As part of the International Trade and Forfaiting Association (ITFA) initiative to digitalise trade finance, Swedish blockchain company Enigio Time and global software provider China Systems have partnered to digitalise the latter’s back-office trade finance system.

ITFA’s digital negotiable instruments (DNI) initiative, revealed last month, aims to digitalise trade documents, such as promissory notes and bills of exchange, and have them recognised under common law – which at present they are not.

The first “tangible” outcome of the DNI initiative, says ITFA, is by China Systems and Enigio Time, which partnered to digitalise key trade document flows. Enigio’s trace:original is being integrated with China Systems’ back-office platform Eximbills Enterprise.

trace:original is a blockchain-based solution that enables users to create digital documents, prove and transfer ownership and validate that a digital document is the same as the original version.

GTR first reported Enigio to be working with ITFA to help the industry digitalise negotiable payment instruments in April last year.

Joel Schrevens, solutions director at China Systems, says the first instrument that the software provider has been able to implement digitally is a guarantee, allowing it to substitute a paper-based transaction with a digital document exchange using the same processing flows and capabilities as its paper-based version. “We believe this is especially useful for the processing of domestic guarantees,” he says.

“Our technology not only mimics today’s physical document flows but also offers the highest levels of security, integrity and traceability,” says Göran Almgren, CEO of Enigio Time. He adds: “The solution is both channel and data standard-agnostic, ie it can be used not only by, but also between, different trade processing platforms and it does not require parties to be on-boarded onto a specific platform.”


A wider goal

Typically, digital trade instruments operate under contract law as opposed to common law, which means many authorities in trade do not recognise them. As part of its DNI initiative, ITFA is lobbying the UK government to change the law to allow for legal recognition. “If we’re successful, what that would mean is that the English law, which is this 1882 statute, would be changed, so that it recognises a bill of exchange or a promissory note in digital form,” ITFA’s chair Sean Edwards told GTR in a previous interview.

The ICC is also urging governments to lift legal barriers on the use of electronic trade documentation, such as bills of lading, bills of exchange, promissory notes and commercial invoices. In an open letter to UK secretary of state for justice Robert Buckland, secretary general of the ICC’s UK chapter Chris Southworth requests a reform of two pieces of legislation in order to enable digital trade for at least as long as the pandemic continues.

One country that has recently taken steps to recognise digital trade documents is Oman. A few weeks ago, it revealed it had introduced e-delivery and e-cargo release orders, enabling the sultanate’s logistics sector to approve digital documents and keep trade flowing. All transactions at the port of Salalah and more than 60% of those at Sohar port are now paperless.

ITFA’s Edwards said at the time: “Hopefully, this is the beginning of a sort of tide of jurisdictions becoming more digital, especially the smaller ones. A lot of emerging markets take direction from smaller countries rather than the more developed jurisdictions.”