AEO status is now crucial

JAMES PRINCE, indirect tax director at KPMG in East Anglia, provides a warning for local firms involved in the movement of goods in and out of the EU

THE recent high profile security alerts concerning freight traffic illustration how it is important for businesses not to overlook a vital supply chain security accreditation.

On January 1 2008, the European Union introduced a security and safety certification for companies, known as the Authorised Economic Operator (AEO) regime, which would allow those businesses holding the accreditation to have their shipments prioritised over those that do not have AEO in certain situations. In addition, certain customs duty reliefs and simplifications going forward will only be available to those businesses that meet the AEO standards.

The fight against terrorist activities potentially has a substantial impact on international trade but unfortunately, the take up of AEO with local companies has been slow, as businesses have not seen the immediate benefits.

Recent events have made it a priority now for all businesses who import or export to review progress on their own AEO implementation projects. Quite literally we are potentially at the point where no accreditation could mean no movement of goods, and sweeping review of freight security measures being undertaken inevitably has to consider making greater use of the AEO system, which was set up for this very purpose.

The benefits of being AEO accredited have been on stream for a while, but while the import-export industry supports the simplification process, it has been dogged by complaints from some quarters that becoming an AEO offers no real benefits, won’t have an impact on already fast clearance times and that it is not clear is the extent to which becoming an AEO will make any difference.

There is also the view that the application process is overly complex. The regime in the UK is administered by HMRC, who have a number of officers throughout the country trained to deal with applications and carry out the required audits prior to granting approval.

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Understandably for many, including haulage and freight companies, another piece of red tape is the least of their worries in the current climate and the approval process is not straightforward.

That being said, the businesses that we have worked with to help them gain the accreditation have invariably found ways to drive greater efficiencies as a result of the process.

In the current environment, it’s just not an option to opt out. For those local businesses importing or exporting in any volume, the AEO will likely no longer be a “nice to have” but a commercial and reputational necessity.

James Prince is a director with KPMG’s indirect tax group in East Anglia and can be contacted via email at