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...
- 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
"Critical/Embargo countries" Embargo countries like Iran, Cuba,
North Korea, Sudan & Syria.
- If any finished part is designated to
Non-critical countries and the U.S component share is greater than 25% of
the value of the finished parts, then the finished part is subject to U.S
EAR.
- If any finished part is designated to
Critical countries and the U.S component share is greater than 10% of the
value of the finished parts, then the finished part is subject to U.S EAR.
- This is what is known as the de-minimis rule,
and when the re-export share is below this assigned percent based on the destination
country will be exempted for re-export check and known as de-minimis exception.
- If the U.S controlled item re-export share is more than 10% for Critical countries and 25% for Non-Critical countries then the item is subject to EAR regulation check. So, we have to make sure the item is classified with the correct ECCN and identify the right license.
- U.S Origin products can be identified by
transferring the country-of-origin details as additional attributes from
SAP ECC/S4 Material Master to SAP GTS Product Master.
- Then the products with U.S Country of
origin can be used as filter for individual maintenance of the control
relevant products that will be applicable for US re-export checks / the check can be activated for all the products irrespective of any country of origin.
SAP GTS Re-Export Configuration Steps:
Path: SPRO-GTS-General Settings
1.
Define Country Group
USREX_CRIT is for Critical
countries and USREX_UNCR is for Non-Critical countries
2.
Assign Countries to Country
Group
Assign the embargo countries to USREX_CRIT
country group and friendly country/non-risky countries to USREX_UNCR group
3.
Define Legal Regulation
USREX – standard legal regulation
can be used.
4.
Define Determination Procedure
for Active Legal Regulations
LELDT – Standard determination
procedure for active legal regulations can be used. Set the determination rule as
“A – Determination using all Strategies”, if more than one determination
strategies maintained and needs to be determined. For Reexport we can use “ALRG13
– Country Group/Country Group level”. Re-export tab in the product master is
visible based on this determination strategy and the activation of legal
regulation for the maintained strategy.
5.
Activate Legal Regulations
Here, add the country groups at
the country group/country group level.
Path: SPRO-GTS- Compliance
Management-Legal Control
6.
Assign Determination Procedure
for Active Legal Regulations
LELDT, standard will be assigned
for the legal control.
7.
Activate Legal Regulations
Now, activate the USREX legal
regulation for the country group/country group level for both USREX_CRIT
& USREX_UNCR.
8.
Control Settings for Legal
Control
Here, we choose which products can
be checked for this legal regulation. We can activate for all the products or
specific products. And activate the Re-export checkbox and add “EAR” as
reference legal regulation. License type settings can be maintained with some
generic values to complete the mandatory fields, since the license check will
be performed for EAR if any product is relevant for further checks. Since EAR is being referenced there is no need to assign numbering scheme for USREX.
If it's active only for specific products and individual maintenance is active for any products then the re-export shares has to be maintained in the product master, else any export document with these re-export relevant products will be blocked for re-export compliance check.
Path: SPRO-GTS- Compliance
Management-Legal Control-ReExport
9.
Define Foreign Trade Organization
for Re-Export
Create a FTO / add ‘SLLFTX’ BP role
to any existing FTO that needs to be checked for re-export scenarios.
10.
Assign Legal Unit to a Foreign
Trade Organization
Assign the legal units that comes
under the re-export FTO, which performs the export of US items. Without this
step the re-export check will be performed only based on the price details(Net
cost/Product price) maintained in the product master, not based on the
re-export shares in the product master. If price details are not maintained the
re-export will work as per the calculation reaction type configuration.
11.
Configure Country Group of
Legal Regulation for Re-Export
Here, add the country groups maximum
percentage that’s allowed for re-export EAR exemption, Calculation reaction types
and price type components. Under exclusion numbers we can add EAR99.
Calculation Reaction Types:
A: Set Check Relevance for All
Higher-Level Assemblies - Re-export check will always be performed
independently of share, i.e; Further checks will be performed for US EAR.
B: Ignore Component for Value
Share - Product will be considered as not relevant for control with legal
regulation "USREX"
C: Use Price from Plant
Segment as Share, Check if Missing – Reexport check will always be
performed even if prices (Net cost/product price) / re-export shares not maintained
in the product master.
D: Use Price from Plant
Segment as Share, Ignore if Missing - If prices (Net cost/product price) /
re-export shares not maintained in the product master for the plant in the
sales order then the product will be considered as not relevant for control
with legal regulation "USREX". Transfer the material prices to GTS,
if costing is maintained in the material master / maintain the re-export shares
in the product master to check the re-export. Any one should be available in
the product master.
For ex, If we have calculation
reaction as “C” and pricing not maintained / re-export shares not maintained in
the product master, then the re-export check will always be performed.
If Product master is maintained with the re-export shares then the re-export check will be performed as per the value percentage / de-minimis rule for the destination country group.
Path: GTS Area Menu-Compliance
Management-Classification/Master Data-Export view-Maintain Products (T-Code:
/SAPSLL/PR_PRCON_02)
12.
Maintain Products
Here choose the products and go
to re-export tab and maintain the re-export share percentage.
- Click on Create and add the Re-export FTO and Country group (Critical/Non-Critical)
- Under Re-export control relevance, choose whether the component needs to be always controlled / ignored / undergo re-export value calculation based on the re-export share maintained.
- Select the checkboxes ‘No Calc/No comp’ , if required to skip the calculation / to ignore as a component.
- Here, we have three pre-defined shares namely Pre-defined Hardware share, Pre-defined Software share and Pre-defined Technology share of this component price. Maintain the price/share for any of these as applicable for value calculation. These three shares determine whether any U.S origin hardware is included in the foreign hardware, U.S origin software is included in the foreign software and U.S origin technology is included/used for drawing the foreign technology.
- De-minimis exception of 10% for Critical countries and 25% for Non-critical countries will check for hardware into hardware / software into software / technology into technology for the items. So, we cannot apply de-minimis exception based on hardware share into software.
- Percentage of Hardware share, Software share and technology share will be calculated as per the value mentioned under the shares.
- Display Re-Export Data for Product in SAP GTS Area Menu-Compliance management-Classification/Master Data-ReExport Calculation, can be used to see all the products with the re-export shares maintained for any selected Re-Export FTO.
- Re-Export calculation for the BOM's can be performed in SAP GTS Area Menu-Compliance management-Classification/Master Data-ReExport Calculation, for multiple products/individual products/changed products. Some pre-requisites are transferring the materials and BOMs from SAP feeder system to SAP GTS based on plant/cross plant groups and then maintaining the re-export share values of software, hardware and technology for those parts used in the BOM.
For ex: Let’s maintain the below
re-export share values for a product XYZ.
·
Predefined Hardware Share – 5
EUR
·
Predefined Software Share - 5
EUR
·
Predefined Technology Share – 2
EUR
-------------------------------------------------
Total
Share - 12 EUR (considered as 100 percentage)
Now each share percentage will be
as below
·
Predefined Hardware Percentage
– (5/12)*100 = 41.67
·
Predefined Software Percentage
- (5/12)*100 = 41.67
·
Predefined Technology
Percentage – (2/12)*100 = 16.67
Sample Scenario 1:
Let’s consider an order from France
to Singapore (ie sent to non-critical country, Singapore) with a U.S item. As
per de-minimus rule only item value of 25% above will be subjected to US EAR.
Pre-defined Hardware share is maintained as 10 EUR. Since we have not maintained the pre-defined software / pre-defined technology shares the percentage of pre-defined hardware share will be 100%.
1)
First the calculation will be
for hardware share of the item value with the formula below.
Hardware Share Formula: (Item
value per PC * percentage of pre-defined hardware share in the product master)
Item value per piece is based on
the price/quantity in the sales order.
Here it is, 50 EUR * 100% = 50
EUR. (Calculated hardware share of the item value)
2)
Now the re-export hardware
share will be calculated with the below formula
Re-export Hardware Share Formula:
(Predefined hardware share/Calculated hardware share of the item value)*100
Here it is, (10/50)*100 = 20%.
20% is less than the de-minimus percentage for non-critical country, SG. Hence the re-export control is not checked here.
Even If the re-export hardware share is exactly 25%, then EAR is not checked.
If the predefined hardware share
has been increased to 30,00 then the item value in the order exceeds 25% based
on de-minimus rule and the legal control EAR will be eligible in this scenario.
1)
First the calculation will be
for hardware share of the item value with the formula below.
Hardware Share Formula:
(Item value per PC * percentage of pre-defined hardware share in the product
master)
Here it is, 50 EUR * 100% = 50
EUR. (Calculated hardware share of the item value)
2)
Now the re-export hardware
share will be calculated with the below formula
Re-Export Hardware Share Formula:
(Predefined hardware share/Calculated hardware share of the item value)*100
Here it is, (30/50)*100 = 60%.
60% is more than the de-minimus percentage for non-critical country, SG. Hence the re-export control enables the further checks under US EAR. So, under US EAR the license should be maintained as applicable based on the ECCN, Country of destination (as per License Determination Rules).
Sample Scenario 2:
Now let’s consider we have all
three pre-defined values maintained for any product.
For ex:
· Predefined Hardware Share – 5 EUR
·
Predefined Software Share - 5
EUR
·
Predefined Technology Share – 2
EUR
-------------------------------------------------
Total Share - 12
EUR (considered as 100 percentage)
Now
each share percentage will be as below
·
Predefined Hardware Percentage
– (5/12)*100 = 41.67
·
Predefined Software Percentage
- (5/12)*100 = 41.67
·
Predefined Technology
Percentage – (2/12)*100 = 16.67
Now consider an order with an
item value per 1PC is 50 EUR which is divided as per above percentage against
each share.
·
Predefined Hardware Share – (50
EUR * 41.67 %) = 20.83 EUR
·
Predefined Software Share - (50
EUR * 41.67 %) = 20.83 EUR
·
Predefined Technology Share –
(50 EUR * 16.67 %) = 8.33 EUR
------------------------------------
Total - 50
EUR
·
Re-export Hardware Share – [ ( 5/20.83) * 100] = 24.00%
·
Re-export Software Share – [ ( 5/20.83) * 100] =
24.00%
·
Re-export Tech Share – [ ( 2/8.33) * 100] = 24.01%
Here, none of the re-export share
percent is above 25%, hence the product is not relevant for USREX legal
regulation.
The above calculations are captured
in an excel spreadsheet for easy re-export share calculations. Message me if
you would like to get a copy of the calculation sheet.
Snapshot of the calculation sheet below,
Re-Export functionality in SAP GTS is very useful for the companies to be compliant with the US export regulations even if the product is exported from outside U.S to another country. It’s a mandatory requirement for any exporters to comply with the U.S export controls to avoid any fines/penalties/cancellation of licenses from the U.S Department of Commerce.
So, if your product is controlled
and re-export required a license then you can apply electronically for one with
BIS through SNAP (Simplified Network Application Process)
For any queries/suggestions/corrections please drop a message. Happy Learning...
Comments
Post a Comment