Insider Thoughts: “Digitisation brings huge productivity gains for all aspects of an international trade transaction”

This interview is part of a series of posts where we speak to each of those 20 course authors from our new Certificate in Digital Trade Strategy, to get some wider context on the importance of digitising supply chains, learn about some potential obstacles to doing so and get a taste of the content from their lesson within the CDTS.

Our latest interview is with Raoul Renard, Attorney and former Deputy Director, Legal Reform, ICC Digital Standards Initiative. Raoul shares his expertise during  module 3 from the course; The making of an enabling legal environment for digital trade. Please note the views shared in this interview do not necessarily reflect those of ICC Academy.

Why should an organisation make digitising their trade and supply chains a priority? 

Raoul Renard (RR): Electronic transferable records, which are explained in detail later in this post, promise to make trade faster, cheaper, simpler, more secure and better for the environment. Digital platforms now exist that enable the use of distributed ledger technology to verify the integrity and singularity of electronic transferable records, which include the digitalised states of negotiable instruments (bills of lading, bills of exchange, letters of credit and warehouse receipts).

What are the biggest potential benefits of digitisation in your opinion and what are the costs, both financially and operationally, of not digitising?

RR: There are huge productivity gains for all aspects of an international trade transaction. For instance, an electronic bill of lading (eBL) contains data fields that are essential for customs clearance at the port of discharge, change of title from seller to buyer, the issuance of letters of credit, and other processes.

A physical bill of lading must be couriered around the world and can suffer from delays and risk of loss. We saw this most clearly early in the pandemic, when documents that would normally arrive the same-day or overnight were taking more than a week to arrive.

Delays in the provision of physical bills of lading raise the spectre of demurrage costs at the port of discharge. Physical documents also require laborious back-office reviews in banks, which can be vastly improved upon through the use of electronic transferable records.

What do you see as the biggest obstacles to trade and supply chain digitisation? What are some common pitfalls and how can a business successfully navigate these?

RR: There are many obstacles to trade and supply chain digitisation, including resistance to change, an interest in maintaining the status quo by some vested interests, and significant technical challenges. While there are many obstacles, for my part a key challenge lies in the current lack of an enabling legal environment for the use of electronic transferable records.

Widespread adoption of the UNCITRAL Model Law on Electronic Transferable Records (MLETR) will provide a harmonised legal environment and accelerate the uptake in digital trading solutions.

What impact would you like the Certificate in Digital Trade Strategy (CDTS) to have?

RR: I would like students of the CDTS to come away with a holistic understanding of what is required to digitise trade and supply chain processes. With respect to enabling legal frameworks, I’d like policymakers and industry participants alike to understand the benefits of legal harmonisation, and to appreciate the value of MLETR.

Please can you explain what an Electronic Transferable Record (ETR) is and illustrate what the concept of transferability means??

RR: The concept of transferability denotes the ability to transfer the claims to performance of a given instrument from one party to another through the act of indorsement. For instance, a bill of lading serves as evidence of a contract of carriage, title to the goods described upon it, and confirmation of receipt of the goods. A bill of lading is transferable in the sense that – through the act of indorsement – title to the goods described upon the bill of lading may be transferred.

Finally, what are the key benefits of ETRs?

RR: ETRs come with a whole host of benefits. Their use can reduce fraud risk, as the singularity of ETRs recorded on distributed ledgers can be assured. They can provide access to new forms of metadata throughout supply chains, generating new industry insights and enabling industry players to better measure progress against key sustainability metrics. They will also speed up transactions and lower transaction costs.

The Certificate in Digital Trade Strategy will be released on 9 November 2022. 

Certificate in Digital Trade Strategy (CDTS)

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