Why SAP GTS?
Meet the Experts
⇨ As businesses expand and offer their products worldwide, trade compliance has become more crucial than ever.
⇨ The complexities of global trade, the need for accurate documentation, and an efficient process requires businesses conducting international trade to utilize a global trade management system.
⇨ SAP Global Trade Services (GTS) is SAP’s solution for managing the complex trade compliance requirements
How SAP’s Global Trade Services Can Benefit Your Company?
As businesses expand and offer their products worldwide, trade compliance has become more crucial than ever. At the same time, international trade regulations are becoming more complex as countries formulate stricter regulations. For example, civil penalties for violating trade regulations in the U.S. go up to $1 million, 20 years of imprisonment, and additional administrative penalties of up to $250K per transaction.
Global Trade Complexities
Gone are the days when companies could manage their global trade with a spreadsheet or manual methods. Today, trade compliance requires a standalone system that can manage its complexities and load. A good example of such a complexity revolves around the Denied Party Lists that companies need to monitor continuously. These lists comprise the names of individuals, organizations, and entities with whom it is forbidden to do business, in whole or in part.
The lists are maintained and published by governments and international bodies worldwide and are constantly updated to reflect entities that have committed national security or trade law violations. Companies engaging in businesses with the barred entities on these lists are liable for violation penalties and bad press.
A second complexity of global trade is the application of free trade agreements like USMCA (US, Mexico, Canada Free Trade Agreement) or CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). Free trade agreements allow the duty-free import of items from certain countries. These agreements contain Rules of Origin based on product classifications. Manually determining preferences on a product is difficult and, in most cases, impossible. By qualifying products for free trade agreements, companies can benefit from significant import duty savings. Free trade agreements and the Denied Party List are two of the many complex components of trade compliance. Other complexities relate to Foreign Trade Zones and Bonded Warehouses, among others.
Businesses need to equip themselves with systems and solutions to address and navigate complex global trade compliance rules and requirements accurately and efficiently. The complexities of global trade, the need for accurate documentation, and an efficient process requires businesses conducting international trade to utilize a global trade management system.
To maximize efficiency, a global trade system solution should interface with the ERP system to allow the passing of applicable trade data, precluding, and reentering the data. It should also allow electronic communication with outside agencies like customs and brokers.
In 2001, SAP released SAP Global Trade Services (GTS). Prior to the release, the Foreign Trade Module managed the Foreign Trade Requirements in SAP systems. GTS was SAP’s solution for managing the complex trade compliance requirements. SAP GTS has evolved through the years into a world-class trade compliance system, and the latest release is GTS E4H or GTS Edition for HANA. It runs on a HANA database and uses FIORI tiles to enhance the user experience. GTS comprises three modules:
- compliance management
- customs management
- risk management
Each of these modules holds functionalities that enhance a company’s trade compliance program.
The Compliance Module functionality keeps a company out of trouble with the government agencies. There are three components to the Compliance Module and are mentioned below.
Sanctioned Party List Screening
The Sanctioned Party List Screening screens the business partners and business documents (Sales Orders, Deliveries, and Purchase Orders) against the Denied Party List loaded in the system. This screening is enhanced by the HANA screening. SAP GTS uses a screening algorithm that takes configured parameters and compares the names and addresses of business partners against the names and addresses of the denied parties.
Users can then review the outcome of this screening to determine if it is a true hit or a false positive. To clear a false positive, the user can be required to enter the reasons for them to release the business partner or document. There is also an audit function that provides a history of the screening of a business partner or document, which helps facilitate an audit of the Business Partner or Document.
Embargoes can be screened either at the country level or the country-to-country level. The country level prohibits any shipment to and from that country systemwide. The country-to-country level prohibits the shipment from a certain country to a certain country.
Legal Control (Application of Import and Export License)
In this module, import and export licenses can be entered and can be attached to the applicable Sales Document, Purchase Order, or Delivery automatically or manually. If there is not an applicable license, the system will block the document from downstream processing. GTS allows the creation and application of exemptions and exceptions to the other documents as well. The compliance module within SAP GTS allows a company to be proactive and reduce the risk of violating trade compliance regulations.
Customs Management is the second module of SAP GTS. The Customs Management Module provides efficiency and accuracy to a company’s export and import process. Within this module, a user can produce documentation for importing or exporting products. Information is electronically passed from the Feeder System to the SAP GTS system. Additional information can either be defaulted in or entered manually by users.
The system applies a completeness check to ensure that all required information is in the system. Companies can file the import or export declarations electronically with the customs office of the applicable country, send the information electronically to a broker for them to file, and produce the required paperwork for the cross-border transaction.
Within the customs module, there is functionality that facilitates Foreign Trade Zone and Bonded Warehouse Management. These tools help defer, reduce, or eliminate the duties required upon importing a product. SAP GTS Customs Module facilitates an efficient and accurate filing of customs documents and saves a company money.
Risk Management is the third and final module of SAP GTS. Risk Management consists of preference determination functionality or, in other words, the functionality for free trade agreements Management. Free trade agreements between countries reduce the duties paid on imported goods. To run this functionality, users must either manually load rules of origin or purchase the electronic rules of origin from a third-party provider.
Because the rules of origin can be complex, it is preferable to purchase from a third-party provider. The preference determination functionality aids the users in soliciting a vendor declaration from their suppliers, performing the calculations to determine if a product qualifies for a free trade agreement, and sending out certificates to the company’s customers. This simplifies the preference determination process and allows companies to implement multiple free trade agreements with different Rules of Origin.
The system stores detailed analysis to prove that products are either qualified or not qualified. Companies can also see why their products do not qualify and make changes to their supply chain to qualify their products. This functionality also results in reduced duties.
SAP GTS modules simplify the global trade compliance processes to a large extent. This simplification results in efficiency through a standardized process, cost savings due to avoidance of fines and reduction in trade cost, and accuracy of filed documents. SAP’s Global Trade Services enables companies to clear the hurdles presented by the complex and rapidly evolving trade compliance environment.
SAP GTS and Sustainability
SAP Global Trade Services allows a company to create sustainable trade compliance programs. Sustainability is crucial not only in the world of trade compliance but also to businesses. Sustainability comprises three components: Climate Action Solutions, Circular Economy Solutions, and Social Responsibility Solutions.
Based on these, SAP GTS can contribute to sustainability in the following ways:
First, SAP GTS helps with Circular Economy solutions by creating sustainable compliance programs. These sustainable compliance programs eliminate waste by making the process more efficient, which allows more time for overseeing processes. The system allows for the creation and storage of electronic documents which reduces paper documentation.
Second, SAP GTS aids social responsibility. Using the Sanctioned Party List, companies can ensure that they are not buying from or selling to entities that are not socially responsible. This allows companies to block all documents from entities that do not maintain a proper work environment or block countries that have engaged in human rights violations. This GTS functionality can be used with other SAP components such as SAP Environment, Health, and Safety Management to create socially responsible solutions within a company.
SAP’s Global Trade Services is a solution that helps companies simplify the complexities of international trade. Through GTS functionalities, companies can simplify their global trade processes, mitigate risk involved with trade compliance violations, reduce cost through efficient processes, reduce import duties, and aid a company’s sustainability efforts. With GTS, organizations can steer their way through the complex and difficult world of international trade.