HSBC has successfully executed a blockchain-enabled, live trade finance transaction between the UAE’s Universal Tubes & Plastic Industries Ltd. and India’s Tata Steel Ltd. – a global first for the steel industry. *
The Contour blockchain platform enabled end-to-end digitisation of the documentation required for Universal Tubes to import its order of flat carbon steel to the UAE from Tata Steel in India. The transaction is a real case scenario of the operational viability of blockchain as an alternative to conventional exchanges of paper-based documentation.
Sunil Veetil, Regional Head of Global Trade & Receivables Finance (GTRF) at HSBC, Middle East, North Africa and Turkey, said: “We are delighted with Universal Tubes’ and Tata Steel’s decisive action to conduct this trade over Contour, which reinforces the commercial and operational viability of blockchain and the Contour platform. We are confident this will pave the way for widespread adoption by other clients, counterparties and industries, many of whom we are already in talks with. HSBC, as the world’s leading trade finance bank,1 is pioneering the transformation of global trade using blockchain technology.”
Trade finance powers much of global trade but traditionally it involves heavily manual and paper-based processes. Digitisation of these processes can reduce transaction times from 5-10 days to under 24 hours, unlocking working capital and enabling more trade to be done between countries.
While the physical transfer of goods between the UAE and India takes a relatively short time due to close proximity, the administrative paperwork can often impede delivery. By using blockchain, the reduced transaction time will boost the efficiency of trade between the two countries, which is valued at around $60 billion with the UAE being India’s third largest trading partner.
Anil Taurani, Managing Director, Universal Tubes & Plastic Industries Ltd, UAE, said: “The future of trade is digital and the success of this blockchain transaction encourages us to look forward to linking all our future Letter of Credit transactions to this solution. The speed, visibility, efficiency and enhanced security it offers is a tremendous advantage and opens up immense opportunities for us. Despite the involvement of multiple players, we found the entire experience seamless and transparent.”
Contour’s platform allows all parties to have visibility of a trade while also ensuring that no single organisation controls all the data. This ensures that banks, importers and exporters have improved visibility without compromising security. HSBC is a founding shareholder in Contour and was the first bank to join the platform as a full production member in December 2020.
Peeyush Gupta, VP (Steel Marketing & Sales), Tata Steel, said: “We continuously leverage our in-house potential and that of the external ecosystems through carefully curated partnerships to drive innovation. Adoption of this platform is in line with our objective of agility and enabling a faceless yet trustworthy all-time interface to better customer experience. This unique initiative, executed in collaboration with HSBC, demonstrates our continued efforts to lead technology led disruptions by challenging the status quo and reimagining the global trade set-up.”
The transaction also incorporated essDOCS’ CargoDocs solution, enabling the transfer of the title of goods alongside the letter of credit and further streamlining the entire process.
*The specifics of the trade mean it was a global first for the steel industry; the first integrated paperless letter of credit and eDocs transaction for a steel export globally, and the inaugural end-to-end paperless trade combining electronic bills of lading and digitised letter of credit in the steel commodity segment.
1 Euromoney, https://www.euromoney.com/article/178jpplzjljf2aywdu3w4ew9mkzazhkigp5cmu4qtpprb6d8vk/surveys/trade-finance-survey-2021
2 Ministry of External Affairs, India, https://mea.gov.in/Portal/ForeignRelation/Bilateral_Brief_feb_2020_.pdf