Introducing the Authorised Economic Operator (AEO)
With global and regional markets facing significant stressors, such as rising inflation and security threats, customs and revenue services are working to streamline and facilitate cross-border trade so as to strengthen economic resilience. The Authorised Economic Operator (AEO) programme is one of the measures that has been developed to do this.
What is the AEO programme?
The AEO programme is a flagship Customs-Private Business partnership. It aims to increase voluntary compliance with global trade standards through the provision of incentives. In a nutshell, South African customs shares some of its security and compliance duties with the trusted business partner in the private sector; this partner is then rewarded with various benefits which are aimed at facilitating trade.
Who can become an AEO?
Any company that engages in cross-border trade can apply for AEO status. This would include the following entities: manufacturers, exporters, importers, brokers, intermediaries, carriers, consolidators, airports, ports, terminal operators, integrated operators, warehouses, distributors, freight forwarders.
The entity must, however, also be approved by the South African Revenue Service (SARS) as complying with international best practice trade and supply chain security standards.
What criteria must be met by a potential AEO?
SARS introduced 2 levels of accreditation: Level 1 Compliance, and Level 2 Safety and Security. Specific criteria to be fulfilled by the applicant, as well as the specific benefits received, are assigned to each level. Companies must satisfy the detailed criteria in the following domains in order to qualify for AEO status.
Level 1 Compliance:
- Compliance with Customs and Excise Act 1964 (e.g. 3 years record of compliance with the Act)
- Computer, accounting and logistical systems (e.g. full audit trail; internal controls for detecting irregularities; verifiable backup procedures)
- Adequate knowledge of customs and excise laws and procedures (i.e. will need to have an Accreditation Competency Assessment Certificate issued)
- Evidence of sufficient financial resources (e.g. 3 years audited records)
- Tax compliance (e.g. no outstanding tax returns, penalties or interest payable to SARS)
Level 2 Safety and Security:
In addition to the above, Level 2 applicants are further required to satisfy criteria under the following Safety and Security domains:
- Building premises security (e.g. security sensitive areas are protected from unauthorised entry)
- Personnel security (e.g. personnel identification measures; security screening of prospective employees)
- Business partner security (e.g. clearly identified business partners)
- Cargo and conveyance security (e.g. ensure goods are untouched and kept intact)
- Crisis management and incident recovery (e.g. contingencies in place particularly to deal with loss of company records or other relevant information)
- Consultation, co-operation and communication (e.g. liaison officer on company staff)
- Security education, training and threat awareness (e.g. regularly reviewed procedures for managing global supply chain risks)
- IT security (e.g. systems to prevent hacking)
- Corporate governance – corporate governance affairs based on principles contained in the latest King report (currently King IV – https://www.iodsa.co.za/page/king-iv )
The relevant legislation pertaining to the AEO programme can be found below
- Customs and Excise Act, 1964; Amendment of Rules, 2021
- Customs and Excise Act, 1964; Amendment of Rules, 2022
What are the benefits of AEO status?
Where a company is awarded AEO status, it receives various benefits dependent on the AEO level, as described above. These benefits aim to facilitate cross-border trade, and therefore essentially relate to lower trade costs (e.g. exemptions from security payments; expedited drawbacks and refunds) and quicker turn-around times (reduced inspections; priority treatments).
For both levels, a Client Relationship Manager (CRM) is assigned to the AEO. This individual acts as the voice of the AEO within South African Customs and is their direct point of contact there.
There is also recent good news for AEO traders in the Southern African Customs Union (SACU) region. As of May 2023, AEO traders from Botswana, Eswatini, Lesotho, Namibia and South Africa are able to benefit from a Mutual Recognition Agreement (MRA) that was signed between these member states. The MRA is expected to promote trade opportunities as well as support the seamless movement of goods across the region by introducing fast-tracked controls and lowered customs clearance administration costs.
To give your company a competitive edge in these challenging times, consider applying for AEO status. Contact one of our consultants on 087 550 1038 to assist you with the process.