Model for Electronic Account Settlement Using Bank Credit Cards in the International Transportation Industry

by Tony Young
October 16, 2000

The System

The idea being proposed is an electronic alternative to the traditional methods of freight payment among trading partners in the international transportation industry. In this model, each trading partner would open specific merchant and purchase card accounts in conjunction with their current accounts for the purpose of freight invoice settlements. In the Canadian transportation industry, as in most countries, inbound freight is on a cash basis. Credit terms on outbound freight exist but normally for the duration of time the goods are in transit, usually 15 to 30 days. Because of credit terms on outbound freight, its timely collection is often a challenge for the carrier.

The lack of electronic payment solutions perpetuates inefficiencies in the movement of goods as well as higher costs due to the labour and paper intensive methods currently being practiced. Presently, when an inbound shipment arrives, the carrier must fax an arrival notice (freight invoice) to the notify party, being the freight forwarder or customs broker. The forwarder or broker must then issue a cheque and bring it to the carrier’s freight cashier counter in order to obtain a "delivery order", a document that allows the consignee to take possession or effect delivery of the goods. Because of the urgent nature of most inbound shipments, these transactions are done by messengers. A signing officer, or officers, must always be on duty in order to sign cheques throughout the day for incoming arrival notices and the carrier must provide a cashier to exchange cheques and endorsed original bills of lading (where required) for delivery orders.