The finance ministry has granted Authorised Economic Operator (AEO) status to the gems and jewellery sector.

It will facilitate exports and imports of gem and jewellery with shorter cargo release time, reduction in bank guarantee by 50 per cent compared to non-AEO entities and expedite resolution of customs, central excise and service tax cases.

What is AEO programme?

• The AEO programme was introduced as a pilot project in 2011.

• The AEO programme seeks to provide tangible benefits in the form of faster Customs clearances and simplified procedures to those business entities who offer a high degree of security guarantees in respect of their role in the supply chain.

• AEO is a programme under the aegis of the World Customs Organisation (WCO) SAFE Framework of Standards to secure and facilitate global trade.

• It has a three-tier structure — AEO-T1, AEO-T2 and AEO-T3 — with the level of facilitation linked to level of assured compliance. 

• It was designed to set standards to secure and to facilitate the ever-growing flow of goods in international trade. 

• Today, the programme has a membership of nearly 5,000 AEO entities. That is 5,000 economic entities which have actively collaborated with Indian Customs to ensure safety and security in the supply chain. 

• And in return, they are reaping benefits of an ever-widening set of benefits from Indian Customs such as faster processing and clearance of cargo, deferred payment of duty, direct port delivery/entry.

• The facilitation measures implemented through the Indian AEO programme has ensured a significantly faster movement of goods at Indian ports, which in turn has translated into substantial savings in time and cost for the Indian trade.

• The programme aims to enhance international supply chain security and facilitate movement of legitimate goods.

• AEO encompasses various players in the international supply chain. 

• Under this programme an entity engaged in international trade is approved by Customs as compliant with supply chain security standards and granted AEO status and certain benefits. 

• AEO is a voluntary compliance programme. Those business entities in the global supply chain, who are interested in getting benefits of the programme, may apply for authorisation or certification as per the procedure prescribed by the government. 

• It enables Indian Customs to enhance and streamline cargo security through close cooperation with the principle stakeholders of the international supply chain — importers, exporters, logistics providers, custodians or terminal operators, custom brokers and warehouse operators.

Genesis of AEO

• The genesis of AEO scheme dates back to September 11, 2001 terror attack in US which made all the governments to realise that the supply chain itself could be used for terror activities and a need was felt to make the supply chain secure.

• Since the supply chain is controlled by the trade, the Customs administration is partnering with the trade in order to secure the supply chain. 

• The US started CT-PAT (Customs Trade – Partnership against terrorism) programme. 

• Later, WCO adopted SAFE Framework of Standards in 2005 in order to secure and facilitate the trade. 

• The SAFE framework has three pillars comprising Customs to Customs partnership, Customs to Business partnership and Customs to other government stakeholders. 

Mutual recognition

• Mutual Recognition Agreements are the international face and connecting link of the domestic AEO programme of various countries. It acts as an equaliser that harmonises the minor difference to allow for seamless facilitation in terms of benefits and processes for movement of goods across borders for the domestic AEO accredited entities. 

• Mutual Recognition of AEOs is a key element of the WCO SAFE Framework to strengthen end-to-end security of supply chains and to multiply benefits for traders at a global level.

By mutual recognition of AEOs two customs administrations agree to:

i) Recognise the AEO authorisation issued under the other countries programme.

ii) Provide reciprocal benefits to AEOs of the other countries AEO entity.

• Indian Customs has collaborated with several foreign customs administrations to align with their AEO programmes, which effectively allows Indian Customs to internationalise the core principles of the programme and provide benefits to Indian trade at the international level.

Manorama Yearbook app is now available on Google Play Store and iOS App Store