Relaxed norms to help MSMEs get AEO recognition

In a welcome move, the Central Board of Indirect Taxes and Customs (CBIC) has relaxed the compliance and security requirements for micro, small, and medium enterprises (MSMEs) to get recognition as authorised economic operators (AEO). The idea is to help an MSME get internationally recognised quality recognition that indicates its secure role in the international supply chain and an assurance that it is a ‘secure’ trader and a reliable trading partner.

In 2016, the CBIC launched a revised trade facilitation programme by merging the existing accredited clients programme (ACP) and ongoing AEO scheme into a revised AEO programme that provides additional facilities to the legitimate traders who have demonstrated strong internal control systems and willingness to comply with the laws administered by the CBIC.

For the economic operators other than importers and the exporters, such as the logistics service providers, Customs brokers, warehouse keepers, custodians or terminal operators, the AEO programme offers only one tier of certification (i.e. AEO-LO), whereas for importers and exporters, there are three tiers of certification (i.e. AEO-T1, AEO-T2, and AEO-T3). The eligibility criteria for recognition are stringent for higher levels of recognition as AEO-T2 and AEO-T3. The parties having higher levels of recognition enjoy more facilitation measures. 

The AEO scheme has grown in popularity over a period of time. At present, there 791 entities with AEO-LO recognition, 3,206 parties with AEO-T1 recognition, 581 parties with AEO-T2 recognition, and 20 parties with AEO-T3 recognition. They enjoy facilities such as lesser physical and documentary checks, direct port delivery and direct port entry for import and export containers, lesser quantum or waiver of bank guarantees, waiver of merchant overtime fees, deferment of import duties, quicker refunds and so on.  

The CBIC has entered into mutual recognition agreements (MRA) with certain other countries, where the Customs administrations recognise AEOs as secure entities and give the goods exported by them a higher level of facilitation. The AEOs recognised for the purpose can thus better predict the movement of their goods, particularly for time-sensitive shipments, and also enjoy saving in costs which would otherwise be incurred due to delay at the destination ports. By last August, 564 Indian AEOs had become eligible for facilitation under the MRAs.  

However, all AEOs must furnish 100 per cent of differential duty as security if they request provisional assessment when inquiry is initiated based on reasonable belief that the matter involves mis-declaration of origin or when verification of signatures and seals is initiated under Free Trade Agreements in terms of Rule 5 or 6(1)(a) or 6(1)(b) of Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020. 

As the MSMEs were finding it difficult to meet some of the eligibility criteria for getting recognition as AEO, the CBIC has now relaxed some of the conditions. MSMEs can now apply for AEO recognition even if they have only 10 (instead of 25) bills of entry or shipping bills in a year. They need have business activities only for last 2 (instead of 3) years. New simplified documentation is prescribed while applying for AEO recognition. The security requirements prescribed for MSME now cover minimum verifiable security criteria. The time limit for processing their applications is reduced. The benefits are increased to furnishing bank guarantees for lesser amounts. MSMEs should take note and avail the benefits available to them. 

email: tncrajagopalan@gmail.com