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Inefficiencies inherent in paper-based trade documentation have long posed obstacles to businesses. However, the enactment of the ETDA in September 2023, designed to address these barriers by giving electronic trade documents the same legal recognition as their paper counterparts, changed the future of international trade.

This much-anticipated move promised to revolutionise trade by streamlining processes, reducing costs, and paving the way for more sustainable trade practices. 

One year later, the question remains: how has the ETDA influenced the adoption of digital trade solutions, and are businesses reaping the anticipated benefits?

To help answer these questions and more, Trade Finance Global (TFG) spoke with Sarah Green at the Law Commission, Susan Ashworth, Senior Trade Finance Specialist at Matalan, and Surath Sengupta, Head of Trade And Working Capital Product at Lloyds.

ETDA’s impact

The ETDA was created to resolve a fundamental legal challenge: until 2023, trade-related documents in electronic form were not legally recognised under English law in the same way as their paper equivalents. For documents such as bills of lading to be effective, they must be considered “possessable” – as a requirement that previously could not be met by digital versions, digital documents could not have the same legal effect as their paper counterparts. 

Green said, “Essentially, what that 2023 Act does is say… that where digital documents or electronic documents… have certain characteristics and perform certain functions which emulate paper, they should be treated by the law as exactly equivalent to paper.” This legal shift was long overdue. 

In an era of rapid technological advancement, international trade was one of the last sectors heavily reliant on paper. Transporting paper documents across borders created not only inefficiencies and delays but also unnecessary environmental harm. Green added, “If we were going to design this system from scratch today… nobody would suggest doing it with paper.”

By eliminating the legal barriers to digitalisation, the ETDA promised to make trade faster, cheaper, and more sustainable. 

Challenges and adoption of digital trade solutions

Despite the advantages the ETDA provides, the adoption of digital trade solutions has been neither immediate nor uniform. 

While the legal framework now allows for the use of electronic documents, there remains a degree of reticence among businesses to fully embrace these innovations. This hesitance can be attributed to several factors, with unfamiliarity and perceived risks topping the list. 

For many organisations, introducing electronic documents brings concerns about new forms of digital risk, even though digital documents offer enhanced security over paper, which can be easily lost, stolen, or forged.

The transition to digital trade documents also requires investment – both in technology and in training personnel to use the new systems. While larger corporations may have the resources to make this shift, many smaller businesses feel they lack the capacity to undertake such a transformation. 

Small- and medium-sized enterprises (SMEs), in particular, have expressed concerns that digitalisation may require a wholesale overhaul of their processes, which they are not ready for. Green said, “A lot of organisations I’ve spoken to, particularly SMEs… they feel that if they’re going to digitalise, it needs to be all or nothing… which is, of course, not true at all.” 

Incremental changes can be made over time, allowing businesses to gradually phase in electronic documentation without major disruption. Nevertheless, the adoption of digital trade solutions has been quicker than anticipated in some quarters. 

Larger companies, which have more to gain from the efficiencies offered by electronic trade documents, have been at the forefront, but the landscape is not uniform. The speed of adoption varies significantly depending on industry, geography, and the position of the business within the trade ecosystem.

Practical benefits realised by early adopters

For those businesses that have embraced the shift to digital trade documentation, the benefits are clear and profound. 

One of the most immediate advantages has been the significant reduction in transaction times. Traditionally, paper-based trade processes could take several weeks due to the time required to physically courier documents between parties. In some cases, this could stretch to as long as 30 days. By using digital documents, businesses have been able to reduce this timeline to mere hours.

Ashworth said, “We recently completed a fully digital documentary collection. When we do transactions like this using paper, they are fairly complex—with two freight forwarders, three banks, and three corporates involved—and would normally take between 25 and 30 days to complete.

“By making this transaction fully digital, we were also able to finish this transaction in 2 hours.” 

This time saving directly impacts a company’s cash flow and working capital. 

Sengupta said, “That’s the working capital benefit that these corporates or SMEs can actually get out of this. Going from weeks and months to hours and minutes, that’s the difference.”

In addition to the time saved, digital transactions can also reduce fees and related expenses. Transporting paper documents internationally, for example, can be expensive, especially when multiple couriers are involved in the process, which is generally the case in a multi-party transaction.

Ashworth added, “When using paper process, the physical documents for a transaction like this would need to be couriered up to nine separate times.”

By eliminating the need for physical documentation, businesses can save on courier fees and bank charges, as many transactions no longer require as many intermediary banks. 

Global and industry-wide impact of ETDA

As the first G7 country to enact such legislation, the UK set a powerful precedent for the rest of the world. Sengupta said, “About 60-70% of world trade is documented under English law. The ETDA was bound to have a very positive impact on the international trade landscape and regulations.” 

The act has encouraged other countries to consider adopting similar legislation, with France, Singapore, and the United States among the nations following suit. The internationalisation of digital trade documentation has already begun, with key global players recognising the need to move away from paper-based processes.

While the ETDA’s immediate impact has been most evident in industries such as shipping and retail – sectors where time is of the essence – the legislation is poised to transform other industries as well. Perishable goods industries, for example, benefit greatly from the time saved through digitalisation. 

However, despite the strong progress in these sectors, there is a misconception that the ETDA is only relevant to industries heavily involved in the shipping of physical goods. In reality, the act applies to a wide range of sectors, from manufacturing to finance, and the full spectrum of global trade can benefit from the efficiencies it enables.

Ashworth said, “Hopefully, over the next five years, we can continue scaling up the benefits as we now have the use case studies… not pilots, but real use cases.”

By recognising electronic trade documents as legally equivalent to their paper counterparts, the ETDA has laid the foundation for faster, more efficient, and more sustainable trade processes. Early adopters have already begun to realise the significant benefits, from reduced transaction times to cost savings, while the broader industry is beginning to shift towards wider acceptance of digital trade solutions.

While challenges remain—particularly regarding education and digital risks—momentum is building. As more businesses come to understand the practical advantages of digitalisation and as technology providers continue to simplify the process, the adoption of digital trade solutions is likely to accelerate. 

Sengupta said, “We’ve already demonstrated there is real value… it crunches time in trade finance, releases working capital, reduces costs, and creates a more sustainable process.”

The future of trade is digital, and the ETDA represents a crucial step in that direction.