Bhubaneswar : HSBC India and HSBC UAE have successfully executed a blockchain enabled, live trade finance transaction between ArcelorMitttal Nippon Steel India Limited (AM/NS India) and Universal Tube & Plastic Industries Ltd. (UAE).
The success of this transaction reinforces the commercial and operational viability of blockchain as an alternative to conventional exchanges for paper-based documentation. The solution applied in this transaction is a significant upgrade for organisations engaged in international trading of goods, as it allows all parties to use a single unified platform thereby streamlining and simplifying the process.
With AM/NS India as the seller of steel goods to Universal Tube & Plastic Industries, UAE, the end-to-end paperless transaction was executed over the Contour platform. Contour, which has been built on blockchain technology, facilitates comprehensive digitisation of the end-to-end ‘Letter of Credit’ (LC) transaction, including the e-presentation of trade documents via the interface with essDOCS’ CargoDocs platform.
In this case, the LC was issued by HSBC UAE for the importer, Universal Tube & Plastic Industries, UAE with HSBC India acting as the advising and negotiating bank for the exporter, AM/NS India.
How it works
Contour enables the underlying LC trade transaction to be fully digitised from the LC issuance stage to the final presentation of documents. It also allows transaction parties to transfer, manage and present electronic Bills of Lading (eB/Ls) and supporting documents seamlessly within its platform via the Contour-CargoDocs interface.
The use of blockchain technology in trade finance has been instrumental in enhancing transparency and security for all parties. It helps to significantly reduce the document negotiation cycle time from as much as a week to around one day, thereby aiding unlocking of working capital for businesses. Digitisation also reduces costs associated with paper-based documents, reconciliation and streamlining the processing flow. Increasing the velocity of trade, particularly in situations where shipping routes are relatively short is another advantage.
Mr. Dilip Oommen, Chief Executive Officer, ArcelorMitttal Nippon Steel India (AM/NS India), said, “We are committed to providing smarter steel solutions for a better world. As a leading steel player in New Digital India, the company is continuously exploring avenues to strengthen its capabilities to automate and digitise the processes. Implementing Blockchain is a step in this direction and gives us a competitive advantage. The future of trade, both international and domestic, is increasingly going to be more dependent on innovations, such as blockchain platforms”
Mr. Hitendra Dave, Chief Executive Officer, HSBC India, said, “The commercialisation of blockchain technology to digitise trade finance is clearly gathering momentum. Having been pioneers in this arena, we are happy to partner with ArcelorMitttal Nippon Steel India in leveraging blockchain technology. The benefits and transformative impact of this technology are evident and we are confident that it will lead to greater adoption by corporates for their trade finance requirements.”
Removing the hurdles of close-proximity trade
India is UAE’s second largest trade partner and increased economic collaboration between the two is expected to further drive up bilateral trade between the two nations. While the physical transfer of goods between India and UAE takes a relatively short time, the administrative paperwork can delay their delivery. Reduced transaction time will help boost the efficiency of trade in the India-UAE corridor that is characterised by many close-proximity shipping routes.