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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)
BPR/ISP Result for Cross-Border E-Commerce Process Reform
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
2.2. Environment Analysis : 2017 SMEs Survey on CBEC (2/6)
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)
Survey to CBEC companies(2/6)
11
2.2. Environment Analysis : 2017 SMEs Survey on CBEC (3/6)
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.
Survey to CBEC companies(3/6)
12
2.2. Environment Analysis : 2017 SMEs Survey on CBEC (4/6)
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
Survey to CBEC companies(4/6)
13
2.2. Environment Analysis : 2017 SMEs Survey on CBEC (5/6)
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
Survey to CBEC companies(5/6)
14
2.2. Environment Analysis : 2017 SMEs Survey on CBEC (6/6)
► 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
Survey to CBEC companies(6/6)
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
2.3. Business Process Analysis : Cross-Border E-Commerce (2/3)
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
2.3. Business Process Analysis : Cross-Border E-Commerce (3/3)
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
BPR/ISP Result for Cross-Border E-Commerce Process Reform
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
Strategic action item 2
CBEC Export Start-up Collaboration System
implementation
Strategic action item 4
Smart Logistics Network
implementation
Strategic action item 3
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]