Manufacturing executives have long relied on the expert advice of their foreign trade partners when conducting business internationally. Transportation suppliers, customs brokers, and others are an integral part of the supply chain, and their contributions can have a direct impact on a U.S. company's success and profitability. At the same time, information technology developments and the Internet are continually integrating the various aspects of international trade, from sourcing to delivery to the customer.

According to Kristen Fletcher, managing director of global trade and advisory for ABN AMRO, companies are progressively looking to their banks for ways to alleviate the myriad risks associated with cross-border commerce. Leading trade finance institutions are answering the call, Fletcher says, with products that offer improved risk mitigation through the use of innovative technology.

"A number of market factors are creating an opportunity for banks to significantly enhance the value they add to their customers' cross-border risk mitigation efforts," Fetcher says. "First, corporate customers' investments in enterprise resource planning systems have raised expectations for transaction processing cost savings. However, ERP packages don't provide cross-border trade functionality and ERP vendors don't possess the expertise to expand into cross-border trade processing. Second, recent supply chain software entrants are primarily addressing the flow of goods and information without integrating funds-flow information from banks. Third, as companies increasingly move to open account terms, they need new tools to protect them against cross-border risks. Finally, regulatory bodies such as the UCP, are expanding their rules to include electronic trade, thus creating a framework that enables emerging electronic solutions."

Transaction Visibility

These events, combined with ongoing technological advancements, are making it possible for banks to offer their customers some very attractive products. ABN AMRO's AllTrade, for example, gives transaction visibility to partners along the supply chain, including banks, importers, exporters, and their service providers, Fletcher says.

"To the best of our knowledge, AllTrade is the most sophisticated bank-created product of its kind available on the market," she says. "By allowing importers, exporters, and their third party service providers to interact across a common platform, AllTrade provides a path to more automated and paperless cross-border trade."

Fletcher says banks can also leverage Internet-based customs compliance software. Through partnerships with providers such as NextLinx, Vastera, ClearCross, and Open Harbor, banks can help their customers reduce the occurrences of trade in restricted goods and with denied parties.

The scope of ABN AMRO's offerings extends beyond corporate customers to other financial institutions: "ABN AMRO provides a full portfolio of products for financial institutions that lack ABN AMRO's global network and resources to invest in the trade expertise and the technology necessary to meet all of their customers' needs," Fletcher says. "We're in the forefront of in-sourcing trade banking capabilities for other financial institutions, including providing private labeled trade processing services."

SMEs Find Their Finance Niche

Although the leading trade finance institutions have a number of appealing products and services, they're typically geared toward large corporate customers like General Electric and Caterpillar, says Dick Barovick, editor and publisher of the Export Sourcebook, an online resource for information on export and project finance and development. "The larger the bank, the less interested it is in smaller transactions from small- to mid-sized firms," Barovick says.

Barovick says, in the trade finance world, banks pursue different strategies depending upon their size. Barovick divides these banks into five tiers.

"In the U.S., the global players are Chase Manhattan, Citibank, and Bank of America. The next tier are multi-state banks whose locations cover anywhere from a dozen to twenty states. Their focus is on middle market business-a $1 million minimum transaction isn't uncommon," he says. "The third tier encompasses regional banks, or those that operate in from one to three states. Fourth tier banks are community banks, such as Florida-based BankAtlantic. The last tier are what I call 'specialty banks,' and they are in a class of their own."

Although the tier one banks described by Barovick deal almost exclusively with large corporate customers when it comes to credit services, in the area of payment, such as letters of credit, "even the global banks are willing to work with smaller customers," he says. The reason? "The bank has already invested in a communications network and technology, so they're getting more mileage out of their investment," Barovick says, adding, "LCs are largely automated today, and banks can generate additional fees out of an existing investment." WT

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