Executive summary - EY

1 28 July 2016. EY Tax Alert CBEC issues Revised Guidelines regarding Authorised Economic Operator Programme under Customs Executive summary In June 2016, Central Board of Excise and Customs (CBEC) had released a draft Circular relating to Customs facilitation scheme in the public domain Tax Alerts cover for comments. significant tax news, developments and This Tax Alert summarizes the revised guidelines now issued by CBEC vide changes in legislation the Final Circular1 which merges two facilitation schemes, viz. Accredited that affect Indian Client Programme (ACP) and Authorised Economic Operator Programme businesses. They act (AEO), into a combined three-tier AEO programme. as technical summaries to keep you on top of For the economic operators other than the importers / exporters, the new the latest tax issues. Programme offers one tier of certification (AEO-LO) whereas for importers /.

2 For more information, exporters, there will be three-tier of certification (AE0 - T1, T2 and T3). please contact your EY. advisor. The unified trade facilitation programme aims to provide additional benefits to entities who have demonstrated strong internal control system and willingness to comply with laws administered by CBEC. The Circular inter alia outlines benefits such as inclusion of direct port transfers, deferred duty payment, fast tracking of refunds, adjudications and disbursal of drawback amounts, paperless declarations etc. The programme will also cover small and medium enterprises (SMEs) through low value thresholds. _____. 1 CBEC Circular No. 33/2016-Cus dated 22 July 2016. Background Special focus on small and medium scale entities ( any entity handling 25. import or export documents annually). CBEC had issued Circular No. 42/2005- Cus dated 24 November 2005 regarding Provision of Deferred Payment of the ACP scheme and Circular No.

3 Customs duties delinking duty 28/2012-Cus dated 16 November 2012. payment and Customs clearance. regarding the AEO scheme. Mutual Recognition Agreements with In June 2016, CBEC had released a draft other Customs Administrators. Circular relating to the Customs facilitation schemes in the public domain Faster disbursal of drawback amount. for comments. Fast tracking of refunds and Post such public comments, CBEC has adjudications. issued revised guidelines merging two facilitation schemes, viz. ACP and AEO. Extension of facilitation to exports in into a combined three-tier AEO. addition to imports. programme. Self-certified copies of FTA / PTA origin Revised guidelines offer only one tier related or any other certificates required certification ( AEO-LO certificate) for for clearance would be accepted. Logistics Providers, Custodians or Terminal Operators, Customs Brokers Request based on-site inspection /.

4 And Warehouse Operators) whereas for examination. importers and exporters there will be three tiers of Paperless declarations with no supporting documents. Objective of the revised AEO Programme shall continue to remain same as earlier Recognition by Partner Government that is to provide businesses with an Agencies and other stakeholders. internationally recognized quality mark which will indicate their secure role in the international supply chain and that their Eligibility criteria for Customs procedures are efficient and compliant. An entity with an AEO status applying for AEO certificate can, therefore, be considered a 'secure'. trader and a reliable trading partner. Anyone involved in the international supply chain that undertakes Customs Outline of key features of the revised related activity in India can apply for AEO. guidelines enlisted in the Circular have status irrespective of size of the been discussed below.

5 Business. Key features These may include exporters, importers, logistic providers ( carriers, airlines, freight forwarders, etc.), Custodians or Direct Port Delivery of imports to ensure Terminal Operators, Customs House just-in-time inventory management by Agents and Warehouse Owners. Others manufacturers clearance from wharf to who may qualify include port operators, warehouse. authorized couriers, stevedores. Direct Port Entry for factory stuffed Specific exclusion from application of the containers meant for export by AEOs. AEO status for businesses that are not involved in Customs related work /. activities such as banks, insurance companies, consultants and the like 2 AEO-T1 Certificate categories of businesses. AEO T2 Certificate AEO T3 Certificate Application for AEO status will only cover Customs (other than aforesaid). legal entity of the applicant and will not during the last three financial years, automatically apply to group of to the total duty paid and drawback companies.

6 Claimed during the said period is more than 10 percent, such cases Importer / Exporter must have filed at will be reviewed by the AEO. least 25 declarations in the form of Bills Programme Manager before of Entry or Shipping bills during the last deciding on issuance of continuance financial year. of AEO status. In order to apply for AEO status the Further, conditions prescribing the applicant must be established in India. Applicant to fulfil certain criteria from a For this they should provide evidence security perspective and maintenance of which may include: records have also been detailed. A certificate of registration issued o by the Registrar of Companies. Benefits of an AEO. certificate o Details of places / locations where goods are being handled, Scope of benefits to be accorded to the loading, unloading, storage etc., in AEOs would be based on the categories the course of supply to / from as classified below, AEO-T1, AEO-T2, international supply chain.

7 AEO-T3 and AEO-LO. o Proof that the business has its own Enlisted below are the key benefits accounts. available to the AEO's, classified as per the categories of certificate they hold. Generally, the applicant should have business activities for at least three financial years preceding the date of AEO-T1. application. High level of facilitation in imports and However, in exceptional cases on the export of their consignments, thereby basis of physical verification of internal ensuring shorter cargo release time. controls of a newly established business entity, the AEO Programme Manager Facility of Direct Port Delivery of their may consider it for certification. import Containers and / or Direct Port Entry of their Export Containers would Circular inter alia prescribes a section on be available. Legal Compliance [para ] which stipulates as follows Separate space will be earmarked in the Custodian's premises, wherever feasible.

8 There should be no Show cause notices (SCNs) involving fraud, Wherever required, the quantum of the forgery, outright smuggling, Bank Guarantee would be 50% of that clandestine removal of excisable required to be furnished by an importer /. goods or cases where Service tax exporter who is not an AEO Certificate has been collected from customers but not paid to the Government. In respect of Customs, Central Excise and There should be no case wherein Service tax cases . prosecution has been launched or is o Investigations to be completed in 6 to being contemplated against 9 months. applicant or its senior management. o Dispute resolution at the level of If the ratio of duty demanded or adjudicating authorities would be drawback demanded or sought to be done preferably and far as possible, denied in all SCNs issued under within 6 months. No regular transactional Post Clearance Facility to paste MRP stickers in their Audit (PCA), instead onsite PCA will be premises will be provided.

9 Conducted once in two years only. No regular transactional PCA, instead 24/7 clearances on request at all sea onsite PCA will be conducted once in ports / airports No Merchant Overtime three years only. Fee charges need to be paid. Facility to submit paperless declarations Validity of the certificate shall be two with no supporting documents. years. All Customs Houses will appoint a Client AEO-T2 Relationship Manager (CRM) at the level of Deputy / Assistant Commissioner as a Following benefits would be provided single point of interaction with them. over and above the benefits offered in T1. Refund / Rebate of Customs / Central Excise duty and Service tax would be Higher level of facilitation (as compared granted within 45 days of the submission to AEO-T1) in imports and export of their of complete documents. consignments. Trade facilitation by foreign Customs For Importers / Exporters not opting for administration with whom India enters Direct Port Delivery / Direct Port Entry, into a Mutual Recognition Agreement /.

10 Seal verification / Scrutiny of documents Arrangement. by Custom officers would be waived. Consignments will be given out of charge Validity of the certificate shall be three or let export order, as the case may be, years. without any scrutiny by the officers. AEO-T3. The containers selected for scanning will be scanned on priority, by giving front Following benefits would be provided line of treatment. over and above the benefits offered in T2. Facilities of deferred payment of duty and faster disbursal of drawback amount Highest level of facilitation (as compared within 72 hours of EGM submission will to AEO-T2) in imports and export of their be provided, from a date to be notified. consignments. The Bill of Entry / Shipping Bills selected Their containers will not be selected for for Assessment and / or Examination will scanning except on the basis of specific be processed on priority by the Customs intelligence.