Executive Insights is a series by Shipping and Freight Resource that provides useful insights and thoughtful analysis of what is happening in the maritime, shipping, freight, logistics, supply chain, and trade industries.. Executive Insights is your chance to pick the brains of industry veterans, leaders, and enablers..
The COVID-19 pandemic displayed how vulnerable supply chains were and brought the digitalization of the shipping and freight industry into sharp focus.. While a lot has been spoken and written about “paperless trade” and the digitalization of trade, we are still a long way away from large-scale adoption.. There is, however, renewed interest in digitalization and digital standards for the industry..
In this edition of Executive Insights, we caught up with Hannah Nguyen, Director–Digital Ecosystems, Digital Standards Initiative (DSI) at the International Chamber of Commerce (ICC) to speak just about the state of digitalization and digital standards in the industry..
You can watch the video below or read the transcript..
Good afternoon Hannah, welcome and thank you for your time today on Executive Insights.. To start with, could you give a quick brief about your background and your current role..
First of all, thank you so much for giving us the opportunity for the ICC Digital Standards Initiative to come on board today to share some of the things that we are doing that would benefit the shipping and freight community.
I’m based out of Singapore at the ICC Singapore hub. We are a small team with a big mission to accelerate the digitalization of the world’s international trade and supply chain.
SFR: A lot has been spoken and written about “paperless trade” and you recently wrote and released “Standards Toolkit for Cross-border Paperless Trade”.. What was the catalyst for this document and the basis behind its creation..??
I’d like to echo what you mentioned that a lot has been said and written around the topic of paperless trade. But however, when we scan the literature and the coverage of content on this topic, a lot has been centered around a national single window and all of those customs-related processes and documents, but there’s a lot more.
When we look at the world of physical processes, especially around our shipping and freight processes, there are a lot of standards that actually can help the digitalization of many of those paper documents. So we’re talking about things like bills of lading warehouse receipts for instance.
Of course, all those are processes and documents that have been floating around, and so when we talk about, you know how to accelerate this trade and supply chain digitalization, we have entered into many conversations where people say look, I really want to digitalize but I don’t know what are the standards I can use to make sure that I use the same standard and dictionary as my counterparts.
Let’s say from a shipper to the freight forwarder from a freight forwarder to the ocean carrier there is a question How do I have that same language? So we started telling them, “Look these are the few standards that you can use” and people were like “Wow, Thank you so much for telling us.” !!
So we discovered that this is a gap in knowledge, and perhaps it’s the perception issue where people think that there are not a lot of standards that they can leverage, when in fact there are a lot.
So that was where we first started with the impetus behind making a go-to guide that didn’t exist. This is what kept market players, especially industry players, but also from governments and Customs and Border agencies “How to have this common language?”
And so that is where I team up with our partner at the World Trade Organization Emmanuelle Ganne to actually create these standards toolkit for cross border paperless trade and we have been so heartened by the warm reception that we have had since its launch in two months ago.
SFR: What have been some of the challenges in getting the industry to come together to accelerate digitalization..??
Yeah, it goes back to the very core mission of why the Digital Standards Initiative was set up in 2020 around the middle of the COVID-19 pandemic and especially emerging out of that. I think it’s even more timely now that we accelerate the work that we are doing.
So since the beginning we recognize that there have been so many players so many people working at this issue and challenges and opportunities as represented by trade digitalisation for so many years, we have been talking about, you know, digitalization of the bills of lading for instance.
So I think we have all been here long enough to know that this has been a journey where there was for example one service provider who was able to make electronic bills of lading, and then there were two and then there were a few and now there are more than 10, I think variations, but still there is also a consensus among market participants that there is still a digital island issue where people have been working in silos and optimizing in silos.
So there is a constraint inherent in that working mechanism when you can really make things a little bit better for yourself and for those people that you are connected to within that mini ecosystem. But you can’t have the benefits of skill because nobody can connect to all of the multiple digital islands that exist out there.
So the very mission that we are set up with and what we are focused on doing every day is really getting the industry to work together and I think we have had some great success over there were within the 1st Nine months of our existence, we managed to set up an industry Advisory Board that comprised of 30 industry leaders.
This is the first time where we are able to see around the same table that we have the full participation from the supply chain actors, so we have not only importers, and exporters, but also freight forwarders, ocean carriers, ports, customs, the standards development organizations that make standards for those users sitting down there and also the financial supply chain that makes use of all this information coming out from the physical supply chain.
So we have banks, insurers, and credit insurers all looking at the same thing and saying look, how can we share the database how can we trust the data being shared among each other and how do we ensure interoperability. So this is one example where I think the chances are there, but we are taking a lot of steps in order to address those.
SFR: What security measures and safeguards are in place to ensure that data integrity is maintained when sharing across the ecosystem..??
I think this is a very important consideration, of course, and I would just like to remind ourselves and the audience that in the existing world that we operate in, which is still a heavily paper-based world with four million pieces of paper flying around as we talk. In that world, inherently, there’s a lot of risks.
Because as we go and exchange paper and I’m trying to trust all the information that is on these pieces of paper, we have all seen throughout these few years quite a few high profile scandals which are related to papers being used in shipping and freight. For instance, fake bills of lading or may be fraudulent warehouse receipts, from various commodities and also other, perhaps not so high profile cases that many of us may experience ourselves but do not make it to the newspaper.
So, this is a real problem that everybody knows. So, paper inherently has its risk in terms of data integrity, because you can always have ways to go around faking a piece of paper or maybe the signature or the stamp of authority that is actually on it.
So, as we move to digital, I think this is where we have the opportunity to do things actually slightly better, if not a lot better. So, depending on the technology that we use and the design of the ecosystem, I think when we go digital, there are many standards and frameworks that actually can address some of those issues.
I give you 2 examples. For example, when I was from not too long ago in that world, looking at authorized signatures that may go into certain documents, so as a freight forwarder you rely on that signature may be from a cargo owner or from a bank.
So you really have to, you know, take a look at the list of signatures and the thing that you have in front of you and on the document and make that very human judgment of whether it looks the same or not, and that can be a variation.
But there are technologies, for example, verifiable credentials which is the V1 of the standards that we advocate for in our standards toolkit that we mentioned earlier.
This is an excellent example where instead of relying on your eye’s technology can help you to know that OK, Hariesh is the authorized signatory of this particular company and he’s authorized in his functional role as XYZ to sign this particular document and that is something that you don’t have to make a judgment on, there is something that technology can assist with to know that this was actually signed by that authorized signatory.
Another example, I can give you is this interoperable framework that we also highlighted as part of the standards to keep, The Trade Trust framework. This is a framework that is open source and a publicly freely available utility where you are able to ascertain whether the piece of paper that was sent to you now is still format, maybe it’s a PDF format, Excel format doesn’t matter, that was actually sent to you and you receive it’s not tampered with same as per the latest version from the source from the creator, so there’s a way for you to actually ascertain that data authenticity, so this is 2 examples that I just want to highlight.
To say that you know it doesn’t mean that when we go digital, the risk increases, of course, the risk will still be there somewhere, because in every commercial business endeavor in any process but kind of technology use. There will still be some residual risk somewhere, but if we just compare paper and digital side by side, there are opportunities to address some of the problems inherent in the paper-based process.
SFR: There are some that would argue that with digitalization, you are also prone to the risk of cybercrime, and cyber-attacks. Have you considered the impact and risk of cybercrime and cyberattacks and how this will be handled once there is large-scale adoption of standards..
Thanks for that question and again I would highlight that you know the large-scale adoption of standards may not and should not inherently make it riskier in terms of, you know when you mentioned the incidences of cybercrime and cyber attacks. In fact, in the status quo that we are having today if we send each other an attachment via an email or any link that we share on the email that this risk remains there already, right?
So let’s say if the link is unsafe, if you know there’s a phishing attempt, somebody is forging my email logins the risk is already there. There’s nothing new here. But if we look at the approach in terms of going digital and exchanging data within a trusted technology environment.
There is a lot of thinking and design, that it that goes into making digital systems a lot more resilient. So, I do have a lot of faith in all the technologies out there that are looking at this and knowing that actually if we all adopt the higher threshold of standards we actually minimize the risk of such penetration of such attacks.
In the future, because we would all be migrating to a higher level of security and a large part of that I would go back to the example of digital identity. If we are able to all go for certain industry standards in terms of digital identity and having that recognized across the ecosystem, it’s not only easier to verify each other where that data comes from whether it’s authentic, whether I can trust you or their source information, but also increase the level of security because all of these would be aligned at a higher threshold.
SFR: Since the adoption of MLETR on 13th July 2017, only 6 countries, have adopted this model as legislation and incorporated it into their country’s law.. But none of the major/key trading countries have adopted this.. Do we know the reason and reluctance for this..?? What is being done to enhance large scale adoption..??
That I would say is half of the mission of the DSI because on one part of our initiative we really are focused on harmonizing standards, but on the other half of the initiative, which is actually spearheaded by my colleague Rahul, based in New York, our Deputy Director of legal reform, we are laser-focused on advocating for the Model Law on electronic transferable records from UNCITRAL.
And I think to be fair, in terms of the scale of history, UNCITRAL has been the advocate for a lot of modern laws that have been adopted by many countries around the world. And one example of that would be of course the model laws on electronic signatures, but also the model of e-commerce, so those other things are actually underlined a lot of the transactions that you, and I experience every day.
So we are all so used to E-commerce and E-shopping and we wouldn’t have known but behind the background, because of the adoption of more than hundreds of countries around the world, this model now it makes it so seamless for you and I to go shopping on whether it’s Alibaba or any other e-commerce platform that you can think of around the world, Amazon or anything. So the adoption journey of that e-commerce is related to Model Law.
The MLETR that we’re talking about for electronic transferable records is a pretty young Model Law. It was finalized in 2017, and I think, as of now we have 7 jurisdictions. They have already adopted that, and that was some in the space of two years and come in this year and I think just two weeks ago we see a very important announcement coming up from the UK because of the Queen’s speech where you know there’s a bunch of bills being considered in Parliament and part of that is a proposal to address this particular paper-based problem.
Issues to actually upgrade the law of the UK to be aligned with the modern age so that not only paper-based bills of lading, for instance, are recognized but also their digital counterparts.
And while that Bill is going through their process in the Parliament, it is not adopted yet, UK is on the list of seven existing countries that adopted monitor making, it is a very welcoming sign because the UK obviously is a leading indicator in the world of commerce and also we see the continuous commitment from the G7, from the UK, we move on to the German Presidency.
We have seen 2 announcements from the ministers of the G7 with their commitment explicitly to say, look we need an aligned framework and we need to adhere to the principles that are actually, being advocated for in this model law. I think this is a very welcoming sign that we will see a lot more of the leading trade nations actually spearheading the way in this adoption.
And to your second question, but it’s being done at the design regarding this period work we have constructed a legal reform Advisory Board and this comprises of a different set of stakeholders where we have the ICC national committees working together with international organizations like UNCITRAL, UNESCAP and also a lot of the Intercontinental Future Agreement regional bodies as well as development banks.
So what is important about this construct is that it allows everyone to accelerate the legal reform work needed. So, ranging from advocacy to actually looking at local laws, which part of it needs to be updated so that it can be aligned to this Model Law etc.
So that is a journey, but because of this advisory Board that we have constructed we are very hopeful that we will be able to make it to, you know, 10s to hundreds of countries within a much shorter amount of time.
SFR: I’m sure the UK’s involvement is going to be very powerful and if they adopt it, I’m sure there are many other countries that would follow, especially from the Commonwealth I would suppose.
But coming to the last question, a lot of people have been saying yeah all this is well and good but are these practical solutions to the problems that we are facing in the supply chain currently..??
I think the issues that we have been tackling would be the ones that underline the systemic issues that we need to solve in order to address the supply chain disruptions and again, like you mentioned, it could come from future pandemics, it could come from, you know, logistical bottlenecks that happen anywhere.
You know a ship getting stuck in the middle of a canal, or maybe geopolitical events and conflicts, or that can happen anywhere right in a bigger or smaller scale in recurring sequence so I think through all of this we have all known that we need to make the supply chain more resilient, we need to make them a lot more transparent, we need to have the visibility in real time communication and data analytics in order to make the decision making and resource allocation much better.
So how do we actually do that? We need to be able to bring the data which is now again stuck in physical documentation and processes or maybe in siloed machines to be able to bring that to the ecosystem level.
So let’s say if a delay is from a shipper to the freight forwarder to the ocean carrier or maybe at the harbor side you know where exactly the problem is. You will know where exactly that container is.
You would know who is responsible for what you would know where that supply chain is kind of, you know, stuck at this particular moment in time. And not only that, because of that layer, besides enabling that supply chain resilience, you would enable more people to participate in the supply chain.
While also decreasing the cost and complexity that is involved in that participation so that we are talking about, you know involvement of SMEs, of more diverse communities, economic actors able to actually participate where they otherwise would not have because of all the complexities and costs that were part of the existing heavily paper based system.