Author: Oleksandr Fedoryshyn, Managing Partner at F&P
Quite often, we face a lack of awareness among businesses about the mechanisms that allow them to simplify customs procedures and speed up business processes through the institution of an authorised economic operator (AEO).
Since 2019, the functioning of the AEO institution has been attracting increasing attention in Ukrainian legislation and in practice since 2021. Thus, while in 2021 only one company received the relevant status, today their number has grown to several dozen and is approaching a hundred.
The main aim of obtaining AEO status is to make it easier for your business. Of course, this does not mean complete distancing from customs control procedures, but depending on the simplifications received, the company will be able to save time, money, technical, and other resources in the international supply chain.
The Customs Code (CC) provides for two types of authorizations: AEO-B and AEO-C. The difference between them is that both types offer enterprises advantages such as priority in customs formalities, reduced control forms within the ASUR, and the use of the national AEO logo. However, only AEO-B allows receiving notifications from the customs authority about the selection of goods and vehicles designated for customs inspection.
At first glance, it may seem that businesses should choose the AEO-B type due to the greater number of advantages, particularly for work planning. However, the reality is that not all legally guaranteed simplifications actually work in practice. For example, special traffic lanes at border crossing points are often absent.
It is important to note that the legislation provides the option to choose: to obtain AEO status or to apply for authorization for the use of simplifications, end-use procedures, or transit simplifications.
Considering financial stability and other parameters, enterprises most often seek authorization to apply simplifications such as a general guarantee with a reduction of the base amount security by 50% or 70%, self-application of special type seals, as well as the procedure of release at the place of location.
Other types of simplifications defined by legislation and that can be obtained include general guarantee, exemption from guarantee, simplified declaration procedure. Moreover, after obtaining one simplification, the enterprise can apply for an additional one.
Customs legislation defines various roles for enterprises that can obtain AEO status, including manufacturer, exporter, importer, customs representative, carrier, freight forwarder and warehouse keeper. Often, one company can perform several roles, for example, being a manufacturer, exporter, and importer simultaneously.
Depending on the role, the company will have to delve into the description of internal processes, involving a large number of structural units responsible for accounting, customs, IT, HR, legal, production, security, or other areas in the processing or even development of documents.
From our practice, the necessary documents that need to be developed and implemented by the enterprise include:
- provisions for interaction with customs authorities;
- document flow procedure;
- accounting policy provisions;
- internal control procedures;
- algorithm for registering goods flows during export;
- algorithm for registering goods flows during import;
- provisions on information and principles of information security;
- policy for creating and storing backups;
- other internal rules, instructions, processes, and procedures (or their equivalents).
Obviously, one of the biggest challenges in obtaining AEO status or authorization of simplifications is the establishment of all documentation procedures, as well as the actual work of the company’s departments that are related to the international supply chain of goods in accordance with the developed internal documents.
It is precisely the outlined points that serve as the main markers during the inspection of the company by customs authorities and the formation of their conclusions regarding the compliance (non-compliance) of the enterprise with the criteria and/or conditions for granting authorization or relevant simplifications.
The decision to grant authorization is formalized by an appropriate order of the State Customs Service, and the enterprise is issued a permanent certificate.
The Fedoryshyn & Partners team has significant experience and invites collaboration on matters related to obtaining AEO status or authorization of simplifications.
