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AEO and Brexit – will it help?

By December 22, 2017February 1st, 2018VAT news

We have seen a marked increase recently in the number of businesses seriously considering applying to become AEOs – Authorised Economic Operators. The impetus for this arises from Brexit and the need to manage supply chain risk by planning for a potential ‘hard Brexit’. In the early days following the referendum there was a focus on trying to establish what the increased cost of customs duty might be within the supply chain, both as a result of current preferential tariff rates potentially falling away, and an increase in the incidence of customs duties applying as a result of all UK/overseas transactions becoming imports or exports.

More recently however, focus has shifted to concerns about delays to supply chain deliveries as a result of border queues, caused by increased volume and also teething issues and potential systems issues in the UK and overseas. Businesses are therefore looking for ways in which they can ensure they are not at the back of the queue at the border. When AEO was first introduced back in 2008, speed of clearance and being in the ‘green lane’ was hailed as a major benefit. The reality was somewhat different however, with so few businesses applying for AEO that there was no queue. For the first time however Brexit brings this benefit to life.

Many businesses are grappling with the question of whether they should apply for the full authorisation which includes ‘Safety and Security’, or the more straightforward ‘customs’ AEO which is focused only on blue chip customs and systems processes. As there are 2 tiers to AEO authorisation, the question arises as to whether, in the event of a long queue of AEOs at the border post Brexit, which move to the front. The answer is surely those with full AEO, but for some businesses this could delay the process of getting ready to make an AEO application as it often presents the greatest degree of complexity and generates the most remediation work prior to an application being filed (although this might not be the case for all industries depending on how key security and other regulations are for their industry).

In theory HMRC require 120 days to audit an AEO application but in our experience many businesses see this clock stopping once an application has been made so that further detail can be provided and remediation work can be carried out. In addition HMRC’s workload in this area will ramp up, leading to further delays.

We would recommend that any business relying on just in time deliveries gives serious consideration to applying for AEO to ensure there is no impact of not benefitting from an accreditation that is currently widely recognised globally under various suppy chain security Mutual Recognition treaties. Our approach to helping businesses determine how ready they are to make an AEO application involves spending 2 days on site with you working through key areas to capture the profile of the business and apply traffic light coding, showing areas requiring most work in red. Please contact Julie Park on 0781 400 4236 or if you’d like more detail