Export Compliance Management Seminar 29 May 2012: Automated Trade Compliance Processes


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Bruno Fransman - Honeywell


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Export Compliance Management Seminar 29 May 2012: Automated Trade Compliance Processes

  1. 1. Automated TradeCompliance processesAutomation and Control Solutions Bruno Fransman May 29th 2012
  2. 2. Introduction
  3. 3. Why automation? • Key findings from the report include: – 84 percent of compliance professionals expect to handle more regulatory information in 2012 – More than a third of respondents spend an entire working day each week staying up-to- date with regulatory changes – 70 percent of respondents expect the cost of senior compliance staff to be higher this year – Only 11 percent of companies expect a significant increase in their budget for compliance this year • While regulatory requirements continue to grow, compliance teams are showing signs of resource constraints limiting their ability to perform vital compliance functions. More than a third of compliance professionals say they spend more than an entire working day each week in simply staying up to date with regulatory changes and assessing their impact on the business. • At the same time, compliance teams report difficulty finding time to coordinate with other parts of the company involved with managing regulatory risk. More than half of compliance professionals surveyed said they spend less than one hour a week working together with internal audit colleagues. One-third of respondents say they similarly spend less than one hour a week consulting with their legal and risk teams. • While keeping executive management informed of regulatory issues is a key part of the compliance role, more than a quarter of respondents say they spend less than one hour a week reporting to their boards. In the U.S., more than half of the companies surveyed spend less than one hour a week reporting to their boards. This raises concerns about whether executive management is being kept sufficiently informed on compliance issuesCompliance Teams Stretched to their Limits (March 13th, 2012 by Corporate Compliance Insights and Cost of Compliance Survey 2012 by Thomson Reuters ACCELUS)
  4. 4. ACS Today Profile • Sales: $15.5B • 70,000 Employees • Technology, leading brands • Large installed base Strengths • Security, ECC, Life Safety • Global reach 41% 36% Growth • 164 countries served • > 2M ship to addresses Focus • 54 acquisitions since 2003 • 110 ERPs ECC S&C HLS HBS HPS HSG HSM Buildings Fire/Smoke Process Sensors ControlsThermostats Motion / Human Speed and Position Presence Sensors Building Sensors Scanning System & Automation Panels Instant Pressure Alert Mobility Sensors Water Control CCTV/ Gas Detection Voice Picking Gas DVR Distributed Personal Satellite Valves Control tracking Military SensorsIndustrialBurners Control Personal Protection Systems Mobile ComputingComprised of 93 Supply Chains, 118 Plants, 93 DC’s, 9 Integration Centers
  5. 5. Background Distribution Footprint 219 Global Locations Distributing Product118 Factories - 93 DC’s - 9 Integration Centers
  6. 6. Honeywell – Corporate Policy“Honeywell will comply fully with all applicable export and import control laws and regulations of the United States and of all countries in which it conducts business.”• Customs laws • Requirement to declare goods accurately on importation – classification, valuation, country of origin • Implies that our trade data is accurate – including sourced items! • Use free trade agreements legally and intelligently• Export control laws • Certain goods of strategic nature require government approval before export • Use of military components can “infect” non-military products • Restrictions on importing from certain countries – embargoes• Other government agency (OGA) requirements • ACS now faces permitting requirements in US/ MXon health/medical products in HSP – eyewash, first aid kit elements, ibuprofen, etc.
  7. 7. ACS Trade Service OfferingsTeam Vision: ObjectiveA collaborative ensemble of Build a global complianceprofessionals partnering with infrastructure; enable rapid tradeHoneywell colleagues to efficiently problem-solving; continuouslytransact business across national Enabling Growth improve cross-border productivityborders as advantageously as •Export De-control and Licensing and operations; and eliminatepossible for Honeywell, our •Customer Duty Preference Requestcustomers, and our suppliers while •Transaction Structuring and Approvals regulatory barriers to growth. •Regulatory Advice, Advocacy, and Rulingsobeying international trade rules. Productivity and Operational Support • Duty Avoidance and Incremental Duty Savings • Broker Management and In-house Customs Brokerage • Software and Automation • Product-line Moves and Technology Collaboration • Supply-chain Security • Direct Shipments/ Cross-dock Operations • Sourcing Decisions/ Vendor-managed Inventory Ensuring Compliance with International Trade Rules Mitigating Risk of Non-compliance • Standardized Internal Controls Government Inquiries and Audits • HS and ECCN Classification Government Disclosures • Internal Risk Assessments and Remedial Action Plans • Submissions to Government Agencies and Post-entry Audits • Cross-functional Training • Pre-acquisition Due Diligence and Post-acquisition Integration Enabling Growth and Increasing Productivity from a Foundation of Compliance
  8. 8. Components of Honeywell EU Trade Strategy CENTRALIZED CUSTOMS • Optimized trade operations AUTHORIZED ECONOMIC OPERATOR CERTIFICATION • Faster border crossings • Smoother customs operations CUSTOMS BROKER Automated Trade MANGEMENT • Trade documents • Control entries • E-Filing • Measure Brokers • Preference calculation • Assure compliance • De-minimis calculation • Maximize duty savings • Export control • …. TRADE MASTER DATA MANAGEMENT WRITTEN PROCEDURES • HS and ECCN Classification • Written procedures • Net weight • Develop training • Origins • Establish accountabilities Driving to meet EU requirements
  9. 9. Automated Trade solutions Introduction
  10. 10. CP/S Modell for EU TRADE SolutionAutomation andControl SolutionsWeb-Order DeliveryEDI-Order Order entry Picking Packing Shipping Master DataLINK-Order creation Transaction G Freight cost Automated Screening calculation Customs Freight Export Freight Audit EU PCT Forwarder G Documents & Payment Caclulation Integration G = GLOBAL used Automated Tool Partners Other SAP + Roles and Content from external source
  11. 11. SAP GDM Trade Compliance and Solutions SAP CP/S NATRADE Docs XI - Gateway SAP Pref Calc. Automated Specific Automated Systems Trade Solutions at De-minimus. EU sites Export Documents Global DPL Screening EU Export Documents ECCN Shipping License EU Electronic -Customs NAFTA Calculation,, EU DG Documents Shipping docs , ….. Landed cost calculation EU Preference Calculation + docs
  12. 12. ACS Intranet Trade solutions
  13. 13. ACS Intranet solutions
  14. 14. Customs Issue Log14 HONEYWELL - CONFIDENTIAL File Number
  15. 15. Metrics Web Tool15 HONEYWELL - CONFIDENTIAL File Number
  16. 16. AEO16 HONEYWELL - CONFIDENTIAL File Number
  17. 17. Customs Compliance Assessment• Rolling out EU compliance self-assessment• Assess gaps and overall readiness for AEO• Traffic light report• Improvement plan Traffic light report and improvement plan
  18. 18. Automated Customs Solutions
  19. 19. Electronic customs filing • Limited to exports (interfaced with SAP) - Export declaration filing • Export Trade documents - Commercial (Customs/shipping) invoice - EUR.1/A.TR - COO - LTDO (Long Term Declaration of Origin)19 HONEYWELL - CONFIDENTIAL File Number
  20. 20. Automated Preferential Process Flow in FTA - (exporting plant point of view) Vendor Customer CustomerVendor ? Business Task 1 Business Task 2 Business Task 3 Vendor Declaration Preference Calculation Management Proof of Origin Sales Product XYZ documentation Look up missing/expired VDs BOM Shipping Plant S1 S2 S3 •Declaration of Origin Dunning/Solicitation ? on the Invoice or Packing list C11 C21 C31 • Fax, E-mail C12 C22 C32 •European docs: EUR1, A.TR •Printing …………………. •Long Term Declaration (LTD) •Portal E1 E2 … E3 E4 E5 Get VD ? MX EU CN ? Proof of Origin Legal Rules of Origin for Preference Calculation
  21. 21. Automated Export Control
  22. 22. CP/S Global Design Model - Export Global Design Model - Export: The ACS global export design model consists of an integrated solution managed by Automated Tool with SAP hold management.  3 TRADE APPROVED solution variants  Solution based on regional requirements and site risk profileExport Control Function: Gold Silver BronzeRestricted party screening via Automated Tool with soft alertsRestricted party screening via Automated Tool with hard blocksSAP Embargo controls with hard BlocksSAP Embargo controls on returns with hard blocksForeign trade data missing with hard blocks (ECCN, HTS or COO)Missing end user or end use results in hard blocksAutomated Tool license determination with hard blocksAutomated Tool license management and decrementingSAP license determination with hard blocksSAP license management and decrementingMaterial master fields for ECCN, HTS and COOSAP or automated export tool docs (C/I and SLI)
  23. 23. Sensitive country analysis - OriginQualify Honeywell for sales by verifying non-US contentAutomation improves visibility on flows and costs and increases compliance level and generates savings and realizes growth
  24. 24. What is denied party screening & why is it required? • Export control laws make it unlawful for Honeywell US and its non-US subsidiaries to conduct business with entities that - violate export regulations; or - are involved in proliferating weapons of mass destruction; or - Are involved in narcotics trafficking; or - represent embargoed or terrorist-supporting countries. • Honeywell is liable if it does business with an entity involved in these activities. We cannot avoid liability by saying that we did not know of their activities. • The Tool provides several lists that includes the names, addresses and reason for denial for all restricted organizations, companies and individuals. All end users must be screened against these denial lists to ensure compliance!
  25. 25. How does this impact our job & what to expect?• Customer and Vendor Account Creation – When creating customer and vendor accounts – immediate transfer to Automated Tool for denied party screening (DPL) – If Automated Tool determines that there is a match, then order cannot be placed using this party until the DPL hit has been resolved in Automated Tool• Order Entry – Party Creation at Order Level (Sales and delivery order) – If a customer is added ad hoc at the order level, then party info transferred to Automated Tool immediately for DPL screening – If Automated Tool determines that there is a match, then a delivery block will be created on the line items in the order until possible match resolved in Automated Tool.• The SAP user will be notified via warning messages of any DPL matches, as well as daily summary reports e-mailed to a designated mailbox. – If a parties is changed after delivery, then the export docs and PGI will be blocked and the user will receive a workflow message
  26. 26. Lessons learned • Change management - From fully outsourced trade compliance to semi-outsourced  Business do underestimate the impact  Automation doesn’t mean that everything is automated: e.g.: • Trade Data Management: garbage in garbage out • Export control » Before: no order screening only manual party screening » Automated Tool: order screening => increased involvement by entities and functions: Sales, Order Admin and purchasing » “One time only” customers : repeated false hits • Customs » Stricter processes (“less” flexible): people do complain » PCT: discipline on trade data management up to26 level of components HONEYWELL - CONFIDENTIAL File Number
  27. 27. Benefits • Increased compliance level - Helps for AEO-certification • Increased awareness across functions - Better visibility: Trade compliance more then just “stamping” documents - Increased understanding and appreciation of our function - Trade also means sales not just blocking or fire fighting • Better reporting to senior management - Metrics for senior management - Duty savings reports - => part of quarterly meeting reviews with CEO • Funding to get additional resources • Funding to get more and better automation27 HONEYWELL - CONFIDENTIAL File Number
  28. 28. Non Productivity vs. Productivity – ConclusionsACS would incur $110M in Annual Duty Costs If It had No Global Duty Avoidance Program Year Import Value Duty Spend Duty Saved Duty Liability Duty Ratio 2011 3,474,646,476 59,807,627 50,689,151 110,496,778 3.18% 2010 3,142,132,983 57,035,301 53,368,281 110,403,582 3.51%ACS Duty Spend is $51M Annually Because of its Global Duty Avoidance Program Year Import Value Duty Spend Duty Saved Duty Avoided per $1 Import Actual Duty Ratio Value 2011 $3,474,646,476 $59,807,627 $50,689,151 85 cents 1.72% 2010 $3,142,132,983 $57,035,301 $53,368,281 93 cents 1.82% 46% Reduction in Duty Liability achieved through our Duty Avoidance Mechanism
  29. 29. 2011 ProductivityImport Volumes in USD Duties paid in USD Country Import Value 2% 30 3% Country Duty Paid Millions 42% US 1,554,275,102 4% 7% US 25,258,564 25 MX 686,677,631 MX 584,716 20 CN 402,811,856 7% 45% CN 4,352,089 CA 248,372,627 15 22% CA 2,756,762 GB 140,055,300 12% GB 4,452,195 10 15% IN 122,098,503 IN 13,085,576 7% 7% DE 75,202,161 20% DE 426,402 5 5% 1% 1% Other 245,153,296 Other 8,891,323 0 TOTAL 3,474,646,476 US MX CN CA GB IN DE Other TOTAL 59,807,627 US MX CN CA GB IN DE OtherDuty Rates in USD Duty Savings in USD Top Importing Countries Country Import Value Duty Paid Duty % Country Savings Program Duty Savings US 1,554,275,102 25,258,564 1.63% US 15,383,204 Processing 19,069,415 MX 686,677,631 584,716 0.09% MX 10,910,333 NAFTA 17,317,626 CN 402,811,856 4,352,089 1.08% CN 9,254,410 Duty Drawback 8,814,864 CA 248,372,627 2,756,762 1.11% CA 1,491,493 FTZ/Bond 2,081,102 GB 140,055,300 4,452,195 3.18% GB 1,640,856 Other FTA/GSP 1,672,972 IN 122,098,503 13,085,576 10.72% IN 10,358,852 HTS 285,373 DE 75,202,161 426,402 0.57% DE 855,381 EU Charlton House 280,125 TOTAL 3,474,646,476 59,807,627 1.72% Other 803,620 Other 179,680 TOTAL 50,689,151 TOTAL 50,698,151 Highest Duty Rate % Country Import Value Duty Paid Duty % AR 5,837,970 892,968 15.30% BR 26,673,072 3,644,519 13.66% VE 2,765,852 334,892 12.11% IN 122,098,503 13,085,576 10.72%
  30. 30. Next Steps – wish list • Broker Management - Two way interface : PO’s and metrics reporting - Import metrics  Duty savings and risk assessment tool  Reporting • Trade data improvements - Global HTS-classification tool - Origin solicitation and management • Further improve our intranet tools30 HONEYWELL - CONFIDENTIAL File Number
  31. 31. Any Questions? We’ll always try to answer and support the business but answer can be dependent from support of others31 HONEYWELL - CONFIDENTIAL File Number
  32. 32. Thank you for your attention.Bruno FransmanGlobal Customs Compliance DirectorBruno.fransman@honeywell.com+32 2 728 20 38