Unpacking the Digital Transformation of Trade

29/11/2023

Digital Transformation of trade - shipping containers at port at sunset

Trade-enabling technology – TradeTech – makes international commerce more efficient, inclusive, and sustainable. In this three-part series, digital trade expert Craig Atkinson, CITP addresses key questions and practical considerations related to technology-enabled cross-border interaction among buyers, sellers, intermediaries, and governments.

Craig Atkinson, CITP Headshot

Craig Atkinson is the Founder and Director of Lexmerca International Trade and a Trade Development Specialist with the International Trade Centre (ITC), the joint agency of the United Nations (UN) and the World Trade Organization (WTO). His roles focus on addressing legal-technical challenges that affect global trade.

Active in the field of digital trade, Craig participates in the World Economic Forum’s TradeTech community and in projects with multiple international organizations, academic institutions, technology foundations, and standards bodies.

Academically, he is a Non-Resident Fellow with the World Trade Institute (WTI) as well as a Research Affiliate with the Singapore Management University (SMU) Centre for AI and Data Governance and the SMU Centre for Computational Law. Professionally, Craig has been a FITT Certified International Trade Professional (CITP) since 2011.

What is digitization? From documents to data?

Digitization involves moving away from paper documents – that may be authoritative with original ink signatures or stamps – toward electronic representations of what paper ‘would’ include.

Digitization vs Digitalization

Digitization is the conversion of analog content into an electronic form (resulting in a representation of data, information, objects, images, sounds, documents, signals, etc.).

Digitalization is the utilization of digital technology to improve processes and alter business and governance models. These changes lead to opportunities for improved coordination.

Unfortunately, it is common to conflate efforts for digitization, the first step in digital transformation, with ‘digitalization’ that follows. To really understand what digitization entails for trade, it is important to initially know something about electronic data.

As industry and government transition toward Electronic Data Interchange (EDI) or Application Programming Interfaces (APIs) between systems, many types of trade documents – financial/commercial, transport, and compliance – are being digitized and represented as ‘digital paper’ or originating as machine-readable (i.e., neither requiring extra ‘keying-in’ of data by people nor optical character recognition, OCR, by machines).

Digital paper formats, such as PDFs, may or may not contain machine-readable data fields (or have data appended). Among others, directly machine-readable formats include the eXtensible markup language (XML, a standardized markup language designed to define how data and information is organized) and JavaScript Object Notation (JSON, a standardized file and data interchange format that uses human-readable text to store and transmit data objects as tables).

An endpoint for digitization, electronic data sources break the mould of thinking about ‘documents’ and move the conversation toward how ‘data’ are structured and used as well as availability, quality, compatibility, and legality.

How is the digitization of trade documents taking hold in practice?

My experiences in advancing electronic business and government technology (GovTech) can help to answer this question. Since 2018, I’ve been an Expert with the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT). Through the international system, UN/CEFACT engages with all stakeholders in the trade community to develop standards and technical guidance.

In advancing digitization, its outputs include the UN Trade Data Element Directory (UNTDED/ISO 7372) as integrated into other standards, the ‘buy-ship-pay’ Reference Data Model (BSP-RDM), the Supply Chain Reference Data Model (SCRDM), the Multi-Modal Transport Reference Data Model (MMT-RDM), and document representation standards for electronic invoicing (e-invoice) and electronic sanitary and phytosanitary (SPS) certificates (E-cert).

As a global forum, goods trade professionals should be aware that UN/CEFACT’s standards increasingly underpin domestic electronic commerce (e-commerce) and digital trade.

The conceptual framework for digital trade

chart showing the conceptual framework for digital trade from IMF, OECD, UNCTAD and WTO
Source: IMF, OECD, UNCTAD and WTO (2023)

I also maintain a Member-Observer role in the Universal Business Language (UBL) Technical Committee (TC) under the Organization for the Advancement of Structured Information Standards (OASIS). Involving contributions from individuals, the private sector, and governments, OASIS develops open standards in a variety of areas, including transportation, payments, and finance.

For example, the UBL TC has produced an open library of trade-relevant electronic document representations (e.g., sales invoices, purchase orders, and carnet for temporary export of goods) in XML and JSON formats. Version 2.4 of UBL was recently approved as a Committee Specification.

Several document-specific initiatives are emerging in parallel to these efforts, leading to a greater need for stakeholder collaboration to resolve potential interoperability issues between proliferating document standards.

For instance, the Future of International Trade (FIT) Alliance was established in 2022 by five founding members (BIMCO, DCSA, FIATA, ICC, and SWIFT). The main objectives of the FIT Alliance are to raise awareness and accelerate adoption of a standardized electronic Bill of Lading (eBL) across entities in ocean shipping (creating a ‘universal eBL’). For trade professionals looking to engage with eBL initiatives, it’s critical to consider what any bill of lading should include.

Shaping digital standards for customs, I also monitor the work of the World Customs Organization (WCO) and updates to its Data Model (DM). A pillar of goods trade facilitation for more than 20 years, the WCO DM provides structured, harmonized, standardized, and reusable sets of data definitions and electronic messages to meet operational-legal requirements at the border.

Adapting to and utilizing such standards at digital ‘touch points’ with cross-border regulatory agencies is quickly becoming a core competency for trade professionals involved in compliance.

Lastly, trade professionals should follow developments in the legal environment at home and abroad. By committee, lawyers under the United Nations Commission on International Trade Law (UNCITRAL) have crafted model laws as templates to inspire national legislation for the legal recognition of electronic trade documents/data. Alongside work to map trade data elements, the International Chamber of Commerce Digital Standards Initiative (ICC DSI) promotes UNCITRAL instruments.

While such initiatives have largely emphasized goods trade, digitization combined with the legality of electronic communications and transacting is also needed for services trade when contemplating e-invoicing, e-payments, and taxation.

So, that’s digitization in a nutshell. It is vital for stakeholders in the trade community – from senior leaders to newly minted trade professionals – to have a strong grasp on the nuance. The ‘end-to-end’ supply of electronic data is only as strong as its weakest link and its availability is a midway point. An additional step, digitalization, is required for digital transformation to address the manual processes associated with cross-border interaction.

What is digitalization? Towards process improvements and systems?

A second step, digitalization can occur when you have requisite data sources in electronic form and there is no longer a need to physically coordinate the submission, exchange, and processing of paper documents. Within disparate initiatives, digitalization concerns process improvements – multi-layered possibilities for better coordination and automation of procedures – that arise from using electronic data sources with digital technologies (typically through computer programming). For trade, digitalization can help businesses to anticipate costs before they’re incurred and better comply with market requirements.

This implies that, by leveraging digital technologies, the potential for market expansion is significantly greater for businesses of different sizes. Digitalization can be considered the ‘great equalizer’ because it means that an individual or small business may use technology to better participate in domestic e-commerce and digital trade. For digitalization-oriented approaches to work, there needs to be foundational Digital Public Infrastructure (DPI) in place, such as national or regional Single Window (SW) systems for trade.

In combination with the right public infrastructure, tools like Digital Intermediation Platforms (DIPs), “online interfaces that facilitate… direct interaction between multiple buyers and multiple sellers, without the platform taking economic ownership of the goods or rendering the services that are being sold (intermediated)” create possibilities for small enterprises to scale their international market reach to the level of businesses with fully staffed trade operations/compliance teams.

How can professionals contribute to the digital transformation of trade?

Digital transformation is as much of an endpoint as it is the beginning of a cycle that changes how businesses, intermediaries, and governments interact. Aside from staying aware of the various initiatives for digitization and digitalization, it’s important for trade professionals to actively contribute given their unique experiences within different stakeholder groups.

Informing the development of infrastructure allows people to build specific tools to address the ‘pain points’ experienced by small enterprises. This also means that any trade professional should be able to use these tools, along with their expertise, to have the option of going ‘beyond the border’.

A caveat, technology aside – I believe that businesses should always try to learn their home market first.

Any good trade advisor will tell you it’s better to prove your local market, or at least operational capacity, before making a foray into international markets.

Combining practical experiences with trade expertise, like the Certified International Trade Professional (CITP) designation, equals a path to success for businesses in this new ‘digital economy’.

It’s important that businesses have team members with a grounded professional background in trade before considering digital transformation or offering services.

A CITP or someone who has completed a program, like the FITTskills program, is incredibly useful for the purposes of validation within a particular community, whether business or government, related to trade.

About the author

Author: Pamela Hyatt

I am the Content Marketing Specialist for the Forum for International Trade Training (FITT). You can find some of my work on TradeReady.ca. My background is in copywriting, journalism and social media. My passion lies in connecting people to the stories that are most important to them.

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