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Keeping Up in Global Trade

Feature Article | March 9, 2015 by Andreas Schmitz

Sanction lists, trade agreements, embargos: Managing the complexities of international trade is a piece of cake with the SAP Global Trade Services application.

Russia stops the import of fresh produce from the United States and European Union (EU) countries and introduces import duties for EU candidate Ukraine. China and the US agree to lift 200 tariffs under the international Information Technology Agreement (ITA). The EU and the US, meanwhile, enter negotiations for a proposed free trade agreement called the Transatlantic Trade and Investment Partnership (TTIP):

Countries are constantly negotiating with one another to secure better terms and conditions for their international trade or – in the case of Russia’s embargo – to suspend trade with individual countries. It’s difficult to keep pace with this constant flux, yet companies doing business internationally have no other choice: They must comply with current trade regulations.

International trade: Adhering to sanctions lists and trade agreements

In a recent dispute, the American supervisory authority accused a large German bank of having aided nuclear proliferation by doing business with Iran’s national shipping line IRISL. The bank is now facing a €650 million fine for its sanctions violations.

Another DAX company was in the sanctions spotlight several years earlier, for having exported the common anaesthetic propofol to the United States for use as lethal injection of prisoners condemned to death.

“These days, even an iPhone’s sensors can be deployed to guide missiles,” points out SAP’s Ralf Vath, who knows how important it is for global companies to know and abide by each country’s specific trade regulations.

A German car manufacturer that builds cars in Mexico, for example, pays a preferential (lower) tariff for those components imported from the EU that have a defined minimum proportion of their origin in the European Union. But before that can happen, the company needs to know where the raw materials for the motor, the steel components for the chassis and body, and the electronics for the entertainment system come from.

“Basically, it’s all about identifying the goods’ “preferential origin” and the domestic value added,” explains Vath, an SAP consultant and project leader who has helped numerous renowned corporations implement the SAP GTS application and optimize their customs processes.

Benefitting from preferential tariffs

Once manufacturers and exporters have established the “originating status” of their goods, they could qualify for preferential treatment. If “preferential tariffs” have been agreed between the importing and exporting countries or a community of nations such as the EU, their products may attract lower or zero customs duty.

In the case of SICK AG, a sensor technology company based in Waldkirch, Germany, it’s a matter of clarifying the preferential status for some 20 million bills of material items. Sanctions lists need to be screened, country embargos checked, expert and import permits managed, preferential agreements applied – these are just some of the challenges that have prompted SICK and more than 2,000 other global corporations including the sanitary fittings manufacturer Hansgrohe, automaker BMW, specialty chemicals manufacturer Sika, and the sporting goods company Amer Sports (whose brands include Salomon, Wilson, and Arcteryx), to turn to the one solution that specializes in these very processes – SAP GTS.

The power of SAP GTS

Faced with ever-increasing audit requirements, SICK decided it needed to harmonize its global customs processes and simplify customs clearance. It wanted a new, global system that covered all processes centrally and could be customized to the respective local languages. SAP GTS was the answer.

SICK has thus far been using the solution’s export control and preference processing services and plans in future to migrate its customs processing to the solution as well.

Some of the main functions and services of SAP GTS include:

  • Compliance: The application automatically cross-checks sales documents, payments, business partners, employees, and job applicants against current sanctions lists, thus eliminating the need for manual compliance checks. It also makes archives available for audits.
  • Embargos: All incoming and outgoing shipments are checked for trade restrictions. If any trade restrictions are in place, the consignment documents will not be issued and the relevant employees will notified.
  • Export and import control: The software recognizes the licenses and permits that are required for each transaction. Dual-use goods, for example, which can potentially be used for both civilian and military applications, require proof of their intended use. The system also runs checks against the International Traffic in Arms Regulations (ITAR) and American re-export provisions, both of which are aimed at combating terrorism.
  • Customs processing: The customs tariff contains vital information such as applicable tax rates, import bans, and restrictions that determine the amount of duty levied. The service provides an electronic interface with the customs software used by German customs (ATLAS) and their American counterparts (Automated Commercial Environment). Companies can also print out their required “movement certificates” and “certificates of origin” with this service.
  • Preference calculations: Companies that can prove their products’ origin enjoy preferential treatment by customs. Central availability of information about your and your suppliers’ goods is therefore essential. Business partners can submit their “vendor declarations” electronically using a self-service function. This enables calculations across all locations, which in turn increases transparency and simplifies collaboration with customs authorities.

Sven Geisler, IT manager at SICK, sees several advantages of SAP GTS: Trade preferences can be updated more quickly, data is more reliable thanks to automated processes and central availability, and companies are able to manage the increasing complexity of global trade more easily. And regardless of whether TTIP becomes reality or not, the next new trade agreements are already on the horizon.

“So it’s a good thing companies can rely on SAP GTS for expert help,” says Vath.

Photo: Shutterstock

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