This concentration of exposure can be accomplished through the establishment of a reinvoicing center
or, if a less cumbersome solution is needed, through back-to-back FX contracts between company subsidiaries, the ITC and external banks.
For example, assume a factory in country X sells to a reinvoicing center
in country Y that sells to a sales affiliate in country Z, and the factory bears the economic burden of any costs or risks incurred by the entities downstream.
A reinvoicing center buys goods from the manufacturing subsidiary or parent, without taking possession, and reinvoices other company affiliates or third parties when it sells the goods.
Most important, the reinvoicing center can assess its net position on all intercompany transactions and hedge in the forward market accordingly.
* Some countries prohibit reinvoicing centers, as well as any third-party billing (for example, France, Spain, Japan).
(3) Based on the company's evolving growth patterns, and legal entity structure, are there opportunities to redefine the construct for trading models (e.g., in-house banks, reinvoicing centers
and procurement hubs)?
Leading companies are using a variety of active strategies to reduce the build-up of trapped cash, including advanced structures around intercompany and third-party commercial flows, such as netting centers, reinvoicing centers
and procurement centers.