export compliance management seminar 29 may 2012: automated trade compliance processes
DESCRIPTION
Bruno Fransman - Honeywell www.exportcompliancemanagement.comTRANSCRIPT
Automation and Control Solutions
Bruno Fransman
May 29th 2012
Automated Trade
Compliance processes
Introduction
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 issues
Compliance Teams Stretched to their Limits (March 13th, 2012 by Corporate Compliance Insights and Cost of Compliance Survey 2012 by Thomson Reuters ACCELUS)
• Large installed base
• Global reach
• > 2M ship to addresses
• 110 ERPs
• Sales: $15.5B • 70,000 Employees Profile
Strengths • Technology, leading brands
• Security, ECC, Life Safety
• 164 countries served
• 54 acquisitions since 2003
S&C
Speed and Position
Sensors
Pressure
Sensors
ECC
Thermostats
Gas
Valves
Water
Control
Building
Automation
HSG
CCTV/
DVR
Motion / Human
Presence Sensors
Control
Systems
HPS
Distributed
Control
Process
Controls
HBS
Buildings
Instant
Alert
HLS
ACS Today
Growth Focus
Fire/Smoke
Sensors
System
Panels
Gas Detection
36% 41%
Personal Protection
Scanning
&
Mobility
Industrial
Burners
HSM
Comprised of 93 Supply Chains, 118 Plants, 93 DC’s, 9 Integration Centers
Mobile Computing
Voice Picking
Personal Satellite
tracking
Military Sensors
219 Global Locations Distributing Product
118 Factories - 93 DC’s - 9 Integration Centers
Background
Distribution Footprint
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.
Ensuring Compliance with International Trade Rules • Standardized Internal Controls
• HS and ECCN Classification
• 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
Mitigating Risk of Non-compliance Government Inquiries and Audits
Government Disclosures
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
Enabling Growth •Export De-control and Licensing
•Customer Duty Preference Request
•Transaction Structuring and Approvals
•Regulatory Advice, Advocacy, and Rulings
Enabling Growth and Increasing Productivity from a Foundation of Compliance
ACS Trade Service Offerings
Team Vision: A collaborative ensemble of
professionals partnering with
Honeywell colleagues to efficiently
transact business across national
borders as advantageously as
possible for Honeywell, our
customers, and our suppliers while
obeying international trade rules.
Objective Build a global compliance
infrastructure; enable rapid trade
problem-solving; continuously
improve cross-border productivity
and operations; and eliminate
regulatory barriers to growth.
TRADE MASTER DATA MANAGEMENT
• HS and ECCN Classification
• Net weight
• Origins
CUSTOMS BROKER
MANGEMENT
• Control entries
• Measure Brokers
• Assure compliance
• Maximize duty savings
AUTHORIZED ECONOMIC
OPERATOR CERTIFICATION
• Faster border crossings
• Smoother customs operations
Driving to meet EU requirements
Components of Honeywell EU Trade Strategy
WRITTEN PROCEDURES
• Written procedures
• Develop training
• Establish accountabilities
Automated Trade
• Trade documents
• E-Filing
• Preference calculation
• De-minimis calculation
• Export control
• ….
CENTRALIZED
CUSTOMS
• Optimized trade
operations
Introduction
Automated Trade solutions
CP/S Modell for EU TRADE Solution
Master Data
Freight
Forwarder
Integration
Freight cost
calculation
Automated
Customs
Export
Documents
Delivery
creation Picking Packing Order entry Shipping
Automation and Control Solutions
Web-Order
EDI-Order
LINK-Order
G
G = GLOBAL used
Partners
Transaction
Screening
Freight Audit
& Payment EU PCT
Caclulation G
Other
SAP + Roles and Content from external source
Automated Tool
SAP
SAP GDM Trade Compliance and Solutions
SAP CP/S
XI - Gateway
Automated
Systems Specific Automated
Trade Solutions at
EU sites
Global DPL Screening EU Export Documents
ECCN Shipping License
NAFTA Calculation,,
Shipping docs , …..
EU Electronic -Customs
EU DG Documents
NA
TRADE
Docs
EU Preference Calculation
+ docs
Pref Calc.
De-minimus.
Export Documents
Landed cost calculation
ACS Intranet Trade
solutions
ACS Intranet solutions
14 HONEYWELL - CONFIDENTIAL File Number
Customs Issue Log
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Metrics Web Tool
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AEO
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
Automated Customs
Solutions
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• 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)
Electronic customs filing
Proof of Origin
Vendor Vendor
?
Proof of Origin
documentation
•Declaration of Origin on the Invoice or Packing list •European docs: EUR1, A.TR
•Long Term Declaration (LTD)
Automated Preferential Process Flow in FTA - (exporting plant point of view)
Customer Customer
Look up missing/expired VDs
Dunning/Solicitation
• Fax, E-mail •Printing •Portal
Get VD
Vendor Declaration Management
Business Task 1 Business Task 3
E3
S1 S2 S3
C11 C21 C31
E1 E2 E4 E5
………………….
BOM Sales Product XYZ
C12 C22 C32
Business Task 2
MX ? EU CN
Preference Calculation
?
…
?
Legal Rules of Origin
for Preference Calculation
Shipping
Plant
Automated Export Control
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 profile
Export Control Function: Gold Silver Bronze
Restricted party screening via Automated Tool with soft alerts
Restricted party screening via Automated Tool with hard blocks
SAP Embargo controls with hard Blocks
SAP Embargo controls on returns with hard blocks
Foreign trade data missing with hard blocks (ECCN, HTS or COO)
Missing end user or end use results in hard blocks
Automated Tool license determination with hard blocks
Automated Tool license management and decrementing
SAP license determination with hard blocks
SAP license management and decrementing
Material master fields for ECCN, HTS and COO
SAP or automated export tool docs (C/I and SLI)
Sensitive country analysis - Origin Qualify Honeywell for sales by verifying non-US content
Automation improves visibility on flows and costs and increases compliance level and generates savings and realizes growth
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!
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
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• 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 to
level of components
Lessons learned
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• 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 automation
Benefits
Non Productivity vs. Productivity – Conclusions
Year Import Value Duty Spend Duty Saved Duty Avoided per $1 Import Value
Actual Duty Ratio
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%
ACS would incur $110M in Annual Duty Costs If It had No Global Duty Avoidance Program
ACS Duty Spend is $51M Annually Because of its 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%
46% Reduction in Duty Liability achieved through our Duty Avoidance Mechanism
0
5
10
15
20
25
30
US MX CN CA GB IN DE Other
Mill
ion
s
Duties paid in USD
2011 Productivity
Import Volumes in USD
Duty Rates in USD Duty Savings in USD
Country Import Value
US 1,554,275,102
MX 686,677,631
CN 402,811,856
CA 248,372,627
GB 140,055,300
IN 122,098,503
DE 75,202,161
Other 245,153,296
TOTAL 3,474,646,476
Country Duty Paid
US 25,258,564
MX 584,716
CN 4,352,089
CA 2,756,762
GB 4,452,195
IN 13,085,576
DE 426,402
Other 8,891,323
TOTAL 59,807,627
Country Import Value Duty Paid Duty %
US 1,554,275,102 25,258,564 1.63%
MX 686,677,631 584,716 0.09%
CN 402,811,856 4,352,089 1.08%
CA 248,372,627 2,756,762 1.11%
GB 140,055,300 4,452,195 3.18%
IN 122,098,503 13,085,576 10.72%
DE 75,202,161 426,402 0.57%
TOTAL 3,474,646,476 59,807,627 1.72%
Top Importing Countries
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%
Country Savings
US 15,383,204
MX 10,910,333
CN 9,254,410
CA 1,491,493
GB 1,640,856
IN 10,358,852
DE 855,381
Other 803,620
TOTAL 50,689,151
Program Duty Savings
Processing 19,069,415
NAFTA 17,317,626
Duty Drawback 8,814,864
FTZ/Bond 2,081,102
Other FTA/GSP 1,672,972
HTS 285,373
EU Charlton House 280,125
Other 179,680
TOTAL 50,698,151
42%
1%
7%
5% 7%
22%
15%
Highest Duty Rate %
45%
20%
12%
7%
4%3%
2%
7%
US MX CN CA GB IN DE Other
1%
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• 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 tools
Next Steps – wish list
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Any Questions?
We’ll always try to answer and support the business but answer can be dependent from
support of others
Bruno Fransman
Global Customs Compliance Director
+32 2 728 20 38
Thank you for your attention.