An interesting challenge that companies that trade internationally face is that certain products or products of a certain origin may not be supplied to some countries under penalty of high fines.
In my comparison research of Cloud ERP solutions, there appear to be few solutions that support the processes within companies.
Employees who are responsible for registering and processing orders have a lot of work to do. Especially when a company supplies goods to countries that are subject to an embargo or a company produces or trades goods that can be used for both civilian and military purposes.
Now that more and more companies move registration of orders to the front end, where customers register orders in a webshop or order management systems, the need for support is even more desirable. We want to warn customers during registration of order lines for goods that are marked as strategic or not allow to include these at all.
In part one of this series of articles I briefly and concisely explain what Export Control is all about.
Strategic Goods, Multi-lateral Export Control Regimes, Export Licenses are discussed in this article.
Based on my many years of experience with the subject matter, I present a description of the minimum support ERP solutions should provide to simplify the work of employees who are constantly dealing with export-related matters.
In part two I will go into more detail about which suppliers of Cloud ERP solutions support Export Control and how they do it.
Who are the suppliers of Cloud ERP solutions that offer support?
Let's start with the solution I wrote about earlier:
QAD Adaptive ERP - Regulatory Attributes (Controlled Substances) and Global Trade Compliance Management
QAD Adaptive ERP is one of those ERP solutions that has been providing functionality since 1996 to support organizations in recording and complying with export control regulations.
Regulatory Attributes provides extensive functionality with Controlled Substances:
This could be the coding system used in the European Union's list of dual-use goods (Annexes I and IV) or the Export Control Classification Numbers as issued by the American Bureau of Industry and Security (BIS).
[See references: Export Control Classification Number (ECCN) - BIS]
The combination of these licenses and control numbers facilitate organizations in complying with export control regulations.
For example, strategically sensitive products for which no license has been granted/obtained cannot be delivered to countries or destinations that are subject to an embargo.
The solution also helps companies producing items in different countries such as China or Turkey in preventing items originating in China are delivered to customers in the US.
QAD offers clients new ways to deal with compliance management.
The latest Global Trade Compliance Management solution provides many more options such as Deemed Exports and Automated Export Management.
[See references: Compliance with Deemed Export Regulations]
For a full description of the Controlled Substances functionality:
[See references: QAD Adaptive ERP: Module Regulatory Attributes]
And let's not forget the most complete provider:
SAP S/4HANA
When I look at SAP S/4HANA in relation to the topic of this article I see the image in the article on Trade Compliance on the SAP Community Blog page - "The Where, the Who, the What, and the Why of Trade Compliance and How Different SAP Solutions Keep Your Company Safe".
I would almost dare to say 'do I need to say more'.
I can give a complete description of the functionalities available in SAP S/4HANA, but I have worked with SAP functionality for a number of years and know that you cannot find better and more complete functionality elsewhere.
Discover this yourself during the short training "Managing Product-Related Export Control".
For a full description of the International Trade Compliance functionality of SAP S/4HANA:
See references: SAP S/4HANA: International Trade Compliance]
Then we arrive at the newcomer in the field, where dual-use and advanced export control only recently became available:
D365 Finance and Supply Chain Management
Microsoft has not been making progress for very long with D365 Finance and Supply Chain Management. After the acquisition of Damgaard / Navision in 2002, the biggest question was what will Microsoft do with both solutions.
A struggle that lasted until 2015 and it wasn't until around 2018 that real change came - the year of the Cloud had arrived.
Today D365 Finance and Supply Chain Management has two options for supporting Export Control:
Dual-use goods
The functionality for products with dual-use helps companies track strategic products and validate that rules are met when those products are sold or shipped.
[See references: D365 Supply Chain Management: Dual-use goods]
This way companies can:
This is checked when registering orders.
Furthermore, functionality is available to record licenses obtained for each product, country/region, validity dates and certificate numbers.
There is also an option to specify whether and on which documents the data should be printed, for example, on the invoice, the packing slip and/or the sales order.
In short: it's like 'Controlled Substances', well done.
Advanced Export Control
Microsoft, like QAD, has developed and recently released a more extensive version for enterprise support.
Advanced Export Control was launched last September 2023 and is immediately available to both new and existing users. For existing users at no additional cost, it is included in the Dynamics license.
Please note: Advanced Export Control is not D365 Finance or Supply Chain functionality but a Dataverse App.
Companies should take into account that this App consumes storage capacity. Data upload/download and storage are the new gold in the world of Cloud.
The solution is fully integrated with 'Finance and Supply Chain Management', as demonstrated in the demo during the TechTalk presentation last September 18.
Attention, companies that already use 'dual-use goods' must realize that Advanced Export Control works completely separate. The Advanced Export Control functionality is more extensive, covers more scenarios and can be integrated with multiple solutions.
Advanced Export Control will relieve organizations and employees and ensure that export regulations are complied with during confirming, picking, packing, shipping and invoicing of a sales order.
Warning: Microsoft does not provide and maintain a library of current Export Control jurisdictions and rules, companies must take care of this themselves.
The Advanced Export Control functionality has 5 building blocks:
[See references: D365 Supply Chain Management: Advanced export control overview]
Let me quickly run through these:
If a rule is configured as an error, meaning a 'red flag', any activity that matches the rule is blocked for that jurisdiction, unless an exception exists. A rule is usually a combination of a country/region, a transaction purpose, and a set of codes and categories.
For some examples, consider the Multilateral Export Control Regimes mentioned earlier.
But jurisdictions do not have to be based on this. If I understand correctly, they could also solve the example of items from China that are not allowed to be delivered to America.
HS-codes, better known as 'commodity codes', read the article 'Commodity Codes Explained' by QAD.
[See References: Import Management 101: Commodity Codes Explained]
These restrictions can be recorded here:
In the example, a rule for the US EAR restrictions is defined based on the country/region chart. According to this rule, if an order contains any items that have an ECCN in the MT or NS control category, the system won't allow it to be sold to Angola. If a user tries to confirm an order that contains one of these items for shipment to Angola, they receive the following error message: "Action blocked by US EAR restrictions."
Exceptions allow an action that a restriction would otherwise block. Common types of exceptions include global exemptions and corporate policies.
But there is a positive side to this, after all, the world is full of exceptions, and take it from me, SALES always wants to push the limits of the impossible and we have to find a way to overcome that in a decent way.
Exceptions may make it possible to deliver under the condition that a text and/or license is printed on documents.
The demo during TechTalk, worth watching
During the demo, Microsoft shows in detail how the new Advanced Export Control functionality works within D365 Finance and Supply Chain Management.
A few interesting observations from my side:
To get a good idea of how solid the solution is and how deep it is integrated with Finance and Operations, I recommend viewing the demo in full.
When I was reading the user manual I felt uneasy with the paragraph: "the advanced export control solution lets you express these rules, even complex ones, by using formulas that are similar to the formulas in Microsoft Excel".
But I can reassure you, during the demo Microsoft shows how intuitively defining PowerFX formulas is supported.
Microsoft is well on its way to creating an application that is universally usable for multiple solutions, a strong example of Composability.
By the way, this is very interesting because this functionality may also become available for D365 Business Central users.
References