The deal was carried out between Tricon Energy USA – a petrochemicals broker – and Indian conglomerate Reliance Industries, with HSBC acting as advising bank to the latter and ING as the issuing bank to the former.
Two key components of the deal were carried out over the blockchain and, even taking into account all of the ballyhoo surrounding the technology, their shift to the blockchain could genuinely change the way importers and exporters do business with one another.
Firstly, in such transactions, the importing company has to provide the exporter with a letter of credit (LC), from its issuing bank, before a deal can go ahead.
Leaving aside the time needed for an importer to get that LC, it can take two weeks for the bank issuing it to send it to exporter’s advising bank and have that advising bank approve it.
The reason for this is that, in order to ensure the veracity of such documents, they are usually sent via post or courier. Moreover, copies are not just sent to the exporter but have to be shipped to each party involved.
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Monday’s transaction removed the need for that time-consuming process. Everything is done digitally – no need for moped-riding couriers – and all parties can see the documents.
Moving the Bill of Lading to the Blockchain
The second component of the trade was its bill of lading. For those unfamiliar with the term, think of it as being akin to a receipt that you sign when you order something from Amazon.
A courier brings you your goods, and you have to sign a receipt, that lists those goods, to confirm that you have indeed received them.
For companies shipping gasoline, the process is similar but on a much grander scale.
A ship’s captain will take a bill of lading, that details what his cargo is and its quantity, and get the importer to sign it to confirm that the cargo has been delivered.
The transaction that was carried out on Monday moved that process on to the blockchain for the first time.
All of this should enable exporters and importers who adopt the technology to speed up their business interactions.