After progress in 2023, will 2024 be the year businesses see the benefits of trade digitalisation?

Thu 21 Dec 2023
Posted by: William Barns-Graham
Trade News

In December 2020, the British government launched its ‘2025 UK Border Strategy’ with the stated aim of establishing the “most effective border in the world” by 2025. With 2024 on the horizon, we will be approaching the ‘one-year-to-go' point for this strategy, but is the UK truly on its way to achieving this ambitious goal, at least when it comes to cross-border trade?

In this time, the government has been faced with introducing new controls to ensure safety, security and biosecurity with checks on goods entering Britain from the EU – the country’s largest trading partner and closest neighbour. While the EU introduced border controls on goods immediately after the end of the post-EU exit transition, the UK has postponed import rules on several occasions. The Border Target Operating Model (BTOM), published in August 2023, sets out how remaining controls will be introduced over the course of 2024, and includes a new, digital-first, risk-based approach, which will also be applied to non-EU goods.

The government has prioritised the digitalisation of trade and customs processes as a way of both dealing with new post-EU exit requirements and as part of its plans for delivering the effective border it promised in 2020. The last year has seen further evidence of progress on this front.

As well as introducing BTOM, the government passed the Electronic Trade Documents Act (ETDA) into law in September, began development on the new Single Trade Window (STW) portal to streamline data entry requirements for traders and carried out pilots of a new ‘Ecosystem of Trust’ (EoT) methodology, which uses rich supply chain data to allow for a risk-based approach to deciding what border checks need to be conducted. Progress was needed, however, to ensure that the whole ecosystem of trade was ready, with the deadlines for exporters to use the new Customs Declaration Service (CDS) and for transit users to use the updated ‘NCTS5’ (New Computerised Transit System) moved into 2024.

So, as we approach the end of the year, should we view 2023 as another year of progress towards the digitalisation of UK trade and the establishment of the most effective border in the world?

Electronic Trade Documents Act

Ilona Kawka, a digital trade and customs specialist at IOE&IT, highlights ETDA as being “one of the most significant developments in the field of trade this year”. The legislation gives digital versions of key trade documents – including bills of lading – the same legal footing as their paper equivalents.

“There was a legal gap in English law about the status of electronic documents before the ETDA,” she says.

“The ETDA fills the blank spot in the regulations by providing electronic trade documents with the same legal recognition and functionality as paper versions and it has a significant positive impact on the UK's global trade prospects but also brings many benefits to the trader community.”

The UK was praised for taking a "leading role" in introducing the act by Deepesh Patel, editorial director at Trade Finance Global, during an IOE&IT webinar in September. Sylwia Nowak, senior customs and foreign trade compliance officer at Brose, agrees that the legislation is “really important” for many businesses because they “will no longer require physical copies of documents of title” when dealing with banks and other financial institutions involved in the facilitation of cross-border goods movements.

On the September webinar, 75% of attendees said they thought the bill will have a ‘positive impact’ on their ability to trade, though Ramin Takin, the co-founder of Exabler, said the benefits will be felt more quickly by larger businesses.

BTOM and beyond

IOE&IT launched a paper later in September, titled ‘BTOM and Beyond’, highlighting the several changes that were due to be introduced in the next 18 months for traders. However, while change can mean hassle, Nowak is excited to see that the STW – a new single sign-on portal which bids to become the only interface businesses need to use to provide goods data for cross-border trade – features prominently.

“The government is taking a strategic approach by introducing elements of the new STW in 2023 and 2024, with some users expected to be able to raise import and entry summary declarations on it soon, and customs technology suppliers also becoming able to interact with it.

“This is a great initiative as traders will be better able to check the status of goods that are crossing the border, improving transparency and data visibility. The platform is building on the current APIs but improving them quite significantly, giving companies and their intermediaries the opportunity to already start thinking strategically about their customs processes.

“This integration of supply chain data is a huge advantage for businesses and is the thing I’m most looking forward to, as multiple users will be able to interact with data and add extra information into declarations.

“Currently, many import declarations are submitted using one-sided data from suppliers. The importers of record sometimes don’t have any interaction with the intermediaries using that data to file the declarations, putting them at a disadvantage. So, the ‘collaborative filing’ aspect of the BTOM and STW will be a real game-changer.”

In the more immediate future, Nowak says that, although the deadline for exporters to use CDS has been pushed to March 2024, the ability for companies to start using it earlier has proven beneficial, allowing her company to start testing processes and go live well in advance. CDS is a key platform on which STW is being built, so she thinks this exercise will bode well for the future.

The future for trade facilitation

Kevin Shakespeare, director of strategic projects and international development at IOE&IT, says the move towards introducing STWs both in the UK and abroad reflects a “global understanding that we need to make trade simpler”, particularly following the introduction of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) in 2017 (negotiations for which concluded in 2013).

“There’s a realisation that digitalising trade is a force for good, particularly as a way of improving trade accessibility for SMEs, women, smaller economies and other marginalised groups,” he says.

He says that the move towards legislating for the use of digital trade documents – as seen in the UK with ETDA but also internationally in Singapore and the UAE – and the introduction of STWs are a sign of “things coming together”.

Kawka notes that 2023 has seen more and more new technologies integrated into supply chain and compliance processes, and cites the EoT pilots in the UK and the establishment of digital corridors in the EU as examples of this. Advances in AI and machine learning could pave the way for further enhancements.

“AI and machine learning are becoming key in predictive analytics, assisting companies in identifying market patterns, managing supply and planning inventory or stocks. The use of digital platforms for trade financing and customs documentation also facilitated cross-border operations, drastically decreasing time and costs.”

Nowak says that the potential of AI to improve efficiency further for the customs industry is significant, and notes that AI investment was a key feature of both the Spring Budget and Autumn Statement this year.

“It’s important that government is supportive of AI projects. The technology presents tremendous opportunity given the scale of data collection in customs.

“AI provides the ability to make sense of this vast, ever-changing data to detect and predict patterns accurately and at far greater speed than humans.”

Kawka also notes that the spread of 5G networks has “greatly increased communication and data transfer rates”, which in turn has “transformed the landscape for Internet of Things (IoT) applications in trade, such as real-time tracking and monitoring of shipments”.

Tangible business impacts in 2024?

Shakespeare notes that 2023 has been another “great year for trade digitalisation and facilitation” but that businesses now need to start seeing tangible, practical benefits.

“We want 2024 to be the year where businesses see more tangible benefits from digital trade and trade facilitation. Businesses that embrace compliance and being transparent should be the ones to benefit.”

Kawka says the initiatives and progress of 2023 has “put in motion” these benefits, with some already being “visible”.

“Many companies made large investments in numerous digital solutions over the past year or two and they will bring visible improvements sooner or later.

“Businesses could notice immediate improvements in operational efficiency and in the quality of the data that is produced because of digitalisation and standardisation.

“There will also be longer-term benefits, as we expect to see it enable greater resilience and more sustainable growth for companies, through real-time monitoring and decision-making driven by accurate data and predictive analytics."

However, she says that, to achieve tangible benefits, businesses need to “remain competitive, flexible and adaptive to the changing market and digital initiatives”.