Multinational companies are facing great compliance challenges when addressing the continuously evolving international legal requirements. Customs and trade compliance management has a significant impact on production location and purchasing decisions, delivery times, cost savings and competitive advantages. Thus, it is crucial that the appropriate GTM (Global Trade Management) software is in place and fully integrated with a company’s overall IT infrastructure (e.g. ERP Host System) as well as with its customs and trade compliance business processes in order to increase efficiency, ensure transparency, minimize compliance risk, and save costs.
MIC is the one that delivers this. MIC is the worldwide leading provider of global customs and trade compliance software solutions and offers a singular configurable GTM software solution that meets the needs of companies of any size in any industry that requires international customs and trade compliance management. The software is organically developed and provided on a harmonious platform. 1 GTM Source System with 1 Database, 1 Graphical User Interface, and 1 consistent Maintenance & Support Service – Globally.
Already more than 700 customers in 55+ countries on six continents use MIC customs and trade compliance software and among those you can also find the Magna Steyr plant in Graz (Magna Steyr Fahrzeugtechnik AG & CO KG).
The Magna Steyr plant in Graz - an overview
The Magna Steyr plant in Graz plays a special role within Magna. Apart from its 100-year-old history, the location is characterized by its large size and complete vehicle competence. The Graz location is the biggest Magna location within Magna International worldwide. With the present product and model mix Magna Steyr is covering the whole band width of powertrain technologies – from ICE to plug-in hybrid to purely electric vehicles. This makes Magna the first, and currently, the only vehicle contract manufacturer worldwide to be making this broad range of vehicles for different customers.
MIC modules in use and what is available
MIC is providing parts of its customs and trade compliance software solutions platform to Magna in Graz for already more than 25 years. Among the MIC modules that are in use by Magna Steyr in Graz you’ll find for example MIC-CUST® for imports and exports as well as inward processing relief (IPR), MIC Intra for Instrastat reporting or MIC OCS for supply chain solicitation (SCS). All of this is carried out on-premises and with specific interfaces to Magna’s ERP system fully fulfilling Magna’s requirements.
However, MIC’s overall bunch of customs and trade compliance software solutions consists of the following modules:
- Global Trade Content Services (MIC GTCS) for the different customs & trade compliance processes (e.g. export control commodity lists, exchange rates, code lists like customs offices, customs tariffs, etc.) covering 150+ countries ensuring automatic regular updates for all MIC modules.
- Central Classification System (MIC CCS) supporting companies in automating the tariff and export control classification process with user-validated selection and matching rules, decision trees and suggestion algorithms utilizing artificial intelligence and machine learning (AI/ML) in order to achieve consistent classification over all products globally and therefore increase compliance and reduce workload & costs.
- Origin Calculation System (MIC OCS) for automated management of supplier declarations via an innovative supplier web portal and automated preferential and non-preferential origin calculation with full audit trail for over 250 Free Trade Agreements (FTAs) worldwide.
- Global Filing Solution for automated electronic export and import customs clearance processes (MIC-CUST®) with local customs authorities’ systems in 55+ countries on 6 continents incl. special regimes like Inward Processing Relief (IPR), Bonded Warehouse (BWH), Foreign Trade Zone (FTZ), Free Zone (FZ), Processing Trade and others. This also includes the legally required inventory management.
- Export Control Management (MIC ECM) for the central check of business transactions as required by export law, including screening against sanction lists, embargo checks, end user/end use check resp. dual-use reviews, identification of licensing requirements and license management.
- MIC Data Analytics & Visualization collects, translates and transforms data from different sources (e.g. Authority Reports, Broker Declaration Data, MIC-CUST® Import, MIC-CUST® Export, Internal IT-Systems) into readable language according to WCO, EU and country-specific data sets. In context with trade content such as customs tariffs and free trade agreements, these data sets turn into usable information. All this information is prepared in such a way that it can be visualized quickly and easily, either via APIs in in-house solutions or directly in the MIC platform for analysis and interpretation.
The need for more due to global sourcing
As already mentioned above, Magna Steyr in Graz is using some of MIC’s customs and trade compliance software solutions since the 1990s. One is MIC’s supply chain solicitation (SCS) system used for the supplier solicitation as a B2B web portal solution, which is one out of two parts of MIC OCS. This gives customers like Magna in Graz the opportunity to efficiently manage supplier declarations. Generally, the following functionalities are covered in OCS SCS:
- Assignment and maintenance of suppliers as well as workflow-based allocation of suppliers to selected team members
- Global standardization of the supplier declaration management process
- Automatic collection of key information for supplier declarations through ERP/host system(s) integration
- Manual and/or automated requests for supplier declarations - via web, e-mail or paper
- Web portal for direct data entry and/or file uploads by the supplier, including the option for the supplier to expire or modify specific part origin information and to enter additional key information (e.g. export control classification, tariff number)
- Automated, intelligent follow-up process that includes a reminder mechanism
- and many more
However, efficient supplier solicitation is only one side of the coin when it comes to leveraging from the benefits offered by free trade agreements (FTAs). Additionally, it requires the capability for an optimized and compliant calculation of the preferential origin of a finished product.
Mr. Gerald Lorbek, Senior Manager Customs Compliance & Export at Magna Steyr in Graz, said: „We have been managing long-term supplier declarations with MIC application (OCS SCS) for several years already,” and then continued, “but preferential origin calculation was performed with an external application and not fully integrated. Due to global sourcing, it will be increasingly difficult to achieve the preferential rules for the finished products. Furthermore, with the previous system it is not possible to perform an audit trail/protocol. Simulation calculation was not possible with the existing application.“
For global companies like Magna Steyr in Graz, that purchase raw materials and parts from different sources around the world, it’s important to know and to understand, that FTAs globally offer potential duty savings to them yielding a competitive advantage. However, companies can only leverage such potential savings and competitive advantages by complying with a number of complex rules of origin and maintaining detailed documentation. This requires them to establish processes and software for the calculation of the origin of goods which conform to applicable laws and auditing requirements in order to avoid possible fines and future unplanned costs.
The application in place for preferential origin calculation at Magna Steyr in Graz couldn’t provide this in full, as described by Mr. Lorbek, and therefore Magna Steyr in Graz decided to look for another solution.
Introduction of MIC’s origin calculation module OCS CALC
The requirements for the new preferential origin calculation software were clear, Mr. Lorbek reported: “The requirement was that preferential origin calculation must be fully integrated in the long-term supplier declaration management system – this was the MIC-SCS module. Furthermore, it was important to use every method to improve the preferential origin result, such as sub-assembly calculation, consideration of partially preferential content of certain components to achieve the product and trade agreement-specific origin rule for the related finished goods. Also, retrospective changes of the “ex-works” price must be considered for the preferential origin calculation.”
And this is what MIC’s OCS CALC supports for a multitude of FTAs worldwide. It fully integrates with OCS SCS, the supplier solicitation module, and enables an optimized calculation of the origin of goods based on multi-level bills of materials, resulting in the creation of the appropriate certificate of origin documentation. Further, each process step is traceable via a complete audit trail. Changes in the originating status of the goods are reliably detected, affected goods are recalculated, and thus compliance is maintained, all on an ongoing basis.
All of this, as well as that MIC has been providing its customs application to Magna Steyr in Graz for more than 25 years and that the MIC OCS SCS was already in place, led to Magna’s decision to switch to MIC’s origin calculation module OCS CALC. This decision gave Magna Steyr in Graz the possibility to have both, the supplier solicitation and the preferential origin calculation of goods, running in one system.
The OCS CALC enables customers like Magna in Graz an optimized origin of goods calculation with the following features:
- Top-down, bottom-up and accumulation (advantage calculation) bring up a lot more positive origin calculation results
- Determination of the preferential origin of goods as well as the origin under commercial law (for individual products or product ranges)
- High performance calculation of the origin of goods for both flat and multi-level bill of materials
- Configurable defaults and tolerance thresholds are available
- Calculation of the threshold value (minimum sales price)
- Support of min/max price logic
- Cross-plant and cross-system calculation for the origin of goods
The ultimate highlight among those calculation features is MIC’s unique advantage calculation. This mixture of a top-down, bottom-up and accumulation calculation brings up a lot more positive origin calculation results what means to be a real game changer to MICs’ customers.
The course of project and faced challenges
Besides the implementation of the standard software features of the MIC OCS CALC module, some Magna Steyr specific requirements had to be developed. Modifications in the price finding logic, additional features in the bill of material (BOM) explosion screen, implementation of Magna‘s PAB parts logic, integration with Magna’s ERP system, just to mention some of them.
With that in mind it can be said that the start and go-live of the project were quite in line with the expectations, the project communication was excellent. However, there were also some hurdles to take alongside the course of the project.
Mr. Lorbek told: “MIC’s project management was structured. During the workshop sessions, MIC could not satisfy all specific requirements, but in the end a solution was found which did not compromise this project in any way.” Asked, if there had been special challenges, Mr. Lorbek answered: “In terms of system performance: The huge amount of data and processing of all these data within a certain time frame. There were some issues with reporting, but MIC also solved these in the end … and the project was finished within the agreed timeframe.”
Looking at the outcome of the project Mr. Lorbek said: “There are improvements and advantages regarding the preferential result due to measures such as subassembly calculation, partial preferential portion for certain components as well as usage of Free trade agreement-specific origin rules. Further MIC OCS would enable us to provide preferential calculation for additional production volumes.”
Finally, Mr. Lorbek had the following advice to those that want to run a similar project and being successful: “Sales figures for different markets for the finished products should be available. Availability of interfaces from ERP regarding bill of materials, material costs, final destination of product and sales prices should be given.”