International trade often means jumping through hoops. There are various requirements to be met, and documents to be prepared that are very specific to the policies of each country. If you use conventional methods or use paper, your company will need a lot of time to complete all the existing administration. In addition, the costs involved are very high.
To avoid this, various countries are introducing innovations to enable them to conduct international trade without using paper documents. This includes doing administration and documentation digitally, and relying on digital signatures.
But what is the legal basis, application, and advantages of implementing this paperless international trade with digital documents and digital signatures? Let’s take a closer look.
Legal basis of digital signatures in international trade
In order for paperless international trade to run well, the following legal foundations have already been established:
The UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Digital Signatures are widely used as frameworks for international trade regulations in various countries.
In the European Union, several rules have been made to regulate international trade, especially in digital administration and the use of digital signatures. One of these is the General EU Electronic Commerce Directive, Digital Signature Directive, and the Brussels Convention on Online Transactions.
The General Usage for International Digitally Ensured Commerce (GUIDEC) was formulated by the International Chamber of Commerce (ICC) to guarantee documents and the use of electronic data in international trade.
Advantages of paperless international trade
The implementation of paperless international trade using digital signatures has many benefits for both parties - government and traders - that are directly related to trading practices. Here are some of the benefits that will be obtained if applied properly and optimally:
Benefits for government
International trade carries with it complex administration. When using paper for administrative matters, just imagine how complicated it is for officers to be constantly examining incoming and outgoing documents. This will hamper the trading process, which of course can result in business losses.
Using digital signatures for international trade will certainly make digital documents more efficient and secure. This is because digital signatures can still be guaranteed as valid despite not requiring paper documentation. In addition, no paper documents means no need for storage space. Trade administration documents can be stored digitally in the cloud, making it safe and easy to audit.
International trade using digital signatures is also appropriate for various commodities, especially commodities that are easily damaged, such as marine products, foodstuffs, and others. The administrative process is very short, and the products can be traded immediately without being held back by excessive red tape.
Benefits for traders
Digital signatures lead to smooth business in international trade or export-import business. Over the past two decades, international trade has become an increasingly complex process. Digital documents and digital signatures simplify the trading process.
A paperless system for international trade cooperation will speed up movement and increase efficiency when dealing with administrative documents such as purchases, inventory, storage, and certification. Everything can be done easily, with costs reduced to a minimum and a much faster processing speed compared to the conventional way of using paper documents.
The paperless administration process also allows for automation using the online platform that the company can operate efficiently with a reduced need for people to manage administrative files.
Principles of paperless international trade with digital signatures
The United Nations Commission for International Trade Law (UNCITRAL) sets out several main principles to be adhered to when implementing paperless international trade using digital signatures in order for its implementation to operate efficiently across national borders. These principles include:
Firstly, no discrimination should be made by the relevant institutions between digital documents and digital signatures and paper documents in terms of service or implementation.
Secondly, digital signatures carry the same legal weight in the eyes of the law as physical documents. Digital signatures may be more efficient and faster, but this does not affect their legal validity and does not violate international trade law norms.
Thirdly, the implementation of paperless trade policies with sustainable digital signatures. Technology never stops developing, so implementation should include a technical framework that adapts to existing developments. It should be always easy to apply by players in trade and industry and other related sectors.
In addition to the above principles, regulations regarding paperless international trade must comply with the standard rules issued by the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce. It is also necessary to pay attention to the principles regarding data security and the authentication process. This includes sending and receiving digital documents to other parties.
Application of paperless international trade in various countries
The paperless system in international trade has been tested and successfully implemented in several countries, including:
The Italian government has been serious about implementing paperless international trade and using digital signatures since 2014. This is marked by the existence of e-Invoicing as part of public administration services such as tax administration and other social security programs.
The following year this system was implemented in almost all ministries, particularly for financial transactions. At present, it is also applied to all trade processes between countries as well as with companies in various industrial fields in accordance with regulations issued by the United Nations.
Today, China can claim to be the leading player in trade. Some of the country’s success can be ascribed to its gradual adoption of paperless policies. The Chinese government has its own systems for providing access to supporting international trade such as ports, airports, container terminals, and the industrial transportation sector and the movement of goods.
An example of this is the Ruago port in Jiangsu Province on the east coast of China. Thanks to its well-integrated system, the port of Ruago can keep costs to a minimum and create smoother international trade. In 2014, for example, by implementing paperless administration, importers were able to save up to 1.2 billion Renminbi for shipping to other countries using containers.
In 2011, the prime minister of Canada and then US President Barack Obama signed an international trade cooperation agreement which was contained in 'Beyond the Border: A Shared Vision for Perimeter Security and Economic Competitiveness'. The agreement also resulted in a policy that focuses on the efficiency of shipping goods between countries. It also discusses the application and use of digital documents and digital signatures in administration, and the level of security and risk management with special online platforms. The program involves cooperation between Canadian and United States customs authorities for the security of goods. The government also cooperates with various international trade actors.
Paperless trade and digital signatures are not without problems or challenges. One of these is that they have not been comprehensively implemented across all countries. In 2017, the average score set by the United Nations for 120 countries for the implementation of paperless trade was only 61% of the total 100%. Only about 34% of countries were judged to be implementing paperless international trade well. Most of the countries that have implemented a trading system with digital documents and digital signatures are developed countries. In developing countries, paperless policies have not been optimally implemented.
Paperless trade constraints generally occur due to cultural factors of administrative services in a country. In developed countries, or some other countries that already have access to one-stop international trade services, paperless trade can work well. This is because the one-stop service system makes incoming and outgoing data easier to integrate with trade administration documents.
So the challenge facing global trade today is how to harmonize synergistic international trade regulations. Differences in policies still remain. The regulations that have been applied are invariably domestic in nature, or applicable on a regional basis.
A new breakthrough is needed for countries to sit down together to discuss the implementation of paperless international trade with the equality of document recognition and digital signatures. The aim is to create a healthy, fast, and efficient international trade climate and ensure the security of this trade process.
From the above review, it can be concluded that the existence of digital signatures has an influence on the sustainability of international trade in the global era. Although various countries have their own policies regarding international trade, the presence of digital documents and digital signatures will be increasingly crucial.
If your company is a global company that conducts business activities internationally, of course, it will require digital documents and digital signatures that are recognized internationally. For that, you need to use an internationally recognized electronic certificate issuer.
VIDA is the right choice for your international digital-signature needs. Certificates and digital signatures issued by VIDA are now recognized in 40 countries around the world thanks to the Adobe Approved Trusted List (AATL) certification. VIDA ensures that your company's trade documents will remain valid, even if your business partner is in a different country.
For a more detailed explanation of how VIDA's solutions can help your company's international trade business processes, contact us today.