Chapter 5 Future developments
Unlike open account trading, where only
the payment element is processed by the
banks, the banks do play a role in transferring
information, with the buyer’s bank offering a
guarantee similar to that available via a letter
of credit.
This exchange of information also allows
banks to use the BPO as the basis for a wider
range of financing solutions, including pre-
and post-shipment financing, as well as other
services, such as risk management.
However, despite the potential
advantages, there has been limited take-up
of the BPO since the Bank of China became
the first user in 2010. The BPO is most
commonly used between banks in China and
Japan. As the next step towards trying to
develop its use, the International Chamber
of Commerce is working to develop a set of
standards (similar to UCP 600 for letters of
credit) to provide an accepted set of global
rules. An ICC working group is expected to
publish a set of rules (URBPO) in early 2013.
The BPO is not intended as a replacement
for the letter of credit, although the effective
bank guarantee and the use of banks as
intermediaries suggest that role. Instead,
the BPO is viewed as a new product to
sit alongside existing letters of credit. The
development of ICC-sponsored international
standards may give the BPO the boost
required to expand market awareness and,
consequently, use.Anti-money laundering and
economic sanctionsThe ICC Banking Commission has also
established a working group to assess the
impact of economic sanctions on trade
finance. Because sanctions can affect
the ability of banks to process payments,
they can have the effect of preventing
settlement under an otherwise compliant
letter of credit. Some banks want to
protect their own positions (primarily with
respect to reimbursement due to other
banks nominated to pay on their behalf) by
inserting sanctions clauses into letters of
credit. Sellers should not accept sanctions
clauses, as they override the basic principle
of a letter of credit: that a bank has nooption but to pay if a compliant letter of
credit is presented.
The Banking Commission is reviewing
other anti-money laundering and sanctions
regulations, with a view to updating
guidance on a range of interconnected
issues. These include checks under know-
your-customer requirements and as a
protection against false documentation
(designed to circumvent sanctions).Technology
The evolution of technology continues to
offer many potential efficiency gains which
can improve the use of working capital. The
gains come from two main improvements.
First, if used appropriately, technology is
able to reduce processing costs, notably by
the replacement, and possible redesign, of
manual processes. Second, technology can
also improve the visibility of activity along a
supply chain. Instead of a paper trail which
may only be visible to one participant at
any particular time, technology offers the
opportunity for different companies (and
departments within those companies) to
review the progress of a transaction at the
same time. This greater visibility offers many
benefits, including a stronger relationship
between customer and supplier, and more
financing opportunities.E-invoicing
The concept of electronic invoicing is no
longer new, although there remain a number
of different market definitions. In the purest
sense, e-invoicing is a process in which an
invoice is raised, sent, received, processed
and archived electronically, although some
practitioners may refer to e-invoicing if some
of these steps are performed manually.
These definitional differences emerge from
the wide range of solutions currently available
in the market.EU Second Directive on VAT Invoicing
EU Directive 2010/45/EU was adopted in
2010 for implementation at the beginning
of 2013. Among its objectives was that
of increasing the use of e-invoicing by