eTrade Paperless Korea Innovation 2007 The Present and

e-Trade (Paperless) Korea, Innovation 2007 The Present and Future of Korea’s e-Trade (Paperless Trading) Capacity Building Workshop on Trade Facilitation Implementation for Asia and the Pacific Region March 18, 2005, Kuala Lumpur, Malaysia Dr. Yoon Say Jeong, Secretary General e-Trade Facilitation Center KITA (Korea International Trade Association)

e-Trade (Paperless) Korea, Innovation 2007 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

e-Trade(Paperless) Korea, Innovation 2007 1. Brief History of e-Trade(paperless Trading) in Korea q In 1989, Korean government initiated “Comprehensive Trade Automation Plan” q 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 q In 1991, Korea Trade Network (KTNET, Capital : US$75 million) was established by the investment of private sector (Korea International Trade Association, 100%) q 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 q Major part of Trade Automation System is customs clearance, But it covers LC advice, logistics, finance and payments and other trade related B 2 B 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. 2

e-Trade(Paperless) Korea, Innovation 2007 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) Development • Electronic Value added tax receipt (2001) stage • Export clearance system(1994) • Import clearance system(1996) • Export cargo system(1997) Paperless clearance P/Lㆍautomatic • Import cargo system(1998) clearance system • Customs duty back system(1997) Business Process computerization process computerization Task and statistics computerization Trade statistics computerization 1974 EDI clearance automation project for 6 years commencement (’ 92) 1999 1992 3 2001 year

e-Trade(Paperless) Korea, Innovation 2007 2. Current Status of e-Trade in Korea 100% of Customs Clearance and Logistics Customs Broker Trader Bank MFCS KTNET Other Government Agency KCS Air Line Inspection Co * KCS : Korea Customs Service MFCS : Manifest Consolidation System Bonded Warehouse 4

e-Trade(Paperless) Korea, Innovation 2007 3. Background of Innovating Korea’s e-Trade System Realization of the National Future e-Trade Model Demands for innovation on overall process of trade Give the opportunity to innovate whole trading process with the new IT technology The launch of a 3 year e-Trade plan facilitation Realize seamless etrade service by connecting effectively with government and related organizations 5 The core task for e-government blueprint Issue guidelines on national e-trade future model

e-Trade(Paperless) Korea, Innovation 2007 4. Organization q Vision : e-Trade Korea, Innovation 2007 q Organization : National e-Trade Facilitation Committee, July 2003 q e-Trade Process Innovation BPR/ISP : December 2003 ~ June 2004 q 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 Public Administrative Committee Private Private e-Trade Facilitation Committee Chair : Vice Minister of MOCIE Chair : Ex-minister of MOST e-Trade Facilitation Center (KITA) Logistics Platform Finance /Customs W/G W/G Legal W/G 6 Marketing W/G Global W/G

e-Trade(Paperless) Korea, Innovation 2007 5. Goal & Strategy 2 1 Internet Based National e-Trade Infrastructure 3 International Collaboration for Cross Border Paperless Trading Seamless e-Trade Service Process Innovation v Current Process Information Strategic Planning Analysis v e-Trade Platform Design & To-be Process Modeling v Standard - Marketing - Financial Settlement v Integration & Interface - License/Certificate v Action Plan (2004~2007) - Insurance v e-Trade Facilitation Center - Logistics : PMO - Trade Declaration v Legal System on e-Trade v Institutional Model v Incentive & Community Supporting System v Bilateral/Multilateral Agreement on International Collaboration v Mutual Recognition on Global e-Trade v APEC, WCO, UN/CEFACT, PAA, EU IST, ASEM, Asia PKI Legal Structure Global Network 7 4 Acceleration of e-Trade Community

e-Trade(Paperless) Korea, Innovation 2007 6. To-be Model of e-Trade Service (1/2) Trade Automation Global e-Trade AS-IS (Trade Network) License/ Certificate Authority . . . (e-Trade Platform) e-Trade Platform ① e-Trade Service Customs Service Marketing ③ ② KTNET Trading Company ② ③ 2 nd Wholly Responsible Company Trading Company Bank ① Trading Company Financial Settlement License/ Certificate Authority ② Customs Service License/Certificate Declaration Logistics Trading Company e-Trade Infrastructure Mess e-Doc e-Standard aging Repository Registry Hub Bank TO-BE Bank Logistics Company Global ④ Network 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 8

e-Trade(Paperless) Korea, Innovation 2007 7. To-be Model of e-Trade Service (2/2) Financial Settlement Bank Marketing e. Market. Place Credit Card License/Certificate Insurance KFTC Credit Evaluation Company Trading Company (Including SME) Insurance Company e-Trade Single Window e-Trade Platform Certified Certificate Authority Customs Service National Logistics Single Window Global Networking Standardization Agency Document Standard 9 Global e-Trade Hub

e-Trade(Paperless) Korea, Innovation 2007 8. Roadmap of 3 -year innovating plan • Upgrade User’s e-Trade System Environment Phase 3 e-Trade solution for SME (’ 07) • Establish Global Network • Upgrade Core Infra fulfilling Seamless e. Trade Service Implementation Phase 2 (’ 06) License/Certificate & Marketing support system • Interface with Related Parties Phase 1 (‘ 04 -’ 05) • Building Core Infra of e-Trade Platform • Standardizing documents e-Trade document circulation system eb. XML based document standardization • Reform related Laws and Systems 10

e-Trade(Paperless) Korea, Innovation 2007 9. e-Trade Service (Phase 1) – e-L/C System (for Exporter) L/C by EDI e-L/C Consolidation & Circulation System AS-IS Goal : Advise L/C by EDI TO-BE Goal : No more Paper L/C Presentation Support : Process : v e-L/C Life Cycle Management v Advise L/C online (EDI) v e-L/C Negotiation History Management (75, 000 by EDI out of 600, 000 SWIFT transaction) v e-L/C Balance Management v Print out Advised L/C on Beneficiary side v Presentation of Printed Paper L/C for Negotiation Opening Bank v Endorse the Balance on Nego Opening Bank v Circulate Endorsed Paper L/C EDI Exporter Print Out KTNET Messaging Hub e-L/C Advising Bank Exporter Advise, Amend Nego Advising Bank Transfer Negotiation Bank 1 st Negotiation Bank 2 nd Beneficiary 11

e-Trade(Paperless) Korea, Innovation 2007 10. e-Trade Service (Phase 1) – Conceptual Model Systems Purpose Repository e-L/C system Red : New System by June 2005 - Prevention of Re-key - Certification of Contents - Keeping Transaction history Trading Company Blue : Existing System L/C Opening Bank The world’s first e -L/C system Service Portal Web Services e-L/C Consolidation & Circulation System KFTC Advising Bank e-L/C (Advise, Amend, Transfer, Nego) eb. XML on VPN Balance Management Circulation Management Negotiating Bank Messaging Hub 12 e-Records Circulation e-Records Repository (Pilot)

e-Trade(Paperless) Korea, Innovation 2007 11. Lessons Learned q Strong leadership is a critical factor in the successful implementation of paperless trading. Close inter-ministry cooperation among regulatory parties is necessary. q Modernization of customs procedure, system is most important step q To hear voices from business community is important because paperless trading is not only technical but also cultural issue to business community. q 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 13

e-Trade(Paperless) Korea, Innovation 2007 12. Future work : international Cooperation q Participate in paperless trade activities such as APEC, ASEM, WTO, and PAA etc. - Korea successfully held the 1 st APEC PPP(Public-Private Partnership) Dialogue under ECSG meeting in SOM I, February 2005 - Korea has been worked closely with PAA (Pan Asia e. Commerce Alliance) member countries to make e-Trade networks in Asia q Korea has experience in building Paperless Trade System since 1991 q We would like to share Korea’s 14 -year-experience with other countries 14

e-Trade(Paperless) Korea, Innovation 2007 Contact Information Thank you Dr. Yoon-Say Jeong Secretary General e-Trade Facilitation Center q Email : wizard@kita. net q Phone : 82 -2 -6000 -5433 q Fax : 82 -2 -6000 -2307 15