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SAP GTS - US Reexport Controls

Introduction: The U.S Department of Commerce regulates exports and re-exports of "dual-use" items through EAR (Export Administrative Regulations). If any controlled product is of U.S origin or in anyway connected with U.S then even if it's shipped anywhere from outside the U.S to any other countries, it should be compliant with EAR and require a license from the U.S BIS (Bureau of Industry and Security). When a foreign-based company imports products or components from the U.S and uses them in its production, and then exports the produced materials to another country, the process is known as U.S. Re-export and is subject to U.S. regulations.  Firstly, we need to determine if any foreign-produced materials that contains the U.S origin components are subject to EAR or exempted based on the de-minimis exception. Here the ultimate destination countries are classified as "Non-Critical / Friendly Countries" and...
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Partial Embargo based on Region

Embargo:

  • Embargo Compliance Screening  is mainly used for screening the business partner countries used in the import/export transaction.
  • Business partners are screened to make sure the company is not doing business with any embargo nations as listed by the United Nations / under any sanctions.
  • We can maintain full embargo / partial embargo situations in SAP GTS.
  • In outbound transactions (export) we can screen the partner functions like sold-to-party, ship-to-party, bill-to-party, payer, End user/Ultimate consignee, contact persons, Freight forwarders/Carriers and any client-specific partner functions on the sales order / Outbound delivery / Customs export declaration.
  • In Inbound transactions (import) we can screen the partner functions like vendor, Goods supplier, Freight forwarders/Carriers and any client-specific partner functions on the Purchase order / Inbound delivery / Customs import declaration.
  • E-mail functionality can be enabled to send mail to particular person for any blocked business partners / documents in SAP GTS-Embargo screening.
  • This screening helps to avoid any trade penalties due to any compliance violations.
Full Embargo:
  • For full embargo, currently we have Iran, Cuba, Syria, Sudan, North Korea in the Embargo list.
  • It's meant as Full Embargo since no countries are allowed to have any import/export business with these five countries.
  • This can be achieved by maintaining the embargo situation for country-specific Information  in GTS Area Menu.
Partial Embargo:
  • There could be any client specific / partial embargo situations, where few other countries like China, Venezuela, Russia, Belarus can be added to the Embargo list for any specific countries. (For ex: Partial embargo between US to CN, US to RU, etc..)
  • This can be achieved by maintaining the embargo situation for Legal Regulation/Country of Departure/Destination Information in GTS Area Menu. Here the embargo is limited only for the selected country of departure and country of destination combination.
  • We can have a situation where the client is expecting to have embargo screening based on the country-region (For ex: Ukraine - Crimea region). 
  • Region based embargo check is not possible through embargo configs / maintenance. However, we can achieve this through other compliance checks like SPL / Legal Control (Licensing).
Partial Embargo based on Region:
  • There could be any client specific / partial embargo situations, where few regions in any specific country needs to be screened for compliance. (For ex: Partial embargo screening between US to Ukraine (UA) - Crimea (KRM) Region)
  • But in standard there is no option to perform embargo screening based on the region.
  • We can achieve this compliance screening based on the region through SPL screening / Legal control check. Let's see each option in detail.
1) Using Legal Control - Licensing Option:
  • Standard EAR Legal control check based on the ECCN classification and LDR (License Determination Rules) also checks for the license. 
  • Standard EAR can sometimes miss the hard block for any region wise check. (For ex: The client prefers to have hard block for all the transactions to Crimea for validation and then to release manually. However, if the product is not controlled (EAR99) for Ukraine then the document might be missed for the user intervention, if the product picks the NLR license type from the LDR)
  • Alternatively, we can go for Z-legal regulation (for ex: ZUACR) with a determination strategy set for Country/country level (ALRG02). Make sure to maintain the determination rule "A-Determination using All Strategies", if other determination strategies are maintained in the sequence for LELDT-Determination Procedure. Then activate the legal regulation for US to Ukraine.
  • Maintain the license type determination procedure based on the regions. (For ex: ZREG with CD20 - Region of Country of Departure(FTO)/Region of Country of Destination/Control Class;  Or CD21 - Region of Country of Departure(FTO)/Region of Country of Destination/Control Grouping).
  • Assign the license type determination procedure(ZREG) for this new legal regulation (ZUACR).
  • Maintain two different license types. (For ex NLR & CHK). NLR is for UA-Non Crimea Region transactions & CHK is for UA-Crimea Region transactions. 
  • For NLR, maintain the license check attributes accordingly for automatic release of the document during compliance check.
  • For CHK, maintain the license check attributes like "Document number" so that it will be blocked always for document number assignment.
  • Now, maintain the LDR for the "Region of FTO, US-All regions" to "Country & Region of Destination, UA-KRM region" with the license type CHK. 
  • And maintain the LDR for US-All regions to UA-Other than KRM region with the license type NLR.
  • Below snapshot we can see NLR license applied for the US FTO to UA-Non Crimea (CHG) Region for the sales order compliance screening. So NLR can be automatically applied for the release. This is before enabling the No control option in the LDR. Here we have to maintain a license to release this block. We can also skip NLR license creation by enabling No Control exemption option in LDR.
  • Below snapshot after maintaining the LDR rules with the "No Control" option. 
  • In the below snapshot, CHK license is checked for the sales order compliance screening. Now the document will always be blocked for US to UA-KRM and license has to be applied by maintaining the document number to the existing license / by creating a new license.
  • In the below LDR Snapshot we can see the maintained entries for US, Texas (TX) Region to Ukraine (UA), Crimea(KRM) Region for EAR99 classification.
  • We can also maintain the LDR rules based on the Control groupings, so that the number of LDR rule maintenance can be reduced. Control grouping to be activated for the legal regulation and all the control class can be grouped into one control group.

2) Using SPL Option:
  • Standard SPL Check (SPLUS) for the partners will block the document if there is a matching SPL entry for any business partner (as per the SPL partner group) maintained in the business transaction.
  • To have an hard block on all the transactions to Ukraine, Crimea region, we can create a new legal regulation for SPL check.(For ex: UACRM)
  • This SPL compliance screening based on the region is possible only with SAP GTS Search comparison procedure where search term origin is available for the region. Not possible with the SAP HANA Search procedure where region option is not available.
  • Activate this legal regulation for Country Group/Country level. (For ex: CNTRYGR_AL to cover all the departure countries and UA as destination country).
  • Create a new SPL comparison procedure (For ex: UACRM) and activate SAP GTS Search. 
  • In the Search term origin maintain the country and region and link with the 'AND' Operator and 100% as Minimal Similarity.
  • Maintain the control settings of this new legal regulation and add new SPL list type and other required details. (For ex: UACRM).
  • Now maintain an entry for this new list in the GTS Area menu. 

  • Next maintain the required General settings for this new comparison procedure in the GTS Area Menu. (UACRM)
  • Run the Post data load activities for this new SPL legal regulation.     Step 1: Reset Buffer; Step 2: Generate Comparison terms for SPL Lists; Step 3: Aggregate the Comparison Terms generated in previous step;  Step 4: Generate Comparison Terms for Business Partners; Step 5: Screen all the BP’s / Documents (B1, B2  / C1,C2)
  • Now any transaction with the business partner country as "UA" and the region as "KRM" will be blocked for SPL compliance check.
  • The BP can be released to allow further transactions without screening or just release the document to proceed further. In this way the next transaction for the same business partner will be blocked for compliance check and release.
  • In this option there is no need of maintaining the LDR /  licenses master data like the other licensing option.
For any queries/suggestions/corrections please drop a message. Happy Learning...
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