Global trade is on the cusp of a digital revolution, led by legislative shifts like the UK’s upcoming Electronic Trade Documents Bill. As the transformation gathers pace, significant economic gains are projected, with the International Chamber of Commerce (ICC) estimating full digitisation could add as much as US$9tn to G7 trade over the next five years. The challenge, however, remains in connecting these high-level predictions to the daily realities faced by businesses on the ground. To better understand the practical impact of this digital shift, Eleanor Wragg speaks to a cross-section of businesses engaged in international trade to learn how they perceive trade digitisation, what obstacles they anticipate, and what support they need for a successful transition.
The global mining giant
Since carrying out its first electronic bill of lading (eBL) transaction in 2013, BHP, the world’s largest mining company by market capitalisation, has become an enthusiastic proponent of supply chain digitisation.
With a business model dependent on shipping enormous volumes of very high-value cargo around the world, miners are keenly aware of the disadvantages of paper-based trade. For example, there are legal and commercial risks inherent in the issuance of letters of indemnity when cargo arrives at discharge ports before the paper bill of lading (BL). Additionally, the relative ease with which physical BLs can be tampered with or falsified has been a central theme in some of the most egregious commodities fraud cases of recent years.
To push for change, in March, BHP – alongside fellow miners Anglo American, Rio Tinto and Vale – threw its weight behind a new initiative by the Baltic and International Maritime Council (Bimco) to boost eBL adoption in at least one commodity to 25% of annual seaborne trade volumes by 2025. Speaking to GTR, Hui Ling Chan, BHP’s vice-president of commercial outbound operations, estimates that the company has already achieved eBL use in over 15% of its bulk business.
However, for BHP, the advantages of digitisation go beyond increased efficiency and reduced risks.
“Our digital transformation can potentially attract the broader workforce and enables us to compete for diverse candidates,” says Chan. “We want to be able to provide flexibility, and that is challenging if we continue to function in an environment dealing with physical documents.”
As the biggest dry bulk charterer in the world, shipping commodities such as iron ore, copper and nickel to customers across almost every industrial sector on earth, BHP’s success in digitising its value chain depends on its ability to bring everyone else – from the banks that finance its trades to the owners of the vessels that carry its goods – along with it on the journey. This, says Chan, has been a learning process.
“We have found it easier to focus on the two end points of supply chain than to go sequentially through it. By getting alignment between us as the producer and our end customer, we can work through and meet in the middle,” she says.
Overcoming the oft-cited roadblock to eBL adoption globally – that of uncertainty over which of the overwhelming number of platforms on the market to choose – has been another focus.
“We are proponents of interoperability for this reason,” says Chan. “Our approach has been to enter strategic partnerships with a small number of solution providers, because we are cognisant of the additional burden of multiple platforms on customers, banks and supply chain partners.”
As a member of the Mining and Metals Digitalisation Forum (MMDF), BHP has also used its market-making heft to advocate for legal reform to recognise electronic trade documentation. Most recently the MMDF participated in the Law Commission of England and Wales’ consultation on the Electronic Trade Documents Bill. With the bill expected to become law imminently, Chan is optimistic about its impact on the wider supply chain.
“The legal reform doesn’t change the way I would do my business, but it provides me a lever to better bring my supply chain partners along the journey,” she says. “A large proportion of letters of credit are governed by English law, so it is a familiar legal framework, therefore the recognition of electronic documents in English law will give people additional comfort when considering using eBLs.”
However, in order for all of the benefits of the legal reform to be unleashed, Chan believes more awareness-raising is required.
“The education piece is so important,” she says. “There’s already a lot of work being done by the International Chamber of Commerce on this, as well as seminars and webinars by like-minded industry participants.”
While BHP has the resources to navigate the complexities of digital transformation, Chan acknowledges that not all companies are in the same position. “In hindsight, because the industry wanted to move quickly on digitisation, there was an oversized emphasis on targeting the largest players,” she says, adding that for small to medium-sized enterprises (SMEs), the shift to digital can seem particularly daunting.
“They certainly don’t have the luxury I do of having a full legal department behind me to help my understanding,” Chan says.
One way BHP is addressing this divide is by sharing its own experiences and best practices with the wider business ecosystem. “It took us a number of years to get to where we are today,” Chan says, “but by sharing our experience and best practices with the wider ecosystem, we can bring everyone else along much quicker.”
The automotive supplier
Founded more than 100 years ago in Germany, Brose Group is the world’s fourth-largest family-owned automotive supplier. With customers including over 80 car manufacturers, every second car worldwide is equipped with at least one Brose product, from seat adjusters to air conditioning compressors.
In recent years, the automotive industry has experienced unprecedented upheaval as a confluence of external factors upended the traditional just-in-time model, forcing players to seek new ways of managing their supply chains and avoiding delays.
As well as implementing systems to monitor their most critical links in the supply chain and flag potential issues in real time, companies in the sector need support to ease the burden of doing trade – and getting rid of paper should be a priority, says Sylwia Nowak, Brose Group’s senior customs and foreign trade compliance officer.
“We have a huge archive of paperwork,” she tells GTR. “All of the data is inputted into our ERP systems, so we shouldn’t need to be keeping all of these physical documents, but cross-border trade remains a very onerous procedure that leads to unnecessary delays and friction at times. Dealing with hundreds of suppliers does not make things any easier.”
She sees fostering better communication between corporates and governments as pivotal to creating a better system. In her view, current inefficiencies stem in part from a lack of understanding and dialogue between both sides, and more efforts should be made to promote more open and frequent exchanges between them.
“The government can’t make the necessary changes if they don’t know what’s expected,” she says.
In practical terms, this could mean corporates taking the initiative to provide detailed proposals to governments about what changes would make the most positive impact on their operations. Government, in turn, should be open and responsive to this feedback, considering it seriously when formulating policy and implementing new systems.
Nowak has a laundry list of suggestions, including creating a smart system that can read uploaded export documentation and automatically identify when preferential origin can be claimed, in order to minimise duty charges. She believes that if governments can provide tangible, advantageous solutions like this, interest in trade digitisation among corporates will increase.
However, she also recognises that facilitating this dialogue can be challenging, especially given scepticism from corporates who feel they have been let down in the past.
“I regularly speak at industry conferences to try and drive customs and trade digitisation,” she says. “I’ve approached so many companies on this, but the impression some of them seem to have is that nothing will change, so what’s the point.”
She highlights some difficulties faced by importers and freight forwarders dealing with changes since Brexit including the introduction of the Goods Vehicle Movement Service and the switchover to the Customs Declaration Service (CDS) as an example. “From our perspective, as an importer, there was a time when CDS was not working correctly, and we were trying to communicate via the official channels, explaining that we needed to import the goods as soon as possible, because production in the West Midlands could be at risk of stoppage. We had to work very hard to import goods via a different mode, because we could not wait for the official response – which arrived three days later.”
As an enthusiastic proponent of digitisation, Nowak is convinced that through trust-building and consistent communication, this gap can be bridged.
“As a society, the direction of travel towards digitisation is clear. We need to work together and keep providing ideas, and only then will we have a trade system that works well for everyone,” she says.
The fresh fruit importer
Lincolnshire-based importer Melon&Co was established in 2021 by Agricola Famosa, Brazil’s largest fresh fruit producer, to provide a year-round supply of melons and mangoes to the UK market. Led by chief executive Justin Szymborski, Melon&Co imports around 85,000 tonnes of fruit each year – or approximately 100 shipping containers per week – which it sells to supermarkets and other outlets throughout the country.
Having spent his entire career in the sector, Szymborski is no stranger to its complexity. With a business model that depends entirely on getting highly perishable fresh produce from fields in South America to consumers in the UK in the minimum possible time, even the slightest delay can take its toll.
“This is a high risk, high turnover, high volume, low margin business,” he tells GTR. “We’re talking about short shelf-life products, and the longer they stay in port, the more money it costs. I need to move these goods around quickly and efficiently. I need to minimise food wastage. And I need to stop flying documents over from Brazil to satisfy bureaucracy.”
“Flying so much paperwork around the world is just ridiculous in 2023,” he adds. “Eight years ago, I questioned whether we could digitise our paperwork. And we’ve been working on it ever since.”
These efforts culminated in the company’s recent inclusion in the UK government’s Ecosystem of Trust pilot. The scheme seeks to assess the use of technology, data and trusted trader relationships to minimise the administrative burden of customs and border processes. The potential benefits are significant – an 80% reduction in border delays that would slash barriers to trade and add as much as £25bn to UK GDP, according to research by the Institute of Export & International Trade.
During the pilot, Melon&Co used technology developed by Contained Technologies – a company set up by Szymborski’s brother, Alex – to send live supply chain data to the government and other critical partners during the pilot, enabling it to cut red tape and get its goods into the country faster.
With trade digitisation initiatives often dominated by large corporates and their banking partners, the pilot offered a chance for smaller companies – often characterised as digital laggards – to effect change.
“I think people underestimate SMEs, but the reason they’re all still in existence is because they’ve had to be creative. We want to lead the way and fix something that’s completely outmoded,” he says.
“We’ve been afforded this opportunity because Alex is my brother and he at least listened to me. Nobody else from the big software houses ever has; we always end up with systems that are expensive and don’t really do what we want them to do. Supply chains are under so much pressure, and we just want to speed up operations and make them more cost effective. It’s that simple.”
Having had a taste of the digital future of trade, Szymborski now wants to see it brought to bear. He welcomes developments such as the UK government’s Border Target Operating Model, set to enter into force in October, and the imminent passage of the Electronic Trade Documents Bill, but acknowledges that some in the industry are cynical about the proposed timeframes.
“I think a lot of people have been quite negative about trade digitisation because they don’t believe it’s going to happen,” he says. “More power to [ICC UK secretary-general] Chris Southworth’s elbow for galvanising everybody and pushing for change, but the view of some of the industry committees is that you might digitise one aspect, but the same level of manual processes will be required by another department.”
To ensure a disjointed approach doesn’t prevent businesses from leveraging the full potential of technology in trade, he calls for better linkages between different areas of government.
“Throughout the pilot, I’ve been running things in parallel. I’ve been sharing my data, but obviously, I’ve still had to do my paperwork which just adds another layer of complexity,” he says.
“I really want the government to introduce the single trade window and unify all the different departments because my data is the same data whether I’m talking to the Department for Environment, Food and Rural Affairs or HMRC. I want to be able to take title on my goods in advance, share my eBL data and pre-declare everything whilst it’s still on the boat so I can make my submissions while the goods are in transit.”
“We hear that Brexit is an opportunity to reduce bureaucracy. We have got an opportunity here to do everything properly and professionally and still maintain the high standards that we all want at the border,” he adds. “We need to get on with it. I think we’ve had long enough.”
The wine and spirits industry body
The Wine and Spirit Trade Association (WSTA) represents over 300 companies producing, importing, exporting, transporting and selling wines and spirits in the UK. Its members range from major retailers, brand owners and wholesalers to fine wine and spirit specialists, and logistics and bottling companies.
David Richardson, who has been the WSTA’s regulatory and commercial affairs director since 2015, describes his role as “explaining industry and government to each other”. He compares the shift towards digital trade to the transition from horses to tractors; while people may not be asking for it explicitly, it is the inevitable way forward.
Unlike in the perishable goods sector, where time is of the essence, the business case for digitisation in this industry, according to Richardson, is about reducing duplication and costs.
According to WSTA member Félix Solís Avantis, a Spanish winemaker, import costs for the UK wine industry have soared since Brexit, while increased duties, set to come into force from August this year, will cost the industry a further £440mn per year, putting it under severe financial pressure. The company says that automating the export declaration process alone will help save it around €1mn per year – an initiative Richardson is keen to see happen.
“The challenge for a lot of businesses is that if you want to move wine from one place to another, then you need to deal with lots of different authorisations, commercial documents, insurance documents, your customers’ requirements, and your suppliers’ requirements. There’s a lot of information floating about that you have to type and retype in a slightly different format each time,” he tells GTR. “The reality is that somebody’s produced some wine, and that wine isn’t really going to change between them and the end consumer, so why can’t that information just flow through the chain and be replicated? That’s ultimately what this is all about.”
A recent Ecosystem of Trust pilot, carried out by digital platform Chainvine and Fujitsu UK & Ireland, leveraged Atamai Freight blockchain technology to transmit data on a test shipment of wine from Félix Solís’ winery in the Spanish municipality of Valdepeñas to a Tesco distribution centre in the UK. Because it allowed different government agencies, customers, producers and consumers to access all the key information in one place, the pilot reduced the usual export time by 25%.
Richardson appreciates the efforts made by HMRC to streamline processes and acknowledges the positive direction of change. However, he says he would like to see more readiness from the government to adopt initiatives – such as the Ecosystem of Trust pilot – that have been proven to work.
“I’d be reluctant to call for change to be any faster, because industry needs time to respond and adapt,” he says. “If I was going to have any call for action, it would be a willingness to set up dress rehearsal schemes and sandboxes, with a provision that says,
‘We will allow you to do this legally in real life as a test, and then if it works, we’ll allow you to continue doing it’. If something works, let’s roll it out to everybody.”
He’s also optimistic about the positive impact of the passage of the Electronic Trade Documents Bill, which he believes will not only improve trade finance accessibility at a time when the industry is struggling for working capital, but also enable quicker and more efficient border processes.
“Digital documentation should enable border agencies to take a more risk-based approach, in that if data is coming through electronically, it can be analysed automatically,” he says. “Hopefully, that will also contribute to a quicker transit through the border.”
