The UK government has introduced a law to digitise bills of lading in order to cut shipping costs and improve the efficiency of importing and exporting goods. Large companies, such as Maersk, and forward-facing countries are also accelerating the development of tools to create a new age of efficient international trade.
The inefficiency of paper documents in international trade
The UK is the sixth largest economy in the world, with annual global trade worth about £1.266 trillion. Yet until recently, UK global trade relied mostly on paper documents to handle critical aspects of the supply chain, leading to significant inefficiencies and wastage of time at the ports. In the UK, trade documents are still regulated by the Bills of Exchange Act of 1882 and currently the UK ( similar to many other countries) still relies on paper-based processes, procedures and documents, resulting in tons of paper that become worthless after a single use, furthermore increasing the country’s carbon footprint. This use of paper is also accompanied by the need for physical presentation and transfer of documents, which delays even further an already complicated process; according to CargoX, transferring a paper-based trade document can take as many as ten days, compared to a mere few seconds for an electronic process.
Countries are harnessing the blockchain and digital solutions
With the multiple advantages of digitising trade documents already clear, several countries and industries are adopting digital solutions in their ports to help improve the efficiency of their international trade. In the UK, the Electronic Trade Documents Bill was introduced this year which, as summarised by the House of Lords Parliamentary Library, states: “The bill would allow businesses to choose to use electronic trade documents, but they would not be required to use them. It would also allow paper documents to be converted to electronic documents and electronic documents to be converted to paper ones. The UK government has said the bill would “boost” the UK’s international trade, reduce financial and environmental costs, and increase efficacy and security. The measures have been largely welcomed by the sector.” Having passed the first reading at the House of Lords on 12th October 2022, this Bill serves to provide optimism about the future of trade in the country. A few other countries, such as Singapore and the Netherlands, have also recognised the importance of digitised shipping documentation; the Port of Singapore has already adopted legislation to accept electronic Bills of Lading (e-B/L) as legally valid. Likewise, the Port of Rotterdam is promoting innovation with projects such as the Dutch Blockchain Coalition, Spark! Living Lab and 2Tokens. Trials such as these are garnering much positive feedback from stakeholders, as shown in a pilot scheme between the Port of Rotterdam Authority and the Port of Singapore, in which stakeholders commented that “the results of the most recent trial also show that digital transfer of ownership by means of an e-B/L saves time and improves efficiency.” Seamless interoperability was discovered in the trial, which showed that “an e-B/L issued by one platform could be verified and processed by another digital trade platform.”
Promoting the economy (and environment) with digital solutions
Digitalising the handling of shipping and trade documents has demonstrable benefits for the economy and environment, promising sustainable growth in the countries where they are adopted. Singapore law firm, Watson Farley and Williams, notes that: “The cost of processing physical trade documents can constitute up to 20% of transportation costs.” For the economy, using both e-bills of lading and digitised copies of documents, such as bills of exchange and promissory notes, will open new opportunities. Predictions from expert networks are generally positive. According to Trade Finance Global, electronic documents will significantly lower administration costs and, in the UK, provide a £1.14 billion increase to business over ten years; the advantages also include a boost for small to medium-sized businesses (SMBs). The International Chamber of Commerce provides important context as well, estimating that small and medium businesses could see a 13% growth in international business were trade to be digitised. Furthermore, the Digital Container Shipping Association notes that the UK can save a significant amount of money by adopting digital solutions. According to its analysis, around $4 billion could be saved each year if 50% of the container shipping industry adopted e-bills of lading.
Notably, as regards the environment, digitisation of trade has the potential to help the trade industry reduce its carbon footprint. The UK government claims that 28.5 billion paper trade documents are printed and flown worldwide each day, which significantly adds to the trade industry's emissions. Using digital solutions can markedly help to cut the world’s carbon emissions by up to 20% per annum, a World Economic Forum report states. Digitalisation also provides opportunities to improve security and compliance across the supply chain in the trade industry. With the application of blockchain, distributed ledgers and smart contracts, enforcing transparency and accountability will be easier. Additionally, tracing historical data and records will be speedier, therefore helping stakeholders to derive richer insights from the flow of information. In 2018, Maersk and IBM Blockchain created TradeLens, a blockchain-powered platform with the ability to connect every part of the global shipping industry. This enterprising blockchain has been designed to
provide a single trustworthy database on which all the links on a supply chain can work together. Using TradeLens, clients can trace their cargo container in real time and, unsurprisingly, it has since been adopted and used by other firms. For example, Roberto Bucci, an Italy-based freight forwarder with a specialisation in African Trades has turned to Maersk for help after experiencing many challenges whilst using manual documentation processes in the management of commodities on behalf of their clients. Maersk has provided a solution by switching Bucci’s manual process to a digital documentation process through the TradeLens e-B/L, with the benefit of ensuring that the sharing of information between Bucci and their partners is secure.
Although digitisation and blockchain technology present a clear path to improved performance and sustainability in the trade industry, the broader realities are not as clear cut. Only a few countries are at the same stage as the UK, Holland and Singapore in adopting digital technologies in their trade industries. The UK, for example, has had to overcome legislative and legal obstacles before including electronic documentation in its international trade industry and, for decades, longstanding laws have required B2B trade documents to be paper-based, meaning that a change in legislation is required in many jurisdictions before electronic documents can become mainstream. Therefore, a global, paperless revolution is needed in international trade for the benefits of paperless trade to be fully maximised. The G7 is making remarkable progress towards paperless trade, with countries such as the UK and Germany in the advanced stages of adopting electronic trade documents. Likewise, eight jurisdictions worldwide have adopted Singapore’s Model Law on Electronic Transferable Records (MLETR), with twelve others involved in the various stages necessary for passing it into law.
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