- AEO Certificate—Security and Safety
- AEO Certificate—Customs and Security (so-called "full certificate")
Importers and exporters wishing to obtain an AEO certificate must meet the specific requirements corresponding to the AEO certificate of their choice. In order to qualify for the AEO Customs Simplification Certificate, applicants must satisfy certain requirements relating to the management of commercial and transport records and general good standing. In order to qualify for the AEO Security and Safety Certificate, the applicant must implement stringent security measures concerning their entire supply chain management in addition to meeting some of the requirements of the AEO Customs Simplification Certificate. Last of all, the qualification requirements for the AEO Customs and Security Certificate include all of the requirements for both the AEO Customs Simplification Certificate and the AEO Security and Safety Certificate.
As far as the benefits are concerned, the AEO Customs Simplification Certificate provides, among others, significant trade facilitation advantages, such as fewer physical and document-based controls, priority treatment of consignments and choice of location for customs controls. The AEO Security and Safety Certificate, in addition to selected benefits of the AEO Customs Simplification Certificate, provides that holders will benefit from simplified entry and exit summary declarations and prior notification of physical control. Finally, the AEO Customs and Security Certificate will provide the benefits of both the AEO Customs Simplification Certificate and the AEO Security and Safety Certificate.
Who Can Apply and Where?
AEO status can be granted as of 1 January 2008. However, due to the substantial number of applicants throughout the European Union, it is recommended that interested entities commence self-assessment and collection of supporting documents and data without delay. Moreover, certain EU Member States are about to launch pilot programmes whereby companies can test their AEO-related procedures. Applications for AEO status can only be made by "economic operators" established in the European Union, with limited exception provided to certain airlines and shipping companies that may apply even though they are not established in the European Union. Economic operators are persons who, in the course of their business, are involved in activities covered by customs legislation. Thus, any European entity that imports goods into the European Union or exports goods from the European Union is eligible for AEO status.
The application for an AEO certificate will need to be lodged with the customs authority of the EU Member State in which the applicant keeps its customs-related documentations and conducts its customs-related operations. In the case of a parent company with subsidiaries, EU customs regulations implementing the AEO regime require that each distinct legal entity must apply separately for an AEO certificate. It is not possible to make a single application for a whole group. This will be extremely burdensome for multinationals consisting of several subsidiaries, each of which is involved in customs operations.
On the other hand, branches of multinational companies will not be required to submit separate AEO applications as they do not constitute separate legal entities. These will be covered by the AEO certificate of the head office. To a certain extent, the difficulties that arise for groups of companies in this area can be overcome by chanelling all imports and exports through a captive import/export company.
Pre-Arrival and Pre-Departure Declarations
As of 1 July 2009, EU authorities will require importers and exporters to lodge pre-arrival and pre-departure summary customs declarations up to 24 hours prior to exportation or importation, depending on the method of transportation. Thus, the European Union will become one of the few customs territories in the world requiring not only pre-arrival declarations but also pre-departure customs declarations. The new EU customs rules will require pre-arrival and pre-departure declarations to be stored in electronic format for at least three years. Since many multinational companies will choose to centralise their electronic storage of these documents, they will have to carefully evaluate the applicable EU Member State’s national legislation relating to data protection and retention. The AEO Security and Safety Certificate and AEO Customs and Security Certificate are aimed at lessening this burden by providing significant benefits with regard to pre-arrival and pre-departure declarations. Non-AEO entities will have to provide pre-departure and pre-arrival declarations consisting of additional security-related information.
Benefits of Application for AEO Status
The AEO regime will provide certain benefits as faster and less burdensome customs procedures result in lower costs.
Some EU Member States, notably those with well-functioning customs services, have already announced that they will introduce priority treatment for "AEO goods", including faster customs clearance and designated customs officials dealing only with AEO goods. On the other hand, non-AEO goods are expected to face more stringent verification procedures, notably in relation to document and physical controls. As a result, it is expected that clearing of "non-AEO goods" will take significantly more time than "AEO goods".
McDermott Will & Emery Customs Practice
McDermott Will & Emery’s lawyers in Brussels and Washington DC regularly advise clients in a wide range of industries on all aspects of EU and US customs laws and requirements. The Brussels office is currently advising one of the world’s largest express couriers on all aspects of its application for AEO status in all 27 EU Member States.