Prove the origin of your products and take advantage of the benefits offered by FTAs
You’re sitting in Germany and looking at importing a product. One supplier in Mexico says they can offer it at $105. Another in the US says they can offer it for $100. With all else being equal you’d naturally go for the cheaper alternative. But what is often not considered is the Free Trade Agreement between Europe and Mexico. In some cases customs duties can be 0%, in other up to 20% or more depending on the preferential status of a product. Thus it can end up being considerably more expensive if importing from certain countries and therefore often considerable savings can be made when FTAs are correctly applied. In the case of some of MIC Customs Solutions’ customers, often millions of Euros.
MIC Customs Solutions was founded in 1988 in Austria and focuses exclusively on the development of customs software solutions, which can be integrated into an ERP system such as Oracle, SAP or any other enterprise or legacy system. MIC can also support the customs departments in implementing automated import and export processes including customs regimes with economic impact such as inward & outward processing relief, bonded warehouse, and free zone as well as processing under customs control. But also the increase of the automation level in the tariff classification process by introducing our global classification tool is one of our specialities. MIC additionally supports in the origin calculation and supplier solicitation process as well as in aspects of compliance (Export Control incl. Denied Party Screening).
One of MIC’s products is their origin calculation system (MIC OCS), which consists of 3 pillars: Supply Chain Solicitation, the Free Trade agreements and the origin calculation itself.
MIC receives for example the order data from various ERP systems. Based on this MIC automatically generates long term supplier declarations, which are then sent out to the related supplier for collecting the preferential country of origin as well as preferential status for the supplied goods under the requested Free Trade Agreement (FTA). This is a legal requirement for suppliers and usually done by exchanging Long Term Supplier Declarations on paper. Due to the new technologies it can nowadays in most cases be done over the web through a supplier portal that MIC has designed to make the process faster, cheaper and more transparent. Originals can be signed and uploaded to the supplier web portal in countries the customs authorities accept it.
In order to cope with the huge number of Free Trade agreements across the globe, MIC designed a flexible rules engine that easily allows considering new free trade agreements as they become established. MIC today supports more than 75 Free Trade Agreements in productive usage.
The third pillar is the origin calculation itself. MIC gets all the bill of materials (often multi-level BOMs) from the various systems and then calculates whether the finished product is certified for preferential status or not under the selected Free Trade Agreement. This is important because if the finished product has preferential status then this also means more competitiveness to our customers. Further such origin calculation processes can also be used for simulations in order to come to the most cost efficient and competitive sourcing decisions as described in the beginning of this article. So origin calculation is not just a topic for customs – it’s an important topic with a huge optimization potential for the complete supply chain.