SAP GRC Global Trade Services includes functionality called Preference Processing, which helps you maintain customs priorities within your system and eases your exporting operations. It allows you to separate countries with which you have trade agreements from banned countries, as well as preferred countries based on importing and exporting tax rates.

In a previous article, I walked you through configuration steps to set up communication between your SAP ERP Central Component (SAP ECC) and SAP GRC Global Trade Services systems, as well as some Risk Management settings within SAP GRC Global Trade Services.

In this article, I take you through the loading and processing of master data within SAP GRC Global Trade Services Risk Management to the processing and printing of vendor declarations. You perform the first steps within SAP ECC, while the majority of the steps take place within SAP GRC Global Trade Services.

SAP ECC Process

Step 1. Load initial and ongoing master data. You need to load the master data that is required for processing Risk Management transactions from SAP ECC to SAP GRC Global Trade Services:

• Materials
• Bills of material (BOMs)
• Vendors
• Customers

You can perform the initial load by using transaction /n/SAPSLL/MENU_LEGALR3, clicking the Master Data tab, and then going to the Initial Transfer of Master Data to SAP GTS section (Figure 1).

Figure 1

Initial and ongoing transfer of master data from SAP ECC to SAP GRC Global Trade Services

After you finish the initial transfer, you need to set up the change pointers to recognize any new records and changes to the existing records. A change pointer is a function used by the SAP system that captures changes to the master data record or any new record addition into the master data. The change pointer uses the message type (i.e., master data template) to capture the information in which the target system is interested. With the help of Application Linking and Enabling (ALE), the system transfers the data. You can set up change pointers under the Basic Settings tab in the screen in Figure 1. First you check the box for global activation. Then you need to activate the change pointer for the following message types:

• Material Master Message Type: /SAPSLL/MATMAS_SLL
• Customer Master Message Type: /SAPSLL/DEBMAS_SLL
• Vendor Master Message Type: /SAPSLL/CREMAS_SLL
• Address Master Type: /SAPSLL/ADRMAS_SLL
• Change Pointers for Product BOM: /SAPSLL/BOMMAT_SLL
• Change Pointer for Product Price: /SAPSLL/PRCMAT_SLL
• Change Pointers for Procurement and Sales: /SAPSLL/PSDMAT_SLL

By activating the message types, the system captures the new records or changes to existing records and allows you to transfer them to SAP GRC Global Trade Services.

Step 2. Transfer master data from SAP ECC to Risk Management. You should consider five master transfers to Risk Management, including three that are mandatory and two that are optional.

• Determine procurement indicator (must). The procurement indicator allows you to decide if you want to request the vendor declaration and use preference calculation based on a part being made internally or procured externally.
• Perform material price transfer (must). The material price helps in performing the calculation for the threshold value for preference calculation. If the price of the part exceeds the threshold, then the higher-valued part might influence the preference determination.
• Transfer BOM (must). The structure of the BOM influences how the final product is determined. In other words, one of the component characteristics might change the final product's characteristics (e.g., country of origin, tariff), so this BOM structure is key in determining the preference.
• Obtain the vendor's material number and description (company-specific scenario). The vendor material number allows you to map the number or name with your material number for identification.
• Obtain the customer's material number and description (company-specific scenario). The customer material number allows you to map the number or name with your material number for identification.

The procurement indicators are in-house or sourced from a vendor, which helps in the preferential determination. The value or price of the part is used for the preferential determination and calculation of the threshold. The part number you have known within SAP ECC might have a different name or identification with your customer or vendor and this transfer can provide you that information for the purposes of reporting. You can find this transaction under the SAP Risk Management section of the Master Data tab in Figure 1.

SAP GRC Global Trade Services Cockpit Process

Step 3. Review errors in transfer. You can validate the transfer for the procurement indicator, BOM, and material prices for any errors during the transfer process. Within the SAP GRC Global Trade Services area menu, click on Preference Processing - Master Data. This displays if there were any errors in the transfer of the material price, BOM, and procurement indicator. Similarly, you can review the log for the transfer of business partners under Systems Monitoring.

Step 4. Assign the commodity code via the worklist. The commodity code is necessary for material identity within Preference Processing. You use this material classification to identify the proper North American Free Trade Agreement (NAFTA) rule of origin and therefore determine the preference status of finished goods. To do so, follow menu path SAP Global Trade Services ? SAP Customs Management – Classification ? Classification with Commodity Code ? Classify Products via Worklist and then click the execute icon. Then you need to assign the appropriate commodity code to the product. Select the product (e.g., US Schedule B Commodity Export/Dispatch) (Figure 2) and click the classify multiple products icon (Figure 3). A pop-up window appears. From the drop-down list in the Tariff Number field, select the commodity code.

Figure 2

Select the commodity code

Figure 3

Assign the commodity code to the product

Step 5. Display the worklist for vendor declaration. As soon as a purchase order or goods receipt document is created, the SAP GRC Global Trade Services system creates a worklist for vendor declarations. The worklist is the basis for the vendor declaration request. Within the SAP GRC Global Trade Services area menu, follow menu path Preference Processing ? NAFTA Display ? Worklist for Vendor Declaration (Figure 4). Enter the administrative unit in the Administr. Unit field and the vendor number in the Business Partner Number field.

Figure 4

Worklist for vendor declaration display

Step 6. Request the vendor declaration. A vendor declaration must exist before a good can be eligible for preferential treatment. If there is no vendor declaration for a good, that good is always deemed to be a non-originating good. For this reason, you need to request vendor declarations from your vendors and send a reminder if a vendor does not send you a vendor declaration in time.

Use transaction /SAPSLL/PREVDI_03 or follow menu path SAP Global Trade Services ? Preference Processing ? Request Vendor Declaration (Figure 5).

Figure 5

Request the vendor declaration

You need to enter the Administrative Unit, the Business Partner Number, and the Validity Period. Select Print preview and Simulation Run if you want to preview the results. Otherwise, leave Simulation Run unchecked and check Create Log for updating. If you check the Request Initial LTVD check box, the system sends the request to the vendor. The worklist is based on existing purchase orders and goods receipts in the feeder system. Long-term vendor declarations that already exist are not taken into account.

You can request long-term vendor declarations from your vendors for each administrative unit and for a specified period of time. The system prints these requests for long-term vendor declarations based on the selection criteria you enter.

You can limit the number of requests that are printed by entering the following parameters:

• Preference agreements
• Business partner number of the vendor
• Product number

Figure 6 displays the different transactions, functions, and features within NAFTA preference processing. You can reach it by going to the SAP GRC Global Trade Services cockpit (transaction /SAPSLL/MENU_LEGAL), clicking Preference Processing, and selecting the NAFTA tab.

Figure 6

NAFTA long-term vendor declaration and other functions

In Figure 6, you can also see the Dun Vendor Declaration function in the Vendor-Based Long-Term Vendor Declaration section. If you do not receive the long-term vendor declaration you requested from your vendor within an appropriate period of time, you can dun the vendor declaration in a number of steps.

You need to enter the same selection criteria as Request Vendor Declaration to generate the request. Depending on the dunning level (>0), the system searches requested vendor declarations that have not yet been maintained. It prints these requests for long-term vendor declarations based on the selection criteria you enter.

Step 7. Maintain the vendor declarations in SAP GRC Global Trade Services. You need to manage and archive the vendor declarations that you receive from your vendors. If your organization is subject to an audit by the authorities, you have to show the vendor declarations to the relevant authorities.

Long-term vendor declaration management maintenance involves determining the range of data and maintaining the indicators for each agreement. If a product is only partly qualified for preference, the vendor can provide a detailed negative vendor declaration. Therein the vendor quotes the number of the unqualified parts of the delivered product to the benefit of the preferential status. This could be the starting point for multiple vendor declaration maintenance.

You can also extend a long-term vendor declaration. If you have unprocessed goods from a vendor in stock and the validity of the long-term vendor declaration has expired, the vendor-material relationship is considered inactive. You can reactivate this relationship by extending the existing long-term vendor declaration.

You need to enter the vendor-based long-term vendor declarations that are received by your organization in SAP Risk Management Preference Processing (Figure 7). You have five options:

1. Maintain a long-term vendor declaration
2. Enter a vendor declaration for each administrative unit
3. Maintain multiple long-term declarations
4. Maintain for multiple administrative units at once, provided that the administrative units belong to a group of logical systems
5. Extend a long-term vendor declaration

Figure 7

Maintain long-term vendor declaration

These are some features and functionality that allow you to manage the vendor declarations. These features allow you to manage and process multiple vendor declarations.

Step 8. Aggregate vendor declarations. If there are several vendor declarations for the same material, use the aggregation process to specify which declaration should be used for determining preferential origin. The system uses the worst-case declaration (that is, the least favorable vendor declaration for determining preferential origin) as default for reporting to customs.

Long-term vendor declaration management aggregation is based on the administrative unit, product, preference agreement, and preference model. It also maintains the log of the aggregated vendor declarations and uses the worst-case declaration, if several vendor declarations exist for one material.

Run transaction /SAPSLL/PREVDI_15 and click Aggregate Vendor Declaration under the Administration section shown in the screen in Figure 6. This produces the screen shown in Figure 8.

Figure 8

Vendor declaration aggregations

When you run the report shown in Figure 8, it pulls the material with multiple vendor declarations. The output generates a report of vendor declarations. Select the one in which you are interested and click the Save and Aggregate LTVDs button (Figure 9).

Figure 9

Maintain long term vendor declarations

Step 9. Calculate the threshold value for determining preferential origin. This calculation is based on preference rules that you can define yourself or obtain from third-party data providers. You can store fundamental rules relating to a preferential agreement (e.g., a general tolerance rule, a minimum processing rule, or a set of goods rule).

You can enter preference rules manually or upload them from a data provider. The system displays an overview of all the preference rules for each preference agreement and lists the countries to which each agreement applies. The preference zones consist of the NAFTA countries and the country group belonging to the agreement. The preference rules consist of the commodity codes, standard rule, alternative rule, and the validity period.

Figure 10

Preference determinations for aggregated vendor declarations

You can perform preference determination by selecting the NAFTA tab from the screen shown in Figure 6 and clicking Perform Preference Determination under the Preference Determination section. In the Header data, enter the relevant data. Select the preference model from plant-based preference determination or cross-plant preference determination. The model selection depends on how you source from the product (i.e., if it is sourced from multiple plants, then the cross-plant model applies). In the model view, enter the plants, depending on the model and the plant group. In the parameter view, other entries are optional, except the BOM view for determining the BOM explosion. For this, you either need to enter T for a top-down method or B for a bottom-up method. For top-down, only primary material is relevant and assemblies are not taken into account. For bottom-up, the system determines each assembly and stores the results in the product master.

The system stores the results of the determination in the customs product master. The Cross-Plant Preference Model shown in the screen in Figure 10 enables preferential result optimization in the case of distribution production and mixed reference. The processing of the procurement information follows a two-stage approach, which results in an optimized preference statement compared to the individual determination for each plant.

In the preference determination function, you determine whether products are sourced from multiple vendors or countries of origin. Those manufactured in-house are authorized for preferential customs duty. First, you execute the preference determination for each BOM alternative per plant defined in your company. Then the system aggregates the results on plant level. If you're determining preference on plant group level, the plant level results are then aggregated to get the result per product and plant group.

Step 10. Evaluate preference results. You use the results of preference determination in the sales documents (e.g., orders and billing documents) to determine eligibility for preferential treatment. You can compare the threshold value (e.g., preference price) with the ex-works price (i.e., the price of the product to be delivered until it reaches the buyer's door) of the material. If the ex-works price is greater than or equal to the preference price, the product is eligible for preferential treatment. If the ex-works price is lower than the preference price, the product is not eligible for preferential treatment.

The determination of preference eligibility in SAP GRC Global Trade Services happens by comparing the preference price of the material with its ex-works price (Figure 11). Depending on the result, SAP GRC Global Trade Services flags the product as eligible or ineligible. To reach the screen in Figure 11, from the NAFTA tab in Figure 6, click Display Preference Result by Document under the Preference Determination section.

Figure 11

Preferential determination assigned to document

Step 11. Print preference documents. You use movement certificates as proof that a product is eligible for preferential treatment when it passes through customs. Within the EU, for example, you need movement certificates for goods traded with countries with which the EU has concluded free trade agreements, preferential agreements, or cooperation agreements. You also use movement certificates for states that are associated with the EU (e.g., developing countries, South Africa, Mexico). You can perform this task by clicking Display Vendor Declaration in the Monitoring section of Figure 6 (Figure 12).

Figure 12

Monitor long-term vendor declarations for customer's purpose

SAP GRC Global Trade Services can take a billing document as a basis for printing out movement certificates that you can present to customs authorities.

Step 12. Issue vendor declarations. Vendor declarations for customer purposes are the final link in the vendor declaration loop. The company itself assumes the role of the vendor and makes a vendor declaration available to its customer. SAP GRC Global Trade Services offers an option of generating a vendor declaration per customer, product, and agreement. Under the Administrative section of the screen in Figure 6, click on Issue Vendor Declaration (Figure 13).

Figure 13

Issue long-term vendor declarations for customers

When issuing the vendor declarations for the customer's purposes, you need to enter the validity period, partner number, product number, printer control, and additional options. You can issue long-term vendor declarations for customers provided that the aggregation results and preference determination results for the delivered goods indicate that the customer can obtain such a vendor declaration.

You can use this function to issue long-term vendor declarations for a specific administrative unit and a defined period of time as well as to enter additional details. The assignment of external product and partner numbers from the feeder system helps you communicate with other user departments because you can use these numbers when responding to inquiries from other departments about the partners or products for which vendor declarations have been issued.

Rajen Iyer

Rajen Iyer is the cofounder and CTO at Krypt, Inc. Rajen has written several in-depth, best practice articles, white papers, patents, and best-selling books on SAP Logistics and SAP Global Trade Services, including Effective SAP SD and Implementing SAP BusinessObjects Global Trade Services. He is also an invited speaker at industry conferences.

You may contact the author at Rajen@kryptinc.com.

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