Five hurdles the UK must overcome to make the potential benefits of trade digitalisation a reality

Wed 13 Sept 2023
Posted by: William Barns-Graham
Trade News

Electronic Trade Documents Act

The Electronic Trade Documents Act (ETDA) has been hailed as a potential game-changer, with technology and digital economy minister Paul Scully saying it could save UK businesses an estimated £1.1bn over the next decade.

At a Institute of Export & International Trade (IOE&IT) webinar last week, 75% of the delegates said that they thought the act would have a positive impact on their business. However, as noted in our explainer last week, ETDA itself is relatively short on detail about how industry can go about making the most of the opportunities it is claimed that it could create.

The legislation says electronic versions of certain trade documents now have the same legal footing as their paper-based equivalents. But beyond that, it’s relatively short on detail on how businesses can go about making the most of this new digital era.

This week, we look at five of the main challenges the UK now faces as it goes about trying to make the purported benefits of ETDA a reality.

1: Awareness and understanding

Ministers and peers, trade policy wonks and IOE&IT members have been talking about ETDA for months, but the same is probably not true for the business community in the UK writ large, particularly given the competing pressures that firms have been facing in the light of the impacts of the war in Ukraine, the pandemic and Brexit.

Further still, as with any legislation, there will be a need to translate the act into “plain English”, says Sylwia Nowak, a senior customs and foreign trade compliance officer at automotive supplier Brose Group.

“The legislation needs to be translated into plain English for businesses to be able to prepare for it, because some of the legal language can sometimes be difficult to understand,” she says.

Ramin Takin, co-founder of global trade management software firm Exabler, further explains that the need for clarification about the legislation is important because the act itself is quite short on detail.

“Compared to some other countries, there’s less information or guidance about how this will be operated,” he told me last week.

Nowak says that it’s important that government and organisations like IOE&IT continue to provide clarity on how ETDA will work through guides, blogs and webinars. She adds, though, that businesses are well-used to new rules and processes being introduced in the post-Brexit climate:

“People didn't know what to expect when we left the EU single market. Many businesses didn't know exactly to expect when GVMS was introduced or how the new CDS imports module would work.

“There are always challenges, but as long as there is that communication between the government, industry and people in in the middle, like the transport companies and banks, to ensure that we are all on the same page, then we're not going to fail.”

2: Adoption

“It's here now, it's available, but it's not forcing anyone to do anything, it’s not a mandatory regulation” says Takin about the legislation.

IOE&IT director of strategic projects and international development Kevin Shakespeare agrees that the non-mandatory nature of the legislation means it’s not a given that businesses will start using digital documents. He explains:

“I think one of the challenges is always industry adoption. IOE&IT is very keen to use our network to ensure there is adoption and not just by the big corporates, but further down the supply chain as well, so that it can help smaller companies.”

From a technology perspective, Takin notes that, because the legislation is so open, there could be a “first mover” issue in terms of who from the tech industry will establish the first solutions that help businesses to digitalise their trade documents.

“In general, it's good to have something that’s more open, because then it’s up to industry to come up with the solutions.

“But to get things moving, there could be a problem for whoever it is that takes the first step to come up with a view on what’s going to work and what’s not going to work.

“It will take time for the different roles within industry to become clear and for people to stake their ground.”

Ilona Kawka, a digital trade and customs specialist at IOE&IT, says that government officials, business leaders and software developers need to collaborate to ensure that the right solutions are provided to help firms reap the benefits of ETDA. She adds that businesses also need to be shown that it is in their best interests to become adopters so that they can gain a “competitive advantage”.

“A business looks at digital transformation in order to try to gain competitive advantage, if it allows the business to improve its operations significantly.

“By going through a digital transformation, businesses could make real-time data accessible to their suppliers, partners and other outsourcing companies. They need to be shown that this will help improve the quality and efficiency of their processes.”

3: Data security and working with partners

One of the main issues identified by businesses since the ETDA was drafted by the Law Commission in 2022 has been data security.

Indeed, at last week’s IOE&IT webinar, 30% of the delegates listed either data security or privacy as their main concern relating to the digitalisation of trade. Such is the importance of supply chain relationships, this was only exceeded by the need to “ensure partners are on board”, which was the top concern of 36% of the delegates.

Takin explains:

“Businesses will ask questions around who controls data – who am I giving this information to? Do I need to give them all of this information?

“Business may currently be used to sharing certain data with partners by email and phone, or using shared folders.

“When people start to share data via a portal of some sort, when things go digital, things can start to become a little more hands off. People then get worried by this, as though they’re losing a bit of control as things become more automated.

“They can become concerned about whether they’re using the portal or controlling their data correctly. Businesses can start to worry about process control and compliance.”

4: Standards and interoperability

Introducing and implementing digital standards will certainly have a key role to play, both for ensuring businesses can use new digital procedures with confidence, and also for ensuring developers can create systems to an adequate quality. Further, the need for new systems to be interoperable with each other has also been highlighted as a key challenge to be addressed.

The International Chamber of Commerce (ICC) is taking a lead on this front through its Digital Standards Initiative (DSI), Takin says, and standards such as these need to be “adopted and promoted”.

Kawka agrees, saying:

“Standards provide a transparent framework that promote interoperability, data consistency, security, and, in many cases, help to provide a further legal basis for digitalisation.

“The development and use of global standards is therefore essential to the success of trade digitalisation.”

5: International partners need to follow UK’s lead

ETDA has been called the “missing piece in the jigsaw” by the ICC’s UK secretary general Chris Southworth.

The jigsaw, however, needs to be global in scale, not just British. Such is the international nature of trade, ETDA will only help businesses to trade more efficiently if it is replicated in other markets.

As Kawka explains:

“To achieve a truly international trade ecosystem in the future, it is essential for other countries not only to follow, but to collaborate and keep each other informed about the progress of adoption of digital trade practices.

“The collaboration in the efforts of embracing digital trade is very important for various reasons, such as trade facilitation, developing regulatory frameworks and mutual recognition within bilateral and multilateral trade agreements.

“We need to ensure that UK doesn’t become a digital island, but instead enable local businesses to create truly global digitalised supply chains on the highest level of their efficiency.”

That said, the UK has taken a lead by introducing ETDA and is in a strong position to drive global adoption. English and Welsh common law operates in approximately 40 countries and territories, according to World Population Review, with a further 60 adopting it as part of a mixed legal system.

Nowak says that the UK has an opportunity to encourage to introduction of ETDA in these countries, particularly those that are in the Commonwealth.

“The UK has provided a really good example of how to go towards digitalisation which I think other countries will follow, especially Commonwealth countries like Australia or New Zealand,” she says.

She adds that it is vital that new digital systems created in different markets can operate with each other. She notes that upcoming UK Single Trade Window needs to be able to interoperate with its equivalents overseas, including in Australia and New Zealand.

Shakespeare adds that the UK can also drive adoption through the trade agreements it’s securing following its departure from the EU and cites the Digital Economy Agreement it secured with Singapore last year as an example of this.

But the UK is not alone in pursuing the path towards trade digitalisation, he says.

“Germany is not too far behind the UK in introducing legislation, while the US, France and the Netherlands are getting closer too, as are the likes of Thailand and Japan in Asia.

“Nonetheless, the UK needs to encourage other countries to adopt it, including countries like Kenya in Africa, India through the ongoing FTA negotiations, and Caribbean countries too.”