Unlocking Global Trade Efficiency: Promoting Digital Trade through the Adoption of the UNCITRAL Model Law on Electronic Transferable Records (ICC)

7 Dec 2023 09:00h - 10:00h UTC

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Disclaimer: This is not an official record of the UNCTAD eWeek session. The DiploAI system automatically generates these resources from the audiovisual recording. Resources are presented in their original format, as provided by the AI (e.g. including any spelling mistakes). The accuracy of these resources cannot be guaranteed. The official record of the session can be found on the UNCTAD website.

Full session report

Milot Ahma

The European Bank for Reconstruction and Development (EBRD) has been actively promoting the Malitra reform for over a year. This reform aims to facilitate access to finance for small and medium-sized enterprises (SMEs). The EBRD is involved in various bodies that advocate for the reform and its benefits, demonstrating their commitment to supporting economic development.

Multilateral development banks (MDBs) also play a role in explaining the benefits of Malitra to country authorities and advocating for its implementation. However, it is important to note that the impact and benefits of the reform may vary for each country.

The Malita reform is considered essential in the transition to a digital economy. It aims to facilitate digitalization and innovation, which are crucial for economic growth. Electronic representation of instruments like bills of exchange and promissory notes is also revolutionizing their usage, opening up new opportunities.

The EBRD has evaluated countries’ readiness for digitization through a blueprint report in partnership with Castle. This evaluation framework assesses the legal framework and actual instruments in place.

Making a business case for countries to understand the economic impact of the reform is crucial. Authorities must be convinced of the reform’s potential impact and prioritize its implementation.

The EBRD is actively involved in legal reforms to encourage governments to embrace digital trade and trade finance. They advocate for Malita alignment and incorporating digital trade documents into their facilities.

Overall, the EBRD’s commitment to promoting the Malitra reform and embracing digitalization highlights their dedication to fostering economic growth, innovation, and infrastructure development. By advocating for the reform and supporting governments, they create an enabling environment for businesses to thrive.

Jun Xu

The extended summary discusses the potential benefits and challenges of using electronic transferable documents, specifically the Electronic Bill of Lading (EBL), in the global trade finance industry. The speakers in the discussion present various viewpoints and arguments regarding the adoption and implementation of electronic transferable records.

One of the main arguments highlighted is the need for EBLs to be legally recognised and functionally equivalent to paper documents. The speakers emphasise that electronic documents like EBLs should have the same legal status as their paper counterparts. This recognition is essential to ensure a smooth transition from paper-based processes to electronic methods.

However, the slow adoption of legislation enabling electronic transferable records is seen as a major obstacle worldwide, including in Asia. Studies from the International Chamber of Commerce (ICC) and the Asian Development Bank (ADB) highlight this slow progress. Legal uncertainty is mentioned as a significant challenge, with the absence of clear regulations hindering the broader use of electronic transferable documents.

Despite these challenges, the speakers present a compelling argument for the advantages of EBLs. They explain that with electronic documents, such as EBLs, transactions can be processed within moments instead of weeks, leading to faster trade processes. This speed brings a reduction in costs and workload. Additionally, the elimination of risks associated with paper documents, such as loss or damage, is another significant benefit of electronic transferable records.

The discussion also introduces Melita, a digital platform, as a solution to aid in the adoption of electronic transferable documents. Participants suggest that Melita can provide a legal framework and platform for banks to maintain a continuous monitoring process for specific exposures related to collateral. It is mentioned that negotiable EBLs can be taken as collateral by banks, and Melita can facilitate better control over trade documents.

The potential of electronic methods in trade finance is further emphasised by the speakers. They point out that electronic transmission of documents allows for immediate payment processing and reduces the chances of document loss during transmission. A case instance is shared, wherein a customer’s documents were lost in transit, highlighting the need for electronic methods in mitigating such risks.

The conversation also highlights the broader impact of implementing electronic transferable records. It is noted that global trade finance accounts for a significant portion of global GDP, with studies indicating a trade finance gap of trillions of dollars. Participants suggest that Melita can play a vital role in promoting global trade, bridging the finance gap, and achieving an additional trillion dollars in trade by 2026 through digitalisation.

Furthermore, the implementation of Melita is seen as an opportunity to boost the digital trade finance ecosystem. Currently, less than 5% of merchandise trade is digitised, indicating the potential for growth in the digitalisation of trade finance. The speakers highlight the importance of harmonised standards for electronic documents, which Melita can facilitate.

Another noteworthy point is the consideration of sustainability in trade finance. The speakers note that the adoption of 100% electronic bill of lading could save thousands of trees annually. Melita is seen as a tool that promotes paperless processes and contributes to environmental benefits in global trade.

Finally, the ICC eRules are mentioned as a compatible solution with Melita principles. Participants suggest the use of ICC eRules in trade to ensure harmony and compatibility between different digital systems.

In conclusion, the extended summary highlights the need for the legal recognition and equivalence of electronic transferable documents, namely the Electronic Bill of Lading (EBL), to overcome the challenges faced in the adoption of electronic methods in trade finance. The potential benefits of EBLs include faster processing, reduced costs and workload, and the elimination of risks associated with paper documents. The implementation of Melita, a digital platform, is seen as a solution that can aid in the adoption of electronic transferable documents and facilitate better control over trade documents. Participants also stress the broader positive impact of Melita in promoting global trade, bridging the trade finance gap, boosting the digital trade finance ecosystem, and contributing to sustainability in trade finance. The compatibility of ICC eRules with Melita principles is highlighted as a means to ensure compatibility between different digital systems in trade. Overall, the discussion presents a comprehensive analysis of the potential benefits and challenges of electronic transferable documents in global trade finance.

Tianmi Stilphe

The International Chamber of Commerce (ICC) Digital Standards Initiative is dedicated to promoting the adoption and alignment of the model law on electronic transferable records, known as Malita. This model law, which has been under development for multiple years, aims to enhance trade efficiency through digitalisation. The ICC’s initiative is global in scope, with its base in Singapore.

One key emphasis of the initiative is on the significance of collaboration and community in promoting digital trade. The panel includes representatives from different organisations and sectors, such as On-Situal and Bank of China, showcasing the collaborative approach taken. This demonstrates that digital trade requires the involvement of various stakeholders working together to achieve its goals.

While digital trade has made significant progress in business-to-consumer (B2C) transactions, logistical processes and global cross-border trade still heavily rely on traditional, paper-based documentation. This highlights the necessity to modernise and digitise these logistical processes to improve trade efficiency.

The paper-based process of trade is relatively slow and can be susceptible to interruptions, as seen during the COVID-19 pandemic. The reliance on physical documentation posed challenges due to disrupted supply chains and limited mobility. This experience highlighted the need for digital solutions that can mitigate the potential interruptions caused by global-scale events.

Within the modernisation process of global trade, the banking industry and trade finance play crucial roles. Their active involvement in this process can significantly impact the speed and efficiency of transnational commercial transactions.

The adoption of digitalisation in trade processes, such as the use of electronic transferable records, offers numerous benefits. It can lead to faster and more efficient trade operations, lower costs, and reduce the risks of document loss, forgery or fraud. The ability to transfer electronic bills of lading (EBLs) in moments instead of weeks improves both speed and accuracy. Additionally, electronic records reduce the workload, cost, and accessibility barriers associated with traditional paper-based systems.

Furthermore, the adoption of Malita and other legal reforms enables the creation of an inclusive and interoperable legal environment for international trade. This is crucial as it provides certainty to traders and recipients by granting a transparent and consistent legal framework across different nations.

Digitisation is also seen as a key enabler for small and medium-sized enterprises (SMEs) in the global economy. Traditional trade processes often pose significant barriers to SMEs due to high costs and limited resources. However, with digital platforms, these businesses can advertise their products and reach customers without the need for substantial capital investments. Furthermore, digitalisation can significantly lower operational costs for businesses.

The transition to digital trade processes is not a swift or easy one. Each country’s journey towards digitalisation presents unique challenges. However, numerous resources and guidance, such as a one-hour crash course on Malita, are available to facilitate this transition. Additionally, platforms exist to track the progress of digital transformation.

In conclusion, the adoption and alignment of the model law on electronic transferable records, promoted by the ICC Digital Standards Initiative, is crucial in improving trade efficiency and enabling global digital trade. Collaboration and community involvement are emphasised to foster digital trade. The paper-based process of trade needs to be modernised and digitised to overcome its limitations. The banking industry and trade finance play critical roles in the modernisation process. The adoption of digitisation in trade processes offers faster and more efficient operations, lower costs and reduced risks. It also enables the creation of an inclusive and interoperable legal environment for international trade. Lastly, digitisation facilitates SME participation in the global economy by reducing barriers to trade. While the transition to digital trade may present challenges, resources and guidance are available to support this process.

Luca Castellani

The United Nations Commission on International Trade Law (UNCITRAL) has been at the forefront of promoting electronic transactions for over three decades. They have prepared model laws and treaties that have been adopted in more than 100 states. One area that UNCITRAL has addressed is the use of physical paper documents in the ordering of goods or payment, which has traditionally been the norm. The need to modernize this process and embrace electronic transferable records became even more evident during the COVID-19 pandemic, where the reliance on paper documents created significant chokepoints in trade.

To address this issue, the Model Law on Electronic Transferable Records (MELITRA) was developed just in time before the pandemic hit. MELITRA was designed to enable the electronic use of documents of title without requiring changes to existing legislation. Its benefits have been widely acknowledged by international bodies and nations, facilitating its adoption. This model law has played a pivotal role in the digitization of commerce, allowing users to control logistics and supply chains in a more efficient and resilient manner. Additionally, MELITRA accommodates the input of data from the Internet of Things (IoT), enabling the digitization of the entire trade process from start to finish.

Both the private and public sectors have shown a keen interest in MELITRA, with the G7 countries demonstrating particular enthusiasm. Luca Castellani, a prominent advocate, strongly supports the adoption of MELITRA, emphasizing its ability to facilitate the digitization of trade and commerce. Not only does MELITRA offer benefits to businesses, but it also contributes to cost savings. For example, a case study involving a small or medium-sized enterprise (SME) importing fruit from Latin America using electronic bills of lading resulted in a saving of approximately £174,000 per year. This represents a remarkable 10 to 15% of the company’s overall profit. Therefore, embracing trade digitalization can lead to significant cost savings for businesses.

Furthermore, the increased adoption of Malita, a system for issuing electronic bills of lading, will provide businesses with greater choice and flexibility in their trade operations. Currently, the adoption of Malita is limited to certain jurisdictions, which restricts options for companies wishing to utilize electronic bills of lading. However, reports indicate a growing acceptance of electronic bills, with cases of shipments from North America to Chile being covered under Singapore law, demonstrating the expanding recognition of electronic bills in trade.

Trade digitization and the uptake of electronic transfer records are happening at a faster pace than initially anticipated. The progress of digital transformation in trade is outpacing expectations, underscoring the significance and urgency of embracing new technologies and practices. Digital transformation is an ongoing process that will continue to evolve with advancements in technology and changes in business practices. The International Chamber of Commerce (ICC) and its Digital Standards Initiative (ICCDSI) deserve recognition for their efforts in leading the journey of digital transformation in the private sector.

In conclusion, UNCITRAL’s promotion of electronic transactions, the development and adoption of MELITRA and MLETR, and the push for trade digitalization have created a significant shift in the way trade is conducted. The benefits of digitization, such as improved efficiency, resilience, and cost savings, are widely recognized by both the private and public sectors. The momentum towards digital transformation is growing rapidly, and embracing these changes is crucial for businesses to remain competitive in the evolving global market.

JX

Jun Xu

Speech speed

128 words per minute

Speech length

1863 words

Speech time

873 secs

LC

Luca Castellani

Speech speed

147 words per minute

Speech length

2014 words

Speech time

823 secs

MA

Milot Ahma

Speech speed

187 words per minute

Speech length

1949 words

Speech time

624 secs

TS

Tianmi Stilphe

Speech speed

166 words per minute

Speech length

3161 words

Speech time

1142 secs