UCC strengthens the case for AEO
Being an Authorised Economic Operator (AEO) already entails advantages for companies that have invested in doing the work to gain the AEO certification. With the new Union Customs Code (UCC), companies with an AEO permit will be able to gain additional advantages leading to more predictable and efficient logistics flows as well as an increased competitive edge.
UCC – additional possibilities for AEO companies
Centralised clearance (being able to clear all customs declarations from one central location in the EU) and self-assessment (self-declaration of custom fees, similar to VAT reporting) are two new possibilities under UCC that will be implemented towards the end of the initial UCC implementation period from 1 May 2016 to 31 December 2020. To take advantage of these, AEO will be a prerequisite. AEO-ready businesses will therefore be well positioned to take advantage of these new possibilities when they become available.
Existing AEO benefits are still valid
Direct AEO benefits, including fewer physical and document-based controls, pre-notification in case of controls, easier access to customs simplifications and other customs authorisations, as well as access to mutual recognition with third countries, will continue to apply under UCC. The same is true of the soft benefits, such as better cross-functional communication and cooperation, improved customs knowledge and better risk management, which often outweigh the direct benefits as detailed by customs authorities.
Certification becomes a permit
With the UCC, AEO becomes a permit (authorisation) and all AEO certifications will have to be reviewed in line with the new UCC guidelines. Much is recognisable from before, but there is an additional competency requirement that is realised through either experience and/or professional qualifications. There is also likely to be more focus on ensuring that AEO applicants have robust routines that reflect their business, and that those routines are known in the business and used on a day-to-day basis. Achieving AEO status under UCC will facilitate future permit application and/or permit reconsideration processes.
Trouble evaluating the benefits of AEO have stopped action in the past
Ever since the Authorised Economic Operator (AEO) certification was launched in 2008, many companies have been trying to evaluate whether to go for AEO or not. What are the benefits? How long does it take to become certified? Can we do it ourselves or do we need some help? What do we really gain by being AEO? This has sometimes stopped companies taking active steps to get ready for AEO.
Furthermore, some AEO-certified companies have felt that they have been exposed to more controls after AEO certification than before. In other instances the initial certification was fairly easy to achieve, but it then proved much harder to retain at a subsequent audit because routines were not being kept up to date or there had been insufficient internal controls and reviews performed in the business.
Hard work pays off
Our experience shows that companies that did a thorough job at the time of certification and that also afterwards had a genuine focus on maintaining knowledge, following routines and updating documentation as and when appropriate, have been able to benefit from improved customs management to a greater extent than they first envisaged.
Six situations to consider regarding AEO, based on KGH’s experience
Based on KGH’s experience, here are six situations where being AEO could be beneficial for a company:
- Freight forwarder serving customers with logistics flows to and from the EU.
- Strong business links with countries where the EU either has mutual recognition or is likely to have it in the not too distant future.
- Businesses with many permits that will be reconsidered as part of the transition to UCC, where being AEO may facilitate the reconsideration process for other customs permits.
- Large customs guarantee, which may be able to be reduced as a result of being AEO.
- Interested in centralised clearance and self-assessment that will be introduced towards the end of the UCC implementation period.
- Interested in raising customs knowledge in a business, in order to better manage risks and be able to take advantage of business opportunities connected with international trade. Here AEO can also be seen as a seal of quality.
KGH can help you find the way forward
If you have any additional questions or need any other kind of assistance, please don’t hesitate to contact us.
Catharina Olofsson, Consulting Director