Paperless Trade

Online Trade Tools Now Crucial To Supply Chain Efficiency

By David Verhotz

In today’s fast-paced international business environment, the time required to process trade documents can present a challenge to the supply chain and cash flow. Cash and trade converge, as do the physical and financial supply chains, in the effort to improve working capital efficiency. While exporters want to receive payment quickly and with certainty, importers want to know when goods are arriving in order to better manage inventory levels and cash positions.

Trade managers are faced with two major challenges in the financial supply chain. First, processing letters of credit and other trade documents extend the transaction cycle. Foreign trade transactions require an overwhelming amount of paper documentation to manage. These include L/C applications and copies, cover letters, purchase orders, packing lists and certificates. Manual preparation requires time and effort and is prone to error. Second, tracking and reconciling payments also takes time. Waiting for faxed or mailed L/C reports to arrive from the bank further delay reconcilement and analysis. Fortunately, online services or software are now available, and help reduce paper handling and facilitate timely retrieval of payment information.

Automate Your L/C Process

Whether you’re an importer or exporter, online systems can help speed preparation of your trade documentation. These services enable electronic creation and submission of import and export letters of credit and other trade documents via the Internet.

Online systems feature customized template forms that can help speed processing when you are buying from an overseas vendor, for example.

An importer can pre-format L/C templates with vendor name, address, merchandise description, frequently used clauses and phrases, and other repetitive information. You can also build and store online a database of overseas vendors, overseas banks, freight forwarders, agents and other suppliers for later use. With one-time input, you have all the information you need in one place.

These services also allow a user to create a new L/C from an old one, which helps reduce redundant data input in cases where the terms of the L/C remain the same for each shipment. An importer can also interface their ERP purchase order system with a bank provided, Internet-based purchase order manager that will link and download data to import letters of credit, import collections, corporate issued letters of credit, and open account transactions and will then be interfaced to the A/P system to complete the supply chain.

Electronic L/C Presentment

Electronic presentment of L/Cs may help eliminate even more paper handling. Exporters can structure their letters of credit to allow them to electronically present drawings and shipping documents, which then can be accessed by the banking system through a secure web site.

In April 2002, the International Chamber of Commerce published the Electronic Uniform Customs and Practice rules for electronic L/C presentations. The eUCP is a supplement to the Uniform Customs and Practice 500, the rules for letters of credit used by banks worldwide. Standards are now in place, but electronic L/C presentment has yet to enjoy widespread use. While foreign companies have fax and e-mail capabilities, many still do not have the technology necessary to create or view documents online.

Timely Payment Information

Online systems can help an organization obtain timely payment information and act accordingly. This streamlines payables and reduces delays commonly caused by information gaps.

For example, importers can go online to view information on open letters of credit or payments in progress. They can view and approve a payment from any computer with Internet access. Likewise, exporters can check on the status of an export collection using the Internet.

Still other services automate the reconcilement process. Some banks will deliver to customers a daily electronic file with deposits matched to the corresponding L/C payments. This eliminates manual reconcilement, telephone calls and waiting for bank statements.

Many online services offer comprehensive reporting as well, enabling a user to go online to view transaction history and generate reports. Finally, some banks can provide clients with CD-ROMs that store electronic images of a month’s worth of L/C or collection shipping documents.

Several banks, including KeyBank, provide electronic international trade services. These services will allow you to use the Internet to create documents, submit requests and retrieve transaction details for all international transactions. Look for a service that provides an automated e-mail alert system, which will keep you informed of completed activities, transaction status and upcoming deadlines, including shipment and expiry dates.

A comprehensive solution that integrates cash management, trade settlement and finance, and logistics management is the key to managing information across physical and financial supply chains. Banks are redefining their traditional role as a trusted intermediary in cross-border trade through use of the Internet and sophisticated technology, to integrate suppliers and buyers online.

David Verhotz is a senior vice president and head of KeyBank's international division. He has over 26 years of international banking experience and is responsible for all of KeyCorp's world-wide foreign correspondent banking relations and KeyCorp's sovereign risk management. David can be reached at (216) 689-3684 or david_verhotz@keybank.com.