If we are not, then we should prepare and government must be in the front and center of this endeavor. Simply put, the adoption of digital trade is the process of moving paper-based trade documentation to electronic documentation. These documents include bills of lading, bills of exchange, promissory notes warehouse receipts, invoices, certificates of origin, guarantees, and standby letters of credit. The International Chamber of Commerce or ICC estimates some billion paper-based documents are being processed at any one point in time around the world.
The benefits of trade digitalization increase access to trade finance, reduce the risk of fraud, create global standards for developing and emerging economies, and support business through substantial cuts in trade costs.
Trade finance documents such as those mentioned above may be made available and distributed across banks, institutional investors, or non-bank institutions like supply chain providers. These documents are instruments where finance may be enabled. Digitalizing these documents makes them available to a wider potential market in a secure way. The usual processing time of a month or more may be cut substantially.
Digitalizing documents allows transparency in the trading system that can prevent multiple uses of one document, and misallocation of product codes to avoid taxation or identification as a dual-use good. Identification, tracking and authentication become a more simple and faster process as the system can address risks related to fraud, AML, and KYC.
The move to creating global standards for digital cross-border trade has commenced with the ICC spearheading the program with the support of institutions such as GS1, ISO, and the World Customs Organizations, among others. Several economies and international banks are on board as the Digital Standards Initiative of ICC in Geneva is working overtime to get the program flying. The capacity building and engagement aspects to get on board this program may need a serious push from the government if the Philippines wishes not to be left out.
Digital documentation indeed speeds up the processing time. The non-standardization and manual nature of, say, bill of lading, makes border processes complex and costly for the exporter. Reams of manual documentation in customs and excise forms, identification and accreditation requirements, rules of origin, and Incoterms compliance present a major challenge. At the end of the day, all these digitalization of trade documents, which includes buyer and seller digital identification, service contracts and invoices will speed up and make more secure the access to trade finance between buyer and seller as well as the supply chain providers.
As this digital documentation provides the mechanism for enabling finance and reducing the cost of trade, more importantly, is what will be gained between and among stakeholders – Trust. This system will enhance partner relationships among buyers, sellers, banks, financial institutions, logistics providers, and the entire ecosystem of trade.