AEO status and customs reliefs
AEO can be likened to a “passport of privileges” – it will:
- Lower your risk profile as importer and therefore minimise risk for delays at the border
- It will also allow you to waive or reduce mandatory financial guarantees for suspended and deferred customs duty and import VAT
- Operating to AEO standards is a requirement for being awarded any customs reliefs, such as Customs Warehousing.
The UK government intends to uphold the AEO programme and its privileges post Brexit, under a UK badged AEO scheme. HMRC have suggested that AEO certified companies will have their goods fast tracked in the case of the severe delays expected in connection with a ‘no-deal Brexit’.
Start your AEO accreditation process now
We believe AEO accreditation is a crucial precaution for businesses to take to prepare for a no- deal Brexit, which remains a risk until a withdrawal agreement is approved by the EU and the UK Parliament. This is something that HMRC is also actively encouraging UK traders to do.
The AEO accreditation process is neither quick nor straightforward. It requires businesses to undergo a rigorous self-assessment of internal processes and controls relating to Customs compliance and supply chain security all of which need to be documented in preparation for the ‘AEO audit’, which HMRC currently undertakes on all applicants.
Many businesses have already applied for AEO in anticipation of Brexit. Unsurprisingly, HMRC is very busy with the increasing number of applications, and it is legally entitled to a six month processing time. Although a new application for AEO may not be approved in time for a no-deal Brexit, businesses should still consider applying as its benefits will continue beyond the immediate aftermath of Brexit. Based on our experience, businesses make the following errors when seeking AEO-accreditation:
- Under-estimating the amount of time and resources required - if the self-assessment process has been completed in a day, it’s unlikely to have been done properly and HMRC is likely to reject the AEO application. Failed applications are then sent to the back of the queue (which is likely to be even longer by that point).
- Understanding the question - HMRC is looking for specific, targeted information rather than looking to audit every internal control/process that the business has in place.
- Answering all the questions in the AEO application form as fully as possible – where applicants are asked if they have documented controls and procedures in place, ticking the ‘no’ box is not an option, but neither is ticking the ‘yes’ box if they haven’t put in place the necessary controls and procedures and documented them in detail.
Here are some good practice preparation steps which applicants can take to increase their chances of successfully obtaining AEO accreditation as soon as possible and at the first attempt:
- Ensuring that there is sufficient internal and senior buy-in for the project to stop it stalling when everyone’s day jobs fight for priority
- Before the application is submitted to HMRC, double-checking that the information contained within it is accurate and can be supported when HMRC check it
- Using the process as an opportunity to introduce efficiencies and good practice into the business more generally, resulting in a more secure supply chain and compliant internal controls.
Given the increase in numbers of businesses now actively starting the AEO application process, and in light of the above points, new applicants must ensure that they are submitting complete, detailed and accurate AEO applications to HMRC.
Customs Warehousing is a great relief if you are importing goods for storage and you are not sure at the time of import where the goods will eventually end up.
With a customs warehouse authorisation you can suspend the customs duty and import VAT for as long as the goods remain under customs control in your warehouse. In addition, duties and VAT are void for goods being re-exported to customers outside the EU.
Either way, there is a financial advantage to be gained. Post-Brexit, the advantages of a customs warehouse may multiply – depending on your goods flows. For example, if you import goods from China intended for customers both in the UK and Ireland and you store the goods in a central warehouse located in the UK awaiting orders.
In that scenario, you won’t risk paying duties twice; first by you upon import into the UK and subsequently when the goods are shipped to Ireland.