Export Management Module 1

1. Export ManagementModule 1

2. Journey of the day • Introduction • Why Export - Definition and environment • DIAGEO specifics on Export • Rules and Regulation for Export • Simulation of Export Cases • Customer Service Focus • Conclusion Coffee Break about every 90 mins. Lunch at about 13:00

3. Introductions I N T R O D U C T I O N S

4. Gilles Lauga • Delos partner since the origin (2003)Consultant since 1990. • CFPIM (Certified Fellow in Production and Inventory Management) • Team coach, educated by Mediate-coaching • 15 years experience in industry • Iran, Iraq, Venezuela, Morocco, Luxemburg • Pharmacy & OTC, sport goods, chemicals, aeronautics and space, electrical equipments, … • Speaks French, Spanish and English.

5. Learning objectives of the day • Understand what Export means • Raise awareness about DIAGEO specific requirements (company and products) relevant for Export • Understand the basic principles of Export Management and its rules and regulations • Experience the impact of Export Order Management in the light of the wider Supply Chain • Be aware of the interdependencies between Export Order Management and the Vision “Customer led Relationship”

6. Journey of the day • Introduction • Why Export - Definition and environment • DIAGEO specifics on Export • Rules and Regulation for Export • Simulation of Export Cases • Customer Service Focus • Conclusion Coffee Break about every 90 mins. Lunch at about 13:00

7. Why Export –Definition and environment Definition of Export: By the UNESCO: To sell and deliver goods or services to a buyeroutside your country. By the Finance community: To send or transport goods abroad out of a customs territory; to sever them from the mass of things belonging to one country with the intention of unitingthem to the mass of things belonging to a foreign country.

8. Why Export –Definition and environment Why do we need to Export: Every adult adores one of our Brands • DIAGEO Brands have to be made available globally • Growth targets can only be achieved if global distribution is ensured • Distribution in more than 180 countries • Local production is often restricted by • legal requirements • Brand heritage • Marketing strategy

9. Why Export –Definition and environment Why do we need to Export: Create commercial, customer led Supply Chain Nemo @ Sept 2006 Excellence in export management is one of the Enablers for this vision.

10. Diageo –a global span Ref. Fortune Magazine dd. 19th of March 2007 Top Companies Beverage Sector

11. Why Export –Definition and environment Why is it so complex to export products? • Individual Customs & Excise regulations • Individual laws • Different currencies / fluctuating exchange rates • Different business cultures and religions • Distance between countries • Different languages

12. Why Export –Definition and environment What regulatory Organisation gets involved? • Customs & Excise • EU export legislation body • Local Ministry of economy or finance • Government organisation for statistics • Chamber of commerce • Others • depending on country and requirements

13. Breakout session • What is your role as Customer Service along this process? • What are the relevant elements to consider for your role? • Write them down on the template • Present them to the group • 3 Teams 15 Minutes to prepare 30 Minutes to present Copy write Corporate Edge LTD 2003

14. Breakout sessionProcess template:

15. Why Export – Definition and environment • General Order to Cash Process for Export Order Request Order Entry Order Approval Order Confirmation Inventory Management • Entering: • Into ERP System • Approving • Legal's • Licenses • Pricing • Credit • Content • Build on: • Contract • Import licenses • Long term agreements Confirming • Legally accept order under export-Terms Physical availability or production order Payment Receiving Cash Order Billing Shipping Receiving Documentation • Build on: • Letter of Credit • Bank agreement • Issuing Invoice Shipment: Physical delivery with required documents Documents: Producing and approving required documents • Approving: • Payment terms • Amount • Collections • Build on: • Letter of Credit • Bank agreement • Issuing Invoice

16. Journey of the day • Introduction • Why Export - Definition and environment • DIAGEO specifics on Export • Rules and Regulation for Export • Simulation of Export Cases • Customer Service Focus • Conclusion Coffee Break about every 90 mins. Lunch at about 13:00

17. DIAGEO specifics • Regulatory requirements • Alcohol regime • Legal and religious issues • Tax and Duty • Special tax and duties on alcohol • Relationship with Markets • Supplier Replenishment Markets (SMR) • Usually own Organisation (IMC), Inter-company trading • Less order management requirements – rather controlling • Make to Order Markets (MTO) • IMC and 3rd Parties customers • Physical order placement through Service Centre

18. What have you learned • Definition of Export • The drivers for complexity in an export environment • Export Management Process (Order to Cash) • DIAGEO specific requirements Copy write Corporate Edge LTD 2003

19. How do you feel?

20. Journey of the day • Introduction • Why Export - Definition and environment • DIAGEO specifics on Export • Rules and Regulation for Export • Simulation of Export Cases • Customer Service Focus • Conclusion Coffee Break about every 90 mins. Lunch at about 13:00

21. Content Rules and Regulation for Export • Incoterms and Transportation • Receipt of Export Order • Export Documentation • Invoicing and Payment • Import License and DIAGEO specifics

22. Incoterms and TransportationRelevance along the process: Order Request Order Entry Order Approval Order Confirmation Inventory Management Payment Receiving Cash Order Billing Shipping Receiving Documentation

23. Incoterms and TransportationIncoterms • Rules and Regulations for Incoterms are a uniform set of international rules • Promulgated by the International Chamber of Commerce in Paris • For the interpretation of the terms most commonly used in international contracts for the sale of goods. (ref. www.giagroup.com/terms-of-trade-i.cfm)

25. Incoterms and TransportationMost used Incoterms within DIAGEO • FREE ON BOARD (FOB) • Seller bears risk/costs up to the ship’s rail • Buyer bears risk/costs from the time the goods move across the ship’s rail • COST AND FREIGHT (CFR) • Seller bears risks for goods up to the ship’s rail at port of shipment • Buyer bears risk from ship’s rail at port of shipment and costs from port of discharge • COST, INSURANCE AND FREIGHT (CIF) • Seller bears risks for goods up to the ship’s rail at port of shipment • Seller buys marine insurance for the buyer at minimum coverage • Buyer bears risk from ship’s rail at port of shipment • DELIVERED DUTY UNPAID (DDU) • Seller bears risk and costs for goods in transit • Buyer is responsible for customs formalities and any demurrage cost

26. Incoterms and Transportation Transport Methods; what type of transport exist • Standard • Sea freight • Road • Standard - Express • Road • Exception • Rail • Very Urgent • Airfreight • Road But regular Transport method is usually already agreed and often a combination of several.

27. Incoterms and TransportationConsignee (ship to.....) • Acts as a receiving agent for and on behalf of the customer • Acts as a legal representative for and on behalf of the supplier • Confirm arrival goods (time / quality) • Confirm purpose of the shipment • Acts as a payment agent Copy write Corporate Edge LTD 2003

28. Incoterms and TransportationContract of Carriage • Contract between DIAGEO and the carrier to transport of products. • Contract of carriage versions • Bill of Lading - for sea transport • Airway Bill – for Airfreight • Way Bill – Short form Bill of lading • CMR – Road freight The contract of carriage is the base for any transportation

29. Incoterms and TransportationInsurance • Liability vs. Insurance • The value of DIAGEO’s products (selling price + duty + taxes) • Compliance with Insurance requirements • Checking and approving carrier • Align with Insurer Copy write Corporate Edge LTD 2003

30. Incoterms and TransportationInsurance • The insurance is linked to the risk transfer defined by the agreed Incoterms (International Commercial Terms) • Cover for DIAGEO is provided by Captive Insurance Company (AGSIC) and External Insurers • Diageo Retainsthe first £50,000,000 of losses. • The Group retention heightens the need for managed risk taking. Which is linked with the selection and certification of carriers, consignees, etc. • In the case of an insurance incident all necessary documentation must be provided within 3 months (process description attached to Course pack) Copy write Corporate Edge LTD 2003

31. Receipt of an export orderRelevance along the process: Order Request Order Entry Order Approval Order Confirmation Inventory Management Payment Receiving Cash Order Billing Shipping Receiving Documentation

32. Receipt of an export orderFollowing information needs to be in place • Distribution Agreement / Service Level Agreement (SLA) / Contract • Local Product registration, Products licenses for the market • Agreement for shipping (Carrier, method of transport, destination details, Incoterms, etc.) • Customs & excise information (if needed) • Payment terms, bank details & acknowledgement, currency • Definition of legal requirements (packages, labels, etc.) Copy write Corporate Edge LTD 2003

33. Receipt of an export orderFollowing information should be confirmed to customers • The order acknowledgement should contain • Confirmation / amendments of previously mentioned aspects • Payment instructions / process confirmation Copy write Corporate Edge LTD 2003

34. Export DocumentationRelevance along the process: Order Request Order Entry Order Approval Order Confirmation Inventory Management Payment Receiving Cash Order Billing Shipping Receiving Documentation

35. Export DocumentationExport documentation is required to comply with: • Customs & excise regulations • Banking payment • Transportation

36. Breakout session • Three Teams • Asia / International • America / Latam • Europe • Develop a list of documents that are required to export into the respective region • Write them on Post it’s and put them at the appropriate point on the process poster • Time • 20 mins preparation and mapping • 5 mins each Team presenting to group Copy write Corporate Edge LTD 2003

37. Export DocumentationKey export documents we will look at • Bill of Lading • AAD • SAD • Certificat of Origin • EUR1 / ATR

38. Export DocumentationBill of Lading • A bill of lading is used to confirm • The receipt of a shipment of goods • Indicate vessel for transport and destination • Indicate terms for transportation • Shipment confirmation for payments • This document covers a range of Commercial and legal functions • Evidence shipment of Cargo • Ship on board bills • Evidence of a Contract of Carriage • Document of Title to Cargo • More detailed information see handout Copy write Corporate Edge LTD 2003

39. Export DocumentationAAD (Accompanying Administrative document) • Type of delivery note which must be used in the duty-suspended movement of excisable goods between Member States of the EU. The accompanying administrative document is only used within the EU. • The document has to be: • Identify products already been subject to excise duty • Providing single identification • Accompany movement of products Copy write Corporate Edge LTD 2003

40. Export DocumentationSAD (Single Administration Document): • All goods exported to the EU (or non EU goods moved between member States) must be declared to the customs authority of the respective member State using the SAD, which is the common import declaration form for all member states, laid down in the community Customs Code(Regulation EEC 2913/92) • More detailed information see handout Copy write Corporate Edge LTD 2003

41. Export DocumentationCertificate of Origin • A document, required by foreign governments, declaring that goods in a particular international shipment are of a certain origin. • Customs offices will use this document to determine whether or not a preferential duty rate applies on the imported products and in respect to legality. • This document needs: • Approval by the chamber of commerce • The Chamber of commerce needs to have access to documents to assess origin • It certifies origin not country of shipment(means it had to underwent substantial change) Copy write Corporate Edge LTD 2003

42. Export DocumentationEUR1/ATR (Preference Documents) • The EUR1 form entitles originating UK or EU goods to preferential import duties (list of markets attached) • Confirms that the goods "originate" in accordance with EU rules • The same is relevant for the ATR document (Turkey) • Further details see attachment Copy write Corporate Edge LTD 2003

43. Invoicing and PaymentRelevance along the process: Order Request Order Entry Order Approval Order Confirmation Inventory Management Payment Receiving Cash Order Billing Shipping Receiving Documentation

44. Invoicing and PaymentExport Invoice 2 types of “Invoices” do exist: • Pro-forma Invoice • Pre Commercial billing document • Used for tax and customs duties calculation. • Commercial Invoice • Financial and cash purposes • Record or evidence of transaction Copy write Corporate Edge LTD 2003

45. Invoicing and paymentRules for Commercial export Invoices • Some countries require specific language in the commercial invoice • Local or international languages • Declaration on commercial invoices • Wording in some countries • Certification and/or legislation of commercial invoice • Chamber of commerce or Consulate Copy write Corporate Edge LTD 2003

46. Breakout session • 2 Teams • List all Payment methods on Post its • Rank them along a risk and complexity matrix (each Term in relation to risk of payment and complexity of handling) • Time • 15 mins preparation and mapping • 5 mins each Team presenting to group Copy write Corporate Edge LTD 2003

47. Out of the box Solutions Invoicing and PaymentTerms of payment High Complexity Credit Card Pre – approved credit Letter or Credit Low Risk High Risk Cash against Documents / Documentary letter of Credit Pre – Payment / Cash in advance Open Account Low Complexity

48. Invoicing and PaymentTerms of payment generally used by DIAGEO • Pre-payment / Cash in advance • Safest method • Timelines critical • Letter of Credit L/c’s • Bank's promise of paying the exporter • Often a letter of credit issued by a foreign bank is confirmed by a local bank. • Irrevocable and revocable (not advisable) L/c’s do exist • Cash against Documents / Documentary letter of credit and drafts • Bank is acting as an intermediary/guarantee. • Close to Letter of Credit • Open Account • Payment within a certain no. of days after Invoice • Established relationship • Further information please see attachments Copy write Corporate Edge LTD 2003

49. Import License and DIAGEO specificsRelevance along the process: Order Request Order Entry Order Approval Order Confirmation Inventory Management Payment Receiving Cash Order Billing Shipping Receiving Documentation

50. Import License and DIAGEO specificsImport license • An import license is a document issued by the national government authorising the importation of certain goods into its territory. • Some countries (e.g. Nordics) requiring an import license for importation of alcohol beverages prior export • The local Consignee / Importer has to ensure the required license is existing and valid • The local customs & excise Organisation can stop, ban or destroy (depending on local regulation) the shipment if the required license is not available