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Trade Compliance Policy

1. Background and purpose

Building on the Sandvik Group’s core values of “Customer Focus, Innovation, Fair Play and Passion to Win”, Sandvik is committed to responsible global trade and the development of appropriate measures, including those covering trade compliance regulations (customs, sanctions and export control).

Sandvik moves goods, tangible as well as intangible, domestically and across borders. When exporting or transferring goods, it is vital to comply with applicable trade laws and trade regulations. This will ease the cross-border movement and reduce the risk of fines, penalties, delays of shipments, loss of export/import privileges, criminal liability, and damage to the Sandvik brand. Complying with trade laws could enable free trade and cost-saving opportunities that are beneficial for Sandvik and our Customers. This policy aims to establish a group framework for trade compliance processes and procedures applicable for all Sandvik entities. The implementation of these processes and procedures applicable to all Sandvik entities. The implementation of these processes and procedures should result in robust and well-functioning trade compliance management within Sandvik.

2. Definitions

  • Customs value

    The customs value is the value of a product for customs purposes declared in the customs declaration at the time of import/export. Customs duties are generally applied based on a percentage of the customs value.

  • Embargo and Sanction

    An embargo is the complete ban or prohibition of trade by one country or a group of countries with another country or a group of countries. A sanction is a trade restriction or a trade prohibition of certain type of product, service, or technology to specified countries, entities and/or individuals. Common reasons for imposing sanctions include e.g. nuclear non- proliferation and humanitarian purposes.

  • Export Control Status

    The way a product and its related technology is classified according to applicable export control lists that are stated in export control regulations. Products are given an export control code (e.g., ECCN for dual-use goods) that defines if and in what way the specific product or technology is controlled according to regulations and if the product requires an export license.

  • Export Authorization

    A document or a general approval issued by a relevant competent authority authorizing the export of a controlled item (tangible or intangible).

  • Extraterritorial Reach

    There are countries whose export control legislation has an extraterritorial reach (e.g., the US). This means that the legislation needs to be considered even for transactions that occur outside of these countries.

  • HS classification

    The process of assigning numerical HS tariff codes to products for import or export.

  • HS tariff code

    Identification numerical code that describes the type of product, used as a worldwide standard for international trade, and typically defines product's rate of duty and its import and export admissibility. It is also called HS code, commodity code, tariff code, HTS code, etc.

  • Intangible goods

    Intangible goods can be drawings, software, technology, and other forms of data. Typical ways of transferring intangible goods are via e-mail, servers, training and/or conversation.

  • Non-preferential origin

    The non-preferential origin (commonly known as “made in” or “Country of Origin”) of a particular product is either the country where the product has been produced in whole or, when more than one country is involved in the production, the country where the last substantial transformation was carried out. There are criteria, often product specific, to determine whether a transformation is substantial or not. Such criteria may differ from country to country.

  • Preferential origin

    The preferential origin is the status of the product used for free trade and to benefit from preferential tariffs at import. The preferential rules of origin define if a product could obtain preferential origin under a specific preferential or free trade agreement between two or more parties.

  • Prohibited Territories

    These countries and territories are decided by the GEM based on proposals from Sandvik 's Compliance Functional Council and documented according to set procedure. The countries and territories are presented on the trade compliance Intranet page

  • Prohibited Third Parties

    (i) Individuals and entities listed by the US as Specially Designated Nationals (SDN), (ii) individuals/entities which are subject to asset freezes imposed by EU and UK, (iii) individuals/entities which directly or indirectly are owned 50% or more in the aggregate by US SDNs or individuals/ entities which are subject to EU and UK asset freezes, (iv) individuals/entities which are controlled by individuals/ entities which are subject to EU and UK asset freezes, (v) individuals/entities designated as prohibited by Sandvik on its internal Gray List and (vi) individuals/entities established in a Prohibited Territory, except when required for legally permitted trademark registrations. Sandvik may not conduct business with any Prohibited Third Parties.

  • Restricted Parties

    An individual or entity who appears as an entity or individual on a sanctioned or restricted list (i.e. not lists with SDN:s or individuals or entities subject to asset freezes by US, EU or UK) by the U.S. government (for example BIS’ entity list) or any other country's government (for example Japanese Meti) or otherwise subject to limited sanctions. Sandvik may only conduct business with Restricted Parties under limited circumstances and when permitted under the Restricted and Prohibited Party Screening Procedure.

  • Restricted Party Screening (RPS)

    The process of screening all third parties involved in business relations with Sandvik (customers, suppliers, intermediaries). The purpose of this process is to screen all third parties against sanction lists to comply with governmental lists of denied and restricted parties. The approved tools used are Trade Express and SAP-GTS or any other approved screening tool.

  • TC Network

    Sandvik Trade Compliance Network is a group of employees appointed by the Business Areas and/or Divisions that have been assigned responsibilities within customs and/or export control areas

  • Third Party

    A legal or physical person which is not part of or employed by the Sandvik Group

  • Weapons of Mass Destruction

    Chemical, biological or nuclear weapons, other nuclear explosive devices or unmanned aerial vehicles including missiles, rockets and drones capable of delivering such weapons.

3. Scope

This policy describes the responsibility for all Sandvik employees and entities regarding trade regulations globally. The policy covers the rules related to HS Tariff Codes, Country of Origin and Free Trade, Customs Valuation, Classification and Export Licensing, Restricted Party Screening, and Embargo and Sanctions Management.

4. Audience

This policy applies to the following entities within the Sandvik Group:

  1. All entities

Furthermore, this policy also applies to all Sandvik employees, anyone working for or on behalf of Sandvik and employees of Sandvik controlled joint ventures.

5. Policy statement

In accordance with Sandvik Code of Conduct, Sandvik is committed to complying with applicable trade laws and regulations in the countries where we operate.

5.1 Customs

5.1.1 HS Tariff Codes

Sandvik is legally required to declare all products to Customs at the time of import and export. We shall state a specific customs numeric code called HS tariff code in customs declarations for each product. Sandvik shall assign correct HS tariff codes to all products consistently, following the rules set by the World Customs Organization. A common global approach will enable compliance and synergies throughout the supply chain.

5.1.2 There Country of Origin

There is no single international definition of the origin of a product; nevertheless, a distinction is made between two systems: non-preferential and preferential origin. The rules for non-preferential origin determine the economic origin rather than the geographic origin. The economic origin is not the country from where the goods are exported, and it depends on the origin of all components in the product and in what countries the transformation takes place. Even though there is no global harmonization, and each country defines its national legislation, many have based their rules on the concepts set out by WTO: wholly obtained products, or last, substantial, economically justified processing criteria (change in tariff classification, added value, or specific processing).

In the case of preferential origin, the rules are written in the bilateral/multilateral free trade agreement or tariff concession, e.g., Generalized System of Preferences (GSP).

5.1.3 Non-preferential Origin (“made in”)

There are legal requirements to declare non-preferential origin upon import and export according to local legislation. All Sandvik entities and businesses shall always state the correct non preferential origin at the invoice and on the customs declarations. Some countries also require physical marking of the non-preferential country of origin (“made in”) on the product or package, e.g., labeling, engraving. All Sandvik entities and employees shall follow the national legislation of the countries of export and import. The physical marking requirements applicable for a particular country can be obtained from the local customs authorities or the BA Trade Compliance organization.

5.1.4 Free Trade and Preferential Origin

When Sandvik benefits from free trade, all goods shall fulfill the applicable free trade agreement rules, and preferential origin shall be declared for all products. The rules for determining the preferential origin are product-specific and outlined in each free trade agreement. Please note that the rules for determining preferential original are not the same as the non-preferential rules of origin (see the definitions section above).

5.1.5 Customs Valuation

Sandvik is legally required to declare the customs value for all products at the time of import and export in customs declarations. Customs valuation rules are set out by the World Trade Organization and apply globally, with some country or region-specific differences. Any value declared for Sandvik products shall meet both global and local requirements. All goods shall be valued at arm ́s length price, meaning the customs value between related parties shall be as between independent parties.
Further details about customs can be found in the Customs Procedure.

5.2 Sanctions and Export Control

All Sandvik entities shall adhere to applicable embargo, sanctions, and export control regulations, including national sanctions and those with Extraterritorial Reach. However, as a breach could impair the Group’s ability to provide goods and services to its customers, the Group has established a policy that may be more stringent than what is permitted by law and regulation.

The Group adopts a policy of not permitting any business, except legally permitted trademark registrations, with parties in certain countries or territories (“Prohibited Territories”). These countries and territories are decided by the GEM based on proposals from Sandvik's Compliance Functional Council. The Prohibited Territories are presented on the Trade Compliance Intranet page.

The Group also adopts a policy of not permitting any business with:

  • any Prohibited Third Parties;
  • any Restricted Parties except when permitted under the Restricted and Prohibited Party Screening Procedure;
  • any party, if there are reasons to suspect that our products will be used in relation to (i) Weapons of Mass Destruction or (ii) military items in a country subject to a UN, US and EU arms embargo, except when assessed as legally permitted as a result of the review required by the Export Control Procedure and, in case of (i) that it also is approved in writing by the relevant division President (herein “prohibited use”); or
  • any party, if there are reasons to suspect that our products will be diverted, for example through Third Party intermediaries, in breach of applicable embargoes, sanctions, and export controls including for a prohibited use, to a Prohibited Third Party or to a Restricted Party other than when permitted under the Restricted and Prohibited Party Screening Procedure (circumvention of trade restrictions).

To mitigate this risk of non-compliance the following applies:

5.2.1 Export Control Classification and License Management

All Sandvik products, software, technology and services, shall have a defined export control status in accordance with applicable export control regulations in each relevant jurisdiction. Export authorization requirements are based on many variables. In order to understand whether an authorization is required for a specific product, the export control status, end user, intended end use and destination country shall be known. This is further detailed in the Export Control Procedure.

5.2.2 Restricted Party Screening

All Sandvik entities shall conduct Restricted Party Screening of all Third Parties involved in business relations with Sandvik. Restricted Party Screening shall be performed in compliance with applicable data privacy laws. This is further detailed in the Restricted and Prohibited Party Screening Procedure.

5.2.3 Anti-circumvention

All Sandvik entities shall manage its risk for circumvention of prohibitions through controls proportionate to the risk. This is further detailed in the Prevention of Circumvention of Trade Restrictions Procedure.

6. Exceptions

N/A

7. Roles and responsibilities

7.1 Group Function Third Party Management (Trade Compliance)

  1. Ensuring/Maintaining a proportionate Trade Compliance Program within Sandvik.
  2. Ensuring that this policy and related documents are communicated and kept up-to-date.
  3. Ensures that this Trade Compliance Policy is specifically communicated to BA General Counsels and BA Compliance officers.
  4. Preparing relevant Group common procedures, work instructions, guidelines, templates and training materials.
  5. Coordinates the TC Network to communicate, monitor, find synergies and share information about best practices.
  6. Providing tools, subject matter advice and support to the Group and Business Areas (“BAs") to support their implementation.
  7. Implementing and overseeing, in collaboration with the BAs, Group common systems and internal processes necessary to implement this policy.
  8. Provides requirements and content for the self-assessment tool Compliance House within the customs and export control areas.
  9. Provides professional advice as an industry representative to relevant and appropriate agencies of state in respect of the drafting and legislation of trade compliance laws and regulations and their implementation.
  10. Monitoring of implementation this policy and related Group Procedures, by Group and BAs, and reporting through the Group Head of Compliance on adherence to the Group Executive Management and the Audit Committee.

7.2 Business Area

Each Business Area should:

  1. Appoint a manager, or similar, to join the TC Network and who is responsible for driving the implementation of this policy within the BA as a whole and ensure sufficient resources to implement and adhere to this policy and any accompanying procedures. Such resources may include additional trade compliance roles such as TC Expert, TC Coordinator and/or TC Specialist. As a minimum, the BA Trade Compliance Officer shall be supplemented by at least one trade compliance contact person for each site where import/export activities are conducted;
  2. Implement this policy and the supporting documents throughout their respective organizations;
  3. Communicate this policy to BA Management and to Relevant Employees in the BA and divisions;
  4. Ensure that the BA as a whole follow the Group common processes and systems to facilitate Group wide compliance with this policy;
  5. Implement localized procedures and work instructions as required to meet the requirements of this policy and the supporting documents with the support of the subject matter experts;
  6. Encourage employees to seek timely advice whenever they are considering an arrangement that gives any doubt as to whether it would achieve business objectives in a legitimate way;
  7. Ensure that any known or suspected breaches of this policy are reported to the most senior Compliance Officer in the BA, the BA General Counsel, the Group Head of Trade Compliance, and the VP Head of Group Compliance,
  8. Investigate alleged or suspected breaches of this policy under the oversight of the BA General Counsel and taking required remedial actions;
  9. Report trade compliance risks, policy implementation status, and maturity on an entity level using the Sandvik Compliance House tool. It provides an action plan to mitigate risks, and progress is visually reflected in Red, Amber, or Green.
  10. Ensure that there are mechanisms in place to monitor the implementation of this Policy and related procedures throughout the BA and divisions and regularly report on the status of implementation to the Group Head of Trade Compliance;
  11. Demonstrate leadership and setting the tone that Sandvik does not tolerate anti-competitive behavior and will exercise consequential remediation in the event of a breach.

7.3 Employees

  1. Responsible for adhering to the Trade Compliance policy and procedures in their daily operations;
  2. Adhere to the Trade Compliance requirements described in the Sandvik Code of Conduct Section 2.3;
  3. Completing the mandatory e-learning on Trade issues as outlined in the Training Procedure;
  4. Speaking up (according to the Speak Up Policy) and reporting any concerns of irregularities and or improper actions not complying with Trade law, this policy, and the supporting documents.

8. Monitoring of compliance

Compliance with this policy will be monitored through:

  • The Compliance House;
  • Internal control as minimum through the control IDs: O2C.03, P2P.01, P2P.13, IM.01;
  • Annual target setting and follow-up in the Compliance Functional Council; and
  • Internal Audit

Compliance status will be reported to the Audit Committee every quarter.

9. References to associated policies and procedures

  • Section 2.3 of Sandvik Code of Conduct
  • Compliance Third Party Management Policy
  • Customs Procedure
  • Export Control Procedures
  • Restricted and Prohibited Party Screening Procedure
  • Prevention of Circumvention of Trade Restrictions Procedure

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