Fair Trade Commission Reflects Standard Contract to Require Confidentiality Agreement When Providing Technical Data at Principal Contractor's Request

2021 Revision and Establishment of Standard Subcontract Agreements for 14 Industries

[Sejong=Asia Economy Reporter Joo Sang-don] Going forward, when a subcontractor provides technical data at the request of the original contractor, it is mandated by the standard contract to enter into a confidentiality agreement.

On the 26th, the Fair Trade Commission announced that it has newly established and revised the standard subcontract contracts for 14 industries in the manufacturing, construction, and service sectors to promote and establish fair subcontract transaction order.

The standard subcontract contract is a contract established and distributed by the Fair Trade Commission to ensure balanced transaction conditions between the original contractor and the subcontractor and to induce fair subcontract transaction order. It is currently distributed across 48 industries.

This year, the standard subcontract contracts for the mold manufacturing industry, requested by related business organizations, and the coastal cargo transportation industry, whose necessity was raised through a written survey, were newly established.

Additionally, to properly reflect changes in transaction realities and market conditions, 12 industries including fire facility construction, landscaping planting, chemical, primary metals, medical devices, precision optical instruments, publishing and printing, rubber and plastics manufacturing, textiles, food and beverages, rebar processing, and engineering activities were revised.

In particular, the main contents of the 'Subcontract Mold Transaction Guidelines' were reflected in the standard subcontract contracts of the chemical, medical device, precision optical instruments, and primary metals industries, which have a high proportion of mold usage, following the four industries (machinery, automobile, electrical, electronics) from the previous year.

First, common to all 14 industries, when a subcontractor provides technical data to the original contractor, a provision was specified that obligates the original contractor to enter into a confidentiality agreement with the subcontractor regarding the technical data. Also, as the recognition criteria for technical data changed from 'data kept confidential through reasonable efforts' to 'data managed as confidential,' this was reflected in the contract definition clause. Along with this, if the original contractor refuses to receive the deliverables, the subcontractor is allowed to complete the necessary measures for delivery at their own business site and demand the original contractor to receive them.

In the mold manufacturing industry, it was specified that if the original contractor and subcontractor agree on the payment ratio of advance and interim payments to enable the subcontractor to recover initial costs after manufacturing and delivering the mold, this should be recorded on the contract cover at the time of contract signing. There was an issue that since over 70% of costs are required early in mold manufacturing, delayed recovery exacerbates management difficulties due to a shortage of working capital for the subcontractor. It was also stipulated that when the original contractor uses the delivered mold to produce prototypes, the agreed advance and interim payments must be made.

In the maritime transportation industry, it was specified that the subcontract transaction price between the original contractor and subcontractor should be determined reflecting supply costs and that this should be stated in the preamble. Also, if there is a significant increase in fuel prices used on ships, or delays in delivery due to the responsibility of the shipper or original contractor, natural disasters, or labor strikes, the subcontractor may request price adjustments from the original contractor.

A Fair Trade Commission official said, "Through this establishment and revision of the standard subcontract contracts, the difficulties raised by original and subcontractors have been detailed and reflected, so both parties are expected to conduct business activities under more balanced transaction conditions." He added, "In particular, mold manufacturers will be able to receive payment faster than before after delivering molds, and subcontractors in the coastal cargo transportation industry are expected to receive fair payments reflecting supply costs such as fuel."

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