The Present and Future of Korea’s e-Trade (Paperless Trading)

1. The Present and Future of Korea’s e-Trade (Paperless Trading) Capacity Building Workshop on Trade Facilitation Implementation for Asia and the Pacific Region March18, 2005, Kuala Lumpur, Malaysia Dr. Yoon Say Jeong, Secretary General e-Trade Facilitation Center KITA (Korea International Trade Association)

2. Table of Contents 1. Brief History of e-Trade(paperless Trading) in Korea 2. Current Status of Korea’s e-Trade 3. Background of innovating e-Trade strategy in Korea 4. Organization 5. Goal & Strategy 6. To-be Model of e-Trade Service (1/2) 7. To-be Model of e-Trade Service (2/2) 8. Roadmap of 3-year Innovating plan 9. e-Trade Service (Phase 1) – e-L/C System (for Exporter) 10. e-Trade Service (Phase 1) – Conceptual Model 11. Lessons Learned 12. Future work : International Cooperation

3. 1. Brief History of e-Trade(paperless Trading) in Korea • In 1989, Korean government initiated “Comprehensive Trade Automation Plan” • In 1991, Korea enacted “Act on Trade Automation” and Ministry of Commerce & Industry (currently MOCIE) made an “Agreement on Trade Automation” with Korean Customs Service • In 1991, Korea Trade Network (KTNET, Capital :US$75 million) was established by the investment of private sector (Korea International Trade Association, 100%) • Korea Customs Service designated KTNET as sole Trade Automation Service Provider Korea realized a 100% electronic customs clearance system through both VAN/EDI and Internet • Major part of Trade Automation System is customs clearance, But it covers LC advice, logistics, finance and payments and other trade related B2B services Samsung Electronics estimates that it has benefited US$800 million through Trade Automation System every year, reducing ordering time from 10 days to 2 days.

4. Export clearance system(1994) • Import clearance system(1996) • Export cargo system(1997) • Import cargo system(1998) • Customs duty back system(1997) P/Lㆍautomatic clearance system Paperless clearance process computerization Business Process computerization Task and statistics computerization 1. Brief History of e-Trade(paperless Trading) in Korea Diverse Initiatives in Clearance and Cargo Management • Export clearance P/L system(1995) • Import clearance P/L system(1999) • Export automatic clearance system (2000) • Electronic fund transfer for duty(1999) • Electronic Value added tax receipt (2001) Development stage Trade statistics computerization EDI clearance automation project for 6 years commencement (’92) 1974 1999 year 2001 1992

5. 2. Current Status of e-Trade in Korea 100% of Customs Clearance and Logistics Customs Broker Trader Bank Other Government Agency MFCS KTNET KCS Air Line Inspection Co Bonded Warehouse * KCS : Korea Customs Service MFCS : Manifest Consolidation System

6. Demands for innovation on overall process of trade The core task for e-government blueprint The launch of a 3-year e-Trade facilitation plan Give the opportunity to innovate whole trading process with the new IT technology Issue guidelines on national e-trade future model Realize seamless e-trade service by connecting effectively with government and related organizations 3. Background of Innovating Korea’s e-Trade System Realization of the National Future e-Trade Model

7. 4. Organization • Vision : e-Trade Korea, Innovation 2007 • Organization : National e-Trade Facilitation Committee, July 2003 • e-Trade Process Innovation BPR/ISP : December 2003 ~ June 2004 • e-Trade Service (Phase 1) : December 2004 Private e-Trade Facilitation Committee ~ December 2005 National e-Trade Facilitation Committee Chair : Prime Minister Secretary : Ministry of Commerce, Industry and Energy Private Public Administrative Committee Private e-Trade Facilitation Committee Chair : Vice Minister of MOCIE Chair : Ex-minister of MOST e-Trade Facilitation Center (KITA) Logistics /Customs W/G Marketing W/G Global W/G Legal W/G Platform W/G Finance W/G

8. Process Innovation Information Strategic Planning • Current Process Analysis & To-be Process Modeling - Marketing - Financial Settlement - License/Certificate - Insurance - Logistics - Trade Declaration • e-Trade Platform Design • Standard • Integration & Interface • Action Plan (2004~2007) • e-Trade Facilitation Center : PMO 1 1 2 • Legal System on e-Trade • Institutional Model • Incentive & Community Supporting System • Bilateral/Multilateral Agreement on International Collaboration 2 • International Collaboration • Mutual Recognition on Global e-Trade • APEC, WCO, UN/CEFACT, PAA, EU IST, ASEM, Asia PKI 3 3 Legal Structure Global Network 4 4 Acceleration of e-Trade Community Internet Based National e-Trade Infrastructure International Collaboration for Cross Border Paperless Trading Seamless e-Trade Service 5. Goal & Strategy

9. 6. To-be Model of e-Trade Service (1/2) Trade Automation Global e-Trade AS-IS TO-BE (Trade Network) (e-Trade Platform) License/ Certificate Authority License/ Certificate Authority e-Trade Platform Customs Service ... e-Trade Service ① ② Marketing Customs Service ② ③ Financial Settlement License/Certificate Trading Company ② Bank Declaration KTNET Bank Logistics Trading Company ③ ① e-Trade Infrastructure Logistics Company Trading Company 2nd Wholly Responsible Company e-Doc Repository e-Standard Registry Messaging Hub Bank Global Network ④ Trading Company ③ ① Seamless e-Trade Service on Single-Window ② One Submission, No Multiple Submission for Same Online Document and provide diverse customs service (EDI, Web) ③ Guarantee of Online Document Originality Exchanged on Central e-Trade Repository under the law ④ Global Networking on National e-Trade Infrastructure ① 1:1 Networking by Wholly Responsible Company, Breaking Online Process Flow ② Submission of Same Document Repeatedly to Several Parties ③ Exchange of Online Document between Trading Partners, but Submission of Offline Paper Document to Third Party

10. 7. To-be Model of e-Trade Service (2/2) Financial Settlement Bank Marketing Credit Card License/Certificate Insurance KFTC eMarketPlace Credit Evaluation Company Insurance Company Global e-Trade Hub Insurance Company Trading Company (Including SME) e-Trade Platform e-Trade Single Window Global Networking Certified Certificate Authority Customs Service National Logistics Single Window Standardization Agency Document Standard

11. Upgrade User’s e-Trade System Environment •  e-Trade solution for SME • Establish Global Network Phase3 (’07) • Upgrade Core Infra fulfilling Seamless e-Trade Service Implementation •  License/Certificate & Marketing support system • Interface with Related Parties Phase2 (’06) • Building Core Infra of e-Trade Platform • Standardizing documents • e-Trade document circulation system • ebXML based document standardization • Reform related Laws and Systems Phase1 (‘04-’05) 8. Roadmap of 3-year innovating plan

12. 9. e-Trade Service (Phase 1) – e-L/C System (for Exporter) e-L/C Consolidation & Circulation System AS-IS TO-BE L/C by EDI Goal : Advise L/C by EDI Process : • Advise L/C online (EDI) (75,000 by EDI out of 600,000 SWIFT transaction) • Print out Advised L/C on Beneficiary side • Presentation of Printed Paper L/C for Negotiation • Endorse the Balance on Nego • Circulate Endorsed Paper L/C Goal : No more Paper L/C Presentation Support : • e-L/C Life Cycle Management • e-L/C Negotiation History Management • e-L/C Balance Management Opening Bank Opening Bank Advise, Amend L/C EDI KTNET Messaging Hub e-L/C Advising Bank Nego Advising Bank Exporter Exporter Transfer Negotiation Bank 1st Negotiation Bank 2nd Negotiation Bank 2nd Beneficiary Print Out

13. 10. e-Trade Service (Phase 1) – Conceptual Model Systems Purpose - Prevention of Re-key - Certification of Contents - Keeping Transaction history e-L/C system Repository Red : New System by June 2005 Trading Company Blue : Existing System Service Portal Web Services L/C Opening Bank The world’s first e-L/C system e-L/C Consolidation & Circulation System Circulation Management Balance Management e-L/C (Advise, Amend, Transfer, Nego) KFTC ebXML on VPN Advising Bank Negotiating Bank Messaging Hub e-Records Repository (Pilot) e-Records Circulation

14. 11. Lessons Learned • Strong leadership is a critical factor in the successful implementation of paperless trading. Close inter-ministry cooperation among regulatory parties is necessary. • Modernization of customs procedure, system is most important step • To hear voices from business community is important because paperless trading is not only technical but also cultural issue to business community. • It is essential that support from international organizations related to e-trade standard/ technology and developed countries should be provided to developing countries for realizing global paperless trading

15. 12. Future work : international Cooperation • Participate in paperless trade activities such as APEC, ASEM, WTO, and PAA etc. - Korea successfully held the 1st APEC PPP(Public-Private Partnership) Dialogue under ECSG meeting in SOM I, February 2005 - Korea has been worked closely with PAA (Pan Asia eCommerce Alliance) member countries to make e-Trade networks in Asia • Korea has experience in building Paperless Trade System since 1991 • We would like to share Korea’s 14-year-experience with other countries

16. Contact Information • Email : wizard@kita.net • Phone : 82-2-6000-5433 • Fax : 82-2-6000-2307 Thank you Dr. Yoon-Say Jeong Secretary General e-Trade Facilitation Center