With its successful transformation of the letter of credit (L/C), one of the payment settlement tools in trade transactions, into electronic format and the subsequent launch of an e-L/C distribution system service, Korea has opened the e-L/C era for the first time in the world, enabling distribution and management of paperless L/Cs electronically.

 The Ministry of Commerce, Industry and Energy (MOCIE), Korea International Trade Association (KITA), Korea Federation of Banks (KFB) and Korea Financial Telecommunications & Clearings Institute (KFTC) announced that the Industrial Bank of Korea, Daegu Bank, Korea Exchange Bank, Hana Bank and SC First Bank of Korea started e-L/C electronic advice and distribution service on September 22, while other commercial banks, Kookmin Bank, Korea Development Bank, Shinhan Bank, Woori Bank and Chohung Bank, are preparing for their launch of the service by the end of this year.

 As part of the first-phase project for e-trade service on the e-government roadmap, the 'e-Trade Innovation Plan,' confirmed by the National e-Trade Council in September last year, the e-L/C distribution and management system was established in December last year and was launched on a full scale after operational tests.

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 Until the new e-L/C system was in place, trading firms had to visit banks to get paper L/Cs, and negotiating banks had to handwrite payments details on the back of the L/Cs. Therefore, there were concerns about damage and loss and controversies over falsification/forgery, duplicate payment, etc.

 With the launch of the e-L/C service, however, transactional transparency is being secured and the concern over falsification/forgery is expected to disappear. As receipt, notice, transfer and storage of L/Cs now can be processed electronically via the Internet, the processing time for L/C-related transactions will be shortened to less than 30 minutes from four hours and savings also will be realized in transport expenses, manpower costs, etc., thereby realizing large-scale innovation in work processes.

 At present, the number of export L/Cs that are distributed domestically is about 600,000 per year, accounting for 30% of total export payment settlement methods. KITA expects that due to the start of the e-L/C service, the domestic trading business community will be able to cut expenses by more than 8 billion won per year in the future, forecasting the expense reduction amount to reach 20 billion won annually in 2010 when e-trade is fully activated.

 As for the e-L/C distribution and management system put into operation by Korea for the first time in the world, foreign countries have shown keen interest. Recently, the People's Bank of China expressed the intention to station an investigation group in Korea to learn and introduce the system, and Taiwan also is showing all the more interest in Korea's e-L/C service as it has failed in the promotion of its own e-L/C system in the past.

 A related MOCIE official said, "When the e-trade distribution and management service is further advanced through the second-phase of the e-trade service project in 2006, applications for negotiation and transfer of the e-L/C and related information can be advised via SMS (Short Message Service) to make trade transactions much easier.

 To enhance trade competitiveness further through realization of paperless trade nationwide, the government has been promoting this project since January this year after establishing the 'e-Trade Promotion Center' composed of government agencies, MOCIE, Korea Customs Service (KCS), etc. and private trade-related organizations, KFB, KITA, KOTRA, KTNET, KFTC and Dacom, etc. under the arm of the National e-Trade Council, with KITA as its secretariat.