SME Wish 'Delivery Price Linkage System' Pilot Operation from September

Lee Young, Minister of SMEs and Startups

[Asia Economy Reporter Donghyun Choi] The long-awaited "Delivery Price Linkage System" (hereinafter referred to as the linkage system) by small and medium-sized enterprises (SMEs) will enter full-scale pilot operation starting this September.

The Ministry of SMEs and Startups announced on the 11th that it held a 'Delivery Price Linkage System TF Meeting' at the Foundation for Large and Small Business and Agricultural and Fishery Cooperation, with participation from industries including large and small businesses and experts. The meeting, chaired by Minister Lee Young of the Ministry of SMEs and Startups, was organized to conduct final discussions on the pilot operation plan of the linkage system and the special agreement to promote the introduction and expansion of the linkage system.

Minister Lee said, "Today, four days before the 77th Liberation Day, is the day to declare liberation from the burden of rising raw material prices that SMEs had to bear alone," adding, "We will open the door to coexistence and start a new leap forward by beginning the pilot operation of the linkage system."

Finalization of Special Agreement on Delivery Price Linkage

The Ministry of SMEs and Startups plans to create a business culture where matters related to delivery price linkage are pre-negotiated between companies and recorded in a 'special agreement' to ensure that delivery prices for SMEs can be properly adjusted in the future.

To prepare a special agreement that can function effectively in the field, the Ministry collected industry opinions through eight rounds of meetings and practical review sessions with companies currently operating the linkage system, conducted research projects, and sought legal advice. They also coordinated with the Fair Trade Commission (FTC) to unify the main contents of the special agreement.

The Ministry of SMEs and Startups and the FTC agreed to recognize special agreements regardless of which ministry’s form companies use.

The role of the special agreement is to inform companies wishing to introduce the linkage system about the specific matters to be pre-negotiated and to support easier conclusion of contracts including delivery price linkage clauses by having these matters recorded through inter-company consultations.

To fulfill this role, the special agreement is structured into a main text that stipulates the purpose, definitions, and effectiveness, and an annex where companies record the necessary details for delivery price linkage.

The items to be recorded in the special agreement include product name, main raw materials, price reference indicators, adjustment conditions, adjustment cycle, and the formula for delivery price linkage.

By utilizing the special agreement, both consignors and consignees can operate the delivery price linkage system as they desire.

The Ministry plans to provide detailed guidance in a future guidebook since various methods of linking delivery prices to raw material prices are possible.

A representative from a large company attending the TF meeting said, "The special agreement will be the starting point of the linkage system," and added, "We will actively utilize it when concluding contracts in the future."

Pilot Operation of the Linkage System Starting in September

The pilot operation of the delivery price linkage system will begin in September and its performance will be reviewed after six months.

The pilot operation means concluding consignment contracts using the 'Special Agreement on Delivery Price Linkage' and adjusting delivery prices according to the contents of the special agreement.

Contracts between companies can be for one year or longer. Partial modifications of the special agreement or the use of the FTC’s 'Subcontract Payment Linkage Contract' are also recognized.

The pilot operation will be based on voluntary participation by large companies and others. Companies will be encouraged to use the special agreement when drafting actual contracts. The Ministry will promote participation through briefings and recruit participating companies for two weeks from the 12th to the 26th, selecting about 30 companies by the end of August. In early September, a voluntary promotion agreement ceremony will be held with the selected companies to announce the start of the linkage system.

Incentives will also be provided to companies participating in the pilot operation. In the second half of this year, commendations will be awarded to participating companies first, and from 2023, various incentives from the Ministry of SMEs and Startups will be provided, including preferential evaluation for government awards, preferential selection for smart factory support projects, and an increase in the maximum loan limit for SME policy funds up to 10 billion KRW.

Furthermore, until February 2023, when the pilot operation’s performance will be reviewed, continuous consultations with related ministries will be held to discover additional incentives and verify delivery price adjustment records to grant incentives. Systematic support such as providing raw material price information and training on the use of the standard special agreement will also be promoted to facilitate smooth implementation by participating companies.

The Ministry also plans to promote the continuous expansion of the delivery price linkage system. It will disseminate successful cases from the pilot operation and conduct promotional activities to raise awareness of the delivery price linkage system. The voluntary promotion agreement will be continuously pursued until the pilot operation is established as a corporate culture rather than a one-time event.

Surveys on satisfaction with the delivery price linkage system and identification of difficulties will be conducted among participating companies, and necessary improvements and supplements will be reflected in the special agreement to enhance field acceptance.

Minister Lee stated, "Through this special agreement and pilot operation, we will make the delivery price linkage system, which has been a long-standing wish of the SME sector for the past 14 years, a reality," and added, "This will be the first step to solving the problem where SMEs could not reflect raw material price surges in delivery prices."

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