Integrating electronic bills of lading into trade finance
Sector: Tertiary sector · Industry: Shipping and maritime transport · Organisation: essDOCS Ltd., Voltron (Bankenkonsortium auf R3 Corda) · Maturity level: Pilot
essDOCS Ltd. integrated its CargoDocs DocEx document solution into the blockchain-based trade finance application developed by the Voltron consortium. This integration provides corporate clients and financial institutions with unified access to electronic bills of lading and accompanying trade documents under letters of credit. As part of these operational trials, the partners executed a fully paperless end-to-end iron ore trading transaction.
Documentation status
- Project status: Pilot (as of 14 August 2019) — Successful completion of practical tests and execution of the first fully integrated paperless iron ore transaction in August 2019.
- Evidence: Evidence medium
- Editorial review: pending
Description
essDOCS Ltd., in collaboration with the Voltron banking consortium, has demonstrated how shipping documents and trade finance can be digitally consolidated on a shared platform. In traditional foreign trade, original documents such as bills of lading often have to be couriered for days before banks release payments or ports hand over cargo. By linking the CargoDocs DocEx system with distributed ledger technology, all contract-relevant information is immediately and fraud-proof available to the parties involved.
The technical collaboration aimed to seamlessly connect the established CargoDocs DocEx solution from essDOCS for electronic bills of lading to the R3 Corda-based Voltron trade finance platform. Through programming interfaces, banks and corporate customers receive a consolidated view of all data and title transfers processed under a specific letter of credit. According to a 2019 World Trade Organization (WTO) report, this document integration was tested in over 25 production-near pilot tests by international financial institutions. A practical milestone was the handling of a fully digitised transaction in international iron ore trade in August 2019. The implementation demonstrates that existing industry solutions for legally compliant electronic shipping documents can successfully interact with DLT financing networks to overcome manual media breaks in global shipping.
Perspectives
B2B — organisations perspective
The integration allows trading partners and banks to jointly view shipping documents and letter of credit status without time-consuming postal document dispatch. This significantly accelerates the issuance, verification, and settlement of trade finance instruments in maritime goods transport.
Employees perspective
Bank and trade department clerks receive digital document verifications in a central application interface. This eliminates error-prone manual cross-checking of physical papers against letter of credit conditions.
Benefits
General
- Shortening of letter of credit processing times from days to a few hours
- Avoidance of port demurrage charges through timely proof of ownership
- Elimination of fraud risks through tamper-proof digital title transfers
B2B — organisations
- Faster release of goods and funds
- Reduced transaction and courier costs in foreign trade
Employees
- Elimination of repetitive paper verification processes
- Lower error susceptibility in letter of credit reconciliation
Challenges
General
- Incomplete legal harmonisation of electronic bills of lading in many port states
- Need to connect numerous heterogeneous IT systems of banks and shipping companies
B2B — organisations
- High reconciliation effort between banking consortium and IT service providers
- Slow acceptance of digital transport documents by customs authorities
Employees
- Transition of proven verification routines to digital document views
Technology foundation
R3 Corda DLT platform, developed for banks and corporate consortia, ensuring confidential exchange of sensitive cargo and financial data through strict point-to-point messaging.
Implementation examples
Integration of CargoDocs DocEx into Voltron
The time-consuming and fraud-prone physical delivery of bills of lading by courier delays the release of ship cargoes and blocks bank credit lines.
essDOCS connected its CargoDocs DocEx platform to the Voltron trade finance application to link electronic bills of lading with digital bank letters of credit. The consortium successfully conducted live pilots on this basis, including a fully integrated iron ore trade.
In April 2019, essDOCS and the Voltron banking consortium announced a collaboration to integrate the transfer of electronic bills of lading directly into the DLT trade finance platform based on R3 Corda. The integration allowed corporates and participating banks a unified view of all contractual shipping documents under a letter of credit. The system was validated in more than 25 live pilots and enabled a paperless commodity transaction for iron ore shipments in August 2019.
Media discontinuities between shipping companies, freight forwarders and financing banks as well as the risk of delayed goods handovers at destination ports.
Tags
Trade finance, Bill of lading, Letter of credit, Sea transport, Corda