TradeGo, a China-focused blockchain consortium, has teamed up with supply chain collaboration platform Huoduibao to facilitate what it says is the first-ever digital warehouse receipt pledge financing that uses an electronic bill of lading (eBL) as a means of verification of title to the goods.

The transaction saw Chinese importer Shandong Energy Intelligent Industry Technology buy a shipment of rubber from Malaysian supplier Halcyon Agri Corporation on documents against payment terms. The shipment was carried by shipping company SITC, which created and issued an eBL via the TradeGo platform.

Upon arrival, the goods were discharged at warehousing giant China Materials Storage and Transport Development Company’s (CMSTD) facilities in the Qingdao free trade zone. A digital warehouse receipt was then issued on the Huoduibao commodity supply chain collaboration platform, a joint venture between Chinese logistics company JD Logistics and CMSTD.

Using the connectivity between TradeGo and Huodiubao, China Construction Bank verified the warehouse receipt’s authenticity by cross-checking it against the consignee and title holder data from the eBL, before releasing US$196,000 in pledge financing to Shandong Energy Intelligent Industry Technology.

“In cross-border trade, it is not convenient for the digital warehouse receipt pledge financing business to trace the source and title of the cargo using traditional paper documents,” a TradeGo spokesperson tells GTR. “By combining information from the eBL and the digital warehouse receipt, the entire cargo import chain can be connected digitally, from loading to transportation, custom clearance, warehousing, pledge financing and cargo delivery. This enables the title of the cargo to be traced at any time, and guarantees the convenience, authenticity and the safety of the entire transaction life cycle.”

Since the Qingdao scandal in 2014, in which Chinese firm Dezheng Resources raised Rmb12.3bn (US$1.78bn) in funds using fake warehouse receipts for aluminium ingots, alumina and refined copper, numerous industry players have sought to find ways to bring back confidence into China’s warehouse financing sector – landing on the greater implementation of technology as a solution.

In 2016, CMSTD became a pilot partner for LMEShield, a short-lived central electronic register for storing and verifying warehouse receipts from the London Metal Exchange (LME). In the years to follow, and amid a Chinese government-led push to blockchain technology across industrial sectors, electronic warehouse receipt alliances sprang up, including one developed by Qianhai Mercantile Exchange, a subsidiary of Hong Kong stock exchange HKEX, which also owns the LME.

“The credibility of warehousing enterprises and regulators, which are important participants in commodity trade and financing, has been seriously questioned. If banks are to re-enter the inventory-related commodity finance market, we must reconstruct the credit system of inventory-related pledge financing, the core of which is to solve the problem of how to trust warehousing enterprises,” a spokesperson for Sinochem told GTR last year.

In 2020, the state-controlled oil company launched a blockchain warehouse receipt platform for the petrochemical sector, using internet of things (IoT) technology to monitor the goods linked to the receipts. In 2022, its technology facilitated China’s first digital warehouse receipt pledge for crude oil, in a transaction that saw Shandong Port Finance Holding lend US$6.3mn to Qingdao Taihe Jiabai Energy against a cargo held at Jingbo Logistics warehouse in Binzhou.

For its part, TradeGo says that by using its eBLs to add an additional layer of trusted data to electronic warehouse receipts, it aims to inject further confidence into the sector, and expects to carry out more live transactions in the near future.

“The authenticity and uniqueness of the original eBL on the TradeGo platform can be guaranteed based on blockchain technology, giving financial institutions comfort over the authenticity of cargo documents,” says a TradeGo spokesperson. “With this integration between the two systems, TradeGo’s eBL becomes a trustworthy verification source for the Huoduibao platform’s digital warehouse receipt.”