Blockchain Case Studies in Global Trade.
Blockchain technology is making a difference in the following case studies.
How a frozen seafood exporter in India is reducing risk and saving money by going digital
Challenge:
Avanti, a frozen seafood exporter in India was shipping containers of shrimp worth $200,000 around the world in state-of-the-art refrigerated containers, or “reefers,” aboard fast ocean carriers. But despite rigorous procedure, their pricey cargo remained vulnerable to the risk of delayed, lost, or stolen Bills of Lading. This would halt the shipments and require significant urgent effort to correct the documentation and occasionally resulted in spoilage and huge losses.
Then COVID hit, and the three-week process from Bill of Lading issuance to cargo release became chaotic. Labor disruption, suspension of courier services and grounded flights created serious disruption and risk for the exporter and their consignees in New York. The exporter and consignee didn’t have visibility of their cargo and whereabouts of their Bills of Ladings.
Like many exporters across different industries, Avanti understood the potential of a digital Bill of Lading. They understood that going digital would enable easy movement of their BLs and their shipments amidst the turmoil caused by COVID. They also needed a rapid implementation.
Solution & Benefit:
They used a Blockchain based solution for managing their Bill of Lading that sped up the process. The biggest time savings came from the elimination of the air courier leg, which also saved the exporter as much as $50 per BL for a potential savings of over $5,000 per year.
Avanti gained clear visibility of their BLs status and location in the journey.
No one can steal an electronic BL and the chance of a BL getting lost is now completely eradicated.
Blockchain is increasing efficiency in Global Trade document flow.
How Syngenta expedited imports with digital documents, including trade finance from HSBC
“Removing paper from the process not only increases the efficiency and velocity of trade, but also enhances the appeal of the letter of credit as a trade finance solution by minimizing documentary complexity”- Sanjay Tandon, HSBC’S regional head, Asia Pacific.
Challenge:
Syngenta, a global Ag-Tech company that handles seeds, pesticides, insecticides, fertilizers and other chemical products, operates a supply chain focused on safety, speed, and ease of shipping.
To import agrichemical cargo from South Korea into Bangladesh, Syngenta requires a letter of credit to both comply with regulations and finance the transaction. Traditionally, it is a manual, paper-based process:
An Original Bill of Lading (OBL) is couriered from the carrier, Sealand to the client’s operational base in Singapore, and from there to their bank in Singapore (HSBC).
Other trade documents in support of the shipment (the commercial invoice, packing list, certificate of origin and certificate of analysis) and letter of credit are included in the same document pack.
Clerks at HSBC Singapore review the documents for compliance with the letter of credit requirements and to catch any discrepancies. After a successful review, the document pack is couriered to the importer’s bank in Bangladesh.
The Bangladeshi bank reviews the documents, and if all is in order, the documents are sent to the importer.
When the cargo is available for pick-up, the importer ‘surrenders’ the OBL by physically providing it to the carrier in order to secure the cargo release (without it, the cargo isn't released).
If either of the banks identify an error, the documents are returned to Syngenta for revision and resubmission.
This movement and handling of paper documentation was taking 20–25 days to complete. If the documents were delayed, the importer was unable to surrender the OBL to the carrier when the cargo arrived in port. This would lead to additional costs, including possible detention and demurrage, inventory management issues and loss of sales.
Solution and Benefit:
Syngenta’s preferred carrier, Sealand (part of the Maersk Group) saw the challenge and suggested digitizing the documents and workflows using Blockchain based digital Bill of Lading. Sealand was able to issue the OBL for Syngenta’s cargo digitally as an electronic BL, along with the other key shipping documents. In partnership with HSBC, the trade finance workflow was digitized, with the letter of credit also uploaded to the platform and shared securely.
Cost savings:
Eliminated the risks of detention and demurrage charges
On-time documentation reduced the risks of inventory spikes or delayed revenue recognition because of delayed cargo
Time savings:
Dramatically reduced the time taken to send, verify and process documents from end-to-end of Syngenta’s supply chain
Ensured cargo release on schedule
Enabled revisions of documents to be executed – securely and with a clear audit trail – in minutes rather than days
Eliminated document delays and allowed Syngenta to provide their customer with product faster.
Digital document workflow made the execution of the transaction easy, painless, and quick
Digitization and synchronization of banking and shipping document flows helped to eliminate the administrative time required to maintain, send, and rectify paper documents.
Blockchain technology platform modernize global trade operations with greater efficiency, transparency, and traceability.
Covantis Case Study: A global trade system reliant on paper-based processes and manual operations
“Two years ago, we set out on a journey to transform a system of global trade that had changed very little for the last century... We advanced from identifying this crucial need, to working with industry participants across the supply chain to explore and understand the needs of the market, to building a secure and trusted digital network… We look forward to working with our partners to use this technology to enhance efficiencies and reduce operational risk.” - Petya Sechanova, CEO of Covantis
Challenge:
Manual processes: Post-trade processes for bulk shipments remain labor-intensive and manual with paperwork couriered around, and often repeatedly re-entered—increasing both operating costs and risks of human error.
Reliance on email: More than 275 million emails are exchanged annually to process the estimated 11,000 worldwide shipments of grain transported across the oceans. (Source: The IPPC ePhyto Solution, The Food and Agricultural Organization of the United Nations)
Inefficient data exchange: Paper-based certificates and bills of lading are not easily exchanged among multiple parties. It is costly to replace paper-based certificates if they are misplaced.
Specifically in the context of COVID-19, agricultural commodity supply chains have been disrupted by interruptions to paper document deliveries, and the increasing necessity to work from home. The global pandemic has accelerated the importance of the industry’s digital transformation, necessitating an easier way to electronically exchange documents and data.
Goal:
Reducing paper based processes and the amount of email exchanged between multiple parties
Providing a trusted single source of information to securely share documents and coordinate high seas logistics from port to port
Giving multiple parties the ability to share real-time transaction data
Benefit:
The Covantis blockchain platform is forecasted with following efficiency gains, as estimated by Covantis:
60% of execution tasks automated
70% increase in transaction speed
90% reduction in rekeyed entries
80% decrease in error rates and inconsistencies
Using Blockchain based digitalized solution, Covantis has streamlined collaboration between 45 legal entities and 500 users across 16 agri-groups around the world.
343 voyages created
3,850+ messages exchanged
Increase in speed enabling multiple parties to collaborate in a typical message string
528 nominations sent to carry cargo in a specific period
~35 million tons of cargo volume executed between all the parties (buyers, shippers, sellers) resulting in an overall decrease in cost per voyage due to:
Decreased counterparty risks
Enhanced tracking of voyage completion status across participants
Increased productivity with improved communications
99.6% platform availability, which means the platform meets enterprise-level requirements and is available to customers and users working across all time zones
The progress so far demonstrates that the platform is successfully connecting players responsible for moving commodities across the world, and players who have commodity cargo at ports of origin, awaiting export. In this early stage, the platform has successfully begun to replace communications that would traditionally occur over email.