TaxTMI 
TaxTMI 
Authorized Economic Operator (AEO) programme for implementation.
X X X X Extracts X X X X
X X X X Extracts X X X X
....on to secure supply chain of imported and export goods. This programme has been developed pursuant to guidelines of WCO adopted in SAFE FoS (Framework of Standard) in 2005. Many Customs administrations have already instituted AEO programmes or similar programmes which share a common objective of ensuring security in global supply chain from the point of origin i.e. the point of export to import in the receiving country, keeping in view national requirements of respective administrations. The detailed guidelines on implementation of the AEO programme are appended as 'Annexure' to this Circular. 2. One of the salient features of the AEO programme is that any economic operator such as importer, exporter, logistics provider, Customs House Agent can apply for authorization subject to the criteria that the applicant is: (i) able to establish a record of compliance in respect of Customs and other legal provisions. (ii) able to demonstrate satisfactory systems of managing commercial and, where app....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Scrutiny of applications for pilots By 30.9.2011 Selection of 3 pilots and intimation thereof By 15.10.2011 Validation process including field visits for pilots 15.10.2011 - 15.1.2012 Decision on grant of AEO status 15.2.2012 8. All Commissioners are requested to issue a suitable Public Notice and a standing order for guidance of trade and staff. Yours faithfully, ( R. P. Singh ) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tner. 2. Benefits of an AEO Programme: 2.1 Under the programme, a business authorized by the Customs as an AEO can enjoy benefits flowing from being a more compliant and secure company as well as favourable consideration in any Customs proceedings coupled with better relations with Customs. AEO status will also ensure a low risk score that may be incorporated into Customs 'Risk Management System' (RMS) and used to determine the frequency of Customs physical and documentary checks. The benefits may also include simplified Customs procedure, declarations, etc. besides faster Customs clearance of consignments of/for AEO status holders. 2.2 Illustrations: Possible long term benefits flowing to different categories of AEO status holders are as under: (a) Importers: (i) Reduced examination and inspection with AEO status holder being given higher facilitation than that available to ACP Clients. (ii) &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; Businesses that are not involved in Customs related work / activities will not be entitled to apply. This means that in general banks, insurance companies, consultants and the like categories of businesses will not be eligible for AEO status. 4.4 The application for AEO status will only cover the legal entity of the applicant and will not automatically apply to a group of companies. 4.5 There is no provision to grant AEO status to specific site, division or branch of legal entity of the applicant. The application must cover all the activities and locations of the legal entity involved in the international trade supply chain and the identified criteria will be applied across all those activities and locations. 4.6 In order to apply for AEO status the applicant must be established in India. For this purpose, the applicant will be asked to provide evidence which may include: (i) A certificate of registration issued by the Regist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Each application will be acknowledged and recorded in an AEO Programme database. 6. Return of application: 6.1 If application is incomplete or deficient, the applicant will be suitably informed within 30 days of the receipt. 6.2 AEO Programme Manager will not process the following applications until these are rectified, as indicated: (a) Which is incomplete - This may be resubmitted with the complete information. (b) Where the application has not been made by a legal person - This can only be resubmitted by the concerned legal entity. (c) Where no responsible person is nominated - This can only be resubmitted when the applicant nominates a responsible person who will be the point of contact for the AEO Programme. (d) Where the applicant is subject to bankruptcy proceedings at the time the application i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; An applicant must meet certain conditions and ensure compliance with the criteria of grant of AEO status. Thus, an AEO Programme Team will examine applicant's record of compliance over the last three years preceding the date of applicant's application to ensure adherence to Customs, Central Excise and Service Tax laws as well as allied laws that are administered by the Department. Major violations in respect of any other fiscal law such as relating to Income/Corporate Tax will also be taken into account to confirm the compliance level of the applicant. 10.2 Normally, 'technical' or procedural errors, if any, made by an applicant over the past three years in relation to Customs, Central Excise and Service Tax laws that have no significant impact on the revenue or compliance record may not be considered a disqualification for grant of AEO status. This approach would extend to the various allied laws that are administered by the Department. These 'technical' or procedural errors may include the following: (i) Any errors that have been voluntar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10.8 Any errors made by third parties acting on applicant's behalf would reflect upon the applicant's compliance. Thus, the applicant should make such third parties aware of the standards that he operates to and that systems are in place to immediately identify any problems. 11. Managing commercial and (where appropriate) transport records 11.1 For the purpose of AEO status the applicant must have a satisfactory system of managing commercial and, where appropriate, transport records. Such a system may include the following: (i) An accounting system consistent with Generally Accepted Accounting Principles (GAAP) / International Financial Reporting Standards (IFRS) which facilitates audit-based Customs control. (ii) Allowing the AEO Programme Team physical or electronic access to Customs and, where appropriate, transport records. (iii) An ministrative set up and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as a going concern. (iii) Any contingent liabilities or provisions. (iv) Net current assets are positive. (v) Net assets position and the extent of intangible assets. 12.3 It is recognized that in some circumstances it may be normal practice for a company to have negative net assets. For example, a company may be set up by a parent company for research and development purposes when the liabilities are funded by a loan from the parent or from a financial institution. In these circumstances, negative net assets will not necessarily be seen as an indicator of insolvency but further evidence of solvency will be required such as a Bank letter or in case of sole proprietor or partnership firms, personal assets. 12.4 If applicant is a newly established business or have just started trading, his financial solvency will be judged on the basis of records and information. This will include the latest: (i)  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tally them and compare them against transport documents, purchase/sales orders and Customs papers. (j) Internal control procedures should exist when discrepancies and/or irregularities are discovered. 13.4 Conveyance Security: (a) Ensure, to the extent possible that all conveyances used for the transportation of cargo within the supply chain are capable of being effectively secured. (b) Ensure, to the extent possible that all operators of conveyances used for transport of cargo are trained to maintain the security of the conveyance and the cargo at all times while in its custody. (c) Require operators, to report actual or suspicious incident to designated security department staff of both the AEO Programme Team and Customs, as well as to maintain records of these reports, which should be available to Customs. (d) Consider potential p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; All fencing must be regularly inspected for integrity and damage. (n) The number of gates should be kept to the minimum necessary for proper access and safety. (o) Private passenger vehicles should be prohibited from parking in or adjacent to cargo handling and storage areas. 13.6 Personnel Security: (a) All reasonable precautions must be taken when recruiting new staff to verify that they are not previously convicted of security-related, Customs or other criminal offences. (b) Periodic background checks must be conducted on employees working in security sensitive positions. (c) Employee identification procedures should require all employees to carry proper identification that uniquely identifies the employee and organisation. (d) &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the record keeping system, and strength of internal control system. 14.5. The applicant should be prepared to answer questions or provide additional information on all aspect of the application to the visiting AEO Programme Team. 14.6. Where appropriate, in addition to the other requirements detailed earlier, the AEO Programme Team will cover the following: (i) Information on Customs matters. (ii) Remedial action taken on previous Customs errors, if any. (iii) Accounting and logistic systems. (iv) Internal controls and procedures. (v) Flow of cargo. (vi) Use of Customs House Agents. (vii) Security of Computers/IT and documents. (viii) Financial sol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation may be stopped by consensus between the applicant and the AEO Programme Manager in order for the applicant to provide additional information or to permit minor problems to be addressed. The period of stoppage will normally not longer than six months and applicant will be informed in writing of the date when the AEO verification will recommence and the revised date by which applicant can expect a decision on his application. 15. Certification: 15.1. The AEO Programme Manager will inform the applicant of the outcome of his application, which should ordinarily be done within 90 days of the date on acceptance of application. The period during which the AEO verification is stopped does not count towards the 90 days limit within which the AEO Programme Manager must give the applicant a decision on his application. 15.2. If AEO status is granted, the AEO Programme Manager shall send the Certificate of AEO Status to the applicant in hard copy alongwith an electronic copy. The Certificate shall bear the 'AEO logo' that may be used where it is appropriate to do so for the business, for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hanges, the AEO status holder needs to reapply for AEO in the name of new legal entity. 16.5. If the AEO status holder makes Customs errors, they must be reported to the local Customs officers as well as the AEO Programme Team. Errors that are voluntarily disclosed will not impact the AEO status provided that the AEO status holder has: (a) Examined the reasons for the errors. (b) Taken appropriate remedial action to prevent recurrence. 17. Review of AEO Status: 17.1. The AEO Programme Team will review AEO status periodically to ensure continued adherence to the conditions and standards of grant of Certificate of AEO Status. Although the Certificate has no expiry date, it will only remain valid for as long as they meet the conditions of certification. Thus, it is recommended that the AEO status holder should continue to re-assess it's compliance with the conditions of certification and act upon any identified problems as soon as they arise. To begin with, the frequency of such review will be one year. 18. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d has no further right to appeal. (c) Where the AEO status holder requests the authorization be revoked. 19.2. Prior to any decision to revoke authorization, the applicant will be contacted. Any decision taken in this regard will be subject to right of appeal of applicant. Revocation is applied from the day following the authorization holder being notified. 19.3. In case the authorization is revoked, the applicant will not be entitled to reapply for another certificate for a period of three years from the date of revocation. 20. Right to Appeal: 20.1. In case the Certificate of AEO Status is suspended / revoked, the AEO status holder can, within thirty days of the decision, file an appeal before the Director General of Inspection, New Delhi for review of the said order. The Director General of Inspection, after considering the case of the applicant, shall dispose of the appeal within a period of thirty days. ************* Annexure - A &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; Full Name: Position in Company: Dated: * Contact person will be a senior management official who will be nodal contact point and responsible to the Customs for proper implementation of the AEO Programme. ************************************************************** Annexure - B SECURITY PLAN &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....******** Annexure - E SELF-ASSESSMENT FORM (A) Compliance 1 Compliance Yes No Remarks (a) Whether any violation in respect of any provisions of Customs, Central Excise and Service Tax laws as well as allied laws that are administered by the Department has been committed in last three years preceding the date of application? If yes, please indicate the type of violation and action taken against the applicant in 'Remarks' column. (b) Whether any penalty has been imposed for violation of provisions of Customs, Central Excise and Service Tax laws? (c) Whether procedures are in place to identify and disclose any irregularities or errors to the Customs authorities or, where appropriate, other regulatory bodies? and (d) Whether appropriate remedial action is taken when irregularities or errors are identified? Note: The Self-Assessment can be carried out by the applicant themse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (h) Whether it is possible to deliver goods to an unsupervised area? (i) Whether goods have been uniformly marked or stored in designated areas and procedures exist to weigh / tally them and compare them against transport documents, purchase/sales orders and Customs papers? (j) Whether internal control procedures exist when discrepancies and/or irregularities are discovered? (D) Conveyance Security 3.2 Conveyance Security Yes No Remarks (a) Whether all conveyances used for the transportation of cargo within the supply chain are capable of being effectively secured? (b) Whether all operators of conveyances used for transport of cargo are trained to maintain the security of the conveyance and the cargo at all times while in its custody? (c) Whether there is a system for operators to report actual or suspicious incident to designated security department staf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nternational, high value and hazardous cargo. (n) Whether all fencing has been regularly inspected for integrity and damage? (o) Whether the number of gates is kept to the minimum necessary for proper access and safety? (p) Whether private passenger vehicles are prohibited from parking in or adjacent to cargo handling and storage areas? (F) Personnel Security 3.4 Personnel security: Yes No Remarks (a) Whether all reasonable precautions have been taken when recruiting new staff to verify that they are not previously convicted of security-related, Customs or other criminal offences? (b) Whether periodic background checks are conducted on employees working in security sensitive positions? (c) Whether employee identification procedures require all employees to carry proper identifica....