A. General Information
Japan-Vietnam electronic import Letter of Credit Pilot
B. Lessons Learned
FPI IS, FPT Japan Holdings, and TradeWaltz (Japan) conducted a proof-of-concept integrating TradeFlat as the first digital finance ecosystem in Viet Nam and TradeWaltz - Japan's leading trade information platform. The chosen document for this pilot was an import Letter of Credit (L/C).
Promote trade between the two countries and international trade and proof of concept.
Vietnam has had a long and close relationship with Japan in terms of trade and trade digitization. TradeWaltz Inc‘s platform was used for transactions with letters of credit using Mitsubishi Corporation Plastics’ Vietnamese commercial distribution within the support projects related to the diversification of supply chains of the Ministry of Economy, Trade and Industry (METI). From this background, then METI Minister Kajiyama and H.E. Mr. Tran Tuan Anh, Minister of Industry and Trade have conversed about the efficiency of Japan-Vietnam trade procedures on the trade platform, which was incorporated in the joint ministerial statement.
Trade finance
The L/C issuance process includes following steps: (1) The importer in Vietnam creates a Purchase Order (PO) on TradeFlat and sends it to TradeWaltz for submission of the exporter in Japan; (2) The sales contract (COS) signed by both the importer and exporter is successfully uploaded on TradeFlat and TradeWaltz, while the importer in Vietnam digitally signs right on TradeFlat; (3) Import L/C requested by the importer to be issued and issued by the issuing bank in Vietnam right on TradeFlat and successfully sent to the advising bank in Japan for downloading and advice to the exporter on TradeWaltz; (4) When the L/C is issued, the exporter in Japan presents a set of shipping documents including Commercial Invoice (IV), Packing List (PL) and Bill of Lading (BL) on TradeFlat and for the Presenting Bank (5) The Presenting Bank presents those documents to the Issuing Bank to carry out the process of checking documents and accepting payment according to the Document Set (6) The Issuing Bank and Presenting Bank update the payment status of the L/C on TradeFlat.
Letter of credit
The PoC trial run received positive feedback from participating enterprises and banks. The system highly simplifies L/C issuance, optimizes the presentation of electronic documents, enables it to be performed entirely on a digital platform, and shortens processing time as well as controls information of the transaction compared to the traditional L/C flow. From there, the parties aim for the common goal of promoting trade not only between Viet Nam and Japan but also internationally.
The chosen document for this pilot was an import Letter of Credit (L/C). As a result, the total cross-border transaction time decreased from 7-10 days for traditional L/C flow down to 171 minutes in the first test and to 76 minutes and 91 minutes for Deferred L/C and L/C at sight and in the last test (3rd time) correspondingly.