The current European customs legislation, applicable throughout the EU, dates back to the 1992 Community Customs Code (CCC). The CCC was mainly a codification of existing legislation on European customs law and did not anticipate the significant and rapid expansion of global trade that has since occurred.
Since the beginning of the 21st century, it has been clear that the legislation is outdated. A fresh start was needed. The first attempt at modernisation was the Modernised Customs Code introduced in 2008. This project foundered, to be replaced by the Union Customs Code in 2013 (Regulation (EU) 952/2013 of the European Parliament and the Council of October 9 2013 laying down the Union Customs Code (UCC)).
The full application of the UCC is due as from May 1 2016 and it will be further augmented by Implementing and Delegated Acts which are still in draft.
The UCC has three objectives (i) the facilitation of safe and legitimate trade, (ii) a paperless environment for customs and global trade, and (iii) the harmonisation, standardisation and simplification of customs procedures and controls. The primary tool to deliver these is the European accreditation programme of Authorised Economic Operator (AEO).
New life for the AEO accreditation programme
The UCC encourages all market operators to obtain AEO status. Those with this accreditation are considered trustworthy and compliant, and so are granted simplified and speedier customs controls and procedures.
AEO status was first introduced in 2005, however, in practice businesses did not see the expected benefits and so take-up was slow. Through the UCC, the EU is looking for opportunities to renew enthusiasm around AEO status by the revalidation of the three types of UCC authorisations:
i) An authorisation for simplified customs procedures (AEO – C);
ii) An authorisation relaxing safety and security clearances (AEO – S); and
iii) A combined authorisation conferring both benefits (AEO – F).
The objective of the customs simplifications reserved for the AEO – C status (and AEO – F status), is to facilitate and speed up trade. This is essential for globally operating companies, which depend on a smooth-running supply chain. The main advantages include:
- Centralised clearance (article 179 UCC): This allows an AEO operator to lodge a customs declaration at the customs office where the declarant is established, for goods that are actually presented at another customs office. This will benefit centrally managed supply chains.
- Electronic entry in the declarant's records (article 182, 3 UCC): Under this a customs declaration is lodged directly in the declarant's records, which are at all times accessible electronically by the customs authorities, rather than by physical presentation to the customs authorities. This approach results in faster import and export movements.
- Self-assessment: AEO operators can be authorised to perform customs formalities which normally can only be carried out by the customs authorities (such as the determination of the amount of import duties payable, and certain other controls under customs supervision) (article 185 UCC).
- Single and lower duty guarantees: Most customs procedures require lodgment of a guarantee for payment of potential or existing customs duties on a transaction-by-transaction basis. AEO operators can obtain a comprehensive and reduced rate guarantee (article 95, 3 UCC) which allows one guarantee for all transactions. The level of the guarantee may also be lower. This reduces both administrative burdens and costs.
AEO operators can also more easily obtain the benefit of other simplifications, such as the use of simplified declarations, as they should be able to qualify automatically and without having to reprove that they are eligible.
Special procedures, such as transit, storage and processing, which are key in the organisation of the supply chains, should be granted more quickly to AEO operators as they are automatically deemed to fulfill the necessary requirements (article 211, 3 b UCC). This should lead to significant time savings when supply chains and/or sourcing schemes are (re-)organised.
Finally, an explicit reference is made to mutual recognition which on one hand should provide access to EU customs simplifications for companies outside the EU which are authorised in a comparable programme in their home country (for example, C-TPAT/AEO) (article 38, 7 UCC). And on the other hand because it is reciprocal, which implies that AEO operators can enjoy customs simplification in countries outside the EU, when they are operating in third countries with a comparable programme.
Impact on existing AEO authorisations
Under the CCC, AEO status was granted on the basis of non-binding guidelines. The UCC contains precise criteria that must be met in order to be granted AEO status (article 39 UCC) providing more certainty for operators.
In principle, current AEO certificates have unlimited validity and will remain applicable until the customs authorities start a reassessment. Because the UCC foresees new requirements in comparison with the CCC, it is expected that all EU customs authorities will need to reassess the status of existing AEO certifications. Preparation to obtain or retain AEO status is required but has administrative and IT implications that should not be underestimated.
One critical requirement is that the applicant for AEO status must demonstrate practical standards of competence or professional qualifications directly related to the activity carried out. It is still unclear how this requirement will be assessed by the customs authorities, but is likely to mean that companies will need dedicated in-house personnel and training programmes. By implication, customs knowledge and activities can no longer be seen as an adjunct to supply chain efficiency, but must be treated as an integral and essential part in their own right.
On paper the improvements to the benefits of AEO status should make it more appealing to businesses but the real advantages will depend on how the customs authorities interpret and apply the new rules. 'The proof of the pudding is in the eating'.