The Electronic Trade Documents Bill being proposed in the UK is a significant development for the international trade finance industry. If passed, the draft bill will allow for digital possession of documents and proposes a secure and efficient framework for paperless trade finance transactions. The bill is set to be discussed during the UK government’s next parliamentary session.
Though this bill extends to England and Wales only, it is relevant globally because English law is the preferred governing law internationally for business transactions, especially in sectors such as international commercial contracts, banking and financing, maritime and shipping.
Triterras spoke to Treasury Today Group about the proposed bill for its recent article, UK takes lead on digital trade. Ram Arapally, Executive Vice President of Triterras, says: “If the Electronic Trade Documents Bill becomes law it will have a major impact on the commodity trading space by bringing more speed to the trade.” Arapally added: “To allow a digital document to take on the same legal status as physical paperwork increases security and when hashed in a blockchain can be a better source of originality.”
Research from OECD indicates that small and medium sized businesses benefit from streamlining and the automation of trade documents and cross-border processes more than their larger counterparts. The lack of digital records continues to limit access to formal finance for SMES, restricting their ability to grow.
Electronic trade documents will make verification processes more reliable and efficient with monitoring and tracking of documents pre-trade, in transit and in post-trade, demanding fewer manual hours and lower turnaround times for multiple document checking processes.
Distributed Ledger Technologies such as blockchain can play an important role in digitizing traditional documentary credit as well as supply chain finance. Triterras’ Kratos is an AWS managed Hyperledger -based blockchain enabled platform that enables SME traders to get easier access to financing and improves process efficiencies across the supply chain—reducing costs, ensuring against fraud and mitigating risk.
The International Chamber of Commerce estimates that digitizing trade documents could generate $28.41 billion in new economic growth by 2024 and free up $282 billion in efficiency savings.