Bruno Fransman - Honeywell www.exportcompliancemanagement.com

1. Automated Trade
Compliance processes
Automation and Control Solutions
Bruno Fransman
May 29th 2012

2. Introduction

3. Why automation?
• Key findings from the report include:
– 84 percent of compliance professionals expect to handle more regulatory information in
2012
– More than a third of respondents spend an entire working day each week staying up-to-
date with regulatory changes
– 70 percent of respondents expect the cost of senior compliance staff to be higher this year
– Only 11 percent of companies expect a significant increase in their budget for compliance
this year
• While regulatory requirements continue to grow, compliance teams are showing signs of
resource constraints limiting their ability to perform vital compliance functions. More than a third
of compliance professionals say they spend more than an entire working day each week in
simply staying up to date with regulatory changes and assessing their impact on the business.
• At the same time, compliance teams report difficulty finding time to coordinate with other parts
of the company involved with managing regulatory risk. More than half of compliance
professionals surveyed said they spend less than one hour a week working together with
internal audit colleagues. One-third of respondents say they similarly spend less than one hour
a week consulting with their legal and risk teams.
• While keeping executive management informed of regulatory issues is a key part of the
compliance role, more than a quarter of respondents say they spend less than one hour a
week reporting to their boards. In the U.S., more than half of the companies surveyed spend
less than one hour a week reporting to their boards. This raises concerns about whether
executive management is being kept sufficiently informed on compliance issues
Compliance Teams Stretched to their Limits (March 13th, 2012 by Corporate Compliance Insights and
Cost of Compliance Survey 2012 by Thomson Reuters ACCELUS)

4. ACS Today
Profile • Sales: $15.5B • 70,000 Employees
• Technology, leading brands • Large installed base
Strengths
• Security, ECC, Life Safety • Global reach 41%
36%
Growth • 164 countries served • > 2M ship to addresses
Focus
• 54 acquisitions since 2003 • 110 ERPs
ECC S&C HLS HBS HPS HSG HSM
Buildings
Fire/Smoke Process
Sensors Controls
Thermostats Motion / Human
Speed and Position Presence Sensors
Building Sensors Scanning
System &
Automation Panels Instant
Pressure Alert Mobility
Sensors
Water
Control
CCTV/
Gas Detection Voice Picking
Gas DVR
Distributed Personal Satellite
Valves
Control tracking
Military Sensors
Industrial
Burners Control
Personal Protection Systems Mobile Computing
Comprised of 93 Supply Chains, 118 Plants, 93 DC’s, 9 Integration Centers

5. Background
Distribution Footprint
219 Global Locations Distributing Product
118 Factories - 93 DC’s - 9 Integration Centers

6. Honeywell – Corporate Policy
“Honeywell will comply fully with all applicable export and import control laws
and regulations of the United States and of all countries in which it
conducts business.”
• Customs laws
• Requirement to declare goods accurately on importation – classification,
valuation, country of origin
• Implies that our trade data is accurate – including sourced items!
• Use free trade agreements legally and intelligently
• Export control laws
• Certain goods of strategic nature require government approval before export
• Use of military components can “infect” non-military products
• Restrictions on importing from certain countries – embargoes
• Other government agency (OGA) requirements
• ACS now faces permitting requirements in US/ MXon health/medical products
in HSP – eyewash, first aid kit elements, ibuprofen, etc.

7. ACS Trade Service Offerings
Team Vision: Objective
A collaborative ensemble of Build a global compliance
professionals partnering with infrastructure; enable rapid trade
Honeywell colleagues to efficiently problem-solving; continuously
transact business across national
Enabling Growth improve cross-border productivity
borders as advantageously as
•Export De-control and Licensing and operations; and eliminate
possible for Honeywell, our •Customer Duty Preference Request
customers, and our suppliers while •Transaction Structuring and Approvals regulatory barriers to growth.
•Regulatory Advice, Advocacy, and Rulings
obeying international trade rules.
Productivity and Operational Support
• Duty Avoidance and Incremental Duty Savings
• Broker Management and In-house Customs Brokerage
• Software and Automation
• Product-line Moves and Technology Collaboration
• Supply-chain Security
• Direct Shipments/ Cross-dock Operations
• Sourcing Decisions/ Vendor-managed Inventory
Ensuring Compliance with International Trade Rules Mitigating Risk of Non-compliance
• Standardized Internal Controls Government Inquiries and Audits
• HS and ECCN Classification Government Disclosures
• Internal Risk Assessments and Remedial Action Plans
• Submissions to Government Agencies and Post-entry Audits
• Cross-functional Training
• Pre-acquisition Due Diligence and Post-acquisition Integration
Enabling Growth and Increasing Productivity from a Foundation of Compliance

8. Components of Honeywell EU Trade Strategy
CENTRALIZED
CUSTOMS
• Optimized trade
operations
AUTHORIZED ECONOMIC
OPERATOR CERTIFICATION
• Faster border crossings
• Smoother customs operations
CUSTOMS BROKER Automated Trade
MANGEMENT • Trade documents
• Control entries • E-Filing
• Measure Brokers • Preference calculation
• Assure compliance • De-minimis calculation
• Maximize duty savings • Export control
• ….
TRADE MASTER DATA MANAGEMENT WRITTEN PROCEDURES
• HS and ECCN Classification • Written procedures
• Net weight • Develop training
• Origins • Establish accountabilities
Driving to meet EU requirements

9. Automated Trade solutions
Introduction

10. CP/S Modell for EU TRADE Solution
Automation and
Control Solutions
Web-Order
Delivery
EDI-Order Order entry Picking Packing Shipping Master Data
LINK-Order creation
Transaction G Freight cost Automated
Screening calculation Customs
Freight
Export
Freight Audit EU PCT Forwarder
G Documents
& Payment Caclulation Integration
G = GLOBAL used
Automated Tool Partners
Other
SAP + Roles and Content from external source

11. SAP GDM Trade Compliance and Solutions
SAP CP/S
NA
TRADE
Docs
XI - Gateway
SAP
Pref Calc.
Automated
Specific Automated
Systems
Trade Solutions at De-minimus.
EU sites
Export Documents
Global DPL Screening EU Export Documents
ECCN Shipping License EU Electronic -Customs
NAFTA Calculation,, EU DG Documents
Shipping docs , …..
Landed cost calculation EU Preference Calculation
+ docs

12. ACS Intranet Trade
solutions

13. ACS Intranet solutions

14. Customs Issue Log
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15. Metrics Web Tool
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16. AEO
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17. Customs Compliance Assessment
• Rolling out EU compliance self-assessment
• Assess gaps and overall readiness for AEO
• Traffic light report
• Improvement plan
Traffic light report and improvement plan

18. Automated Customs
Solutions

19. Electronic customs filing
• Limited to exports (interfaced with SAP)
- Export declaration filing
• Export Trade documents
- Commercial (Customs/shipping) invoice
- EUR.1/A.TR
- COO
- LTDO (Long Term Declaration of Origin)
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20. Automated Preferential Process Flow in FTA - (exporting plant point of view)
Vendor Customer
Customer
Vendor
? Business Task 1 Business Task 2 Business Task 3
Vendor Declaration Preference Calculation
Management Proof of Origin
Sales Product XYZ documentation
Look up missing/expired VDs
BOM Shipping
Plant
S1 S2 S3 •Declaration of Origin
Dunning/Solicitation
? on the Invoice or Packing list
C11 C21 C31
• Fax, E-mail C12 C22 C32 •European docs: EUR1, A.TR
•Printing …………………. •Long Term Declaration (LTD)
•Portal
E1 E2 … E3 E4 E5
Get VD ? MX EU CN ?
Proof of Origin
Legal Rules of Origin
for Preference Calculation

21. Automated Export Control

22. CP/S Global Design Model - Export
 Global Design Model - Export: The ACS global export design model
consists of an integrated solution managed by Automated Tool with SAP
hold management.
 3 TRADE APPROVED solution variants
 Solution based on regional requirements and site risk profile
Export Control Function: Gold Silver Bronze
Restricted party screening via Automated Tool with soft alerts
Restricted party screening via Automated Tool with hard blocks
SAP Embargo controls with hard Blocks
SAP Embargo controls on returns with hard blocks
Foreign trade data missing with hard blocks (ECCN, HTS or COO)
Missing end user or end use results in hard blocks
Automated Tool license determination with hard blocks
Automated Tool license management and decrementing
SAP license determination with hard blocks
SAP license management and decrementing
Material master fields for ECCN, HTS and COO
SAP or automated export tool docs (C/I and SLI)

23. Sensitive country analysis - Origin
Qualify Honeywell for sales by verifying non-US content
Automation improves visibility on flows and costs and increases compliance
level and generates savings and realizes growth

24. What is denied party screening & why is it required?
• Export control laws make it unlawful for Honeywell US and its non-US
subsidiaries to conduct business with entities that
- violate export regulations; or
- are involved in proliferating weapons of mass destruction; or
- Are involved in narcotics trafficking; or
- represent embargoed or terrorist-supporting countries.
• Honeywell is liable if it does business with an entity involved in these
activities. We cannot avoid liability by saying that we did not know of
their activities.
• The Tool provides several lists that includes the names, addresses and
reason for denial for all restricted organizations, companies and
individuals.
All end users must be screened against these denial lists
to ensure compliance!

25. How does this impact our job & what to expect?
• Customer and Vendor Account Creation
– When creating customer and vendor accounts – immediate transfer to
Automated Tool for denied party screening (DPL)
– If Automated Tool determines that there is a match, then order cannot be
placed using this party until the DPL hit has been resolved in Automated
Tool
• Order Entry – Party Creation at Order Level (Sales and delivery order)
– If a customer is added ad hoc at the order level, then party info transferred
to Automated Tool immediately for DPL screening
– If Automated Tool determines that there is a match, then a delivery block will
be created on the line items in the order until possible match resolved in
Automated Tool.
• The SAP user will be notified via warning messages of any DPL
matches, as well as daily summary reports e-mailed to a designated
mailbox.
– If a parties is changed after delivery, then the export docs and PGI will be
blocked and the user will receive a workflow message

26. Lessons learned
• Change management
- From fully outsourced trade compliance to semi-outsourced
 Business do underestimate the impact
 Automation doesn’t mean that everything is automated: e.g.:
• Trade Data Management: garbage in garbage out
• Export control
» Before: no order screening only manual party
screening
» Automated Tool: order screening => increased
involvement by entities and functions: Sales, Order
Admin and purchasing
» “One time only” customers : repeated false hits
• Customs
» Stricter processes (“less” flexible): people do
complain
» PCT: discipline on trade data management up to
26 level of components
HONEYWELL - CONFIDENTIAL File Number

27. Benefits
• Increased compliance level
- Helps for AEO-certification
• Increased awareness across functions
- Better visibility: Trade compliance more then just “stamping”
documents
- Increased understanding and appreciation of our function
- Trade also means sales not just blocking or fire fighting
• Better reporting to senior management
- Metrics for senior management
- Duty savings reports
- => part of quarterly meeting reviews with CEO
• Funding to get additional resources
• Funding to get more and better automation
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28. Non Productivity vs. Productivity – Conclusions
ACS would incur $110M in Annual Duty Costs If It had No Global Duty Avoidance Program
Year Import Value Duty Spend Duty Saved Duty Liability Duty Ratio
2011 3,474,646,476 59,807,627 50,689,151 110,496,778 3.18%
2010 3,142,132,983 57,035,301 53,368,281 110,403,582 3.51%
ACS Duty Spend is $51M Annually Because of its Global Duty Avoidance Program
Year Import Value Duty Spend Duty Saved Duty Avoided per $1 Import Actual Duty Ratio
Value
2011 $3,474,646,476 $59,807,627 $50,689,151 85 cents 1.72%
2010 $3,142,132,983 $57,035,301 $53,368,281 93 cents 1.82%
46% Reduction in Duty Liability achieved through our Duty Avoidance Mechanism

29. 2011 Productivity
Import Volumes in USD Duties paid in USD
Country Import Value 2% 30
3% Country Duty Paid
Millions
42%
US 1,554,275,102 4% 7% US 25,258,564 25
MX 686,677,631
MX 584,716
20
CN 402,811,856 7% 45% CN 4,352,089
CA 248,372,627 15 22%
CA 2,756,762
GB 140,055,300 12%
GB 4,452,195 10 15%
IN 122,098,503 IN 13,085,576 7% 7%
DE 75,202,161 20% DE 426,402 5 5%
1% 1%
Other 245,153,296 Other 8,891,323 0
TOTAL 3,474,646,476 US MX CN CA GB IN DE Other TOTAL 59,807,627 US MX CN CA GB IN DE Other
Duty Rates in USD Duty Savings in USD
Top Importing Countries
Country Import Value Duty Paid Duty % Country Savings Program Duty Savings
US 1,554,275,102 25,258,564 1.63% US 15,383,204 Processing 19,069,415
MX 686,677,631 584,716 0.09% MX 10,910,333 NAFTA 17,317,626
CN 402,811,856 4,352,089 1.08% CN 9,254,410 Duty Drawback 8,814,864
CA 248,372,627 2,756,762 1.11% CA 1,491,493 FTZ/Bond 2,081,102
GB 140,055,300 4,452,195 3.18% GB 1,640,856 Other FTA/GSP 1,672,972
IN 122,098,503 13,085,576 10.72% IN 10,358,852 HTS 285,373
DE 75,202,161 426,402 0.57% DE 855,381 EU Charlton House 280,125
TOTAL 3,474,646,476 59,807,627 1.72% Other 803,620 Other 179,680
TOTAL 50,689,151 TOTAL 50,698,151
Highest Duty Rate %
Country Import Value Duty Paid Duty %
AR 5,837,970 892,968 15.30%
BR 26,673,072 3,644,519 13.66%
VE 2,765,852 334,892 12.11%
IN 122,098,503 13,085,576 10.72%

30. Next Steps – wish list
• Broker Management
- Two way interface : PO’s and metrics reporting
- Import metrics
 Duty savings and risk assessment tool
 Reporting
• Trade data improvements
- Global HTS-classification tool
- Origin solicitation and management
• Further improve our intranet tools
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31. Any Questions?
We’ll always try to answer and support the business but answer can be dependent from
support of others
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32. Thank you for your attention.
Bruno Fransman
Global Customs Compliance Director
Bruno.fransman@honeywell.com
+32 2 728 20 38