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Why a Global Trade Management system is Integral to an International Supply Chain!

 

A Multinational Organization in any country across the world needs to abide by a set of export and import control regulations that governs the movement of goods, services and technology across international borders.

These Export/Import regulations impact enterprises operating in almost all industries.

Various regulatory bodies that keeps a check on manufacturing and international movement of goods like US CBP (in case of USA), Taxation and Customs Union (in case of European Council) etc. penalize companies that violate these controls.

These penalties can be monetary or legal in nature. In certain cases even criminal proceedings can be initiated against the company.

As a result of these penalties, enterprises also face significant business loss and damage to reputation.

In any International supply chain the role of trade-compliance starts from supplier/vendor selection, when the importer must ensure that he is not dealing with any denied/blacklisted individuals or entities. Further the imports needs to abide by the trade and customs laws of the source as well as the destination country. Subsequently when the business (importer) exports its products to an overseas destination it must again ensure that the legal requirements related to country of origin/destination and various international treaties are met. Also the customs filing must be done in due course of time and the relevant transportation and regulatory documents must be produced as and when required.

Any smart business should also ensure that it is availing the benefits of the trade agreements its products falls into.

 

Various aspects of Global Trade Management

 

A.  Item Classification and contact screening

 

Each item that is exported or imported internationally must contain certain classification codes for:

 

  1. Tariff Calculation (HTS US, HTS EU etc.)

  2. Licensing purpose (ECCN US, ECCN EU etc.)

 

These codes depends on the source and destination country as well as the product attributes. E.g. any item being exported out of UK must contain HTS codes specific to UK for tariff determination, ECCN Code if it is a dual-use item, and even the HTS codes of the country to which it is being exported to.

 

Similarly every enterprise which exports or imports has to ensure that none of its international customers/suppliers fall under the denied list of people/entities as prescribed by UNO.

 

Oracle GTM, performs the item classification and also screen the contacts/orders of the business through its standard functionalities.

 

Cummins Inc., an American heavy equipment company, which operates in more than 190 countries. It has more than 600 distributor facilities and over 7,200 dealer locations across the world implemented Oracle GTM in year 2013-14. They mainly did so to classify their items (goods) and also screen their customers and suppliers against the denied party list. And here is what they have to say - "Through the use of Oracle's Global Trade Management solution, we have achieved new heights of product classification accuracy, consistency, and compliance efficiency in all Cummins locations globally."1 - Dante Monroy, Director Global Trade Operations, Cummins Inc.

 

B.  Embargo and Compliance rule screening

 

As per the UNO mandate all Multi-national enterprises across the world are required to completely refrain from doing any kind of trade with certain embargoed countries from time to time. Several countries including North Korea, Iran, Syria, Sudan, Myanmar etc. have been embargoed time and again by the UNO.

In addition to these blanket bans by the regulatory bodies there are often country-specific requirements based on the international treaties that your home country is a part of. E.g. - Any materials, equipment and technology related to nuclear science can only be trade between countries that are a part of the NSG (Nuclear suppliers group).

 

Oracle GTM configures these rules and ensures adherence to international compliance rules through its standard functionalities of 'Sanctioned territories screening' and 'Compliance rule screening'.

 

 

 

General Electric (GE) a US based multinational enterprise, implemented Oracle GTM in 2013-14 for one of their key businesses P&WE and ensured that they do trade as per the international law abiding by the International embargoes requirements and various other multi country treaties including NSG, MCTR (Missile control technology regime) , Wassenaar agreement and Australia group agreement.2

 

 

C.  License Management

 

It is often seen that certain items, before they can be exported, are required to be accompanied by regulatory licenses. It is often done to ensure that the items are only used for their intended purpose and do not end up in the wrong hands and be misused.

These licenses can be quantity or value based. Any enterprise dealing in items that needs licenses must keep a continuous track of the authorized quantity/value and keep replenishing the same with concerned regulatory authorities. Any item if exported without the required license can attract severe penalty and/or legal action by the international/local law enforcement agencies.

 

Using Oracle GTM's License management functionality one can set up and manage all licenses that are applicable to its items and can also keep a continuous track of the inventory levels of the same. Through this feature the business can also ensure that it never falls on to the wrong side of the law by non-deliberately trying to export an item without the applicable license.

 

                 

 

Cypress Semiconductor Corporation, an American semiconductor design and manufacturing company, needed to centrally manage 30,000 customers in 200 countries complying with all international and country specific regulatory environments.

 

In addition to this they also needed to ensure that few of their export controlled products specifically in countries including US, Malaysia and Japan always have the required licenses before they are exported.

 

They implemented Oracle GTM in 2015-16 to manage their global trade and as per them, using the product they could fully automate their global business and make themselves 100% trade compliant with 0% errors.3

 

 

D.  Customs Filing

 

Any enterprise exporting goods outside a country must file for customs clearance with the national customs authorities. This process has become electronic in most countries and is usually done by establishing a two-way electronic communication to transmit data related to the export items and further receive a response regarding the same.

E.g. in UK every exporter must file with CHIEF customs system, in Germany ATLAS, in Belgium - PLDA and similarly in US every exporter must perform the customs filing with the AES (Automated Export System).

 

Oracle, in 2013, got authorized by the U.S. Census Bureau (Department of Commerce) to enable its customers to perform the AES filing though its product GTM.4

Since then a lot of US based enterprises have used the product to extract the custom specific information from their existing business processes and transmit the same to the authorities to get clearance for their exports.

 

Oracle GTM simply screens the existing business processes of the customer, create customs shipments to prepare the filing data and then transmit an electronic document to the AES system. It also further receives and processes the response that it might get as an acceptance or rejection of the filing.

 

In various other countries Oracle partners with 3rd parties like Descartes to perform the customs filing.

 

 

 

 

E.  Latest developments

 

Oracle recently came up with a new feature 'Landed Cost simulator' that helps enterprises decide the most suitable vendor and the most economical sourcing scenario for their business. It also lets them know if their business is eligible for any duty benefits under any trade agreement.

E.g. - If a Canadian importer has several sourcing options for a product that it is looking to import, Oracle GTM can calculate the cost that each option will incur for the import, including the duties. Additionally if any of the vendors happens to be from a country that Canada has a trade agreement with (say Mexico/US which are a part of NAFTA) it will identify and calculate the duty benefits that the importer will be eligible to claim.

 

 

 

 

 

 

 

Global-Trade-Management is not just a regulatory but a strategic issue for any growing enterprise. If not managed systematically it can result in irreparable losses financially, legally and also on an organization's brand image.

It should be a part of a company's vision and long term growth strategy and hence any enterprise with such an attitude must consider having a robust & comprehensive solution like Oracle GTM!

 

 

References

1 - http://www.oracle.com/us/corporate/customers/customersearch/cummins-1-gtm-2602121.html

2 - https://www.oracle.com/webfolder/s/delivery_production/docs/fy14h1/doc1/ovcs2014-fovce.pdf

3 - http://www.oraclemsce.com/tracks/global-trade-management

4 - https://blogs.oracle.com/scm/oracle-global-trade-management-achieves-aes-certification-to-support-end-to-end-customs-filing-process 

                                                                          Written by: Ravikiran Khobragade & Mohammad Talat


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