Is Authorised Economic Operator Status the key to a smooth Brexit?

  • Insight

08 January 2019

We’ve not only become accustomed to but dependent upon efficient frictionless arrangements for the movement of goods between the UK and other EU member states. Authorised Economic Operator (AEO) status is an internationally recognised quality mark indicating that your role in the international supply chain is secure and that your customs controls and procedures are efficient and compliant.

It does, in effect, mean your company becomes trusted and permitted to trade with far less intervention by HMRC or Border Force and their foreign counterparts than those who are not so certified.

According to the Chartered Institute of Logistics & Transport. Dover and the Channel Tunnel handle 3.7 million freight movements per year, an average of 11,000 trucks a day in both directions (more at peak times). 28% of the UK’s food is imported from the EU, 80% of that on those trucks. Even a minor delay at the port could have far reaching consequences – with impacts doubtless being seen in availability, shelf life, waste and prices.

Preparing for international trading

There is growing concern in many businesses of all sizes about the possibility, whether immediately on Brexit day or following a transition period, of the imposition of customs tariffs and other restrictions and the impact they will have on the ease of movement of goods.

While there is little any business can do about the protracted political process around Brexit negotiations, there are steps that can be taken prepare for trading internationally, whether that’s sooner or later with EU countries or further afield.

You can take advice and train your staff on classification of goods, on trading terms and finance arrangements and on customs procedures.  We are able to help with the whole process.

If your business engages directly or indirectly in international trade, you should consider becoming certified by HMRC under the Authorised Economic Operator (AEO) scheme.

AEO explained

AEO is a global concept aimed at promoting security and safety in the supply chain. It is not limited to those businesses which deal with customs matters. It is open to any size of business, from SMEs to multinationals, if involved in the international supply chain of goods which have been imported or are intended for export.

The advantages of AEO are fewer inspections and other agency interventions; reducing fees and delays and increasing competitiveness. Fast-tracking consignments improves productivity and profitability.  Reciprocal and mutual recognition arrangements for the likes of C-TPAT for faster international customs transits. In the medium term, AEO status offers access to the proposed customs self-assessment regime. 

The application process

The application process is neither a straight forward nor quick process. It can take at least 6 to 9 months.

Preparation is needed if the application is not to be rejected. This should be regarded as an investment, for which advice and support may be necessary. For many companies already engaged in international trade, the end of transitional arrangements following the introduction of new Unions Customs Code (UCC) rules in May 2016 means that compliance audit and finance models need to be looked at in any event.

There are three striking statistics about AEO recognitions by HMRC:

  • Firstly, only 0.25% of UK companies which engage in international trade are currently recognised
  • Secondly, the pace of AEOs recognition has increased, with a third of all approvals granted since June 2016
  • Thirdly, although still a minority of applicants, there has been a significant uptake of AEO from end-users as well as the freight sector. They include ASDA, Boots, ASOS, Next, Trespass, Diageo, Nestle, United Biscuits, Honda, Rolls-Royce and Siemens

As with many other initiatives, the adoption of AEO status by major retailers and manufacturers could ‘reach back’ down the supply chain to create either a competitive opportunity or pre-qualification hurdle for suppliers.

Conclusion

Whether or not you decide to apply for AEO status, it is something you should actively make a decision about now – and not just an idea that you realise, too late, you should have acted upon. Contact our Brexit Lead Neil Amner for further information.