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Sample Bank Payment Obligation Transaction Flow:














Bank-Payment-Obligation-Simulation
What are the advantages of BPO (Bank payment Obligation) for importers?
What are the advantages of BPO (Bank payment Obligation) for exporters?


ICC would like to position new payment method, which is bank payment obligation, somewhere between letter of credit and open account. I would like to give an example of this brand new payment method on this article.

Sample Bank Payment Obligation Transaction Flow: (step-by-step)

In order to get most benefit from the BPO sample please read explanations carefully and try to follow corresponding steps on the figure.

Figure 1 : Bank payment obligation transaction flow
















Step-by Step Bank Payment Obligation Transaction
































































Step 1 : Buyer and seller agreed on BPO (bank payment obligation) as a payment term on the sales contract. Buyer send its purchase order to the seller.
Step 2 : Buyer provides the minimum data from the purchase order and conditions of the bank payment obligation to the obligator bank.
Step 3 : Seller confirms the data from the PO and send its acceptance of the BPO conditions to the recipient bank. If both buyer's and seller's data are matched on the  Transaction Matching Application than the baseline is established. Both buyer and seller will be receiving a matching reports from their banks.
Step 4 : Seller ships the goods as agreed on the sales contract.
Step 5 :Seller presents the shipment data and invoice data to its bank, which submits it to Transaction Matching Application for matching. 
Step 6 : Buyer receives a match report from its bank. Buyer is invited to accept any mismatches if any.
Step 7 : Seller's bank inform seller about the successful dataset match.
Step 8 : Seller sends the trade documents directly to the buyer. Buyer will clear goods from the customs with these documents.
Step 9 : On the due date, the obligor bank debits the proceeds from buyer's account 







 




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How does Bank Payment Obligation work? 
ICC banking commission finally accepted uniform rules for bank payment obligations in July 2013. After this date we have 5 different types of payment  in international trade. Main payment methods in international trade so far was cash in advance paymentdocumentary collectionsdocumentary credits and open account.

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Step 1 : Buyer and seller agreed on BPO (bank payment obligation) as a payment term on the sales contract. Buyer send its purchase order to the seller.
Step 2 : Buyer provides the minimum data from the purchase order and conditions of the bank payment obligation to the obligator bank.
Step 3 : Seller confirms the data from the PO and send its acceptance of the BPO conditions to the recipient bank. If both buyer's and seller's data are matched on the  Transaction Matching Application than the baseline is established. Both buyer and seller will be receiving a matching reports from their banks.

Step 4 : Seller ships the goods as agreed on the sales contract.
Step 5 :Seller presents the shipment data and invoice data to its bank, which submits it to Transaction Matching Application for matching. 
Step 6 : Buyer receives a match report from its bank. Buyer is invited to accept any mismatches if any.
Step 7 : Seller's bank inform seller about the successful dataset match.


Step 8 : Seller sends the trade documents directly to the buyer. Buyer will clear goods from the customs with these documents.
Step 9 : On the due date, the obligor bank debits the proceeds from buyer's account 
bpo-bank-payment-obligation-flow-chart
BPO is irrevocable but conditional payment method. (payment is subject to the electronic matching of agreed datasets)

BPO becomes operative and due according to the agreed payment terms.