What are the benefits of Electronic Transferable Records ETRs ?

Jul 10, 2024

What are the benefits of Electronic Transferable Records [ETRs] ?

Transferable documents or instruments are essential to the functioning of international commerce. They include but are not limited to, bills of lading, promissory notes, bills of exchange, cheques, warehouse receipts, and insurance certificates.

Electronic Transferable Records, therefore, refers to electronic equivalents of transferable documents and instruments. An electronic bill of lading, or eBL, is one such example.

Electronic transferable records bring a host of benefits.

 

1.      Their use can reduce fraud risk in trade finance. Issuance of ETRs recorded on distributed ledgers, for instance, can guarantee singularity of an ETR, and identify the entity that has exclusive control of the record at any one time. Early in the pandemic there were a raft of commodity trade fraud cases, particularly in Asia-Pacific. Letters of credit were duplicated, or were created for non-existent goods. ETRs can help to mitigate this risk.

 

2.      ETRs can provide access to new forms of metadata throughout supply chains, further enabling industries to measure and course-correct their progress toward the United Nations Sustainable Development Goals.

 

3.   Improved quality of the data that companies use for their reporting and analytics needs, will increase analytic accuracy and enable all companies—from MSMEs to multinationals—to better anticipate market movements.

 

4.      Through the liberation of quality data throughout supply chains and international trade processes, financial institutions will be able to find new mechanisms to measure risk, including ESG risk, offering up new asset classes that can drive sustainability in trade finance and help minimize the trade finance gap.

 

5.    ETRs are much faster than their physical counterparts. Consider that prior to the pandemic, express couriering of a negotiable instrument from Seoul to Singapore took a matter of hours. In the early days of the pandemic, when jurisdictions around the world were enacting lockdowns, that same negotiable instrument was taking upwards of a week to arrive. It cost more to deliver the document, it took longer to unload cargo, and ships incurred significant demurrage fees while goods languished in ports. ETRs can make trade faster, cheaper, more secure, and will have environmental and social co-benefits for all.

 

In most jurisdictions around the world, transferable documents or instruments are legally required to be in writing and presented in paper format.

The UNCITRAL Model Law on Electronic Commerce of 1996, or “MLEC”, provides that information shall not be denied legal effect, validity, or enforcement solely on the grounds that it is in the form of a data message. Legislation based on or influenced by the Model Law has been adopted in 82 States and a total of 162 jurisdictions as on date.

The Model Law does not specifically exclude negotiable or transferable records from its sphere of application, instead encouraging enacting States to specify what exclusions they deem appropriate.

Many states chose to exclude ETRs from the Model Law’s sphere of application.




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