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UNNExT Workshops on Trade Facilitation
Almaty, Kazakhstan
4-6 May 2015
UNNExT Workshop on Paperless Trade Facilitation for Small and Medium-
Sized Entreprises
Applications for
SME trade facilitation
beyond Single Window and
the role of public‐private
sector partnerships
: Perspective from KTNET
Sung Heun HA (Rama)
- 2 -
Korea, Used-to-be One of Poorest Countries
1950’s
ODA Beneficiary Country
- 3 -
1964 1974 1988 2000 2005 2011
Import Source: Korea International Trade Association
Rapid Growth in Trade Volume
Export
100
Million
10
Billion
100
Billion
300
Billion
500
Billion
1.08
Trillion
< Unit : U.S. Dollars >
Trade Facilitation- for Sustainable Economic Growth in Korea
2012
1.07
Trillion
573
Billion
526
Billion
2013 2014
1.10
Trillion
560
Billion
516
Billion
1.08
Trillion
- 4 -
Why promote SMEs’ export?
Domestic market
company
Export company
$440,000
$1040,000
SALES PER EMPLOYEE
Domestic market
company
Export company
8.70%
33.30%
EMPLOYEMENT GROWTH RATE
Competitiveness of domestic market oriented company and exporting
company
- 5 -
Support of SME for trade promotion
• Support SME’s participation
to overseas exhibition
• Capacity building program for
SMEs: Training, consulting,
buyer & market information
• Support SME to overcome
TBT
(Technical Barrier to Trade) –
overseas Standard &
Certification
• Facilitation of cross-border e-
commerce
Marketing
& Activities
• Expansion of FTAs
• Increase the use of FTA of
SMEs
• Regional FTA Utilization
Center
• FTA Certificate of Origin
system
• Korea-USA FTA: 59.4 → 69.2
• Korea-EU FTA: 73.5 → 76.4
Free Trade
Agreement
• Fund for Trade Financing
2014 $2.0 Billion / year
• Fund for Trade Insurance
2014 $4 Billion / year
Trade
Financing
Korean government’s policy for SMEs
Ⅱ. Trade Finance Services
through
Paperless Trade Platform
- 7 -
• National e-Trade Committee
– National e-Trade Committee was established in 2003
– Private e-Trade Committee was established in 2005
– Korea e-Trade Facilitation Center to implement 33 tasks from ‘e-Trade Korea 2007 Plan’
Chair : Vice Minister of MOCIE
Administrative Committee
Chair : Prime Minister
National e-Trade Committee
Chair : Dr. Jung Uck, Seo
Private e-Trade Committee
Korea e-Trade Facilitation Center
Platform
W/GFinance
W/G
Logistics
W/GMarketing
W/G
Global
W/G
Law
W/G
e-TP PM
e-TDR
Law Reform e-L/C
e-Nego
RFID
e-L/G
e-
D/O
e-MP
e-Catalog
Solutions
e-C/O
e-B/L
APEC,ASEM
Bilateral Networking
Korea Federation of Banks
KTNET
Korea Financial Telecommunications and Cleanings Institute
KITA
Korea Customs Service
Ministry of Knowledge Economy
1. Paperless Trade Platform of Korea
- 8 -[ 8 ]
GoalTo cope with Korea’s growing trade volume by upgrading the
Electronic trading system into a single window system
Project Period 2005 ~ 2008
Project Cost About 30 million (USD)
Leading
Agencies
Ministry of Knowledge Economy (MKE)
Korea International Trade Association (KITA)
Korea Trade Network (KTNET)
Year1
Building Core
Infrastructure
(2005)
Year 2
Introducing
e-Trade portal
(2006)
Year 3
Realizing uTrade
by e-BL & e-Nego
(2007)
uTradeHub Project
1. Paperless Trade Platform of Korea
- 9 -
(토의주제)개요(토의주제)개요무역포탈(uTrade)
통합포탈Gateway
은행포탈(uBankers) 통관포탈(uCustoms) 마케팅포탈(uTrade Search)
물류포탈(uLogis)uTrade
uBankers uCustoms
uLogis
uTrade
Search
uTradeHub
Gateway
1. Paperless Trade Platform of Korea
- 10 -
Private-Centric Integrated
National Single Window
Trading Co.Declarant Customs-Centric
Single Window
Apply for e-Licensing & Certification
Customs Declaration
OGAs & Regulatory Authorities
Notify the Result
620 types of e-Documents
Notify the Result
Apply for e-Licensing & Certification
Manage and issue the license & Certification in ASPLine
* ASPLine : Electronic licensing & Certification System developed and operated by KTNET
Trading Communities
ForwardersOcean
CarriersAirlines Bonded
TransportationBonded
Warehouse
Customs Brokers Banks Insurances Trading Communities in
overseas countries
B2B, B2G, G2B, Global Service
Other Governments Global Service
B2G, G2B G2G
MOTIE, KIS, Quarantines, NTS etc.
1
3
3
4
3 4
5
2
4
6
7
Successful PPP Korean Single Window Model
1. Paperless Trade Platform of Korea
- 11 -
KTNET is a Paperless Trade Platform Operator and a Customs Network Service Provider designated by Korean Government
KTNET services covers the whole cycle of trade process with 600 different kinds of e-documents with over 300 Million transactions per year
KoreanSingle Window
B2B Commerce, License &
Certification
Trade Finance
CustomsLogistics
Cross Border Transaction
P/O, Invoice, P/L Certificates/License C/O, Insurance, Tax Invoice Purchase Certificate of raw
material
e-L/C, e-Local L/C
e-Negotiation Settlement
Export Clearance Import Clearance Duty Draw-back
(Tariff refund)
S/R, e-B/L Master/House
Manifest Consolidation
General Declaration
Cargo Visibility Advanced
Passenger Information
PAA Global e-C/O
Service Advance
Manifest Service
1
2
34
5
1. Paperless Trade Platform of Korea
Ⅱ. Trade Finance System
of
Republic of Korea
- 13 -
1. Trade Finance in Korea
Trade Finance in Korea
• In a larger sense, Trade Finance means activates related to raising
fund for international trade (Pre/Post-Shipment Finance)
• In a narrow sense, Trade Finance means a pre-shipment finance
system – a mechanism which mandates financial support of the
central bank to exporters or indirect exporters (parts/raw material
supplier) by ‘the rules of foreign trade financing program in relation
to the total loan ceiling’ of the Bank of Korea
⇒ The Bank of Korea’s loan program is designed to help small-
and medium-sized companies and to promote balanced regional
development. It sets a maximum amount of loans for this program
in a periodic manner, which is distributed to commercial banks at
a lower (prime) interest rate than the market rate.
- 14 -
Criteria Contents
By
financing
condition
L/C or other documentary
proof base- Production Fund
- Raw materials fund
- Inclusive financing fund
- Finished goods purchasing fundExport record (history)
base
By
manufacturing
capacity
ManufacturerBy purpose
Production Fund
Raw materials
Fund
Inclusive financing fund
Non-manufacturer Finished goods purchasing fund
2. Trade Finance by Criteria
Pre-Shipment Finance
- 15 -
Trade Finance Loan types
• Production fund loan: Financing for development or production of
goods
• Law materials fund loan: Financing for law materials production
• Inclusive financing fund loan: total financing to SMEs who’s total
export value is under 50 million dollars / year
• Finished goods purchasing fund loan
2. Trade Finance by Criteria
- 16 -
1. Contract for export of goods
2. Arrival of L/C
3. Purchase finished goods or in-house development of parts/raw materials
In-house manufacturing Inclusive financing loan
Open Local L/C
for finished goodsFinished Good loan
4. Secure necessary raw materials
Domestic
raw materials
Take over
goods
Bill of
Exchange
Production loanIn-house
Production/Development
Purchase
by Cash
Take over
goodsProduction loan
Overseas
raw
materials
Open At-Sight L/C
(D/P, COD, CAD)Arrival of Shipping
Documents
Import
Bill Raw materials loan
Take over
goodsOpen local
L/CBill of
ExchangeRaw materials loan
5. Production / Processing Production fund
6. Shipping Loan repaymentNegotiation
3. Trade Finance Process
Open
Local L/C
Bill of
ExchangeRaw materials loanTake over
goods
- 17 -
Pre-condition of exporter for Trade Finance
• Appointment of Foreign Exchange Transaction Bank
Beneficiary shall appoint one or more ‘Foreign Exchange
Transaction Bank’s for trade financing service
Inclusive financing beneficiary shall appoint a ‘Main Foreign
Exchange Transaction Bank’ to prove total trade volume
• Appointed Foreign Exchange Transaction Bank shall keep the
record of each export amount of a beneficiary and the accumulated
export record amount shall determine the total ceiling of a loan
4. Pre-condition for Trade Finance
- 18 -
5. Comparison of L/C base with Record base TF
L/C base Loan History base Loan
BeneficiaryExporters(or its suppliers) with L/C or
other form of GuaranteeExporters with export history
whenWith L/C or other documentary proof
(D/A D/P)
Anytime, regardless of L/C, under the loan
limit set by trade record(history)
Limit of loan Below the amount of L/C or others Below the amount of Loan ceiling
Limit control Balance of Loan Balance of Loan
Term 365 days or less 180 days or less
ConvenienceInconvenient as the loan is case by
caseConvenient
Special feature
Suit for new-comers or company
with less-dependency on advance
raw materials inventory
Suit for traders with heavy dependency on
advance raw materials inventory
Ⅱ. Trade Finance Services
through
Paperless Trade Platform
- 20 -
Dealer/Branch
PC or Local e-L/C
HMC
KCS
P/O
1
e-L/C
PurchaseCertificate or
Local L/C
2
3
Export Declaration
shipment
4
Cargo Insurance
5
C/O
6
7
Documents made by Shipper
Negotiation
Advising bank
Carrier
Nego bank
KCCI
Insurance
1. HMC’s Full Automated Export Process Case
PC or Local e-L/C
- 21 -
Electronic Trade Facilitation Act
(MOTIE)
Export Credit Insurance
Local Letter of Credit
Foreign Trade Act
(MOTIE)
Letter of Credit
Purchase Certificate
Electronic Trade Facilitation Act
(MOTIE)
2. Paperless Trade Finance Services
Paperless Trade Services for Trade Finance
- 22 -
Electronic Trade Facilitation Act – L/C
3. e-Letter of Credit
- 23 -
SWIFT
MT7x
x
Paper L/C
EDI L/C
e-L/C
Exporter
KFTC
(Registry)
Pick Up
EDI
XML uTradeHub
(Registry)
XML
KFTC Message
BrokerEDI
Local
Bank
Opening Bank
Paper L/C
EDI L/C
Pick up
EDI
Foreign
Bank
3. e-Letter of Credit
AS-IS of L/C Notification
• Paper, EDI and XML Letter of Credit
• Difficulties in controlling the trade loan limit & balance
• Documentary proof for issuing Local L/C or Purchase Certification
- 24 -
Electronic Trade Facilitation Act – Local L/C
4. e-Local Letter of Credit
- 25 -[ 25
]
(1) Offer (DOMOFR)
(2) Application for Local L/C Open
(LOCAPP)
(3-1) Local L/C Advice
(LOCADV)
(3-2) Local L/C Advice (LOCADV)
(4) VAT bill (VATBIL)
(5) Delivery receipt (LOCRCT)
(6) Application for
Local L/C negotiation
(APPSPC)
(7) Bill of Local L/C
arrival notice (LDANTC)
(8) Pay order (PAYORD)
(9) Local L/C negotiation
result notice (SPCNTC)
(10) Bill (FINBIL)
(11) Credit Advice (CREADV)(12) Debit Advice
(DEBADV)
Supplier
Opening
Bank NegoBank
Purchaser
(Exporter)
Korea Financial Telecommunications &
Clearings Institute
Bank Network
4. e-Local Letter of Credit
- 26 -
Foreign Trade Act
5. e-Purchase Certificate
- 27 -
Electronic Trade Facilitation Act – Purchase Certificate
5. e-Purchase Certificate
- 28 -
5. e-Purchase Certificate
Application
for Purchase
Confirmation
Exporter
(Purchaser)
VAT Bill(Zero VAT),
Manufacturer
(Supplier)
Purchase
Certificate
Revenue
Authority
VAT Bill Report
/Purchase
Certificate (X)
Customs
Duty Draw Back
Request
Purchase Certificate
Foreign
Exchange
Bank
KTNET
KTNET
Duty Draw Back
• Mainly for Local Tax Exemption and Duty draw-back purpose
• Since 2006, Purchase Certificate became a part of trade finance
system
KTNET
- 29 -
Document ProcessTotal
Transaction
e-Transaction
Thru uTradeHub% Note
Letter of
Credit
Notification 400,000 + 100,000~150,000 25% +
Negotiation
(Presentation)400,000 + 200~ 1,000 0.05% +
Opening 350,000 + 160,000 46%
Local
Letter of
Credit
Opening 250,000 + 250,000 + 100%Mandate use of uTradeHub
Since Feb. 2013
Notification 250,000 + 250,000 + 100%Mandate use of uTradeHub
Since Feb. 2013
Negotiation
(Presentation)250,000 + 26,000 11%
Mandate use of uTradeHub
from Feb. 2014
Purchase
Certificate
Opening and
notification1,000,000 + 1,000,000 + 100%
Mandate use of uTradeHub
Since Jul. 2011
Transaction Figures (2012)
6. Benefits
- 30 -
Benefits for traders
• Identification of indirect exporters especially small and medium
sized for trade finance services
• Traders are exempted from submitting documentary proof (Local
L/C or Purchase Certificate) for ‘Duty draw back’ and ‘Local Tax
Exemption’ by ACT on VAT and data/information are reused among
agencies (Beneficiary, Revenue Authority, Customs, Insurance
Company)
• Direct time and cost savings from ‘Duty draw back’ and ‘Local Tax
Exemption’ as well as lower application fee than paper form
• Local L/C and Purchase Confirmation transactions can be certified
as a export records (history) for future trade loan
6. Benefits
- 31 -
Benefits for banks
• More business opportunities of financing service using lower
interest rate from the policy loan of Bank of Korea
• Strengthen Risk Management in Trade Finance Service – Control of
loan ceiling and Prevention of fraud and double loan application to
other different banks
• Reuse of data and less human resources /cost for trade finance
service
6. Benefits
- 32 -
• Trade Finance System was a key for sustainable growth
of Korean SMEs
• Legal / financial support is essential for a successful
implementation of Trade Finance System
• Paperless Trade Platform can further facilitate the utility
of Trade Finance System by interconnecting
stakeholders and streamlining the process
7. Lessons
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