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Blockchain Bill

Tech News : 27th September 2023

Blockchain Bill


In this insight, we look at the introduction of the Electronic Trade Documents Act 2023 (ETDA), what it means and why it’s so significant, plus its implications. 

The ETDA 

The Electronic Trade Documents Act 2023 (ETDA), which was based on a draft Bill published by the Law Commission in March 2022, came into force in UK law on 20 September. This Act allows the legal recognition of trade documents in electronic form and crucially, allows an electronic document to be used and recognised in the same way as a paper equivalent. The type of trade documents it applies to include a bill of lading (a legal document issued by a carrier, or their agent, to a shipper, acknowledging the receipt of goods for transport), a bill of exchange, a promissory note, a ship’s delivery order, a warehouse receipt, and more. 

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The Aims 

The aims of the ETDA, which gives the electronic equivalents of paper trade documents the same legal treatment (subject to criteria) is to: 

– Help to rectify deficiencies in the treatment of electronic trade documents under English law and modernise the law to reflect and embrace the benefits of new technologies.

 

– Help the move towards the benefits of paperless trade and to boost the UK’s international trade. 

– Help in the longer-term goal to harmonise and digitise global commerce and its underlying legal frameworks, thereby advancing legal globalisation. 

– Complement the 2017 UNCITRAL Model Law on Electronic Transferable Records (MLETR). This is the legal framework for the use of electronic transferable records that are functionally equivalent to transferable documents and instruments, e.g. bills of lading or promissory notes. 

Why The Reference To Blockchain In The Title (‘Blockchain Bill’)? 

The development of technologies like blockchain (i.e. an incorruptible distributed ledger) technology that allows multiple parties to transfer value and record forgery-proof records of steps in supply chains and provenance in a secure and transparent way has made trade based on electronic documents possible and attractive. 

What’s The Problem With A Paper-Based Trade Document System? 

Moving goods across borders involves a wide range of different actors, e.g. transportation, insurance, finance, and logistics, all of which require (paper) documentation. For example, it’s been estimated that global container shipping generates billions of paper documents per year. A single international shipment, for example, can involve multiple documents, many of which are issued with duplicates, and, considering that two-thirds of the total value of global trade uses container ships, the volume of paper documents is immense. 

The need for so much paper, therefore, can slow things down (costs and inefficiencies), creates complication, and has a negative environmental impact. 

Based On Old Practices 

Also, existing laws relating to trade documents are based on centuries old merchants’ practices. One key example from this is, prior to the new ETDA, the “holder” of a document was significant because an electronic document couldn’t be “possessed” (in England and Wales), hence the reliance on a paper system. Under ETDA, an electronic document can be possessed, thereby updating the law. 

How Does It Benefit Trade? 

Giving electronic equivalents of paper trade documents the same legal treatment offers multiple benefits for businesses, governments and other stakeholders involved in trade. Some of the notable benefits include: 

– Efficiency and Speed. Electronic documents can be generated, sent, received, and processed much faster than their paper counterparts. This can significantly reduce the time taken for trade transactions and the associated administrative procedures. 

– Cost Savings. Transitioning to electronic trade documentation can save businesses considerable amounts of money by reducing costs related to printing, storage, and transportation of paper documents. For example, the Digital Container Shipping Association (DCSA) estimates that global savings could be as much as £3bn if half of the container shipping industry adopted electronic bills of lading. 

– Environmental Benefits. As mentioned above, the shift from paper to electronic documentation could reduce the environmental impact associated with paper production, printing, and disposal. Also, as highlighted by the World Economic Forum, moving to digital trade documents could reduce global logistics carbon emissions by 10 to 12 per cent. 

– Accuracy and transparency. Electronic documentation systems often come with features that reduce manual data entry, thereby decreasing errors. Additionally, digital platforms can provide more transparency in the trade process with easy-to-access logs and history. 

– Security and fraud reduction. Advanced digital platforms come with encryption, authentication, and other security measures that can reduce the chances of document tampering and fraud. Blockchain, for example, is ‘incorruptible.’ It’s also easier to track the origin and changes in electronic documents.  

– Accessibility and storage. ETDA doesn’t exactly specify any one technology, only the criteria that a trade document must meet to qualify as an “electronic trade document” (see the act for the exact criteria). That said, electronic documents can generally be easily stored, retrieved, and accessed from anywhere with the appropriate security clearances, making it easier for businesses to manage and maintain records. 

– Interoperability. Digital documents can be more easily integrated with other IT systems, such as customs and regulatory databases, enterprise resource planning (ERP) systems, or financial platforms, providing more seamless trade operations. 

– Flexibility and adaptability. Electronic systems can be more easily updated or modified to reflect changes in regulations, business practices, or market conditions. 

– Harmonisation of standards. The adoption of electronic documents can pave the way for international standards/global standards, simplifying cross-border trade and making processes more predictable and harmonised across countries. 

– Enhanced market access. For smaller enterprises that might not have the resources to deal with cumbersome paper-based processes, the digitisation of trade documentation could make it much easier to access global markets. 

– Dispute resolution. Having a digital (secure) record with a clear audit trail, could make it easier to resolve disputes when discrepancies occur. 

What Does This Mean For Your Business? 

The technologies exist now to enable reliable, secure, and workable systems that use digital rather than paper documents and this UK Act, in combination with other similar legal changes in other countries could help modernise and standardise global trade. Accepting digital documents as legal equivalents to their paper counterparts will bring a range of benefits to global trade including cost and time savings, greater efficiency, reduced complication (and making it easier for more businesses to get involved in international trade), environmental benefits, the advancement of standardisation of trade globally, and many more.

For the UK, not only does the Act update existing laws but could bring a significant trade boost. For example, the government estimates it could bring benefits to UK businesses (over the next 10 years) of £1.1 billion. It’s easy to see, therefore, why the introduction of EDTA is being seen by some as one of the most significant trade laws passed in over 140 years.

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