ESCAP

Identifying key elements of the legal framework for cross-border paperless trade

Yann Duval
Chief, Trade Policy and Facilitation Section, Trade, Investment and Innovation Division

Hong Xue
Professor of Law, Beijing Normal University

The Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific (CPTA), a UN treaty entered into force in 2021, defines cross-border paperless trade as “trade taking place on the basis of electronic communications, including exchange of trade-related data and documents”. While the potential benefits of cross-border paperless trade are now well documented, international trade processes have remained heavily reliant on paper documents and manual processes. One of the reasons explaining the slow progress is the lack of a supportive and sufficiently complete legal framework.

Developing such a legal framework in practice is complex. Many laws and regulations can affect whether data or documents can be electronically exchanged and legally recognized across borders. The figure below provides an overall picture of the different laws, regulations and legal instruments that need to be considered. They are grouped into three categories: (1) E-transaction and digital economy laws, (2) Paperless trade(ing) specific laws and regulations, and (3) international trade agreements.

E-transaction and digital economy laws include all domestic laws governing electronic transactions, communications and interactions. These laws include national e-transaction or e-commerce laws that enable contracts, signatures, bill of lading and other transferrable documents in electronic form to be legally equivalent to their paper form. They also include the laws and regulations aim to promote trade safety, cybersecurity and data privacy, such as the rules on reliability of electronic certification services to manage electronic identities in trade and to ensure authenticity of e-signatures and e-archives. It is recommended to develop these laws based on international model laws and conventions, e.g. UNCITRAL model laws on e-commerce, e-transferable records and e-identity management and trust services, Convention 108 on data protection, among others. These laws typically apply to business to business (B2B) and business to consumer (B2C) transactions, and in some cases to business to government (B2G) transactions.

Paperless trade(ing) related laws and regulations essentially relate to B2G and government to government (G2G) exchange of trade data and documents. Many government agencies involved in international trade are governed by specific domestic laws and regulations. For example, countries have a national Customs laws and associated regulations. Most countries also have laws on food safety or transportation, with regulations affecting the way trade in food products can be conducted. Such laws and regulations need to be checked to ensure they enable legally valid electronic submission of data and documents from businesses to governmental agencies, as well as among governmental agencies.

To this end, many countries have also adopted domestic laws that establish institutional mechanisms and procedures for electronic exchange of trade-related data and documents between business and government agencies, as well as between government agencies. Examples include Republic of Korea’s Act on e-trade facilitation, and the growing number of laws and regulations supporting national (trade) single window operations.

In addition, some countries have also signed international bilateral/regional agreements to enable electronic exchange and legal recognition of regulatory documents across borders. The ASEAN Single Window Agreement is an example, along with its legal and technical protocols. Agencies in different countries responsible for certain documents also often sign bilateral memorandum of understandings (MoUs) to enable electronic exchange of certain data and documents in practice. Developing and signing these agreements, including non-legally binding MoUs, take much time and efforts and create potential interoperability issues. Participation in the CPTA and multilateral frameworks to develop common templates and protocols – as well as alternative interoperable solutions based on emerging technologies – may alleviate such efforts.

Several UN and other international conventions related to international trade and transport also require submission and exchange of specific certificates, such as the Convention on International trade of endangered species (CITES).  Countries parties to these conventions are legally bound to follow agreed procedures. It is therefore important that work on issuance and acceptance of electronic certificates be undertaken under these conventions. A recent ESCAP study covering 10 relevant conventions found mixed progress across the different conventions.

International trade agreements, including regional and free trade agreements also need to be considered. Market access and reciprocal preferential tariff commitments among partners have traditionally formed the core of FTAs. Implementation of these commitments typically involve submission of preferential certificates of origin (CoOs), and it is important that the agreements allow for submission of electronic CoOs. Other topics and issues have gradually been added in FTAs, to the extent that some are called economic partnership agreements. Some countries have also started to sign separate digital trade or economy agreements. Paperless trade(ing) provisions have been increasingly included in these agreements, further enabling cooperation in this area.

This brief identified some of the many domestic and international laws and regulations that need to be considered to enable legal recognition of trade-related data and documents in electronic form across borders. Regulatory requirements for B2B, B2G and G2G electronic trade data and document exchanges should be aligned as much as possible to fully capture the benefits of paperless trade, building on available international standards. All ESCAP members are encouraged to accede to the CPTA to accelerate progress in this area, to benefit from the capacity building and other cooperation programs and promote their innovative ideas and solutions for multilateral adoption – and refer to the ESCAP/UNCITRAL/WTO Toolkit for more details.

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