International trade between professionals is built on a complex documentary chain, yet it is far less digitalised than e-commerce. The latter enables consumers to order or exchange goods and services, cancel orders, have items delivered and pay without a single paper-based document. Less than 0.1% of the four billion new documents produced each year in international trade were digitalised in 2022. While there are digitalisation initiatives for several international trade documents, such as customs documents, certain documents, including some of those most used in international trade such as ocean bills of lading, are historically paper-based and signed manually.
This state of affairs, which is due in part to the fact that French law, and almost all other legal systems, do not recognise the evidential value of electronic “transferable” documents, meaning those that incorporate a right such that said right may not be exercised or transferred independently of the document, results in lead times that are far from usual in business today. For financial intermediaries responsible for distributing trade finance products, it leads in particular to high processing costs that, ultimately, weigh on their ability to effectively support the international development strategies of their clients, as such activities are inherently risky when not secured by instruments such as documentary credit and international guarantees.
Yet these long-standing activities are central to the traditional universal business model of French banks. All of France’s international financial institutions offer services, financing and instruments to secure the international strategies of their customers, including documentary credit, letters of credit and international guarantees. More than 20% of foreign trade flows – €395bn in France in 2022 – are believed to be backed by this type of finance. There is very little automation in these activities, which in France concern almost 2,000 employees at major French financial institutions but which are relatively unprofitable given narrow margins and high overheads that push banks into offshoring strategies.
The adoption by the United Nations Commission on International Trade Law (UNCITRAL) of a Model Law on Electronic Transferable Records provides a benchmark for the implementation by States of legal frameworks conducive to the digitalisation of international trade document flows. Realising this opportunity, several States have already adapted their laws in this way or are now doing so, like the United Kingdom which may adopt such a law by the end of 2023. The benefits of such changes include reduced costs and better profitability, particularly for banks, which will support finance for the stakeholders concerned; greater security, simplification and fluidity for supply chains, benefiting exporters and importers; increased transparency and traceability of trade and improved accessibility of trade finance and security tools for companies of all sizes. This means France should swiftly undertake the necessary transformations.
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Mission co-chaired by Béatrice Collot and Philippe Henry