SAP GTS Free Trade Agreement: A Step-by-Step Guide

Global trade plays a vital role in driving economic growth and development worldwide. Innovations in transportation and communication technologies, along with the establishment of global supply chains through organizations like the World Trade Organization (WTO) and Free Trade Agreements (FTAs), have significantly boosted international trade over time. However, it also brings challenges, such as trade imbalances, protectionist policies, and potential adverse effects on the environment and labor standards.

Global Trade Services (GTS) by SAP is a robust solution designed to streamline and automate international trade processes. Organizations often realize, only after their SAP GTS implementation is live, that they are not leveraging its full potential—resulting in suboptimal ROI and performance. Common reasons include missing components or modules, undocumented processes, and overlooked opportunities like Free Trade Agreements. These agreements provide preferential treatment for goods traded between countries by reducing or eliminating tariffs, thereby promoting international trade. Enabling FTAs in SAP GTS ensures compliance while reducing costs and improving operational efficiency.

What Are Free Trade Agreements (FTAs)?

Free Trade Agreements are arrangements between two or more countries to facilitate trade by reducing barriers such as tariffs, import quotas, and other restrictions. They promote smoother trade among partner nations by reducing or eliminating taxes on goods. Examples include NAFTA (now USMCA), the European Union’s trade agreements, and ASEAN agreements.

FTAs provide substantial benefits to companies, such as:

Reduced customs duties
Improved competitiveness
Streamlined customs procedures

However Effective management of FTAs is essential to maximize their benefits. Organizations must comply with the rules of origin and ensure proper documentation. SAP GTS provides a comprehensive framework to manage these complexities, offering automated, integrated solutions that help businesses stay on top of regulatory requirements, and mitigate risks.

Prerequisites for Enabling FTAs in SAP GTS

Before setting up FTAs in SAP GTS, ensure the following prerequisites are met:

SAP GTS Installation and Configuration: Ensure SAP GTS is properly installed and integrated with your ERP system.

Master Data:

Material Master Data: Ensure accurate product classification (e.g., using HS codes).
Business Partner Data: Update supplier and customer details.

FTA Information:

Understand the FTAs relevant to your business.
Gather the rules of origin and documentation requirements.

Integration with Customs and ERP Systems: Integrate GTS with customs systems and your organization’s ERP system to ensure seamless data flow.

Stepwise Process to Enable FTAs in SAP GTS

1. Activate the Legal Regulation for FTA

SAP GTS uses legal regulations to define trade compliance rules. To enable an FTA:

- Navigate to SAP GTS > Compliance Management > Preference Processing > Legal Regulations.
- Identify and activate the legal regulation relevant to the FTA (e.g., NAFTA, ASEAN).
- Assign countries participating in the FTA to the regulation.

2. Maintain Product Classification

Accurate product classification is crucial for determining eligibility for preferential treatment:

- Access SAP GTS > Master Data > Product Classification.
- Assign the correct Harmonized System (HS) codes to your products.
- Verify the codes align with the requirements of the FTA.

3. Set Up Preference Determination

Preference determination evaluates whether products meet the rules of origin specified by the FTA:

- Go to Preference Management > Preference Processing > Preference Determination.
- Configure the system to calculate preference eligibility based on product-specific rules.
- Maintain bill of materials (BOM) data for multi-component products.

4. Vendor and Supplier Declarations

Collecting supplier declarations is a key step in confirming the origin of components used in your products:

- Use SAP GTS > Compliance Management > Supplier Declarations.
- Request and store long-term supplier declarations.
- Automate periodic updates to ensure compliance.

5. Enable Preference Processing

Preference processing ensures compliance with the FTA’s rules of origin:

- Navigate to Preference Management > Maintain Preference Processing Rules.
- Define rules for origin calculation and assign them to specific FTAs.

6. Configure Export Documentation

Proper documentation is essential for claiming preferential treatment:

- Go to SAP GTS > Customs Management > Export Documents.
- Enable the generation of FTA-specific documents (e.g., Certificate of Origin).
- Ensure integration with customs systems for electronic submission.

7. Run Preference Eligibility Checks

Perform eligibility checks to ensure compliance:

- Use Preference Management > Preference Determination to run simulations.
- Review results for compliance with FTA rules.

8. Monitor and Audit Compliance

Continuous monitoring and auditing are essential for maintaining compliance:

- Set up compliance alerts for changes in FTA rules.
- Use reporting tools in SAP GTS to track FTA usage and compliance.

Capitalize on Free Trade Agreement Benefits

Enabling Free Trade Agreements in SAP GTS is a strategic move that can deliver significant cost savings and enhance compliance. By following the steps outlined in this guide, your organization can harness the power of SAP GTS to manage FTAs effectively. Ensure continuous monitoring, regular updates, and team training to maximize the benefits of your FTA strategy. Regularly updating the system with changes in FTA regulations and rules of origin is a good practice for managing FTAs in SAP GTS.

Enabling Free Trade Agreements in SAP GTS can be a complex process, requiring a thorough understanding of both SAP software and global trade regulations. That’s where an experienced SAP implementation partner like Rialtes can make a difference. As a certified SAP partner with extensive expertise in global trade and risk management, we help companies navigate this process efficiently, ensuring maximum value and return on investment.