The move to a paperless world is not just about compliance with new legislation and adopting newer ways of working, but a move towards a more sustainable, efficient and secure competitive future. Whilst paperless systems are not a new concept and have been used successfully across many industries, there remains a reliance on paper based systems. The World Economic Forum’s 2017 white paper on Paperless Trade set a standard for paperless trade across the world for those wanting to adopt the practice.
Whilst doing a great job of maintaining the status quo, it can be inefficient, timely and costly to continue paper based practices in the long term. Today’s economy demands a plethora of advancements driven by, but not limited to, the need to:
- Provide cost savings
- Increase productivity
- Reduce environmental impact
- Increase security
- Improve speed
- Provide detailed and accurate provenance of goods
- Exchange data with paperless systems already in use within the trade chain
- Tackle illegal and counterfeit trade or trade based money laundering
- Maximise tax recovery through efficient record sharing
This is balanced by the constraints and processes of paper based systems that limit the advancement and innovations. All of these advancement factors drive the cost of goods and services up and down depending upon which can be met against demand for the products and services the systems support.
The ETDA
To boost the UK’s journey on digital transformation, The Electronic Trade Documents Act 2023 (ETDA) was passed in July 2023, effective from 20 September 2023. The ETDA will allow for the legal recognition of trade documents such as bills of lading and exchange in electronic form and accordingly should provide a catalyst to drive adoption and innovation in the trade chain.
The UK currently has over 70 trade agreements in place ranging from trade treaties to full trading agreements.
Although the ETDA allows for and encourages the adoption of electronic trade documents by businesses, it also permits the conversion of electronic to paper as well as paper to electronic where certain conditions are met. This will help support a staged adoption and facilitate a future move to a digital platform wherever it is not yet possible to fully digitise the trade/supply chain. This also recognises that other countries in the trade agreements may not be at the same level of electronic documentation.
Beyond the immediate benefits to businesses, the ETDA also fosters broader economic growth and development. By streamlining trade processes and reducing barriers to entry, electronic documentation opens up new opportunities for small and medium sized enterprises (SMEs) to participate in global markets. Moreover, it enhances trade facilitation, enabling smoother cross-border transactions and strengthening international trade relationships.
What will the requirements be?
The types of documentation required will depend on the type and nature of the transaction and trade agreement. The UK government lists the set of documentation as including (but not limited to):
- Certificate of origin (COO)
- Commercial invoice
- Packing list
- Export licence
- Local regulations
- Dangerous goods
- Insurance
- Export cargo shipping instructions
- Standard shipping note
- Bill of lading or waybill
- CIM consignment note
The benefits and challenges of transitioning to paperless
The transition to paperless is not without its challenges. While the ETDA lays the legal groundwork for electronic documentation, widespread adoption will require investment in technology, infrastructure and digital literacy. Moreover, concerns related to data privacy, cybersecurity and legal enforceability must be addressed in order to build trust and confidence in electronic trade documents. Several case studies from across the world already exist (some are listed in the World Economic Forum’s 2017 white paper on Paperless Trade), which can provide patterns for reuse and guidance on lessons learnt.
For electronic documents to be considered electronic trade documents and fall within the scope of the ETDA, the system on which they run must be sufficiently reliable. The Act outlines essential characteristics that a system must exhibit to be deemed ‘reliable’ for recording electronic trade documents, yet it refrains from mandating specific systems or technologies. This approach should ensure that the ETDA continues to be applicable as digital technologies evolve. Nonetheless, the establishment of industry-agreed standards is expected to facilitate adoption and it might be worth including that many industry sectors have already defined standards to drive paperless trade. For example, the International Air Transport Association’s (IATA) New Distribution Capability (NDC) standard is a program for developing and marketing the adoption of a XML-based data transmission standard. It allows airlines to distribute advanced merchandising offers to third parties and supports end-to-end booking flows, from shopping to purchasing. Similar initiatives are present in the financial world.
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As converting to electronic trade documents contributes to cost savings and resource conservation by eliminating the need for paper, printing and physical storage, businesses can significantly reduce operational expenses and environmental impact. This is beneficial as the number of metrics by which sustainability is measured increases, and customers require ever deeper knowledge of the provenance and carbon footprint of goods and services. An end-to-end electronic trade document trail can assist in answering some of the metrics being set through digital audit trails providing accountability and transparency. Security can also be increased through the use of electronic documents through encryption, digital signature and blockchain safeguarding against tampering and unauthorised access.
There are uncertainties regarding the pace at which market participants will transition to digital processes. Establishing trust in the necessary infrastructure for seamless digital international trade will be a gradual process. The significant standardisation of paper trade documents provides a level of assurance that many stakeholders, especially financiers, value and are likely to continue demanding
However, the move to paperless trade should hopefully gather momentum as the benefits are increasingly being recognised by businesses, regulators and governments building on the work and foundations from the World Economic Forum’s 2017 white paper on Paperless Trade. The ETDA serves as a catalyst for change, paving the way for a more efficient, sustainable, and interconnected global economy. By embracing electronic trade documents, we not only modernise trade processes but also lay the foundation for a more inclusive and resilient future.
Contributors
Max Hemingway FBCS CITP, Dr Sam De Silva FBCS CITP, Prof Mark Josephs FBCS CITP, Resham Dhillon FBCS CITP
