LG Electronics Partners' Fair Trade Agreements Increased 2.5 Times in 3 Years

[Asia Economy Reporter Suyeon Woo] LG Electronics is actively supporting the participation of up to 3rd-tier suppliers in the Fair Trade Agreement to practice sustainable coexistence.

According to LG Electronics on the 22nd, a total of 1,551 1st to 3rd-tier suppliers have participated in the Fair Trade Agreement so far. This is 2.5 times larger than the 611 companies in 2018. LG Electronics first signed a Fair Trade Agreement with 1st-tier suppliers in 2007, the first in the domestic home appliance industry. Since 2012, it has supported the signing of Fair Trade Agreements between 1st and 2nd-tier suppliers, and since 2018, between 2nd and 3rd-tier suppliers as well.

The Fair Trade Agreement is a system where large corporations and small and medium enterprises pledge fair trade and mutual cooperation to establish an autonomous fair trade order. LG Electronics and 1st-tier suppliers use the Fair Trade Commission’s standard Fair Trade Agreement form to sign the agreement. Key agreements include payment within 10 days after issuing a tax invoice, 100% cash payment, and interest-free fund support for equipment and research and development (R&D) investments.

Between 1st and 2nd-tier suppliers and between 2nd and 3rd-tier suppliers, autonomous Fair Trade Agreements are implemented, where suppliers pay within 20 days after issuing a tax invoice, expand cash payments, and settle promissory notes within 60 days.

[Image source=Yonhap News]

LG Electronics has further strengthened the Fair Trade Agreement by expanding the Win-Win Payment System, introduced in 2015, to 3rd-tier suppliers last year. Earlier this year, it was recognized for its efforts in expanding the Win-Win Payment System and was selected as an 'Excellent Win-Win Payment Company' by the Foundation for Large and Small Enterprises and Agriculture, Forestry and Fisheries Cooperation.

The Win-Win Payment System supports the payment of goods from large corporations to 1st-tier suppliers to be extended to 3rd-tier suppliers. This system allows suppliers below the 1st tier to receive cash on the payment date, and 2nd and 3rd-tier suppliers can convert the payment into cash early based on the credit of the large corporation before the payment date, making it very useful.

Moreover, since 2010, LG Electronics has been operating a Win-Win Cooperation Fund worth 200 billion KRW together with Industrial Bank of Korea, Korea Development Bank, and others, providing benefits to suppliers who have signed the Fair Trade Agreement. Suppliers can receive low-interest loans through the Win-Win Cooperation Fund when they need funds. Until last year, only 1st and 2nd-tier suppliers were eligible, but from this year, 3rd-tier suppliers are also eligible.

LG Electronics is also leading efforts to protect suppliers’ technologies. Since 2013, it has fully supported the costs required when suppliers deposit their technologies to protect trade secrets and core technologies. Up to last year, a total of 1,290 technology deposits have been assisted.

Technology deposit is a system that reduces the risk of technology leakage by storing suppliers’ core technologies in reliable government institutions. Suppliers can invest in technology development with peace of mind, large corporations can stably receive high-quality parts, and even if suppliers go bankrupt or close, the right to use core technologies is guaranteed.

Lee Siyong, Executive Vice President and Head of Purchasing and SCM Management Center at LG Electronics, said, "We plan to create a healthy ecosystem for mutual growth by signing Fair Trade Agreements not only with 1st and 2nd-tier suppliers but also with 3rd-tier suppliers. We will continue to strive to grow together through various supplier support."

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