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  • 6.4.4-E-COMMERCE AND SUPPLY CHAIN MANAGEMENT-ELECTRONIC TRADE EXECUTION IN PRACTICE

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  • Electronic trade execution in practice

     
     

    Contract. Once a deal is established the contract details are automatically transmitted to the principal parties to the trade, using the secure messaging platform and the contract XML standard. (XML means extensible mark-up language.)

    Back-office link. This is automatic, since both parties have received the contract confirmation and the information has been integrated into their back-office systems through their user interface. The contract data are now ready for further execution.

    Price fixing. The price is fixed either by using an e-marketplace or directly between the parties by trading futures via their futures broker, using the network to confirm the transactions.

    Letter of credit. If called for, the network is used to establish the letter of credit through a message from the opening bank to the exporter's bank.

    Shipping instructions. For an FOB contract the importer will provide shipping and document instructions to the exporter and the opening bank via the network. The opening bank in turn sends an undertaking to the exporter's bank, detailing the commercial documents to be presented under the letter of credit.

    Pre-shipment finance. On the basis of the letter of credit (or other undertaking) the exporter can apply for pre-shipment finance, using the protocols provided by the system (and their relationship to the banking system). Upon approval the bank's collateral manager will be automatically linked into the transaction.

    Freight. The importer can negotiate freight through a carrier's electronic service provider (e.g. INTTRA or GTNexus), confirmed through the network's electronic messaging system.

    Shipment. The exporter advises the coffee's availability and makes a container booking using electronic messaging. (This incidentally also facilitates the establishment of the ship's stowage plan.) The importer books for voyage and space with the carrier as per this advice. These messages are simultaneously copied to other involved parties, for example the handlers of the cargo to the export terminal, the warehouse and the agency supervising weighing and stuffing. Of course the foregoing presupposes that all of those involved, including customs, have updated their electronic back-office systems using data obtained from a web interface or using their own document management software.

    Bill of lading. Using details from the booking and document instructions received earlier, the carrier issues an electronic bill of lading and registers it under the network title registry for release to the exporter. The exporter is notified through the system, and will endorse the B/L to the appropriate party, usually the bank that financed the goods, who is then registered as pledgee on the B/L. Alternatively, the B/L can also be issued directly in a bank's favour.

    Shipment advice. This is sent via the network, using the XML standard for electronic shipping advices.

    Dispatch. The exporter combines the commercial invoice with the other export documents received from the different service providers and authorities, and packages these into a network message which the network forwards to either the buyer or the bank.

    Verification. The documents are verified electronically with the instructions registered under the L/C undertaking. If there is any discrepancy the system notifies all parties and asks for refusal or acceptance of the documents.

    Presentation of documents. If the documents are correct they are transmitted for inspection and/or approval (as per the L/C protocol) to the importer's bank or, in the case of CAD (payment cash against documents on first presentation) directly in trust to the importer. When the importer's bank makes payment, the electronic documents are released automatically to the importer. Alternatively, the L/C opening bank, which was acting as pledgee on the B/L, will endorse the B/L to the importer once the electronic funds transfer (EFT) has been confirmed through the SWIFT clearing system.

    At the receiving end. Before or upon arrival of the vessel, the carrier notifies all concerned (importer, clearing agent, customs, inland roasting plant, etc.) of the vessel's ETA, followed by a notice of arrival, using XML. The importer settles the freight, releases the B/L to the carrier or shipping agency at the port of destination, and copies the B/L together with the commercial invoice to the clearing agent, all through the electronic network system and all at the same time. Again, each party knows instantaneously who said what to whom.

    Final delivery. If the coffee is going to an inland roasting plant, notifications of cargo arrival, sample orders and delivery orders will pass electronically between the importer and the roaster. If the roaster operates on a VMI basis (vendor managed inventory) then the importer will place the coffee either at the roasting plant, or at an intermediate container station, or in a warehouse or silo park pending final delivery. All this is done through network instructions to the clearing agents, trucking company and warehousemen. Again, everyone knows what is happening, and the roaster can see where the coffee is.

    Finally the importer issues an XML invoice and delivery order to the roaster, copied to the clearing agents, truckers and warehousemen. Upon payment this delivery order acts as transfer of title as per the conditions determined in the ECF or GCA standard form contract.