THE international trade industry generates as many as four billion paper documents every year, according to some estimates. The topic of how and whether to digitalise these documents have been a subject of countless debates in the industry over the years.

Recently, a new development in the UK made headlines when a new law received royal assent, paving the way for the country to take a big step towards paperless trade.

The Electronic Trade Documents Act (ETDA), as it is called, sets out to clearly define paper and electronic trade documents, provide recognition of electronic trade documents, and govern the conversion from paper to electronic format.

Industry players have long identified and mapped out the technology, the understanding of the subject matter, and the pain points associated with the shift towards electronic trade documents and the exchange of data.

Even so, there was a significant obstacle to overcome. Stakeholders remained reluctant to commit their organisation’s resources without clear evidence that these new practices would gain widespread legal acceptance, both locally and globally.

One impact of the ETDA is the increased legal certainty that it provides to the entire global trade ecosystem. This legal recognition holds immense significance, given that more than 80 per cent of bills of lading (BL) worldwide are governed by English law. This fact alone reinforces the law’s significance and how it will shape the future of international trade for years to come.

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The complexities and inefficiencies inherent in traditional trade documentation have long been recognised as a challenge in the global trade landscape.

Take, for instance, the BL – a document that states the content, origin and destination of the shipment, and serves as a title document for the shipment. This document has traditionally been exchanged on paper, with only 2 per cent exchanged electronically.

This document can change hands up to 30 times for a single shipment, incurring costs at each node. It is also a pre-requisite to create and issue several other dependent trade documents.

The lack of a firm legal framework for the recognition of electronic trade documents has led to many ad-hoc efforts that solve immediate commercial needs, rather than considering the broader structural change required to affect transformation at scale.

This silo-ed approach to digitalisation introduced a new set of problems in terms of standards, interoperability, and security.

Singapore sets the example

As the recently concluded Singapore-India cross border exchange of electronic BLs have shown, the digital exchange of cross-border trade documents is viable and can be interoperable between different platforms and systems.

In Singapore, the challenges of going electronic were identified early. There have been efforts to digitalise the exchange of trade data and create a consent-based channel for structured data exchange with peers using SGTraDex, a public-private partnership that operates a neutral digital highway for trade data sharing. This was done on a strong foundation of industry-use cases that span the trade finance, maritime and logistics industries.

The involvement of the public sector in operating the data infrastructure ensures there is commercial viability, neutrality and trust – all of which are essential for private sector participants when they exchange sensitive commercial data.

There is also the legal recognition of digital documents in Singapore. The country was among the first few in the world to fully adopt the United Nations Commission on International Trade Law’s Model Law on Electronic Transferable Records (MLETR), with the Electronic Transactions Act expanded to cover transferable records such as BLs.

In Singapore, MLETR compliance is enabled through the introduction of TradeTrust, a digital framework that comprises a set of globally accepted standards of title documents – such as BLs and promissory notes – across various digital platforms.

TradeTrust also enables the MLETR compliance of documents as they pass through, which maintains the exclusive control by their owners and protects the integrity of the data.

By adopting a digital framework such as TradeTrust, organisations across the shipping, logistics, trading and financial domains that have a touchpoint with the same title documents will be able to do so within their existing platforms and workflows.

Fully digital ecosystem

SGTraDex, in partnership with the Centre for Digital Trade and Innovation in the UK, ran a series of pilots in May and June this year to demonstrate the technical feasibility.

The next set of pilots will demonstrate the legal and commercial feasibility of an interoperable electronic BL ecosystem with key stakeholders such as banks and traders to assess the viability.

Once the ETDA comes into effect later this month, SGTraDex will leverage the insights gained from these pilots to facilitate the live exchanges of electronic BLs, which will fully eliminate the need for physical document exchange.

Chris Southworth, the secretary-general of the International Chamber of Commerce in the UK, said the ETDA will, for the first time, provide a scalable legal environment in which to digitalise trade and bring the trading system into the 21st century, particularly when combined with other countries such as Singapore which have already reformed laws.

This, he said, creates a host of opportunities for all companies using English and Singapore law, wherever they are in the world, to do away with paper and digitalise supply chains. This will help make a much stronger case for a cheaper, faster, simpler and more sustainable trading system which is long overdue.

The writer is chairman of SGTraDex Services, a Singaporean public-private partnership operating a common data highway for facilitating the exchange of digital trade documents