The tracing list difference between nafta & usmca v1.2

W H I T E PA P E R B Y
KARTHIK GUNDA
www.kryptinc.com
THE TRACING LIST DIFFERENCE
BETWEEN NAFTA AND USMCA
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SUDHEER DHADI
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https://tinyurl.com/y4r

02
The context of this white paper is specific to Automotive Manufacturing and associated Equipment Manufacturers in
countries partnering the USMCA agreement.
The white paper attempts to explore more about – What was a Tracing List?; Why components were deemed to be
originating in NAFTA?; Why they cannot be considered as deemed in USMCA?; Do we have a provision to deal with it in SAP
GTS?; and How can the calculation differ with Tracing Applied and Tracing not Applied?
C O N T E X T
H O W WA S
W H I T E PA P E R
A B R I E F
Originally when NAFTA was drafted, there were a set of components related to chassis like – axles, brakes, wheels, electrical
components like – lighting, wiring, switches, batteries and exteriors like – doors, glass etc., where every part that could be
conceived of about a Automobile, when it was drafted, was listed into a ‘Tracing List’.
The purpose of the Tracing List was, to make sure all the key parts of a vehicle are properly accounted for, for their
originating content and to prevent manufacturers from manipulating the content of origin by importing key components
from non-partnering countries and assembling to claim as of NAFTA origin.
However, with advancement of technology, entry of battery run EV’s , with change in technologies, many components are
newly added for music systems, digital clocks, dashboard instruments etc., those components that were not part of the
original tracing list were ‘Deemed’ to be originating in former NAFTA agreement. (for example Bluetooth music system is
not in Tracing list, where as a cassette player figures out in the tracing list)
So what changes now with USMCA? Every component must be accounted for its origin, and the percentage of their
originating content will have to be known.
Consider a hypothetical scenario as follows:
A car Manufacturer in US has procured the Suspensions from a Supplier in Mexico, say the Mexican supplier had declared
the product as originating by calculation of RVC and the product had qualified by an RVC percentage of 67%.
If the component has Costed 70 USD and the component is part of a Car costing 3,000 USD.
In the RVC calculation of the Car, only 46.9 USD (67% of 70 USD) should be considered as Originating and the
remaining has to be treated as non-Originating.
However, in most of the cases it was ‘deemed to be originating’ and total 70 USD used to be considered as
Originating.
For those components falling under the Tracing List, these finite details used to be calculated by the
Automobile Manufacturers.
Although such segregation of originating and non-originating based on the Supplier declared percentage
was not possible in SAP GTS for 2 reasons.
T R A C I N G L I S T F R O M U S C B P A N D W H AT I S T H E C H A N G E I N U S M C A ?
T R A C I N G C A LC U L AT E D I N S A P G T S F O R N A F TA ( P R I O R T O U S M C A ) ?

03
AN EXAMPLE ILLUSTRATING A SCENARIO TO COMPARE BOTH THE CASES FROM KRYPT’S DEMO ENVIRONMENT:
CASE 1 – RVC CALCULATION WITHOUT TRACING RELATED ENHANCEMENT IN SAP GTS:
Component 167 in the above BOM is externally procured and has a cost of 85 USD, it was qualified as Originating by the
supplier with a 70% by RVC.
When the Finished Good 184 is calculated without considering the tracing enhancement, it is ‘deemed to be originating’
and total 85 USD was counted as Originating, so the Finished Good shows up as qualifying.
A Finished Good, BOM number184 defined and available in SAP GTS,
Structure of the Sample BOM
1) Lack of provision to collect the Vendor declared percentage of originating content during the LTVD solicitation
2) Lack of Formula or Logic in the Standard Calculation to base it according to a vendor provided/declared RVC
Originating percentage
This was possible with tweaks in the Standard Application by accommodating the calculation with a custom-built logic.

04
Only 70% of 85 USD (i.e., 59,5 USD) was considered as Originating in the calculation, remaining is considered as
Non-Originating.
CASE 2 – RVC CALCULATION WITH TRACING RELATED ENHANCEMENT IN SAP GTS:
Vendor provided percentage captured in a Custom Table as 70%
CALCULATION
Calculation of the same Finished Good 184 with this entry of 70% maintained
**We have built for our clients an improvised Vendor Solicitation Process to seek these details from Suppliers.

05
H A S T H E T R A C I N G L O S T R E L E V A N C E I N U S M C A ?
The Tracing List is non-existent, but that would mean, it is more like every component needs to be deemed as part of
tracing list in the current USMCA.
This way of calculation illustrated above can be improvised for suiting the S & A requirements in the new USMCA.
There are no exemptions of any items in the new USMCA, there will not be any ‘Deemed to be Originating’.
S O , C A N T H I S O L D M E T H O D U S E D I N N A F T A I L L U S T R A T E D A B O V E H E L P I N T H E N E W
U S M C A ?
For Automotive Sector, there is a necessity to prove the S & A Content Certification as per the Appendix C & D of the new
USMCA (Please refer the CBP link provided below). When any of the assembly or sub-component is procured from a
Supplier and when it is qualified by an RVC while importing, there is a need to keep a record of the originating
percentage. Later when the finished product is produced, we can take only that percentage of the value in the finished
product calculation.
This is not a ‘Must Have’ or the ‘Only Way’ to arrive at the Total Steel or Aluminum content, but this approach may benefit
for the S & A Certification, where the Producer’s Purchase of Steel / Aluminum has to be presented to the US CBP as
a required data element for Annexure C & D, and it can prove beneficial from a record keeping perspective too.
Reference: https://www.cbp.gov/document/guidance/usmca-implementation-instructions
Change in the Total for Components is evident for Originating and Non-originating based on the Supplier provided
percentage.
Going by strict calculation procedure, this Finished Good would not have qualified.

06
C O M PA N Y
B A C K G R O U N D
G L O B A L F O O T P R I N T
Founded in 2008, Krypt has the largest and the most experienced Global Trade and Supply Chain practice in the world.
Krypt has delivered hundreds of projects to Fortune 1000 companies over the last 12 years in the Global Trade and Supply
Chain business. Krypt now boasts nearly 200 employees in offices all around the world, providing our customers with
regional, national and global expertise in every major industry. Headquartered in the US, Krypt also has regional offices in
Canada, UK, Ireland, Netherlands, Germany, and India.
Krypt has the largest and the most experienced Global Trade Services practice in the world. Utilizing our team of business
consultants who are not only trade experts, but also licensed customs brokers, Krypt has delivered hundreds of projects to
Fortune 1000 companies over the last 12 years in the Global Trade business. We know the topic so well, we have authored
8 books on the subject including the latest books on Practical Guide to SAP GTS – Part 1, 2, 3.
We offer our customers flexibility and innovation in addition to standard, out-of-the-box solutions. Krypt will customize a
solution to fit your specific business needs.
Krypt is a strategic partner with SAP with dedicated focus on the SAP Supply Chain Execution space. We do SAP GTS, EWM,
TM and IBP implementations, upgrades and support. Krypt has one of the largest teams in the world focusing on Supply
Chain Execution and Compliance, with over 80+ consultants in the US, 40+ consultants in Europe and 80+ in our offshore
setup in India. We know the topic so well, we have authored books on the subject and have 100+ white papers published.
Krypt is not just a services company, but also a product development company with continuous investments into R&D and
has a comprehensive product portfolio and accelerators which complement SAP implementations & upgrades and Supply
Chain Analytics.
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C O M PA N Y
D I F F E R E N T I AT O R S
02
C O M PA N Y
P R O F I L E
01
S A P C O N S U LT I N G . E L E VAT E D
S O L U T I O N S
IBP, TM, GTS, EWM, KAI, S/4 HANA
P R O D U C T S
UX. Cloud, Visibility, Connect, Concierge
T H O U G H T L E A D E R S H I P
Krypt has authored 8 books and 100+ white papers published by SAP press.
PA R T N E R S H I P S
“One-Stop Shop” – partnerships and reseller agreements with SAP, middleware, content providers, and
industry organizations.
03
• Specialized Expertise in only Global Trade & Supply Chain
• Boutique Consulting Company – Flexible, Adaptable, Innovative
• Largest Global Trade & Supply Chain Practice worldwide
• Global reach with Experts and Offices worldwide
• Custom Solutions, Integrations, Migrations and Interfaces
Krypt provides tangible value to our customers by bringing
together systems and business experts, pre-delivered content
and unique, high-value solutions to meet unique business
challenges. Pairing our complementary products with standard
SAP offerings, our customers have seen 10% to 40% savings
over three years.
07

A U T H O R
P R O F I L E
KARTHIK GUNDA, Solution Architect
e-mail: karthik.gunda@kryptinc.com
,
F O R M O R E
I N F O R M AT I O N
Karthik is an SAP GTS Solution Architect at Krypt India. He has a total of 14 years experience in SAP (of which 5 years
has been in SAP GTS and rest in SAP SD) Consulting, Implementation and Support assignments with extensive
knowledge of processes, working with clients from Electronics, Hi-Tech Engineering, Agricultural Equipment, C&F
Machinery, Media, Pharma, Medical Device Manufacturers, and Auto Ancillary Equipment industries across
geographies.
E-mail: solutions@kryptinc.com
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c
SUDHEER DHADI, Sr. SAP GTS Technical Consultant
e-mail: sudheer.dhadi@kryptinc.com
Sudheer has around 9 years of SAP ABAP experience, half of it in SAP GTS & SAP EWM. His experience includes -
implementation, roll-outs/enhancement, support projects working with key global clients. He has sound
understating on Iintegration between ECC, EWM and CRM/GTS Systems. He has good experience on GTS functionality
- Customs – Export, Imports, Bonded Warehouse, Product Classifications. He is hands-on with documents like EAD,
TAD along with Export & Transit Declaration Creation Consolidation based on multiple combinations of TU, Ship To,
Intermediate Shipto Etc., He is experienced in coordinating with the cross functional Team.

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