By Marina Comninos, Co-Head, ICE Digital Trade

*This article originally appeared in Trade for Prosperity: A Definitive Guide to Boosting International Trade for UK Businesses, Summer / Autumn 2024 (p.144-145) and is published with the kind permission of ICC United Kingdom.

The International Chamber of Commerce estimates that 4 billion documents move through the global trade system on any given day. McKinsey estimates that digitising bills of lading could save $6.5 billion in direct costs and enable $40 billion in global trade. Surely that is incentive enough for the industry and other stakeholders to be laser focused on facilitating the transition, even if it is complex.

The current pace of digitisation does not, however, suggest that this is the case: so why is the international trade community still a digitisation laggard?

Historically, a key reason cited by industry to explain the slow pace of eBL adoption has been legal uncertainty. Most national laws did not recognise electronic bills of lading (eBLs) as the legal equivalent of their paper counterparts. As a result, eBL solution providers found a workaround: each provider created its own contractual ‘club’ which ensured that its eBLs were recognised amongst the members of its club. Some of these contractual networks received broad acceptance. For example, the ICE Digital Trade legal framework is particularly strong in the bulker industry, where eBLs are being used at scale. Some trade routes are at 70+% digital, recognising that eBLs are the answer to the difficulties, costs and inefficiencies associated with paper BLs. At an industry wide level, however, digital penetration remains very low.

The foundations for changing this legal uncertainty were set in 2017, when UNCITRAL published the Model Law on Electronic Transferable Records (MLETR). Of the critical maritime nations, first Singapore in 2021 and then the U.K. in 2023 changed their laws to recognise eBLs. It is noteworthy that the State of New York recognised eBLs as far back as 2001. However, the nature of international trade is such that one country recognising something is not sufficient - you need a coalition. And this coalition is gradually being built: France, Germany and the Netherlands have taken steps towards adopting MLETR or equivalent legislation, and the G7 have publicly declared that they will adopt legislation recognising eBLs.

The coming into force of the Electronic Trade Documents Act in the UK in 2023 was hailed as a milestone, and expectations ran high that it would prove to be a catalyst to speeding up what has historically been a painstakingly slow adoption curve.

However, despite such enabling legislation, the pace of change is still slow, and we need to accelerate to avoid burnout by those in the industry who are digitising.

Critical to this acceleration is platform interoperability: members of the international trade community must be free to choose their preferred eBL platform(s), and be able to interact with counterparties who have not made the same choice. The closed contractual clubs prevent interoperability and therefore broad adoption of laws recognizing eBLs as equivalent to their paper counterparts is key. Technical interoperability requires close collaboration between the relevant stakeholders, and great work has been done by the Digital Container Standards Association and the FIT Alliance to enable this.

Secondly, as an industry, we need to focus on change management: the least discussed, but most complex hurdle to trade digitisation. Trade is a multi-stakeholder game: if we only look at the drafting, approval and issuance of eBLs at a loadport, this requires the rewiring of the export document process, typically involving at least three stakeholders simultaneously - shipper, carrier, ship agent and/or forwarder. For eBLs to succeed, it is equally imperative to coordinate with the rest of the downstream supply chain – traders, buyers, banks, import customs. As a result, trade digitisation requires coordinated and simultaneous change management across the supply chain.

The building blocks to ensure success and accelerate digitisation are clear, we just need to focus on them as an industry in a collaborative manner:

• Legislative change: the broader the adoption of laws recognising eBLs as equivalent to paper BLs, the better. We therefore need to lobby governments to enact the Model Law, or a piece of legislation influenced by the Model Law
• Data standards: a clear set of standards which ensure the efficient and secure exchange of data across platforms are a prerequisite for interoperability
• Change Management: it is incumbent on solution providers to make the transition to digital as seamless and effortless as possible
• Leadership: change by definition needs strong leadership, with people recognising that it is needed and willing to undertake the effort. For that leadership to continue to thrive, the problems associated with analog trading practices need to be clearly articulated, and the benefits broadly publicised. If the pace of change is too slow, we risk losing the powerful momentum which has recently built up

Trade cannot truly prosper in the 21st century without digitisation. The benefits are self-evident and implementation is long overdue. Addressing the remaining hurdles is possible, but requires deep expertise and a cooperative approach.