Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

« Infosys Edge: Plug-Tune-Play Oracle GTM Solution | Main | Designing Next Generation Supply Chain and Logistics »

The Global Impact of TPP and Oracle GTM's Adaptability

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 Vietnam.

The main objectives of the agreement are:

          -          Comprehensive market access
    -          Inclusive trade and development
    -          Regional integrations
    -          Addressing new trade challenges

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.

How Oracle 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 of origin.

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.

gtm3.png

2)      Non-discriminatory trade liberalization

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.

How Oracle 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.

How Oracle 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.

gtm4.PNG

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.

How Oracle 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 faster.

Written by: Ravikiran Narayan Khobragade and Mohammad Haider Talat

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles