Preference Processing

Customs preference is an important part of the export process. It is formed by agreements made between countries or groups of countries from different trade areas. The countries or groups of countries with which another country or group of countries has such an agreement are described as preference zone.

During business transactions that take place between countries or groups of countries having a preference agreement, you must determine whether or not the goods in question are valid for preference.

In the case of trading goods, a vendor declaration is necessary for the goods to be viewed as valid for preference.

For goods manufactured in-house, validity for preference is determined using preference rules. The most important factors here are the origin of the raw materials used and the the amount of processing carried out on the goods. For example, a material may be allowed to consist of third country components by up to 20 percent and still be valid for preference. The basis for preference determination in the SAP system is the bill of materials, used to identify the components of goods to be exported, as well as the commodity code which must be assigned to each individual component.

Determine the following:

o the individual preference zones which play a role in the preference determination procedure from the point of view of the exporting country

o the destination countries which belong to these preference zones o the procedure to be used when determining the preference price

o the rules which determine how the individual preference procedures are to be used in preference determination.

Finally, assign the individual preference rules and commodity codes to preference zones.

16.4.13.1 Define Preference Zones

In this IMG activity you define existing preference zones for the departure country. Depending on existing contracts, these preference zones can represent individual countries (e.g. Poland or Rumania) or groups of countries (e.g. EFTA).

16.4.13.2 Determine Preference Zones

In this step you define the preference zone to which a destination country belongs from the point of view of the exporting country.

Example

From point of view of Germany as the exporting country, Switzerland belongs to the EFTA preference zone.

Activities

Enter all the combinations of exporting country and destination country for which you want to carry out preference determination. Assign a preference zone to each of them.

16.4.13.3 Define Preference Procedure

In this step, you define the preference procedures which specify how preference determination should be carried out.

The procedure may have the following characteristics:

o With change in classification

A procedure with this characteristic defines the maximum percentage share of non-original goods with classification change up to which the main part is still recognized as original goods, or to what extent the share of non-original goods may be processed.

o Without change in classification

A procedure with this characteristic defines the maximum percentage share of non-original goods up to which the main part is still recognized as original goods.

o Third country

A procedure with this characteristic defines the maximum percentage share of non-original goods with item change up to which the main part is still recognized as original goods, o 50:50 Rule

A procedure with this characteristic ensures that the value of non-original pre-materials cannot exceed the value of original pre-materials.

o Harmonized System (HS)

A procedure with this characteristic defines the maximum percentage share of components with a particular commodity code

16.4.13.4 Assign Preference Rule / Percentages

In this step, you define preference rules. A preference rule specifies which procedure is used for determining preference. Furthermore, you can maintain relevant performance measures for preference determination, such as the percentage rate.

Example

Preference rule 001 has the following characteristics:

o Procedure 00001 (HS item) o Percentage rate 20%

o Commodity code 2000 o Operation code LE (less than)

During preference determination, the bill of materials is only valid for preference if less than 20% of the components have the commodity code 2000.

16.4.13.5 Assign Commodity Code And Rule By Preference Zone

In this IMG activity, you assign a preference rule to a preference zone. This assignment is dependent on the preference country and the commodity code.

You may also define alternative rules.

During preference determination for a bill of materials, the corresponding procedures are determined by taking the rules that apply to that preferene zone into account. A preference price is determined for each procedure. The highest preference price determines the preference price for the main component of the bill of material. If an alternative rule is applied, preference determination is carried out according to this rule. In this case, the better, i.e. the lowest preference price is adopted.

16.4.13.6 Alternative Commodity Code

Use

You can use this table to maintain an alternative commodity code for the main component of a bill of material.

If this table has been maintained, the system will use the alternative entry instead of the original entry in the material master as a calculation basis.

Example

Minimum processing in the area of preference law.

16.4.13.7 Define Tariff Alternation

In this step, you define a tariff alternation that deviates from the normal model (if there are no entries here, a tariff alternation with a value of 4 is assumed). Normally, the tariff alternation is dependent on the first four digits of the commodity code.

Example

A tariff alternation with a value of 2 is used in the chemicals industry.

Actions

Only enter a value for an interval between commodity codes if they have tariff alternations that deviate from the standard value of 4.

16.4.13.8 Define Preference Code (PAC)

Use

In this IMG activity, you define the preference code.

As of reporting period January 1997 for importing from third countries, preference is to be

registered/output according to customs law based on Article 10 Section 1 letter h) of decree (EU) no.

1172/95 of the Council from 22nd May 1995.

Preference is understood as the most favorable duty conditions, the prerequisites for which have to be met at the time of submitting the customs declaration. To declare the preference, please use a three digit numerical code.

Examples of the most commonly used preference codes:

100 Application of third country customs record

120 GATT product allocation according to foot notes in customs tariff 200 Application of APS custom record without further requirements 300 Application of the GPS (General Preference System) duty rate

without further restrictions

If no other favorable duty rate is applied for, please specify code "100".

16.4.13.9 Maintain Control Data for Vendor Declaration

In this step, you maintain plant-specific settings necessary for creating vendor declarations.

The dunning process and dunning letters are influenced by the control data in table T001W.

You can create all texts using the general SAP word processing tool Tools -> SAPscript -> Standard Text.

When you enter the filename of these texts in table T001W, the program uses them only when no different text numbers have been stored in the corresponding parameter fields of the function

'Request/Dun/Manage Vendor Declaration'.