15 August 2023(Lloyd's List) - THE UK’s Electronic Trade Documents Act, which received Royal Assent last month, may not look like an obvious game changer for global trade. But when it comes into force next month, supporters say that it could do just that.

The Act provides that an electronic trade document has the same effect as an equivalent paper trade document, and that 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.

Crucially, this will give electronic bills of lading the same rights as paper bills of lading, which is expected to help to the move towards eBLs.

“The ocean bill of lading functions as a document of title,” said Dominique Willems, head of public affairs and government relations at the Digital Container Shipping Association.

“Whoever holds that document is also the owner of the goods. The rules around this document of title are based on this, which has worked for centuries, but that is not the case anymore.”

In order to show a person is the holder of the document and the goods they have to be able to possess the document. Under UK law that is only linked to tangible assets.

“This is a fundamental issue that leads to a large percentage of BLs not being used in an electronic way,” Willems said.

The weakness in the physical model was seen at the start of the pandemic, he added. Entire supply chains stopped simply because a piece of paper couldn’t be handed over from one person to another.

“Under an emergency situation people took paper-based documents and sent them as pdfs, but that is just a different way of sending a paper document,” he said. “It is not true digitalisation. A lot still went by courier, leading to unnecessary transport moves.”

These workarounds were no more efficient than a paper document, yet were still costing the industry billions of dollars a year. The association estimates that even with a 50% uptake of electronic bills of lading, the sector could save as much as $4bn per year by 2030.

But the Trade Documentation Act ensures that an electronic document is recognised in an equivalent manner to the paper document.

“It gives legal certainty to the people who trade and own the goods that if they had to be in a court they could be reassured that the eBL is accepted,” Willems said. “This has been what has been holding back a lot of parties from going digital.”

He added that it was “immensely important” that this had happened in the UK.“We are talking about commercial law, the type of law that regulates transactions between two private parties,” he said.

“Because there is not [an] international court for this, companies have to pick one jurisdiction under which the contract is made. For centuries this has been the UK. Around 80% of global BLs are done under UK law, so this is major step forward in terms of being able to use eBLs.”

It also leads the way for other countries in how to deal with eBLs.

“In general it gives a very strong message that it is possible now,” Willems said.

That will be necessary if the DCSA, and its container line sponsors, are to achieve their goal of 100% eBL adoption by 2030.

There are still challenges to that goal. The Act removes the commercial barriers but there are still customs regulations and other procedures that rely on paper BLs.

“In Canada, for example, when there a dangerous goods on board, a paper-based BL has to be produced,” Willems said. “That is not something anyone wants, it is just that no one has changed it. These types of things need to be changed everywhere. But there is momentum to get this fixed.”

Moves are afoot, however. Europe and the UK have moved to having customs declarations digitalised. But many countries, particularly in the developing world, still use paper and rubber stamps.

“That is still something that needs to be solved before we see 100% adoption.”

One element of the new legislation that has raised concerns among lawyers is the fact that it is relatively vague in its requirements, which leaves it open to challenges in court. The Act calls for the use of a “reliable system” to ensure the security of the BL and its use, but does not prescribe what a reliable system is. But Willems said this was a feature rather than a glitch.

“We are aware that there is a certain amount of ambiguity in the legislation and this revolves particularly around requirements about reliability,” he said.

“The legislation doesn’t prescribe exactly what system you use, it just says you must use a reliable system. Nor does it say what type of digital signature must be used, just that you can verify the signature.”

Once legislation starts prescribing a particular technology, it risks locking the market into that technology, he added. Blockchain, for example, might be popular today but not in a few years.

“That’s what got us into this problem in the first place,” Willems said.

“We’ve seen initiatives where details are prescribed, going as far as doing accreditation of systems for being reliable.”

But that would not work for the business case of the eBL.

“Today you just sign with a pen; there is no fuss with platforms and accreditation,” he said.

“To digitalise that it has to be as simple as paying with a credit card. Of course, there should be reliable systems behind it. But that should be up to the market to deal with this.”