For exporters, getting paid is a document-intensive business. In most cases, they must create and send multiple copies of invoices, bills of lading, certificates of origin and other documents to their trading partners and banks in order to receive payment for their products.

Many of these documents are rooted in business practices that are hundreds or even thousands of years old. (The ocean bill of lading, for example, may date back to the time of the Phoenicians.) But handing off paper documents no longer makes sense in an age when information can be electronically sent around the globe in just seconds.

Paper-based export payment transactions, such as letters of credit (L/Cs), can take weeks to settle. (See the sidebar, "What is a letter of credit?" on page 57.) By some estimates, a typical letter of credit transaction requires about 30 individual steps to complete, says Ray Graber, a senior analyst with financial service consultant TowerGroup of Needham, Mass.

L/Cs have other drawbacks, too. While documents are in transit, buyers and sellers are left in limbo, wondering when or if they will arrive. Letters of credit and other document-based payment methods also carry hundreds of dollars in bank fees. But Graber suggests that many banks would gladly forego some of that income in order to save time and money by moving transactions along electronically.

That's why a growing number of companies have introduced products that automate the export payment process. These products are rapidly gaining acceptance among international traders because they make getting paid faster, cheaper and simpler.

Two important developments have laid the groundwork for export payment automation. In April, the International Chamber of Commerce (ICC) released the "eUCP" supplement to its Uniform Commercial Practices for Documentary Letters of Credit , known as UCP 500. UCP 500 establishes internationally accepted rules for processing and paying documentary letters of credit. The eUCP supplement contains rules that apply when documents are presented to banks electronically. Although export payment services have been around for several years, the eUCP supplement is important because it creates international standards for electronic documents and payments.

The other important development was the launch in 1999 of Bolero International and its bolero.net product. Bolero, a joint venture of the Society for Worldwide Interbank Financial Telecommunications (S.W.I.F.T.) and the TT (Through Transport) Club risk-management association, is a communications platform for secure electronic transmission of international trade data and documents.

Bolero.net uses standardized messages that represent international trade documents. The messages, which comply with international legal conventions, are formatted in "bolero XML," a proprietary protocol that is interoperable with the United Nations EDIFACT standards for electronic data interchange. The product also includes a "title registry," which is a mechanism for electronically exchanging payment for ownership of goods, reports Peter Scott, bolero.net's commercial director. Two other unique aspects of bolero.net are the Bolero Association, which represents members in regard to product and standards development, and the Bolero Rule Book, a legal framework that binds members to follow specific procedures for document creation, transmission, acceptance and security.

In addition to shippers, many of the world's largest banks, freight forwarders and carriers participate in bolero.net. Bolero also partners with software providers that manage the flow of information between seller and buyer. "Think of bolero.net as a telephone system," says Graber, "and the other companies as the providers of the information that moves through that system." (Bolero, however, is now developing a product that eventually will allow it to compete with those providers.)

Though each company that automates export payments is unique, they all have some basic functions in common. They all receive purchase orders from the buyer and transmit them electronically to the seller for approval. They enable online negotiation and revision of terms of sale and documents. They receive and distribute electronic versions of the required documents between all parties in the supply chain. Most verify documents' compliance with the terms of the transaction, some guarantee payments, and all electronically authorize and manage the transfer of funds to the exporter. These systems also track the status of documents and the various steps in the payment process. Data are encrypted and users must authenticate their identification through digital signatures. Although these products largely focus on letter of credit transactions, they also may be used for open account, cash in advance, sight drafts and other types of international collection methods.

Within that general framework, each product has a different approach to achieving its objectives. TradeCard, for example, has patented software that matches documents against the purchase order down to the line-item level and identifies discrepancies, says CEO Kurt Cavano. The buyer and seller can negotiate changes online; once settled, the software recalculates pricing and creates a history of the negotiation. TradeCard also takes on some financial risk. Through its relationship with Coface, formerly France's export/import bank and now the world's largest provider of export guarantees, TradeCard opens a line of credit that it manages for its customers. Exporters also can choose to purchase a 30-day, 100-percent payment guarantee from Coface. When all terms have been met to the seller's satisfaction, TradeCard triggers payment. "We are replacing the letter of credit," says Cavano. "Our attitude is, let's not automate the old, let's build something new."

CCEWeb's Internet-based application, called @GlobalTrade, focuses on automating the letter of credit process. Through partnerships with banks, it offers an "eLC" (electronic Letter of Credit) card that gives buyers the convenience of a credit card while exporters still get the security of an irrevocable letter of credit, says David Jack, CCEWeb's vice president, e-commerce. @GlobalTrade operates through a group of Documentary Clearance Centers (DCCs) in major international banks that process documentary credits on behalf of other banks. The DCCs provide a number of services, including L/C issuance and advising, assignment of proceeds, checking for compliance, delivering documents, obtaining reimbursements and paying the exporter, Jack explains. A unique aspect of @GlobalTrade is its ability to transmit documents using the widely available Adobe Systems portable document format (PDF). Adobe Acrobat 5.0, which supports XML transmissions, enables reuse of information, creates digital signatures and has built-in security to prevent unauthorized changes to documents. The platform-independent software lets users see the document online in its familiar form, making the system accessible and affordable even for small and medium-sized companies that don't have sophisticated electronic commerce capabilities.

USBank's PowerTrack started out as an electronic freight payment system but has grown to include export payments as well. Like its competitors, PowerTrack delivers electronic documents and lets buyers, sellers and third parties collaborate and make adjustments online. What's different is that PowerTrack can be integrated with billing and general ledger systems as well as ERP and supply chain software, says Rick Langer, a senior vice president of USBank and PowerTrack's general manager. The product's roots in banking allow USBank to establish credit limits for buyers and underwrite most transactions. "It's no different from using a purchasing card in most cases," he says. PowerTrack also matches up and verifies compliance between the invoice, pricing, and other financial parameters with proof of performance by carriers. When all conditions have been met, the system pays the exporter. PowerTrack also offers online exception reporting.

Several other providers, such as Tradepaq, Appian Bridge, Vastera, AMS (American Management Systems) and China Systems, offer export payment products. (See the table on page 55.)

The potential benefits of export payment automation are many. Because discrepancies and amendments can be handled online at no cost, exporters can avoid the banks' hefty amendment fees. General fees are lower, too. Cavano estimates that a representative $40,000 letter of credit transaction might cost $750 in various fees and delivery charges. A TradeCard transaction of that size would cost about $150, he says. Shippers could expect similar savings with other payment automation products.

Export payment automation also eliminates most of the reasons traditional payment processes take weeks to conclude: communications delays caused by time zone differences, mailing and/or hand-delivery of documents, multiple intermediaries, and time-consuming back-and-forth negotiations over discrepancies and amendments. In addition, the visibility afforded by document tracking eliminates the wait period for written communications from banks and uncertainty about the status of the transaction, says Robin Roberts, an analyst with investment bank Stephens Inc. in Little Rock, Ark. She adds that the products' safeguards, which include electronic identity verification required for all participants, offer a measure of security now that tracking money flow to international terrorists has become a priority.

Roberts also notes that automation gives the exporter much greater control over the payment process. "Importers and banks historically wanted to delay payments as long as they could," she says. "If it's automated, what excuse could they give?" A case in point: According to one unverified report, when Kmart declared bankruptcy earlier this year, suppliers that used an automated payment system were paid. But those using traditional letters of credit were informed that discrepancies had been found in their L/C documents and that it was uncertain when they would be paid.

There are some important things to keep in mind when evaluating these products. For example, not all countries accept electronic documents and signatures. Each product, moreover, has a different fee structure and operating method. Many of them have relationships with each other—@GlobalTrade, for example, cooperates with China Systems. Finally, these systems will not work at peak efficiency unless all of the participants in the supply chain, including carriers and freight forwarders, are involved.

Nonetheless, Graber, for one, considers these electronic services to be a major advance. "I really don't see any drawbacks," he says. "It's all good news."

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