The Trans-Pacific Strategic Economic Partnership
Agreement (TPP) is a proposed trade agreement signed initially by the four
Pacific Rim countries of Brunei, Chile, New Zealand, and Singapore, and later by
Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and
The main objectives of the agreement are:
The signing of the trade treaty is bound to usher in
the following changes:
1) More cumulative
rules of origin
Countries that are a part of the same Trade agreement
can share production/manufacturing of goods and can comply with the concerned
laws of origin together if the Trade agreement allows for 'Cumulative Rules of
Origin'. It simply means that a manufacturer in a country can use raw materials
from another manufacturer in another country (that is a part of the trade
agreement) without losing the actual status of the input.
GTM will help: Using Oracle Global
Trade Management (GTM), any import (to be used as an input in the manufacturing
of an item) coming to a member country from another member country can be
flagged, and the final item created can still bear the country of origin as the
one where the plant is located.
For example, Oracle GTM is being implemented for a
customer in Canada (member country) who is importing some parts from Malaysia
(another member country) to create an item. This customer further exports to
Israel and wants to enjoy the benefits of the agreement that Canada separately
has with Israel. Using Oracle GTM, the
customer can change the origin of all incoming parts from member nations to
'Canada' and enjoy the desired benefits. At the same time, it can also ensure
that the parts coming from non-member nations still show their actual country
This can be done by simply creating a compliance rule
set-up that screens the origin locations of all the incoming parts and checks
them against the list of member and non-member nations.
Non-discriminatory trade liberalization will be a
byproduct of the TPP. With this agreement, more modern, simpler, standardized
and more transparent regulations will come into existence to facilitate trade. This
will be very similar to the case of European Union (EU), where customs
procedures have been standardized across all 27 member states.
This simply means that a lot of countries engaging in trade
with TPP members will be exempted from certain mandatory documents that were required
earlier. A long list of documents will most probably be reduced to just a few
documents. Some of these documents, however, will be demanded by customers and
will have to be produced only when asked for.
GTM will help: Oracle GTM's feature
of 'document generation' offers high degree of customization (unlike other GTM
solutions) and can be made to create a single document that contains all the information
required by various regulatory bodies. With its next release, Oracle also plans
to introduce a readymade, customer-driven 'document request' feature that will allow
customized documents to be created as per requests made by the customer.
3) Landed cost calculation
to become a decisive factor
In the non-discriminatory environment that TPP will
bring, various countries will be treated alike by importers. There will be no
or minimal non-tariff trade barriers like 'export subsidies,' 'import quotas,'
'determination of the eligibility of an exporting firm by the importer,'
'preference to domestic suppliers,' etc. Under such conditions, 'landed cost'
of import / procurement will play an important role in deciding which country
to import from.
For instance, an importer in Canada, interested in
importing from a TPP member country, will treat all members alike and will not
give any special treatment to a particular member nation. Thus, deciding whether
to import from Thailand, South Korea, Vietnam, or even Mexico will depend
heavily on the 'landed cost in Canada' for all these options. In earlier times,
Mexico would have received preference due to North American Free Trade
Agreement (NAFTA) and its proximity to Canada, resulting in lower logistics
cost. Now, however, that will not be the case.
GTM will help: Oracle GTM's 'landed
cost estimator' feature allows any customer (importer) to create test scenarios
that allow imports from various nations and then comparisons of the results. It
also allows the importer to add tentative costs like freight, insurance, duties,
etc. After creating and analyzing different scenarios, the customer will be
much better placed to decide which country to import from.
4) Duty drawbacks
/ rebates by the government to see growth
Exporters based in the member countries outside of the
free trade zones (FTZs) will also increase in number. A number of local
manufacturers and merchants who will export to other TPP member countries will
claim duty drawbacks / reliefs from their governments. This will give rise to a
need for quick and accurate document generation.
GTM will help: Usually, to claim the
benefits of duties, a 'proof of export' has to be made. The 'document generation'
feature of GTM, once again, will help exporters produce these 'proof of export'
documents and will help the exporters reap the benefits of duty drawbacks / relief
Written by: Ravikiran Narayan Khobragade and Mohammad Haider Talat