A shipment of milk powder from New Zealand dairy processor Fonterra to China’s Sichuan New Hope Trading has become the first blockchain trade transaction between the two countries.

HSBC was the bank on both sides of the transaction, while blockchain-based digital courier platform Wave provided the underlying technology. The transaction saw the carrier that shipped the goods issue to Fonterra a cryptographically signed electronic bill of lading via Wave’s platform. Fonterra added additional trade documents and presented the digital ‘envelope’ to HSBC New Zealand, which in turn verified that the documents and commercial terms matched the letter of credit and eUCP600 rules. It then forwarded this digitally to the issuing bank, HSBC China. For its part, HSBC China then sent the documentation to Sichuan New Hope Trading, which surrendered the bill of lading back to the carrier, thus releasing the cargo.

The end-to-end process – which would ordinarily have taken a couple of weeks – was completed in less than 24 hours.

“This development supports the digitisation of Fonterra’s supply chain into the key market of China,” says Rob Roughan, interim CEO of HSBC New Zealand.

Fonterra carries out thousands of letter of credit transactions each year, and says that it has been attempting to speed up the process for several years. It adds that by digitising these trade workflows it will be able to streamline its supply chain process and cut down on costs.

The bill of lading is one of the most important documents in international trade, present from origin to destination and essential to ownership of cargo, customs clearance and financing. Under normal paper-based processes, it takes days if not weeks for a bill of lading to travel from origin to destination, physically changing hands several times along the way.

Demand for electronic bills of lading has surged during the pandemic, as exporters, carriers and financiers alike have raced to find alternatives as physical transfers of documents were held up by movement restrictions.

“We now see ourselves as ‘mission critical’ to ensuring trade can continue as physical movement of people and the paper they carry has been shuttered across the world,” says Gadi Ruschin, Wave’s CEO. Wave is now calling for more companies to follow Fonterra’s approach and digitise their trade activity, and says it plans to “accelerate efforts” for a wider adoption of the digital solution.