How the ICC is Setting the Standard: Driving a Digital Agenda for Trade?

If you are involved in trade finance, when you hear about the International Chamber of Commerce (ICC), you would associate the organization with issuance of rules. This is true to a great extent as the ICC have been in the business of ‘issuing rules’ since the 1930s, which was when the first version of Uniform Customs and Practice for Documentary Credits (UCP) started.

Post this, order and certainty were introduced to those who were involved in documentary credits and, whilst subsequent versions of the UCP were issued to keep up with various developments in the market, it sort of provided a launching pad for further set of rules like the Uniform Rules for Collections (URC) introduced in 1979.

However, the evolution of the market increased the need for digitization because of which the ICC has had to keep up with the pace. In this article, we will discuss how the ICC is setting the trend for driving a digital agenda.

What Challenges is the ICC facing with Rule Issuance?

The ICC’s rule-issuing activities are facing three main challenges.

Increase in Demand: Firstly, the rapid increase in global trade has caused a significant increase in the volume of documents that need to be processed. This has led to an increased demand for efficiency and accuracy in rulemaking.

Complexity of the Trade: Secondly, the growing complexity of global trade has made the task of drafting rules more difficult. This is because it is difficult to produce a set of rules that can address all of the different types of transactions that might be involved in a particular trade. Furthermore, the constantly changing nature of international trade means that rules need to be updated on a regular basis.

Achieving Uniformity: The increasing number of countries involved in international trade has created a need for a unified set of rules that can be applied across different jurisdictions. This is because it is difficult to achieve uniformity of rules if they are created only in response to the specific needs of a particular country or region.

What are the Solutions to These Challenges?

The ICC has been tackling these challenges in various ways. Few of them are

Customized Rules: Firstly, the ICC has been actively engaging with market participants, including banks, corporates, and government authorities, to understand their needs and expectations in terms of rulemaking. This has enabled the ICC to draft rules that are more tailored to the needs of different stakeholders.

Tech Integration: The ICC has been making use of new technologies to facilitate the process of rulemaking. For instance, the ICC has been developing a web-based platform that will allow users to access and use ICC rules, as well as to comment on them and make suggestions for improvement.

Improved Coordination: ICC has been taking steps to promote better coordination between the different countries involved in international trade. This includes actively engaging with international organizations, such as the United Nations, to ensure that there is a unified approach to international trade.

The Role of Legal Structures in Driving Digitization in Trade

The role of legal structures in driving digitization in trade is also essential. This is because the legal framework, in the form of contracts, is essential for the enforcement of rules and regulations.

• The use of digital technologies, such as blockchain and smart contracts, has enabled the ICC to create more efficient and secure legal structures for trade finance.
• For instance, the ICC has recently developed a set of rules for blockchain-based trade finance, which will enable users to securely and efficiently execute trade finance transactions using blockchain technology.
• The ICC has also been actively promoting the use of digital technologies in the logistics sector. This includes the development of a set of rules for the use of digital technologies in the tracking and tracing of goods.

Why are Supply Chains Not Fully Connected to The Idea of Digitized Trade?

Despite the fact that the ICC has been actively promoting the use of digital technologies in trade and logistics, supply chains are still not fully connected to the idea of digitized trade. This is due to a number of reasons, such as the

• The lack of trust in new technologies,
• Limited understanding of the benefits of digitalization.
• Not enough regulatory clarity.
• The lack of investment in the infrastructure required for the implementation of digital technologies.
• Limited access to adequate technical skills and adequate financial resources.

How a Fully Digital Approach Impacts SCF?

A fully digital approach can have a positive impact on supply chain finance (SCF). It has the potential to significantly improve the efficiency and accuracy of the process. A few of the ways in which a fully digital approach to SCF can benefit stakeholders include:

• Reduced Manual Processing: By automating the majority of processes, manual input from stakeholders can be reduced, eliminating the potential for errors and saving time.
• Improved Accuracy: By using digital technologies such as blockchain, data can be captured more accurately and securely, reducing the risk of fraud and improving the accuracy of the information.
• Faster Payments: By using digital technologies such as smart contracts, payments can be made in real-time, reducing the time lag between invoicing and payment.
• Improved Visibility: By implementing a digital platform, stakeholders can gain access to real-time data and insights that can help them to make more informed decisions.

Closing Thoughts

The ICC is setting the trend for driving a digital agenda in the area of trade finance. By engaging with market participants and leveraging new technologies such as blockchain, the ICC is able to create a set of rules that are more tailored to the needs of different stakeholders.

Furthermore, the ICC is also taking steps to promote the use of digital technologies in the logistics sector in order to improve the efficiency and accuracy of the process. Finally, a fully digital approach to SCF can significantly improve the efficiency and accuracy of the process and benefit all stakeholders involved.