• Journal of Korean Institute of Industrial Engineers
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• v.28 no.3
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• pp.232-239
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• 2002

This paper analyzes how a buyer can determine the economic replenishment policy when the supplier allows delay in payments for an order of a product. For the analysis, it is assumed that the length of credit period is a function of the buyer's amount of purchase, and inventory is depleted not only by buyer's demand but also by deterioration. Investigation of the properties of the model developed allows us to develop an algorithm whose validity is illustrated using an example problem.

• Proceedings of the Safety Management and Science Conference
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• 2001.05a
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• pp.199-203
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• 2001

In today's business transactions, it is more and more common to see that the buyers are allowed some grace period before they settle the account with the supplier. In this regard, we analyze the problem of determining the buyer's EOQ when the supplier allows day-terms credit. For the analysis, it is assumed that the buyer's demand rate is a function of the on -hand inventory level and the relevant mathematical model is developed.

• Proceedings of the Safety Management and Science Conference
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• 2002.05a
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• pp.243-247
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• 2002

This paper deals with the problem of determining the buyer's economic lot sizing policy for exponentially deteriorating products under trade credit. Assuming that the supplier's credit terms are already known and the length of delay is a function of the buyer's order size, we formulate the mathematical model and the solution algorithm is developed based on the properties of an optimal solution.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.35-47
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• 2020

An economic downturn can occurred through unexpected events in various fields, such as the subprime mortgage crisis and the outbreak of Coronavirus Disease-2019 (COVID-19). Trade credit is important for small- and medium-sized enterprises (SMEs), especially during a monetary contraction, as it is the last option for firms that lack bank credit. This study aims to determine whether trade credit is profitable for the buyer and supplier firms during and after a financial crisis. We use panel data consisting of all trade credit transactions and financial statements of 5,751 Korean firms during the period 2008-2012. It shows that trade credit is more profitable for both buyers and suppliers in the post-crisis period than during the crisis. Moreover, trade payable is more effective for unconstrained buyers than for constrained buyers. Finally, a mixed strategy is superior to an aggressive or passive strategy of SMEs. The results suggest less profitability of trade credit during a period of contraction and greater sensitivity of the buyer SMEs, emphasizing the idiosyncratic liquidity strategy of each firm. This study can be helpful to develop a strategy of profitable trade credit for SMEs and to establish a policy of managing liquidity for the authority.

• Journal of the Korean Operations Research and Management Science Society
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• v.31 no.1
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• pp.25-36
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• 2006

Consider a supply chain in which a vendor supplies a product to a buyer. We assume that the buyer's and vendor's inventory cost structures are different, resulting in differences in inventory order/delivery cycle times. Here, if one party insists on its individually optimal order/delivery quantity, the other party will suffer from mismatches in cycle times. Under this scenario, coordination contracts that make use of either a Net Term/Two parts Term Trade Credit or a Quantity Discount are designed to align individually optimal order Quantities. We compare and analyze the perform ances of these contracts. The focus of the comparison is the ability of contracts to generate a lower cost for the supply chain. We show that a Trade Credit policy can be effectively used to coordinate a supply chain. In many cases it will result in a lower supply chain cost compared to that achieved by using a Quantitative Discount policy.

• Journal of Distribution Science
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• v.21 no.9
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• pp.115-121
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• 2023

Purpose: This study aimed to deal with disputes between the seller and the buyer in connection with the Letter of Credit (LC) in a sales contract. The Contracts for the International Sale of Goods (CISG) provides the rules on the fundamental breaches which can lead to termination of the sales contract but the CISG is not enough to govern issues arising from the LC disputes when the sales contract is not clear about the payment terms. This paper tried to find some solutions to the disputes by considering international rules, such as the Principles of European Contract Law (PECL). Research design, data and methodology: The methodology applied in this study was an analysis of some court decisions and extended literature review. Results: The study revealed that in contracts for the sale of international goods, the buyer was obliged to open an LC as manner of payment. If the buyer failed to open an LC or amend the terms of the LC, the seller could avoid the contract because this could deprive the seller's expected interest. Conclusions: Few studies in Korea have been comprehensively analyzed in terms of the obligations of regarding the LC with respect to the CISG in court cases. This study suggests safeguarding the buyer and seller when the LC is considered absolute or conditional.

• Korean Management Science Review
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• v.21 no.2
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• pp.273-289
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• 2004

Although the Internet is useful for transferring information, Internet auction environments make fraud more attractive to offenders, because the chance of detection and punishment is decreased. One of these frauds is the phantom transaction, which is a colluding transaction by the buyer and seller to commit the illegal discounting of a credit card. They pretend to fulfill the transaction paid by credit card, without actually selling products, and the seller receives cash from the credit card corporations. Then the seller lends it out with quite a high interest rate to the buyer, whose credit rating is so poor that he cannot borrow money from anywhere else. The purpose of this study is to empirically investigate the factors necessary to detect phantom transactions in an online auction. Based upon studies that have explored the behaviors of buyers and sellers in online auctions, the following have been suggested as independent variables: bidding numbers, bid increments, sellers' credit, auction lengths, and starting bids. In this study. we developed Internet-based data collection software and collected data on transactions of notebook computers, each of which had a winning bid of over W one million. Data analysis with a logistic regression model revealed that starting bids, sellers' credit, and auction length were significant in detecting the phantom transactions.

• Proceedings of the CALSEC Conference
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• 2004.02a
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• pp.75-82
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• 2004

Recently introduced by the major credit card associations as replacements for the decommissioned SET and 3DSET protocols, the new payment models, 3DSecure and UCAF/SPA, have been designed to provide online merchants with a solution to an existing problem in online credit card transactions - the lack of an effective and efficient means of authenticating cardholders. The expected benefits arising from this added level of security from the merchant′s perspective are increased consumer confidence, significant reduction in the levels of fraud and charge backs and "liability shift". Using data gleaned from preliminary interviews, discussion forums and promotional material, we present a critical analysis of the potential barriers and facilitators that will impact on the widespread traction of these programs in the marketplace in the coming years.

• Proceedings of the Korean Operations and Management Science Society Conference
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• 2004.10a
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• pp.68-98
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• 2004

Although the internet is useful for transferring information, Internet auction environments make fraud more attractive to offenders because the chance of detection and punishment are decreased. One of fraud is phantom transaction which is a colluding transaction by the buyer and seller to commit illegal discounting of credit card. They pretend to fulfill the transaction paid by credit card, without actual selling products, and the seller receives cash from credit card corporations. Then seller lends it out buyer with quite high interest rate whose credit score is so bad that he cannot borrow money from anywhere. The purpose of this study is to empirically investigate the factors to detect of the phantom transaction in online auction. Based up on the studies that explored behaviors of buyers and sellers in online auction, bidding numbers, bid increments, sellers' credit, auction length, and starting bids were suggested as independent variables. We developed an Internet-based data collection software agent and collect data on transactions of notebook computers each of which winning bid was over 1,000,000 won. Data analysis with logistic regression model revealed that starting bids, sellers' credit, and auction length were significant in detecting the phantom transaction.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.42
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• pp.133-160
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• 2009

In International trade the buyer and seller are normally separated from on another not only by distance but also by differences in language and culture. It is rarely possible for the performance of obligations to be simultaneous and the performance of contracts therefore calls for trust in a situation in which the parties are unlikely to feel able to trust each other unless they have a longstanding and successful relationship. Thus the seller under an international contract of sale will not wish to surrender documents of title to goods to the buyer until he has at least an assurance of payment, and no buyer will wish to pay for goods until he has received them. A gap of distrust thus exists which is often bridged by the undertaking of an intermediary known and trusted by both parties who will undertake on his own liability to pay the seller the contract price in return for the documents of title and then pass the documents to the buyer in return for the reimbursement. This is a common explanation of the theory behind the documentary letter of credit in which the undertaking of a bank of international repute serves as a "guarantee" to each party that the other will perform his obligations. The independence principle, also referred to as the "autonomy principle", is at the core of letter of credit or bank guarantee law. This principle provides that the letter of credit or bank guarantee is independent of the underlying contractual commitment - that is, the transaction that the credit is intented to secure - between the applicant and the beneficiary ; the credit is also independent of the relationship between the bank and its customer, the applicant. The most important exception to the independence principle is the doctrine of fraud in the transaction. A strict interpretation of the rule that the guarantee is independent of the underlying transaction would lead to the conclusion that neither fraud nor manifest abuse of rights by the beneficiary would constitute an objection to payment. There is one major problem related to "Independent guarantees", namely abusive or unfair callings. The beneficiary may make an unfair calling under the guarantee. The countermeasure of beneficiary's unfair calling divided three cases. First, advance countermeasure namely by contract. In other words, when the formation of the contract, the parties must insert the Force Majeure Clause, Arbitration Clause to Contract, and clear statement to the condition for demand calling. Second, post countermeasure namely by court. Many countries, including the United States, authorize the courts to grant an order enjoining the issuer from paying or enjoining the beneficiary from receiving payment under the guaranty letter. Third, Export Insurance. For example, the Export Credit Guarantees Department is prepared, subject to certain conditions, to cover the risk of unfair calling. Of course, KEIC in Korea is cover the risk of the all things for guarantees. On international projects, contractor performance is usually guaranteed by either a standby letters of credit or Independent guarantee. These instruments will be care the parties.