Exactly two weeks ago the Electronic Trade Documents Act 2023 (The Act) received Royal Assent from King Charles III and will come into effect on the 20th September 2023. It sets out the basis upon which trade documents can exist and be dealt with in electronic form, such that an electronic trade document has the same effect as an equivalent paper trade document.
The Act paves the way for a significant shift in international trade. It states that a person may possess, endorse and part with possession of an electronic trade document, and anything done in relation to an electronic trade document has the same effect in relation to the document as it would have in relation to an equivalent paper trade document.
The International Chamber of Commerce has estimated that digitalising trade documents could generate £25 billion in new economic growth by 2024, and free up £224 billion in efficiency savings.
Prior to the Act, under English law it was not possible to possess electronic trade documents and therefore key English law principles in relation to documentary intangibles (such as bills of exchange) could not be applied to electronic forms of those documents.
The Act also amends the Bills of Exchange Act 1882 and the Carriage of Goods by Sea Act 1992 to remove certain incompatible provisions and means that businesses can now exchange trade documents electronically, such as bills of exchange, bills of lading, waybills, and insurance certificates.
The Act speeds up trade transactions and removes the need for paper documents in many cases. It also addresses transferability issues by permitting the legal concept of ‘possession’ to apply to an electronic document.
The transfer of documents of title, which can take days, could now happen in moments, but the UK is the first G7 country to pass this capability into law, so the government must now take the lead in building the systems and getting the digital economy agreements in place with the rest of the world.
The United States and Germany, have legislation enabling the use of most transferable documents already in place, while France is not far behind and Japan is exploring digital bills of lading and already possesses laws for digital promissory notes.
The UK’s move is likely to encourage similar shifts elsewhere. Already, there is talk of comparable bills in other jurisdictions, which may act as a catalyst, prompting a domino effect in other countries.
The Act does not outline specific requirements for an electronic trade document system, which allows for the development of industry standards for such systems, such as the Digital Container Shipping Association (DCSA)’s e-bill of lading, the ICC’s Digital Standards Initiative (DSI), and the Future International Trade (“FIT”) Alliance.
The Act will be transformative to trade and trade finance processes, but in the short-term users of trade documents and finance providers will need to deploy “reliable systems”, get comfortable with the risks associated with them and prepare for governments in other key jurisdictions to adopt similar legislation.
Metro is leading the industry in developing the technologies and platforms that integrate with critical trade documents, including electronic bills of lading (eBL).
We have a seat at the UN/CEFACT forum and are members of the bodies that agree the standards and frameworks for standardised industry e-bill of lading and critical documents.
Please EMAIL Andrew Smith, CCO, now for further Information on our digital capability and how this can benefit your own continued global trade growth ambitions.