UK Electronic Documents Bill Marks Major Gain for Trade Digitization

The United Kingdom government on Thursday (Oct. 13) passed the Electronic Trade Documents Bill in parliament, ending the legal requirement for certain business documents, such as bills of exchange, promissory notes, warehouse receipts, and marine and cargo insurance certificates, to be printed on paper.

Learn more: Letters of Credit Face Extinction From Digital Cross-Border Trade Tools

According to the government, the new law will provide a 1.14-billion-pound ($1.6 billion) boost to U.K. businesses over a 10-year period by reducing contract processing times and lowering administration costs.

By removing the legal obligation to keep paper records and putting digital and paper documents on the same legal footing, the bill is also expected to help cut down on the millions of paper documents that UK businesses print every day.

In the maritime shipping industry especially, digitization has been significantly slowed by outdated legislation and a lack of standardization.

For example, the Digital Container Shipping Association (DCSA) estimates that in 2020 just 0.3% of the 16 million bills of lading (B/L) issued by ocean carriers were electronic, with paper documents costing the industry around $11 billion per year.

This overreliance on paper bills and certificates in the shipping industry has led to significant inefficiencies that could be solved by electronic documents.

For anyone not familiar with global shipping, transporting documents around the world between carriers, customers, banks and insurers might seem ridiculous in the age of instant communications. However, this bureaucratic system is the reality for signing off the vast majority of international sea freight journeys.

With as many as 30 different parties involved in each trip, organizing the signing and handover of mounting piles of paperwork slows down trade and hampers growth in the sector.

Besides the economic cost of paper document trails, moving 16 million documents around the world each year can be argued as an unnecessary use of carbon-emitting transport when an electronic transaction can do the same job.

Add to that the tons of paper used to print multiple copies of documents and pack them for delivery, and the advantages of electronic alternatives immediately become clear.

Research by the Economic and Social Commission for Asia and the Pacific (ESCAP) suggests that the emissions savings from fully digitizing regulatory procedures around trade could save between 32kg and 86 kg of CO2 equivalents per end-to-end transaction. Scaled up, ESCAP said that this figure implies annual savings of up to 13 million tons of CO2 in the Asia Pacific region alone.

Policy, Technology Go Hand-in-Hand

While policy change alone cannot drive the shift to paperless global trade processes, the U.K. government’s announcement can be viewed as a step in the right direction.

Learn more: Blockchain Is Accelerating The Digitization of Trade Transactions

At the international level, the transition to paperless trade is also on the United Nations (UN) agenda. The UN Commission on International Trade Law adopted the Model Law on Electronic Transferable Records (MLETR) in 2017 to encourage the adoption of electronic transferable records.

Meanwhile, the DCSA is leading the private sector charge to develop and implement global standards for e-B/Ls and other important e-document formats. Founded by MSC, Maersk, CMA CGM, Hapag-Lloyd, ONE, Evergreen, Yang Ming, HMM and ZIM, DCSA members include seven out of 10 of the world’s largest shipping companies by freight capacity.

The bill could also see the U.K. adopting blockchain technology to prevent data breaches and document fraud, which in turn increases security and trust in the trade documentation process.

It’s a solution companies like CargoX have been looking into by creating blockchain transfer systems for secure document authentication and communication.

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