The transaction involved a shipment of cotton from Texas, USA to Qingdao, China, using the efficiencies of a distributed ledger – Skuchain’s Brackets system – for all parties.

The trade involved an open account transaction, mirroring a Letter of Credit, executed through a collaborative workflow on a private distributed ledger between the seller (Brighann Cotton  (US)); the buyer (Brighann Cotton Marketing Australia); and their respective banks (Wells Fargo and Commonwealth Bank).

The trade introduced a physical supply chain trigger to the terms of the transaction to confirm the geographic location of goods in transit before a notification is sent to allow for release of payment. The tracking feature adds a new dimension, providing all parties with greater certainty compared with traditional open account and trade instruments like Letters of Credit, which focus on documents and data.

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.

Brighann Marketing general manager Cameron Austin said: “The combination of these emerging technologies could eliminate many inefficiencies currently experienced in international trade. The benefits of lower costs and improvements to security through reduction of errors, risk and time, enable a company to achieve greater efficiency and have more predictable working capital.” 

Commonwealth Bank’s Cash-flow and Transaction Services executive general manager Michael Eidel said:  “Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies around the world could benefit from these emerging technologies. We strive to stay at the forefront of disruptive technologies to understand how they can be used to enable greater efficiencies and solve the real world challenges our customers face.

“The interplay between blockchain, smart contracts and the Internet of Things is a significant development towards revolutionising trade transactions that could deliver considerable benefits throughout the global supply chain.”

Wells Fargo International Trade Services head Chris Lewis said: “Wells Fargo is committed to exploring emergent technologies and innovative concepts that benefit our customers.  In this case, we demonstrated how a new approach to trade could benefit a joint Wells Fargo and Commonwealth Bank customer, Brighann Cotton. 

“This marks another step in evaluating technology that, over time, could support the evolution of trade finance.  While significant regulatory, legal and other concerns remain to be addressed with the technology, we are committed to engaging with our partners to explore potential applications within trade finance.”

Following the successful completion of this transaction, Commonwealth Bank and Wells Fargo will continue actively collaborating with trade finance clients, financial institutions, fintech companies and consortiums like R3, as well players in the insurance and shipping industries, to ensure their clients benefit from the changes in technology across the global trade ecosystem.