The UK’s recent departure from the EU has brough sharply into focus its international trade activities and the role of its renewed presence within the World Trade Organisation, and how its trade policy intersects and impacts upon supply chains, including those within the industrial manufacturing sector. The UK automotive sector has complicated supply chains expanding over Europe, Asia and beyond, and cross-border trade facilitation is required to enable them. To date, documentation related to supply chain operations (for example, customs paperwork) has been paper-based, which is known to be highly inefficient, introducing unnecessary economic costs and carbon emissions, and acting as a ‘pain-point’ introducing delays in the physical movement of goods.
The Electronic Trade Documents Act (ETDA) passed into UK law (20th September, 2023), and for the first time sets the techno-legal framework to allow paper-based customs, excise, trade finance and related documentation to be replaced by reliable and secure electronic counterparts. This makes it significantly easier to trade in goods and simplifies supply chain operations in many sectors such as manufacturing, chemicals, agriculture, food and textiles. The UK is the first Western country to adopt these far-reaching legal measures, and there are many significant and potentially paradigm-shifting implications for trade and industry for both the UK and its trading partners. Recent Government and ICC estimates forecast that the ETDA could generate a net benefit to the British economy of £1.4 billion over the next decade and open new global markets by making trade more straightforward, efficient and sustainable.
These short term economic/tactical benefits of trade digitalisation (cheaper, faster, simpler) may also be separated from the longer term (more transparency, accountability, and security plus greater ESG/SDG compliance assurance for both manufacturer and consumer). Given the increasingly urgent drivers to address climate change and decarbonise society and industry, moving forward the most important thing any regulatory authority may need to know about a consignment of goods is its carbon footprint, with its customs code, tariff, or port of origin as secondary importance.
However, there are still several technical and educational hurdles which need to be overcome before paperless trading becomes a day-to-day reality for most businesses. The C4DTI is an industry-led organisation, based at Teesside University, which is working to address some of these issues and create an open digital trade system based on common, internationally recognised standards. C4DTI was setup as part of a roadmap of actions outlined in a report led by Teesside academics exploring barriers and opportunities of digital trade which was delivered to HMRC in March 2022.
C4DTI is working to implement the ICC Digital Trade Roadmap, which provides a toolkit for implementation of MLETR/ETDA-compliant documentation. It is also working on defining the stakeholder requirements for a technology stack for trade transformation (see figure), and its implementation using IoT, Digital Twins, Blockchain, AI and Digital Identity concepts. Although the proposed technology stack is vendor-agnostic, there is a clear link between the ETDA and the technology. It is the tokenisation of uniqueness that makes the techno-legal functionality of a document, such as Bill of Lading for example, achievable via code. And once that is achieved, the money that passes in consideration for transfer of title can also be tokenised. They become “suit generis” for legal purposes and can be exchanged in the same virtual environment instantaneously thus reducing all the credit and default risk associated with today’s paper-based processes.
Figure: Trade Technology Stack Stakeholder Requirements
In the context of UK Automotive manufacturing, transition to volume EV production for European Markets remains at the forefront of planned activities. Increasingly, end manufacturers and supply chain OEMs require essential materials and minerals which are subject to supply challenges (such as cobalt and lithium for batteries and semiconductors), with logistics also spanning multiple continents.
Existing rules related to customs and border controls, in addition to planned incoming rules related to Rules-of-Origin clauses in the UK/EU Trade and Cooperation Agreement (TCA) planned for 2026 make for interesting applications of digital technology related to trade.
There are multitude of interrelated challenges, but also fertile ground for maximization of potential to overcome challenges using digitalisation applied to cross-border trade and supply chains. This will require, however, the onboarding of a multitude of stakeholders across many sectors and tiers of supply chain, which is a significant challenge. This latter point brings us directly back to the data – a major issue is that OEMs regard this as a commercial asset that they are very reluctant to share. But the ETDA and envisioned technology stacks can, in principle, enable “sharing without sharing” or “pooling” of data. Secure systems can be set up where data can be pooled on a commodity, corridor or indeed industry wide basis for a benign “super user” (eg gov’t) to derive insights and foresights into the data so that approaching risks can be responded to quicker and more strategically.
The C4DTI is working on two UKRI/Make UK funded flagship projects, alongside academics from Teesside University, Cambridge University, the ICC, Chainvine and other industrial partners from the manufacturing and automotive sectors, which are looking at ways in which manufacturing and other businesses can take full advantage of the passage the ETDA and the IoT explosion.
The PROGRESS Digital Trade Testbed project aims to test the reliability of digital trade systems by tracking the physical location and transit of consignments.
Using a 5G digital test bed at Teesside International Airport, the project will mimic the movement and treatment of goods in anticipation of including such innovation in integrated digital environments in the future. It will provide a testing ground for the hardware, software and other infrastructure that are required to map multiple data sources a deliver full actionable insight into the physical location and condition of goods. It will also provide a unique and world-first test-facility to legally validate the automated electronic documentation checks related to frictionless cross-border trade, such as Bills of Lading and Phyto-sanitary Certification – which is required for goods to move freely and without inspection across borders.
The Critical Minerals Flagship Project will use blockchain technology to improve the sustainability and resilience of critical mineral supply chains, which are vital to the manufacturing sector to achieve net zero. Typically, supply chains in this sector can stretch across hundreds or thousands of miles and dozens of companies which use a vast array of decentralised networks of data. The project will use an innovative approach, using new and existing technology, to allow insights from this data to be shared confidentially and without conveying additional information and without the need for sharing the underlying data. This concept will allow users to, for example, ascertain the provenance of minerals used in their EV batteries and be assured that they are being obtained from sustainable and ethical sources.
Digital trade has the potential to revolutionise the way in which Britain does business, making it much more efficient and sustainable, and will be critical to the achievement of long-term prosperity and our net zero aspirations. However, there is much work still to do: the passage of the ETDA is not an ending, it is a beginning. As we slowly begin to implement true digital supply chains to facilitate domestic and cross-border movement of goods and finance, the power of the IoT, Digital Twins, Blockchain, AI and Digital Identity to integrate the virtual and physical worlds will slowly start to become apparent.
Michael Short is a highly qualified automation and process control engineer with extensive industrial experience. He holds a BEng degree in electronic and electrical engineering and a PhD in algorithms and architectures for real-time robot control. He is a member of professional engineering institutions and works at Teesside University as a professor. Michael is recognised as one of the influential figures in the UK’s Net Zero agenda.