Customs Procedures become increasingly attractive to companies with higher exposure to duties as their business grows through expansion or as they try to enter new markets. Customs Procedures can greatly reduce the duty burden on a company, ensuring that duties are paid when goods are sold as opposed to when they are brought into the European Union or simply not paid because a destination outside the Union has been found for the goods.
The introduction of the Union Customs Code (UCC) in the European Union put increasing emphasis on the Authorized Economic Operator authorization. The authorities were asking traders are you ready for AEO; are you AEO-Ready; are you adhering to the requirements? See the overview we put together in 2015.
The regulations require that companies meet AEO obligations when applying for Customs procedures.
Customs Procedures included are:
- Bonded warehousing
- Inward processing relief
- Outward processing relief
- Customs guarantees
When applying for a Customs Procedure, the authorities have two considerations:
- If you hold an AEO authorization, you are pre-approved as the authorities have validated your processes and procedures. They can skip that process and go directly to issuing the License.
- If you do not hold an AEO authorization, you must prove you adhere to the AEO requirements before the authorities can start processing the application.
When the UCC was introduced, the main question we all asked ourselves was, “when you don’t have AEO authorization, how are Customs Authorities going to validate this?" The answer to that query is that a list of self-assessment questions will need to be completed by the trader, requesting the Customs Procedure authorization. In essence, authorities are using a slimmed-down version of the actual AEO guidelines to collect the data and determine if the requestor is ready to apply for the requested Customs Procedure.
One of the common questions we receive is, if a company is found to adhere to the AEO requirements and is thus AEO-ready, should they just apply for AEO status? The answer to that question is complex. To hold and maintain AEO status requires that the program is continuously monitored, that any gaps are identified, and that corrective actions are implemented to ensure that all processes and procedures are up to date with the regulatory requirements. If this cannot be achieved due to the cost of implementing a full AEO program, it will be better to remain AEO-Ready. However, if a company is considering acquiring more than one Customs Procedure and would like to reduce its customs bonds, then applying for the AEO authorization will most likely be beneficial.
Being AEO-Ready will give the company the indirect benefits we spoke about in our previous blog without the burden of needing to maintain the AEO authorization, even if this is done in a slimmed-down version. The procedures set clear goals and guidelines on how the work needs to be completed compliantly and successfully. The main drawback of AEO-Ready vs. AEO Authorized will be that the company will miss out on the direct benefits of the AEO program. One advantage of choosing AEO-Ready is that the effort to become an authorized AEO trader in the future will be lower than starting from scratch once the company identifies what access to the direct benefits of the AEO program means to its organization.
If you need support in applying for Customs Procedures or ensuring you are AEO-ready, please contact one of our consultants for support.
Read the previous two blogs in this series.