tpp preparation - automation for analysis and compliance

TPP PREPARATION – AUTOMATION FOR ANALYSIS AND COMPLIANCENicholas Stipp, Director of Asia OperationsONESOURCE Global Trade, Thomson ReutersNovember 25, 2015

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AGENDA

• OPPORTUNITIES & CHALLENGES• US FTA COMPLIANCE OVERVIEW & CASE STUDIES• AUTOMATION TO ENABLE PREPARATION & ONGOING

COMPLIANCE

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OPPORTUNITIES

• Duty free access to previously restricted markets– 98% of tariff lines– Most on entry-into-force– Some substantial reductions (including high-duty countries like Vietnam)

• Common rules of origin across all TPP member countries– Accumulation rules across all TPP member countries

• Common paperwork for all TPP destinations

SIGNIFICANT GAINS IN COMPETITIVE ADVANTAGE VS. NON-TPP COUNTRIES

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IS TPP GOOD FOR ME?

Challenges:• It’s a BIG document• The origin rules are complicated• The tariff reduction schedules are complicated• Overlapping agreements• Customs compliance is complicated

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2,707 pages

149 MB

30 chapters

4x12 annexes56 related instruments

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COMPLICATED RULES OF ORIGIN

RVC?

FVNM?

CTC?

CTH?

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COMPLICATED TARIFF REDUCTION RULES

EIF? B10? US15?

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COMPLIANCE IS COMPLICATED• Prepare supporting documentation from TPP suppliers• Produce compliant CoOs (format is not defined, but

guidelines are there)

• Importers & exporters are permitted to issue• Printing is easy; sufficient documentation and diligence

is challenging• Your government will not pre-check anymore

• US (and other aggressive regimes) can come to both importers, exporters and their suppliers

• Authorities can request any time• You are the first line of verification, not your government

• 5 years from CoO date of issue

Accumulation Rules

Self Issuance of CoOs

Direct Verification

Record Keeping

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OVERLAPPING AGREEMENTS

Mexico

Canada

NAFTASource: Jakarta Post with Amendments

• TPP may not be better than existing agreements

• In some cases, covers fewer tariff lines

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AGENDA


COMPLIANCE

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US FTAs – WHAT CAN THEY TELL US FOR TPP

• Singapore-US FTA since 2003• NAFTA since 1993• Establishes norms for operations

– Complicated and extensive requirements for compliance

– Aggressive origin verification and direct audit

– Large penalties

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US IS AGGRESSIVE AND LEADS THE WAY• Demonstrated aggressive approaches to origin

verification across all FTAs• Generally does not provide time extensions to

resolve & provide, as these determinations should have been made before importation

• Failure to respond more detailed investigation and potential penalties

• All TPP Country Customs Organizations have revenue at risk which drives more aggressive compliance

– Korea has now become one of the most aggressive regimes in Asia following KORUS FTA

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CASES…. NAFTA - DOUBLE the loss or gain from the violations for false origin claims

Most settlements are confidential• Large Japanese Ink Company

– $45M settlement for a combination of false origin and anti-dumping violations

• Major US Automaker– Long legal battle with CBP seeking $42M in damages for

insufficient documentation ; eventually settled..but the legal fees…

• Major Electronics Manufacturer– $10M settlement for false origin claim (originally assessed

>$20M fine)

• Even in ASEAN-India – major electronics companies claiming Malaysian origin with no basis

• Singapore can lock you up! US has too….

$45M

$42M

$10M

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AGENDA


COMPLIANCE

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MANUAL ANALYSIS AND COMPLIANCE IS DIFFICULT

PurchasingBOM

FTA Personnel

SalesSupplier Documents

Complicated Internal Data Gathering

Complicated Research & Preparation Work

Rates, Country Differences

Product- Specific Origin Rules

FTA Personnel

CalculationCoO Self-Issuance

• Data gathering can take months and is often out-of-date once collected• Once data gathered, searching, calculation and CoO issuance could take hours per product• Multi-sourcing locations make verification complicated on a shipment-by-shipment basis

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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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MAPPING YOUR DATA SOURCES Monitoring &

ReportingIssuing

C/O Origin

DeterminationSupplier

DeclarationEligibility AnalysisPreparation

Directly interface with major ERPs as well as legacy system to extract correct data for further calculation.

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ANALYZING CURRENT ITEMS FOR ELIBILITY Monitoring &

ReportingIssuing

C/O Origin



Easily identify FTAs where you currently qualify and where you are close; multiple rules per FTA

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INDIVIDUAL ITEM CONSIDERATIONS Monitoring &

ReportingIssuing

C/O Origin



Single item drill down for shipment level compliance and identification of critical suppliers

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FOCUSED VALUE?Build-Down (BD40) origin determination

Description Material Origin status HS Code Value

Cost of Materials Used

A Origin 8452.50 10

B Non-Origin 8708.99 10

C Non-Origin 8708.99 10

D Non-Origin 8452.60 10

E Non-Origin 8302.30 10

F Non-Origin 8708.99 10

G Non-Origin 8708.99 10

H Non-Origin 8452.70 10

Sales Price (at FOB) with HS Code of 8452.40 100

Focused Value method (FVM50) origin determination

1) Under BD40, the product concerned does not qualify for BD40. Sales Value (100)- VNM (70)/ Sales Value (100)= 30%2) However, under FVM, the product concerned does qualify for FVM. Sales Value (100)- FVNM (20)/ Sales Value (100)= 80% FVM can sometimes definitely help to benefit under TPP In order to take advantage of the rule, the company must manage per HS Code wise list of FVNMs to properly determine the

origin of the product under FVM.

Description Material Origin status HS Code Focused Value

Cost of Materials Used

A Origin 8452.50 Y 10

B Non-Origin 8708.99 N 10

C Non-Origin 8708.99 N 10

D Non-Origin 8452.60 Y 10

E Non-Origin 8302.30 N 10

F Origin 8708.99 N 10

G Non-Origin 8708.99 N 10

H Non-Origin 8452.70 Y 10

Sales Price (at FOB) with HS Code of 8452.40 100

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AUTOMATE FOR COMPETITIVE ADVANTAGE• Prepare supporting documentation• Get ready for CoO issuance

• Identify new suppliers within TPP• Consider new locations for expansion• Ensure they meet origin rules• Prepare documentation

• Many overlap, seek the benefits today

• For importers, costs will drop• Exploit your advantage versus less-prepared

competitors

Be ready day 1

Make supply chain decisions now

Maximize FTA utilization before TPP

Once ratified, sell based on reduced landed cost

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MORE INFORMATION

tax.tr.comNicholas StippPhone: +65.9178.8854 Email: [email protected]

tpp preparation - automation for analysis and compliance

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