Relaxed AEO accreditation for MSMEs - Relaxations in requirements

In its recent circular no. 54/2020 -customs dated 16th December 2020, CBIC has considerably relaxed compliance and security requirements for MSME enterprises. In this article, an attempt is made to explain the modified requirements to enable MSMEs to avail the benefits of Authorized Economic Operator ( AEO) scheme.

What is AEO Accreditation

AEO is a programme under the aegis of the World Customs Organization (WCO) SAFE Framework of Standards to secure and facilitate Global Trade. The programme aims to enhance international supply chain security and facilitate the movement of legitimate goods.

There are 3 tiers (levels) of certifications under the AEO program-

1.AEO T1 - Verified on the basis of document submission only

2.AEO T2 - In addition to document verification, onsite verification is also done

3.AEO T3 - For AEO T2 holders who have enjoyed the status for 2 years only on the basis of document verification and for AEO T2 holders who have not enjoyed the status continuously or has introduced major changes in business, the applicant is subjected to physical verification

For logistics providers, custodians or terminal operators, custom brokers and warehouse operators there is only one tier: AEO LO - In addition to document verification, onsite verification is done 6 3

What are the benefits of AEO certification

1. Self-declaration of SION under Para 4.07A of FTP 2015-20 for AEO Exporters in cases where SION is not notified.

2. Inclusion of Direct Port Entry for factory stuffed containers meant for export by AEOs for AEO T1, T2 AND T3.

3. Inclusion of Direct Port Entry for factory stuffed containers meant for export by AEOs for AEO T1, T2 AND T3.

4. Provision of Deferred Payment of duties - delinking duty payment and Customs clearance for AEO T2 and AEO T3

5. Benefits of Mutual Recognition Agreements with other Customs Administrations for AEO T2 and AEO T3.

6. Fast tracking of adjudications and refunds including IGST refunds and disbursal of drawback.

7. Priority in processing and clearance of goods.

8. Self-certified copies of FTA / PTA origin related or any other certificates required for clearance would be accepted.

9. Paperless declarations with no supporting documents.

10. Recognition by Partner Government Agencies and other stakeholders as part of this programme.

Which enterprises are classified as MSMEs?

The recent classification revised from 1.7.2020 is given below:

*Applicable for both manufacturers and service providers

Relaxations to MSMEs for obtaining AEO certification

1. Requirement of handling a minimum of 25 documents in last FY has been reduced to 10 documents.
2. Business activities requirement in last three years reduced to 2 years.
3. Legal and compliance qualifying reduced from the last 3 years to 2 years.
4. Application annexures at present have been reduced to just 2 - Annexure 1 and Annexure 2.
5. For AEO T2, the requirement of physical verification has been rationalized substantially.
6. The time limit for processing applications for AEO T1 and T2 have been reduced to 15 days (from 1 month) and 3 months(from 6 months) respectively.
7. Relaxation in furnishing bank guarantee of 25% (from 50%) for T1 and 10% (from 25%) for T2.

With the above relaxations MSMEs should take benefit and enjoy the AEO status.

Note: The writer is Founder of Fintaxwise Solutions and can be reached at lekhrsood@gmail.com