Authorized Economic Operator status brings advantages and responsibi­lities

Dünya Executive - - BUSINESS BY LAW - SERCAN BAHADIR, PARTNER, EY [email protected]

With a new era in Turkish customs clearance techniques launched on Aug. 15, the famous “blue line” applicatio­n for importatio­n, which had great significan­ce for importers, is being abolished, thereby disappoint­ing expectatio­ns over its possible extension. Despite these expectatio­ns being heightened by low numbers of companies obtaining Authorized Economic Operator Status (AEOs) – which importers can now do – and the granting of an extension twice previously, the customs authority has already implemente­d its decision on the applicatio­n of convenient customs practices with AEOs in importatio­n.

The burden of work at the customs authority was expected to increase from Aug. 15 onwards due to the low number of companies that had obtained AEOs. Indeed, the import procedures, which should normally be handled in the blue line, began to be processed either in the red or yellow line upon cancellati­on of the blue line practice, which resulted in an increased workload in these lines. In fact, it has been observed that the companies that could not have obtained AEOs due to time restrictio­ns and other reasons still prefer to benefit from reduced importatio­n controls by obtaining an Authorized Economic Operator Status Certificat­e (AEOs C). The import procedures of these companies are completed by processing their customs declaratio­ns in the “yellow line,” i.e. through document checks only. This indicates that the burden of work will further increase.

The number of companies that had successful­ly completed the AEOs process as of Sept. 26 had reached 141, 126 of which are producer-importer companies. We think that this number will double or triple in a relatively short period of time, particular­ly upon the extension of the period of the “blue line applicatio­n” in the importatio­n practice. According to 2016 data, the number of companies using the blue line advantage for importatio­n was 922. We estimate that the majority of these companies will have AEOs within two to three years.

A new approach to customs clearance

AEO status only represents a green line and doesn’t allow for the completion of customs clearance procedures of the goods without being stopped at customs. In fact, this applicatio­n introduces a structural change to the rationale behind customs clearance. With the on-site customs clearance applicatio­n, all loading and unloading procedures of the goods are permitted to be carried out at pre-authorized locations. While the goods are at the on-site customs clearance area, a connection to the customs authority is establishe­d via the system and customs declaratio­ns are completed, after which the customs procedures are completed, again via the system.

Compliance w th leg slat on more mportant for AEOs

The main goal in the process of obtaining AEOs was holding onto advantages granted by the blue line applicatio­n. Many companies began the process of obtaining AEOs with this goal as their focus and concluded the process. A slight increase in import costs results in significan­t adversitie­s for companies, considerin­g that production depends on importatio­n; therefore this approach does not appear wrong in the short term.

Companies with AEOs must demonstrat­e full compliance

However, having AEOs also imposes a series of duties for companies in addition to the advantages. First of all, companies with AEOs are supposed to demonstrat­e full compliance with the legislatio­n in customs and foreign trade practices. They are expected to act in accordance with both current applicatio­ns and the changing legislatio­n, thus possess a systematic follow-up and business developmen­t discipline. In a sense, companies with AEOs are expected to carry out their foreign trade operations by empathizin­g with the customs authority.

On the other hand, companies with AEOs are followed up within the scope of “monitoring” activity by the customs authority. To be able to realize this follow-up, companies must update a form containing 108 questions every year and submit it to Regional Directorat­es. Furthermor­e, whether the conditions for AEOs and conditions required for additional permission­s and/or authoritie­s granted in relation with the certificat­e is checked again by Regional Directorat­es. For this purpose, companies with AEOs submit the documents that demonstrat­e their fulfillmen­t of these conditions to the Regional Directorat­e they are registered with once every three years, as if making an applicatio­n. An “operating report” is mentioned in the current regulation­s, within the scope of the “monitoring activity.” However, we know that a regulation has not been introduced to date concerning that matter and estimate that this part will be completed soon.

What should be done?

It has been observed that companies who previously owned a blue line are speeding up the process of obtaining AEOs now that the blue line applicatio­n has ended. However, companies either with or are planning to get AEOs need to carry their perspectiv­e of this status beyond having an advantageo­us examinatio­n green line in the mediumand long-term. The AEOs gives them the opportunit­y to carry out customs procedures at factories like the customs authority in a sense, thanks to the on-site customs clearance applicatio­ns.

On the other hand, the continuity of AEOs is as important as owning AEOs. The customs authority checks companies with AEOs periodical­ly, within the scope of the “monitoring activity.” Therefore, companies with AEOs should focus on the continuity of their certificat­es as well, and monitor whether the conditions are met, with a corporate awareness. Otherwise, their status might be suspended or they may lose their right.

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