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Ecosystem of Trust pilots and trade digitalisation

2022 has been a significant year for the digitalisation of international trade in the UK. Key moments include the introduction of the Electronic Trade Documents Bill in Parliament, the government’s £180m commitment to establishing a Single Trade Window and its backing of six different consortia to run Ecosystem of Trust’ pilots.

The overall aim of these initiatives is to help the government better implement border controls while reducing bureaucracy for businesses. An Institute of Export & International Trade (IOE&IT) paper in March estimated that this could reduce border delays by 80% and add over 1% (approximately £25bn) to UK GDP, reducing barriers to trade and making it more accessible to businesses of all sizes.

The Electronic Trade Documents Bill is expected to pass through Parliament in 2023 and will help to establish the legal framework for digitalised trade. The development of the Single Trade Window is also due to begin in earnest next year, while the government is expected to publish its much-anticipated plan for digitalising import controls on EU goods entering Britain – the Target Operating Model – in January.

The Ecosystem of Trust pilots that have been running over the last few months will have a less immediate impact on traders. However, their success could be as important as any of the key initiatives in this arena, proving to government and industry what a fully digitalised trading environment could look like and the benefits of this for traders.

What is the Ecosystem of Trust?

An Ecosystem of Trust essentially combines the latest supply chain and port technologies, blockchain-encryption and state-of-the-art auditing and stockpiling programmes to give the government the information it needs to reduce checks and therefore streamline the data input requirements of traders.

In 2022, the government backed six different consortia to run pilots of how this could work in practice. One of these involved the IOE&IT alongside IOTA Foundation, Supply Chain Tracking (SCT) Technology, Maritime Cargo Processing (MCP) and Retail & Asset Solutions (RAS).

The idea isn’t completely new. Trusted trader schemes have existed for years and the consortium mentioned above built its pilot on technology that has already been created to establish digital trade corridors between the UK and Kenya – the Trade Logistics Information Pipeline (TLIP) established in partnership with TradeMark East Africa.

Why this matters

The goal of the Ecosystem of Trust is to reduce the need for checks from border authorities and to therefore reduce documentary requirements and the risk of delays for traders.

Jens Munch Lund-Nielsen, the head of global trade & supply chains at the IOTA Foundation, recently told the IOE&IT Daily Update that the record number of documents submitted for a single consignment was 650. Removing this level of administration would be a significant time-saver for traders.

Alban Odhiambo, a director at the trade promotion body TradeMark East Africa, recently spoke to the Times about what an Ecosystem of Trust would mean for traders:

“Our idea was to ask if we could set up a mechanism that removes all this burden from the person who is exporting: a mechanism that enables me as a small or medium-sized exporter not to have to invest into a huge logistics backbone to support my exports.

“It means I can focus on my core business, which is either to grow french beans or flowers, for example.

IOE&IT director general Marco Forgione says it’s about future proofing border processes too. Also speaking to the Times he says:

“The reality is our border system needs to be modernised. It needs to meet not just the needs and demands of business today, but the global governance rules that emanate from the WTO. It’s got to be fit for purpose.”

The technology behind it: blockchain

The IOE&IT consortium bought together a range of the latest cutting-edge supply chain technologies, including digital seals, blockchain and the latest auditing and spot-checking technology.

Lund-Nielsen explains that IOTA Foundation’s “best in class” distributed ledger technology ensures that data submitted about goods is “immutable” and secure, allowing data to be submitted once, reducing the need for duplication and manual entry.

“It’s really important that the data is immutable so that you can trust that it hasn’t been altered or manipulated,” he says. “When you have 30 organisations collaborating on or within different supply chains, businesses can become concerned about who sees their data. The technology we provide allows each owner to manage their own data and control exactly who sees and can alter it.”

The technology behind it: digital seals

Eric Gill, the founder and CEO of SCT Technology, explained to the IOE&IT that digital seals also have a fundamental role in the tracking of the physical movement of freight. Digital seals themselves are tags using GPS and the mobile phone network (GPRS) to report movement data back to SCT’s consignment management application, CMA 3T. The tag is connected to the freight by a cable so that, if removed or cut, a real-time ‘tamper alert’ is sent back to CMA 3T.

He says that the technology allows the authorities to monitor any unauthorised changes to the route (or corridors) permitted by border authorities for a shipment.

“It can monitor any deviation from an authorised route as well as any in-transit flows – i.e. you can see the shipment is being held up or any delays on the route – and this is done in near real-time,” he says. “With the Ecosystem of Trust pilots, the relevant authority or body is therefore able to take timely action as needed.”

The technology behind it: stock auditing

And underpinning this is RAS’s stock auditing technology which ensures that the data being submitted matches with the goods themselves.

“With the Ecosystem of Trust, there are a lot of new technologies,” says Faisal Ashfaq, RAS’s head of supply chain and operations. “RAS underpins them by bringing in an independent market spot check so that we can say everything is how it should be. This gives you a fully rounded, robust and trusted solution.”

The technology behind it: inventory linking

Finally, community systems provider MCP communicates the data to the relevant bodies within the ports that the goods are entering the UK through its Destin8 port community system. Destin8 interfaces with government systems to process and then message the customs clearance information to the actor moving the goods.

“The TLIP system has the capability of taking in data from the commercial invoice, packing lists, health certificates and so on,” MCP’s business operations manager Ole Krebs explains. “It then provides this in a digital format – either as a pdf or as data (in XML or JSON format) onto an open distributed ledger infrastructure. This can be linked to the port community system – which is what we’re trying to do with this particular consortium – or you directly feed it into port health and a single trade window on an API basis.”

De-risking trade

Each of these technologies provides the information government needs to identify and communicate the risk around imports more easily, reducing the number of checks it needs to conduct on goods – particularly sanitary and phytosanitary goods which require more intensive inspections than most standard goods.

Ashfaq explains:

“At the moment, HMRC will intercept a percentage of the containers that land at Dover or Felixstowe. It’s then anything from 5 to 15 days that they’re sitting in the ports. The importer’s not got their stock and doesn’t know when it will arrive.

“If you can trust the trader, you don’t need to stop the shipments. If the trader is not trusted, you can still intercept them. So if you can trust the majority of traders, you can reduce the checks – for example from 20% to 5%. That would be a 15% reduction.”

Forgione agrees, saying that the pilot provides authorities and businesses the ability to de-risk trade. He explains:

“You’ve got security and visibility of all the trade documentations by all the actors, which means that finance costs, insurance costs and logistics costs all reduce because they’re de-risked.

“You no longer have the need to stop shipments at the border. You can do a review or an audit in-market. It means that trade is simplified, speeded up.”

According to Ashfaq, this could see a significant reduction in the traffic jams in Kent that have become such a signifier of the UK’s post-Brexit reality. This will help businesses to send and receive goods more efficiently, while saving administrative costs.

The ultimate impact of this is that prices on imports can go down, providing a much-needed boost for UK consumers and the wider economy during a cost-of-living crisis and a likely recession.

Big picture

It’s only been two years since Brexit and one of the main arguments made in its favour during the referendum was the idea of the UK retaining more control over its borders.  As the government strives towards establishing “the most effective border in the world” through its 2025 Border Strategy, it’s clear that multiple technologies, such as those utilised in the Ecosystem of Trust pilots, will have a key role.

With the Target Operating Model due to be announced in January and the development of the Single Trade Window to begin in earnest in mid-2023, it’s clear that the government is ready to build upon the progress of 2022 next year.

The success and learnings from the Ecosystem of Trust pilots will undoubtedly have a significant impact on the next chapter of trade digitalisation in the UK.