NCD Convention: A New Boost for Trade Finance and Inland Logistics Corridors

In global trade, sea routes and traditional bills of lading have long enjoyed a privileged position in the world of trade finance. Sea‑borne cargo benefits from negotiable bills of lading, and banks are familiar with their function as documents of title, making it relatively straightforward to use goods in transit as collateral for loans, letters of credit or supply‑chain finance structures. By contrast, goods carried by road, rail or air – the lifelines of many landlocked countries and cross‑border logistics corridors – have lacked an equivalent instrument. This gap has meant missed opportunities for financing and limited capital flows to regions far from the sea.

The adoption of the United Nations Convention on Negotiable Cargo Documents (NCD Convention) on 15 December 2025 is therefore seen by many experts as a legal boost for both trade finance and inland logistics corridors. The Convention creates a new type of instrument – the negotiable cargo document (NCD) – that can represent goods in transit under any mode of transport, in paper or electronic form, with the same document‑of‑title function as a maritime bill of lading. This opens up the possibility of selling goods while they are on the move and using them as collateral across all modes of transport, not just at sea.

From Legal Gap to New Trade Finance Opportunities

Under the old model, banks were comfortable relying primarily on bills of lading. A bill of lading serves as evidence of the contract of carriage, a receipt for the goods and a document of title. The legal and commercial recognition of its negotiability keeps the associated risks within acceptable bounds for lenders. In contrast, road, rail and air transport documents such as consignment notes, rail waybills or air waybills are generally non‑negotiable; the right to take delivery is not tightly linked to the holder of the document, which makes it difficult to treat them as strong collateral.

The NCD Convention is designed to plug precisely this gap. According to UNCITRAL, an NCD is a new kind of document of title representing goods in transit, applicable to all modes of transport, both unimodal and multimodal. Rights related to the goods – the right to take delivery, to demand delivery and to resell – are bundled into the document. Only the holder of the NCD can exercise those rights, and transferring a duly issued NCD has the same legal effect as handing over the goods from one party to another.

Equally important, the NCD framework has been crafted to work smoothly in the digital environment. The Convention gives full legal recognition to electronic NCDs (eNCDs), building on UNCITRAL’s Model Law on Electronic Transferable Records (MLETR). When rights over goods are “packaged” into transferable electronic records, the transfer of ownership to a new buyer – or to a bank as collateral – can occur almost instantly. This substantially reduces the risk of document delays, shortens the cash conversion cycle and improves the ability of supply chains to respond to disruptions.

Who Stands to Gain the Most from the NCD Convention?

The FAQ developed by ESCAP, UNCITRAL, FIATA, ICC and the Global Shippers Forum stresses that the NCD Convention benefits many actors along the supply chain, but three groups stand out: traders, financial institutions and landlocked States together with multimodal logistics corridors.

For traders – including exporters, importers and commodity merchants – NCDs greatly enhance their ability to manage market risk. When demand at a destination falls, or political risks, sanctions or regulatory changes make a market less attractive, businesses can resell goods already in transit to another buyer and transfer the NCD, instead of cancelling contracts, diverting cargo or accepting losses. Having a standardized document of title for all modes makes sales of goods in transit less legally adventurous.

For banks and other financial institutions, NCDs provide a new layer of collateral. Rather than restricting their portfolios to shipments covered by bills of lading, lenders can extend financing to cargo moving by road, rail, air or multimodal routes. At UNCITRAL’s 2025 “Shaping the Future” conference, NCDs were highlighted as a potential tool for narrowing the trade finance gap, especially for small and medium‑sized enterprises that can now use shipments in transit as security without pledging additional fixed assets.

Challenges in Implementing NCDs: Costs Today, Benefits Tomorrow

Despite being hailed as a game‑changing tool, the NCD Convention is no magic wand. To bring it to life, States and businesses must be ready to tackle a series of challenges during the transition.

The first challenge lies in aligning domestic law with the Convention. UNCITRAL emphasises that the NCD Convention focuses on documents and rights to goods, without altering existing transport liability conventions. Nevertheless, when incorporating it into national law, each country will need to review legislation on commerce, customs, electronic documents, secured transactions and banking to ensure that NCDs can function smoothly. This requires coordinated action by multiple ministries and agencies – from justice and finance to transport and the central bank – and cannot be accomplished overnight.

A second challenge concerns the digital capabilities of businesses. To fully exploit the power of NCDs, especially eNCDs, companies need clean data foundations, digitised workflows and systems capable of interfacing with platforms that issue and manage electronic documents. Firms that still rely heavily on paper and fragmented filing systems will face upfront investments in technology, training and change management. In the absence of national standards, there is also a risk that each carrier and each bank might adopt its own proprietary platform, creating technological “islands” that are difficult to connect.

Finally, the market itself needs time to build confidence and adjust. Banks must develop new risk models for NCD‑based collateral; insurers have to tweak their products; customs administrations need to update procedures to accept electronic documents; and courts and arbitral tribunals must become familiar with disputes involving electronic documents of title. These soft costs cannot be quantified immediately, but they are essential for NCDs to reach their full potential.

NCDs and the Three‑Legged Stool of Law, Capital and Infrastructure

The NCD Convention does not replace the structures the world has built over decades for sea, road, rail or air transport. Rather, it acts as a layer of legal glue that connects previously separate pieces of commerce, finance and multimodal transport. For landlocked countries and corridors heavily reliant on road and rail, it is a rare opportunity to place their cargo on the same legal track as maritime shipments that banks and investors already understand well.

To turn this opportunity into a real advantage, however, each economy must solve the “three‑legged stool” equation. Domestic law must be aligned with the Convention; the financial system – especially commercial banks – must be willing to develop products and processes built around NCDs; and logistics infrastructure, including digital platforms for electronic documents, must be capable of supporting the new model. If any leg is weak, the stool will not stand. In an era of intensifying geo‑economic competition, countries and companies that move early with NCDs are more likely to become new hubs for both cargo and capital, while latecomers may find themselves playing by rules set by others.