Business

Garment Exporter? Why An AEO Certification Can Add Real Value

Authorised Economic Operator programme (AEO) is a worthwhile investment for any garment manufacturer whose organisation is involved in international supply chain. The status is attributed to only those organisations that maintain safe, secure and compliant international trade procedures. AEO is an internationally recognised status which demonstrates that your organisation operates both efficient and compliant customs controls & procedures.

In this era where business efficiencies are defined by speed, AEO accreditation can help fast-track shipments through customs and security procedures by providing quicker access to simplified custom procedures. In some cases, the benefit may also include waivers for guarantees. A bouquet of other benefits is offered by AEO, including lower rate of physical inspections of imported/exported goods, faster release of shipments, preferential treatment by Customs Authorities, and deferred payment of duties, to the companies that meet compliance criteria & demonstrate the security of supply chain. Therefore, there is undeniable wisdom in getting the certification even though it is not mandatory.

Customs organisations all over the world face the twin challenge of securing the borders from unlawful trade and simultaneously facilitating and speeding up legitimate trade. These are exactly the objectives that AEO works towards achieving. Globally, AEO certification will progressively evolve into an industry standard for claiming eligibility to any administrative & governmental discretions, priority and facilitation. In my opinion, it will not be any different in India as well, very soon.

While AEO certification has been offered since 2012 in our country, the Central Board of Excise and Customs has re-launched a more effective and reworked three -tier AEO programme merging the ongoing Accredited Clients Programme (ACP) & AEO programme recently. This has certainly been received well by the exporter fraternity and found to be very useful. Further, the process of AEO certification has been made a time bound exercise by the government, which implies that AEO-T1 certification can be obtained within a period of one month after submission of required documents by your organization. The AEO-T2 & T3 certifications can be obtained between a reasonable three-five month period.

If you are an organization established in India and are involved in global trade as an importer, exporter, cargo agent, warehouse operator, port operator, carrier or customs house agent, irrespective of the size of your business, you are eligible for AEO certification. Also, since, AEO status is not location specific, it applies to a particular entity as a whole. Each entity needs to apply for AEO certification separately. It is no uphill task to be eligible for AEO or apply for it. An applicant needs to provide the standard operating procedures and details of the following at the time of application:

Site plan details
Business partner details
Legal compliance, that is, no issuance of show cause notice/prosecution case
Security plan details
Safety and Security standards
Managing commercial and transport records
Process map for movement of goods
Financial solvency status

If you are an exporter, there is a three-tier system of certification, with varying levels of benefits: T1, T2 and T3. What makes the process faster and efficient is also that in case of T1 certification, no physical verification is conducted and only the application is reviewed.

Physical verification by AEO Programme Team is conducted to verify compliance with the above requirements for the grant of T2 and T3 certification within 90 days of application. The AEO specialists conduct onsite visit of domestic facilities to confirm the security practices are in place and operational in case of higher certification levels. The team prepares the reports with recommendation to the AEO Programme Manager within 60 days of completion of onsite verifications. AEO certified exporters get varying levels of benefits from importing countries too.

(HKL Magu is chairman, AEP)