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SWIFT successfully tests interoperability solution for electronic bills of lading

The various initiatives to digitize global trade by the global trade collective such as ICC, DCSA, BIMCO, and SWIFT among many others are seemingly bearing fruit albeit slowly, in an era where digital transformation has become of paramount importance.

Recently SWIFT, in collaboration with BNY Mellon, Deutsche Bank, and four Electronic Bills of Lading (eBL) platforms, successfully tested an interoperability solution that paves the way for the widespread adoption of eBLs.

The Imperative for Digitization

COVID-19 brought into sharp focus the various inefficiencies of the continued use of traditional paper-based Bills of Lading including delays and heightened fraud risks.

Transitioning to eBLs offers a myriad of benefits, from cost reduction and enhanced transparency to environmental friendliness. McKinsey has pegged the potential savings from this transition at a whopping USD6.5 billion and facilitation of USD40 billion in global trade by 2030.

Despite the clear advantages, the adoption rate of eBLs remains low, with only 2.1% of electronic bills of lading and waybills issued electronically, as per the FIT Alliance. However, the industry is optimistic, thanks to several ongoing initiatives aimed at boosting eBL adoption.

Key Milestones and Industry Initiatives

The push for digitization has seen significant milestones, like

  1. DCSA member’s commitment to a 100% adoption of eBL based on DCSA standards by 2030
  2. The UK’s Electronic Trade Documents Act (ETDA), granting legal equivalence to eBLs
  3. Commitment from around 80 institutions to the FIT Alliance’s declaration to drive digitalization, starting with eBLs
  4. The 25 by 25 pledge by BIMCO members

Addressing the Interoperability Challenge

A major hurdle in eBL adoption is the lack of interoperability among the existing 9 eBL platforms approved by IG P&I clubs. Each platform operates with its own set of rules and customer bases, creating digital islands and inefficiencies.

SWIFT hopes its history of enabling global interoperability, including initiatives like interlinking central bank digital currencies positions it uniquely to tackle this challenge.

Collaborative Efforts and Proof of Concept

In 2022, SWIFT, along with its FIT Alliance partners and eBL platform providers, began developing an API-based eBL interoperability model. This model allows firms to interact with multiple eBL platforms through a single connection to SWIFT.

The subsequent Proof of Concept (PoC) in 2023, involving eBL platforms like edoxOnline and CargoX, tested a ubiquitous API contract to create a secure channel with SWIFT.

Expanding this PoC to include TradeGo and WaveBL, along with BNY Mellon and Deutsche Bank, demonstrated the feasibility of reproducing the eBL transfer process in a simulated trade transaction.

Positive Outcomes and Industry Perspectives

The PoC successfully proved that financial institutions could exchange eBLs across multiple platforms using existing SWIFT connectivity. This development not only promises enhanced efficiency and reduced fraud risks but also aligns with the high security and compliance standards required in managing transactions.

Industry leaders have expressed optimism about this breakthrough. Joon Kim of BNY Mellon sees it as a potential game-changer in reducing costs associated with document exchange. Deutsche Bank’s Michael Fenyk emphasizes the role of collaborative innovation in standardizing and automating the eBL transfer process.

The Road Ahead for Interoperability

While the solution promises a significant leap towards eBL interoperability, there’s still much to be done. SWIFT continues to engage with its members and the broader trade industry to tackle additional challenges like legal interoperability and technical accessibility. The ultimate goal remains a ‘zero paper trade’ future, where eBLs streamline and secure global trade practices.

The collaborative efforts of SWIFT, BNY Mellon, Deutsche Bank, and various eBL platforms mark a significant stride towards digitizing global trade. By addressing the critical issue of interoperability, this initiative not only simplifies the trade process but also sets the stage for a more efficient, transparent, and secure global trade ecosystem.

As the journey toward digital trade progresses, the industry looks forward to a future where electronic documentation becomes the norm, paving the way for a more interconnected and streamlined global trade landscape.

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