Cargill and Wells Fargo have collaborated on the first electronic export letter of credit using essDOCS along the US to Taiwan shipping route.
It marks the first time commodity trader Cargill has used the third-party buyer export LC for an e-bill of lading, and for Wells Fargo it is the first use of an e-bill of lading, as well as the first eUCP presentation.
Cargill employed Wells Fargo to digitise its trade finance processes in 2015. Subsequently, the bank signed on with essDOCS, provider of a trade software platform at the suggestion of Cargill. The pair then located a buyer and issuing bank in Taiwan to work with on the transaction.
The process was thus:
- Cargill collaborated with the shipping line and its agents to create the electronic bill of lading.
- Cargill then presented documents electronically to Wells Fargo.
- After examination, Wells Fargo forwarded documents to the issuing bank in Taiwan, which retrieved and reviewed the documents from the essDOCS platform for final processing and payment.
Chris Lewis, Wells Fargo’s global head of international trade services, tells GTR that the digitisation allows for a clear streamlining of the transaction flow.
He says: “First, there is reduced overall processing time: rather than the 10+ days that it can take for processing and approving paper bills of lading for international shipments, the whole process, from creation to approvals by banks, can be done in five days or less.
“Second, costs are reduced: courier costs can be eliminated. Discrepancies may be reduced due to more accurate data and electronic collaboration. There is less manual labour spent preparing and revising documents. Because documents are available in a timely manner and are easily accessible, there is reduced risk of incurring costs for demurrage or letters of indemnity.
“Thirdly, because of the reduced processing times, exporters have the opportunity to improve their days’ sales outstanding.”
He explains that the bank used essDOCS at the suggestion of Cargill and that the commodity industry has been “early adopters of electronic bills of lading and e-presentations”.
He explains: “They are heavy users of ocean transportation with a lot of working capital tied up in in-transit inventory. They stand to gain from optimising the supply chain as much as possible. It is no surprise that they are not only early adopters, but helping push the envelope, by hiring staff devoted to digitisation of trade processes.”
Asia is also viewed as a fast adopter of digitisation compared to western markets. According to Marisa Martin, vice-president for Americas at essDOCS, this is due to a large number of first movers in the region, expanding the digital trade network early on.
For the Taiwanese market in particular, Martin feels this transaction could open the floodgates for others to follow.
“For this particular trade route, US to Taiwan, there are still some challenges around the speed that the network is growing, but we believe that successful transactions and major ‘firsts’ such as the first US e-presentation go a long way in expanding the digital trade network and further maximising benefits for all parties involved,” she tells GTR.