LICENSE DETERMINATION

THROUGH SAP GTS

Posted on December 19, 2011 by Ramji

Government bodies impose legal regulations on the trading of goods that are
imported and exported between countries. There are particular goods that
cannot be imported or exported without specific authorization from these
government bodies. If you require special authorization to import or export
goods, you apply for a license. When you receive this license, you create it in
SAP Global Trade Services (SAP GTS).
When you create a sales order document in your feeder system containing a
material that you cannot export or import without authorization, you need to
find a suitable license in SAP GTS. You need SAP GTSto assign a license to the
customs document, and therefore the material, to enable you to continue
your business transaction in the feeder system. However, the system
requires a procedure or a sequence of search criteria to obtain the most
suitable license. SAP Compliance Management provides you with the tools
you need to define a license determination procedure.If the system detects
that the license master is missing in order to export a certain product,
the document is blocked automatically and you have to assign a license to
the sales order as per US export administration regulations (EAR) and then
release the blocked documents in GTS. Figure shows a blocked sales order
because of License Determination.

In this regard SAP GTS helps you classify your products and upload export list
numbers to your
products as shown in

Figure

The blocked documents can be monitored for further processing as shown in

Figure

The licenses can be issued or maintained through SAP GTS system as shown

in figure
While understanding about License determination, it is important for us to
know about ECCN ECCN, stands for Export Control Classification Number. An
ECCN is an alpha-numeric classification used in the Commerce Control List to
identify items for export control purposes. An ECCN is different from a
Schedule B number, which is used by the Bureau of Census to collect trade
statistics. It is also different from the Harmonized Tariff System
Nomenclature, which is used to determine import duties.
All ECCNs will have 5 characters, for example, 1A001, 4B994, or 8D001.
There are 10 categories on the Commerce Control List. The first number of
the ECCN identifies the category to which it belongs, for example, 1 =
Nuclear Materials Facilities and Equipment, 4 = Computers, 9 = Propulsion
Systems, Space Vehicles and Related Equipment.
However, EAR99 is a different type of classification. It serves as a basket
designation for items that are covered by the EAR, but are not specified on
the Commerce Control List. EAR99 items can be shipped without a license to
most destinations under most circumstances. There are limitations on the

use of EAR99. However, the majority of the commercial exports from the
United States fall into this category
License determination using SAP GTS:
IMG Activity

Activated the appropriate legal regulations for import and export

controls

Created and assigned license determination procedures to the

appropriate legal regulations

Created and assigned licenses to license types in the legal control

master data

Activated the setting in the IMG to ensure the system determines

licenses according to the sequence you are creating.

You created and assigned the determination procedure to your legal

regulations in the Implementation Guide (IMG) forSAP GTS which the system
uses to find the most appropriate license for your document. Although you
made all the settings in the IMG for SAP GTS for the system to find a
determination strategy for licenses, the parameters in the search sequence
are empty until you maintain values in the application.
Activities
In the Legal Control service, you decide, based on your customs document,
which legal regulation the system uses to search for a license. You also
decide which license type you require, for example, a general license or
individually valuated license. According to the rules you defined, the system
then determines which licenses are available for assignment to the
document. This process flow is described in more detail in the steps below.
Process Flow:
1) Embargo checks can be performed based on legal regulation and country
of departure/destination.
2) The function of embargo in SAP GTS is same on import and export sides.
3) When we create a purchase order or a sales order, the embargo service
checks whether
we can import from or export to a particular business partner in a particular
country.
4) The documents are blocked if there is an embargo on any country where
you have your business partner located at.

5) These blocked documents are further processed and released in SAP GTS.
Blocked documents should be released manually
-GTS check should happen both in order and delivery level
During billing level, the feeder system should ensure to transfer all data
elements required for AES reporting

SAP GTS Export Management Functionality

Export Classification
Maintain Export Numbers
Assign Export Numbers
Mass Reclassification of Export Numbers
Export Compliance
Sanctioned Party list screening
Manage Export Licenses
Embargo Check
Audit trail
Outbound Customs Services
Export Document Determination
Export Document Printing

Electronic Customs Communication

Transit Procedure Outbound
Electronic Export Procedure
Bonded Warehouse Processing
Inward/Outward Processing
Export Process Monitoring
Outbound Trade Finance Services
Letter of Credit Assignment
Letter of Credit Compliant Printing
Letter of Credit Monitoring(S1)SAP GTS Import Management
Functionality
Import Classification
Import Number Administration
Import Number Assignment
Import Mass Reclassification
Import Compliance
Sanctioned Party List Screening
Import Control
Embargo Check
Audit Trail
Inbound Customs Services
Import Document determination
Import Document Printing
Electronic Customs Communication
Duty Calculation
Transit Procedure Inbound
Free Circulation
Bonded Warehouse Processing
Inward/Outward Processing
Import Process Monitoring
Inbound Trade Finance Services
Open Letters of Credit
Monitor Letters of Credit
SAP GTS Trade Preference Management Functionality
Vendor Declaration Handling
Request Vendor Declarations

Dun Vendor Declarations

Web-based Supplier Self Services
Vendor Declaration Aggregation
Preference Determination
Perform Preference Calculation
Customer Declaration Handling
Issue certificates of origin to customers
Revoke certificates of origin to customers
SAP GTS Restitution Management Functionality
Securities and Licenses Handling
Create and Maintain Securities and Licenses
Calculate Securities
Monitor Due Dates
Restitution Recipes Handling
Manage Recipes
Restitution Calculation
Calculate Restitution Amount
Create Refund Application

ICENSE AND LETTER OF CREDIT

MANAGEMENT THROUGH SAP GTS
Posted on August 6, 2013 by Ramji

Company needs to get licenses for exports or imports. Many products require
licenses. Licenses can be maintained in SAP GTS as a master and track its
validity period and residual quantity and value. There is no single licenses
available in all the countries. I discuss this topic keeping US requirement into
consideration. SAP GTS allows you to determine the license and if at all
missed in Sales order (or) delivery created in feeder system, block it for
further processing.
Step 1 :-

Product you are planning to export needs to be classified for Export Control
Classification Number (ECCN). If you need to import the product then you
need to classify for Import Control Classification Number (ICCN). What is
ECCN. This is just five character codes, what basis classification happening
we saw it in previous articles.
Let me explain to you again by taking one ECCN as an example : 3A001
we divide these into three parts :Chapter 3 Product Category (Electronics)
Validity A Product Group (System, Equipment and Component)
ECCN 001 Reason for control
Category
0
1
2
3
4
5
6
7
8
9

=
=
=
=
=
=
=
=
=
=

Nuclear materials, facilities and equipment (and miscellaneous items)

Materials, Chemicals, Microorganisms and Toxins
Materials Processing
Electronics
Computers
Telecommunications and Information Security
Sensors and Lasers
Navigation and Avionics
Marine
Propulsion Systems, Space Vehicles, and Related Equipment

Product Group
A. Systems, Equipment and Components
B. Test, Inspection and Production Equipment
C. Material
D. Software
E. Technology
Software

Encryption

Symmetrical Algorithms

Asymmetrical Algorithms

Hash Algorithm
EU or US

Hardware (Computer)

Performance (APP)

Encryption

EU or US

Reason for control

000 999

If Your Item is Not on the Commerce Control

List EAR99
If your item falls under the jurisdiction of the U.S. Department of Commerce
and is not listed on the CCL, it is designated as EAR99. The majority of
commercial products are designated EAR99 and generally will not require a
license to be exported or reexported. However, if you plan to export an
EAR99 item to an embargoed country like iran, to a party of concern like
Denied person list , or in support of a prohibited end use can be used as a
nuclear product, you may be required to obtain a license.
Three factors important to determine whether license is required or not :1) Destination country / Country groups
2) End user (or) Ultimate consignee
3) ECCN
What is important to understand here is License determination is
transaction specific not Product specific

Step 2 :You have to define number scheme in the export list. You can define it as US
ECC
It comprises of :- Structure of Export list / Coding Schemes / External unit of
measures
This configuration settings is the basis for building up ECCN master data in
GTS side.
Step 3:Assigning the defined number scheme with a Legal Regulation. Legal
Regulation is nothing but governing rule needs to be set either to meet
requirement of particular country or country groups. In this case we take EAR
Legal Regulation . Need to assign EAR with USECC.
Step 4 :Number scheme needs to maintain as master data in GTS. We will see how
we can maintain in our example USECC
Dual use items which has ten categories as we have seen in Step 1 ;
For example , Category 5 related to Telecommunication
5A002.a.2 equipment designed or modified to perform cryptanalytic
functions.
5D002.c.1 only software having the characteristics, or performing or
simulating the functions, of equipment specified in 5A002.a.2
Control grouping
This function enables you to define, under specific legal regulations, different
groupings of products with a description for each grouping. You can then
assign individual products to the groupings. These groupings reduce the

workload for import and export legal control and the license determination
service. The system uses control groupings, for example, to determine which
license types can be used for importing and exporting specific products that
belong to a specific control grouping.
In the Area menu, you need to create groupings as master data. The grouping
controls the legal control process and the assignment of licenses to a product
depending on the legal regulation. You can group products with different
control classes into one group if they require the same export or import
management process. As the export and import regulations for a product are
not based directly on the product or the assigned control class, the grouping
you assign to the product in the product master is used in legal control to
determine the type of license.
But this activity need to do carefully, but this exercise helps definitely for client in terms
of workload.
Sometimes Products having same Export Control Classification number have different
controls, in those cases we can take advantage of Peculiarity code and grouping in
conjunction with license determination
Step 5:
Determination strategy decides how active legal regulation needs to be determined :-Country level
-Country / Country level
-Country/Country group level
-Country group level
-Country group / Country level
-Country group / Country group level
Step 6 :-

License type needs to be created for determination purpose. For example if you need to
create Individual Validate license for EAR US LR. You can create EARUS+IVL
Foreign trade organization
Legal unit
Business partner
Partner function
Product number
Control class (export control classification number)
Document number from feeder system
Country of departure/destination
Peculiarity code
Import code number
Check first doc.in doc flow
Country of Dest / Dept
Business Transaction type
License can be decrement value and Quantity update. Again this feature depends on
the requirement. You can have only Quantity update as well.

.
Visio Flow License determination flow
License can be maintained as created, applied, active and expiry. The license
will get detected only when it is in the active state.
Licenses will get decrements quantity and value, when it is utilized against a
transaction. Licenses acquired against volume of shipment
decrements only quality. Value based licenses deducts value against
shipment. The user can see residual value against total value in the
license master
Letter of credit management
In SAP GTS system, License and letter of credit management shares same
processes. The tables also shared between licenses and LoC

Letter of credit process

The above process flow is a simple Letter of credit transaction. We can see
step by step business flow
Received inquiry from the customer
Submitted Quotation . Inform SWIFT details of your bank
Agreed for Letter of credit
Buyer (Importer) opens a letter of credit with his relationship bank. The
relationship bank here is issuing bank.
The advising bank of you receive L/C through SWIFT
Now you have to create a master data for LoC in GTS side. Update values
like Maximum value, Date of expiry, Presentation date,Last date of shipment
and any other additional clauses you require to adhere while submitting the
document for negotiation to bank. If the partial shipment is allowed you can
see residual value if it is not allowed you have to complete by one shipment.
This settings you can do it R/3 side itself to disallow partial shipment.
Letter of credit determination you can have following strategy
Country level / country group level / partner group level . you can develop
combination of these three. Ideally keeping partner group level in search is
better and will give flexibility for change .
Since license and letter of credit sharing the same table, there is a problem if
any changes you are trying to do in the letter of credit that impacts license
as well. I am not able to understand why SAP has developed logic sharing
and licence and LoC though both are conceptually different
You can expect regular updates from me .
Next topic . Customs Duty Calculation ..