Why AEO accreditation is freight’s best defence against a ‘no deal’ Brexit

Why AEO accreditation is freight’s best defence against a no-deal Brexit

Managing Director | SCALA

We are now just months away from Britain leaving the European Union and, somewhat worryingly, a no-deal scenario is looking an increasing possibility.

While many are still holding out hope that an agreement will be reached by the 19 March 2019 deadline, there is a strong possibility that the EU will reject the Chequers Deal put forward by the UK Government.

If that happens, it will mean there will be no 21-month transition period, as proposed by Theresa May. Instead, everything associated with being a member of the EU could come to an abrupt end and consumers, businesses and public bodies will have to respond immediately to the changes.

With no real set precedent, the consequences of a no-deal Brexit are extremely hard to predict, but it is highly likely to cause severe disruption to UK/EU cross border movements. It is also likely that existing non-EU import/export movements will be affected, with HMRC set to become overwhelmed with handling UK/EU movements.

While the outcome of these negotiations is out of our hands, there are certain steps that freight companies can be taking now that will help to mitigate the effects of any Brexit situation.

In particular, all businesses that operate in the EU should seriously consider applying for Authorised Economic Operator (AEO) status, which is almost universally expected to enable smoother cross-border movements in the post-Brexit world.

What is Authorised Economic Operator status?

AEO status is an internationally recognised quality mark indicating that a business’s role in the international supply chain is secure, and that its customs controls and procedures are efficient and compliant.

The programme, which aims to enhance international supply chain security and to facilitate legitimate trade, is open to any entity involved in the international supply chain that carries out customs-related activities in the EU.

Traders who voluntarily meet the wide range of criteria work in close co-operation with customs authorities to assure the common objective of supply chain security and are entitled to enjoy benefits throughout the EU.

What are the benefits of attaining AEO accreditation?

The accreditation gives quicker access to certain simplified customs procedures and in some cases the right to ‘fast-track’ your shipments through some customs or security procedures.

Businesses can apply for AEO status for customs simplification (AEOC), AEO status for security and safety (AEOS), or both, with the two certificates offering different benefits.

Benefits of AEOC include:

• Moving goods in temporary storage between different member states.

• A notification waiver when making an entry in a declarant’s records (EIDR).

• A 70 per cent reduction in a business’s deferment account guarantee to the customs duties.

• Undertaking centralised clearance (when available).

• Completing self assessment (when implemented).

Benefits of AEOS include:

• A lower risk score – used to determine the frequency of customs physical and documentary checks.

• Consignments being fast-tracked through customs control.

• Reduced requirements for the mandatory pre-arrival/pre-departure Entry Summary Declarations or Exit Summary Declarations (EXS).

• Reciprocal arrangements and mutual recognition with countries outside the EU - for example, USA or trading partners that adopt the World Customs Organisation safe framework.

Holders of either certificate will also enjoy:

• Fewer physical and document-based controls.

• Priority treatment if selected for control.

• Possibility to request a specific place for customs controls.

• Recognition as a secure and safe business partner.

• Improved relations with customs and other government authorities.

• Reduced theft and losses.

• Fewer delayed shipments.

• Improved planning.

• Improved customer service.

• Improved customer loyalty.

• Lower inspection costs of suppliers and increased co-operation.

How to apply for AEO accreditation

For both certificates, there are comprehensive criteria to fulfil relating to compliance, record keeping and solvency.

HMRC will check that the business has been compliant with customs and tax requirements, and will also look for serious or repeated infringements of customs rules committed by the business, anyone in the business, or its legal representative for customs matters.

The business will then need to be able to show that it has procedures in place to identify and correct any irregularities or errors, has satisfactory procedures for handling controlled goods and has procedures in place to tell HMRC about any changes in its customs business activities.

HMRC needs to be satisfied that the business has a satisfactory system of managing commercial and, where appropriate, transport records.

And finally, the business must prove it’s been financially solvent for three years before its application and that it has the ability to meet its financial commitments both to HMRC and other creditors.

Once it is confident that there is sufficient evidence of its processes and procedures to prove that it meets these criteria, the business can then complete an application pack which contains an application form and questionnaire.

Following a visit by HMRC to verify all supplementary documentation, the accreditation will then be granted within 120 calendar days.

Why is now the time to act?

While applying for AEO accreditation is not necessarily a quick or easy process, the potential benefits for freight companies are vast, particularly in light of the imminent upheaval expected to be caused by Brexit regardless of whether a deal is agreed or not.

With focus and correct management, the application can be completed in under six months, meaning that companies that begin the process now stand the best chance of minimising the disruption to their business. 

Despite the potential gains, according to a House of Lords report  as of September 2018 there were still just 638 traders registered for AEO in the UK. This is perhaps due to concerns about how complex or time-consuming the application process will prove to be.

For businesses with these concerns, we would highly recommend seeking the help and advice of an experienced third party, who will be able to provide expertise to manage the process from end-to-end, ensuring it is completed as quickly and smoothly as possible.