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TMI BlogReview of entity based facilitation programmes viz. Accredited Client Programme (ACP) and Authorized Economic Operator (AEO) programme — Revised GuidelinesX X X X Extracts X X X X X X X X Extracts X X X X ..... provide further benefits to the entities who have demonstrated strong internal control system and willingness to comply with the laws administered by the Central Board of Excise and Customs. The prominent features of the new programme are: i. Inclusion of Direct Port Delivery of imports to ensure just-in-time inventory management by manufacturers - clearance from wharf to warehouse ii. Inclusion of Direct Port Entry for factory stuffed containers meant for export by AEOs iii. Special focus on small and medium scale entities - any entity handling 25 import or export documents annually can become part of this programme iv. Provision of Deferred Payment of duties - delinking duty payment and Customs clearance v. Mutual Recognition Agreements with other Customs Administrations vi. Faster disbursal of drawback amount vii. Fast tracking of refunds and adjudications viii. Extension of facilitation to exports in addition to imports ix. Self-certified copies of FTA / PTA origin related or any other certificates required for clearance would be accepted x. Request based on-site inspection /examination xi. Paperless declarations with no supporting documents xii. Recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to secure and facilitate global trade. Since then, this unique international instrument has ushered in modern supply chain security standards with the help of a closer partnership between Customs and business in the form of Authorized Economic Operator (AEO) programme, which constitutes one of the three pillars on which SAFE Framework rests.The AEO programme seeks to provide tangible benefits in the form of faster Customs clearances and simplified Customs procedures to those business entities who offer a high degree of security guarantees in respect of their role in the supply chain. The SAFE Framework sets forth the criteria by which businesses in the supply chain can obtain authorized status as a secure partner. Such criteria address issues such as threat assessment, a security plan adapted to the assessed threats, procedural measures to prevent illegitimate goods entering the supply chain, physical security of buildings and premises used as loading or warehousing sites, and security of cargo, means of transport, personnel and information system. 1.1.2 Over the years, AEO has become a flagship programme for WCO Members as it offers an opportunity for Customs to share its respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of certification (i.e. AEO-T1, AEO-T2 and AEO-T3). Accordingly, henceforth the AEO Programme Manager may, following an application by an economic operator, issue the following Authorized Economic Operator Certificates (hereinafter referred to as AEO certificates)to which the applicant may be eligible as per the eligibility conditions and criteria laid down under paragraph 3 of this circular: 1.2.1 AEO-T1Certificate - This certificate may be granted only to an importer or to an exporter. For the purpose of this certificate, (i) the Importer/ Exporter should fulfill the criteria mentioned at para 3.1 below; and (ii) All other requirements as stipulated in paragraphs 3.2, 3.3 and 3.4 below shall be considered to have been met if the information and documents submitted by the applicant prove the claims of the applicant to the satisfaction of the AEO Programme Manager. 1.2.2 AEO-T2 Certificate - This certificate may be granted only to an importer or to an exporter For the purpose of this certificate, (i) the economic operator should fulfill the criteria mentioned at para 3.1 below; and (ii) all other requirements as stipulated in paragraphs 3.2, 3.3, 3.4 and 3.5 below shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits in terms of this circular in terms of paragraph 1.5 below. They shall remain AEO-T2 or AEO-LO certificate holders till the validity period mentioned in their AEO certificate issued under Circular 28/2012-Customs dated 16-11-2012. Thereafter, they will have to follow renewal procedure as prescribed in this circular. In the meantime, it shall also be open for them to apply for AEO-T3 certificate, if eligible. 1.4.2 All the existing ACP clients who have been granted ACP status in terms of the erstwhile ACP circulars and who continue to possess such status validly shall be provisionally granted AEOT1 Certificate by the AEO Programme Manager within 15 days of issue of this circular, and thereafter, they shall become entitled for benefits in terms of this circular in terms of paragraph 1.5 below. They shall remain AEO-T1 certificate holders till the validity period mentioned in their ACP renewal /granting letter. Thereafter, they will have to follow renewal procedure as prescribed in this circular. 1.4.3 All such ACP clients shall have an opportunity to submit applications for grant of AEO Certificates in terms of this circular within 90 days of issue of this circular. The val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Facility of Direct Port Delivery (DPD) of their import Containers and/ or Direct Port Entry (DPE) of their Export Containers would be available to them. However, this facility will be dependent on the volume of their Import/ Export trade in terms of number of containers. iii. ID cards to be granted to authorized personnel for hassle free entry to Custom Houses, CFSs and ICDs. iv. Wherever feasible, they will get separate space earmarked in Custodian's premises. v. In case they are required to furnish a Bank Guarantee, the quantum of the Bank Guarantee would be 50% of that required to be furnished by an importer/ exporter who is not an AEO Certificate Holder. However, this exemption from Bank guarantee would not be applicable in cases where the Competent Authority orders furnishing of Bank Guarantee for provisional release of seized goods. vi. Investigations, if any, in respect of Customs, Central Excise and Service Tax cases would be completed, as far as possible, in six to nine months. vii. Dispute resolution at the level of Adjudicating Authorities in respect of Customs, Central Excise and Service Tax cases would be done preferably and as far as possible within six months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h no supporting documents in physical form. xiv. All Custom Houses will appoint a "Client Relationship Manager"(CRM) at the level of Deputy / Assistant Commissioner as a single point of interaction with them. The CRM would act as voice of the AEO within Customs in relation to legitimate concerns and issues of AEO and would assist in getting procedural and operational issues resolved by coordinating with different sections within Customs as well as other stakeholders. xv. The refund/Rebate of Customs/Central Excise duty and Service Tax would be granted within 45 days of the submission of complete documents. xvi. They will get trade facilitation by a foreign Customs administration with whom India enters into a Mutual Recognition Agreement/Arrangement. 1.5.3 Benefits for AEO-T3: The following benefits would be provided over and above the benefits offered in T2: i. They shall be accorded highest level of facilitation, as compared to AEO-T2, in imports and export of their consignments. ii. Their containers will not be selected for scanning except on the basis of specific intelligence. Further when any container is selected for scanning, top most priority will be given f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Waiver of solvency certificate requirement under circular 24/2016 (d) Waiver of security for obtaining extension in warehousing period under circular 21/2016 (e) Waiver of security required for warehousing of sensitive goods under circular 21/2016 1.5.5 With a view to promote an overall voluntary compliance framework, the selection of AEO's for on-site post clearance audit (OSPCA) in respect of AEO-T1, AEO-T2 and AEO-T3 shall be based on risk assessment. Better and higher compliance level demonstrated by the AEO shall be taken into account for determining the frequency of audit. It is also clarified that AEO's undergoing OSPCA shall not be subjected to routine transactional PCA. Detailed guidelines on risk based OSPCA will be issued subsequently. Section 2 Application for an AEO certificate 2.1 An applicant for grant of any of the aforesaid four AEO statuses, namely AEO-T1, AEO-T2, AEO-T3 and AEO-LO, should submit the application in the proforma enclosed. The application form contains ten annexures. However, an applicant is required to fill-in and submit only those annexures which may be applicable to it, as mentioned below: Sl No Annexure Subject Application fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c providers (e.g. carriers, airlines, freight forwarders, etc.), Custodians or Terminal Operators, Customs House Agents and Warehouse Owners. Others who may qualify include port operators, authorized couriers, stevedores. The list is not exhaustive. 3.1.2 Businesses that are not involved in Customs related work / activities will not be entitled to apply. This means that in general, banks, insurance companies, consultants and the like categories of businesses will not be eligible for AEO status. 3.1.3 Application for AEO status will only cover the legal entity of the applicant and will not automatically apply to a group of companies. 3.1.4 There is no provision to grant AEO status to specific site, division or branch of legal entity of the applicant. The application must cover all the activities and locations of the legal entity involved in the international supply chain and the prescribed criteria will be applied across all those activities and locations. 3.1.5 In order to apply for AEO status the applicant must be established in India. For this purpose, the applicant should provide evidence which may include: (i) A certificate of registration issued by the Registrar of Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these eligibility conditions and criteria under paras 3.3 and 3.5 with a view to make the above AEO certificates more available to MSMEs. The criteria of turnover indicated in MSME Act would be taken into consideration for categorization of entities into Micro, Small and Medium Enterprises. 3.1.10 DG(Systems), CBEC will progressively introduce an ICT based solution, which will not only cater to the management of AEO enrolment life-cycle but will also help ensure that all Authorized Economic Operators receive high quality service. All communication between AEO/AEO applicants and Programme Manager shall be through e-mail at [email protected]. 3.2 Legal Compliance: 3.2.1 There should be no show cause notice issued to them during last three financial years involving fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax has been collected from customers but not deposited to the Government. 3.2.2 There should be no case wherein prosecution has been launched or is being contemplated against the applicant or its senior management. 3.2.3 If the ratio of disputed duty demanded or drawback demanded or sought to be denied, in all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi. Have satisfactory procedures for verifying the accuracy of Customs declarations. vii. Have appropriate information technology security measures to protect the applicant's computer system from unauthorized intrusion and to secure the applicant's documentation. 3.4 Financial solvency An applicant must be financially solvent during the three financial years preceding the date of application. The applicant should not be listed currently as insolvent, or in liquidation or bankruptcy. Further, the applicant should not have defaulted in payment of due Customs duties during the past three years. The applicants must submit an undertaking regarding its solvency and a Solvency Certificate issued by the Statutory Auditor of the applicant. 3.5 Safety and security 3.5.1 The applicant must have in place appropriate internal controls and measures to ensure safety and security of applicant's business and his supply chain, in addition to any specific legal requirements that may be applicable to the business.In order to satisfy the requirements of AEO status, the applicant will need to ensure security of procedures, cargo, procedures, conveyances, premises, personnel and business partners. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccess control measures are in place to prevent unauthorized access to shipping areas, loading places and cargo areas. With this view, following criteria should be fulfilled by the applicant: i. Buildings must be secure against unlawful entry. ii. All gates, fences and windows must be secured with locking devices or alternative access monitoring or control measures. iii. Authorized personnel must control the issuance of locks and keys. iv. Adequate internal and external lighting must be provided especially for entrances and exits, cargo handling and storage areas, fence lines and parking areas. v. Gates through which vehicles and/or personnel enter/exit must be manned, monitored or otherwise controlled. Vehicles accessing restricted areas must be parked in approved area and their license plate numbers furnished to Customs upon request. vi. Only properly identified and authorized persons, vehicles and goods may be permitted access. vii. Access to document or cargo storage areas may be restricted. viii. There should be appropriate security systems for access control. ix. Restricted areas should be clearly identified. x. Integrity of structures and systems must be periodicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure that the conveyances to be used in connection with the operations to be covered by the certificate are handled in a manner which ensures security of the cargo. With this view, the applicant must: i. ensure to the extent possible that all conveyances used for the transportation of cargo within the supply chain are capable of being effectively secured. ii. ensure to the extent possible that all operators of conveyances used for transport of cargo are trained to maintain the security of the conveyance and the cargo at all times while in its custody. iii. require operators, to report actual or suspicious incident to designated security department staff of the applicant company as well as to maintain records of these reports, which should be available to the AEO Programme Team and the Customs. iv. ensure that potential places of concealment of illegal goods on conveyances are regularly inspected, v. ensure that transporters make sure that conveyance integrity is maintained while the conveyance is en route transporting cargo to export/import points or import/transit containers by utilizing a tracking and monitoring activity log or records. vi. ensure that pre-determined routes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant must get written confirmation of meeting AEO equivalent security criteria. Such business partners must have one of the following written documents demonstrating their compliance with security criteria: a. Contractual document b. A completed self-assessment security questionnaire from the applicant. c. A written statement from the business partner demonstrating their compliance with AEO security criteria. d. Senior business partner officer attesting to compliance. e. Documents from the business partners demonstrating their compliance with and equivalent and accredited security program administered by a foreign Customs authority. iv. Periodic reviews of business partner's processes and facilities must be conducted based on risk, and must maintain the security standards required by the applicant. 3.5.8 Security Training and Threat Awareness In order to secure the international supply chain, the applicant must ensure that its concerned employees actively participate in security awareness programmes. With this view, following criteria should be fulfilled by the applicant: (i) The applicant should ensure that: a. A threat awareness program is established and maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30 days of the receipt of the application. 4.4 Processing of application: 4.4.1 On receipt of the complete application and after ensuring that the applicant is eligible to apply, the information and documents submitted by the applicant shall be scrutinized to assess whether or not the eligibility conditions and criteria for granting the AEO certificate as mentioned under the Section 3 of this circular are met by the applicant. 4.4.2 If necessary, further information and/or documents in support of the claim of the applicant may be called for by the AEO Programme Manager or by an officer on his behalf. Such request shall be sent in writing. 4.4.3 The applicant shall submit such information and/or documents within a reasonable time. 4.4.4 In case of an application for grant of AEO-T1 status, once the eligibility conditions and criteria for granting the AEO certificate as mentioned under the Section 3 of this circular are found to have been met by the applicant to the satisfaction of the AEO Programme Manager, the applicant shall be issued the AEO-T1certificate within 30 days of submission of the information and/or documents. 4.4.5 In case of an application for grant of AEO-T2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AEO Programme Team may cover the following: (i) Information on Customs matters. (ii) Remedial action taken on previous Customs errors, if any. (iii) Accounting and logistic systems. (iv) Internal controls and procedures. (v) Flow of cargo. (vi) Use of Customs House Agents. (vii) Security of Computers/IT and documents. (viii) Financial solvency. (ix) Safety and security assessment - premises, cargo, personnel etc. (x) Logistic processes. (xi) Storage of goods. 4.4.5.8 During the course of physical visit/verification, the person who is nominated in the application form as point of contact must ordinarily be available unless unforeseeable situation arises. In addition, individuals responsible for specific business activities such as transport, record keeping and security should also be available. 4.4.5.9 On completion of verification, the AEO Programme Team will prepare their report and make a recommendation to the AEO Programme Manager within 60 days of completion of visits/verification. The contents of report and recommendation can be seen by applicant who will get the opportunity to sign the same, but this will not be a mandatory requirement. 4.4.5.10 Within 30 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultation with the applicant. Thereafter, the procedures as mentioned in the paragraph 4.4.5, 4.4.6 and 4.4.7 above shall be followed. However, in case of any significant changes in the business or the processes since the previous physical verification by an AEO Programme Team, the applicant may be subjected to physical verification as may be deemed necessary by the AEO Programme Manager by following the procedures as mentioned in the paragraph 4.4.5, 4.4.6 and 4.4.7 above. 4.5 Certification: 4.5.1. If AEO status is granted, the AEO Programme Manager shall send the Certificate of AEO Status to the applicant in hard copy along with an electronic copy. The Certificate shall bear the 'AEO logo' that may be used where it is appropriate to do so for the business, for example, company stationary, sign age on vehicles or other publicity materials. The copyright for the logo is owned by the AEO Programme Manager on behalf of the Indian Customs Administration. 4.5.2. The AEO status will be activated within a week from the date of issue. Following this period, the applicant should enter the AEO certificate number on all Customs documentation to indicate their AEO Status. 4.5.3 It is high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gramme Team. Errors that are voluntarily disclosed will not impact the AEO status provided that the AEO status holder has: (i) Examined the reasons for the errors. (ii) Taken appropriate remedial action to prevent recurrence. 5.4 Review of AEO Status: 5.4.1 The AEO Programme Team will review AEO status periodically to ensure continued adherence to the conditions and standards of grant of Certificate of AEO Status. Thus, it is recommended that the AEO status holder should continue to re-assess its compliance with the conditions of certification and act upon any identified problems as soon as they arise. The frequency of such review will be two years, three years, five years and five years in case of AEO-T1, AEO-T2, AEO-T3 and AEO-LO respectively. As far as possible, the review and the onsite PCA, if applicable, will be conducted simultaneously. 5.5 Suspension or downgrading of AEO Status: 5.5.1 The AEO Programme Manager may suspend the Certificate of AEO Status in the following cases: i. Where any non-compliance with the conditions or criteria for the Certificate of AEO Status has been detected; or ii. In the case of a Custodian or Custom Broker or Warehouse Operator, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et by it. AEO Programme Manager will consider such applications by following the procedure adopted while granting the fresh AEO status. 5.7 Revocation of AEO Status: 5.7. 1 In following circumstances, the Certificate of AEO Status will be revoked: i. Where the Certificate of AEO Status is already suspended and the AEO holder fails to take the remedial measure within 60 days to have the suspension withdrawn; or ii. Where there is a reasonable belief that an act has been perpetrated that is liable to lead to prosecution and /or is linked to an arrest of person under Customs Act, 1962 as mentioned in Para 3.2.2; or iii. A show cause notice has been issued to them involving fraud, forgery, outright smuggling, clandestine removal of excisable goods or cases where Service Tax has been collected from customers but not deposited to the Government as mentioned in Para 3.2.1; or iv. Where the AEO status holder requests the authorization be revoked. 5.7.2 Prior to any decision to revoke authorization, the applicant will be notified. Revocation is applied from the day following the authorization holder being notified. 5.7.3 In case the AEO status is revoked, the AEO-T1 and AEO-T2 statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senior management official within the administration of the applicant) in order to make available to the AEO Programme Manager or to any officer authorized by the AEO Programme Manager all the information necessary for the proving compliance with the requirements for issuing the AEO certificate. Annexure - B (applicable for grant of AEO-T2, AEO-T3 and AEO-LO) SECURITY PLAN The economic operator wishing to participate in the AEO Programme shall submit to Customs a security plan documenting the policies, processes and procedures that it has in place to ensure that goods for export/import are packed at a secure premise/facility, accurately accounted for and transported securely to the point of export/import from the point of origin. The security plan must detail the company's written and verifiable policies, processes, procedures etc., in respect of the following: - Procedural security. - Document security. - Physical security. - Access controls. - Personnel security. - Training and skill upgradation. - Compliance with other Government security related requirements, if any. Annexure - C (applicable for grant of AEO-T1, AEO-T2, AEO-T3 and AEO-LO) PROCESS MAP Proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the details of Company Secretary. (vi) Details of places/locations where goods are being handled, e.g. loading, unloading, storage etc., in the course of supply to/from international supply chain. (vii) Proof that the business has its own accounts. Whether your entity has business activities for at least three financial years preceding the date of application? Whether you have filed or handled at least 25 documents i.e. Bills of Entry or Shipping bills, with the Customs Authorities during the last financial year. A summary sheet may be provided. Whether the applicant has ever been convicted of a criminal offence? If so complete details of the same should be submitted. Note: 1. The Self-Assessment can be carried out by the applicant themselves or through a third party having expertise. 2. If some points are not applicable, these should be mentioned in the 'Remarks' column with reason thereof. Annexure-E.2 Legal Compliance (applicable for grant of AEO-T1, AEO-T2, AEO-T3 and AEO-LO) E.2 Compliance Yes No Remarks (a) Whether there is any cases of infringement of Customs Laws by any of the following persons over the three financial years pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edures in place for the handling of licenses and authorizations connected to export/import? (d) Whether having satisfactory procedures in place for archiving of the company's records and information, and also for protection against the loss of information? (e) Whether there is a system to ensure that employees are made aware of the need to inform the Customs authorities whenever compliance difficulties are discovered and establish suitable contacts to inform the Customs authorities of such occurrences? (f) Whether there is a satisfactory procedure for verifying the accuracy of Customs declarations? (g) Whether there is an appropriate information technology security measures to protect the applicant's computer system from unauthorized intrusion and to secure the applicant's documentation? Note: The applicant should enclose appropriate documentary evidences in support of above claims. Annexure E.4 Financial Solvency (applicable for grant of AEO-T1, AEO-T2, AEO-T3 and AEO-LO) E.4 Compliance Yes No Remarks Whether the applicant has been financially solvent during the three financial years preceding the date of application? (Solvency would gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the import/export cargo are accurately indicated? c. Import/export cargo are verified against purchase/delivery orders? d. Drivers delivering or receiving cargo are positively identified before cargo is received or released? Whether all shortages, overages, and other significant discrepancies or anomalies are resolved and/or investigated appropriately? E.5.2 Premises Security: Yes No Remarks (a) Whether building is fully secured against unlawful entry? (b) Whether all external and internal gates, fences and windows are fully secured with locking devices or alternative access monitoring or control measures? (c) Whether the issuance of locks and keys is controlled by management or authorised personnel only? (d) Whether adequate internal and external lighting have been provided especially for entrances and exits, cargo handling and storage areas, fence lines and parking areas? (e) Whether gates through which vehicles and/or personnel enter/exit have been manned, monitored or otherwise controlled? (f) Whether vehicles accessing restricted areas are parked in approved area and their license plate numbers furnished to Customs upon request? (g) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments, purchase/sales orders and Customs papers? (l) Whether internal control procedures exist to deal with situations when any discrepancies and/or irregularities are discovered? E.5.4 Conveyance Security Yes No Remarks (a) Whether, to the extent possible, all conveyances used for the transportation of cargo within the supply chain are capable of being effectively secured? (b) Whether, to the extent possible, all operators of conveyances used for transport of cargo are trained to maintain the security of the conveyance and the cargo at all times while in its custody? (c) Whether all operators are required to report actual or suspicious incident to designated security department staff of the applicant company as well as to maintain records of these reports, which should be available to the AEO Programme Team and the Customs? (d) Whether potential places of concealment of illegal goods on conveyances are regularly inspected? (Such places include all internal and external compartments & panels.) (e) Whether the transporters are required to maintain the conveyance integrity while it is en route transporting cargo to export/import points or import/tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) A completed self-assessment security questionnaire from the applicant. (iii) A written statement from the business partner demonstrating their compliance with AEO security criteria. (iv) Senior business partner officer attesting to compliance. (iv) Documents from the business partners demonstrating their compliance with and equivalent and accredited security program administered by a foreign Customs authority. (d) Whether a system exists to encourage other concerned business entities/trading partners to assess and enhance supply chain security? (e) Whether a system is in place for periodic reviews of business partner's processes and facilities based on risk, and maintenance of security standards by the business partners is as required by the applicant? E.5.7 Security Training and Threat Awareness Yes No Remarks (a) Whether the applicant has established and maintained a threat awareness program for employees to foster awareness of the threat at each point in the supply chain? (b) Whether employees of the applicant are aware of the procedures which are in place to address a situation and how to report it? (c) Whether specific trainings are offer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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