Global SCM

490610
Week 10 International Trade
Seiwook Chung

Global SCM (490610-1) 1

 Weekly Plan
Lecture Topic Lecture Goals

• Demand Planning
1
2
Introduction
Basics of SCM
Class, norm and goal setup, walking through syllabus, evaluation
Macro supply chain, end to end process
3 Demand Planning Forecast and forecast accuracy, statistical forecast, bullwhip effect
4 Supply Planning MRP and replenishment, safety stock, reorder point, lead-time
5 Purchase Direct and indirect purchase, EOQ, Kanban, VMI
6 Inventory Planning Inventory planning and control, Inventory metrics,
7 Midterm
3PL Service provider selection, physical counting, Latest technology, H
8 Warehouse azmat
9 Int’l Transportation Ocean and air, industry norms, terms, and knowledge
10 International Trade Incoterms, country of origin, AEO, customs
11 SAP R3 and APO ERP basics, master data, integration with other tools,
Generic S&OP process and cross-functional communication, leadershi
12 S&OP p for SCM
13 Capacity 1 Discussion of "the goal", bottleneck
14 Capacity 2 Capacity planning
Global SCM (490610-1) 2
15 Final exam
 Supply Chain ②

2nd tier 1st tier

Factory W/H* Distribu Custom
Supplie Supplie Retailer
⑬⑭ ⑧ tor er
r⑤ r⑤

Information (Demand plan③ , Supply plan④)

Information (Orders⑤)

Material (Inventory⑥. Transportation⑨, trade⑩)

Reverse Supply Chain

$$$

SAP/ERP⑪
GlobalS&OP ⑫
SCM (490610-1) 3
* W/H: warehouse
 TOP Export Countries

https://youtu.be/yV1oryYvofE Global SCM (490610-1) 4

 Top Import Countries

https://youtu.be/uHEG67Fdf5c Global SCM (490610-1) 5

 Week 10
• Recap
• Definition
• Incoterms
• Import requirements & Docs
• Agreements, Certificates, Organizations

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Recap

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 TEU & FEU
(20/40 Foot Equipment Unit)
• TEU is an unit of o
cean cargo capacit
y in terms of numb
er of 20 ft contain
ers.
• 2 TEU = 1 FEU

https://en.wikipedia.org/wiki/Twenty-foot_equivalent_unit
Global SCM (490610-1) 8
 Bill of Lading (B/L)
• A document issued by
a carrier or forwarder
to acknowledge the re
ceipt of cargo for a sh
ipment
• Evidence for the cargo
possession taking
• Notified to the destina
tion customs broker /
consignee
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 VOCC
(Vessel Operating Common Carrier)
• The party which actually operates ships
• Their customers are shippers or NVOCC
• SMDT: Liner, carrier, steamship lines

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 NVOCC
• NVOCC is ‘Non Vessel Owning Common
Carrier’. NVOCC operation comprises of s
ales, stuffing and transport of the contai
ners to gateway ports. The bill of lading i
ssue and overseas distribution is taken c
are by the agents of NVOCC
• Scale economy (price and space)
• Flexibility in schedule

Global SCM (490610-1) 11

 LCL (Less Than Container Load)
• Delivery service for not large enough for
the full container load but not urgent
enough for air shipment
• Freight forwarder build a full container
by getting LCL cargos from different
shippers
• Cost is usually between FCL and Air
• Hazmat is not allowed

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 Air Freight Forwarding
• A air freight service to plan and coordinate
the cargo moving from point A to point B
• Scope
– Charter the space from carriers (airlines) & sell
to cutsomers
– Take the possession of the cargo when receivin
g until giving the possession to the consignee
– Issue Bill of Lading

Global SCM (490610-1) 13

 Passenger & Cargo Aircraft
• Passenger aircraft
– Only lower deck
for freight

• Cargo aircraft
– Both upper *
lower deck for
freight

https://mk.kuehne-nagel.com/ Global SCM (490610-1) 14

HAWB Sample

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Dimensional (Volumetric) Weight
• Convert volume to weight for commercial
freight price calculation
• Converting factor can be different by the f
orwarder/carrier or country
• Mostly used formula
– (Length(Cm) * Width(Cm) * Height(Cm)} / 6000
– (80cmX60cmX114cm)/6000 =91.2 Kg

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 Chargeable Weight
• For air, typically used greater number
between dimensional weight and actual
weight
• Also applicable for weight base surcharges
• If base rate is USD 2.50 / kilo
– Actual weight: 35 Kg
– Dimensional weight: 91.2 Kg
– Chargeable weight: 91.2 Kg
– Therefore, USD 2.50 * 91.2 Kg = USD 228.00
http://wap.dhl.com/serv/volweight.html
Global SCM (490610-1) 17
 How to Cut Lead Time
Air Freight
• Booking priority
• Direct flight instead of transit routing
• Pre-customs clearance
• Unloading first
• Pick up at the destination airport and
separate inland transportation instead of
milk run

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Definitions

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 International Trade
• The exchange of capital, goods, and servi
ces across international borders or territo
ries
• An international trade can be viewed as
import and export depending on the
standpoint
• Main differences from domestic trade:
customs, duty, and currency

Global SCM (490610-1) 20

 Import & Export
• Import is buying goods or services from an
other country while export is selling goods
or services to another country
• Both Importer and exporter should comply
the law and regulation of both countries wh
ich is subject to the audit in later
• By Korean Law, import to keep the import d
ocs for 5 year, while 3 years for export docs
 Scope for the audit by the authority
Global SCM (490610-1) 21
 Customs
• An authority or agent responsible for scr
eening passenger & goods and giving th
e permission associated with leaving or e
ntering the country including the duty co
llection. Anything harmful for the securit
y or safety of the country is to be screen
ed by the customs

Global SCM (490610-1) 22

 Bonded Area
(Customs Area, Customs)
• Bonded: the postponement of taxation of i
mported goods for a certain period of time
until an import permit is obtained.
• Bonded area: the area for bonded goods an
d passenger
• Belongs to the territory but before the cros
s the commercial boarder

Global SCM (490610-1) 23

 Bonded Warehouse
• An authorized warehouse to store,
configure, or manufacture the dutiable
goods before paying duty (customs
clearance). Goods waiting for the import
customs clearance is stored in a bonded
WH
• Duty free shop
• Imported goods to be reexported w/o
declaration
• Global / regional service distribution center
Global SCM (490610-1) 24
 Free Trade Zone (FTZ) in Korea
• Similar functions to bond
ed warehouse which is no
t area ruled by the govern
ment mainly for economic
benefits
• Mostly around major airp
orts and seaports but als
o applicable for inland loc
ations

Global SCM (490610-1) 25

 ICN Cargo Terminal

Korean Air

Others

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Busan New Port

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Customs Clearance (Declaration)
• The act of passing goods, through custo
ms, which is entering or leaving the coun
try, commercially
• Tax (mainly duty and value added tax)
• Import requirement
• Docs submitted and limited portions for
physical check

Global SCM (490610-1) 28

 (Customs) Duty
• Tax which is charged for the importation
by the government of the importing
country
• Duty amount = duty rate X product
value (invoice value + transportation,
insurance, etc)
• Duty rate varies by country and product
type (HS Code)

Global SCM (490610-1) 29

 COO (Country of Origin)
• Define the origin of the country for impo
rted and exported products.
• If manufactured in multiple countries, tak
e the one where product’s value is added
most
• Definition is based on WTO rules but can
be different by the local laws
• Must be marked on the product

Global SCM (490610-1) 30

COO Sample

Including Korea, it is
required to submit COO doc
certified by the Chamber of
Commerce of the origin
country

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Process

Global SCM (490610-1) 32

 Import Process
CBP (Customs & Border Protection)

https://youtu.be/UTDO2IRaVIM Global SCM (490610-1) 33

 Import / Export Process
Local Transportation,
inland transpiration,
Exporter Importer
drayage
Shipper Consignee

Origin Country Bonded Int’l Bonded Destination Country

Global SCM (490610-1) 34

 Drayage
• Shipping goods, usually for a short distance
from the port to the final destination door,
or from the origin door to the port
• SMDT: Inland transportation, pickup/delivery,
local transportation
• Applicable for both air and ocean
• Usually by truck

Global SCM (490610-1) 35

 Korea Customs Service
• The customs authority of Korea
• Belongs to Ministry of Economy &
Finance but independently operated org

www.customs.go.kr Global SCM (490610-1) 36

 What Customs Does
• View & control in & out transactions of goods &
money across the commercial boarder
• Fair taxation
• Prevent illegal trade, illegal goods (drugs,
weapon, etc), unapproved goods (food, drug,
etc), and illegal money wire
• Lead imports and exports to comply with the
regulations (chemical, radio wave, medicine,
COO)
• Support and promote the export and import

Global SCM (490610-1) 37

 (Licensed) Customs Broker
• Is a person or a firm who is licensed to
represent for customs clearance & related
activities
• Employee by importers, exporters, freight
forwarders, carriers, etc
Top brokers in Korea 2019 
* 250억5000 = KRW 25,000,000,000

Global SCM (490610-1) 38

 Customs Broker License in KOR

http://www.kcba.or.kr/main.aspx
Global SCM (490610-1) 39
 Unipass
• A platform built by Korea Customs Service
• online filing for import/export declaration
• Support importer / exporter
• Clearance database
• Tax payment

https://unipass.customs.go.kr/ Global SCM (490610-1) 40

 HS (Harmonized System) Code
• Harmonized commodity description & coding system
• The standard for international trade including export
and import declaration
• 8-10 digits for commodity types
• A factor for the duty rate determination with origin &
destination country
• Must be on the commercial invoice

https://www.kotra.or.kr/kh/common/getHSCodeList.do
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 HS Code Lookup

Global SCM (490610-1) 42

https://www.kotra.or.kr/kh/common/getHSCodeList.do
Incoterms

Global SCM (490610-1) 43

 Incoterms®

• Incoterms® : INternational COmmercial TERMS.

• Published by International Chamber of Commerce in
1936
• Amended in 1953,[4] 1967, 1976, 1980, 1990, 2000, 2
010, 2020 (9 versions)
iccwbo.org Global SCM (490610-1) 44
 Incoterms®
• Determines, between shipper and
consignee, the responsibilities for tasks,
risks, and costs in international
shipments
• Related to International commercial law
• Not synchronized with the definition of
the asset in accounting
• Trademark  ‘Incoterms® 2020’

Global SCM (490610-1) 45

 Container Loading Failure

https://youtu.be/yqe0Hwa-vgc Global SCM (490610-1) 46

 Task
Incoterms® 2020 Risk
Cost

Global SCM (490610-1) 47

Only for Inland Waterway

Global SCM (490610-1) 48

 Commonly Used Terms
EXW – Ex Works (named place of delivery)
The seller makes the goods available at their
premises, or at another named place.
FCA – Free Carrier (named place of delivery)
The seller delivers the goods, cleared for export, at a
named place (possibly including the seller's own
premises).
CPT – Carriage Paid To (named place of
destination)
The seller pays for the carriage of the goods up to
the named place of destination.
CIP – Carriage and Insurance Paid to (named place of
destination)
DPU – Delivered At Place Unloaded (named place of
destination)
DAP – Delivered At Place (named place of
destination)
DDP – Delivered Duty Paid (named place of
https://www.ocskorea.com/eng/csservice/incoterms.do
Global SCM (490610-1)
destination) 49
Import Requirements &
Import Documents

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 Import Requirement
• Defines required conditions and certificates
by HS Code in import customs clearance
• Mainly based on Customs Act
• Also accordingly to Electrical Act, Radio Wave
Act, Chemical Act, Pharmaceutical Affair Act,
Medical Device Act, etc
• Importer & its broker: responsible for the
compliance

Global SCM (490610-1) 51

Filing Docs for Import Declaration
(Commercial) Invoice & AWB

Global SCM (490610-1) 52

Certificate of Import Declaration

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Agreements, Certificates,
Organizations

Global SCM (490610-1) 54

 FTA (Free Trade Agreement)
• An agreement between 2 countries (An
union of countries)
• To promote the development of internation
al trade by eliminating/reducing tariffs, quot
as and regulations
• Usually becomes effective by the signoff of
both governments and by approvals of eac
h Parliaments
• COO (Country of Origin) = export country
Global SCM (490610-1) 55
 Korea Has FTA With
• ASEAN
• Australia
• Canada
• Central America (Costa Rica, El Salvador, Honduras, Nicaragua, Panama)
• China
• Chile
• Colombia
• EFTA (Iceland, Liechtenstein, Norway, and Switzerland)
• European Union
• India
• Indonesia
• New Zealand
• Peru
• Singapore
• Turkey
• United Kingdom (enter in to force after Brexit)
• United States
• Vietnam
Global SCM (490610-1) 56
 TP (Transfer Price)
• Buying price on the invoice when the seller a
nd the buyer are related (Intercompany trans
action)
• Shouldn’t be outside of the fair market value,
or subject to the audit by the authority for fa
ir duty declaration
• Example
– Astrazeneca Korea buys from AZ HQ
– GE Healthcare Korea sells to GE Healthcare US
– Celltrion sells to Celltrion Healthcare
Global SCM (490610-1) 57
 (ATA) Carnet
• Referred as “a passport of goods”, is a temporary i
mport-export doc
• No duty under the condition of reexport within 12
months if approved by ICC’s of both im/export cou
ntries
• Import requirements can be waived
• Not for sales in the importing country
• Not consumable
• Special (Domestically un-source-able) service tools
• WCO is another governing body
ATA: Admission Temporaire-Temporary Admission
Global SCM (490610-1) 58
 AEO
(Authorized Economic Operator)
• A global standard to set a higher bar for trade
security improvement
• Scopes all players associated with import and
export (manufacturers, importers, exporters, brok
er, carriers, forwarder, etc)
• AEO certified parities can get incentives (priority
at customs or fee waive, etc)
• A similar program in the US is C-TPAT

Global SCM (490610-1) 59

 WCO
(World Customs Organization)
• An intergovernmental organization of which
members are the customs authorities of 180+
countries.
• Focuses
– Commodity classification (HS Code)
– Country of Origin (COO)
– Duty
– Supply chain security
– International trade facilitation
– Customs enforcement activities
– Against illegal drug and weapon trade
– Overall trade compliance
http://www.wcoomd.org/ Global SCM (490610-1) 60
 WTO
(World Trade Organization)
• An intergovernmental organization that
regulates and facilitates international
trade between nations
• Set the standard of the international
trade
• Incoterms and COO

Global SCM (490610-1) 61

 TSA
(Transportation Security Administration)
• An agency of the U.S. Department of Homeland
Security
• Has authority over the security of the traveling
public in the United States
• Established the current security screening standard
which is globalized eventually (passenger & cargo)
 Additional lead time for cargo shipments

Global SCM (490610-1) 62

 Next on Deck
Lecture Topic Lecture Goals

• Demand Planning
1
2
Introduction
Basics of SCM
Class, norm and goal setup, walking through syllabus, evaluation
Macro supply chain, end to end process
3 Demand Planning Forecast and forecast accuracy, statistical forecast, bullwhip effect
4 Supply Planning MRP and replenishment, safety stock, reorder point, lead-time
5 Purchase Direct and indirect purchase, EOQ, Kanban, VMI, CMI
6 Inventory Planning Inventory planning and control, Inventory metrics,
7 Midterm
3PL Service provider selection, physical counting, Latest technology, H
8 Warehouse azmat
9 Int’l Transportation Ocean and air, industry norms, terms, and knowledge
10 International Trade Incoterms, country of origin, AEO, IATA, customs
11 SAP R3 and APO ERP basics, master data, integration with other tools,
Generic S&OP process and cross-functional communication, leadershi
12 S&OP p for SCM
13 Capacity 1 Discussion of "the goal", bottleneck
14 Capacity 2 Capacity planning
Global SCM (490610-1) 63
15 Final exam
End of Presentation

Global SCM (490610-1) 64