CASE STUDY

EXECUTIVE SUMMARY

Anticipating a dramatic growth in its Asia-Pacific business, the

chemical division of a global petroleum company was seeking to

reengineer its export letter of credit (L/C) process in the Pan-Asia

market from a largely manual operation to an electronic process.

Throughout a rigorous 16-month timeline, Bank of America

Merrill Lynch demonstrated its capabilities as a full-service provider

with the global network, people, skills and technology needed to

streamline the process, improve reporting and management visibility,

and enable the company to manage its supply chain more efficiently.

TAblE of ConTEnTS

Transforming a global export letter of credit process: from reactive to proactive . . . . . . . . . . . 2

Moving from a high-volume, manual process . . . . . . . . 2

A pitch-perfect proposal . . 3

Implementing an innovative solution . . . . . . . . . . . . . . 4

The right technology . . . . . 5

Looking ahead . . . . . . . . . 5

Reengineering an Export letter of Credit Process Accelerates Cash Conversion

SEPTEMBER 2012

Global Integrated Energy Company

REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 2

TRAnSfoRMInG A GlobAl EXPoRT lETTER of CREDIT PRoCESS:

fRoM REACTIVE To PRoACTIVE

one of the most common challenges faced by exporters is the inherent

inefficiency of the paper-intensive process of export letter of credit

documentation and negotiation. Recently, a global leader in the petrochemicals

industry, anticipating a 15 – 20% growth in its Asia-Pacific business, was seeking

a solution that would align with its growth requirements. They needed to

streamline their entire export L/C model — migrating it from a largely manual

process to a more timely and accurate electronic process.

MoVInG fRoM A HIGH-VolUME, MAnUAl PRoCESS

Costly and cumbersome, the company’s incumbent export L/C process involved

an extremely high volume — up to 7,500 presentations annually supporting USd

1B of sales turnover — and a level of discrepancies in third-party documents as

high as 35%. “The documents the company was receiving from buyers were not

coming in the order they wanted,” says Sonal Priyanka, vice president in Trade

and Supply Chain Sales at Bank of America Merrill Lynch. “They would always

need to follow up with amendments and modifications. There were also multiple

charges from correspondent banks that had a major impact on their margins.”

When the company worked with their buyers and buyers’ banks with the incumbent

provider, there would be delays in the processing of their export documentation

because of the disparity in L/C formats. data was not standardized and the

entire process was decentralized. As a result, the company needed to reduce

correspondent bank charges and delays in processing export documentation.

“At a very high level, they were looking to accelerate cash conversion — through

both timeliness and accuracy of the expert letter of credit documentation

collections handling,” says Bruce Proctor, managing director and head of global

Trade and Supply Chain finance at Bank of America Merrill Lynch. “They needed

to be able to provide and deliver compliant documents as quickly as possible to

secure payment and accelerate cash conversion.”

REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 3

A PITCH-PERfECT PRoPoSAl

In 2010, at the company’s headquarters, corporate banking and sales executives

from Bank of America Merrill Lynch proposed our participation in a global pilot

project. “People, technology and processes are our strength, and we were quite

pleased to join the pilot to help consolidate the company’s trade processing to

achieve economies of scale and eliminate paper and turnaround of compliant

documents,” says Robert Ingersoll, managing director and senior corporate

banker in the oil & gas group at Bank of America Merrill Lynch.

once the company agreed to the pilot, Ankur gupta, vice president, Regional

Sales – Asia for Bank of America Merrill Lynch, set out to put processes and

procedures in place that would demonstrate the bank’s end-market expertise

to handle the client’s export needs in all the markets in which they do business

throughout Asia. “We demonstrated that we had the people on the ground, the

banking relationships, and the ability to confirm letters of credit in established

and less established markets in the region,” gupta says.

Bank of America Merrill Lynch worked with Trade Technologies, Inc., a global

leader in trade payment document solutions, and the company’s customers

and their banks to help execute and test best practices for driving paper out of

the process and standardizing L/C formats and templates. They also leveraged

the USd clearing relationships that Bank of America Merrill Lynch has with key

issuing banks in Asia — and all the major banks engaged in the company’s

business — to influence those banks to use Bank of America Merrill Lynch as the

reimbursing bank and to reduce the charges from corresponding banks.

The Bank of America Merrill Lynch export L/C processing arrangement included

advising, document preparation and examination, and credit confirmations

in eight countries. By eliminating paper wherever possible, Bank of America

Merrill Lynch is able to provide electronic straight-through processing wherever

appropriate. Standardizing the form and formats of L/C templates promises to

help the company achieve a higher probability of getting required data in a way

in which they can identify and address discrepancies more quickly. And real-time

performance reporting enables them to manage the supply chain more efficiently.

“We demonstrated that we had not only the right technology and platform,

we had the individuals in market to work with the company’s buyers and

their buyers’ banks to drive this uniformity,” says Chris Bozek, Product head,

global Trade and Supply Chain, Bank of America Merrill Lynch.

“ We demonstrated that we had

not only the right technology

and platform, we had the

individuals in market to work

with the company’s buyers and

their buyers’ banks to drive

this uniformity.”

Chris Bozek Product Head Global Trade and Supply Chain Bank of America Merrill Lynch

REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 4

IMPlEMEnTInG An InnoVATIVE SolUTIon

The Bank of America Merrill Lynch proactive approach to reengineering the

company’s export L/Cs featured an innovative document preparation and

presentation solution. With Trade Pro® functionality, Bank of America Merrill Lynch

is able to receive L/Cs and contact the company within 24 hours — via email,

fax or SWIfT — and streamline the flow of information between the company,

the buyers and buyers’ banks.

Throughout the implementation of the solution, there was consistent

communication among all of the groups involved — with the Bank of America

Merrill Lynch Asia and U.S. teams working in lockstep in their approach. Every

step of the way, the local Bank of America Merrill Lynch team in China was

engaged with the company’s local team on the ground. “More than streamlining

the process, our focus was on maintaining consistent communication and how

well we understood the client’s culture,” says Carrie Moore, managing director in

the Energy & Power group at Bank of America Merrill Lynch. “The way our culture

complemented the clients was very compelling.”

THE SolUTIon: oPERATIonAl flow AnD DoCUMEnT MAnAGEMEnT

“ More than streamlining

the process, our focus was

on maintaining consistent

communication and how

well we understood the

client’s culture.”

Carrie Moore Managing Director Energy & Power Group Bank of America Merrill Lynch

What the Trade Pro

platform does:

y Provides customized settings,

data mining and reporting for

specific global business needs

y Enables importers to automate

purchase order details into L/C

transactions

y Provides online images of

related paper documents or

electronic data elements for

additional transaction-level

insight

y Provides exporters with access

to web reporting to view export

L/C transaction details and

presentation discrepancies

y Integrates with CashPro for a

more holistic approach to

treasury and trade

The Company(as Seller)

Trade Pro®

Issuing Bank(as Buyer’s Bank)

1. Issue L/C

3. L/C review & checklist against L/C template

5a. Shipment details

2. Advise L/C

11. Present docs for payments

5. Order details

4. Arrange shipment. Issue L/C

6. Courier original BL & other third-party docs

2b. L/C copy

10. Advise discrepancies & follow-up

9. Print & collate other third-party docs for checking against L/C

8. Transmit completed docs

Freight Forwarder or

Other Third Party

Freight Forwarder (as Doc Prep

Service Provider)

7. Prepare docs against L/C

Trade Pro®

(as Advising L/C and Nego Bank)

“ Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed. ©2012 Bank of America Corporation

REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 5

THE RIGHT TECHnoloGY

The team leveraged Trade Pro — the Bank of America Merrill Lynch electronic

trade finance platform used by organizations worldwide to enhance their trade

and financial supply chain operations — to provide online functionality for the

company to manage its global trade and treasury coordination electronically,

in real time and to improve its ability to optimize working capital. Accessible

via CashPro® online, the Bank of America Merrill Lynch global client portal, Trade

Pro includes new tools for data mining and reporting, multi-language capability

customized for each user, and a fully integrated trade and treasury view.

In this case, Trade Pro enabled the standardization of processes in order to

gradually cut the need for manual processes and increase electronic processes.

The Bank of America Merrill Lynch team added value to the solution with

suggestions about how the close integration between Trade Pro and CashPro

online would enable the company to achieve a combined treasury and trade

view of their transactions, from initiation through final settlement.

“In fact, a lot of what we brought to the table was advisory to the client and their

multiple freight forwarders,” says Bozek. “We demonstrated how Trade Pro works

and how it can provide better and more timely data to help manage the supply

chain. We showed them how we can build the electronic interfaces between us

and all the members enabling the transaction flow — the company, the freight

forwarder, the buyers and their issuing banks.”

looKInG AHEAD

Today, the company is able to manage its global trade and treasury coordination

electronically and in real time — improving its ability to optimize working capital.

At every step, the Bank of America Merrill Lynch provided transparency, exhibiting

a focus not only on the company’s immediate needs but also looking ahead to

the future. “This is a journey, not an event,” says Bozek. “over the next couple of

years, we will be up and running with a sustained commitment from both parties.

We’ll continue to drive paper from the process, with all parties in the process,

enabling straight-through electronic processing wherever possible.”