The future of trade is digital

AT THE recent 13th World Chambers Congress (WCC) held in Geneva, chambers and business leaders affirmed the importance of “achieving peace and prosperity through multilateralism”, a conference theme befitting today’s synergies in digitalising international trade.

Singapore, as an important global trade and finance hub, has consistently been at the forefront of trade digitisation, from ratifying the Regional Comprehensive Economic Partnership (RCEP) to being one of the first adopters of the United Nations Commission on International Trade Law Model Law on Electronic Transferable Records (MLETR). Even as digital trade flourishes without interoperable rules and regulations, digital cross-border trade, especially one that goes by a universally accepted playbook, plays an even bigger role in driving today’s economic growth.

As the world’s largest free trade agreement covering 30 per cent of global gross domestic product and a third of the world’s population, the RCEP is expected to bring renewed optimism for greater regional economic integration and enhanced trade and investment facilitation. Businesses have been benefitting from modern, mutually beneficial economic partnerships that build on existing agreements Asean has with its free trade partners.

Singapore has also recently adopted the MLETR, enabling the creation and use of electronic bills of lading (eBLs) that are legally equivalent to paper-based ones. Digitising this key trade document will enable the shipping industry to benefit from faster transactions, cost savings and lowered fraud risks, and support the digital transformation of Singapore as a financial, trading and maritime hub.

Unknown to many, documentation for a single shipment can be slowed down, with up to 50 sheets of paper that are exchanged among up to 30 different stakeholders, as it passes physically from party to party like shippers, banks and customs agents, and across different jurisdictions and ports. According to McKinsey, the scaled use of eBLs could unlock up to US$40 billion in global trade by reducing trade friction, especially for emerging markets, and bringing us to this new frontier in transforming international trade.

Realising a universal eBL

Today, for a transaction to flow efficiently, all stakeholders need to be onboarded to the same platform. There are currently 10 authorised eBL platforms, but they are not connected to each other. This results in all parties needing to sign up to multiple providers with different processes and rule-books – which is time-consuming, costly and inefficient. Getting everyone on the same digital platform requires colossal effort, with some even reverting to paper-based documentation, even as many agree that the future of trade is – or should be – digital.

Swift has been working with members of the Future International Trade (FIT) Alliance, Digital Container Shipping Association (DCSA), Baltic and International Maritime Council, International Federation of Freight Forwarders Association (FIATA) and the International Chamber of Commerce, alongside eBL platform providers, to develop an interoperable model for eBLs.

With a digital trade solution, we could receive data from one trade platform via an application programming interface (API) and convey it to a different platform. This allows companies to trade with each other and exchange eBLs, regardless of eBL platforms. This means that the trade industry need only sign up for one provider, speeding up document exchange in its electronic form. This helps reduce costs and improve efficiency and security; and means we needn’t wait for a physical, paper-based BL to transport goods from one port to another.

Swift has been developing a proof of concept for this solution, using an electronic transport document API that leverages DCSA’s industry specifications. Working with two authorised eBL providers, the industry conducted a series of interoperability trials in early 2023, facilitating the timely and secure interactions between eBL platforms in a typical bill of lading lifecycle with Swift as a connecting network.

These successful experiments underscore advances made by the trade finance community, corporates, and the wider industry in helping accelerate digital trade – especially important when the eBL could boost trade revenues by up to 20 per cent and cut processing times by 60 per cent. According to McKinsey, a universal eBL will save the industry US$6.5 billion in documentation costs versus a paper-based BL.

While many of the technical and legal obstacles to universal eBL are being addressed, the FIT Alliance also committed to the FIT Alliance eBL Declaration at the 13th WCC, committing the industry to adopting eBL solutions and to support the development of eBL standards.

Some of the world’s largest bulk shippers and nine of the top 10 ocean carriers have committed to switch their BLs to eBLs within two to seven years. To date, 26 FIATA members have adopted the eBL.

We call on more businesses worldwide, small and large, to do likewise and embrace digital trade, working together for the future of global commerce.

The writer is global head of wholesale payments and trade strategy at Swift