BANK PAYMENT OBLIGATIONS - LALIVE · BNP Paribas Fortis MU (Mauritius) Bank of China, Changzhou Standard Chartered, India KBC AfrAsia Bank Limited Bank of China, Dongguan JP (Japan)

BANK PAYMENT OBLIGATIONS The Way Forward in International Trade?

Geneva, 14 November 2013

Agenda

Welcome: Caroline Ming (ACCE)

Introduction and panel moderator: Alexander Troller (LALIVE)

Presentations:

1. Legal: Melina Llodra (LALIVE)

2. Banking: Cyrus Siassi (ING)

3. Corporate: John Walker (Dupont International Operations)

Q&A

LEGAL PERSPECTIVE Melina LLODRA, Counsel

LALIVE – GENEVA LALIVE – ZURICH LALIVE IN QATAR L.L.C

Rue de la Mairie 35 Löwenstrasse 2 PO Box 23495 PO Box 6569 QFC Tower 1 1211 Geneva 6 8001 Zurich Diplomatic Area, West Bay Switzerland Switzerland Doha, Qatar TEL. +41 22 319 87 00 TEL. + 41 44 319 80 00 TEL. + 974 44 96 72 47

Outline

Scope of URBPO

Concept of BPO

BPO and other payment mechanisms

Key legal issues under URBPO

Scope of URBPO

Neither a Convention nor a law uniform rules published

by the ICC that provide framework for BPO

Scope lies solely in the bank-to-bank space

Do not cover exchange of documents only DATA

Adoption of ISO 20022 TSMT is mandatory

Concept of BPO

A Bank Payment Obligation is an irrevocable and

independent undertaking given by an Obligor Bank to a

Recipient Bank to pay a specific amount on an agreed date

under the condition of a successful Data Match or

acceptance of a Data Mismatch (Article 3 URBPO)

Establishment and payment of a BPO

1. Contract

5. Shipment – Documents

6. D

ata

Subm

issio

n

2.

Request

BP

O

9. Payment

TMA

2. C

onfirm

request

9. P

aym

ent

BPO is established:

irrevocable but conditional

Obligor

Bank Recipient

Bank

Buyer Seller

BPO is due

BPO and other payment mechanisms

Source: International Chamber of Commerce

BPO and other payment mechanisms (cont.)

BPO L/C Open Account

Independent and

irrevocable undertaking

between the Seller’s and

the Buyer’s Banks.

Beneficiary: seller’s bank.

Independent and

irrevocable undertaking

between the Buyer’s Bank

and the seller. Beneficiary:

seller.

Undertaking between buyer

and seller.

Payment subject to Data

Match or acceptance of

Data Mismatch.

Payment subject to

presentation of confirming

documents to Buyer’s

Bank.

Payment subject to

presentation of confirming

documents to the buyer.

Objective check. Subjective check. Subjective check.

Not subject to confirmation

as seller is not a party to

BPO.

May be confirmed /

unconfirmed.

N/A

Key legal issues under URBPO

Article 6: BPO vs Underlying Contract

BPO is separate and independent from the underlying transaction

Claims or defences arising under the underlying contract do

not affect the Obligor Bank’s undertaking to pay.

Recipient Bank cannot avail itself of contractual relationship

between buyer and the Buyer’s Bank.

Exceptions to autonomy of BPO?

Key legal issues under URBPO (cont.)

Article 10: Undertaking of Obligor Bank

Irrevocable obligation to pay or incur a deferred payment

obligation and pay at maturity, subject to the occurrence of the

Data Match or acceptance of Data Mismatch.

Would any mismatch entitle the Buyer’s Bank

to reject payment?


Article 12: Involved Bank does not assume any liability for:

effectiveness of data received from buyer or seller;

goods, services or other performance to which such data relates;

acts or omissions of person referred in any data (e.g. carrier,

forwarder, insurer)

BUT Involved Bank must ensure that data submitted to TMA

accurately reflects data it has received from buyer or seller

(Article 9 (c))

May BPO reduce risk of fraud?


Article 13: Force Majeure

Same as UCP 600

New force majeure events: inability to access a TMA and

failure of equipment, software or communications network

Article 14: Unavailability of Transaction Matching Application

No liability of Involved Bank in case of unavailability of TMA for any

reason whatsoever

What if TMA is proprietary to the Involved Bank?

BANKING PERSPECTIVE Cyrus SIASSI, Head of Legal

ING

BANKING PERSPECTIVE Cyrus Siassi

Admitted to the Geneva Bar Solicitor England & Wales

Head of Legal ING Belgium, Brussels, Geneva branch

• The Bank Payment Obligation is “the new kid on the block” • A new instrument in the world of Supply Chain Finance, Open

Account trading and Trade Finance • Based on SWIFT’s Trade Service Utility (TSU) • Will …

– Banks offer the BPO to its customers? – The BPO be a success in the market?

• Only time will tell… • But let’s first see how it works, what it is and what it does…

32 32

Recipient

Bank Obligor Bank

Buyer Seller

Bank Payment Obligation (BPO)

Transaction

Matching

Application

33 33

Recipient

Bank Obligor Bank

Buyer Seller


Transaction

Matching

Application

1

1 Purchase Order data +

Request to issue BPO

34 34

Recipient

Bank Obligor Bank

Seller


Transaction

Matching

Application

1

2 2

2

2 Purchase Order advice with

BPO option

Buyer

35 35


Transaction

Matching

Application

1

2 2

2

3

3

3 Accept PO data

Recipient

Bank Obligor Bank

Buyer Seller

36 36


Transaction

Matching

Application

1

2 2

2

3

3

4 4

4 Match results

Recipient

Bank Obligor Bank

Buyer Seller

Established

baseline

37 37


Transaction

Matching

Application

1

2 2

2

3

3

4 4

Recipient

Bank Obligor Bank

Buyer Seller

Established

baseline

BPO is

established

4 Match results

38 38


Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

5 Shipment of goods

Documents (if any) to buyer

Seller Buyer

Recipient

Bank Obligor Bank

Established

baseline

BPO is

established

39 39


Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6

6 Invoice and shipping data

Seller Buyer

Recipient

Bank Obligor Bank

Established

baseline

BPO is

established

40

Established

baseline

40


BPO is

established

Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7

Recipient

Bank Obligor Bank

Buyer Seller

7 Match results

41 41


Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7 8

8 Accept or reject mismatches, if any

Recipient

Bank Obligor Bank

Buyer Seller

42 42


Transaction

Matching

Application

1

2 2

2

3

3

4 4

5

6

6 7

7 8

Recipient

Bank Obligor Bank

Buyer Seller

9 BPO is due: Payment at sight or

deferred payment undertaking with payment at maturity

9

BPO is

due

27

27

28

28

29

29

30

30

31

31

32

32

33

33

34

34

Modernising Trade and Supply Chain Finance services

• All trade banks in the world use SWIFT's MT7xx standards with their

correspondent banks

• ICC and SWIFT standards are future proof and can be adopted by

any bank, any corporate client and any solution vendor

• 30+ banks are extending the use of SWIFT’s industry standards to

the corporate world through the MT 798; all leading vendors have

adopted the MT 798

• Leading Trade banks are partnering with the ICC and SWIFT to

modernise trade pratices through the new BPO payment method

• All leading trade vendors and major trade banks are adopting the

BPO which confirms the growing acceptance and immediate

relevance of the BPO to the trade market.

The BPO in the market today

BPO adoption grows steadily

Counter Count

Banking groups adopting BPO 53

Banking groups live on BPO 6

Banking groups ready for live use of BPO 12

Banking groups reachable on TSU 83

BIC8s reachable on TSU 140

BIC8s and BIC11s reachable on TSU 214

Countries reachable on TSU 45

Live BPO banks Live Banks Region Intra / Inter-

bank transations

Locations of live corporate supply chains

Corporate case study

Bank of China APAC Intra in China Inter

CN Ito Yokado’s Chinese suppliers

Bank of Tokyo Mitsubishi UFJ

APAC Intra Inter

JP, HK, CN, TW Ito Yokado

Korea Exchange Bank APAC Inter KR OMRON Automotive Electronics Korea Co.Ltd.

Standard Chartered Bank

EMEA Intra BE, OM BP Chemicals Octal

Siam Commercial Bank

APAC Inter TH PTT Polymer Marketing Co (in development)

Hua Nan Bank APAC Inter TW Importer in TW

Banks ready to go live but with no live BPO transactions yet

• Bangkok Bank

• Bank al Etihad (Jordan)

• Barclays

• Byblos Bank (Lebanon)

• Commercial Bank of Dubai

• Commerzbank

• Deutsche Bank

• J.P. Morgan

• Kasikornbank (Thailand)

• Standard Bank of South Africa

• Sumitomo Mitsui Banking Corporation (SMBC)

• UniCredit

53 Banks adopting BPO (update as at June 21, 2013)

Including 15 from the Top20 Trade banks

48

49

Banks adopting BPO per country

53 banking groups

143 BIC8 and BIC11

41 countries

Europe – Middle East – Africa AP AE (United Arab Emirates) LB (Lebanon) AU (Australia) ID (Indonesia) Commercial Bank of Dubai BLOM Bank ANZ Bangkok Bank, Jakarta First Gulf Bank Byblos Bank Bank of Tokyo-Mitsubishi UFJ, Sydney Bank of Tokyo-Mitsubishi UFJ, Jakarta Standard Chartered, Dubai MT (Malta) CN (China) Standard Chartered, Indonesia BE (Belgium) FIMBank Bank of China, Beijing IN (India) BNP Paribas Fortis MU (Mauritius) Bank of China, Changzhou Standard Chartered, India KBC AfrAsia Bank Limited Bank of China, Dongguan JP (Japan) CH (Switzerland) NG (Nigeria) Bank of China, Foshan Bank of Tokyo-Mitsubishi UFJ, Tokyo UBS Standard Chartered, Nigeria Bank of China, Guangdong Sumitomo Mitsui Banking Corp. (SMBC) DE (Germany) NL (Netherlands) Bank of China, Huizhou Standard Chartered, Japan Commerzbank ING Bank of China, Jiangsu KR (South Korea) Deutsche Bank Rabobank Bank of China, Nantong Korea Exchange Bank Unicredit OM (Oman) Bank of China, Shandong LK (Sri Lanka) ES (Spain) Standard Chartered, Oman Bank of China, Shanghai Standard Chartered, Sri Lanka la Caixa PK (Pakistan) Bank of China, Shaoxing MY (Malaysia) FR (France) Standard Chartered, Pakistan Bank of China, Shenzhen Bank of Tokyo-Mitsubishi UFJ, Berhad BNP Paribas QA (Qatar) Bank of China, Wuxi Maybank Société Générale Al Khalij Commercial Bank Bank of China, Zhejiang RHB Bank GB (United Kingdom) Qatar National Bank Bank of Communications Standard Chartered, Malaysia Bank of America, London SE (Sweden) Bank of Communications, Beijing PH (Philippines) Barclays Handelsbanken Bank of Communications, Guangzhou Bank of Tokyo-Mitsubishi UFJ, Manila Deutsche Bank, London SEB Bank of Communications, Ningbo Standard Chartered, Philippines HSBC Swedbank Bank of Communications, Shanghai SG (Singapore) J.P. Morgan, UK SI (Slovenia) Bank of Communications, Shenzhen Bank of America, Singapore Qatar National Bank, London NLB (Nova Ljubljanska Banka) Bank of Tokyo-Mitsubishi UFJ, Beijing Bank of Tokyo-Mitsubishi UFJ, Singapore Royal Bank of Scotland, London TR (Turkey) Bank of Tokyo-Mitsubishi UFJ, Guangzhou Deustche Bank, Singapore Standard Chartered, UK Turkiye Is Bankasi Bank of Tokyo-Mitsubishi UFJ, Shanghai First Gulf Bank, Singapore GR (Greece) ZA (South Africa) China Citic Bank Qatar National Bank, Singapore National Bank of Greece First Rand Bank of South Africa China Minsheng Banking Corp. Standard Chartered Singapore IT (Italy) Standard Bank of South Africa China Minsheng Banking Corp., Beijing TH (Thailand) Banca Popolare di Vicenza Standard Chartered, South Africa China Minsheng Banking Corp., Dalian Bangkok Bank JO (Jordan) China Minsheng Banking Corp., Shanghai Bank of Tokyo-Mitsubishi UFJ, Bangkok Bank al Etihad China Minsheng Banking Corp., Shenzhen Kasikornbank China Minsheng Banking Corp., Tianjin Siam Commercial Bank

Americas Standard Chartered, China Standard Chartered, Thailand AR (Argentina) CL (Chile) HK (Hong Kong) TW (Taiwan) Bank of Tokyo-Mitsubishi UFJ, Buenos Aires Bank of Tokyo-Mitsubishi UFJ, Santiago Bank of America, Hong Kong Bank of Tokyo-Mitsubishi UFJ, Taipei BR (Brazil) US (United States) Bank of China, Hong Kong Hua Nan Bank Banco do Brasil Bank of America Bank of Tokyo-Mitsubishi UFJ, Hong Kong Standard Chartered, Taiwan Banco Itau BBA BNY Mellon BNP Paribas, Hong Kong VN (Vietnam) Bank of China, Brasil Citi Citi, Hong Kong Standard Chartered, Vietnam Bank of Tokyo-Mitsubishi UFJ, Sao Paulo Deutsche Bank, New York HSBC, Hong Kong CA (Canada) J.P. Morgan J.P. Morgan, Hong Kong Bank of Montreal Royal Bank of Scotland (US) Standard Chartered, Hong Kong Standard Chartered, US

Partner Trade portal Trade portal

BPO certified trade platforms

Misys Trade Portal Misys TI Plus

CORPORATE PERSPECTIVE

John WALKER, Credit Manager Performance Chemicals

DuPont International Operations

Company profile - DuPont

• Founded in 1802, DuPont puts science to work by creating sustainable solutions essential to a better, safer, healthier life for people everywhere. Operating in approximately 80 countries, DuPont offers a wide range of innovative products and services for markets including agriculture, nutrition, electronics, communications, safety and protection, home and construction, transportation and apparel.

• DuPont’s Net Sales in 2012 were $ 34.8 billions, resulting in operating earnings after income taxes of $ 3.6 billions along the value chains in which we operate:

• Agriculture

• Electronics & Communications

• Industrial Biosciences

• Nutrition & Health

• Performance Chemicals

• Performance Materials

• Safety & Protection

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Quantitative Potential for BPO

Unsecured Terms of payment

BPO

Secured Terms of payment

Benefit Analysis BPO replacing LC-U

• Staffing cost reduction

• Bank cost reduction

BPO replacing ordinary unsecured collections

• We will be in a position to replace and secure a third (of today unsecured) collections through BPO, at relatively low cost and staffing

The two crucial questions for Corporates

1. Pricing of the BPO tool

2. Go-live plan (time) of your Trade Bank Partner

THANK YOU!