The European Union introduced the concept of an Authorised Economic Operator (AEO) in July 2007 with the first companies being officially accredited in April 2008. The origin of AEO comes from the World Customs Organisation SAFE Framework, the intention is to accredit entities who meet certain Safety and Security standards. The overall aim of the initiative is to create networks of AEO and equivalent companies worldwide so that secure supply chains can be built internationally.
In the US, the equivalent standard is C-TPAT (Customs – Trade Partnership Against Terrorism) which has been in existence a little longer than AEO. Other similar standards are being discussed in Asia and other parts of the world. Clearly, for a worldwide system to be workable, each standard needs to be recognised by the other Authorities. Discussion on mutual recognition are starting, with the EU and the US discussing the recognition of C-TPAT and AEO and an outcome to these discussions is expected during 2011. Mutual recognition of other standards is likely to follow after this.
How does an EU company obtain AEO status?
To apply for AEO, a company must be registered in an EU Member State and trade outside of the EU. Application is to the Member State where a company is established. There are two application forms – the first is form C117 which covers the Company organisation and basic company details. The majority of the information needs to be completed using form C118, which requires significant detail on the Security and Safety levels within the applicant organisation. A company can decide to only apply for AEOC (Customs Simplification); AEOS (Security and safety) or AEOF (Full) which covers both Customs Simplification and Security and Safety. HMRC recommends that companies apply for AEOF if at all possible.
Application forms C117 and C118 are relatively straight forward and have explanatory notes with them. However, the amount of detail that is required to fully answer each question on Form C118 can be considerable. The application form is the first step for the applicant to prove to Customs that the organisation is compliant with the AEO requirements. Customs recommend that each applicant undertakes an internal audit of it’s Safety and Security systems prior to applying for AEO. Going through each question and making sure that you have evidence to support each answer is a good way of doing this. With over 100 detailed questions relating to Physical Security, Financial security, Staff, IT, Goods in, Goods out, External Carriers and more, it will not be a quick exercise to put a credible application together but it will enable you to understand more about how your organisation operates and any possible areas that need to be strengthened.
The European Commission also now recommends that a company undertake a Security Self-Assessment prior to applying for AEO. The self assessment covers most of the areas that are on Form C118 and in some EU countries they now use the self assessment form as part of the application. A self assessment is an invaluable tool before making an AEO application as it shows any areas that need attention. If these are only found during the AEO audit, the applicant will only have a short period in which to address the issue or will have to re-apply. It is much better for the applicant and for Customs if any obvious problems are dealt with prior to application.
What happens next?
When the application forms are complete, they can be submitted to Customs. Once submitted, Customs have 90 days to consider your application (will be longer if you have operations in other Member States and Customs need to consult with their colleagues in these locations). Initially, Customs will perform an audit on the data submitted in the application form and may come back to you with questions. The main audit will be a site visit.
From the initial audit, Customs will have identified areas where they need to focus on to ensure that the applicant’s systems are fully compliant. The main visit will be pre-arranged and you will need to ensure that the relevant staff who are responsible for the areas to be looked at are available. The length of the visit will depend on the size of the organisation and the scope of the audit.
Ideally, everything will be OK at the audit and there will be no need for any further inspection. If there are any areas that require remedial work, these will be made clear to the applicant and the time scale to complete the work given. If there is a significant amount of work to be done, Customs may recommend that you withdraw your application and re-apply when ready.
If the audit is successful, you will be accredited for AEO. The certificate provided by UK Customs is not that special, an A4 form with stamp and signature.
What is important though is that you will be added to the EU Register of AEO qualified companies so that other companies can see that you are AEO qualified.
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