AEO - Is it Worth Making an Application

Strong and Herd Associate Neil Markendale-Brettell responded to our July article Brexit Opportunities of a Different Kind with another point of view about the benefits of applying for Authorised Economic Operator (AEO) status.

Firstly, it must be clear that this is not a note against any eligible business obtaining AEO status, it is just a warning that being an AEO in the United Kingdom is not a magic bullet and any business considering making an application should first ensure they are aware of the benefits and the associated costs. It is also worth noting that AEO status is only granted to a business that “has dealings with Customs legislation”.

Presently, under the Union Customs Code: -

Holding an AEO (C) status will grant:

Easier application for simplifications allowed under the appropriate customs legislation;

                Fewer physical and documentary controls

                Prior notification of any customs control to be carried out

                Priority treatment if selected for control

                Possibility to nominate the place that any control is carried out

                Recognition of status as a “trusted trader” within HMRC regimes.

Holding AEO (S) status will give:

                Fewer safety and security controls both physical and documentary

                Prior notification of any physical control related to safety and security

                Priority treatment and the ability to nominate where safety and security checks are carried out 

                Fewer delays in the release of goods from customs control.

However, applicants should be aware that, presently in the UK, at least 96% of imports and exports are cleared “route 6” i.e. cleared without examination almost immediately without any HMRC intervention.  With the Government’s commitment in the Chequers statement to an almost frictionless removal of goods from the ports, it is difficult to accept that this rate of examination will change. The benefit from holding AEO status, therefore, appears to be less clear.

Aside from the clearance of the goods, there may be financial benefits from the simplifications that are offered under the customs legislation to an AEO authorisation holder. i.e. applications for warehousing, temporary storage, provision of guarantees etc. Presently under the UCC any application for a customs warehouse etc includes a requirement to hold AEO status or to meet the AEO criteria.

All deferment accounts, duty guarantees for customs purposes, etc, are subject to a reduction or waiver if the business holds AEO status. Whether this will benefit the business will depend on the present cost of any guarantee held by them and whether the cost of obtaining and maintaining AEO status is less than the reductions obtained in the cost of the guarantees.

Therefore, I urge caution before making any application to hold AEO status until the business has examined, closely, what are the benefits to themselves and possibly their customers, to holding AEO status following the agreement reached between the UK and the EU. It is only when the details of the BREXIT agreement are known that the benefits, if any, for UK businesses will become known. Only when a business is satisfied that there will be a business benefit should an application be made.

Article written by Neill Markendale-Brettell - Associate of Strong & Herd LLP

Strong and Herd offer a public course Authorised Economic Operator and the Link to the UCC, which could be a valuable first step in evaluating the possible benefits of AEO status for your company. More details here.

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