Brexit: Authorised Economic Operators (AEO)

After Brexit, customs declarations to UK Customs are expected to increase five-fold to 255 million annually and the UK companies making declarations to double to over 270,000. But only 0.2% of those traders have AEO status – ten times fewer than Germany. Without this, traders will not have access to key customs facilitations but will face the full weight of customs requirements. Acquiring AEO certification status can take at least 6 months but there are practical ways to ease the process and it promises to repay the effort in the years ahead. 

The introduction of customs controls on EU-UK trade after Brexit will impose potentially substantial administrative burdens and risk of delays on traders. The UK government intends to implement a ‘highly streamlined customs arrangement’¹ to minimize the requirements as far as possible, based on new technological solutions and on negotiating with the EU to continue close customs co-operation. But there will remain an irreducible minimum of new obligations with which traders will have to comply, on both sides of the Channel. 

In preparing for this, there is one clear step that companies can take to minimize the impact on their business: to apply for certification as an AEO. 

What is AEO Status? 

AEO certification is an internationally recognised quality mark for companies whose customs procedures are efficient and compliant, and who can therefore be considered as secure and reliable trading partners. Developed by the World Customs Organisation, it is established in the EU as a part of the Union Customs Code. 

The UK government intends to continue AEO certification on a national basis after Brexit and to negotiate mutual recognition with the EU so that UK companies with AEO status would be given the same benefits in the EU as they will in the UK. 

What Are the Types of AEO and Their Benefits? 

There are 2 types of AEO. Businesses can apply for one or both, without charge. Both provide recognised status across the EU (subject to agreement), the US and elsewhere. 

Security and Safety (AEOS): based on customs compliance, financial solvency, appropriate record keeping, and security and safety standards. Benefits include: 

• a lower risk score in customs’ risk management systems, used to determine the frequency of customs physical and documentary checks; 
• consignments may be fast tracked through customs controls. They may still be subject to examination but, if so, will receive priority over non-AEOs. 

Customs Simplifications (AEOC): based on customs compliance, financial solvency, appropriate record keeping, and practical standards of competence or professional qualifications directly related to the activity carried out. Benefits include eligibility for: 

• moving goods in temporary storage; 
• a notification waiver when making an Entry in Declarant’s Records;
• a 70% reduction in a deferment account guarantee; 
• using Centralised Clearance and Self-Assessment (when implemented);
• accelerated applications for procedures such as Customs Freight Simplified Procedure, inward processing, customs warehousing and customs comprehensive guarantee reductions or waivers for potential debts. 

What Are the Criteria? 

Certification is managed in the UK by HM Revenue and Customs (HMRC). It involves a multi- stage process over some 6 months to check the applicant’s customs track record over the last 3 years, their customs and security procedures and their financial health. To start the process, the applicant must complete a detailed self-assessment. HMRC then assess the application, validate the financial and customs track record, and conduct physical audits at key operating locations. The main criteria include: 

• an appropriate record of compliance with customs legislation and taxation rules; 
• a satisfactory system of managing commercial , and where appropriate, transport records, which allows appropriate customs controls; 
• proven financial solvency; 
• practical standards of competence or professional qualifications directly related to the activity carried out (for AEOC); 
• appropriate security and safety standards (for AEOS). 

After certification, HMRC will conduct periodic checks and audits. As an AEO, businesses are expected to manage risks involved with their business partners, make them aware of their security and safety standards and ensure they are reflected when in contractual arrangements. 

How Dechert Can Help 

Dechert has a team ideally placed to help with this and other aspects of preparing for Brexit. We have extensive experience of developing compliance policies and procedures in relation to customs, VAT and excise duties, tariffs, product regulations, record keeping, security and safety standards, sanctions and export and import licensing. We have in our team experts who, in addition to legal expertise, have first-hand experience of working in a range of government and regulatory bodies. 

Footnotes 

1) Customs Bill: Legislating for the UK's Future Customs, VAT and Excise Regimes, October 2017