Customs in India, like in other countries are responsible to clear the imported or export goods after proper checking whether they are importable/exportable under various rules made by different ministries for different products as per licensing/approvals required and for collection of duties. Further, they implement various concessions and exemptions that are given to a certain class of products, depending upon their end-use, source country or under certain schemes of DGFT.
In an increasingly globalized world, the efficient movement of goods across international borders is crucial for businesses and economies. However, international trade also comes with its fair share of challenges, such as security risks, regulatory compliance, and delays at customs checkpoints. To address these issues and foster a safe and efficient supply chain, countries around the world have implemented the Authorized Economic Operator (AEO) program.
What is the AEO Scheme?
The AEO scheme is a voluntary trade facilitation program designed to identify and recognize businesses that have demonstrated a high level of compliance with customs regulations and supply chain security standards. By earning AEO status, companies are acknowledged as safe and reliable trading partners, which provides them with several benefits and incentives.
Objectives of the AEO Programme
The Indian Customs AEO Programme, in alignment with the World Customs Organization (WCO) SAFE Framework of Standards, has the following key objectives:
- Internationally Recognized Certification: AEO status grants businesses an internationally recognized certification, which enhances their reputation and credibility in the global market.
- Secure and Reliable Trading Partners: AEO certification identifies companies as secure and reliable trading partners, providing confidence to other entities involved in the supply chain.
- Time and Cost Savings: AEO benefits translate into tangible savings in time and costs for certified businesses, making them more competitive.
- Secure Supply Chain: The AEO program aims to secure the supply chain from the point of export to import, mitigating potential security risks.
- Enhanced Border Clearance Privileges: Businesses with AEO status enjoy enhanced border clearance privileges when dealing with countries that have Mutual Recognition Agreements (MRAs) with India.
- Minimal Disruption to Cargo Flow: AEO-certified businesses experience fewer security-related disruptions to the flow of cargo.
- Customs Assistance: AEO status provides access to Customs advice and assistance, particularly when dealing with unexpected issues in countries with MRAs.
Structure of the Indian AEO Programme
The Indian AEO Programme comprises three tiers for importers and exporters:
AEO-T1: Entry-level tier with basic benefits and compliance requirements.
For example, Facility of direct port delivery (i.e. DPD) would be available in case of import containers based on the volume of their import trade in terms of the number of containers.
AEO-T2: Intermediate tier with increased benefits and higher compliance requirements.
AEO-T3: Highest tier with the most significant benefits and strictest compliance requirements.
Additionally, there is a single-tier AEO Programme for Logistics Providers, Custodians or Terminal Operators, Customs Brokers, and Warehouse Operators, known as AEO-LO.
Deferred Payment on Import Duty under AEO
The Deferred Payment of Import Duty scheme, operating under the umbrella of the Authorized Economic Operator (AEO) program in India, is a significant trade facilitation measure introduced by the Central Board of Excise and Customs (CBEC). The scheme is based on the principle of ‘Clear first-Pay later,’ which delinks duty payment from Customs clearance. This innovative approach aims to streamline the movement of goods from the wharf to the warehouse, ultimately facilitating just-in-time manufacturing.
As part of the Government of India’s focus on ease of doing business, the AEO program rewards entities that demonstrate robust internal control systems and a commitment to complying with CBEC-administered laws. Importers holding AEO-T2 or AEO-T3 status are eligible to benefit from the Deferred Payment of Import Duty scheme, which allows them to defer duty payment until a later date.
To avail the benefits of the Duty Deferment Scheme, every certified AEO-T2/AEO-T3 importer must obtain an ICEGATE Login, which serves as a necessary authentication mechanism for customs-related transactions. An AEO nodal person is appointed to handle and authenticate all customs-related communications on behalf of the AEO. The contact details of this nodal person are provided during ICEGATE registration to ensure timely communication and authentication of information.
The scheme’s implementation requires careful consideration to prevent misuse and maintain the integrity of the system. By granting eligible importers the flexibility to defer duty payment, this initiative encourages smooth trade operations, enhances operational efficiency, and fosters a conducive environment for international businesses in India.
Eligibility Criteria and Application Process
To be eligible for AEO registration, a business entity must meet specific criteria, including having experience in customs-related work, being part of the international supply chain, and having engaged in business activity over the last three financial years.
The application should be submitted to
the jurisdictional Chief Commissioner of Customs or through the online AEO India website.
The Authorized Economic Operator (AEO) scheme is a forward-thinking initiative that benefits businesses involved in international trade by providing them with recognition, security, and facilitation advantages. By fostering a safer and more efficient supply chain, the AEO programme contributes to overall economic growth and stability. While participation in the program is voluntary, companies that choose to become AEO-certified position themselves as reliable and trusted partners in the global marketplace
Q1: Is AEO License mandatory for businesses involved in the supply chain?
A1: No, the AEO scheme is an optional program. However, acquiring AEO status provides multiple benefits to the AEO entity.
Q2: What is the validity of the AEO Registration status?
A2: The validity of AEO certification is 3 years for AEO-T1 and AEO-T2 entities, while it is 5 years for AEO-T3 and AEO-LO entities. AEO-T1 entities certified on or after 1st April 2019 do not require renewal; their certification is auto-renewed without an end date.
Q3: How can an AEO avail the facility for deferred payment of duty?
A3: To avail the deferred payment of duty facility, an eligible importer, including AEO, should intimate its intent to the jurisdictional Principal Commissioner of Customs and register on the ICEGATE platform.
Q4: Can facilitation benefits be availed by Indian AEOs in foreign countries?
A4: Yes, facilitation benefits can be availed by Indian AEOs in countries that have signed Mutual Recognition Agreements (MRA) with India.
Q5: Are all AEOs entitled to Direct Port Delivery/Direct Port Entry facilities?
A5: Yes, AEO-T1/T2/T3 entities are entitled to Direct Port Delivery (DPD) or Direct Port Entry (DPE) facilities by applying for DPD permission to the concerned Chief Commissioner and registering themselves with the port authorities.
Q6: What are Mutual Recognition Agreements under AEO Registration?
A6: Mutual Recognition Agreements (MRA) are bilateral agreements between Customs Administrations, facilitating the recognition of AEO validations between countries. MRAs allow extending reciprocal benefits to each other’s AEOs.
Q7: Is the Authorized Economic Operator certification valid across all customs stations in India?
A7: Yes, once an entity obtains AEO registration, it is entitled to all AEO benefits across all airports, customs ports, and land customs stations in India.
Q8: Who can apply for the AEO status?
A8: Any business entity engaged in international trade and involved in the international supply chain, including importers, exporters, custodians, logistics providers, customs house agents, port operators, and warehouse owners, can apply for the AEO license.
Q9: What are the eligibility criteria for AEO certification?
A9: To obtain AEO registration, the entity should be established in India, involved in customs-related activity, in business for the last 3 years, dealt with a minimum of 25 customs-related documents in the last financial year, and have a clean record in terms of customs law compliance.
Q10: Can the branch office of a legal entity obtain a separate AEO registration?
A10: No, AEO registration is not granted for specific divisions, sites, or branches of a legal entity. The certification applies to the entire legal entity engaged in international trade.
Customs look at the valuation of the goods while importing and exporting because most of the import duties and export incentives are based on the value of the goods. Further, it is important from the perspective of proper foreign exchange outflow or inflow. Valuation of the goods is done under Section 14 of the Customs Act 1962, and as per Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 & Customs Valuation (Determination of Value of Export Goods) Rules 2007. Customs assess the goods and their value presented by the importer. Upon assessment, the goods are allowed for clearance upon payment of duty.
Primarily the declared transacted value is accepted as the value of the goods (except in specific cases). However, the customs may not accept the declared value based on various reasons such as :-
- Related party transactions
- Significantly higher value of comparable identical/similar goods imported at or about the same time
- Abnormal / specific and special discounts.
- The misdeclaration/ non-declaration of specified parameters
Special Valuation Branch of the customs deals with cases involving related party transactions and follows a procedure as laid down in the circulars issued by CBEC from time to time. The procedure involves an investigation spread over a period of time and requires the importer to reply to a set of questionnaires and also maintain documentation and furnish the information as and when required. After the investigation, the customs may accept or reject the value. On rejection, the value is re-determined based on the sequential methodology (identical/similar valuation, deductive valuation, computed valuation, residual valuation). At times such a re-determination may involve the imposition of a fine and penalty depending on the reasons for rejection of the value.
Re-Exports and Re-Imports
Capital goods, equipment, components, parts and accessories, whether imported or indigenous, may be sent abroad for repairs, testing, quality improvement or up-gradation or standardization of technology and re-imported without a license/certificate/permission
Re-imports of goods for reasons of being defective or rejected etc. can be done wherein all the benefits that had been claimed are required to be reversed.
Export of Imported Goods: In the same or substantially the same form may be made without a license / certificate / permission provided that the item to be imported or exported is not mentioned as restricted for import or export in the ITC (HS). Goods, including those mentioned as a restricted items for import (except prohibited items), may be imported under Customs Bond for export in freely convertible currency without a license / certificate / permission provided that the item is freely exportable without any conditionality / requirement of license / permission as may be required under ITC (HS) Schedule II. If the goods have to be exported after having been paid duty, for reasons of being defective or unusable etc, they can be exported under drawback.
Import on Export basis: New or second hand capital goods, equipment, components, parts and accessories, containers meant for packing of goods for exports, jigs, fixtures, dies and moulds may be imported for export without a license / certificate / permission upon payment of duty. The drawback of duties paid at the time of import is available depending upon the time of utilisation in the country. Alternatively, imports can be done on the execution of Legal Undertaking / Bank Guarantee and paying the applicable duty at the time of re-export.
ROLE of Andees
Andees team assist in the documentation required, application preparations, representation and coordination with Customs and other concerned Government Departments till the receipt/approval of SVB, REX, AEO etc.