Embracing Electronic Trade Documents is not a moon shoot, it’s actually as clear as day

Enigio, Patrik Zekkar

“Rather than re-inventing the wheel, the MLETR and the UK ETDA principles for future technology development should be applied for the digital trade transformation”

In the journey of change, Socrates once remarked; the key lies not on focusing all your energy in battling the old, but on building the new.

Adoption of electronic trade documents is undisputably an essential component in acheiving the digital trade transformation, so why hasn’t it already happened?

Since the mid-nineties, e-mail has become a ubiquitous means of communication. It has since almost entirely replaced communication using physical paper. Today it’s unlikely to find a company anywhere in the world which does not use e-mail. Likewise, it’s unlikely to find a company which does not use Microsoft Word or similar word processing software to produce documents.

The result of this, is that in today’s world all documents are actually born digital.

So why didn’t this transformation extend to trade documents already in the 90’s? Why have we, for another 30 years, persistently continued to print trade documents to paper, despite that they were all born digital. The negative impacts are obvious on data quality, efficiency, overheads, speed, security, the environment and more…

It sounds like a paradox, a paper paradox.

Yet the reasons are simple. While we can create and send data digitally, trade documents are more than data. Trade documents can be singular, they can be transferred from one party to another, they can carry assets, they can be traded, they can be tied to individuals and organisations, among many other specific capabilities that data alone does not permit.

A well-known peculiarity of trade finance is that, in may ways, the process is the product. The product is based on the various steps in the process: creating, issuing, amending, signing, transferring, checking, etc. Documents are the backbone of this process where transactions are delicately orchestrated to manage the complexity of geographical and multiparty involvment, bridging business practices, security and trust.

The MLETR and the UK ETDA are built on the principle of functional equivalence of a paper document. With technology replicating the paper document and enabling the requirements  in trade processes (eg. exclusive control, transferability, etc.) to remain.

This limits the necessary industry transformation to the change of medium, to go from paper trade documents to digital trade documents, while at the same time maintaining well established processes  and procedures fundamental for trust, recognition and acknowledgement in global trade transactions.

Rather than re-inventing the wheel, the MLETR and the UK ETDA principles for future technology development should be applied for the digital trade transformation. An obvious example is the implementation of standards or defined interoperability frameworks, for use in change of medium between documents, instruments and records. Applying contractually based approaches have proven unsuccessful in driving wider adoption, and by not adopting interoperability following legislative principles based on MLETR we risk failing to realise the full benefits of such activity.

The digital transformation should not require tearing down existing, proven processes and frameworks in order to fit new technology. We should instead focus on developing technology that complements  and enhances the stable foundation that has enabled today’s interconnected world through global trade finance.