The Electronic Trade Documents Act (ETDA) enacted: What’s next
On 20th September 2023, the UK embarked on a transformative journey in the realm of trade with the enactment of the Electronic Trade Documents Act. This groundbreaking legislation has given digital trade documents, such as bills of lading (BLs), the same legal standing as their traditional paper counterparts. But as we stand at this pivotal moment, the question arises: What's next?
A recap: The ETDA’s significance
The Electronic Trade Documents Act (ETDA) is more than just a legislative change; it's a paradigm shift. Historically, only a meagre 2.1% of BLs and waybills were issued electronically in containerised trade. However, with this new Act, there's an opportunity to completely transform the global shipping industry by significantly enhancing efficiency, reducing costs and minimising international trade's carbon footprint.
As of September 20th, electronic trade documents now have the “same legal treatment, effects and functionality” as paper documents as long as they satisfy the Act’s specific criteria requiring them to be:
susceptible to exclusive control
fully divested on transfer
controlled by a reliable system that is able to ensure and prove the authority of the documents, safeguard them from unauthorised access, and differentiate the original from any duplicates
A recent survey by the Institute of Export and International Trade (IOE&IT) revealed that a whopping 75% of businesses believe the Act will positively impact their operations. Notably, none of the respondents foresaw any negative implications.
“This new system will be a major boost to businesses. Trade will become much more efficient and cost-effective thanks to these changes. Whilst it is understandable that some businesses will have concerns about the new processes coming into place, and there may be potential ‘first-mover’ problems to overcome, we are eager to ensure these new streamlined processes are adopted by smaller businesses in the UK, not just the big corporations.”
The ETDA in action
The UK's largest retail financial services provider, Lloyds Bank, seizing the moment, announced the completion of the very first transaction under the new law on the very first day of its implementation, issuing a digital promissory note to Matalan which essentially marked the industry's readiness to embrace the digital future.
Gwynne Master from Lloyds Bank lauded the legislation as a pivotal moment for a more cost-effective, swift, and eco-friendly global trading framework. Matalan's Ed Collier further expressed pride in being part of this pioneering transaction, emphasising the benefits of digitisation for more efficient and sustainable trading.
The road ahead might be bright but filled with challenges
While the Act's enactment is a significant milestone, the journey towards a fully digital trade ecosystem is filled with challenges and uncertainties. We’ve summarised some of the key issues below:
Technological neutrality: The Act's deliberate technological neutrality, while providing flexibility, also brings ambiguity. Without prescriptive definitions of systems for issuing electronic trade documents, concerns about data security and IT implementation have arisen among business owners.
Global acceptance: The Act's potential is intertwined with its global recognition. While English law governs a substantial portion of global trade documents, the Act's full benefits can only be unlocked if other nations recognise and adopt similar stances on electronic documents.
Interoperability: With multiple technology providers in the fray, standardisation and interoperability become crucial. The industry needs a unified approach to ensure seamless integration across different eBL providers.
Industry adoption: Despite the Act's benefits, there's an apparent hesitation among stakeholders. Many shipping companies, especially SMEs, might find the transition daunting. According to IOE&IT’s recent survey, 36% of respondents believe partner alignment will be the primary barrier to progress.
In a series of interviews conducted by GTR with experts from various sectors, including trade finance, law and technology, on the challenges and hurdles in the transformation journey, several key insights emerged:
Stephanie Betant from HSBC highlighted the transformational nature of the Act, emphasising the need for an open system where parties aren't bound to a specific platform or provider.
Enno-Burghard Weitzel from Surecomp stressed the importance of proving the technology's value and trustworthiness to stakeholders.
Joanne Waters from DAC Beachcroft expressed skepticism about immediate widespread adoption, citing the conservative nature of many shipping companies.
Christopher Chatfield from Kennedys emphasised the need for clarity on what constitutes a "reliable system" for issuing electronic documents, suggesting that court rulings might be required for guidance.
The visionary perspective
Lord Holmes, a staunch advocate for technological advancements, aptly summarised the Act's essence, stating, “Not only will this bill make trade faster, cheaper, and greener, it is an English law model of how to legislate for technology through specific criteria. A blockchain bill that will stimulate blockchain development and adoption without ever mentioning blockchain.”
His words underscore the Act's dual significance. On one hand, it's a testament to the UK's forward-thinking approach, recognising the potential of blockchain without getting bogged down in the specifics. On the other, it's a call to action for innovators and industry leaders to harness the power of blockchain and other emerging technologies to revolutionise trade.
Conclusion: Embracing the digital future
The Electronic Trade Documents Act is undeniably a game-changer. However, its success hinges on collaborative efforts between industry players, technology providers and regulatory bodies. As the UK stands at the forefront of this digital revolution, it's imperative to address existing challenges, foster global collaborations and pave the way for a seamless digital trade ecosystem.
The future of trade is digital, and with the ETDA, the UK has taken a monumental step. The onus now lies on industry stakeholders to harness this opportunity and shape the future of global trade. As we move forward, it's essential to remember Lord Holmes' vision and work collectively to realise a faster, cheaper and greener trade ecosystem.
HOW TO GET READY FOR THE UPCOMING UK ELECTRONIC TRADE DOCUMENTS BILL | READ BLOG
How Cygnetise can help in the process
Cygnetise complements the use of e-signatures and document management systems and allows organisations to manage, distribute and control authorised signatory data digitally, in real-time, in a secure, transparent and tamper-proof way.
By using Cygnetise, companies can now easily:
update, share and manage signatory data in real-time, from anywhere in the world,
have one single source of truth,
have instant, remote access to the latest signatory data entry,
keep a historical record of any changes made,
have a sufficiently standardised process across all your functions/entities,
efficiently share your up-to-date signatory data with your banks and other counterparties.
This can also deliver some additional direct benefits like lower operational and financial fraud risks and enhanced governance (ESG) and internal control systems.