customs & border modernization, trade facilitation and technology markus a. werling, vice...

Customs & Border Modernization, Trade Facilitation and Technology

Markus A. Werling, Vice President SAP AG, IBU Public Sector

Michael C. Eads, VP Marketing/Board MemberTatis S.A.

SAP AG 2006, Custom & Border Management / SAP-TATIS / 2

Summary of SAP Today

SAP AG in 2005 revenues: €8.5 billion More than 32,000 companies run SAP software

Providing more than 25 industry solutions

35,873 SAP employees (Dec, 2005)

12 million users in 120+ countries team with us to… Integrate their business processes

Extend their competitive capabilities

Get a better return on investment at a lower total cost of ownership

Unique partner ecosystem More than 1,600 partners

Overall more than 180,000 SAP partner certificates


Summary of TATIS Today

TATIS SA was founded in Switzerland in 2000 developed a comprehensive customs management system application

suite

The TATIS business strategy is to develop alliances with global technology and business partners

Solution of TATIS SA TATIScms V1.01 is a modular customs management system that

incorporates methodologies, business applications, tools and best practices:– Designed to address revenue and trade compliance, enforcement and trade

facilitation

– Risk-centric

– Based on intervention by exception

– WCO/ WTO aligned (ACV, Kyoto, UCR, SAD)

Luxembourg Project Highlights & Lessons Learned to Date

Wrap up and Discussion

Customs & Border Modernization

TATIS/SAP Solution Offering: Overview & Demo

sample for a picture in the title slide


Customs’ Challenges & Modernization Drivers

CHALLENGE DESCRIPTION

Increasing Trade Volume- Proliferation of Trade Agreements

- Port Congestion

- Customs Workload

Increasing Threats (supply chain security)

- Smuggling

- Terrorism

- SPS, Health & Safety (Mad Cow, SARS, Bird Flu, etc)

- Transnational Crime

- Unsafe Goods (consumer protection)

Trader Compliance- Lack of Transparency,

- Under-invoicing

- Poor Trader Understanding

Organizational/HR

(Internal Stakeholders)

- Training & Career Development

- Productivity

- Incentives & Motivation

Regulatory/Legal- Multilateral: WTO, WCO (framework of standards)

- Regional and Bilateral: EU (MASP)

Customer Service

(External Stakeholders)

- Trade Facilitation

- Transaction Costs

- Customs Processing Time

- Port Competitiveness

Interagency Cooperation- Connectivity & Collaboration

- Needs & Requirements

- “Buy In”/Support


System Landscape & Functions at Customs

besondereErledigung

Accounts

Ope

ratio

ns

Functions

Dat

a A

reas

Business Areas and Business Activities

TransitExportImportEntry VSt AnmeldungKFZ

MotrorradSteuer

3rdParty-

information

Rechts-mittel

Einwand

RiskMgmt..

TarifMaintenance

Enterpriseinformation

management

ergänz.An-

meldung

Exit Meldungen(Reports)

Waren-bewegung

Sicherheits-leistungen

Tarife & Maßnahmen

Risikoprofile

Domeinen

Payment

nicht-finanzielleVerpflichtungen

Personal & Organisation

Abschöpfung

receive EU

send EU

RiskSelection(Wert undGefahr)

EinkommenSammlung

Declaration Handling (pre-arrival and post-arrival)Waren-orientiert

OtherInspection

AccountMgmt.

Inspection Codelists

maintenance

Risk Accountmanagement

Lizenzen administr.Über-

wachung

Lab

receive DE

send DE

TARIC

TARIC

EBTIAFIS

SEED

AURA

NIZZA

KIS

TAB

KIS

KOBRA

ATLAS KOBRA

ATLAS

NIZZA

EZT-ONLINE

ATLAS

ATLAS

COSINUS

AÜV

PRISMA

KIS KVKKIS

TAB TAB

KIS

ADLER

ECNCCN/CSI

NIZZA

TARIC(CCN/CSI)

(CCN/CSI)

(CCN/CSI)

Declaration Handling Steuer-orientiert

Support

AIDA

AÜV

BENGALI

PRÜF

BSV

CUTEPAD

DIANE

EMCSEWSE

EZTONLINE

MOZART

RIS

MVSCIS

QUOTA

ATLAS KOBRA

NIZZA

ZEUS.

SIGMA

ATLAS

(CCN/CSI)

BIBER

TIGER

TARA

ZEBRA

RAMSES

BISON

EZTONLINE

NIZZA NIZZA

NIZZA

ATLAS KOBRA

ATLAS

ATLAS

EZT-ONLINE

Multiple, redundant, stand-alone systems

Expensive Point-to-Point Integration

Fragmented access and Inefficient billing & collection

Risk of non-Compliance

Risk of uncaptured revenue/duty

Limited view of taxpayer/trader


Low compliance

Uncaptured revenue

Limited view of taxpayer


Agility to meet business and legal changes


Single revenue type limitations

Risk of non or low compliance

Uncaptured revenue/duty


No risk scoring capabilities, limited visibility into taxpayer total obligations and status, and inability to track or match documentation results in poorly targeted, incomplete audit coverage

No method for detecting and reducing fraud and non-filing

No single view of taxpayer or taxpayer’s total obligation, resulting in lost revenue and lower compliance

Specific Pain points Business Practice Improvement needed

Reforming Tax & Revenue Management and Customs & Border Management

For each tax, fee, revenue and payment type, and for each step in the revenue lifecycle a separate system is required. These are often, silos, custom-built, “one-off”, or legacy in-house systems with outdated technology.

Outdated stovepipe systems using point to point integration aren’t prepared to meet changing business and legal requirements

Limited channels of access hinders taxpayer interaction, causing low constituent satisfaction and negatively impacting compliance rates

Taxpayers have no ability to access accounts and make payments on-line

Multiple systems, processes and personnel for different revenue types, (fees, taxes, duties, payments) causes redundant data capture ?

How can IT help


Commitment

Baseline (Environmental Analysis)

Customs Expertise

Customs Integrity

Risk Management

Audit (Internal/External)

Compliance

Enforcement

Modernization Strategy

Da

ta A

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lys

is/

Bu

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on

/Te

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Pro

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ss

Ma

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Imp

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Tra

inin

g &

Kn

ow

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Tra

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Qu

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FUNDAMENTALS

PROCESSES

EN

AB

LE

RS

©TATIS SA

Customs Modernization Fundamentals


Market Trends and Drivers

Key Drivers

1. Increased Trade Volume

2. Regulatory Changes e.g.: WTO Supply Chain Security Authorized Economic Operators EU MASP Convergence

3. Legacy Systems

4. Organizational/Operational Changes & Mergers– Customs & Revenue Management (UK,

SARS)– Border Control (USA, SARS, UK)

5. Service Oriented Architecture (SOA)/Enterprise Services Architecture (ESA)

HighHigh

SECURITYSECURITY FACILITATIONFACILITATION

LowLow


Customs Role in Trade Facilitation

Trade Facilitation: “the simplification and harmonization of international trade procedures (the activities, formalities and practices involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade”)*.

1. Countries with a Low TF Index have the following problems: Border/Port Delays Lack of Transparency & Predictablity Complicated Documentation Requirements Outdated, innefficient Customs Procedures Resulting High Trade Transaction Costs (from 1 to 15%).

2. Higher impact on SMEs

3. Direct Relationship Between High TTCs and FDI

4. Marginal Improvements in TF Would Result in US$ Billions of Savings to World Economy

26.9%

27.5%

28.1%

28.1%

28.1%

29.4%

29.4%

31.3%

31.3%

32.5%

33.1%

40.6%

0% 10% 20% 30% 40% 50%

% of Respondents w ho sa id "M ost Cha llenging"

Identif y ing s hipping ex c eptions

Shipment v is ibility f or s upply c hain partners

Integration w ith other enterpris e units

Calc ulating total landed c os t

Connec ting to gov ernment trade s y s tems

Sc reening f or dangerous parties

Settling international pay ment trans ac tions

Clas s if y ing produc ts f or c us toms purpos es

Multi-modal planning/s c heduling/routing

Shipment v is ibility f or c ompany ex ec utiv es

Submitting regulation complianc e doc uments

A c c es s ing s hipping regulation inf ormation

K ey Global Trade C hallenges


A Snapshot on the Business of Public Services Organizations

SocialServices &

Social SecurityDefense

Public Security

Education

Transportation

Democracy

Public Broadcasting

Justice

Environment, Health & Safety Retail Services

Aid & Development

Customs & Border

Management

Government & Constituent

Services

Energy

Public Utilities

Banking Services

Postal Services

Health

Public Administration

Tax & RevManagement


Differentiated Approach Enables Government TransformationCo-Innovation on Open Platform

Industry Value Networks

Enterprise Services

SAP ISVs

CustomersSystem

Integrators

TechnologyPartners

SocialServices &

Social Security

Defense

Public Security

Education

Transportation

Democracy

Public Broadcasting

Justice

Environment, Health & Safety

Retail Services

Aid & Development

Research

Government & Constituent

Services

Energy

Public Utilities

Banking Services

Postal Services

Health

Public Administration

Tax & RevManagement


… is a Service Oriented Architecture with

Enterprise Services for flexiblepublic sector specific

application landscapes.

Enterprise Services Oriented Architecture (Enterprise SOA)

Open through web services and other standards – including a repository of public & private industries services

Easy to change,user friendly,

encourage innovation

No product but basis for developing and assembling of new applications and for integration of existing applications

Open, secure, reliable, scalable


The Key Elements of Enterprise Services Architecture

Service-enabled Process-integrated Model based

BUSINESS PROCESS PLATFORM

PEOPLEPRODUCTIVITY

EMBEDDEDANALYTICS

APPLICATIONCOMPOSITION

SERVICEENABLEMENT

Customs AgenciesDeclarant

Application ComponentsApplication Components

Enterprise Services

Repository

Business Process Platformfor Public Services

PartnerPartner BI(internal)

BI(internal)

ERP(internal)ERP

(internal)

Declarations Tariff bookRisk

Management Inspection

Partner Composite Application

RegistrationBusiness

RulesFramework

DunningClearing

InvoicingPayment

ExceptionCockpit

SAP Composite Application

Analytics


Example: Electronic Filing Services – Process View

Validate Taxpayer Details

Check Filing History

Lin Smith

Tax payer

Enter Return Data

Process Tax Return

Michael Foster

Tax agent

Tax & Revenue Management

Check Pre-payments

Print-out Result with Payment

Form

Send Return Data

…


SAP Public Sector Collection & Disbursement

Analytics

Example: Electronic Filing Services – System View


Check Filing History

Enter Return Data

Check Pre-payments

Print-out Result with Payment Form

Send Return Data

Process Tax Return

External Portal

BP Platform PS

Enterprise Service

Repository

Validate Taxpayer

Get Taxpayer Filing Objects

Get Taxpayer Filing History

Select Pre-Payment Items

Get Taxpayer Details

Get Taxpayer Address


Analytics

Example - Extended Electronic Filing Services


Check Filing

History

Enter Return Data

Check Pre-payments

Print-out Result with

Payment Form

Send Return Data

Process Tax Return

Exchange Infrastructure

External Portal

Services

Calculate Penalty and

Interest

Calculate Penalty

Agility: Calculate additional penalties and interest

Business Process Platform for Public Sector

Calculate Interest

SAP Public Sector Collection & Disbursement


Solution Overview

TATIS Technical TATIS Technical SpecificationsSpecifications

TATIScms was developed on open source technology using J2EE compliant open architecture. It is database and platform independent and can work with any 3rd party or legacy system: J2EE (Java)

Linux / Unix Platform

Oracle 9i (10i) RDBMS

Drools Rules Engine

Internationalization (Multi-language Support)

SAP Netweaver Migration & Certification

Integration to External Financial systems (SAP, Oracle, etc)

TATIS Technical TATIS Technical SpecificationsSpecifications

TATIScms was developed on open source technology using J2EE compliant open architecture. It is database and platform independent and can work with any 3rd party or legacy system: J2EE (Java)

Linux / Unix Platform

Oracle 9i (10i) RDBMS

Drools Rules Engine

Internationalization (Multi-language Support)

SAP Netweaver Migration & Certification

Integration to External Financial systems (SAP, Oracle, etc)

WTO/WCO & Best Practices WTO/WCO & Best Practices AlignmentAlignment

Aligned with WCO Revised Kyoto Convention

Harmonized System WTO Agreement on Customs

Valuation (ACV) WCO Best Practices (e.g. SAD) Provides Comprehensive Risk

Management-based Enforcement Program

Based on concept of “intervention by exception”

WTO/WCO & Best Practices WTO/WCO & Best Practices AlignmentAlignment

Aligned with WCO Revised Kyoto Convention

Harmonized System WTO Agreement on Customs

Valuation (ACV) WCO Best Practices (e.g. SAD) Provides Comprehensive Risk

Management-based Enforcement Program

Based on concept of “intervention by exception”


High Level Solution View

User Management Engine

Business Data Warehouse

Mobility

Trader Correspondence

Business Workflow

Analytics

NetWeaver Integration Platform

Mu

lti

Ch

an

ne

l In

terf

ac

e (

We

b,

FA

X,

ED

I)

TATIScms + mySAP Business Suite

Document Management

Case Management

CoreFunctionality

CrossFunctional

Tools

Invoicing Payment Clearing Task & Resource Management Business Rules Framework Dunning Exception Cockpit

Tariff Book Risk Engine Valuation Control Bonded Warehousing Bonded Manufacturing Transit Inspections Traveler Manifest

Usability Extensions


Comprehensive Customs Application Stack

Declaration Processing

Tariff Book

Bond Management, Prepayments

Administration & User Management

Risk Management and Inspection

Valuation Control and Inspection

Compliance &Enforcement

Transit

Bonded Warehousing

Bonded Manufacturing

DutySuspenseRegimes

Core CustomsAutomation

Reporting

Manifest

Traveler Management


Customs Declaration Life Cycle

Pre-Arrival Submission

7

4

2

3

1

5

Classification/Valuation

Formal Registration

Duty/Tax Calculation

Risk Assessment

Invoice/Billing/Payment

6

Reporting/Audit

Integrated Case Management


Par

tial

ly U

nkn

ow

n

Chan

ges W

ith Tim

e

Manageable

Risk Management: Strategic Objectives of RM Program

Developing a Customs Intelligence infrastructure or coordinating planning and steering operational activity;

Ability to gather, analyze, validate, store and retrieve intelligence;

Manage Customs interventions as exceptions to normal processing; and,

Focus limited inspection resources on where they are most needed.


Risk Management: Trade Segmentation

Candidates for Green ChannelRISK


Risk Management Program Overview

Building the Foundation

Workload Analysis Drives Key Policy Decisions Related to Risk:

Identify Primary Focus Industries

Establish Trade Priority Issues

Focus on Largest Importers

Develop Account Management Strategy

Strengthen Partnerships with Compliant

Traders and Service Providers

Initiate Legislative Program Reforms if

Necessary


Solution Risk Engine

Sorts reliable traders from

unreliable ones based on their demonstrated

compliance over time

Sorts reliable traders from

unreliable ones based on their demonstrated

compliance over time

All selection parameters are under Customs

control

All selection parameters are under Customs

control

Uniform risk management system for customs transaction processing systems

(declaration processing, manifest)

Uniform risk management system for customs transaction processing systems

(declaration processing, manifest)

Inspections are assigned to

specific teams

Inspections are assigned to

specific teams


KnownThreats

NewTraderRule

High RiskTrader

RandomRule

LowRisk

Trader

Selects for high priority intervention, where a particular threat is certain to occur

=

Selects for control any transactions involving a new trader, who presents an unknown threat=

=Selects for control any transaction involving a trader who has demonstrated poor compliance in his customs business

= Selects transactions at random to sample general trader population and provide “honesty” check on low risk traders

Selects for release transactions involving traders who have demonstrated a high degree of compliance over time in their customs business

=

= Selects for control transactions that match Customs defined criteria of possible threat (automatic step up/step down with each hit/miss)

Transaction Profiles

Applies filters

sequentially - in order of

the potential severity or

probability of threat

Applies filters

sequentially - in order of

the potential severity or

probability of threat

Risk Filters


Risk Analysis

System automatically calculates a compliance

rating for each trader who does business with

Customs

System automatically calculates a compliance

rating for each trader who does business with

Customs

Automatically updates profiles with inspection feedback – the system

“tunes” itself

Automatically updates profiles with inspection feedback – the system

“tunes” itself


Targeting Screen (sensitivity adjustments)

Customs sets system selection parameters for high and low risk traders (negative and positive selections)

Customs sets system selection parameters for high and low risk traders (negative and positive selections)


Wear-Off effect

Customs decides impact of old violations

on trader rating

Customs decides impact of old violations

on trader rating


Prevent tax loss from under-valuation, false invoicing and

Customs fraud in general

Collect price data of “identical or similar” goods needed for

Customs valuation purposes (i.e., valuation under methods 2 or

3, audit support, validation of related party prices, etc.)

Identify operations or traders that may require audit or

investigation

Prevent evasion of hard currency controls through over-

valuation

Ensure accuracy of external trade statistics

Valuation Control: Objectives


Allows Customs to obtain product data from importers at the level of

detail required to make valid price comparisons

Allows Customs to target imports that present high risk of under-

valuation (“reasons to doubt”), and deliver a control message to

Customs valuation examiner

Allows the Customs examiner to analyze declared prices against

historic data, and adjust for different trade levels, currency

fluctuation, mode of transport, and other WTO-allowed factors

Automatically builds an in-country, price database, accessible by

Customs managers, of good and bad prices for analysis, creation of

risk profiles, planning, etc.

Valuation Control: Design Features


Paperless Customs and

Excise PROJECT Current implementation project:

Replacement of the existing joint system by Belgium and Luxemburg to process customs documents, provide Integration to NCTS and ensure integrated Financial Accounting

Selected data volumes 2004: 220.278 Single Administrative

Documents

8600 Excise Tax Documents (ACC4)

360+ users

PROJECT VISION

“Creating a paperless integrated customs administration environment that while enabling international trade in a secure manor provides an efficient, user-friendly interface to traders, facilitating compliance with law and saving administrative costs.”

PROJECT OBJECTIVE

Facilitate the development of cooperation between the customs administrations of the Member States of the European Union with a view to create an Europe-wide electronic environment in the area of customs

and indirect taxation Single view of the taxpayer/economic operator

Flexible architecture that will enable the subsequent integration of functionalities

For other customs missions (e.g. MASP)

Vehicle Tax, Road Tolling et. al.

Prevent fraud and the application of illicit tariffs using a risk management system

Process customs and excise declarations electronically

Bolster the effectiveness of the Customs Administration

Increase level of service to traders thereby facilitating compliance

KEY CHALLENGES Disparate legacy solutions across the state maintaining multiple

functions Inconsistent processes and duplication of effort

Customs Management Luxemburg: Objectives


Customs Management Luxemburg: Solution Architecture

SAP NetWeaver 2004s

Business Process PlatformPublic Services

EnterpriseServices

PSCD

Tatis cmsSAP Application

Components

SAD Rules Taric

Customs AgentEconomic Operator

MCC UITatis UI SAP UI

Core NCTS

Web UI B2B Interface

BI

Websphere

Tuxedo

Arctic Engine

Rules Engine

Enterprise Portal Luxemburg Customs


Customs Management Luxemburg: Schedule

20d

Oct 06 14

Mar

07

Go L

ive Q

3/0

7

CO

E F

AT

Cycle

1

Now

Development + Integrate L

ux T

ests

In

tg.

Sol.

Tests

in

Lu

x

12

Ap

r 0

7Data clean / Data migration Take-on/Rollout

COE -FAT Fixes-SAP Stds-Lux CRs-Final tests

CO

E F

inal

Delivery

to L

ux

SAP Stds partially included

Integration test: SAP PSCD Arch. to Cpt – Feb-07Tests: SAP PSCD Func. to Cpt – Mar-07PSCD Integration & Tests done in Cape Town Final Qualification in Lux – Apr-07

SAP Standards completed

Milestones Review by Lux and SAP in Capetown

Deliver

to S

AP

12

May 0

7

Deliver all FunctionsFor Lux Phase 1

x mths

Deliver

to L

ux

30

Ap

r 0

7


Key Lessons Learned so far

Commercial off the Shelf provides open, secure, scalable solution for specific LoB like Tax & Customs Management

Tax & Customs Policy and Administration needs to consider lead time for implementation of new regimes (e.g. Multi Annual Strategic Plan in Europe)

Policy needs to provide clear guidance and governance

Business needs to be on board for modernization project– Lux Airport 2nd largest cargo airport in Europe

– Significant impact on Luxemburg Economy (Transit Country for CEE goods to the US market)

Strong alignment between development (enhancement) project and implementation project needed

A new and fully integrated solution requires top executive commitment for change management


Low compliance

Uncaptured revenue

Limited view of taxpayer


Agility to meet business and legal changes


Single revenue type limitations

Risk of non or low compliance

Uncaptured revenue/duty


Best Practice aligned (WCO, WTO)

Continuous Innovation to meet regulatory and business process

changes

No risk scoring capabilities, limited visibility into taxpayer total obligations and status, and inability to track or match documentation results in poorly targeted, incomplete audit coverage

Maximize revenue collection and trader compliance

Comprehensive Customs and Revenue Management Suite

No method for detecting and reducing fraud and non-filing, wrong or incorrect declaration

No single view of taxpayer or taxpayer’s total obligation, resulting in lost revenue and lower compliance

Business Practice Improvement needed IT can helpPain points specific

Reforming Tax & Revenue Management and Customs & Border Management

For each tax, fee, revenue and payment type, and for each step in the revenue lifecycle a separate system is required. These are often, silos, custom-built, “one-off”, or legacy in-house systems with outdated technology.

Outdated stovepipe systems using point to point integration aren’t prepared to meet changing business and legal requirements

Intervention by Exception – Risk Management

Limited channels of access hinders taxpayer interaction, causing low constituent satisfaction and negatively impacting compliance rates

Taxpayers have no ability to access accounts and make payments on-line

Based on an open, scalable, secure Business Process Platform

Multiple systems, processes and personnel for different revenue types, (fees, taxes, payments) causes redundant data capture

Worldwide 24x7 Support


Further Information

Internet

www.sap.com/industries/publicsector/

SAP Service Marketplace: www.service.sap.com

www.tatis.com

Contacts

Gonda Marcusse, [email protected], SAP AG

Michael Eads, [email protected] , TATIS

customs & border modernization, trade facilitation and technology markus a. werling, vice...

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