AEO, trusted and checked trader and EU Customs code reform: some considerations and the risks management approach

The “Proposal for a regulation of the European Parliament and of the Council establishing the Union Customs Code and the European Union Customs Authority, and repealing Regulation (EU) No 952/2013 – Partial mandate for negotiations with the European Parliament” gives some interesting changes to the the Union Customs Code

From the customs compliance standpoint, there is the analysis of the trust and checked trader which is the economic operator whose electronic systems keeping record of their compliance and the movement of their goods are shared with customs authorities. This is the criterion of the trasparency which is the precondition for some benefits “… notably the possibility to release the goods on behalf of customs without the necessity for their active intervention, except where a pre-release approval is required by other legislation applied by the customs authorities and to defer the payment of the customs debt…”. the Trust and Checked trader should be able to release its goods under the supervision of the customs authorities but without waiting for their intervention.

Trust and Check trader should be able to:

release goods for any entry procedure at receipt at final destination of the goods or for any exit procedure at the place of delivery of the goods.
Record properly the arrival and/or the delivery in the EU Customs Data Hub;
inform the customs authorities where a problem arises so that those authorities can take a final decision on the release. Indeed, where the internal controls systems of the Trust and Check traders are robust enough, the customs authorities should be able, in cooperation with other authorities, to authorise the traders to perform certain checks on their own.

In general, the criteria and conditions to become a Trust and Check trader should build on the AEO criteria.

It is important to take into consideration the fact that the EU framework of AEO is very fragmented and rich in differencies among the Member States[1], therefore, to ensure uniform conditions for the implementation of the new Customs Code, implementing powers should be conferred on the Commission in order to “ to adopt the modalities for the application of the criteria for granting the status of Authorised Economic Operator and of Trust and Check trader”.

For sake of completeness, the new articles on AEO and Trust and checked traders are listed and commented below:

Article n.23 “ Application and authorisation for authorised economic operator[2].

Article n.24 “ Granting of the status of authorised economic operator” [3].

Article n.25 “Granting the status of Trust and Check trader”.[4] .

According to the mentioned articles, the AEO and the Trust and Checked trader status represent an accidental and non-mandatory element of the customs obligation. These authorizations are the customs decision able to “defining and qualifying” its owner. Indeed, in this way the economic operator becomes reliable within the context of a participatory cooperation relationship with the customs administration.

The AEO authorization and Trust and Checked trader one are an administrative deed released by the national customs entity/bodies in accordance with the EU regulations. This are valid throughout the EU customs territory and, if a mutual recognition agreement is valid, also with third countries; furthermore, despite being regulated in customs regulatory acts, it is important to highlight that it constitutes an authorization based on an overall evaluation of the structure and functioning of the object being requested. It therefore has 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.

Specifically, the these authorizations need a number of checks, centered on the audit, including, as above mentioned, not only the purely customs aspects (such as the management of the symptomatic elements of the customs debt) but also the structural and subjective aspects of the applicant which are substantiated in the possession of certain criteria in terms of the ability to control, monitor and react to the corporate structure in relation to the occurrence of harmful or potentially harmful events; in other words, the holder of the aforementioned authorization must demonstrate an adequate ability to control and correct his activities together with other requirements indicated by EU legislation and, in any case, attributable to the criterion of qualified care.

AEO and Trust and Checked Trader are, especially, based on the participatory cooperation between the economic operator and the customs body.

[1] Whereas n. 11 “ As highlighted by the European Court of Auditors and in the evaluation of the implementation of Regulation (EU) No 952/2013, it is also desirable to address the lack of uniform monitoring of compliance of the criteria and obligations set out in customs decisions, by reinforcing the relevant provisions. On one side, the holders of decisions should not only comply with obligations set out in the relevant decision but also monitor on a constant basis their compliance and provide for an internal organisation where such [self-]monitoring activities can prevent, mitigate or remedy any possible errors in their customs processes. On the other side, customs authorities should regularly monitor the implementation of customs decisions by the holders of such decisions, in particular when these are established for less than 3 years and are therefore potentially more prone to pose risks, in order to ensure that that person complies with the obligations established by the customs decisions. This is particularly relevant when those persons benefit from specific status such as that of Authorised Economic Operator (AEO) or Trust and Check trader, who enjoy several facilitations in customs processes. In addition, in order to strengthen risk management at Union level, customs authorities should notify the EU Customs Authority of all decisions taken upon application and inform that Authority about the monitoring activities, so that this information can be taken into account for risk management purposes”.

[2] ”[2]: “ An economic operator who is established in the customs territory of the Union and who meets the criteria set out in Article 24 may apply for the status of authorised economic operator.

The customs authorities shall, following consultation with other authorities, if necessary, grant one or both of the following types of authorisations:

(a) that of an authorised economic operator for customs simplifications, which shall enable the holder to benefit from the simplifications in accordance with the customs legislation; or

(b) that of an authorised economic operator for security and safety that shall entitle the holder to facilitations relating to security and safety.

Both types of authorisations referred to in paragraph 1, second subparagraph, may be held at the same time.

As part of the monitoring activity carried out pursuant to Article 7(4), The customs authorities shall at least every 3 years perform an on-site or desk-based close in-depth monitoring visit of the authorised economic operator’s activities and internal records with a view to verify in particular the practical application of the procedures in place to

comply with the criteria referred to in Article 24 (1) points (b) and (e).

The status of authorised economic operator shall, subject to paragraph 5 of this Article and to Article 24, be recognised by the customs authorities in all Member States.
Customs authorities shall, on the basis of the recognition of the status of authorised economic operator and provided that the requirements related to a specific type of simplification provided for in the customs legislation are fulfilled, authorise the operator to benefit from that simplification. Customs authorities shall not re-examine those criteria which have already been examined when granting the status.
The authorised economic operator referred to in paragraph 1 shall enjoy more facilitations than other economic operators in respect of customs controls according to the type of authorisation granted, including fewer physical and document-based controls. The status of authorised economic operator shall be taken into account favourably for customs risk management purposes.
The customs authorities shall grant benefits resulting from the status of authorised economic operator referred to in paragraph 1 letter b to persons established in third countries, who fulfil conditions and comply with obligations defined by the relevant legislation of those countries or territories, insofar as those conditions and obligations are recognised by the Union as equivalent to those imposed on authorised economic operators established in the customs territory of the Union. Such a granting of benefits shall be based on the principle of reciprocity unless otherwise decided by the Union, and shall be supported by an international agreement of the Union, or Union legislation in the area of the common commercial policy.
As part of the protocols and procedures for crisis management laid down in Article 203, the EU Customs Authority shall establish A joint a business continuity mechanism to respond to disruptions in trade flows due to increases in security alert levels, border closures and/or natural disasters, hazardous emergencies or other major incidents shall be established providing that the customs authorities may facilitate and expedite to the extent possible priority cargos related to authorised economic operators.
The Commission is empowered to adopt delegated acts, in accordance with Article 261, to supplement this Regulation by determining:

(a) the type and frequency of the monitoring activities by both the persons referred to in paragraph 1 and the customs authorities referred to in paragraph 3;

(b) the simplifications for authorised economic operators referred to in paragraph 5;

The Commission shall specify, by means of implementing acts, the procedural rules for:

(a) the consultations in respect of the determination of the status of authorised economic operators referred to in paragraph 1, second subparagraph, including the deadlines for replying;

(b) the business continuity mechanism referred to in paragraph 8.

Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 262(4)”.

[3] 1. The criteria for the granting of the status of authorised economic operator shall be the following:

(a) the absence of any serious infringement or repeated infringements of customs legislation 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 shall ensures that relevant employees are instructed to inform the customs authorities are informed 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 type and size of 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 and the implementation of secured mechanisms for notifying customs authorities of any information concerning suspicious movements or unauthorised handling of goods that could affect security and safety at the entry of goods in the EU customs territory or at export formalities.

The Commission shall adopt, by means of implementing acts, the modalities for the application of the criteria referred to in paragraph 1. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 262(4).

[4] “An importer or exporter or indirect representative, who is resident or registered established in the customs territory of the Union, meets the criteria set out in paragraph 3 and has conducted regular customs operations in the course of that person’s business for at least 2 3 years, may apply for the status of Trust and Check trader to the customs authority of the Member State where that person is established.

Without prejudice to the first subparagraph, a deemed importer may apply for the status of Trust and Check trader if he or she is making use of the special scheme laid down in Title XII, Chapter 6, Section 4 of Directive 2006/112/EC for at least 2 years.

The customs authorities shall grant the status of Trust and Check trader following consultation with other authorities, if necessary, and after having had access to the relevant data of the applicant for the last 2 3 years in order to assess compliance with the criteria in paragraph 3.
The customs authorities shall grant the status of Trust and Check trader to a person who meets all the following criteria:

business activities;

(aa) compliance with rules concerning the special scheme laid down in Title XII, Chapter 6, Section 4 of Directive 2006/112/EC, if applicable;

(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 transport records, which allows appropriate customs controls and evidence that non-compliance has been effectively remedied; the applicant shall ensure that relevant employees inform the customs authorities are informed whenever compliance difficulties are discovered and establishes procedures for informing the customs authorities of such difficulties;

applicant shall have fulfilled his financial obligations regarding payments of customs duties and all other duties, taxes or charges which are collected on or in connection with the import or export of goods, including on VAT and excise duties due in relation to intra-Union operations;

(d) practical standards of competence or professional qualifications directly related to the type and size of activity carried out, including that relevant employees are instructed on how to interact with customs authorities through the EU Customs DataHub;

(e) appropriate security, safety and compliance standards, adapted to the type and size of 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 and the implementation of secured mechanisms for notifying customs authorities of any information concerning suspicious movements or unauthorised handling of goods that could affect security and safety at the entry of goods in the EU customs territory or at export formalities;

(f) having an electronic system providing or making available to the customs authorities

in real-time all data on the movement of the goods and the compliance of the person referred to in paragraph 1 with all requirements applicable on those goods, including those relating to safety and security and including where relevant sharing in making available via the EU Customs Data Hub to customs authorities:

(i) customs records;

(ii) accounting system;

(iii) commercial and transport records;

(iv) their tracking and logistics systems, which identifies identify goods as Union or non-Union goods and indicates, where appropriate, their location;

(v) licences and authorisations granted in accordance with other legislation applied by the customs authorities. As part of the monitoring activity carried out pursuant to Article 7(4), the customs authorities at least every 3 years shall perform and on-site visit in-depth monitoring of the Trust and Check trader’s activities and internal records with a view to verify in particular the practical application of the procedures in place to comply with the criteria referred to in paragraph 3, points (b) and (e).

Where a Trust and Check trader changes its Member State of establishment, the customs authorities of the receiving Member State may reassess the Trust and Check authorisation, after consultation with the Member State that initially granted the status and having received the previous records on the operators. During the reassessment, the customs authority of the Member State that granted the initial authorisation may suspend it.

Trust and Check traders may:

(a) to provide part of the data on his or her their goods after the release of those goods,in accordance with Article 59(3a);

(b) to perform certain controls and to release the goods upon receipt of those goods at the place of business of the importer, owner or consignee and/or upon delivery from the place of business of the exporter, owner or consignor, in accordance with Article 61 (1) and (2);

(ba) benefit from guarantee waiver for potential customs debt in accordance with Article 170.

(d) to periodically determine the customs debt corresponding to the total amount of import or export duty relating to all the goods released by that trader, in accordance with Article 181 (4);

(e) to defer the payment of the customs debt in accordance with Article 188(2);

(f) by way of derogation from Article 110, move goods entering or exiting the customs territory of the Union without the obligation to place them in transit, if the goods are under a duty suspensive regime and are under customs supervision until their final destination within the Union.

7a. Customs authorities shall, on the basis of the recognition of the status Trust and Check trader and provided that the requirements related to a specific type of simplification provided for in the customs legislation are fulfilled, authorise the Trust and Check trader to benefit from that simplification. Customs authorities shall not re-examine the criteria which have already been examined when granting the status of Trust & Check trader.

The Trust and Check traders shall enjoy more facilitations than other economic operators in respect of customs controls according to the authorisation granted, including fewer physical and document-based controls. The status of Trust and Check trader shall be taken into account favourably for customs risk management purposes.

9a. As part of the protocols and procedures for crisis management laid down in Article 203, the EU Customs Authority shall establish a business continuity mechanism to respond to disruptions in trade flows due to increases in security alert levels, border closures, natural disasters, hazardous emergencies or other major incidents providing that the customs authorities may facilitate and expedite to the extent possible priority cargos related to Trust and Check traders.

The Commission shall adopt, by means of implementing acts:

(a) the rules to consult other authorities for the determination of the status of Trust and Check trader referred to in paragraph 2;

(b) the modalities for the application of the criteria referred to in paragraph 3;

(d) the business continuity mechanism referred to in paragraph 9a.

Those implementing acts shall be adopted in accordance with the examination procedure referred to Article 262(4)