compliance e AEO

New European customs code proposal: AEO, trust and check trader status and the monitoring

European Parliament, on 22 February 2024, voted and published the document “…The compromise amendments Establishing the Union Customs Code and the European Union Customs Authority and repealing Regulation (EU) No 952/2013” Proposal for a Regulation (COM(2023)258 – 2023/0156(COD))…”

It has been adopted in the committee with 34 votes in favour to 0 against and 5 abstentions. It has to be put to a vote at an upcoming plenary session (most likely in March) and constitute Parliament’s position at first reading.

In particular, find below, from our point of view, the main points of the proposal:

a) The list of the tasks of the customs authorities.

This is a very interesting point because it gives a complete picture of the functions of the European customs system. As it is possible to read in the following group of tasks, according to the focus of doganastenibile, it is worth of interest the commitment for the environment protection.

However, the competency maps of customs is: 1) ensuring the efficient and proper collection of customs duties and other charges; 2) ensuring that goods that are destined for circulation in the internal market but present presenting a risk for the safety or the security of citizens and residents do not enter the customs territory of the Union, by putting in place the appropriate measures for controls of goods and supply chains ensuring that goods presenting a risk for the security of citizens and residents do not enter the customs territory of the Union, by putting in place the appropriate measures for controls of goods and supply chains; 3)  contributing to protecting human, animal or plant health and life, environment, consumers and other public interests protected by other legislation applied by the customs authorities, in close cooperation with other authorities by ensuring that goods presenting related risks do not enter or leave the customs territory of the Union; 4)  protecting the Union from unfair, non-compliant and illegal trade, including counterfeit and goods that are not in compliance with other legislation applied by the customs authorities through a close monitoring of economic operators, sectors and supply chains and a minimum core of customs infringements and penalties; 5) supporting all legitimate business activity, by maintaining a proper balance between customs controls and facilitation of legitimate trade and simplifying customs processes and procedures through robust real-time risk analysis enabledmade possible, including by the artificial intelligence capabilitiessystems, as definedreferred to in Article 29(1), point (d) (Rapp. 24, S&D 187); 6) promoting cost-efficiency by avoiding duplication, and promoting effectiveness in customs processes and an efficient use of related resources at Union and national level;  7)  gathering, analysing and exchanging relevant information to support evidence-based decision making; 8) contributing to the improvement of the overall enforcement of Union legal acts in other fields, such as those protecting the safety and security of citizens, residents and consumers, the environment and supply chains; 9) ensuring, where the internal market emergency mode has been activated in accordance with Article 14 of Regulation [establishing a Single Market emergency instrument and repealing Council Regulation No (EC) 2679/98 in times of crisis], the flow of crisis-relevant goods as defined in Article 3(1), point (6) of that Regulation…”

b) Authorised economic operator and Trust and Check traders.

In order to the AEO, the Chapter n. 4 of the Compromise amendment provides that: 1) The customs authorities  has to monitor the operator’s continuous compliance with the criteria and conditions for the status of authorised economic operator ; 2) the Commission may adopt guidelines with a view to supporting SMEs recognizing the unique challenges faced by SME; 3) list of criteria to be fullfilled: “ (a) the absence of any serious infringement or repeated infringements of customs legislation, the relevant other legislation referred to inapplied by customs authorities pursuant to Article 20(1) point (c) of this Regulation, and taxation rules, and no record of serious criminal offences; the infringements and offences to be considered are those relating to economic or business activities;  (b) the demonstration by the applicant of a high level of control of his or her operations and of the flow of goods, by means of a system of managing commercial and, where appropriate, transport records, which allows appropriate customs controls and evidence that non-compliance has been effectively remedied; the applicant ensures that relevant employees are instructed to inform the customs authorities whenever compliance difficulties are discovered and establishes procedures for informing the customs authorities of such difficulties; (c) financial solvency, which shall be deemed to be proven where the applicant has good financial standing, which enables him or her to fulfil his or her commitments, with due regard to the characteristics of the type of business activity concerned;  d) with regard to the authorisation referred to in Article 23(1), point (a), practical standards of competence or professional qualifications directly related to the activity carried out; (e) with regard to the authorisation referred to in Article 23(1), point (b), appropriate security, safety and compliance standards, adapted to the activity carried out. The standards shall be considered as fulfilled where the applicant demonstrates that he or she maintains appropriate measures to ensure the security and safety of the international supply chain, including in the areas of physical integrity and access controls, logistical processes and handling of specific types of goods, personnel and identification of his or her business partners…”.

While, it is more interesting the section focused on the trust & check trader. Indeed, it is stated that the applicant must be resident or registered into the EU and needs to prove that “…conducted regular customs operations in the course of that person’s business for at least 2 year…”. The EU customs authority grants the authorization if the following criteria are met: the absence of any serious infringement or repeated infringements; a high level of control of operations; financial solvency; practical standards of competence or professional qualifications; appropriate security, safety and compliance standards, including product safety standards; electronic system hat exceptionally makes available to the customs authorities real-time. 

Also for the trust and check trader, the customs authorities are obliged to monitor the operator’s continuous compliance with the criteria and conditions.

It seems that both the AEO and the trust and check trader are administrative deeds released after an overall evaluation of the structure and functioning of the applicant. These authorizations therefore have an all-encompassing nature of the business complexity; the “complexity” covers all the processes which directly or indirectly impact on the compliance of the customs obligation. It is important to recall that in both the instances, the monitoring is, actually, required by the customs regulation and the risk assessment/management processes.  Firstly, the AEO holder, regardless of its size organization, must delevolop an internal control and reporting system of the customs areas encompassed into the following perimeter:

  • the customs authorizations held by the economic operator evaluating their modifications and changes. In fact, the management of special regimes and other simplifications depends on customs decisions;
  • imported, produced and exported goods since various considerations related to the customs debt arise from these elements;
  • the organizational structure of the company in relation to the production methods starting from the definition of the good to its marketing;
  • the company organization chart analyzed based on training and information needs in customs matters.

In particular, the point regarding import, exported and manufactured goods should be scrutinized in order to check the quantity and quality of sanctions which should be analysed in comparison with the whole number of customs declarations lodged per year and the internal structure of the company organization.

It is important to give an important role to the monitoring of both the customs classification, origin and value management and the correctness of related documents and data; if from this monitoring arises any lack of knowledge, it is suitable to promote trainings and information on customs matters, corrective actions of processes and set up procedures.

The adoption of such a measures should be based on the risk audit and structured into four main stages: identification and prioritization of risks, determination of residual risks, reduction of residual risks to an acceptable level and communication of the audit results to the operator economic.

These phases are carried out as follows:

– establish the various activities of the economic operator to identify and prioritize risks, also examining the relevant security plan, if it exists, and the threat assessment, as well as the measures adopted and internal controls;

– confirm the economic operator’s management strategies and procedures and evaluate the controls to determine the audit of residual risks. Where necessary, verify these controls;

– manage any residual risks to bring them back to an acceptable level;

– inform the management and the involved people in sharing the results of the audit.