UNNExT Workshops on Trade Facilitation Almaty, Kazakhstan 4-6 May 2015

UNNExT Workshops on Trade Facilitation
UNNExT Workshop on Paperless Trade Facilitation for Small and MediumSized Entreprises
Almaty, Kazakhstan
4-6 May 2015
Applications for
SME trade facilitation
beyond Single Window and
the role of public‐private
sector partnerships
:
Perspective from KTNET
Sung Heun HA (Rama)
Korea, Used-to-be One of Poorest Countries
1950’s
ODA Beneficiary Country
-2-
Rapid Growth in Trade Volume
Trade Facilitation- for Sustainable Economic Growth in Korea
< Unit : U.S. Dollars >
500
Billion
100
Million
1964
10
Billion
1974
100
Billion
1988
1.08
Trillion
1.07
Trillion
300
Billion
2000
2005
 Source: Korea International Trade Association
2011
2012
Import
-3-
1.08
1.10
Trillion Trillion
560
573
Billion
Billion
516
526
Billion
Billion
2013
2014
Export
Why promote SMEs’ export?
Competitiveness of domestic market oriented company and exporting
company
SALES PER EMPLOYEE
EMPLOYEMENT GROWTH RATE
33.30%
$1040,000
$440,000
8.70%
Domestic market
company
Export company
Domestic market
company
-4-
Export company
Support of SME for trade promotion
Korean government’s policy for SMEs
• Support SME’s participation
• Expansion of FTAs
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 ecommerce
Marketing
& Activities
• Fund for Trade Financing
2014 $2.0 Billion / year
• Increase the use of FTA of
SMEs
• Fund for Trade Insurance
• Regional FTA Utilization
2014 $4 Billion / year
Center
• FTA Certificate of Origin
system
• Korea-USA FTA: 59.4 → 69.2
• Korea-EU FTA: 73.5 → 76.4
Free Trade
Agreement
-5-
Trade
Financing
Ⅱ. Trade Finance Services
through
Paperless Trade Platform
1. Paperless Trade Platform of Korea
• 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’
National e-Trade Committee
Private e-Trade Committee
Chair : Dr. Jung Uck, Seo
Chair : Prime Minister
Administrative Committee
Ministry of Knowledge Economy
Chair : Vice Minister of MOCIE
Korea Customs Service
KITA
Korea Financial Telecommunications and
Cleanings Institute
Korea e-Trade Facilitation Center
Korea Federation of Banks
KTNET
Platform
W/G
Law
W/G
e-TP PM
Law Reform
e-TDR
Finance Logistics Marketing
W/G
W/G
W/G
Global
W/G
e-L/C
RFID
e-MP
e-C/O
e-Nego
e-L/G
e-Catalog
e-B/L
eD/O
Solutions
APEC,ASEM
-7-
Bilateral Networking
1. Paperless Trade Platform of Korea
uTradeHub Project
To cope with Korea’s growing trade volume by upgrading the
Goal
Electronic trading system into a single window system
Project Period
Project Cost
Leading
Agencies
2005 ~ 2008
About 30 million (USD)
Ministry of Knowledge Economy (MKE)
Korea International Trade Association (KITA)
Korea Trade Network (KTNET)
Year1
Year 2
Year 3
Building Core
Introducing
Realizing uTrade
Infrastructure
e-Trade portal
by e-BL & e-Nego
(2005)
(2006)
(2007)
[- 88]-
1. Paperless Trade Platform of Korea
uTradeHub
통합포탈Gateway
Gateway
물류uLogis
포탈(uLogis)
무역포탈(uTrade)
uTrade
(토의주제) 개요
uBankers
은행포탈(uBankers)
uCustoms
통관
포탈(uCustoms)
-9-
uTrade
Search
마케팅포탈(uTrade Search)
1. Paperless Trade Platform of Korea
OGAs & Regulatory
Authorities
3 4
 * ASPLine : Electronic licensing
& Certification System
developed and operated by
KTNET
Manage and issue
the license &
Certification in
ASPLine
1
4
4
Notify
the Result
Apply for3
e-Licensing &
Certification
Notify the Result
Apply for
3 e-Licensing &
Certification
620 types of e-Documents
5Customs Declaration
Trading Co.
Declarant
B2B, B2G,
2 G2B,
Global
Service
Customs-Centric
Private-Centric
Integrated
National Single
Window
Trading Communities
7
B2G,
G2B
Global Service
Airlines Ocean Customs Forwarders Bonded
Bonded
Banks Insurances
Carriers Brokers
TransportationWarehouse
Trading Communities in
overseas countries
Successful PPP Korean Single Window Model
- 10 -
Single Window
6
G2G
Other Governments
MOTIE, KIS, Quarantines, NTS etc.
1. Paperless Trade Platform of Korea
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
 PAA
 Global e-C/O
Service
 Advance
Manifest
Service
 S/R, e-B/L
 Master/House
Manifest
Consolidation
 General
Declaration
 Cargo Visibility
 Advanced
Passenger
Information
1
5
Cross Border
Transaction
4
B2B
Commerce,
License &
Certification




Korean
Single Window
Logistics
Trade
Finance
Customs
- 11 -
P/O, Invoice, P/L
Certificates/License
C/O, Insurance, Tax Invoice
Purchase Certificate of raw
material
3
2
 e-L/C, e-Local
L/C
 e-Negotiation
 Settlement
 Export Clearance
 Import Clearance
 Duty Draw-back
(Tariff refund)
Ⅱ. Trade Finance System
of
Republic of Korea
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 smalland 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.
- 13 -
2. Trade Finance by Criteria
Pre-Shipment Finance
Criteria
By
financing
condition
Contents
L/C or other documentary
- Production Fund
proof base
- Raw materials fund
- Inclusive financing fund
Export record (history)
- Finished goods purchasing fund
base
Production Fund
By
manufacturing
capacity
By purpose
Manufacturer
Raw materials
Fund
Inclusive financing fund
Non-manufacturer
- 14 -
Finished goods purchasing fund
2. Trade Finance by Criteria
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
- 15 -
3. Trade Finance Process
1. Contract for export of goods
2. Arrival of L/C
3. Purchase finished goods or in-house development of parts/raw materials
Inclusive financing loan
In-house manufacturing
Open Local L/C
Take over
Bill of
for finished goods
goods
Exchange
Finished Good loan
4. Secure necessary raw materials
Domestic
raw materials
Overseas
raw
materials
In-house
Production/Development
Purchase
by Cash
Open
Local L/C
Open At-Sight L/C
(D/P, COD, CAD)
Open local
L/C
Production loan
Take over
goods
Take over
goods
Arrival of Shipping
Documents
Take over
goods
5. Production / Processing
6. Shipping
Negotiation
Production loan
Bill of
Exchange
Raw materials loan
Import
Bill
Raw materials loan
Bill of
Exchange
Raw materials loan
Production fund
Loan repayment
- 16 -
4. Pre-condition for Trade Finance
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
- 17 -
5. Comparison of L/C base with Record base TF
L/C base Loan
History base Loan
Beneficiary
Exporters(or its suppliers) with L/C or
other form of Guarantee
Exporters with export history
when
With 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
Convenience
Inconvenient as the loan is case by
case
Convenient
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
- 18 -
Ⅱ. Trade Finance Services
through
Paperless Trade Platform
1. HMC’s Full Automated Export Process Case
Documents made by Shipper
1
e-L/C
HMC
Advising bank
P/O
PC or Local eL/C
2
Purchase
Certificate or
Local L/C
7
PC or Local eL/C
3
Nego bank
KCS
Export Declaration
4
shipment
Dealer/Branch
Negotiation
6
KCCI
Insurance
Carrier
- 20 -
C/O
5
Cargo Insurance
2. Paperless Trade Finance Services
Paperless Trade Services for Trade Finance
Letter of Credit
Purchase
Certificate
Electronic Trade Facilitation Act
(MOTIE)
Local Letter of
Credit
Foreign Trade Act
(MOTIE)
Electronic Trade Facilitation Act
(MOTIE)
Export Credit
Insurance
- 21 -
3. e-Letter of Credit
Electronic Trade Facilitation Act – L/C
- 22 -
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
Opening Bank
SWIFT
MT7x
x
Pick Up
Paper L/C
Local
Bank
EDI L/C
KFTC
EDI
EDI
KFTC
e-L/C
XML
(Registry)
EDI
EDI L/C
Foreign
Bank
Message
Broker
Paper L/C
Pick up
- 23 -
uTradeHub
(Registry)
XML
Exporter
4. e-Local Letter of Credit
Electronic Trade Facilitation Act – Local L/C
- 24 -
4. e-Local Letter of Credit
Korea Financial Telecommunications &
Clearings Institute
Bank Network
Opening
Bank
NegoBank
(3-2) Local L/C Advice (LOCADV)
(3-1) Local L/C Advice
(LOCADV)
(9) Local L/C negotiation
result notice (SPCNTC)
(7) Bill of Local L/C
arrival notice (LDANTC)
(12) Debit Advice
(DEBADV)
(10) Bill (FINBIL)
(2) Application for Local L/C Open
(LOCAPP)
(6) Application for
Local L/C negotiation
(APPSPC)
(11) Credit Advice (CREADV)
(8) Pay order (PAYORD)
(1) Offer (DOMOFR)
(4) VAT bill (VATBIL)
Purchaser
(Exporter)
(5) Delivery receipt (LOCRCT)
[- 25
25 ]
Supplier
5. e-Purchase Certificate
Foreign Trade Act
- 26 -
5. e-Purchase Certificate
Electronic Trade Facilitation Act – Purchase Certificate
- 27 -
5. e-Purchase Certificate
• Mainly for Local Tax Exemption and Duty draw-back purpose
• Since 2006, Purchase Certificate became a part of trade finance
system
Revenue
Authority
Foreign
Exchange
Bank
KTNET
VAT Bill Report
/Purchase
Certificate (X)
KTNET
Application
for Purchase
Confirmation
Purchase
Certificate
VAT Bill(Zero VAT),
KTNET
Purchase Certificate
Exporter
(Purchaser)
Duty Draw Back
Duty Draw Back
Request
Customs
- 28 -
Manufacturer
(Supplier)
6. Benefits
Transaction Figures
Document
Letter of
Credit
Local
Letter of
Credit
(2012)
Process
Total
Transaction
e-Transaction
Thru uTradeHub
%
Notification
400,000 +
100,000~150,000
25% +
400,000 +
200~ 1,000
0.05% +
350,000 +
160,000
46%
Opening
250,000 +
250,000 +
100%
Notification
250,000 +
250,000 +
Negotiation
(Presentation)
250,000 +
26,000
1,000,000 +
1,000,000 +
Negotiation
(Presentation)
Opening
Purchase Opening and
Certificate notification
- 29 -
Note
Mandate use of uTradeHub
Since Feb. 2013
Mandate use of uTradeHub
100%
Since Feb. 2013
Mandate use of uTradeHub
11%
from Feb. 2014
100%
Mandate use of uTradeHub
Since Jul. 2011
6. Benefits
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
- 30 -
6. Benefits
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
- 31 -
7. Lessons
• 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
- 32 -
- 33 -