1. E-Invoicing & Legal Aspects RA42 Presentation Michael Uebber, LH SIS – Simplified Interline Settlement

2. September 2008SIS – Materials – E-Invoicing2 Overview of this Presentation  Introduction  Introduction to E-Invoicing  E-Invoicing with Integrated Settlement  Legal Aspects of E-Invoicing  Legal Obligations of E-Invoicing

3. September 2008SIS – Materials – E-Invoicing3 Introduction to E-Invoicing

4. September 2008SIS – Materials – E-Invoicing4 The typical paper process is fragmented and discontinuous e-invoicing process e-invoicing platform The Internet email XML 01110001101010010011101 Supplier Receives Email Can view Invoice On-Line Airline AP Manager Airline AP System 0111000110101001001110101011 Transmit Invoice Electronically Transmit Invoice Electronically Print Paper Invoice Mail Invoice Supplier Receives Paper Invoice Checks Invoice on Paper Airline Manager Invoice Data Entry AP Clerk Airline AP System Typical paper process

5. September 2008SIS – Materials – E-Invoicing5 E-Invoicing in the aviation industry Carriers are already using an e-invoicing platform:  Over 270 participating airlines  Over 5,500 participating suppliers (fuel, ground handling, etc)  Plus various bilateral relationships  But carriers don’t currently use e-invoicing for settlements between themselves – just to pay suppliers  But similar relationship (supplier – customer)

6. September 2008SIS – Materials – E-Invoicing6 E-Invoicing with Integrated Settlement

7. September 2008SIS – Materials – E-Invoicing7 SIS follows a 2 pillar strategy to address the challenges of e-invoicing implementations  Address the content of e-invoicing (What information is part of the invoices):  Development and maintenance of Invoice Standards together with industry experts  E-Invoicing WG modifies the “IATA Aviation Invoice Standard”  Address the communication part of e-invoicing (How are invoices exchanged and processed):  A web service to support and promote the exchange of e-invoices  SIS selects supplier with e-invoicing tool

8. September 2008SIS – Materials – E-Invoicing8 E-Invoicing with IS Billed Airline Integrated Settlement Billing Airline Enabling Processes Billing & Invoicing Processes Central Repository “Digital Signature” Company Enabling Processes Settlement Processes ICHACH Processes at time of Sales NFP engine ARC COMPASS™ Prorate Engine IS-WEB IS-XML IS-IDEC Other IS-WEB IS-XML IS-IDEC Billing File / Data (similar to today) Billing File / Data (similar to today)  Create invoice file (where applicable)  Optionally create and verify digital signature  Optionally store e-invoice in a legal archive  Settle claims via ICH / ACH  Make invoice (incl. optional digital signature and verification) available for download

9. September 2008SIS – Materials – E-Invoicing9 Legal Aspects of E-Invoicing

10. September 2008SIS – Materials – E-Invoicing10 What makes an e-invoice a legal document?  Legal document with all required information (based on jurisdiction), e.g.:  Specific fields (e.g. Billing Company Address or VAT Registration Number)  Digital signature (if required)  “Stamp” (if required)  Depending on legal requirements, the same submission file could be a legal invoice or just simple billing data

11. September 2008SIS – Materials – E-Invoicing11 Required Data & IS  Some jurisdictions require 14 elements on a legal invoice (e.g. VAT Registration #, VAT Amount, Billing Carrier’s Address, Billed Carrier’s Address, etc)  Some jurisdictions require the proper naming conventions (e.g. “IVA” instead of “VAT”)  Some jurisdictions require digital signature, which is string of text that is computed and sent with the signed document in order to prove: 1. Identification of invoicing party (“Authenticity of origin”) 2. File content is unchanged (“Integrity of content”)  With Integrated Settlement, the data can be provided in two ways:  Billing carrier leaves blank, IS supplies data from airline profile  Billing carrier submits (IS will check against airline profile and, if they don’t match, will send a notification)

12. September 2008SIS – Materials – E-Invoicing12 Different Jurisdictional Requirements  Requirements discussed are not consistent across countries  Legal requirements depend on the most restrictive country  European Union – Most RestrictiveBut new Activities  United States – Less Restrictive  Other Countries - ???  IS will be configured by each airline  The transaction depends on the configuration of the most restrictive airline Billed Carrier Billing Carrier U.S.E.U. U.S. E.U. Digital Signature Required?

13. September 2008SIS – Materials – E-Invoicing13 Legal Obligations of E-Invoicing

14. September 2008SIS – Materials – E-Invoicing14 Legal Obligations for E-Invoicing  Billing Party:  Create and attach digital signature where necessary  Prove conformity with e-invoicing laws  Apply VAT where applicable  Archive and prevent modification (e.g. on a CD-ROM)  Billed Party:  Verify digital signature before processing the invoice  Archive and prevent modification (e.g. on a CD-ROM)  Logging of the digital signature and key, receipt of billing, and the type of archive and any conversion for 10 years

15. September 2008SIS – Materials – E-Invoicing15 Role of Integrated Settlement  IS legally mandated by billing carriers to “create” or “transport” the invoice  Where necessary, submitted billing data is “transformed” to an invoice by creating the digital signature and/or adding the reference data  IS legally mandated by billed carriers to verify the signature, archive the invoice, and log the receipt  IS also archives keys and signatures  IATA will use a “trusted company” to help to comply with local laws and to create and verify the digital signatures

16. September 2008SIS – Materials – E-Invoicing16 Carriers’ Obligations with IS  Investigate and configure the IS airline profile and submitted files with your country’s requirements for e- invoices  Digital Signature option  E-archiving  Reference data  Etc  Ensure that your carrier complies with your local regulations

17. September 2008SIS – Materials – E-Invoicing17 Thank you. Email: sis@iata.org SIS Website:  www.iata.org/whatwedo/finance/clearing/sis/index.htm www.iata.org/whatwedo/finance/clearing/sis/index.htm