Customs administrations around the world grapple with the dual mandate of hindering illicit trade while streamlining legitimate commerce. To enhance supply chain security and bolster global trade, the World Customs Organization (WCO) introduced the SAFE Framework of Standards in 2005. In alignment with this, various nations have launched trusted trader programs like the C-TPAT in the U.S., Canada’s PIP Programme, and India’s AEO Programme. These initiatives, despite differing names, share a common goal: to secure supply chains while offering compliant businesses advantages such as expedited clearances and reduced inspections.
India’s journey toward a secure trade environment began with the Accredited Client Programme (ACP) in 2005. This initiative was eventually incorporated into the Authorized Economic Operator (AEO) Programme, as outlined in Circular No. 33/2016-Customs dated July 22, 2016. The AEO Programme now stands as India’s principal framework for recognizing businesses that demonstrate compliance and reliability in the international supply chain.
Revocation of AEO Status: A Legacy Issue
The ACP framework allowed revocation of ACP status for issues including mis-declaration, collusion, or fraudulent intent as per Section 28(4) of the Customs Act, 1962. Similar concerns have been noted in GST proceedings, where Section 74(1) notices of the Central Goods and Services Tax Act, 2017 have been considered when reviewing AEO status.
Yet, the AEO Circular specifies that revocation should occur only in cases of fraud, forgery, smuggling, or the clandestine removal of excisable goods. It does not account for revocation based on allegations under Section 28(4) of the Customs Act or Section 74(1) of the CGST Act. Therefore, while the ACP status could be revoked on grounds covered under these sections, the AEO framework does not support such revocations.
Lingering ACP Practices
Despite policy shifts, instances remain where customs authorities revoke AEO status due to notices issued under Section 28(4) or Section 74(1). This ongoing practice reflects a carryover from ACP principles rather than AEO criteria. The continued application of ACP-like conditions can lead to issues, particularly since many customs disputes involve classification, valuation, or exemption claims that may not constitute fraudulent activity. Revoking AEO status based on notice issuance alone could diminish the AEO programme’s purpose and the government’s intent to expand it.
Enhancements and Policy Objectives
The 2026 Budget sought to enhance AEO status appeal by amending the Deferred Payment of Import Duty Rules, 2016, extending the duty deferral cycle from 15 to 30 days. Such amendments aim to encourage manufacturer-importers to seek AEO certification, further signaling the government’s commitment to a robust trusted trader ecosystem. Thus, revoking AEO status solely on notice issuance under specific sections conflicts with the broader goal of increasing industry engagement in the AEO Programme.
Conclusion
While decisive action is warranted in cases of proven fraud or smuggling, revocation of AEO status based merely on notice issuance under Section 28(4) or Section 74(1) appears misaligned with the AEO Circular. The lack of a consistent approach could lead to uncertainty and unnecessary litigation. To mitigate this, the CBIC might consider issuing guidance clarifying that AEO status should not be revoked solely because of notice issuance unless specific AEO Circular offenses are involved. Such clarity would foster consistent implementation, bolster industry confidence, and advance the government’s trade facilitation objectives.
Authors: Rachit Jain, Executive Partner; Kalirajan D, Associate Partner; Saumya Raj, Associate at Lakshmikumaran & Sridharan Attorneys.
The views expressed are personal and do not necessarily reflect Bar & Bench’s perspective.
