On 20 September 2023, the UK Electronic Trade Documents Act came into force, marking a seismic shift in the way commodities will be traded over the coming years.
The headline news is that some of the functions of a paper bill of lading can now be performed by a digital version. Since English law applies to about 80% of bills of lading worldwide, and paper originals have been required for over 150 years, this is an Act of global significance.
What’s in the Act?
The Electronic Trade Documents Act is only seven pages long but effectively puts electronic bills of lading (EBOLS) on the same legal footing as paper versions. The main proviso is that there needs to be a ‘reliable system’ in place that ensures the electronic document cannot be tampered with, mistaken for a copy, or controlled by someone after it’s been transferred.
For now the Act covers just a few documents relating to the import and export of shipped goods. These include bills of lading, bills of exchange, promissory notes, ship’s delivery orders, warehouse receipts, mate’s receipts, marine insurance policies, and cargo insurance certificates.
The Act is short on detail for a reason. It intends to provide a flexible legal framework that can respond to digital innovations coming down the line. In due course, secondary legislation will arrive to fill in the gaps and provide legal clarity where needed. What, for example, is meant by a reliable system in practice? We’ll probably only find out when it is tested in court.
Action required?
You don’t need to do anything, yet. Traditional paper bills of lading remain valid, and most countries still require the original paper versions. This will continue to be the case until lawmakers in other jurisdictions agree that the boost to trade outweighs the seldom talked-about political costs of enabling digitalisation. However, you will soon have the option to adopt electronic bills of lading in certain circumstances, which you didn’t have before.
What is an EBOL?
An EBOL is a digital version of a standard bill of lading, which is a legal document that provides evidence of what’s been loaded onto a vessel, who owns it, who’s in control of it, and who is entitled to receive it.
Benefits of EBOL
Electronic documents such as EBOLS can save time and money by enabling documents and data to be shared in real time while reducing the cost of printing and couriering hard copy documents. In a digital world, it’s more convenient and efficient to consult documents and correct errors on a screen. The environmental costs of using paper documents are also reduced. In the UK, exporters of secondary raw materials such as waste paper are already piloting EBOLS with WAVE BL and a major shipping line, MSC.
Risks of EBOL
The main risk of EBOL to the carrier is when the person entitled to receive the shipments turns up to claim it. Let’s say a carrier accepts a forged or hacked electronic bill of lading and then consigns the goods to someone who’s not entitled to them. That could lead to a costly dispute. Because of this risk, many carriers are wary of accepting EBOLS, even though paper originals are clearly vulnerable to forgery as well.
Long term impact of the Act
The UK’s Electronic Trade Documents Act isn’t going to change the world overnight. But it heralds growing adoption of new technologies such as CTRM software that will drive greater efficiencies and transparency global physical commodity trading.
