Korea International Trade Specialist Grade 1 cheat sheet

Incoterms 2020 divides rules into any-mode (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and sea/inland-waterway-only (FAS, FOB, CFR, CIF); choosing a sea-only rule for containerized multimodal shipment is a common exam trap.

Under FCA (Incoterms 2020), the buyer may instruct its carrier to issue an on-board bill of lading to the seller; this closes the letter-of-credit gap that previously pushed exporters toward FOB.

CIF and CIP minimum insurance: Institute Cargo Clauses (C) for CIF, Institute Cargo Clauses (A) for CIP, both at 110% of contract value in the contract currency.

DPU is the only Incoterm requiring the seller to unload at destination; DAP leaves unloading to the buyer.

Export clearance obligation falls on the seller under all Incoterms except EXW, where the buyer handles both export and import formalities.

Risk transfer: FOB/CFR/CIF pass risk when goods are on board the vessel; FCA passes when goods are delivered to the carrier; DAP/DPU/DDP pass at destination.

Standard documentary set for a letter of credit: commercial invoice, full set of clean on-board ocean bills of lading, packing list, certificate of origin, and insurance policy where CIF/CIP applies.

A shipped on-board bill of lading dated later than the L/C latest shipment date is a discrepancy even if presentation is still within the presentation period.

Proforma invoice is a pre-contract offer document; it does not itself create payment obligation, whereas the commercial invoice is the payment and customs document.

Offer vs. invitation to treat: a price list or catalogue is generally an invitation to treat; a firm offer stating quantity, price, and validity period is capable of acceptance.

Firm offer language: 'This offer is firm, subject to your reply reaching us by 17:00 KST, 30 June 2025.' Counter-offer extinguishes the original offer.

Enquiry/status inquiry opener: 'We are writing to enquire whether you can supply...' - keep register formal, avoid contractions and idioms in contract-related correspondence.

Claim letter structure: (1) reference to contract/shipment, (2) factual description of the defect, (3) evidence, (4) specific remedy requested, (5) deadline for reply.

Adjustment letter should concede facts where verified, state the remedy offered, and avoid open-ended admissions of liability that could be used in arbitration.

Standard L/C amendment request phrasing: 'Please amend the credit to allow partial shipment and to extend the expiry date to 31 August 2025.'

Common trade abbreviations: L/C, D/P, D/A, B/L, C/O, P/I, S/C, T/T, BAF, CAF, FCL, LCL, NVOCC, FCR, AWB.

'Subject to our final confirmation' makes a quotation non-binding; 'subject to prior sale' is a seller-side escape clause.

Collection letter escalation: reminder, then formal demand referencing due date and invoice number, then notice of referral to collection agency or legal action.

CISG Art. 1 applies to contracts of sale of goods between parties whose places of business are in different Contracting States, or where private international law leads to a Contracting State's law.

CISG Art. 2 excludes consumer sales, auction, execution, stocks/securities, ships, aircraft, hovercraft, and electricity.

CISG Art. 6 allows parties to exclude application entirely; Art. 95 reservations let a Contracting State opt out of Art. 1(1)(b).

CISG Art. 38 requires the buyer to examine goods within as short a period as practicable; Art. 39 requires notice of non-conformity within a reasonable time, with a two-year outside limit from delivery.

CISG Art. 25: a breach is fundamental if it results in such detriment as substantially to deprive the other party of what it is entitled to expect, unless the breaching party did not foresee it.

CISG Art. 74 damages: full compensation for loss including lost profit, limited to loss foreseeable at the time of contract conclusion.

UCP 600 Art. 14(c): banks have five banking days following the day of presentation to examine and determine compliance.

UCP 600 Art. 18(c): commercial invoice must be issued in the name of the applicant and made out to the order of the issuing bank unless the credit states otherwise.

UCP 600 Art. 32: banks may refuse documents if they are not presented in the order specified in the credit, but must not refuse solely for that reason if otherwise compliant.

eUCP supplements UCP 600 for electronic records; v1.1 governs presentation where the credit states it is subject to eUCP.

Incoterms 2020 is effective from 1 January 2020; parties should expressly incorporate the version to avoid ambiguity with Incoterms 2010.

Foreign exchange position: net open position = foreign currency assets − foreign currency liabilities; Korean FX regulations cap banks' open positions as a percentage of equity.

Forward rate formula: F = S × (1 + r_quote × t/360) / (1 + r_base × t/360), where r_quote is the interest rate of the quote currency.

Interest rate parity holds when forward premium/discount equals the interest rate differential; covered interest arbitrage closes deviations.

Letter of credit is a separate transaction from the underlying sale (UCP 600 Art. 4 - independence principle); banks deal in documents, not goods.

D/P (documents against payment) releases documents only on payment; D/A (documents against acceptance) releases against a time draft, creating credit risk for the exporter.

Confirmed L/C adds a second bank's payment undertaking; confirmation is typically requested when the issuing bank or its country carries elevated risk.

Standby letter of credit is a guarantee-type instrument governed by ISP98 or UCP 600, not a documentary sale credit.

Korean foreign exchange regulation: foreign currency transactions over a threshold require reporting to the Bank of Korea or designated foreign exchange bank; resident/non-resident rules differ.

Bid bond, performance bond, and advance payment guarantee are the three standard trade guarantees; bid bond is typically 2-5% of contract value.

Market entry modes ranked by control and risk: indirect export → direct export → licensing → joint venture → wholly owned subsidiary (FDI).

Product standardization vs. adaptation: standardization captures scale economies; adaptation responds to local regulation, culture, and technical standards.

Pricing ladder for export: FOB price + freight + insurance = CIF price; add import duties, distributor margin, and VAT to derive landed retail price.

Country risk assessment covers political risk, transfer risk (FX convertibility), and commercial risk; credit insurance and K-SURE/EXIM guarantees mitigate it.

Marketing mix (4P) in export context: product adaptation, price escalation, distribution channel length, and promotion across language/cultural barriers.

Break-even export volume = fixed export costs ÷ (unit contribution margin), where contribution margin = export unit price − variable unit cost.

Trade management KPIs: order-to-delivery lead time, fill rate, L/C discrepancy rate, DSO (days sales outstanding), and claim ratio per shipment.

Distribution channel decision rule: high service requirements and low volume favor agents; high volume and strategic markets favor own subsidiaries or exclusive distributors.

Incoterms choice interacts with marketing: DDP maximizes customer convenience but shifts import duty and VAT compliance to the exporter.