Fair Trade Commission "BYC Violated Written Issuance Requirement and Non-Payment in Indirect Supply Transactions... Correction Order Issued"

Recognition of Payment Responsibility to Consignor in Indirect Supply Transactions

[Asia Economy Reporter Joo Sang-don] The Fair Trade Commission announced on the 12th that it has decided to issue a corrective order against BYC for issuing documents missing subcontract payment details and payment methods in indirect supply transactions and for failing to pay approximately 320 million KRW in subcontract payments.

Indirect supply transactions refer to transactions where BYC, as the original contractor, entrusted manufacturing to a subcontractor, but the receipt of goods and payment were conducted through a third party.

According to the Fair Trade Commission, from around March 2017 to September 2018, BYC entrusted domestic subcontractors with the manufacturing of fabric used in finished garments produced by a sewing company located in Vietnam, conducting indirect supply transactions where the finished goods were received and payments made through the Vietnamese company. In this process, the Vietnamese company acted as a conduit, passing the fabric payment set by BYC directly to the subcontractors, without placing orders or directing work to the subcontractors.

Between March 2017 and September 2018, BYC issued documents lacking subcontract payment details, payment methods, and signatures or seals from both parties for 151 cases of fabric manufacturing entrusted to subcontractors for finished garments produced through the Vietnamese company.

This conduct violates Article 3 of the Subcontracting Act, which requires the original contractor to issue a contract document to the subcontractor before the subcontractor begins work, detailing the subcontracted goods and payment terms, with signatures or seals from both parties.

Although BYC received the goods from the subcontractors, it failed to pay subcontract payments amounting to 328.65 million KRW. The Fair Trade Commission held BYC responsible for the unpaid payments, noting that the obligation to pay lies with the original contractor and that BYC did not take appropriate measures despite continuous delays and non-payments to subcontractors.

Additionally, BYC paid 1.45788 billion KRW in subcontract payments after 60 days from the receipt of goods but failed to pay 27.42 million KRW in late interest for the overdue period.

Accordingly, the Fair Trade Commission ordered BYC to take measures to prevent recurrence of similar or identical acts in the future and to promptly pay the unpaid subcontract payments of 3.2865 billion KRW and the delayed interest to the subcontractors.

A Fair Trade Commission official stated, "This action is significant in recognizing the original contractor as the party who entrusted manufacturing, even when goods were indirectly received and payments made through a third party, thereby imposing compliance obligations under the Subcontracting Act. We expect that unfair subcontracting practices arising from unclear responsibilities in complex supply structures will improve in similar transaction relationships going forward."

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