Session 5: E-commerce and digital trade: Emerging opportunities and challenges
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1 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 Blockchain Innovation Luca Castellani, Secretary, UNCITRAL Working Group IV (Electronic Commerce)
2 Innovations in seamless cross-border trade for e-commerce of SMEs Sung Heun HA (Rama)
3 BPR/ISP Result for Cross-Border E-Commerce Process Reform Ⅰ Ⅱ Ⅲ Background Analysis Planning
4 1.1. Background Reform of Export SMEs to CBEC centric International conventions and 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) Model laws, conventions, guidelines from various international bodies E-commerce articles in various FTAs Government s support scheme for SMEs CBEC Needs for Open Platform for CB E-Commerce Various programs from different government bodies Strengthen competitiveness of SMEs through interconnection, integration and coordination of e- commerce related public services is needed Fierce competition in cross-border e- commerce market Need to facilitate ECO system of e- marketplace for SMEs 4
5 BPR/ISP Result for Cross-Border E-Commerce Process Reform Ⅰ Ⅱ Ⅲ Background Analysis Planning
6 2.1. Introduction to BPR/ISP study Scope of Analysis Environm ent Analysis Business Environment Analysis ICT Trend 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 Business Analysis Cross-Border E-Commerce Business 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 Strategies for integrated CBEC platform modeling 6
7 2.2. Environment Analysis : CB e-commerce statistics Comparison of Import/Export and major products E-Commerce Import VS Export (Korea) Export trend of major products (Unit: KRW 100,000,000) 4,980 3,891 4,452 2,684 Export volume exceed import volume from 16 7,219 5,071 4,924 5,610 6,025 4,463 4,118 4,473 (Unit: KRW 100,000,000) Export is biased to a specific product 5,419 5,932 4,160 3,475 3,322 2, ,038 1, Q Q Q Q Q Q Q Q Q Q Q Q CBEC Export CBEC Import Cosmetics Fashion Electronics Cross-Border e-commerce is increasing rapidly and now it is a new way of doing trade Source: Korea Statistics Services 7
8 2.2. Environment Analysis : SME status Demands analysis of SMEs Intention of SMEs Difficulties of SMEs Cross-Border e-commerce Experience and intention to continue Survey to 1,688 SMEs, Experienced: 766 SMEs Difficulties in CBEC export Marketing cost Specialist Appropriate channel No CBEC Experience 54.62% CBEC Experience 45.38% Intention to continue 86.7% Conformity Certificate Delivery Local marketing materials Customer support No intention 13.3% Expectations towards Korean government Simplification of clearance Strong will of SMEs to continue CBEC and expectations on Simplification of clearance, Export financing and One stop service Export financing Onestop process Source: SME Promotion Agency,
9 2.2. Environment Analysis : 2017 SMEs Survey on CBEC (1/6) Survey to CBEC companies(1/6) Online sales types Intention for overseas sales Overseas sales only Preparing for overseas sales 13.9% 8.6% 2.7% Etc 39.7% Domestic and overseas sales 45.0% 40.0% 35.0% 30.0% 25.0% 40.7% 32.6% 21.1% 20.0% Domestic sales only 35.1% 15.0% 10.0% 5.0% 0.0% 5.6% Domestic & Overseas sales Domestic sales only Overseas sales only Very interested Nuetral Interested Little or no interest Policy to support transform of domestic seller (35.1%) into overseas seller Domestic sellers have high interest in overseas sales 9
10 2.2. Environment Analysis : 2017 SMEs Survey on CBEC (2/6) Survey to CBEC companies(2/6) Reason for domestic sales only Motivation, target market and operation types No 1 Obstacles in direct overseas sales No dedicated overseas sales marketing human resource (Unit: 5 top, 3 middle) Mo tiva tion New market development (73.5) Fierce competition in domestic market Product competitive ness (22.9) CEO s will (18.5) Foreign market testing (17.6) (Unit: %) Influen ce from Etc. compe (1.4) titor (4.5) 2 Lack of B2C overseas marketing knowhows 3.52 Tar get China (51.6) USA (44.4) SE Asia (42.2) Japan (33.5) Europe (31.2) India (15.4) Etc. (4.2) 3 Lack of operation fund Lack of overseas market information Lack of understanding on online platform Difficulties in competitive products * Measure : (5: very important, 4: important, 3: normal, 2: not important, 1: not important at all) Domestic sellers are challenged in overseas sales because of lack of dedicated resources, marketing knowhows and funding Op erat ion Sal es cha nne ls Sales agency (43.0) Amazon.com (56.8) Global open online marketplace (40.8) ebay.com (46.5) Domestic open online market for overseas sales (28.4) Taobao (27.8) Independent online marketplace (24.3) TMall (18.7) Rakut en (13.8) etc. (4.1) etc. (7.4) High dependency on global open e-marketplaces (even sales agencies are utilizing Amazon, ebay and Tmall) 10
11 2.2. Environment Analysis : 2017 SMEs Survey on CBEC (3/6) Survey to CBEC companies(3/6) Overseas Ads and Marketing Difficulties in overseas delivery 45.0% 70.0% 40.0% 35.0% 60.0% 30.0% 50.0% 25.0% 40.0% 20.0% 15.0% 30.0% 10.0% 20.0% 5.0% 10.0% 0.0% SNS Ads Online Online E-MP Ads/ E- Keywor Commun Promotion Mailing ds ADs ity Ads Brochur e Free delivery etc. 0.0% Deliver y cost Import clearan ce Lost and damaged product Delivery delay Return process ing Product location status etc. 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 11
12 2.2. Environment Analysis : 2017 SMEs Survey on CBEC (4/6) Survey to CBEC companies(4/6) Major factors for B2C Overseas direct online sales No. Major factors 1 Product Quality Competitiveness Product price competitiveness Sales processing capacity such as order, delivery and payment 2 Post business management such as customer support Willingness of CEO for overseas business 6 Operation fund 7 English or local language correspondent Product design competitiveness 8 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 12
13 2.2. Environment Analysis : 2017 SMEs Survey on CBEC (5/6) Survey to CBEC companies(5/6) Difficulties in online overseas direct sales Experience of government s program to support online sales Difficulties Law and regulations of importing countries on Customs clearance and certification Intensive competition in overseas sales Lack of 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 al) % 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 87.4 No 12.6 Yes Government s programs to overcome difficulties of SMEs in overseas direct sales is needed Low level of awareness on Government s support program 13
14 2.2. Environment Analysis : 2017 SMEs Survey on CBEC (6/6) Survey to CBEC companies(6/6) Requirements for Korean government s support for B2C online overseas sales Required government s programs Overseas Ads and marketing support program Increase efficiency in logistics & lessen logistics cost Information on overseas clearance & certification Exclusive export funding for B2C online exporters Simplification of self export declaration procedure Overseas market/marketing information and training Exclusive warehouse for SMEs Training and consultation on opening biz. in emp Information and channel for quality products sourcing *Measure : (5: very important, 4: important, 3: normal, 2: not important, 1: not important at all) Strategic Items CBEC export start-up collaboration system implementation Smart logistics network implementation Smart logistics network implementation CBEC export automation system implementation CBEC export automation system implementation CBEC export start-up collaboration system implementation Smart logistics network implementation CBEC export start-up collaboration system implementation CBEC export start-up collaboration system implementation High demands for advertisement / marketing support program of government Strong needs for foreign market/marketing information and capacity building training 14
15 2.3. Business Process Analysis : Cross-Border E-Commerce (1/3) Comparison of trade process and distribution method Conventional Trade Manuf./Supply (Manufacturer) Manuf./Supply (Manufacturer) Between Exporter Foreign buyer, through <paper contract>, offline trade, distribution of goods via local wholesaler and Retailer to final consumer Exporter : From sourcing to clearance at Importing country Cross-Border E-Commerce 3 3 Exporting country 1 Exp. Dec. (Exporter) 1 Imp. Dec. (Buyer) Wholesale (Wholesaler) Retail (Retailer) Purchase (Consumer) Exporter Foreign consumer through <online e-marketplace>, online trade, delivery of goods to final consumer directly Exporting country 1 1 Exp. Dec. Imp. Dec. Purchase (Exporter) Exp. Logistics (logistics SP) Exp. Logistics (logistics SP) 2 offline contract (Exporter/Buyer) Exporter : From sourcing to delivery to final consumer, including return of goods 2 e-mp Order (Exporter/Consumer) (Exporter) Importing country Importing country Overseas Logistics (logistics SP) Change Area (Consumer) Changes in Customer (Buyer Consumer) (Conventional trade) Sales of bulk products to foreign importers (CBEC) Sales of small amount of products to foreign consumer Contract method (Conventional trade) Offline contract with strong legal obligation (CBEC) Online order with less strong legal obligation Business scope (Conventional trade) mostly no responsibility in local distribution and delivery to buyer (CBEC) Wide coverage from sourcing to delivery to foreign consumer 15
16 2.3. Business Process Analysis : Cross-Border E-Commerce (2/3) Comparison of Conventional Trade and Cross-Border E-Commerce Implications Category Conventional trade Cross-Border E-Commerce Customer Transaction cycle Character of sales Foreign buyer (B2B, Fixed buyer) Regular Big amounts but (relatively) small number of transactions Foreign consumer (B2C, unspecified customer) Real-time (irregular) Small amount but big number of transactions Delivery time Long term(months) Short term(within 2 weeks) Transportation means Ocean freight Air freight 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 Logistics cost Low cost(volume transportation) High cost(individual delivery) Contract Offline (Paper contract) Online Order Product life cycle Marketing Method Export Declaration Slow cycle Offline marketing (Exhibition and industry Fair) Export declaration (Customs broker) Fast cycle Online marketing(sns / Ads inside e-marketplace) Export declaration (List declaration or Simple Exp. Dec.) Current trade regulations and infrastructure is built on offline B2B trade environment and it is not efficient enough for CBEC Order cancel Difficult (Compliance to contractual terms) Easy (order cancel/return by consumer mind change or product s fault) 16
17 2.3. Business Process Analysis : Cross-Border E-Commerce (3/3) Business area and scope in the CBEC value chain by stakeholders Main role Supporting role Category Market Analysis Sourcing /Purchase Core activities Sales Channel Development Product mgt. Sales Clearance/ Delivery Returned goods Bill settlement Post activities Tax Funding Manufacturer Key Player Seller(Exporter) online Marketplace (online shop) Logistics SP Support Player (Private) Correspondent agent Solution provider Paperless trade SP Support Player (Public) Trade promotion agencies Trade regulatory agencies Banks 17
18 2.3. Result of analysis : Requirements(1/2) Areas of improvements from difficulties of traders (1/2) Category Difficulties Improvements Market info. Sourcing /Purchase Products mgt. & Sales 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 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 High cost for interconnection to online shop 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 Clearance/ Delivery Heavy burden from multiple export declaration for each sale Difficulties in consolidation of individual parcel Little understanding of Export Declaration form especially HS code Export Declaration Automation services Delivery consolidation automation service 18
19 2.3. Result of analysis : Requirements(1/2) Areas of improvements from difficulties of traders (2/2) Category Clearance/ Delivery Returned goods manageme nt Post manageme nt Difficulties Even with simplified Export Declaration form, it is not easy for traders Heavy burden from Cargo Loading Report in relation to Export Declaration High cost from individual delivery Difficulties in finding proper domestic logistics SP and foreign local 3PL Lack of information on services and pricing of logistics SP Delay and difficulties in handling foreign import declaration 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 for duty exemption on returned goods Difficulties in applying for trade financing with little documentary proof Heavy burden of manual processing of Zero VAT application Heavy burden of manual calculation for sales statistics Improvements 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 19
20 2.4. Implications Improvement directions Improvement strategies 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 Establishment of basis for effective CBEC friendly trade reform policy and decision making CBEC oriented trade business support scheme for efficiency of traders Fostering CBEC collaboration eco system for start-ups and job creation Development of Smart Logistics Infrastructure for competitiveness of traders 20
21 BPR/ISP Result for Cross-Border E-Commerce Process Reform Ⅰ Ⅱ Ⅲ Background Analysis Planning
22 3.1. Information Strategy Planning Vision Promotion of Start-up of Exporting companies through Facilitation of Cross-Border E-Commerce Increase efficiency in SMEs trade business Promotion of Start-ups and job creation Effective CBEC friendly trade reform policy Strengthen trader competitiveness Strategy Strategic Action Item CBEC oriented trade business support scheme implementation Strategic action item 1 CBEC Export Automation System implementation Fostering CBEC Collaborative ECO System Strategic action item 2 CBEC Export Start-up Collaboration System implementation CBEC Policy support basement development Strategic action item 3 Trade Information Big data, AI Open Platform implementation Development of Smart Logistics Infrastructure Strategic action item 4 Smart Logistics Network implementation 22
23 3.2. Implementation roadmap Platform Development 1 st Phase : 2018 Expansion of Services 2 nd Phase : 2019 Advancement 3 rd Phase :
24 3.3. CBEC export automation system implementation Bottlenecks Action items Inefficiency in manual consolidation of orders and creating Export Declaration from orders 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 Exp. Dec. Automation Returned goods Management Automation Export record Certification simplification Purchase Certificate & Payment Automation Trade finance simplification Efficient Billing and Account management Zero VAT application simplification Tariff return simplification Automation of Export Declaration from order information in e-mp Automation of returned goods processing linking with Export Declaration information Direct & indirect Export record certification simplification Simplified Purchase Certificate issuing process Simplification of online trade financing application Efficient online billing and settlement management Simplification and automation of Zero VAT application and document proof Simplification and automation of Tariff return application and document proof management 24
25 User Needs 3.4. CBEC export automation system implementation To-Be features To-Be Model 1 Exp. Declaration Automation Export Declaration simplification with data from e-marketplace CBEC Trader CBEC export automation system Returned goods Automation Export record Certification Simplification Purchase Certificate & Payment Automation Trade finance simplification Billing and account management Zero VAT Application Simplification Tariff return simplification Simplification of returned product Import Dec. utilizing Export. Dec. Direct and indirect export record certification issuance simplification Convenient Purchase Certificate issuance and payment service Facilitation of online trade financing online sales account management Zero VAT application simplification with Export Record Certification Tariff return application and document proof simplification & automation High Efficiency Automation simplification E-MarketPlace Automated Export Declaration Trade Financing simplification Customs Returned goods Export record Certification simplification Efficient billing Zero VAT and simplification account management Tax Authority Purchase Certificate & Payment Automation Tariff return simplification National Paperless Trade Infrastructure 25
26 For more details, please to 26
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