By Alexander Goulandris, Co-Head, ICE Digital Trade

On 20 July 2023, the UK Government lit the fuse on trade digitalization, by recognising electronic Bills of Lading (eB/Ls) under UK law.

This marks a long journey for the UK from a project unofficially called ‘eSeaConnect’ in 1998, started by BP and Shell to digitize tanker Bills of Lading. In order to solve the legal aspect of electronic title transfer, the company lobbied Parliament to update UK law to recognize eB/Ls. As it turns out, it took until last month for that change, with the passing of the Electronic Trade Documents Act 2023.

I have had the privilege of being at the vanguard of this eclectic upgrade of international trade and trade finance for the last two decades.

When Martin and I co-founded essDOCS (now ICE Digital Trade), we identified a number of obstacles that needed to be overcome for eB/Ls to be ubiquitous. Trade digitization over the subsequent years has been slow, but steady, leaving us in the following situation today:

1. Technology: A platform is needed to ensure that an original electronic (record) Bill of Lading is controlled and possessed only by the rightful holder; this was solved as far back as the EU project called ‘Bills of Lading for Europe’ in the 1980s, and by countless other eB/L providers since.
    
2. Legal: A framework is necessary to ensure the electronic Bill of Lading recreates the same functions, rights and obligations as its paper equivalent which are recognized by the relevant legal systems; this is in the process of being solved via adoption of MLETR or equivalent (see my Co-Head’s article on this subject).
    
3. Network Development: A standardized transfer protocol is required since eB/Ls are only valuable when a critical mass of the supply and finance chain operate within the same network (or meaningful interoperability is created between networks).
   
   Working in parallel with the network development hurdle is the issue of Change Management – the least discussed, but most complex of all the hurdles.
   
   Trade is a multi-stakeholder game, meaning that, in turn, eB/Ls are a multi-stakeholder project. If we only look at the drafting, approval and issuance of eB/Ls 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 forwarders. While these parties are aligned and onboarded, it is equally imperative to coordinate with the rest of the downstream supply chain – i.e. traders, buyers, banks, import customs, through their own rewiring, otherwise eB/Ls hit a dead-end before reaching their natural end-point.
   
   As a result, this hurdle requires coordinated and simultaneous change management across the multi-company, bank, carrier, (i.e., cross-supply chain) networks to avoid fragmentation in the existing eB/L networks. Solving this is possible, but requires deep expertise and a cooperative effort.
   
   Counterintuitively, local laws recognizing eB/Ls will, for a time, add rather than reduce complexity, as they will require a new networks of companies, carriers, banks, etc. to be formed who are ready and willing to operate on the new standard. With coordinated efforts, existing eB/L networks can help navigate this complexity without having to start from scratch – effectively acting as a shortcut to re-establishing these new networks.

The UK’s Electronic Trade Documents Act is a key moment for digital trade. Congratulations to the Law Commission, ICC UK and many others who helped shepherd its passage. Congratulations to Singapore and Bahrain, whose earlier adoption of MLETR created the starting gun for these legislative changes.

As the legal hurdle to eB/Ls crumbles, we need to turn our attention and efforts to network building and global supply and finance change management. I would ask all key players in global trade to join the trade revolution and help us all traverse the final stretch and (finally) consign trade paperwork to the dustbin.