New Methods in International Trade for SMEs – Application of Supply Chain Management and Electronic Data Interchange 中小企國際貿易新方法－應用供應鏈及電子資訊交流方案

New Methods in International Trade for SMEs – Application of Supply Chain Management and Electronic Data Interchange中小企國際貿易新方法－應用供應鏈及電子資訊交流方案Connie LeungHead, Trade & Supply Chain Markets, Asia PacificSWIFT

HKTDC World SME Expo Dec 2008

Agenda

Setting the sceneSetting the scene

Collaboration with TradelinkCollaboration with Tradelink

Supply Chain financing bySupply Chain financing by

What is the Trade Services Utility (TSU)?What is the Trade Services Utility (TSU)?


Worldwide

Society

Interbank

Financial

Telecommunication

Leader in secure global financial communication

SS

WW

II

FF

TT

A co-operative organisation serving the financial industry

A provider of highly secure financial

messaging services

The financial standardisation body


3.5 billion messages per year (2007)

8,612 customers

209 countries

Average daily traffic 16 million messages

Peak day of 17.1 million messages , 30 Sep 2008

SWIFT figures (December 2008)


0

5000

10000

15000

20000

25000

1970 1980 1990 2000 2005 2006 2007

US$ billions

CAGR

E.Europe 25%

Asia 15%

US 5%

EU 3%

Sources: The Economist

Setting the sceneGrowth in international trade


International trade continues to grow as economies around the globe strengthen

SWIFT messaging shows an increase in Cat 1 / 2 payment volumes whilst Cat 4 / 7 trade volumes are stagnating. This is a visible confirmation of the global shift to open account

Source: SWIFT Traffic Watch

SWIFT Volumes

43 43 44 47 47 46 47 48

930

1,1001,210

1,350 1,3551,442

1,577

1,831

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2000 2001 2002 2003 2004 2005 2006 2007

Mill

ion

s

Trade SWIFT Volumes Payment SWIFT Volumes

Setting the sceneMigration to Open accounts


Raising ambitionsThe TSU focuses on Open Account

ExporterExporterImporterImporter

Payment inPayment inadvanceadvance

OpenOpenAccountAccount

L/CL/CCollectionsCollections

Increased risk for the exporter

Increased risk for the importer

Traditional trade finance

Business Business opportunitopportunit

yy

TSU

Open AccountL/CsCollectionsOther81 %81 %


Invoice ReceiveMake Ship PayOrder CollectSell

PROCESSING EFFICIENCY

LIQUIDITY MANAGEMENT

Risk- Compliance

- FX hedging

- PO authentication

Services- Cash forecasting

- Discrepancy handling

- Dispute management

In-Sourcing- Document preparation

- Managed a/c payables

- A/c Reconciliation

Pre-shipment finance

Post-shipment finance

Receivables finance

Inventory finance

Setting the sceneDrivers to Open account


Globalisation

Open Accoun

t

Cost PressureInternet

Harmonisation

LESS BARRIERS TO TRADE BETTER UNDERSTANDNG OF MARKETS

BUYER / SELLER COLLABORATION SHAREHOLDER VALUE REQUIREMENTSDEMAND FOR SUPPLY CHAIN EFFICIENCY

Setting the sceneDrivers to Open account


Seller’s bank

Buyer’s bank

MT-based

MX-based

TSU

TSU messages TSU messages

Lodge / Push Through

Guarantees (MT 76x)

Collections (MT 4xx)

Documentary Credits (MT 7xx)

Setting the sceneSWIFT trade services market offering

HKTDC World SME Expo Dec 2008High transaction visibility reduces risk and cost of finance

Vendor’s bankVendor’s bank

5. Acceptance of

documents by buyer

3. Do

cum

ents

Logistics

BuyerBuyer VendorVendor

Trigger points

Buyer’s bankBuyer’s bank

6. P

aym

ent 4. P

aymen

tRisk mitigation

Information

Financing

Settlement

4. Settlement

3. Documents

2. Shipment of goods

1. Creation of PO and transmission to vendor

Setting the sceneTraditional documentary credit workflow


5. Acceptance of

documents by buyer

Logistics

BuyerBuyer VendorVendor

Trigger points

Low transaction visibility increases risk and cost of finance

Vendor’s bankVendor’s bankBuyer’s bankBuyer’s bank

Settlement

2. Shipment of goods

1. Creation of PO and transmission to vendor

4. Vendor presents documents to be checked by buyer

3. Documents

Setting the sceneOpen account workflow


Agenda






TSU Pilot Banks – 2004/5

Asia Pacific

18 Trade Banks8 countries

EMEA

Americas


Buyer Seller

Bank

SWIFTNetKey data Key data

SWIFTNet Trade Services Utility: Industry standards, shared application, community engagement

PO Inv

TSU

Transport document

Transport document

Transport document

Match Match

Bank


TSU Benefits to Bank and Corporate (Release 1.0)

TSU Feature Benefit to Bank Benefit to Corporate

Data Matching Handling Exceptions only Earlier Detection of Discrepancies

Utility Approach Lower Barrier to Market Entry More banks providing supply chain services

New Client Referrals Referrals from other TSU banks New Client Referrals for Corporates

Defend Own Clients Ability to Offer Supply Chain Services will help to retain clients

Corporates will benefit from TSU banks who will have a wider product offering

Idea Sharing TSU banks can share best practices

Best practices learned from other TSU banks can be passed on to corporates whose banks are on TSU

New Revenue Stream Incremental revenue for offering s.c. services

Cost reduction for corporates shifting to OA


TSU Benefits to Bank and Corporate (Release 2.0)

TSU Feature Benefit to Bank Benefit to Corporate

Bank Payment Obligation Easier for Seller’s Bank to Arrange Financing

Buyer: Secure Seller’s Supply of Products

Seller: ease of financing

Notice of Intent to Pay Helps to Get Credit Approval for Pre-shipment financing

Buyer: Secure Seller’s Supply of Products

Seller: easier access to financing

Risk Sharing Portfolio/Balance Sheet Management

Alternative arrangement to get financing

More Document Data: Insurance and Certificate

To reflect current business requirement

Provides holistic view of the open account transaction

Linking Payment With TSU Transaction

Provides Data Mining Foundation

Reconciles treasury and accounts receivable


Trade Services Utility A Growing Community of Banks and Vendors

82 Trade Banks95 BICs30 Countries / Territories

1

1 3

6

2

1

21

1

4

3

49

2

1

2

11

1237

5 2 1

2 3

3

7

1

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TSU banks in the Americas (13)

•Banco do Brasil•Bradesco•Bank Itau

•Laurentian Bank•Bank of Montreal

•The Bank of New York Mellon•Citibank•First National•PNC•JP Morgan•Branch Banking and Trust Co.

•Banco Galicia

•Banco Credito del Peru


TSU banks in Asia Pacific (28)

• KEB• Shinhan Bank• Hana Bank• Woori Bank

•Bangkok Bank•Kasikornbank

•Standard Chartered

•Bank Danamon •Bank Mandiri (Persero)

•ANZ

•Hang Seng Bank

• ICICI Bank

• Bank of China• Bank of Communications• China Construction Bank• China Citic Bank • China Merchants Bank• China Minsheng Banking Co.• Hua Xia Bank• Industrial Bank• Industrial & Commercial Bank

• Bank of Tokyo Mitsubishi UFJ• Sumitomo Mitsui Banking Co.• Mizuho Corporate Bank

• Hua Nan Commercial Bank• Chang-Hwa Commercial Bank• First Commercial Bank • Chinatrust


TSU Banks in EMEA (41) – CEE, BENELUX, Nordic, UK (19)

•Bayerische Landesbank•Commerzbank•Deutsche Bank•Dresdner Bank•HypoVereinsbank•LBBW•Sparkasse Bremen

•UBS•Swiss Re

•Bank Austria

CEE BENELUX, Nordic, UK

•ABN Amro• ING•Rabobank

•DEXIA•Fortis•KBC

•Handelsbanken

•RBS•HSBC


•Calyon•BNP Paribas•Société Générale•Crédit Agricole Ile-De-France•Crédit Mutuel-CIC

•Banca Popolare di Sondrio•Banco Popolare•Unicredit

•Banco Popular•Caja Madrid•Banco Santander•BBVA•La Caixa•Banco Sabadell•Bankinter

•Garanti

•BMCE

•FirstRand•Standard Bank

TSU Banks in EMEA (41) – Southern Europe, MEA (22)

France, Italy, Greece Spain, Turkey, MEA

•Commercial Bank of Dubai

• National Bank of Greece• EFG Eurobank


Agenda






Market situation

• Buyers/Sellers– Too many trade options : LC, OA, TT, Collections

– Manual vs technology : own/banks systems, third party

– No inter-operability of data, re-enter most of the time

• Banks – Loss of revenue : LC vs Open Account

– Lack of automation in OA, system only good for LC

– Supply chain services are in demand

• SWIFT– Bank-to-bank Document matching engine i.e. TSU

– Bank need to build customer front end

• Issues– High costs to invest into the customer front ends– Uncertain about the requirement from the industry


Possible business model: Trade hub for OA business

Forwarder

Bonded WarehouseTransaction

Warehouse AirlinersShippers

Transport/CY

InspectionQuarantine

Government Services

Trade Services

Utility

1. PO

Overseas Buyer Seller in HK1.1 P O

1.2 PO 1.2 PO2. Established baseline2. Established baseline

3. Doc preparation

4. Match report4. Match report

Seller’s bank in HKBuyer’s bank

1.1

PO Status update

Accept/reject

Bridge between

Trade hub and banks

26

New Trends in International Trade for SMEsNew Trends in International Trade for SMEs

A Seamless Global Supply Chain Management A Seamless Global Supply Chain Management SolutionSolution

11 December, 2008

27

Established inSep 1988

Government becomesa shareholder

Granted exclusive franchise (1997– 2003)to provide e-submission services for certaintrade-related documents

Selected by the Government as the developerand operator of DTTN

1992

2003

1988

19942004

Granted license (2004-2008) to continue provisionof government document e-submission services

2005

Publicly listed and traded on the Main Board of The Stock Exchange of Hong Kong

About TradelinkAbout Tradelink2008

Tradelink Beijing Established

28

The HK SAR Government

Key players in the trading sector, including trade associations, terminal operators & financial institutions

43.80%43.80%

12.29%12.29%

Public Shareholders

43.91%43.91%

Digi-Sign CertificationServices Limited

Digital Trade and Transportation Network

Other Shareholders: -

•21% The HK SAR Government

•28% Trade Associations

Government and Industry Expert SupportGovernment and Industry Expert Support

100%100% 51%51%

The digital express link to you business partners worldwide

Building trust in electronic services with Digi-Sign security solutions

29

Document checking and validation

Secure communication channel

7 x 24 electronic interface

Document status tracking

Hotline & onsite technical support and other customer services

“Paper-to-electronic” conversion service

Over 20 million transactions in 2007

LogisticsServicesProviders Importers

Exporters

Freightforwarders

Carriers

Manufacturers

Tra

din

g C

om

mu

nity

Tra

din

g C

om

mu

nity

e-confirmation e-confirmation

SecuritySolution

Tradelink’s Operating ModeTradelink’s Operating Mode

The HKSAR The HKSAR GovernmentGovernment

TradelinkTransaction fee

+Gov’t fee

+e-submission of

trade related documents

Gov’t fee+

e-submission of trade related documents

30

Services Details

Import or Export Declaration (TDEC) e-lodgment of import or export declaration with Customs

Production Notification (PN)e-lodgment of notification to the Trade & Industry Department about cut-and-sewn garments manufactured in HK

Certificate of Origin (CO) e-application for CO to the Trade & Industry Department or other government approved organisations

Dutiable Commodities Permit (DCP)e-application for DCP to Customs for import, export, manufacturing or storage of dutiable commodities

Electronic Cargo Manifest (EMAN) (excluding road mode)

e-submission of manifests for air, rail, water cargo to the Census Department and the Trade & Industry Department

e-receipt of notice / voucher from Customs ande-communication with other government departments

Notifications under Textiles Trader Registration Scheme (TTRS)

e-submission of notification to the Trade & Industry Department for textile trading under TTRS

Tradelink’s Government ServicesTradelink’s Government Services

31

Tradelink’s Commercial ServicesTradelink’s Commercial ServicesServices Details

Trader Documentation Services (TDS)

web-based & client-based application solutions

facilitates secure electronic document exchange for international trade transactions

Electronic Shipping Orders (SO)

platform that assists shippers and forwarders to prepare and submit shipping orders and obtain draft bills of landing

Automated Manifest Services (AMS)

e-solution for carriers and non-vessel operating common carriers

meets the requirements under the “24-hour Rule” imposed by the US Customs and Border Protection

Advanced Commercial Information (ACI) for Canadian Customs

Digital Certificatesupports digital signatures

ensures secure electronic transactions

DTTN

E-platform for the trade and logistics communities to enhance their operational efficiency and reduce cost

An e-business connector for the entire supply chain

A super electronic document conversion engine

A mega electronic data store (2 years online + 7 years offline)

32

Industry Challenges:

Disjoined Communities

Enhance Competitiveness:

A Common Digital Platform to Facilitate Information Exchange

DTTN – the Solution Meeting the Industry DTTN – the Solution Meeting the Industry ChallengeChallenge

33

Community Role of the Community Role of the DTTNDTTN

Electronic message transformation services

Statistical and analytical reporting services

Data inheritance services

Information security services

Electronic message routing services

Portal services

SellersInspectionAgencies

Banks &Financial

Institutions

FreightForwarders

Buyers

Government& Agencies

CarriersInsurance

InstitutionsTerminals

DTTN Key Services Offering

34

Purchase Process Purchase / Sales Order, Order Confirmation

Packing List / ASN, Commercial Invoice,Inspection Certificate, InsuranceDelivery

Booking, Shipping Order, Arrival Notices,Transport Documents - Master / HouseWaybill - Sea / Air, Cargo Receipt,Transport Set, EIR, Delivery / Release Order

Local and OverseasTransportation

Government Trade DocumentsExport / Import License,Customs Clearance,Certification of Origin etc.

Financial Settlement Letter of Credit, Company Guarantee, Bill of Exchange,L/C collection Letter; Document Arrival Notice

Support over 88 major documents related to trade, logistics and finance for both import and export business processes

DTTN to Support the Whole Supply-ChainDTTN to Support the Whole Supply-Chain

35

DTTN Interconnection ExampleDTTN Interconnection Example(Purchase to Delivery)(Purchase to Delivery)

Goods Tracking Locations

Buyer 1 DTTN

1. PO (X 12)

Buyer 2

Forwarders

Seller

ApplicationService

Provider 2

1. PO (Excel)

2. SO, CI, PL (Excel)

2. SO, CI, PL (XML)

SO - shipping orderCI - commercial invoicePL - packing listBL - bill of lading

ApplicationService

Provider 1

Carriers

3. Master SO (XML)

3. Master SO

3. Master SO(EDIFACT) 6. Shipment

Status (Web)

5. BL (XML)

5. BL (Excel)

6. Shipment Status (XML)

4. Shipment Status(X 12)

4. Master BL, Shipment Status(XML)

4. Master BLShipment Status

4. Master BL,Shipment Status

(EDIFACT)

6. Goods / Shipment Status(Web Services/XML)

Goods Status (RFID / EPCGlobal)

Physical Delivery

36

Case Study: A Buyer in UK Case Study: A Buyer in UK and its suppliers in H.K. and Chinaand its suppliers in H.K. and China

Goods Delivery

TDS

FreightForwarder

FreightForwarder

Buying Office

UK Buyer

1. Purchase Order

2. Purchase Order10. Clean Document set

3. Purchase Order7. Bill of Lading

4. Invoice, Packing List, Shipping Order8. Invoice, Packing List, Bill of Lading

5. Invoice, Packing List,

Shipping Order

6. Bill of Lading

9. Invoice, Packing List, Bill of Lading

11. Invoice

, Pack

ing

List, B

ill of L

ading,

e/CO

11. Invoice

, Pack

ing

List, B

ill of L

ading,

e/CO

12. Invoice, Packing List, Bill of Lading,

e/CO

12. Invoice, Packing List, Bill of Lading,

e/CO

Suppliers

Physical

Data

37

Pan Asian E-Commerce Alliance Singapore, PRC, Thailand, Korea, Japan, Macau, Malaysia

Other Regions: Australia, France, Spain, Mexico, United States, The Netherlands

Extending Our Reach with Partners around Extending Our Reach with Partners around the Worldthe World

38

Trading ProcessesTrading Processes

E-Document Exchange

BusinessMatching

ReceivePO Production Inspection Insurance

Chamberof

CommerceCustoms

OutboundLogistic

FreightForwarder Terminal Payment

The Missing Piece – Financial Services,

e.g. Payment

39

The Enhanced Payment Layer The Enhanced Payment Layer ––Collaboration with SWIFT Collaboration with SWIFT

DTTN to provide possible docs/messages supporting transactions for payment/LC/open account related transactions

40

Buyer Seller

Bonded WarehouseTransaction

Warehouse AirlinersShippers

Transport/CY InspectionQuarantine

Forwarder Government Services

Enable electronic document exchange between banks and traders

BankBank

E-Trade (from PO to Payment)E-Trade (from PO to Payment)

41

The Bridge between the Trading Industry The Bridge between the Trading Industry and Banks and Banks

Tradelink/DTTN-SWIFT connection– An electronic gateway for the communication between banks and traders

Documents can be submitted to banks via the connection– E.g. Purchase Order, Commercial Invoice, Shipping Documents & etc

A single channel to communicate with all trading parties, including banks

Minimize data entry efforts

Minimize data entry error

No constraints on collection time and collection location

42

Benefits to Banks’ CustomersBenefits to Banks’ Customers

A one-stop service for the whole trading process

Facilitate data exchange among the involved parties

Provide data inheritance and avoid duplicated data input

Keep track of trading document status and invoice/payment status at a glance

Increase transaction visibility

Improve cash flow management

Improve productivity throughout the supply chain

Obtain more comprehensive services from bank

43

Thank You!!


Agenda






Trade Services Utility Trigger points for liquidity management and processing efficiency

Invoice ReceiveMake Ship PayOrder CollectSell

PROCESSING EFFICIENCY

LIQUIDITY MANAGEMENT

Risk- Compliance

- FX hedging

- PO authentication

Services- Cash forecasting

- Discrepancy handling

- Dispute management

In-Sourcing- Document preparation

- Managed a/c payables

- A/c Reconciliation

Pre-shipment finance

Post-shipment finance

Receivables finance

Inventory finance

TSU TSU TSU TSU TSU TSU TSU

S T

R I

C T

L Y

P R

I V A

T E

A N

D

C O

N F

I D E

N T

I A L J P M O R G A N - G L O B A L T R A D E S E R V I C E S

Supply Chain Financing - Supplier Presentation

S T

R I

C T

L Y

P R

I V A

T E

A N

D

C O

N F

I D E

N T

I A L


Thank You

Documents

New Methods in International Trade for SMEs – Application of Supply Chain Management and Electronic Data Interchange 中小企國際貿易新方法－應用供應 鏈及電子資訊交流方案

New Methods in International Trade for SMEs – Application of Supply Chain Management and Electronic Data Interchange 中小企國際貿易新方法－應用供應鏈及電子資訊交流方案