Estimated reading time: 5 minutes
The arguments for digitalising trade processes are well known. Paper-based processes are inefficient, error-prone, and subject to frequent delays––particularly in times of disruption.
There’s also the environmental cost of paper to consider, which is increasingly important to today’s sustainability-focused companies.
A digital reinvention of trade could address all of these issues. But if you were tasked with digitalising global trade, how would you do it? That’s the question that people, entities, and banks have long been asking, resulting in numerous efforts to tackle the issue in myriad ways.
As many have demonstrated, trade digitisation is highly challenging in practice because of the numerous touchpoints and parties involved in trade transactions.
Many such initiatives aim to gather a selection of players and bring them onto a single platform or closed system, with its own set of processes and rules.
It takes time to coordinate different parties, and widescale adoption of any specific platform may be difficult––if not impossible––to achieve. So, could this approach be missing the point?
Enigio believes the solution to trade digitalisation is in plain sight. There is already a single standard for exchanging information between ports, carriers, corporates, banks and customs––and that’s the paper document.
Harnessing the power of paper
Despite the well-known shortcomings of paper documents, the action of writing something on a piece of paper is very powerful.
When you create a paper document, what you’re really creating is a closed container which can hold a promise, or a set of information.
It can be sent, received, stored, or amended by anyone at any time. And whoever is in possession of the piece of paper may be able to use it to claim ownership of the relevant goods.
So if you want to digitalise global trade, why wouldn’t you create a digital sheet of paper that fulfils exactly the same role as physical paper?
The good news is that regulators have already taken steps to enable this, recognising that digital documents offer a path for digitising global trade.
A key milestone was the creation of the Model Law on Electronic Transferable Records (MLETR) by the United Nations Commission on International Trade Law (UNCITRAL) in 2017, which sets out the idea that a digital record can be used in the place of a paper document, as long as it fulfils all the necessary legal requirements.
Replicating paper in a form that is both digital and interoperable is an approach that offers significant benefits. Existing laws do not need to be changed, and all players can keep their existing systems, business practices, and methods of working with counterparties. Users do not need to sign up for a new service––nor do they need to surrender their data to an external platform, because the data remains in the document.
Digital paper and the benefits for corporates
Corporations, in particular, have much to gain from the digitalisation of paper documents. Today, for example, companies exporting goods need to gather various documents in order to prepare for a shipment, including bills of lading (BLs), invoices, certificates of origin and packing lists.
Obtaining these documents from external parties and internal systems can be time-consuming and cumbersome as the whole process continues to be heavily paper-based.
For example, only 1% of BLs are currently electronic. But despite the inefficiencies, companies are understandably reluctant to change their existing processes, not least because these documents are associated with numerous other internal processes, from product planning to production.
The inefficiency that comes with paper documents also has implications for the transportation of goods.
As the last couple of years have demonstrated all too clearly, delays in the delivery of documents can hold up trade. It’s not unusual for ships to arrive in a port well before essential documents have been received––which means that the offloading of goods may need to be delayed until those documents arrive.
Digital documents can therefore increase the efficiency of trade in two different ways:
- Streamline internal processes. By replacing paper-based documents with digital equivalents, companies can increase the efficiency of their internal processes without needing to re-engineer them.
- Send documents digitally. Companies can send trade documents to the relevant customer, port, carrier or bank in digital form, thereby avoiding the risk of transport delays. Rather than taking five or six days to reach their destination, digital documents can be transferred in a matter of seconds – meaning there’s no need for ships to wait for documents to arrive.
Digital documents in practice
This opportunity is not merely hypothetical. Enigio is one of a small number of providers that offer the ability to digitise original documents.
Enigio’s trace:original solution can be used to create digital original documents that are fully interoperable and can be shared with anyone.
Designed to comply with existing legislation and the MLETR, trace:original has all the qualities of paper and can be used for trade documents including BLs and bills of exchange.
In summary, many initiatives over the years have fallen short of tackling the industry’s reliance on paper.
And in practice, eliminating paper from the equation may not be the best approach to digitising global trade.
Rather, Enigio believes, the way forward is to harness the benefits of paper with a 21st century equivalent that is accessible, interoperable, and efficient––all while addressing the environmental impact of physical paper.