RECENT REGULATORY CHANGES AND THE BENEFITS OF AUTOMATIONNicholas Stipp, Director of Asia OperationsONESOURCE Global Trade, Thomson ReutersJanuary 15, 2015 – Ficient TCM Network
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AGENDA
• DEALING WITH REGULATORY CHANGES – OPPORTUNITIES AND CHALLENGES
• CHINA’S NEW AEO (AUTHORIZED EXPORT ORGANIZATION)• CHINA’S NEW FTAs (FREE TRADE AGREEMENTS)• PROCESSING TRADE CHANGES• ONESOURCE GLOBAL TRADE
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Classification Product Classification
Tariff / Tax Rates Tax Calculation Tax Declaration / Payment Tax Accounting
Correct Goods Declaration
License NeedCounterparty
License Generation
Duty Reduction/Exemption
Customs Regulations/
Systems
Correct Customs Declaration
REGULATIONS IMPLICATIONS
License Declaration
Commercial Agreements Tax Saving Certificates of
OriginCorrect Customs
Declaration
TRACKING REGULATIONS CAN BE CHALLENGING
Rules of Origin Duty Reduction
Reporting Per Systems
Requirements
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MANUAL ANALYSIS AND COMPLIANCE IS DIFFICULT
PurchasingBOM
Trade Personnel
SalesSupplier Documents
Complicated Internal Data Gathering
Complicated Research & Preparation Work
Rules, Rates,
Licenses, CoOs
Trade Personnel
CalculationGovernment Reporting/ Forms
• Data gathering can take months and is often out-of-date once collected• Once data gathered, searching, calculation, and license applications could take hours per shipment• Multi-sourcing locations makes it difficult to keep track of enterprise-wide compliance
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Lead time improvements with
accurate forecasting
Complete automation of trade and logistics
flows
Reduction of costs in logistics and financial areas
Tax Saving using Special Customs Programs & FTAs
Risk Management and Compliance
Process standardization across
sites and countries
On-line visibility and predictability
MANAGE RISK & COMPLIANCE
COSTSREDUCTIONS
ACCELERATION OF GLOBAL TRADE THROUGH AUTOMATION OF CUSTOMS COMPLIANCE
INCREASE PERFORMANCE
ACCELERATE YOUR GLOBAL SUPPLY CHAIN
Seamless ERP integration and data
flows
Lower cost footprint versus ERP-
customized solutions
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AGENDA
• DEALING WITH REGULATORY CHANGES – OPPORTUNITIES AND CHALLENGES
• CHINA’S NEW AEO (AUTHORIZED EXPORT ORGANIZATION)• CHINA’S NEW FTAs (FREE TRADE AGREEMENTS)• PROCESSING TRADE CHANGES• ONESOURCE GLOBAL TRADE
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AEO 2015 REVISIONS• Canceled the enterprise size, trade value, business life and other requirements• Simplified procedure for certification
– Delegating the authority from GACC to regional Customs– 90 days
• Released new AEO standard – ACE contains 18 categories and 32 items
• ERP & import/export system required – GCE contains 18 categories and 29 items
• ERP required• Established dynamic re-certification system
– ACE - every 3 years– GCE - spot checks for re-certification
Lower limitation
Simplified procedure
New AEO standard
Dynamic re-certify system
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Gov
. C
omm
.
AUTOMATION EXAMPLE - IMPORT SOLUTION FLOW
ERP
Impo
rtC
usto
ms
Bro
ker
Purchase Management
Purchase Management
Shipment Mgmt
Account Payables
Goods ReceiptImport Costs Control
Serv Providers / Gov Payments Goods Receipt
Import Entry Generation
Product and Partner Master
Product and Partner Master
GTM Master Data
Accounting
Partner Screening
Import Messages
Gov. Comm.
Supplier Invoicing
Import EntryMgmt
Customs Broker Comm.
Import License
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AGENDA
• DEALING WITH REGULATORY CHANGES – OPPORTUNITIES AND CHALLENGES
• CHINA’S NEW AEO (AUTHORIZED EXPORT ORGANIZATION)• CHINA’S NEW FTAs (FREE TRADE AGREEMENTS)• PROCESSING TRADE CHANGES• ONESOURCE GLOBAL TRADE
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CHINA’S NEW FREE TRADE AGREEMENTSCHINA-KOREA FTA
• Entry into force on December 20, 2015• China 92% of tariff lines zero duties within 20 years • Korea 93% of tariff lines zero duties within 20 years • Current trade volume: $ 235.4B (2014)• Major industries expected to be affected
• Korean Exports: Cosmetics, machinery, food & beverage• Chinese Exports: Agriculture, electrical appliances, clothing, shoes
• Special considerations• Origination rules (RVC,CTC…)• Direct transport• Exception for submit COO: customs value lower than $700• Aggressive enforcement of FTAs from Korean customs authorities
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CHINA’S NEW FREE TRADE AGREEMENTS
• Entry into force on December 20• China 96.8% of tariff lines zero duties within 15 years• Australia 100% of tariff lines zero duties within 5 years• Current trade volume: $136.9B (2014)• Major industries expected to benefit
• Australian Exports: Food (meat, dairy, wine, lobster, fruit), wool, energy, minerals• Chinese Exports: Textiles, leather products, electronics
• Special considerations• Origination rules (RVC, CTC…)• Direct transport• Exception for submit COO: customs value lower than RMB 6000 when China import
CHINA-AUSTRALIA FTA
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CHINA FTA AGREEMENTS IN PERMISSION
• China-ASEAN Upgrades• RCEP
– RCEP is the largest FTA for China. The smooth establishment of the RCEP is of great importance for China to integrate regional production networks and raise the position of global industrial value chain.
In 2013, the import and export volume between China and 15 RCEP members exceeded US$1.2 trillion, accounting for 30% of the total foreign trade in China.
– China is accelerating the process of RCEP negotiations, willing to work with other parties to conclude the prolonged negotiation of the RCEP by 2016
• Others (less soon)– FTA-AP, TPP, China-Korea-Japan,
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ARE THE NEW FTAs GOOD FOR ME?
Challenges:• FTAs are large, complicated documents• The origin rules are complicated• The tariff reduction schedules are complicated• Customs compliance is complicated
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Monitoring & Reporting
Issuing C/O
Origin Determination
SupplierDeclaration
Eligibility Analysis
PROCESS FLOW AUTOMATIONPreparation
• Vendor
Management• Supplier portal • COO registration
• Certificate of Origin self issuance according to regulatory requirements
• Link to auditability• Automated
application
• FTA utilization• Savings from FTA
use• Ineligible orders• Compliance
reporting
• Master Data Management
• ERP mapping• FTA information,
Rules of Origin, Buffer
• Solution configuration
• Origin determination by product and sales order level
• Confirmation at the shipment level
• Compliance with supplier checks
• Origin rules
validation• FTA savings
modeling• Simulation for
supply chain changes
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AGENDA
• DEALING WITH REGULATORY CHANGES – OPPORTUNITIES AND CHALLENGES
• CHINA’S NEW AEO (AUTHORIZED EXPORT ORGANIZATION)• CHINA’S NEW FTAs (FREE TRADE AGREEMENTS)• PROCESSING TRADE CHANGES• ONESOURCE GLOBAL TRADE
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PROCESSING TRADE CHANGESNovember 6, 2015, China customs issued guidance that departs from traditional customs’ administration filed unit consumption write-off, and provides for a “work order write-off” model for processing trade enterprises
• Inventory management at actual production levels rather than pre-planned
• May help eliminate inventory discrepancies of bonded materials and provide improved compliance practices of processing trade enterprises and reducing their implicit compliance cost
Benefits
• A general-credit enterprise (GCE) or higher
• Conducts information management during the whole process of procurement, production, inventory, and sales, etc., through ERP and other systems, can achieve the traceable management
Conditions
• Robust linkages from production ERP to a processing trade management system are required; this is next to impossible on a manual basis
• Velocity and variation of work orders creates many more transactions that must be reported and tracked
Challenges
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PROCESSING TRADE FLOW
Master Data
Production Work Orders
Inventory mgmt
Inventory Transaction (goods receipt)
Incoming goodsImports docs.
Incoming goods local Purchases docs.
Inventory Transaction (goods Issue)
Outgoing of goodsExports docs.
Outgoing of goodsLocal Sales docs.
Reports and Automatic
alerts
Control
Sub-Contract Work Orders
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AGENDA
• DEALING WITH REGULATORY CHANGES – OPPORTUNITIES AND CHALLENGES
• CHINA’S NEW AEO (AUTHORIZED EXPORT ORGANIZATION)• CHINA’S NEW FTAs (FREE TRADE AGREEMENTS)• PROCESSING TRADE CHANGES• ONESOURCE GLOBAL TRADE
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ONESOURCE GLOBAL TRADE OVERVIEWERP – Corporate system – INTEGRATED WITH MAJOR ERPs (SAP / ORACLE)
ONESOURCE GLOBAL TRADE
ContentClassificati
on Tool
CUSTOMS
SERVICE PROVIDER
Customs BrokerFreight
Forwarder
Others
KPIs Reports Accounting Expenses Control
Customs Documents
Systems
Inspections
EDI Links Taxes Calculation
Cost Estimation
Tariff / Taxes Rates
Regulations / News
License Needs
Follow Up
Tax Reduction / Exemption
Product Database
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A PART OF OUR BROADER ONESOURCE SUITE
GLOBAL TRADE
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AUTOMATE FOR COMPETITIVE ADVANTAGE• Automate documentation and submission• Outsource compliance updates• Standardize global processes
Have confidence in your compliance
Maximize duty savings
Sell based on reduced landed cost
Reduce costs and increase scope
• Eliminate manual processes• Gain visibility for your entire supply chain
• Automatically optimize• Simply introduce programs with complicated
qualification and compliance regimes
• Improve your competitive position based on your lower cost base
• Win the market!
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MORE INFORMATION
tax.tr.comNicholas Stipp (Singapore)Phone: +65.9178.8854 Email: [email protected]
Wang Jian (Shanghai)Phone: +86.139.1543.5190Email: [email protected]
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