BPO The new standard rules ICC Portugal New tools for International Trade Nadine Louis Market Manager Corporate and Supply Chain Markets, SWIFT 8 April 203
Commercial solutions Industry standards The BPO relies upon ISO 20022 messaging URBPO 2 3 Buyer Seller Any channel / any format / any solution Trade Matching Application Any channel / any format / any solution Bank portal SWIFT's SCORE Paper SWIFT's Trade Services Utility (TSU) Bank portal SWIFT's SCORE Paper 2
COMPETITIVE Use of ISO 20022 standards is only mandated between banks Corporate COLLABORATIVE There is collaboration between buyer & seller in the selection of the BPO as the agreed payment terms. Corporate There is competition between banks in terms of the level of service they can offer to the corporate in respect of risk mitigation, financing, payment assurance, process efficiency, price etc. In this competitive space, there are no rules or mandatory standards. Banks & corporates are free to negotiate their own terms by way of bilateral forms of agreement. COMPETITIVE Bank There is collaboration between banks in terms of the establishment of a BPO subject to the matching of specified data elements. In this collaborative space, the adoption of the rules (UR BPO) and ISO 20022 TSMT messaging standards is mandatory. COLLABORATIVE Bank 3
Contracts Buyer Purchase order: BPO is one option of payment conditions Seller BPO-based services terms and conditions BPO-based services terms and conditions See SWIFT s TSU Service Description for C2B contractual guidelines Buyer s bank TSU Rulebook in the TSU Service Description Seller s bank Correspondent banking contract 4
ICC International Sale Model Contract Art 5.5: If the parties have agreed on payment against the security of a BPO, then, unless otherwise agreed, the Buyer must arrange for the Seller to receive an assurance of payment in accordance with the agreed payment terms in the form of a BPO to be issued by a bank in favour of the Seller s Bank, subject to the UR BPO published by the International Chamber of Commerce, and to be notified at least 30 days before the agreed date of shipment or at least 30 days before the earliest date within the agreed shipment period. Unless otherwise agreed, the BPO shall be payable at sight and allow transhipments but no partial deliveries. 5
Trade Services Utility Banks addressing corporate needs BPO: a commercial agreement between buyer and seller Buyer Any channel / any format / any solution Paper documents BPO: a new payment term in the Sale contract UR BPO Any channel / any format / any solution Seller Dematerialised flows Buyer s bank ISO 20022 ISO 20022 TSU Seller s bank Database Rulebook Central data matching A legally binding rulebook owned by the ICC and based on ISO 20022 standards An industry-wide messaging and matching platform that implements the BPO in a multi-bank environment 6
BPO flows for data, documents and goods Delivery of goods Use minimum fields Carriers Purchase order 4 Shipment Documents sent directly to the client 8 Invoice and shipping documents Buyer 2 Request BPO based on PO 3 Inform of BPO establishment Seller Transport and invoice data (match report) 6 BPO Obligor Bank Established BPO baseline is due TSU 9 Transfer funds at maturity BPO Recipient Bank 5 7 Transport and invoice data Inform that payment is due on agreed date 7
The BPO builds upon electronic data matching Matching of contract data BPO is established Buyer Bank A ) Sign contract (PO) 2) PO data 3) SO data TSU 4) Match PO/SO data & confirm Seller Bank B Matching of data Buyer Bank A 5) Datasets TSU 6) Match requested datasets & confirm 5) Datasets Seller Bank B BPO is due Transfer of funds Buyer Bank A 7) Debit buyer FIN 9) Pay seller Seller Bank B Trade is settled 8) Transfer funds PO= Purchase Order; SO= Sales Order 8
Message structure tsmt structure Matching conditions References Instruction Parties Baseline Datasets Buyer s bank Purchase order Transport Air Waybill (AWB), bill of lading (BOL), A unique end-toend Transaction Identification (TID) Seller s bank Submitting bank Insurance Certificate Insurance document Certificate document Obligor bank Commercial Invoice The Baseline gathers the matching conditions using data extracted from trade documents 9
http://www.iso20022.org/trade_services_messages.page ISO 20022 tsmt messages Message type tsmt.00.00.03 tsmt.002.00.03 tsmt.003.00.03 tsmt.004.00.02 tsmt.005.00.02 tsmt.006.00.03 tsmt.007.00.02 tsmt.008.00.03 tsmt.009.00.03 tsmt.00.00.03 tsmt.0.00.03 tsmt.02.00.03 tsmt.03.00.03 tsmt.04.00.03 tsmt.05.00.03 tsmt.06.00.03 tsmt.07.00.03 tsmt.08.00.03 tsmt.09.00.03 tsmt.020.00.02 tsmt.02.00.03 tsmt.022.00.02 tsmt.023.00.03 tsmt.024.00.03 Business message Acknowledgement Activity Report Activity Report Request Activity Report Set Up Request Amendment Acceptance Amendment Acceptance Notification Amendment Rejection Amendment Rejection Notification Baseline Amendment Request Baseline Match Report Baseline Report Baseline ReSubmission Data Set Match Report Data Set Submission Delta Report Error Report Forward Data Set Submission Report Full Push Through Report Initial Baseline Submission MisMatch Acceptance MisMatch Acceptance Notification MisMatch Rejection MisMatch Rejection Notification Action Reminder tsmt.025.00.03 tsmt.026.00.02 tsmt.027.00.02 tsmt.028.00.03 tsmt.029.00.02 tsmt.030.00.03 tsmt.03.00.03 tsmt.032.00.03 tsmt.033.00.03 tsmt.034.00.03 tsmt.035.00.03 tsmt.036.00.03 tsmt.037.00.03 tsmt.038.00.03 tsmt.040.00.03 tsmt.04.00.03 tsmt.042.00.03 tsmt.044.00.0 tsmt.045.00.0 tsmt.046.00.0 tsmt.047.00.0 tsmt.048.00.0 tsmt.049.00.0 tsmt.050.00.0 tsmt.05.00.0 tsmt.052.00.0 Status Change Notification Status Change Request Status Change Request Acceptance Status Change Request Notification Status Change Request Rejection Status Change Request Rejection Notification Status Extension Acceptance Status Extension Notification Status Extension Rejection Status Extension Rejection Notification Status Extension Request Status Extension Request Notification Status Report Status Report Request Time Out Notification Transaction Report Transaction Report Request IntentToPayNotification ForwardIntentToPayNotification IntentToPayReport SpecialRequest SpecialNotification RoleAndBaselineAcceptance RoleAndBaselineRejection RoleAndBaselineAcceptanceNotification RoleAndBaselineRejectionNotification 0
Payment Outside scope of BPO Rules Transport and Invoice data Purchase order data ISO 20022 TSMT required to support BPO transactions The BPO transaction lifecycle BPO establishment Initial Baseline Submissions - tsmt.09.00.03 Baseline Match report - tsmt.00.00.03 Data Set Matching BPO irrevocable & conditional subject to matching of specified data Dataset submission and reports - tsmt.04.00.03 Baseline amendments - tsmt.009.00.03 Mismatch acceptance or rejection - tsmt.02.00.03 - tsmt.022.00.02 Bank Payment Obligation due (at sight or deferred) Payment due Payment MT 202 Cash reporting
A BPO is an optional component of a TSU Baseline It is made up of these elements The maximum amount that will be paid under the obligation The maximum amount that will be paid under the obligation, expressed as a percentage of the PO Date at which the obligation will expire The bank that has to pay under the obligation The bank that will be paid under the obligation The amount of the charges taken by the obligor bank Amount of the charges expressed as a percentage of the amount paid by the obligor bank Country of which the law governs the BPO Payment processes required to transfer cash from the debtor to the creditor, including payment terms, amount before charges etc Instructions stipulating the cash transfer characteristics between the two parties 2
Data used in the demo Category Description Purchase order reference po ref 888888 Buyer Name Buyer Address Buyer s Bank Seller Name Seller Address Seller s Bank Goods quantity Goods amount Routing Socks & Co US BUYRUS6S Textile Export GB SELLGB2L,000 EA EUR 25 EA Transport by air (destination:ord) Payment terms As agreed 00% Submitting Bank SELLGB2L BPO Obligor Bank BUYRUS6S BPO Recipient Bank SELLGB2L BPO amount EUR 25,000 BPO expiry date 203-07-0 3
Transaction list: screenshot of 4
New baseline: screenshot of 4 5
New baseline: screenshot 2 of 4 6
New baseline: screenshot 3 of 4 7
New baseline: screenshot 4 of 4 8
Data set: screenshot of 4 9
Data set: screenshot 2 of 4 20
Data set: screenshot 3 of 4 2
Data set: screenshot 4 of 4 22
Data set match report: screenshot of 23
Baseline report after mismatches acceptance: screenshot of 24
Live BPO banks Banks with live transactions + corporate case study Live Banks Region Intra / Interbank transations Locations of live corporate supply chains Corporate case study Bank of China APAC Intra in China Inter CN Ito Yokado s Chinese suppliers Bank of Tokyo Mitsubishi UFJ APAC Intra Inter JP, HK, CN, TW Ito Yokado Korea Exchange Bank Standard Chartered Bank Siam Commercial Bank APAC Inter KR OMRON Automotive Electronics Korea Co.Ltd. EMEA Intra BE, OM BP Chemicals Octal APAC Inter TH PTT Polymer Marketing Co Hua Nan Bank APAC Inter TW Importer in TW 25
Banks ready for live use of BPO Banks ready to go live but with no live BPO transactions yet 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) 26
50 banks adopting BPO (update as at 8 April 203) Including 5 from the top20 Trade banks 27
Banks reachable on TSU 28 82 banking groups 3 banks 204 BIC8 and BIC 43 countries / territories 2 5 6 4 3 3 4 8 5 4 4 5 2 2 6 9 3 3 3 2 3 3 5 3 2 5
True or false? Both banks and Corporates connect directly to the TSU service BPO is about paperless trade TSU supports open account TSU allows only 2 banks in each transaction TSU replaces L/C s TSU supports the URBPO released by the ICC TSU uses data from PO and invoice, nothing else False False True False False True False 29
Join our "Supply Chain on SWIFT" group on Email us at supplychain@swift.com to register to our frequent information mailings Join our frequent Webinars 30