mangalore customs welcomes you all to the Workshop on authorised economic operator scheme

1. mangalore customs welcomes you allto the Workshop on authorised economic operator scheme

2. सीमा शुल्क आयुक्त का कार्यालय नव सीमा शुल्क भवन, पणंबूर, मंगलूर – ५७५०१० OFFICE OF THE COMMISSIONER OF CUSTOMS NEW CUSTOMS HOUSE, PANAMBUR, MANGALORE – 575 010 दूरभाष सं. 0824-2408164 फैक्‍स सं. 0824-2407100

3. Welcomes allto the Workshop on authorised economic operator scheme

4. BACKGROUND….. • Twin challenges before Customs organizations • (a) securing the borders from unlawful trade • (b) facilitating the legitimate trade • To counter the above, WCO adopted SAFE Framework - Standards to Secure and Facilitate Global Trade.

5. …..BACKGROUND • SAFE Framework – • a deterrent to international terrorism • safety to revenue collections • promotion of trade facilitation worldwide.

6. …..BACKGROUND Kyoto (place in Japan) Convention elaborates several key governing principles. Chief among these are the principles of: • transparency and predictability of Customs actions; • standardization and simplification of the goods declaration and supporting documents; • simplified procedures for authorized persons; • maximum use of information technology; • minimum necessary Customs control to ensure compliance with regulations; • use of risk management and audit based controls; • coordinated interventions with other border agencies; • partnership with the trade.

7. …..BACKGROUND • AEO Scheme, adopted by many countries across the globe - a WCO initiative towards SAFE Framework. • Under the Scheme, Customs approved stakeholders as compliant with the supply chain security standards to get benefits like simplified Customs procedures and reduced Customs intervention. • Draft Guidelines on Authorised Economic Operator Scheme formulated by Indian Customs - during December 2010. • Formal Notification of AEO Scheme for implementation – on 23 August 2011. • Focus of the GOI on “Ease of Doing Business” led to development of comprehensive unified trade facilitation programme - the existing ACP scheme and AEO is merged.

8. Global Experience

9. Need for a new AEO programme

10. NEW AEO PROGRAMME • Vide Circular No. 33/2016-Customs dated 22/07/2016, two facilitation schemes namely ACP (Accredited Client Programme) and existing AEO have been merged. • NEW AEO - A single tier AEO programme for economic operators like Customs Brokers, Warehouse keepers etc. • Enhancement of the scope of the programme to provide further benefits to the entities demonstrating strong internal control systems and willing to comply with the various laws.

11. PROMINENT FEATURES • Inclusion of Direct Port Delivery (DPD) of imports to ensure just-in-time inventory management by manufacturers – clearance from wharf to warehouse • Inclusion of Direct Port Entry (DPE) for factory stuffed containers meant for export by AEOs • Special focus on small and medium scale entities – any entity handling 25 import or export documents annually can become part of this programme • Provision of Deferred Payment of duties – delinking duty payment and Customs clearance • Mutual Recognition Agreements with other Customs Administrations • Faster disbursal of drawback amount • Fast tracking of refunds and adjudications • Extension of facilitation to exports in addition to imports • Self-certified copies of FTA / PTA origin related or any other certificates required for clearance would be accepted • Request based on-site inspection /examination • Paperless declarations with no supporting documents • Recognition by Participating Government Agencies (PGAs) and other Stakeholders as a part of this programme

12. What is AEO ? Authorised Economic Operator an organization or a company involved in the movement of goods certified by Customs of each country that such organizations or companies have complied with WCO or equivalent supply chain security standards. includes manufacturers, importers, exporters, customs clearance agents, carriers, consolidators, port owners, airport owners, port or airport operators, warehouse owners and goods distribution agents.

13. AEO Programme • The following are two types of AEO programmes:- • Three tier AEO programmefor importers and exporters - AEO-T1, AEO-T2 and AEO-T3. • Single tier AEO programme for others (other than importers and exporters) – AEO-LO. • Businesses not involved in Customs related work / activities NOT ENTITLED. eg. banks, insurance companies, consultants etc.

14. Eligibility criteria at Macro level 14

15. Dimensions of AEO Security

16. AEO-LO CERTIFICATE • Who can apply ? • economic operators other than importers and exporters viz., Logistics Providers, Custodians or Terminal Operators, Customs Brokers and Warehouse Operators. • Must be an Indian Establishment. (Doc evidence like certificate of registration issued by the Registrar of Companies or Bank account etc. to be provided) • Applicant should have business activities for at least 3 FYs preceding the date of application. (exceptional cases – on the basis of physical verification of internal controls) • Threshold of handling of 25 documents i.e. either Bills of Entry or Shipping Bills during the last financial year. • The applicant should comply with the conditions – legal compliance, commercial / transport records and financial security, and conditions relating to safety and security.

17. …..AEO – LO Certificate • POINTS TO BE REMEMBERED • AEO status covers the legal entity. Does not automatically apply to group companies. • AEO status will not be granted to specific site, division or branch of legal entity but covers all its activities and locations. • The applicant should comply with the conditions – legal compliance, commercial / transport records and financial security. • AEO granted to customs broker – does not imply that status is extended to the clients.

18. LEGAL COMPLIANCE….. • No show cause notice during last three financial years involving fraud, forgery, outright smuggling, clandestine removal or cases where ST has been collected but not remitted. • No case wherein prosecution has been launched or is being contemplated against the applicant or its senior management. • In the following case, application may be considered.

19. LEGAL COMPLIANCE….. • No show cause notice during last three financial years involving fraud, forgery, outright smuggling, clandestine removal or cases where ST has been collected but not remitted. • No case wherein prosecution has been launched or is being contemplated against the applicant or its senior management. • In the following case, application may be reviewed.

20. …..LEGAL COMPLIANCE • An applicant should demonstrate that he has: • procedures in place to identify and disclose any irregularities or errors to the Customs authorities or other regulatory bodies. • taken appropriate remedial action when irregularities or errors are identified. • to ensure that the errors identified are resolved immediately and do not recur.

21. Commercial / Transport Records • Maintenance of an accounting system consistent with GAAP / IFRS which facilitate audit-based Customs control; • Have an administrative set up that has internal controls capable of detecting illegal or irregular transactions; • Have satisfactory procedures in place for the handling of licenses and authorizations connected to export/import; • Have satisfactory procedures in place for archiving of the company’s records and information and for protection against the loss of information; • Keep the employees aware of the need to inform the Customs authorities about the compliance difficulties discovered and to inform the Customs authorities of such occurrences; • Have satisfactory procedures for verifying the accuracy of Customs declarations. • Have appropriate IT security measures to protect their computer systems from unauthorized intrusion and to secure their documentation.

22. FINANCIAL SECURITY • An applicant must be financially solvent during the three financial years preceding the date of application. He should not be listed currently as insolvent, or in liquidation or bankruptcy. • Should not have the instances of default in payment of Customs duties during the past three years. • Submission of an undertaking regarding their solvency and a Solvency Certificate issued by the Statutory Auditor of the applicant.

23. SAFETY AND SECURITY • Must have in place internal controls and measures to ensure safety and security of applicant’s business and his supply chain – viz., security of procedures, premises, cargo, conveyances, personnel and business partners.

24. SECURITY OF PROCEDURES….. • To keep in place appropriate internal controls and measures to ensure safety and security of procedures relating to business / its supply chain. • Develop and maintain a security policy and procedure manual containing detailed guidelines on procedures to be followed to preserve the integrity of the cargo (during its custody, loading and unloading from transport conveyance and transport). • Policy should stipulate how seals are to be controlled and affixed to cargo and transport conveyances. • Keeping in place the security measures to ensure the integrity and security of processes relevant to the transportation, handling, and storage of cargo. • Keep in place proper documentation management procedure to ensure that a document is legible, complete, accurate and protected against the exchange, loss of information and erroneous information.

25. …..SECURITY OF PROCEDURES • Keep in place a system to ensure that information received from business partners is reported accurately and in the time limit prescribed. • Procedure should be in place to ensure : • Reconciliation of Import / Export cargo vis-à-vis the information on the bill of lading. • Accurate indication of the weights, labels, marks and numbers of the import/export cargo. • Verification of import/export cargo with the purchase/delivery orders. • Identification of drivers delivering or receiving cargo before its release or receipt. • All shortages, overages, and other significant discrepancies or anomalies must be resolved and/or investigated appropriately.

26. SECURITY OF PREMISES….. • To ensure security of premises, construction of the buildings should be with the materials, which resist unlawful entry and provide protection against unlawful intrusion. Inspection of integrity of structures and systems to be done periodically. • Identification of Restricted areas - To keep in place appropriate access control measures to prevent unauthorized access to shipping areas, loading places and cargo areas. • Securing the gates, fences and windows with locking devices or alternative access monitoring or control measures. • Proper control with the authorized personnel for issuance of locks and keys. • Clear demarcation within a cargo handling structure to segregate domestic, international, high value and hazardous cargo.

27. …..SECURITY OF PREMISES • Provision of adequate internal and external lighting for entrances and exits, cargo handling and storage areas, fence lines and parking areas. • Manning and monitoring and control of Gates through which vehicles and/or personnel enter/exit. Minimum number of gates for proper access and safety. • Access only by the properly identified and authorized persons and vehicles and goods. Parking of the vehicles accessing restricted areas in approved area. Prohibition of unauthorized vehicles from parking in or adjacent to cargo handling and storage areas. • Restriction of access to document or cargo storage areas. Appropriate security systems for access control.

28. CARGO SECURITY….. • To keep in place appropriate measures for the handling of goods include protection against the introduction, exchange or loss of any material and tampering with cargo units. • Access to the cargo only by the properly identified and authorized persons . • Integrity of cargo should be ensured by permanent monitoring or keeping in a safe, locked area. • Usage of high security seals.

29. …..CARGO SECURITY • Checking the integrity of container seals by the authorized person (as per the procedure prescribed in the security policy). • Distribution of container seals only to authorized personnel to safeguard their appropriate and legitimate use. • Laying down of appropriate procedures on measures to be taken when an unauthorized access or tampering is discovered. • Uniform marking of Goods or storing in designated areas and to keep in place appropriate procedures to weigh / tally them and compare them against transport documents, purchase/sales orders and Customs papers. • Internal control procedures should exist when discrepancies and/or irregularities are discovered.

30. CONVEYANCE SECURITY….. The applicant must: • ensure to the extent possible that all conveyances are capable of being effectively secured. • 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. • require operators, to report actual or suspicious incident to designated security department staff of the applicant company as well as to maintain records of these reports, which should be available to the AEO Programme Team and Customs.

31. …..CONVEYANCE SECURITY • ensure that potential places of concealment of illegal goods on conveyances are regularly inspected. • ensure that transporters make sure that conveyance integrity is maintained while the conveyance is en route transporting cargo to export/import points or import/transit containers by utilizing a tracking and monitoring activity log or records. • ensure that pre-determined routes are identified by the dispatcher, and procedures must consist of random route checks along with documenting and verifying the length of time between the loading point/trailer pickup and the delivery destinations. • ensure that drivers must notify the dispatcher of any route delays due to weather, traffic and/or rerouting. • ensure that the management of transporters must perform a documented, periodic, and random verification process to ensure the logs are maintained and conveyance tracking and monitoring procedures are being followed and enforced.

32. PERSONNEL SECURITY • As far as possible, carrying out security screening of prospective employees to be employed in security sensitive positions. • Taking all reasonable precautions when recruiting new staff to verify that they are not previously convicted of security-related, Customs or other criminal offences. • Periodic background checks must be conducted on employees working in security sensitive positions. • Employee identification procedures should require all employees to carry proper identification that uniquely identifies the employee and organization. • Procedures to be in place to identify, record and deal with unauthorized or unidentified persons, such as photo identification and sign-in registers for visitors etc. at all points of entry. • Expeditious removal of identification and access to premises and information for employees whose employment is terminated.

33. BUSINESS PARTNER SECURITY….. • Implementation of measures to ensure a clear identification of business partners. • To maintainwritten and verifiable process about the capability of financial soundness and compliance with the safety requirement set by the contracts including the capability of detection and correction of safety defects, for the selection of business partners. • If business partners have AEO certification, obtain the business partners’ copies of certification.

34. …..BUSINESS PARTNER SECURITY • For non-AEO partners, obtain the written confirmation of meeting AEO equivalent security criteria. Such business partners must have one of the following written documents demonstrating their compliance with security criteria: • Contractual document • A completed self-assessment security questionnaire from the applicant. • A written statement from the business partner demonstrating their compliance with AEO security criteria. • Senior business partner officer attesting to compliance. • Documents from the business partners demonstrating their compliance with an equivalent and accredited security program administered by a foreign Customs authority. • Carrying out the periodic reviews of business partner’s processes and facilities based on risk and maintenance of the security standards required by the applicant.

35. SECURITY TRAINING AND THREAT AWARENESS….. • To ensure that the concerned employees actively participate in security awareness programmes. • To establish and maintain a threat awareness program for employees to foster awareness of the threat at each point in the supply chain. • To make the employees aware of the procedures the company has in place to address a situation and report. • Offering specific training to assist employees in maintaining cargo integrity, recognizing internal conspiracies and protecting access controls.

36. …..SECURITY TRAINING AND THREAT AWARENESS v. Supply chain security training must include the following items: • Security policy of the company. • Potential risk to internal security of the company. • Maintaining cargo security. • Access control measures of the company. • Identifying and reporting suspicious cargo and personnel. • Conveyance management and cargo security for conveyance management personnel. vi. Maintain records of security training and make available for verification by the AEO Programme Team and the Customs.

37. BENEFITS OF AEO-LO

38. BENEFITS OF AEO-LO

39. TREATMENT OF EXISTING AEOs AND ACPs • Existing AEOs holding valid certificates will be granted either AEO-T2 or AEO-LO certificates. (Time limit – 15 days from the date of circular) • The AEO-T2 or AEO-LO certificates are valid till the date mentioned in old AEO certificates. • For renewal, new procedure prescribed under the present circular is to be followed. • If eligible, they can opt for AEO-T3 certificate during renewal. • Existing ACP clients holding valid certificates will be granted AEO-T1 certificates. (Time limit – 15 days from the date of circular) • The AEO-T1 certificates are valid till the date mentioned in ACP granting / renewal letter. Thereafter, renewal procedure is to be followed.

40. TREATMENT OF EXISTING ACPs • ACP clients are given an opportunity to submit application for grant of AEO Certificates within 90 days. If not submitted, case will be taken up for review. • If submitted, they continue to avail the benefits of AEO-T1 certificate till a decision is taken by AEO Programme Manager. If AEO certificate is not given, benefits will be discontinued. • ACP clients can apply for AEO-T2 or AEO-T3 Certificates. But certificates will be granted after necessary verification of requirements like Legal Compliance, Financial Solvency, Managing records, Safety and security etc. • If ACP or AEO status is denied earlier, they can file afresh as per present circular.

41. APPLICATION FORM

42. APPLICATION SUBMISSION • TO: The jurisdictional Custom Chief Commissioner’s office with a copy to the AEO Programme Manager, Directorate of International Customs or in case of any doubt, to the AEO Programme Manager, Directorate of International Customs, 10th Floor, Tower II, JeevanBharti Building, Connaught Place, New Delhi – 110001. • The Commissioner, Directorate of International Customs, 10th Floor, Tower II, JeevanBharti Building, Connaught Place, New Delhi – 110001 will be the AEO Programme Manager and AEO Programme Team will comprise officers from the Directorate of International Customs or jurisdictional Custom Zones. [Vide Circular No. 3/2018-Customs dated 17/01/2018]

43. VALIDITY OF CERTIFICATES • AEO - T1 and AEO - T2 : 3 years • AEO – T3 and AEO – LO : 5 years • RENEWAL – Time limit

44. MAINTENANCE OF AEO STATUS • Should maintain their eligibility by adhering to the standards. If not, AEO status can be suspended, downgraded or revoked. If revoked, AEO-T1 and AEO-T2 status holders cannot reapply for a period of one year. For AEO-T3 and AEO-LO, the period is 3 years. • Change in legal entity, change of business name / address, change of nature of business, changes in accounting and computer systems, changes in senior personnel responsible for customs matters, addition / deletion of locations etc., should be brought to the notice of AEO programme team. (within 14 days) • If legal entity changes, re-application to be made.

45. Customs - Business Partnership: AEO Benefits Other Companies