E-documents in import LCs and collections, security and the start

Which import documents can go electronic, and how are the special ones kept safe? I-6 has four parts.

(a) What may go electronic. ADs may process trade documents in electronic form, including but not limited to:

• commercial invoices;
• transport documents, including electronic bills of lading where applicable; and
• bills of exchange (drafts).

"Including but not limited to" means these are examples, not a closed list.

(b) Extra care for ETRs. Where documents are ETRs, the AD must make sure that mechanisms are in place to preserve three things:

• Singularity: there is one unique, authoritative version of the document. No twins.
• Control: it is possible to identify, and transfer, exclusive control to a single holder.
• Integrity: the document is protected against unauthorised alteration, including by cryptographic methods or equivalent safeguards.

Why so strict? Iyan explains: "If two 'original' electronic bills of lading were floating around, two people could turn up for the same container. Only one of them would go home happy."

(c) Digital fingerprints. Unique identifiers, such as digital fingerprints or hashes, must be used where feasible to protect the document's integrity. A hash is a short code worked out from a document's contents; change even one figure and the code changes.

(d) A paper safety net. Where full electronic handling of title documents is not feasible, hybrid arrangements with physical fallback may be used. The circular doesn't spell out how a hybrid arrangement should be set up.

I-7 explains how e-documents change hands, and how that is proved. It has three parts.

(a) Ways to endorse. Electronic endorsement may be done through:

• digital signatures;
• secure platform-based transfer mechanisms; and
• authenticated interbank messaging systems, where required for sending settlement instructions, endorsements or operational messages, particularly where platform-based electronic channels are not available or not mutually agreed.

These tools may be used individually or in combination, for issuing, sending, endorsing, authenticating and otherwise processing e-documents under the approved pilot framework. So a bank might sign a document digitally and also confirm it by bank message: belt and braces.

(b) The record is the proof. Platform-generated audit trails and system logs count as evidence of:

• endorsement;
• transfer of control; and
• receipt and acceptance.

If anyone argues later, the system's own record of who did what, and when, does the talking.

(c) One holder at a time. Any transfer of an ETR must ensure that only one party exercises control at any point in time. Iyan compares it to the keys of a container yard: "The moment you hand the key over, it is no longer in your pocket. Two people never hold it at once."

"Sign it, log it, and keep one hand on the key at a time," Iyan sums up. "That's I-7 in one breath," he adds with a grin.

I-8 brings the pilot to the import desk. It has three parts.

(a) Electronic presentation, if the banks accept it. Import transactions under LCs, and documentary collections under sales contracts, may be processed with electronic presentation of trade documents. There is a condition: the relevant banks involved must accept it. The circular gives examples: issuing, advising, nominated or settlement banks, as applicable. Think of a relay race. If one runner in the chain can't carry the electronic baton, the race can't be run that way.

(b) When the other country doesn't recognise e-documents. Sometimes ETRs or electronic trade documents are not legally recognised or enforceable in the counterpart jurisdiction, that is, the country on the other side of the deal. Then ADs may:

1. accept electronic copies of documents for preliminary verification purposes, an early check; and
2. require the physical documents of title or other original documents, where necessary for compliance, legal enforceability or risk management.

Iyan puts it simply: "The file lets you start checking early. The paper is what counts in that country if something goes wrong."

(c) Releasing the goods. Goods under import transactions may be released based on mutually agreed electronic confirmation and verification mechanisms set up within the approved pilot framework. This is subject to the applicable regulatory requirements and the contractual terms between the parties. The circular doesn't describe these mechanisms in detail or list the regulatory requirements. It leaves the mechanism to what the parties agree within the pilot, and the other rules still apply.

I-9 is the security chapter of the pilot. Its four parts are about what the AD (the bank) must do, not the importer.

(a) A safe road for the documents. ADs must make sure documents travel through secure transmission channels with all four of these:

• Encryption: the data is scrambled so outsiders can't read it.
• Authentication: the system checks who is sending and who is receiving.
• Time-stamping: a reliable record of when each document was sent or received.
• Tamper-proof audit logs: a record of every step that nobody can quietly change.

Think of a bonded warehouse: a strong lock, an ID check at the gate, a register with times, and CCTV that can't be erased. All four, not just one.

(b) Recognised standards. Systems must comply with internationally recognised information security standards. The circular doesn't name a particular standard.

(c) Where sensitive data sits. Sensitive document data shall not be mandatorily stored in shared or public infrastructures. Read simply, storing it on shared or public systems must not be made compulsory. The circular doesn't define "sensitive".

(d) A front door for customers. ADs must set up and maintain digital interfaces, platforms or secure channels so customers can submit, access, track and manage trade documents and related data electronically. These must ensure data security, user authentication, auditability and compatibility with interoperable digital trade document systems.

A bank doesn't have to build every piece of technology itself. I-10 says ADs may use digital trade platforms, service providers or open-source solutions, as long as they meet three tests:

1. They support interoperability, meaning they can work with other systems.
2. They enable independent verification of documents, so another party can check that a document is genuine without simply trusting the platform.
3. They meet acceptable governance and security standards.

Then come two softer points:

• Preference should go to solutions that avoid vendor lock-in and support cross-platform compatibility. Vendor lock-in is like a phone charger that fits only one brand: change phones, and the charger is useless. The word is "preference", not a ban.
• Costs of these services may be treated as normal banking charges. The circular doesn't set an amount or a ceiling.

Notice what I-10 doesn't do. It doesn't name any approved platform or provider. It gives the tests, and the AD applies them.

I-11 is one sentence, and it is about reporting. ADs must:

• keep following their usual reporting requirements (the pilot doesn't switch them off); and
• follow any additional instructions that come based on the pilot's outcomes.

So an import done through the pilot is still reported the usual way. And because this is a pilot, more instructions may follow as Bangladesh Bank learns what works, a bit like a new recipe that gets adjusted after the first tasting. I-11 doesn't say what those extra instructions will be or when they will come.

I-12, the last paragraph of Part I, tells us how the pilot starts and how it can grow.

• Phased: the pilot is implemented on a phased basis, step by step, not all at once.
• Only on approved trade corridors: it runs under approved trade corridors. A deal outside an approved corridor is not a pilot deal. I-12 doesn't list the corridors.
• Growth is earned: expansion depends on satisfactory performance and regulatory assessment. Iyan compares it to a new shipping service: "You run one route well before you add more ports."
• The old rules still stand: existing foreign exchange regulations remain applicable unless otherwise modified. Going digital changes how the documents travel. It doesn't cancel the import rules you met in earlier lessons, unless they have been modified.