In my last blog, we discussed how effective electronic data interchange and digital signatures are in terms of archiving and human readability. We found that while both EDI and digital signatures are equally simple to archive, digital signatures are slightly easier to present in a human readable format upon request, and this slight difference gives digital signatures a small advantage.

In this blog, we will look at how EDI and digital signatures compare to each other when it comes to interoperability. What we mean by this is how effectively they enable businesses to exchange and share information between one another using any given format.

Businesses have been using EDI for e-Invoicing for many years and this method really took off in the 80s-90s with Value Added Networks (VANs). Companies connected through unified networks, signing interconnect agreements with one another. Since then, this approach, whether through VANs or otherwise, has become standard in industries such as the automotive, retail and finance sectors. Today, there are hundreds of existing interchange agreements in place through which purchase orders, advanced shipping notices (ASNs) and invoices have been flowing both domestically and internationally. An example of this is in France where EDI for e-Invoicing is very commonplace, and therefore service providers are able to interoperate freely.

As EDI is very straightforward as a well established measure of document exchange, companies are well aware of what constitutes a fully tax compliant EDI message. Language translation issues and a limited understanding of international standards and practices by local auditors can however sometimes create cross¬-border legal recognition issues. That human understanding aside, EDI generally works well across borders. This is especially true when the two countries accept EDI as a compliance method (as in the EU).

Interoperability using digital signatures can work well due to the variety of different formats in which digital signatures can exist. There are currently several different standards offered, the most common being CMS Advanced Electronic Signature (CAdES), the XML Advanced Electronic Signature (XAdES) and PDF Advanced Electronic Signature (PAdES).

Cross-border Interoperability with digital signatures must involve recognition among different countries of the current legal and technical challenges. This includes the varying local country legislation and certificate authorities, and the different formats and algorithms used. While some interoperability standards do exist (GS1) it is argued that a lack of digital signature interoperability is one of the barriers to wider adoption within Europe. The European Commission (EC) has recognised this and as part of the Digital Agenda for Europe program, has announced a review of the e-Signature Directive (1999/93/EC). The EC has incorporated this review into its current STORK initiative, focusing on cross-border electronic identification and authentication which has currently moved into a second phase.

Because of this, EDI has the advantage this time round.