COVID-19 May Lead to Faster Global Rise in Online Trade, Customs Documents, Trade Expert Says

The COVID-19 pandemic may lead to an increase in electronic trade documentation as both governments and industries are increasingly forced to communicate online, said Kevin Shakespeare, director of stakeholder engagement at the Institute of Export and International Trade. Although there has already been a global shift toward online customs and trade procedures, the coronavirus spread may cause that process to speed up, Shakespeare said during a March 26 webinar hosted by the institute.

Shakespeare pointed to the World Trade Organization’s Trade Facilitation Agreement, which contains provisions that urge countries to accept electronic copies of “supporting documents required for import, export, or transit formalities.” Although “there has been some talk … that all the documentation which we know in the paper format will move online,” the pandemic may make electronic procedures necessary, Shakespeare said. “It is fair to say that there could be an increased demand and an increased use of electronic documents,” he said. “So what has been talked about as [happening by] 2025 could come quicker.”

Traders and supply chain actors have already had to adjust to an array of supply chain disruptions caused by the spread of COVID-19, including increased freight costs, cancellations of shipments and a “big increase” in inactive container vessels, Shakespeare said. He said the number of inactive containers has not yet reached the level of the 2008 financial crisis, but it’s “still a big increase.” Shipping companies expect thousands of shipments to be soon stranded at seaports as the pandemic worsens in the U.S. and Europe, according to a March 26 report from The Wall Street Journal.

Shakespeare also said the virus may lead to increased trade disputes due to shipments arriving late or not at all. He said he has noticed companies increasing checks of credit references of new suppliers or customers before finalizing a transaction. “In an ideal situation, customers and suppliers will work together to try to put solutions in place,” Shakespeare said. “But obviously there is a propensity for trade disputes to increase.”

Companies should try their best to “maintain communication” with customers, suppliers and freight forwarders during the pandemic to determine changes in freight costs or potential delays in shipments. “Communication becomes fundamental and important,” he said. He also said companies should take the time to make sure their “specialist” employees are properly trained on customs procedures, including declaring goods effectively. “Now it's more important than ever to get your customs declarations correct,” Shakespeare said.

Companies should also prioritize reviews of their “logistical arrangements” and contracts, Mattias Hedwall, a trade lawyer with Baker McKenzie, said during a March 26 webinar hosted by the law firm. Industry should revisit their contracts to examine provisions related to late deliveries, hardship clauses and the potential to renegotiate contract terms due to the virus. “It's important to remember that what is happening in the world today … affects everyone,” Hedwall said. “It may be best to actually analyze this together with your current counterparties and find a good way forward together.”

Companies may also be considering moving their supply chains, Hedwall said, but should first conduct a careful analysis of the consequences. “We have seen companies being quick and agile to take the decision” to move their supply chains, he said, but they don’t have a “fallback plan and things [don’t] play out as they had expected.” Before moving supply chains, companies should review the new location’s proximity to markets, investment protection and preferential treatment under any trade deals. Companies should also ensure the region has “good infrastructure and technological capacity,” Hedwall said.