Paperless export documents: what's allowed

E-1 opens the door to paperless export collections. ADs may enable secure electronic submission and processing of export documents under documentary collection arrangements. The reason is simple: to keep export procedures in step with the ongoing digitalisation drive.

How does it work? In two steps:

1. The exporter hands the underlying paper documents to her AD, as before.
2. The AD then processes the documents and sends them to the bank abroad through bank-to-bank electronic means.

It works for both collection modes:

• D/P (Documents against Payment): the buyer pays to get the documents;
• DA (Documents against Acceptance): the buyer accepts a bill to pay later and gets the documents now.

Three small words carry a lot of weight here:

• "May": this is a permission, not an order. A bank that is not ready can keep using paper.
• "Bank-to-bank": the electronic journey is between the banks. E-1 describes the exporter's side as handing over the paper documents to her AD.
• "Subject to compliance with the following instructions": the permission comes with conditions. They follow in E-2 to E-4 in this lesson and E-5 to E-9 in the next.

Notice too that E-1 speaks only of documentary collections. It says nothing here about LCs.

E-2 sets the scope. These instructions apply to export documents handled under the Uniform Rules for Collections (URC 522) Supplement for Electronic Presentation, called eURC for short, where the documents are presented electronically in line with the latest version of eURC.

Think of it this way: URC 522 is the rule book for collections, and eURC is its add-on for electronic documents.

Before two banks swap documents electronically, the AD should make sure of two things:

• (a) A prior mutual agreement. The AD and its overseas counterparts, such as the collecting and/or presenting bank, should have agreed beforehand. One bank cannot simply start sending files and hope the other opens them.
• (b) Format and place. The banks must also agree on the format in which each electronic record will be issued and presented, and on the designated place of presentation at the collecting or presenting bank.

Why such fuss? Imagine sending your mother a voice message when she only reads text messages, to a phone number she stopped using last year. The message exists, but nobody receives it. Agreeing the format and the place first means every document lands where the other bank expects it, in a form it can read.

The banks have agreed between themselves. But what about the buyer and the seller? E-3 brings them in.

Sales contracts should indicate that the documentary collection will be handled electronically, guided by eURC.

Why does this matter? The sales contract is where the buyer and the seller set out what each expects. If the buyer expects a courier envelope and receives an electronic message instead, there is room for an argument. As Shabnam puts it, "Surprises are lovely at birthday parties. In a contract, they lead to court."

So the electronic route should be written down at the start, in the contract itself, with eURC named as the guide. The circular uses the word should and does not give any set wording for the clause.

Which documents can go electronic? E-4 says electronic documents include all documents required under the export contract and the accompanying collection instruction, including title documents to cargo and the bill of exchange (draft), as mutually agreed.

The tricky ones are documents that carry title (ownership of the goods) or can be transferred. Their electronic form is called an Electronic Transferable Record (ETR). What the AD may do depends on the local law of the collecting and/or presenting bank:

(a) The local law permits ETRs. The AD may present all documents electronically, in an agreed format and at a mutually designated place of presentation. The AD must make sure that the title, transferability and all associated legal attributes of any ETR stay fully preserved and unaltered, whether the document moves from paper to electronic form or is issued electronically in the first place.

(b) The local law does not permit ETRs. The AD may present everything electronically except documents related to title to goods or with transferability features, such as, but not limited to, the bill of lading, promissory note and bill of exchange (draft). Those must be sent physically to the mutually agreed delivery address. So the set travels in two parts: files by screen, title documents by courier.

(c) The collecting bank wants paper as well. The AD may additionally provide authenticated electronic copies marked "Electronically Received-Authenticated Copy." And where electronic submission is not acceptable to the counterpart bank or jurisdiction, the traditional mode applies: paper, the old way.

(d) In all cases. The AD must ensure that any ETR keeps all features equivalent to the paper document and stays fully valid and legally enforceable.

In short, the first question at the desk is not "Can we scan it?" but "What does the law at the other end allow?" Shabnam's rule of thumb: an electronic title document is only as good as the law that recognises it.