Home' Australian Industry Group Exporters Guide : Exporters Guide 2017-2018 Contents 11
The Australian Industry Group Exporters Guide 2017--2018
CONTENT PROVIDED BY COMMONWEALTH BANK
In November 2016, Commonwealth Bank
and Wells Fargo completed the frst global
trade transaction between two independent
banks, combining blockchain, smart contracts
and the Internet of Things (IoT).
It was a hot, sunny day on 14 September when
a ship set sail from Houston. Few people knew
that the container destined for Qingdao,
China, marked a groundbreaking transaction
between the Commonwealth Bank, Wells
Fargo and Brighann Cotton that combined
these emerging disruptive technologies.
Unchanged for decades
Trade fnance is a paper-based and labour-
intensive exercise that relies heavily on the
use of letters of credit (LC). It takes days, even
weeks, to physically move the documents
advising the exporter that the importer has
the necessary funds to pay for the goods. The
importer undergoes a similar ordeal, awaiting
notifcation of the goods’ arrival at their
destination before authorising payment. Use of
documents means that there are delays to the
notifcation of title transfer. Funds and insurance
are therefore unduly tied up at both ends.
Blockchain technology has the potential to
change all that.
The use of blockchain technology creates
transparency between buyer and seller, a
higher level of security and the ability to track
a shipment in real time. The advancement
from paper ledgers and manual processes
to electronic trackers on a distributed ledger
reduces errors and accomplishes in minutes
what used to take days.
Cameron Austin, General Manager of Brighann
Marketing Inc, says: 'The combination of
these emerging technologies could eliminate
many ineffciencies currently experienced
in international trade. The benefts of lower
costs and improvements to security through
reduction of errors, risk and time, enable a
company to achieve greater effciency and
have more predictable working capital’.
How it was done
» Blockchain: Skuchain Inc.’s Bracket technology
was used to produce a blockchain-based LC
called a blockchain bracket obligation. It had
the same underpinning documentation as
» Internet of Things (IoT): The trial incorporated a
GPS device to track the cotton’s movement. All
parties could see when it left Houston and when
it left the ship. This linked payment and risk to the
actual physical fow of goods. Historically, these
were linked to the paper fow.
» Smart contracts compared the metadata
entered on the Skuchain system, and
confrmed that Brighann Cotton Marketing
Australia’s documentation matched that of
Brighann Cotton Inc. (USA).
» Electronic distribution: All documentation
(except bills of lading) is electronic. There’s no
expense on couriering original and duplicate
documentation around the world. The transfer
of information is almost instant. The smart
contract’s ability to compare metadata could
potentially remove the need for physical
document checks by humans, which would
bring greater accuracy and faster approval,
helping to save time and money.
» One system allows the process to become
completely transparent to designated
parties. All players can track the transaction’s
progress. All parties understand the location
of the goods and their liabilities.
» A secure solution: GPS and information from
the shipper provide notifcation of the cotton’s
departure and arrival. This signals when funds
can be released and when insurance is
needed or no longer required, as specifed
in the contract. With blockchain, documents
can’t be lost and the provenance of each
document is established. Invoices can’t be
duplicated and it is impossible for unauthorised
parties to submit documents. This protects
importers, exporters and their banks from fraud.
The trial with US$35,000 of cotton demonstrates
that blockchain, IoT and smart contracts will
add value to the traditional process. Once trials
like these are validated, such technologies
have the potential to improve business by
reducing costs, risks and time.
For more information or to speak to one of our trade
specialists, visit commbank.com.au/tradefnance or
call 1300 654 112.
Trade finance cottons on to
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