Australia is in danger of being left behind on digitising trade finance as industry calls for a legal overhaul are hampered by government efforts described as muddled and lacking direction. 

The coronavirus pandemic accelerated interest in digital solutions designed to replace the trade and shipping industries’ long reliance on paper-based documentation, but there is little sign of progress in Australia despite years of lobbying by figures in the trade sector.  

“We’ve tried to inject positive support for reform over a long period of time, and we’re still waiting for that to happen,” says Bryan Clark, the director for trade and international affairs at the Australian Chamber of Commerce and Industry (ACCI), who sits on the National Committee on Trade Facilitation. 

Clark tells GTR there are estimated to be up to 200 pieces of legislation that may need reviewing in order to accommodate trade modernisation, which includes using electronic bills of lading and other documents that underpin the financing of trade. 

In a submission to an ongoing parliamentary inquiry into export finance regulation, the ACCI’s top recommendation was that “Australia should review and adapt legal and regulatory frameworks to clarify the recognition and acceptance of electronic documents including those held in blockchains as legal equivalents to paper-based”. 

The federal government has allocated A$28.6mn as part of a delayed national budget, to the development of what it calls a Simplified Trade System (STS), which it said would “also support foundation work towards [a] Single Trade Window”.  

In last week’s 2021-22 federal budget the government shifted responsibility for the STS to Austrade, the country’s trade promotion body, which it said will “drive and coordinate this significant micro-economic reform”. 

An Austrade spokesperson says: “The STS is a programme of reform that will simplify Australia’s international trade regulations, modernise outdated ICT systems and strengthen Australia’s economic resilience. 

“An STS implementation task force will work closely with business and across government to comprehensively review regulations and trade systems.  

“The programme will contribute to the delivery of a simplified, tell-us-once digital model for government-business interaction on Australian import and export movements.” 

But the task force does not yet have terms of reference or members, which will come “from across government agencies”, the spokesperson says. It is expected to be established by the middle of this year. 

A spokesperson for the trade minister, Dan Tehan, referred questions from GTR about legislative and regulatory changes to Austrade, whose spokesperson says: “The government supports developing a digital model for import and export movements. Any specific regulatory or legislative changes will be determined by the STS Implementation Taskforce and relevant government agencies.”

Andrew Hudson, a trade lawyer who is heavily involved with Australian trade organisations, tells GTR that six months after the STS was announced “there’s no significant public disclosure of what’s happening in that space; we’re concerned that it’s not moving along”.  

The money thrown at trade modernisation so far has been “allocated amongst a number of different agencies and they seem to be operating almost independently or separately to one another… there’s no one single point, which appears to be coordinating us”, says Hudson, a partner with law firm Rigby Cooke. 

“I fear that we are falling a little bit behind our correspondent nations in what we’re doing.” 

In addition to the fledgling STS task force, the Australian Border Force created a “whole-of-government Single Trade Window Taskforce” in June last year, which it said was aligned with existing efforts such as the Department of Prime Minister and Cabinet’s deregulation agenda.  

While international momentum behind digitisation has been slow, especially before the coronavirus pandemic, Bahrain, Abu Dhabi and Singapore have all adopted the UNCITRAL Model Law on Electronic Transferable Records (MLETR), which is designed to give legal backing to electronic bills of lading, promissory notes and other trade documents.  

Earlier this month the G7 – Canada, France, Germany, Italy, Japan, the UK and the US – committed to adopting similar legislation, and the ACCI said in its submission to parliament that “now is the time for Australia to adopt MLETR and enable the trade market to function with equal legal recognition of digital and paper-based documentation”. 

Transplanting the model law in Australia – a major economy and common law jurisdiction – would be more complicated than in the countries that have adopted it already.   

Hudson says he is also frustrated by the absence of trade finance representation on the government’s trade facilitation committee. “As far as I’m concerned, this is a problem… as we all know, unless there is finance and insurance in place, trade doesn’t happen”.

ANZ, a major trade finance bank , said in a submission to the export finance inquiry that it is in discussions with the government “about the benefits of digital trade initiatives (ie moving paper-based trade documents to digital form)”. A spokesperson for the bank declined to provide further details. 

A spokesperson for Lygon, a blockchain platform developed by ANZ, other banks and IBM, told GTR earlier this year that it expects to begin using its electronic bank guarantee system for cross-border transactions “to allow the transparent and secure movement of commodities across supply chains”. 

The ACCI’s Clark says he is hopeful that the funding for the STS will advance the push for digitisation and that responsibility is being moved toward the trade department rather than the Department of Home Affairs, which is in charge of border protection. 

He says a proof of concept carried out by the ACCI and consultancy PwC at the Port of Brisbane for the Trade Community System, a digital platform for managing import and export information using blockchain, shows “what the improvements would be if we put them all together”. 

A modern trading system could save A$1bn a year if rolled out nationally, Clark says, adding a recent pilot project using blockchain for certificates of origin on an intergovernmental ledger is also a positive sign.