Glencore Ltd. is in the business of exporting carbon black feedstock, but for years the company, a branch of $44.5 billion Swiss commodities trader Glencore AG, was stymied by payment-collection problems in its largest market — India. “Anyone who deals with India is well aware it’s not the easiest place to sell in,” says David Porter, treasurer of Glencore Ltd., with a sigh.
The problem, in a nutshell, was getting paid on time. The government of India insists on a complex trade finance procedure involving close to 15 separate documents, multiplying the risk of error. “We had documents all over the place — bills of lading, certificates of origin, quality and quantity certificates, manifests, bills of exchange,” Porter recalls. “It was extremely difficult to keep track of all the delays in getting different documents accepted and approved to send to Indian banks for us to get our money.”
Glencore trades on an open-account basis with Indian buyers, which use its feedstock in the manufacture of tires. It considered internally automating the trade document flow, but didn’t want to be in the electronic document exchange business. Ultimately, the company decided to outsource the entire process to J.P. Morgan Chase & Co. Global Trade Services, a treasury services unit of global banker JPMorgan Chase specializing in electronic trade finance.
“They’ve made all the tracking of documents electronic, and run the entire process through a Web portal,” says Porter. “We get paid on time, I’m advantaging the float on the cash, and I can track the document approval and payment process online. Before, we considered it lucky if we got paid five days late.”
Glencore is among a few pioneering companies turning to providers of electronic trade finance services for help managing the often difficult and time-consuming documentary and accounts-receivable processes inherent in international trade. In recent years, such major banking institutions as JPMorgan Chase and ABN AMRO have spread their wings into the emerging electronic trade finance market, offering a range of services that includes electronic letters of credit (LCs) and Web-based document-preparation services. The latter run the gamut from electronic invoices and purchase orders to electronic bills of lading and certificates of origin.
JPMorgan Chase boasts an end-to-end solution integrating all these trade documents on either an LC or open-account basis, and has a number of global customers for it, including BASF Corp. Other banks also provide electronic services. For instance, Bank of America offers electronic management of purchase orders, while Wells Fargo has a product that converts foreign and domestic accounts receivable into cash.
But these financial institutions aren’t the only service providers in the market. Bolero.net, formed in 1998 by a consortium of global banks and logistics providers, offers secure electronic transmission of documents along the entire trade chain, from front-end order processing to back-end trade document exchange. Others include LCconnect, which enables electronic sourcing of export and standby LCs from banks; and TradeCard, which shrinks the paper trail by tracking the complex negotiations involved in global commerce, linking companies to banks, inspection agents, and cargo insurers.