"Hyundai Heavy Industries Ordered to Pay 450 Million Won Including Interest for Unpaid Subcontractor Fees"

Fair Trade Commission Sanctions Hyundai Heavy Industries for Subcontracting Act Violations

A view of the Jaramijo Thermal Power Plant in Ecuador using engine cylinder heads supplied by a Hyundai Heavy Industries partner company. (Photo by Korea Fair Trade Commission)

[Asia Economy Reporter Moon Chaeseok] The Fair Trade Commission has uncovered illegal actions by Hyundai Heavy Industries for failing to pay subcontracting fees amounting to 255.64 million KRW to its partner companies. The Fair Trade Commission ordered Hyundai Heavy Industries to pay a total of 450 million KRW, including the unpaid amount of 255.64 million KRW and delayed interest.

According to the Fair Trade Commission, Hyundai Heavy Industries did not pay 255.64 million KRW in subcontracting fees and approximately 200 million KRW in delayed interest (annual rate of 15.5%) for engine cylinder heads supplied for thermal power plants by its partner companies.

Hyundai Heavy Industries received engine cylinder heads for the Ecuador Jaramijo thermal power plant from its partner companies between June and August 2011. Around October to December 2014, defects were identified in multiple parts after more than three years had passed.

Hyundai Heavy Industries unilaterally demanded that the partner companies supply replacement parts free of charge, claiming the responsibility lay with the partner companies. The partner companies refused, stating that the two-year defect warranty period had already expired and they could not acknowledge responsibility for the defects.

Subsequently, Hyundai Heavy Industries promised to pay the subcontracting fees after clarifying the cause of the defects, and the partner companies delivered 108 cylinder heads between January and February 2015. However, Hyundai Heavy Industries did not pay the subcontracting fees or delayed interest for these 108 cylinder heads.

The Fair Trade Commission viewed this as a violation of Article 13 of the Subcontracting Act and decided to impose a corrective order to prevent recurrence, as well as an order for Hyundai Heavy Industries to pay the unpaid subcontracting fees of 255.64 million KRW and approximately 200 million KRW in delayed interest.

Jang Hyerim, Director of the Manufacturing Subcontracting Improvement Division at the Fair Trade Commission, stated, "'Payment orders' are a unique system under the Subcontracting Act, which holds great significance in providing effective and prompt relief to subcontractors," adding, "It is expected to raise awareness among primary contractors about violations of the Subcontracting Act."

She continued, "The Fair Trade Commission will continue to monitor whether primary contractors comply with the Subcontracting Act to enhance the rights and interests of subcontractors, who are relatively disadvantaged."

This content was produced with the assistance of AI translation services.