BANK PAYMENT OBLIGATIONS The Way Forward in International Trade? Geneva, 14 November 2013

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1 BANK PAYMENT OBLIGATIONS The Way Forward in International Trade? Geneva, 14 November 2013

2 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

3 LEGAL PERSPECTIVE Melina LLODRA, Counsel LALIVE GENEVA LALIVE ZURICH LALIVE IN QATAR L.L.C Rue de la Mairie 35 Löwenstrasse 2 PO Box PO Box 6569 QFC Tower Geneva Zurich Diplomatic Area, West Bay Switzerland Switzerland Doha, Qatar TEL TEL TEL

4 Outline Scope of URBPO Concept of BPO BPO and other payment mechanisms Key legal issues under URBPO

5 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 TSMT is mandatory

6 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)

7 2. Request BPO Establishment and payment of a BPO 1. Contract Buyer 5. Shipment Documents Seller BPO is established: irrevocable but conditional TMA 9. Payment 6. Data Submission 2. Confirm request Obligor Bank BPO is due 9. Payment Recipient Bank

8 BPO and other payment mechanisms Source: International Chamber of Commerce

9 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. Payment subject to Data Match or acceptance of Data Mismatch. Independent and irrevocable undertaking between the Buyer s Bank and the seller. Beneficiary: seller. Payment subject to presentation of confirming documents to Buyer s Bank. Undertaking between buyer and seller. 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

10 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?

11 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?

12 Key legal issues under URBPO (cont.) 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?

13 Key legal issues under URBPO (cont.) 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?

14 BANKING PERSPECTIVE Cyrus SIASSI, Head of Legal ING

15 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

16 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank Transaction Matching Application Recipient Bank 32

17 Bank Payment Obligation (BPO) Buyer Seller 1 Obligor Bank Transaction Matching Application Recipient Bank 1 Purchase Order data + Request to issue BPO 33

18 Bank Payment Obligation (BPO) Buyer Seller 1 2 Obligor Bank 2 2 Transaction Matching Application Recipient Bank 2 Purchase Order advice with BPO option 34

19 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank Transaction Matching Application Recipient Bank 3 Accept PO data 35

20 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank 2 2 Established Transaction Matching baseline 3 4 Application 4 Recipient Bank 4 Match results 36

21 Bank Payment Obligation (BPO) Buyer Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 4 Application 4 Recipient Bank 4 Match results 37

22 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 4 Application 4 Recipient Bank 5 Shipment of goods Documents (if any) to buyer 38

23 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 4 Application 4 6 Recipient Bank 6 Invoice and shipping data 39

24 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Established Transaction BPO Matching established baseline 3 4 Application Recipient Bank 7 Match results 40

25 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Transaction Matching 3 4 Application Recipient Bank 8 Accept or reject mismatches, if any 41

26 Bank Payment Obligation (BPO) Buyer 5 Seller Obligor Bank 2 2 Transaction BPO is Matching 3 4 Application due Recipient Bank 9 9 BPO is due: Payment at sight or deferred payment undertaking with payment at maturity

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35 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.

36 The BPO in the market today

37 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

38 Live BPO banks Live Banks Region Intra / Interbank transations Bank of China APAC Intra in China Inter Bank of Tokyo Mitsubishi UFJ APAC Intra Inter Locations of live corporate supply chains CN JP, HK, CN, TW Corporate case study Ito Yokado s Chinese suppliers Ito Yokado Korea Exchange Bank APAC Inter KR OMRON Automotive Electronics Korea Co.Ltd. Standard Chartered Bank Siam Commercial Bank EMEA Intra BE, OM BP Chemicals Octal APAC Inter TH PTT Polymer Marketing Co (in development) Hua Nan Bank APAC Inter TW Importer in TW

39 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

40 53 Banks adopting BPO (update as at June 21, 2013) Including 15 from the Top20 Trade banks 48

41 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 49 Standard Chartered, US

42 BPO certified trade platforms Partner Trade portal Trade portal Misys Trade Portal Misys TI Plus

43 CORPORATE PERSPECTIVE John WALKER, Credit Manager Performance Chemicals DuPont International Operations

44 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 44

45 Quantitative Potential for BPO Unsecured Terms of payment BPO Secured Terms of payment

46 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

47 The two crucial questions for Corporates 1. Pricing of the BPO tool 2. Go-live plan (time) of your Trade Bank Partner

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49 THANK YOU!