Arthur O. Thomas Describes
@Globaltrade, A New System Which Aims To Take L/C Transactions On-Line
Arthur O. Thomas is
Senior Vice President Business Development for CCEWeb Corporation. He has
worked in the international ocean transportation industry for 21 years. Most
recently he worked with American President Lines, where he was responsible for
Trade & Regulatory Affairs.
DCI:
Could
you give us a little background on how CCEWeb was formed and what its principal
aims are?
Thomas:
CCEWeb
was founded in 1996 as Continental Commodity Exchange. At the time, the
founders created an exchange for internationally traded commodities, hence the
name. From that vision grew the @GlobalTrade solution which is bringing all
parties in the trade transaction onto the same electronic page. @GlobalTrade is
a fully open, interactive secure payment and trade management system capable of
serving multiple financial institutions anywhere in the world.
DCI:
Suppose
I'm an exporter and I want to use @GlobalTrade to conduct my trade
transactions. Walk me through what I would do.
Thomas:
@GlobalTrade
is a system that will allow the exporter/beneficiary to track L/Cs from the
importer/applicant. The exporter would receive a message from our system saying
that an importer will be opening an L/C in his favour. The exporter would then
log into the @GlobalTrade system to take a look at that L/C, this being a sort
of pre-verification of the L/C allowing the exporter and importer, in effect,
to negotiate the details before the credit is even processed and advised to the
exporter.
Having
received the actual credit, the exporter could then move that message
downstream to the pre-identified trade service providers: ocean carriers,
surveyors, insurance brokers, etc. By moving the data directly to them
electronically, these providers will have the ability to rapidly provide data
and/or documents that the exporter needs to collect on the transaction and to
return them electronically to the exporter for subsequent presentation. The
exporter can do all this via the internet without leaving his workstation.
DCI:
A
system like @GlobalTrade needs an acceptance in the market place that
electronic transactions are fully workable. Do you believe that confidence in
electronic trade exists at this time?
Thomas:
@GlobalTrade
is about evolution rather than revolution in trade processing. For quite some
time you're going to have a combination of paper as well as the electronic data
interchange. Confidence will be built over time. Our solution is to work with customers
at their speed of comfort, move into this new e-space bringing people along,
allowing users to use the existing paper practices if they have to, going
digital where they can.
The
key is that the system is built around existing ICC rules accepted globally.
@Global Trade is compatible with the current UCP 500 and will be fully
compatible with current ICC initiatives regarding an eUCP, and our legal team
is drafting a User Agreement that all parties will sign on-line. By using
wherever possible the existing rules and practices people use today, i.e.,
printing to a PDF printer driver instead of to a paper printer, we anticipate
market acceptance.
DCI:
So
CCEWeb will work in transactions that are part paper and part electronic?
Thomas:
Yes,
I believe that one of our strengths is the fact that with our Document
Management System we are able to handle both paper and electronic messaging.
The ultimate goal, of course, is to go completely electronic.
DCI:
Your
marketing material says that your Document Clearance Center (DCC)
"practically eliminates the need for the advising bank/negotiating bank in
the L/C cycle". Who is going to be staffing this center and can they
really substitute for the expertise that banks have built up for many years in
this field?
Thomas:
@GlobalTrade
can eliminate inefficiencies of the advising bank when the exporter has access
to the internet and can therefore receive an authenticated credit advice
directly from the issuing bank, given that the issuing bank has ultimate liability
for settlement under a credit. At the same time where exporters do not have a
access to the internet, the importer/applicant can choose the option to advise
the credit through an advising bank as it is done today.
The
application for the credit must start on the internet through a web browser but
the advice can be electronic and/or paper. The DCC, and there will be more than
one, will be established in partnership with large financial institution(s) and
will be staffed by qualified document checkers.
DCI:
Considering
the quotation I just read, though, do you see banks being more and more
bypassed in this L/C process by outsource providers like CCEWeb?
Thomas:
Actually,
it is the opposite. I think the banks will be able to increase their business
as a result of @GlobalTrade’s end-to-end solution for electronic documentary
credits. The banks can enable their customers to conduct secure payment and
document management over the internet. We're not competing with what banks
currently do in paper processing. We are bringing technology and infrastructure
together to enable banks to be more efficient and provide a higher level of
customer service.
DCI:
How
does your system differ from other systems dealing with electronic trade, such
as Bolero and Trade Card?
Thomas:
Unlike
TradeCard we are not an automatic compliance engine but a Documentary Clearance
Center with people checking documents manually for compliance. TradeCard claims
to be an alternative to documentary credits. @GlobalTrade is an evolution of trade
processing products starting with a documentary credit. Our rule book is UCP
500 soon to be supplemented by eUCP 500. TradeCard has its own rulebook.
Unlike
Bolero CCEWeb is a complete end-to-end solution with one number to call if you
have a question that needs to be resolved. Bolero is bringing a number of
solutions together and is setting their own XML standards hoping that they will
be adopted by the industry. Another key difference with Bolero is that Bolero
is solving the negotiability of a bill of lading issue with a Central Registry
and their own rulebook; CCEWeb solves the same problem with non-negotiable
waybills and three clauses that make a waybill, to our mind, as functional as a
negotiable bill of lading.
DCI:
Then
how do you make your money?
Thomas:
Our
revenue model is transaction fee based. Our fees would be approximately 20-25
per cent lower than average trade processing fees importers/exporters pay today
because our system eliminates the need to involve the advising bank, courier and
telex charges. The fee we plan to charge for our FastTrack sight electronic
documentary credit product would likely be a flat fee, which would be extremely
competitive and useful for traditional traders as well as eMarketplaces that
are looking for a secure payment STP solution.
DCI:
Let's
get back to the UCP 500, because you say that the system complies with it. UCP
500 essentially deals with paper documents. How can it be said that CCEWeb
complies with it?
Thomas:
The
@GlobalTrade system is built on the principles of UCP 500. What we mean is that
there is no change to the fundamentals and principles that UCP 500 brings to
current practice except our use of an electronic delivery channel. The rules
would apply in that we're simply facilitating the process. Our User will cover
what is not covered in the UCP 500 today. It will cover issues dealing with
digital signatures, electronic documents, and other so called e-issues. We do
hope, however, that the eUCP will help us deal with many of these issues, thereby
reducing the size of our User Agreement.
DCI:
Let's
look at specific parts of the system. It's a credit card system and you speak
of the eLC card. What exactly is that card?
Thomas:
eLC
Card stands for electronic letter of credit card. eLC Card is one of the
innovations of @GlobalTrade. It will allow companies and individuals to combine
the convenience and trust of credit card purchasing with the financial security
of an irrevocable letter of credit. This card can be issued in a virtual or
plastic form, depending on the financial institutions offering this service.
The eLC Card will typically be used for
purchases of US$5,000 and up, depending on the credit limit granted by the
buyer's financial institution. It will enable B2B transactions over the internet
by satisfying the need for a secure payment instrument between unknown parties.
It will provide a definite bank undertaking of payment to the seller while at
the same time assuring the buyer that payment will only be made when it is
evidenced that goods have been shipped complying with quality, quantity,
shipment and other stipulations in the credit.
DCI:
That's
the eLC. Then you mentioned the FastTrack concept of the eDC, which means, I
take it, electronic documentary credit. Who developed the FastTrack electronic
documentary credit? Was the ICC involved in this?
Thomas:
Our
sister company L/C Monitor also founded CCEWeb and has developed the FastTrack
eDC product. Our partner and investor, China Systems, the largest trade finance
system vendor in the world, provided support by adapting their customer access
web-based front end system to accommodate the FastTrack eDC requirements.
Our
goal was to create a simple irrevocable conditional payment instrument that's
still subject to the UCP 500 with the following features: 1) it allows the L/C
to be advised directly to the seller via e-mail; 2) the buyer has the
convenience of a pre-defined FastTrack application form. In short, users are
not burdened with a lot of the complicated documentary requirements that a
traditional L/C application contains.
DCI:
If
you claim to be UCP 500 compliant, why didn't you run the eDC past the ICC
before you developed it?
Thomas:
That's
a very good question. The development of the FastTrack eDC was viewed more as
an abbreviation of an existing practice as opposed to a modification of the
practice. FastTrack eDC is a short form application that would allow the
applicant to select from a pre-defined list of e-documents and have those
documents prepared and delivered by the beneficiary via @GlobalTrade system.
Since our entire system is based on the UCP 500 and its underlying practice, we
did not believe we were changing anything that would have required ICC approval
or sign off.
I
assure you that @GlobalTrade will be compliant with eUCP and will help
financial institutions to transition from paper to electronic trade processing.
DCI:
A
couple of more questions about specifics. First, the role of the bill of
lading. You have already indicated that CCEWeb will be using a waybill as a
"functional replacement for a negotiable bill of lading". A waybill,
of course, is not a document of title. What makes you think that the bill of
lading can be so easily replaced?
Thomas:
Our
system is able to handle both traditional bills of lading and the waybill,
which bears three clauses that will offer protection to banks and carriers. I
don't think you can get away from the traditional bills of lading in all cases.
But practice will reduce recourse to them.
Though
our system is flexible enough to cope with paper or electronic messages or any
combination of the two, the greatest benefit for all parties will be where an
all-electronic process is possible. Without the complication and cost of a
Central Data Registry this is not possible where the transport document
required is a bill of lading, since, as a document of title, it has to be a
tangible document, something an electronic message can never be.
However,
if any transport document that is not a document of title, such as a waybill,
is required, then an all-electronic process is possible. Our system
incorporates the possibility of the transport document required being a
waybill, whilst retaining the security of payment inherent in the documentary
credit process.
We
believe that by incorporating our clauses onto the waybill, we can facilitate
the exchange of the goods or the control of those goods and payment. The CMI
rules for waybills would also apply to these documents, so that in terms of
legality, the parties would be bound in a similar manner to the situation under
a full bill of lading.
Of
course, with electronic documents, you're going to have the whole issue of
signature, application, and so forth. Our strategic alliance partners have the
technology in place to authenticate all the parties in the system, making sure
that, for example, the carrier who signs the bill with the digital signature
is, in fact, that carrier.
DCI:
Suppose
I'm one of the parties who would like to sign up to CCEWeb, how do I do it and
how do you verify that I am a person or company that is reliable enough to deal
through the CCEWeb?
Thomas:
If
you are an importer you have to go through your financial institution, because
without a valid credit line you cannot use the system. The banks want to
maintain their relationship with their customer and @GlobalTrade does not
interfere with this relationship. On the contrary, it facilitates a web-based
interface through which a bank’s clients can issue letters of credit and
exchange electronic documents with exporters and trade service providers such
as freight forwarders, surveyors, carriers, insurance companies, customs
brokers, chambers of commerce etc.
@GlobalTrade
is Identrus enabled, and providing the applicant has an Identrus smart card
issued by his financial institution, he would be allowed access to the
system. If applicants do not have an
Identrus identity, they would follow our registration procedure where we would
verify through their financial institution and other means that they are who
they say they are and would help them obtain digital certificates, which would
be used to gain access to @GlobalTrade System.
Exporters
and trade service providers can register directly with CCEWeb, sign the User
Agreement, obtain their digital certificates and use the system. There is no
charge for registration.
DCI:
Where
are you in this process? Are you in the pilot stage? When do you expect to be
fully operational?
Thomas:
We're
in a proof-of-concept stage between November 2000 and March 2001. In April 2001,
we plan to start moving live transactions through the system. On October 15-19,
2001, we plan to launch the FastTrack and standard eDC products at SIBOS in
Singapore.
DCI:
And
you're convinced that the way of the future in this letter of credit business
is electronics.
Thomas:
It
has to be. The lower cost and efficiency of doing business on the internet
drives people to it. Consider the usefulness realized by having clean data.
Many banks offering conventional documentary credit services to clients say it
is expensive and difficult to maintain. Whether they choose to outsource that
business or retain it as part of their service portfolio, the costs associated
with the existing L/C practices and procedures will have to be taken into
account.
Arthur
Thomas's e-mail is thomas@cceweb.com.
For more information and a demo see www.cceweb.com