Question:

We are AEO Tier 3 status holder company, last 3 years we are enjoying benefits under scheme including differed duty, BG waiver, MEA etc. We have observed that Benefits under AEO are not undergone any changes for 2016, on the contrary some of benefits are now not existing as Digitization and digitalization have changed basic process. What is future of AEO scheme? can you give what can be expected? 

Solution:

I am delighted to receive your query and truly encouraged by your interest in understanding the changes, new benefits, and future direction of the AEO scheme.

We first need to understand global background in details . 

Background 

The Authorized Economic Operator (AEO) program is an internationally recognized initiative that certifies businesses involved in the international movement of goods as secure and reliable partners in the supply chain. The World Customs Organization (WCO) introduced the AEO program in 2007 as part of its SAFE Framework of Standards to enhance global trade security and facilitation. 

WCO developed draft concept paper 2.0 in 2019 and this was followed by The 5th WCO Global AEO Conference under the theme “AEO 2.0: advancing towards new horizons for sustainable and secure trade”, held in May 2021 hosted virtually by Dubai Customs to  re-establish  the importance of Authorized Economic Operator (AEO) programmes and helping to shape the vision of AEO 2.0.

What are challenges in present AEO Program and why AEO 2.0 is Required 

What is AEO 2.0?

AEO is based on WCO SAFE Framework of Standards 3 pillars 

There are changes in each Piller, below given are some considerations and expectations.

AEO 2.0 Benefits 

AEO 2.0 offers a range of benefits aimed at enhancing global trade facilitation and security. It emphasizes the harmonization of application, validation, and authorization processes through advanced technology, making systems more streamlined and consistent across borders. The program expands to include e-commerce operators and new economic entities, reflecting evolving trade dynamics. It prioritizes digitalization and contactless systems for improved efficiency and security, while fostering coordinated border management through collaboration with other government agencies and Customs-Post partnerships. Strengthened partnerships and mutual recognition agreements (MRAs) build trust and facilitate seamless trade. Additionally, AEO 2.0 focuses on capacity building to ensure Customs and private sector staff possess the necessary skills to adapt and thrive. These advancements contribute to more resilient, sustainable supply chains and expedite post-pandemic recovery, reinforcing the WCO SAFE Framework as a cornerstone of secure and efficient global trade.

Note :- presently AEO 2.0 is at discussions and deliberation stage and there is no schedule or time lines for implementation.  

Question:

Recently we had received Show Cause Notice (SCN), we made our reply to SCN and attended Personal Hearing (PH), however customs has not accepted our views and issued Order against stand we have taken. Now before we file our appeal we need inputs to be considered and what steps must be taken by us?

Solution: 

Thanks for question. Below given are   inputs to be considered before appeal and road map. I am sure this will help you in making decision.

• Case Strength-

Evaluate the robustness of case by analyzing the factual and legal grounds.  A strong case with clear evidence and sound legal arguments are must for going in appeal. 

• Precedent –

Review past rulings and decisions on similar cases to gauge how the appeal might be treated. 

• Expertise Available-

The quality of legal and technical expertise at your disposal is crucial. Competent professionals can effectively present your case and counter opposing arguments, enhancing chances of appeal.

• Customs Department Strength/Appeal Potential-

Assess the customs department's stance and history of appeals in similar cases. Understanding their approach and value limits helps in anticipating challenges and preparing a solid counterstrategy

Steps to be followed 

After studying above critical points and decision to file Appeal, following steps can be followed. However, these steps are general on nature and based on commodity involved you may have to consult additional experts. 

These steps can be implemented either sequentially or simultaneously, depending on the available time and resources.

Conclusion

In any legal case, the decision to appeal must be carefully considered, as the process is often lengthy and demands significant investment of cost, time, manpower, and resources. Additionally, it is crucial to assess how the appeal aligns with the company's principles, values, and reputation. The decision should balance these factors with the potential benefits to ensure it upholds the organization’s long-term credibility and strategic priorities.

Question:

We are Manufacturing company and planning to establish new unit, we will be manufacturing goods for Exports 65-70% and rest for domestic market. After comparing various schemes and alternatives like EPCG, Advance Authorization, EOU, SEZ and finally zero down on MOOWAR. Can we avail IGCR and MOOWAR both simultaneously? 

Solution: 

That's an excellent question. If you had asked me last week, my response would have been a resounding yes. However, at that time, there was no formal clarification from the CBIC. Fortunately, CBIC has now issued Circular No. 26/2024-Customs dated 21.11.2024, which provides clear guidance on the applicability of concessional duty under the IGCR Rules, 2022, particularly concerning MOOWR. This clarification has brought much-needed transparency to the matter.

Many customs duty exemptions and concessions are subject to end use conditions. IGCR is one of such scheme. In order to ensure that goods imported are used for their intended purpose, the importers need to comply with the procedure laid down in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (‘IGCR Rules’). IGCR scheme has undergone several changes. 

Even though FAQ published by CBIC on MOOWAR was having mention as follows 

“The eligibility to export benefits under FTP or IGCR would depend upon the respective scheme. If the scheme allows, units operating under Section 65 has no impact on the eligibility. In otherwords, a unit operating under Section 65 can avail any other benefit, if the scheme allows.”

Industry and manufactures were worried about uncertainty and possible disputes at later stage as both MOOWAR and IGCR schemes are covered in different regulations. This resulted in Industry making several representations to bring clarity. 

CBIC has now issued Circular No. 26/2024-Customs dated 21.11.2024,giving clarification  that a MOOWR unit can avail any benefit so long as it is allowed in the scheme itself, it was clarified that the simultaneous benefit of exemption requiring compliance with IGCR 2022 along with duty deferment under MOOWR can be availed.  In such cases compliances and conditions as prescribed in the IGCR 2022 and MOOWAR should be followed, including the notification in terms of timelines, etc.

Notification also clarified simultaneous use of IGCR and MOOWAR for intermediate manufacturers is permitted when supplies are made to another unit for final manufacture of the specified finished goods. 

Based on this clarification, I am confident that the MOOWR scheme has become significantly more appealing.

Question- What are criteria for determining Country of Origin? what is difference between Wholly obtained criteria and Substantial transformation criteria?

Solution -Thanks for asking this question , as your question  is part of bigger topic of FTA, Rules of Origin. I am sure you are aware of basics already . In case you wish you can have look at clarification given by me in Daily Shipping Times on 20 th Dec 2023 and 11 th Sept 2024 under same column. 

Determining the country of origin is covered by two . . .

Query: We are manufacturing company, and We are starting exports to various countries in Europe, after internal deliberations and your guidance in recent DST issue under Your Query Our solution we have decided to follow Drawback route. Now can you give more insight on Drawback, it types and process.  

Solution: Thank you for your message and I’m glad to hear that my guidance was helpful in your internal deliberations on the DST issue. It's great to know that you've decided to follow the Drawback route for your exports . . .

Query: We have imported Motor for coil winding M/C   in June 2024, however after imports at the time of installation same is not found suitable due to lower efficiency. Now Overseas supplier has agreed to take it back at his cost. How to handle customs duty refund and other formalities?

Solution: 

Here are specific steps to follow for return of faulty motor .  Since the overseas supplier has agreed to take the motor back at their cost, you will need ensure compliance with customs re-export formalities  . . .

Question – We have ordered machinery parts   after arrival at Airport we observed package is damaged, and few parts are missing. Customs assessment is complete; however, we have not paid customs duty. How to handle this situation? what is legal and best practical way in this case.  Import is using FCA (Shanghai warehouse) incoterm, and we have covered insurance in India. 

Solution – For above situation there is solution in terms of law and practical way, before taking decision you should investigate many factors. 

The first priority is to . . .

Question: We wish to establish MIS for Exports including General Information to Management /Business, Export Compliance, Exports Incentive, Logistics and Timelines etc. can you give us plan for same.

Solution: In last Daily Shipping Times issue dated 3.7.2024 I gave details of MIS in two main areas of Exports namely 1) General Information on Exports 2) Export Logistics -MIS. However, one of the charts could not have been included last time is given now. Chart below gives graphical representation of table giving general Information on Exports. 

Question: We are Importer (Buyer) many times after opening L/C we have to amend L/C due to various issues; this results in extra cost and time. Can you guide to have correct check list for opening L/C? Many times, Seller (Exporter) informed us to follow UCP 600, can you give some insights of same. 

Solution:

International trade has become important in today's interconnected world, driving economic growth and development across nations. It allows countries to specialize in the production of goods and services they excel . . .

Question: Many thanks for last week’s insightful solution on KPI for Customs clearance, can you give what KPI should be implemented for Air Freight, we have majority of imports by Air and presently we are monitoring only rates and to some extent transit times. 

Solution: Last week I covered 1) Important to have total data to make strategy for KPI. 2) Data Source 3) Data Elements 4) Types of KPI. 

In this DST issue I will cover KPI as well as analysis which will . . .