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

Arguments

Electronic transferable documents like EBLs need to be legally recognized and functionally equivalent to paper documents

Supporting facts:

• More than 80% of consumer goods are transported by sea

• Melita provides a legal framework to allow this recognition and use

Topics: Global trade finance, Melita

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The adoption of legislation that enables electronic transferable records has been slow worldwide and in Asia

Supporting facts:

• Studies from ICC and ADB pinpoint this slow adoption

• Legal uncertainty is a major obstacle in broader use

Topics: Global trade finance, Melita

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With EBLs, documents can be transferred within moments instead of weeks, along with the elimination of risks associated with paper documents

Supporting facts:

• Electronic records can be easily accessible at any time, anywhere

• Costs and workload can be reduced

Topics: Global trade finance, Melita

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Electronic methods in trade finance are faster and more convenient

Supporting facts:

• Payment can be processed right away when documents are transmitted electronically.

• There is less chance of loss of documents in the electronic transmission.

• Case instance of a customer whose documents were lost in transit.

Topics: Trade Finance, Electronic Transactions

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Molita can help in promoting global trade and bridging trade finance gap

Supporting facts:

• Global trade finance market value in 2020 was about 5.2 trillion, accounting for roughly 6% of global GDP.

• ADB's study indicates a global trade finance gap of 1.7 trillion US dollars in 2020, expected to rise to 2.5 trillion US dollars in 2022.

• An extra 1 trillion in trade can be achieved by 2026 through digitization of trade finance.

Topics: Molita, Global Trade, Trade Finance Gap

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Implementation of Molita can boost the digital trade finance ecosystem

Supporting facts:

• Less than 5% of merchandise trade is digitized.

• Only 0.01% electronic bill of lading was issued in 2020 which rose to 1.2% in 2021.

• Molita can facilitate digitalization of trade finance with harmonized standards for electronic documents.

Topics: Molita, Digital Trade Finance, Global Trade

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Molita is crucial in supporting the sustainability of trade finance

Supporting facts:

• 100% electronic bill of lading adoption would save 28,000 trees per year.

• Molita can promote paperless processes and contribute to environmental benefits in global trade.

Topics: Molita, Sustainable Trade Finance

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Jun Xu encourages the use of ICC eRules in trade, as they are compatible with Malita principles.

Supporting facts:

• ICC has published a series of ICC eRules

• These eRules are designed to be compatible with Malita principles

Topics: ICC eRules, Malita principles, digitalization trade, trade finance

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Report

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.

Arguments

The United Nations Commission on International Trade Law (UNCITRAL) has been enabling the use of electronic transactions for over 30 years

Supporting facts:

• UNCITRAL has prepared model laws and treaties adopted in over 100 states.

• One area they tackled is the issue of documents of title used for ordering of goods or payment, which traditionally has been based on physical paper documents

Topics: Electronic Transactions, UNCITRAL, Digitalisation

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The Model Law on Electronic Transferable Records (MELITRA) came just in time before the COVID-19 pandemic, which highlighted the need for digitalisation to overcome choke points in trade

Supporting facts:

• MELITRA is designed to enable the electronic use of documents of title, without changing existing legislation.

• The use of paper was a major choke point during the pandemic.

Topics: MELITRA, Digitalisation, COVID-19, Trade

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MELITRA's benefits were acknowledged by international bodies and nations, facilitating its adoption

Supporting facts:

• MELITRA was endorsed by the G7 in 2021.

• The UK adopted the Electronic Trade Documents Act which has pushed players to think about digitization.

Topics: MELITRA, Digitalisation, International Adoption

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The model law on electronic transferable records (MLETR) is pivotal to the digitization of commerce

Supporting facts:

• MLETR allows users of these documents of title in electronic form

• MLETR enables control over logistic and supply chains, building more resilience

Topics: Digital Transformation, MLETR, Trade Digitalization, Online Transactions

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MLETR acts as a gateway to open trade ecosystems

Supporting facts:

• MLETR is designed to accommodate IoT data input

• It enables the digitization of the whole trade process from A to Z

Topics: MLETR, Trade Digitalization, Open Trade Ecosystems, Internet of Things, Big Data

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There's a high interest from both the private and public sectors in MLETR

Supporting facts:

• Both sectors see potential benefits from its application

• The G7 shows particular interest

Topics: MLETR, Private Sector, Public Sector

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Trade digitalization can result in significant cost savings for businesses

Supporting facts:

• Case of SME importing fruit from Latin America using electronic bills of lading resulted in saving of around £174,000 a year

• This is equivalent to 10 to 15% of the company's overall profit

Topics: Trade Digitalization, Cost Savings

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Increased adoption of Malita will provide businesses with more choice when issuing electronic bills of lading

Supporting facts:

• Currently only some jurisdictions have adopted Malita, limiting the choice for companies wishing to issue electronic bills

• The report 'Seizing the Moment, Unleashing the Potential of Trade Digitalization' revealed cases where shipments from North America to Chile could be covered under Singapore law, indicating the growing acceptance of electronic bills

Topics: Malita, Electronic Bills of Lading

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Trade digitization and the uptake of electronic transfer records is happening much faster than expected

Supporting facts:

• The progression of digital transformation is much faster than expected

Topics: Trade digitization, Electronic transfer records

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Appreciation for ICC and especially ICCDSI for leading the journey of digital transformation

Supporting facts:

• ICC and ICCDSI have put in a lot of private sector effort in leading the digital transformation journey

Topics: ICC, ICCDSI, digital transformation

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Report

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.

Arguments

The EBRD has been promoting Malitra for over a year and is a part of various bodies promoting the reform and its benefits

Supporting facts:

• EBRD has been involved in Malitra for over a year

• There is focus on enabling access to finance for SMEs

Topics: EBRD, Malitra, Legal Reform

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Malita reform is a key element in the puzzle of building a digital economy

Supporting facts:

• Malita reform is seen as essential in the transition and development to a digital economy

Topics: Malita reform, digital economy

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Milot Ahma discusses the framework used for evaluating countries' readiness for digitization

Supporting facts:

• In April this year, the EBRD published a blueprint report in partnership with Castle

• This evaluation framework divides the readiness for Melita reform into three levels

• They also look at the substantive legal framework and actual instruments as part of the evaluation

Topics: Digitization, Economic Development, Melita

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Journey of a thousand miles begins with the first one step, implying the need for governments to be courageous and take the first step towards Malita alignment.

Supporting facts:

• The EBRD is working on legal reform to encourage governments towards digital trade and digital trade finance.

Topics: Government Action, Malita Alignment

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The EBRD puts the money where their mouth is, trying to incorporate digital trade documents into their facilities.

Supporting facts:

• The EBRD is exploring ways to incorporate digital trade documents into their facilities, not just for the sake of doing it but to find and deliver benefits.

Topics: Digital Trade, EBRD Funding

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Report

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.

Arguments

Promotion of the adoption and alignment of the model law on electronic transfer records

Supporting facts:

• The International Chamber of Commerce, Digital Standards Initiative is working to promote the adoption and the alignment of the model law on electronic transferable records

• The initiative is based in Singapore but works across the global network

• The model law was drafted over multiple years

Topics: Global Trade Efficiency, Digital Trade, On-Situal Model Law on Electronic Transferable Record (Malitra)

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The importance of digitalisation in improving trade efficiency

Supporting facts:

• Digitalization is a long journey that requires dedication

• The adoption of electronic transferable records is part of this journey

• The On-Situal Model Law on Electronic Transferable Record (Malitra) has been in the works for six years

Topics: Digitalization, Trade Efficiency, On-Situal Model Law on Electronic Transferable Record (Malitra)

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Digital trade is more developed in B2C transactions than in logistics and global cross-border trade

Supporting facts:

• Online shopping and tax returns across government platforms have streamlined for consumers

• However, logistics and global cross-border trade still resorts to traditional, paper-based documentation

• Transfer of these physical documents is done manually

Topics: E-commerce, Trade, Digitalization, Global logistics

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Physical, paper-based process of trade is slow and has potential of interruptions like during the COVID pandemic

Supporting facts:

• COVID-19 pandemic caused significant interruptions in global trade due to the reliance on physical documentation

• Global scale events similar to COVID-19 can potentially interrupt this process in the future

Topics: Trade, COVID-19 Pandemic, Logistics

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The banking industry and Trade finance are crucially involved in the modernization process of global trade

Supporting facts:

• Banking industry has been very active in the modernization process of global trade

• Trade finance can have significant implications on the speed and efficiency of transnational commercial transactions

Topics: Trade finance, Banking, Modernization

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Faster and efficient trade processes with trade digitalization

Supporting facts:

• Electronic transferable records such as EBLs can be transferred much faster, in moments instead of weeks.

• Risks of trade documents loss, forgery, or fraud are reduced.

• Workload and cost may also be reduced and the platform may be easily accessible at any time, anywhere.

Topics: Trade Digitalization, Supply Chain Management

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Consumer benefit from decreased margins

Supporting facts:

• The valid security over an electronic bill of leading may allow a bank to obtain regulatory capital relief in respect of its trade finance exposure.

• The capital relief may further enable the bank to pass on some of that benefit to its clients in the form of a lower margin.

Topics: Trade Finance, Consumer Benefits

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Milot Ahma explains the role of Multilateral Development Banks in promoting legal reforms such as Melita

Supporting facts:

• Multilateral Development Banks strengthen an enabling framework for various transactions.

• They engage in all types of legal reform relating to access to finance and fintech.

• They aim to explain to country authorities what the Melita is and what the impact in that particular country will be.

Topics: Multilateral Development Banks, Legal Reforms, Melita

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Acknowledges the importance of MLETR and its impact on the economy

Supporting facts:

• EBRD published a blueprint report to guide countries on MLETR adoption

• ICC conducted a business case to understand MLETR's impact on UK's economy

Topics: MLETR, Economy, Trade Digitalization

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Emphasizes the need for countries to understand the potential economic impact of MLETR before adoption

Supporting facts:

• MLETR can bear fruitful economic outcomes if implemented correctly

• Economic Impact Study is available for countries interested in understanding the impact of MLETR on their economy

Topics: MLETR, Economic Impact

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Digitalization reduces barriers to trade, especially for SMEs

Supporting facts:

• Digital platforms allow small businesses to advertise their products and reach customers they could not have reached previously without significant capital investments

• Digitalization can significantly lower operational costs for businesses

Topics: Digitalization, Trade, SMEs

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Trade facilitation can be expedited with the use of digital systems

Supporting facts:

• The process time in trade transactions may be reduced from 28 days to 3 days with the adoption of systems like Malitra

Topics: Trade facilitation, Digital systems

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An interoperable legal system or legal environment across different nations is important because it grants certainty to people who are trading with that nation and people who are receiving trades

Supporting facts:

• Eight nations have aligned with the principles of Malita, expected to be 11 or 12 by mid next year

• Malita received attention during COVID-19 pandemic and its importance continues to be recognized

Topics: International Trade, Legal Environment, Malita, Interoperability

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The goal is to adopt or align to the model law for digitalization of trade

Supporting facts:

• Cases shared by ICC UK demonstrated significant economic benefit for SMEs from electronic bills of lading

• Malita's adoption would open up more choices and allow for interaction with local public entities

• ICC France and Germany, as well as Belize, are involved in the digital transition of trade

• There's a transparent platform tracking this digital transition

Topics: Trade digitalization, Legal reform, Economic Development

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Report

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.