session 5: e-commerce and digital trade: emerging ... · session 5: e-commerce and digital trade:...

Session 5: E-commerce and digital trade: Emerging opportunities and challenges

Chair: Tahseen A. Khan, UNCEFACT Vice-Chair, India

Innovations in seamless cross-border trade for e-Commerce

• Sung Heun Ha (Rama), Director, Paperless Trade Business Team, Korea Trade Network (KTNET)

Digital free trade zones and prospects for facilitating e-Commerce

• Ho Thant Theang Laura, Senior Manager, Corporate Office, Malaysia Digital Economy Corporation (MDEC)

Panelists:

• Sami Farhad, Senior Director, International Commercial Law, Alibaba Group

• Shantanu Godbole, Senior Technical Staff, IBM Center for BlockchainInnovation

• Luca Castellani, Secretary, UNCITRAL Working Group IV (Electronic Commerce)

Innovations in seamless cross-border

trade for e-commerce of SMEs

Sung Heun HA (Rama)

BPR/ISP Result for Cross-Border E-Commerce Process Reform

BackgroundⅠ

AnalysisⅡ

PlanningⅢ

4

1.1. Background

Reform of Export SMEs to CBEC centric

• Fierce competition in cross-border e-

commerce market

• Need to facilitate ECO system of e-

marketplace for SMEs

• Various programs from different

government bodies

• Strengthen competitiveness of

SMEs through interconnection,

integration and coordination of e-

commerce related public services is

needed

Needs for Open Platform for CB E-CommerceGovernment’s support scheme for SMEs’ CBEC

International conventions and FTAs

• Model laws, conventions, guidelines from

various international bodies

• E-commerce articles in various FTAs

• Despite low export of Korea, cross-border e-

commerce export has increased 45.3%

compared to last year

• It is expected that cross-border e-

commerce export will reach up to appx.

$3 billion in 2017 ($1.8 billion in 2016)


BackgroundⅠ

AnalysisⅡ

PlanningⅢ

6

2.1. Introduction to BPR/ISP study

Scope of Analysis

Environment

Analysis

Business Analysis

►Policy such trade, e-commerce, e-government and etc.

►Domestic and foreign trade laws and regulations on e-commerce

►Domestic and foreign e-commerce market and industry trend

► Latest ICT trend in e-commerce

► Feasibility analysis for ICT roadmap

➢ To-Be model for Cross-Border e-Commerce Business

➢ Strategies for integrated CBEC platform modeling

Business Environment

Analysis

Cross-Border E-Commerce

BusinessAnalysis

ICT Trend Analysis

ICT System Analysis

►CBEC business structure

► Interview with CBEC exporting companies

►CBEC business process

► IT system related to e-commerce

► Feasibility on interconnection with integrated CBEC platform

7

2.2. Environment Analysis : CB e-Commerce statistics

2,8353,475 3,322

4,160

5,4195,932

959 874 906 778 1,038 1,025

2015 4Q 2016 1Q 2016 2Q 2016 3Q 2016 4Q 2017 1Q

Cosmetics Fashion Electronics

Export trend of major products

Source: 2017.03 Korea Statistics Services

Comparison of Import/Export and major products

(Unit: KRW 100,000,000)

Export is biased to a specific product

✓ Cross-Border e-Commerce is increasing rapidly and now it is a new way of doing trade

2,684

4,452

5,0714,924

5,610

7,219

3,891

4,980

4,463 4,118 4,473

6,025

2015 3Q 2015 4Q 2016 1Q 2016 2Q 2016 3Q 2016 4Q

CBEC Export CBEC Import

E-Commerce Import VS Export (Korea)

(Unit: KRW 100,000,000)

Export volume exceed import volume from ‘16

8

2.2. Environment Analysis : SME status

Demands analysis of SMEs

Intention of SMEs

0 10 20 30 40 50

Onestop process

Export financing

Simplification of clearance

Source: SME Promotion Agency, 2016

Intentionto

continue

86.7%

No intention13.3%

▪ Difficulties in CBEC export

0 10 20 30 40 50 60

Customer support

Local marketing materials

Delivery

Conformity Certificate

Appropriate channel

Specialist

Marketing cost

▪ Expectations towards Korean government

No CBEC Experience

54.62%

▪ Cross-Border e-Commerce Experience and intention to continue

– Survey to 1,688 SMEs, Experienced: 766 SMEs

CBEC Experience

45.38%

Difficulties of SMEs

▪ Strong will of SMEs to continue CBEC and expectations on Simplification of clearance, Export financing and One stop service

9

2.2. Environment Analysis : 2017 SMEs Survey on CBEC (1/6)

Survey to CBEC companies(1/6)

Intention for overseas sales

39.7%

35.1%

13.9%

8.6%2.7%

Domestic & Overseas sales

Domestic sales only

Overseas sales only

► Policy to support transform of domestic seller (35.1%) into overseas seller

► Domestic sellers have high interest in overseas sales

Online sales types

40.7%

32.6%

21.1%

5.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Very interested Interested

Nuetral Little or no interest

Domestic and overseas sales

Domestic sales only

Overseas sales only

Preparing for overseas sales

Etc

10


NoObstacles in direct overseas

sales

1No dedicated overseas sales marketing human resource

2Lack of B2C overseas marketing knowhows

3 Lack of operation fund

4Lack of overseas market information

5Lack of understanding on online platform

6Difficulties in competitive products

Motivation, target market and operation types

► Domestic sellers are challenged in overseas sales because of lack of dedicated resources, marketing knowhows and funding

► High dependency on global open e-marketplaces (even sales agencies are utilizing Amazon, eBay and Tmall)

Reason for domestic sales only

(Unit: 5 top, 3 middle)

Motivation

Target

Operation

New market development

(73.5)

Product competitive

ness(22.9)

CEO’s will(18.5)

Japan (33.5)

Foreign market testing(17.6)

Europe (31.2)

Etc.(1.4)

Etc.(4.2)

etc.(4.1)

Fierce competition in domestic

market

China(51.6)

SE Asia(42.2)

USA(44.4)

Domestic open online market for overseas sales (28.4)

Independent online

marketplace(24.3)

Sales agency(43.0)

Global open online

marketplace(40.8)

Influence

from competitor(4.5)

India(15.4)

3 4 5

3.56

3.52

3.46

3.43

3.27

3.07

(Unit: %)

* Measure : (5: very important, 4: important, 3: normal, 2: not important, 1: not important at all)

Sales channels

etc.(7.4)

Taobao(27.8)

TMall(18.7)

Amazon.com(56.8)

eBay.com(46.5)

Rakuten

(13.8)


11


Difficulties in overseas delivery

► Most preferred online marketing method is SNS Advertisements and search engine keywords Ads

► Heavy burden in delivery cost demands more competitive logistics services with low fee

Overseas Ads and Marketing

SNSAds

Online Keywords ADs

E-MP Ads/Promotion

Online Community Ads

E-Mailing

Brochure

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Free delivery

etc.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Delivery cost

Import clearan

ce

Lost and damaged product

Delivery delay

Return process

ing

Product location status

etc.


12


No. Major factors

1 Product Quality Competitiveness

2

Product price competitiveness

Sales processing capacity such as order, delivery and payment

Post business management such as customer support

Willingness of CEO for overseas business

6 Operation fund

7 English or local language correspondent

8Product design competitiveness

Market research (Domestic and overseas competitors and overseas market)

10 Product introduction such as product registration and contents development

11 Understanding on online business

12 Online marketing such as SNS, search engine, coupon and etc.

*Measure : (5: very important, 4: important, 3: normal, 2: not important, 1: not important at all)

► Most important factor for B2C online direct sales is competitive product► Sales processing capacity is also important

Major factors for B2C Overseas direct online sales

3 4 5

4.15

4.06

4.06

4.06

4.03

3.99

3.98

3.98

4.06

3.91

3.86

3.85


13


Difficulties

Law and regulations of importing countries on Customs clearance and certification

Intensive competition in overseas sales

Lackof overseas Ads. and marketingknowhows

Lack of operation fund

Delivery cost and return of product

Lack of dedicated overseas sales resources

Lack of overseas market information

Competitive products

Customer support on refund/dissatisfaction

Difficulties in payment and settlement

Product registration and local language

Compliance to online marketplace policy

*Measure: (5: very important, 4: important, 3: normal, 2: not important, 1: not important at all)

► Government’s programs to overcome difficulties of SMEs in overseas direct sales is needed

► Low level of awareness on Government’s support program

Difficulties in online overseas direct salesExperience of government’s program

to support online sales

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

No Yes

87.4

12.6

3 4 5

3.47

3.47

3.44

3.42

3.42

3.41

3.38

3.35

3.35

3.33

3.32

3.31


14


► High demands for advertisement / marketing support program of government► Strong needs for foreign market/marketing information and capacity building training

Requirements for Korean government’s support for B2C online overseas sales

Required government’s programs Strategic Items

Overseas Ads and marketing support programCBEC export start-up collaboration system

implementation

Increase efficiency in logistics & lessen logistics cost Smart logistics network implementation

Information on overseas clearance & certification Smart logistics network implementation

Exclusive export funding for B2C online exportersCBEC export automation system

implementation

Simplification of self export declaration procedureCBEC export automation system

implementation

Overseas market/marketing information and trainingCBEC export start-up collaboration system

implementation

Exclusive warehouse for SMEs Smart logistics network implementation

Training and consultation on opening biz. in eMPCBEC export start-up collaboration system

implementation

Information and channel for quality products sourcingCBEC export start-up collaboration system

implementation

*Measure : (5: very important, 4: important, 3: normal, 2: not important, 1: not important at all)

3.93

3.91

3.84

3.84

3.79

3.79

3.79

3.65

3.60

3 4 5


15

2.3. Business Process Analysis : Cross-Border E-Commerce (1/3)

▪ (Conventional trade) Offline contract with strong legal obligation

▪ (CBEC) Online order with less strong legal obligation

Exp. Dec.(Exporter)

Imp. Dec.(Buyer)

Wholesale(Wholesaler)

Retail

(Retailer)

Manuf./Supply(Manufacturer)

Purchase

(Consumer)

Exp. Dec.(Exporter)

Manuf./Supply(Manufacturer)

Purchase(Consumer)

「Exporter↔ Foreign consumer」 through <online e-marketplace>, online trade, delivery of goods to final consumer directly

Between 「Exporter↔ Foreign buyer」, through <paper contract>, offline trade,distribution of goods via local wholesaler and Retailer to final consumer

ConventionalTrade

Cross-BorderE-Commerce

offline contract(Exporter/Buyer)

Exp. Logistics(logistics SP)

Overseas Logistics(logistics SP)

Exp. Logistics(logistics SP)

e-MP Order(Exporter/Consumer)

Imp. Dec.(Exporter)

Change Area

Customer(Buyer → Consumer)

1

▪ (Conventional trade) Sales of bulk products to foreign importers

▪ (CBEC) Sales of small amount of products to foreign consumer

Contract method2

Business scope

▪ (Conventional trade) mostly no responsibility in local distribution and delivery to buyer

▪ (CBEC) Wide coverage from sourcing to delivery to foreign consumer

3

Exporter : From sourcing to clearance at Importing country

Exporter : From sourcing to delivery to final consumer, including return of goods

Exporting country Importing country

11

1 1

2

23

3

Exporting country Importing country

Comparison of trade process and distribution method Changes in

16


Category Conventional trade Cross-Border E-Commerce

Customer ▪ Foreign buyer (B2B, Fixed buyer)▪ Foreign consumer (B2C, unspecified customer)

Transaction cycle

▪Regular ▪Real-time (irregular)

Character of sales

▪Big amounts but (relatively) small number of transactions

▪Small amount but big number of transactions

Delivery time ▪ Long term(months) ▪Short term(within 2 weeks)

Transportation means

▪Ocean freight ▪Air freight

Logistics cost ▪ Low cost(Volume transportation) ▪High cost(individual delivery)

Contract ▪Offline (Paper contract) ▪Online Order

Product life cycle

▪Slow cycle ▪ Fast cycle

MarketingMethod

▪Offline marketing (Exhibition and industry Fair)

▪Online marketing(SNS / Ads inside e-Marketplace)

Export Declaration

▪ Export declaration (Customs broker)

▪Export declaration (List declaration or Simple Exp. Dec.)

Order cancel▪Difficult(Compliance to contractual terms)

▪Easy (order cancel/return by consumer mind change or product’s fault)

▪ Different aspects of Cross-Border E-

Commerce from conventional trade

are unspecified numerous

consumer, irregular purchase, small

volume, small amount, high

transactions, short delivery time,

short product life cycle and easy

termination of contract

▪ Current trade regulations and

infrastructure is built on offline B2B

trade environment and it is not

efficient enough for CBEC

Comparison of Conventional Trade and Cross-Border E-Commerce Implications

17


Key Player

Support Player

(Private)

Support Player

(Public)

Manufacturer

Seller(Exporter)

onlineMarketplace

(online shop)

Logistics SP

Correspondent agent

Paperless trade SP

Trade promotion agencies

Trade regulatory agencies

Banks

Solution provider

CategoryCore activities

Market Analysis

Sourcing/Purchase

Sales ChannelDevelopment

Product mgt. Sales

Clearance/Delivery

Returned goods

Bill settlement

Tax Funding

Post activities

Main role

Supporting roleBusiness area and scope in the CBEC value chain by stakeholders

18

2.3. Result of analysis : Requirements(1/2)

Areas of improvements from difficulties of traders (1/2)

Category

Market info.

Difficulties

• Difficulties in acquiring detailed regulations of foreign countries

• No structured information source for foreign sanitary or conformity certification

• Hard to find proper contact point for tax and tariff

• Difficulties in acquiring valuable foreign consumer market information

Improvements

Sourcing/Purchase

• Hard to find CBEC specialized products distribution channel

• High contract termination case between exporters and manufactures

• High cost and lack of quality for product catalogue development

• Limited margin of profit due to high marketing and operation cost

Products mgt. &Sales

• High cost for interconnection to online shop

• Heavy burden from multiple export declaration for each sale

• Difficulties in consolidation of individual parcelClearance/Delivery

• Little understanding of Export Declaration form especially HS code

• Systematic information source on environment protection regulations, sanitary and conformity certification

• Offer valuable and practical tax, tariff and consumer information

• Facilitation of CBEC product distribution channel

• Develop measures for stable transactions between exporters and manufactures

• Offer low cost product catalogue development service

• Integration of online shop service

• Export Declaration Automation services

• Delivery consolidation automation service

19

2.3. Result of analysis : Requirements(1/2)

Areas of improvements from difficulties of traders (2/2)

Category

Clearance/Delivery

Difficulties Improvements

Returned goods

management

Post manageme

nt

• Even with simplified Export Declaration form, it is not easy for traders

• Heavy burden from Cargo Loading Report in relation to Export Declaration

• Delay and difficulties in handling foreign import declaration

• High cost from individual delivery

• Difficulties in finding proper domestic logistics SP and foreign local3PL

• Lack of information on services and pricing of logistics SP

• Heavy burden of manual processing for duty exemption on returned goods

• Returned goods are not easy to apply for duty exemption

• Threat of high ratio of returned goods due to heavy return cost

• Heavy burden of manual processing of Zero VAT application

• Difficulties in applying for trade financing with little documentary proof

• Heavy burden of manual calculation for sales statistics

• Automation of Export Declaration and Cargo Loading Report

• Customized logistics services to lower logistics service cost

• Shared global logistics infrastructure

• Direct interconnection to foreign customs system

• Link order, export declaration and returned goods for duty exemption

• Automation of CBEC record certification for trade financing

• Online submission of document proof for Zero VAT application

20

1. Coordination among Gov. agencies

2. Business process reform for CBEC

3. Competitiveness through diversified markets and products

4. Basis for CBEC policy

5. Policy for CBEC start-ups

6. Business reform utilizing latest ICT

7. Contents and service advancement through big data analysis

8. Creation of new jobs

9. Promotion of PPP, lower barrier for start-ups

10. Various operation for different businesses

11. New CBEC supporting mechanism

12. New ECO system for new stakeholders in CBEC

13. Systematic information on tax and customs tariff

14. Support of start-ups with various product supply channels

15. B2C specialized online supply channel

16. Strengthen trust among sellers and manufacturers

17. Lower cost for MSMEs

18. Reduce burden on Export Declaration

19. Reduce logistics cost and provide better visibility

20. Reduce cost of returned goods

21. Improved export record certification process

22. Transparent billing and account management

23. Improvement of national paperless trade platform

24. Increase work efficiency in trade financing

2.4. Implications

Improvement directions

➢ Establishment of basis for effective CBEC friendly trade reform policy and decision making

➢ Fostering CBEC collaboration eco system for start-ups and job creation

➢Development of Smart Logistics Infrastructure for competitiveness of traders

➢CBEC oriented trade business support scheme for efficiency of traders

Improvement strategies


BackgroundⅠ

AnalysisⅡ

PlanningⅢ

22

3.1. Information Strategy Planning

Visio

n

Promotion of Start-up of Exporting companies

through Facilitation of Cross-Border E-Commerce

Stra

tegy

Stra

tegic A

ction Ite

m

CBEC oriented trade business support

scheme implementation

Increase efficiency in SMEs’ trade business

Fostering CBEC Collaborative ECO

System

Promotion of Start-ups and job creation

Development of Smart Logistics Infrastructure

Strengthen tradercompetitiveness

Strategic action item 1

CBEC Export Automation System

implementation


CBEC Export Start-up Collaboration System

implementation


Smart Logistics Network

implementation


Trade InformationBig data, AI

Open Platformimplementation

CBECPolicy support

basementdevelopment

Effective CBEC friendly trade reform policy

23

3.2. Implementation roadmap

3rd Phase : 2020

Platform Development

1st Phase : 2018

2nd Phase : 2019

Advancement

Expansion of Services

24

3.3. CBEC export automation system implementation

Bottlenecks Action items

▪ Simplification of online trade financing application

▪ Automation of Export Declaration from order information in e-MP

Exp. Dec. Automation

▪ Automation of returned goods processing linking with Export Declaration information

Returned goods Management Automation

▪ Direct & indirect Export recordcertification simplification

Export recordCertificationsimplification

▪ Simplified Purchase Certificate issuing process

Purchase Certificate & Payment Automation

Trade finance simplification

Efficient Billing and Account

management

▪ Simplification and automation of Zero VAT application and document proof

▪ Efficient online billing and settlement management

Zero VAT application simplification

▪ Simplification and automation of Tariff return application and document proof management

Tariff returnsimplification

1

2

3

4

5

6

7

8

Inefficiency in manual consolidation of orders and

creating Export Declaration from orders1

Difficult manual processing in proving the export history

for returned goods

Heavy cost in maintaining document proof

for export record certification

Restrictions in issuing Purchase Certificate

for Cross-Border E-Commerce Orders

Complicated trade financing process with multiple visits

Difficulties in settlement of bills and billing management

Manual processing of Zero VAT application

Manual processing of Tariff return application

2

3

4

5

6

7

8

25

3.4. CBEC export automation system implementation

To-Be ModelTo-Be features

CBEC Trader CBEC export automation system

Automated Export

Declaration

Export record

Certificationsimplification

Efficientbilling and

accountmanagement

Zero VAT simplification

Tariffreturn

simplification

E-MarketPlaceCustoms

National Paperless

Trade Infrastructure

High Efficiency

Automation

simplification

Use

rN

eeds Returned

goods

Trade Financing

simplification

Purchase Certificate& PaymentAutomation

▪ Facilitation of online trade financing

▪ Export Declaration simplification with data from e-Marketplace

Exp. Declaration Automation

▪ Simplification of returned product Import Dec. utilizing Export. Dec.

Returned goods Automation

▪ Direct and indirect export recordcertification issuance simplification

Export recordCertification

Simplification

▪ Convenient Purchase Certificateissuance and payment service

Purchase Certificate& Payment Automation

Trade finance simplification

Billing and account

management

▪ Zero VAT application simplification with Export Record Certification

▪ online sales account management

Zero VATApplication

Simplification

▪ Tariff return application and document proof simplification & automation

Tariff return simplification

1

2

3

4

5

6

7

8Tax

Authority

26

► For more details, please email to [email protected]

session 5: e-commerce and digital trade: emerging ... · session 5: e-commerce and digital trade:...

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