Becoming an Authorised Economic Operator - Will that provide a smoother passage?

As businesses review post Brexit scenarios one of the questions that arises is whether they should seek to become an Authorised Economic Operator (AEO). The logic behind this is that, even though the precise barriers that will be faced in moving goods across borders are still are to be determined, any resultant disruption will be kept to a minimum.

The background to the introduction of AEO status within the EU was part of a more wide-ranging response to secure international supply chains by encouraging businesses to operate to codified standards in an auditable way.

In trying to understand what an AEO is, a good starting point is HMRC’s Notice C117. The Notice defines an AEO as an economic operator who, by satisfying certain criteria, is considered to be reliable in their customs related operations throughout the European Union (EU) and is therefore entitled to a range of benefits. These can include either easier access to simpler customs clearance, deferment guarantee concessions or relief from customs security and safety controls.

These benefits, therefore, relate quite logically to the two forms of authorisation:

  1. Security and safety (AEOS).
    Customs simplifications (AEOC).
  2. It is possible to apply for one of these authorisations or both.

Manufacturers, exporters, freight forwarders, warehouse keepers, customs agents, carriers and importers can all apply. The same notice defines the criteria for applying, and it is important to note that an application relates to the entire legal entity. Therefore the application has to cover all EU locations within which the legal entity operates.

Against this background, an obvious dilemma emerges. While AEO status has the potential to offer the nearest thing available to the ideal of ‘frictionless trade’ under likely post-Brexit scenarios, achievement of that status might not readily be in the gift of many businesses. A review of the HMRC’s questionnaire C118 and accompanying notes reveals the burden of evidence required. So, even if the task is achievable, it may take time to be so. So where does that leave us?

Application for AEO status since it was first introduced has largely been a strategic decision, recognising the scale and scope of the applicant’s supply chain and how it could be impacted logistically within the EU. It is reasonable to suggest that is still the case, but some of the risks and costs have shifted and will continue to do so. At the moment if the bulk of a company’s trade is intra-EU the case may not be as compelling as if the supply chain is more extensive, or as it could become post-Brexit.

In common with any potentially adverse scenario, a starting point would be a self-assessment of current readiness for AEO status, a related gap analysis and a fuller risk assessment of potential impacts post-Brexit. Some businesses may well be able to undertake this themselves (and have done so). Working with service providers and professionals is a further step along this continuum. Reputable specialists like Strong & Herd offer workshops, and there is a variety of professional support available to businesses setting out on this journey. So, there is an opportunity to gear up in readiness.

While there will be pressures in some sectors driving some business to apply, the net result for others may not be a formal application at this stage. The alternative may be a more measured action plan to build capabilities and reduce exposures so that the business is better positioned to respond when and if it needs to.

I suspect this a topic that will crop up again as Brexit negotiations progress.

About the author

David Millett is a coach and trainer who works regularly for RWA. He has a long experience in trade issues with a background in banking, where he was Head Of Trade Product Management for the Royal Bank of Scotland, before becoming Head of Business Development for UK Export Finance’s short-term business. David is a Fellow of the Institute of Export and former Council Member for the International Chamber of Commerce UK and the British Exporters Association.

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