Ministry of SMEs and Startups Initiates 'Legislation' to Perfect the Payment Linkage System for Supply Prices

[Asia Economy Reporter Choi Dong-hyun] The Ministry of SMEs and Startups has officially begun the legislative process to finalize the 'Delivery Payment Linkage System.' This follows the release of the standard special agreement related to the linkage system last month and the commencement of a pilot operation based on voluntary agreements starting this month.

According to a comprehensive report by Asia Economy on the 15th, the Ministry of SMEs and Startups commissioned a research project just before the Chuseok holiday to prepare amendments to subordinate laws under the Win-Win Cooperation Act related to the delivery payment linkage system. The bills related to the linkage system submitted to the National Assembly by both ruling and opposition parties are largely divided into the Win-Win Cooperation Act and the Subcontracting Act. The Ministry of SMEs and Startups oversees the Win-Win Cooperation Act, while the Fair Trade Commission is responsible for the Subcontracting Act. A ministry official stated, "We do not yet know which bill will pass, but we aim to quickly prepare proposals on matters delegated to subordinate laws under our jurisdiction to prepare for legislation," adding, "This marks the first step toward legislating the linkage system."

The Ministry is primarily preparing detailed criteria for the application targets of the linkage system. Currently, there is no clear standard on which industries and raw materials will be included as subjects of the linkage system. This is because the rate of increase varies by raw material item, and the positions of first- to third-tier partners in each industrial sector differ greatly. Accordingly, the ministry plans to derive appropriate application criteria by considering factors such as the proportion of raw material costs in delivery payments, transaction scale, delivery period, and analyzing domestic and international cases.

They also plan to examine the rate of raw material price fluctuations that trigger the implementation of the linkage system. As of the end of last month, bills related to the linkage system referred to the National Assembly's Special Committee on Livelihood Economy Stabilization include six under the Win-Win Cooperation Act and six under the Subcontracting Act. Generally, the ruling party proposes reflecting price changes in unit prices when raw material prices rise or fall by 10% or more, while the opposition party suggests setting a base price and applying a corresponding ratio. A ministry official said, "It is crucial to set appropriate conditions because adjusting delivery payments even when raw material prices change minimally could increase the burden on companies," and added, "We will establish suitable standard fluctuation rates by referring to overseas cases."

The ministry also plans to specify methods for adjusting delivery payments between primary contractors and subcontractors. According to Article 1 of the 'Delivery Payment Linkage Special Agreement' disclosed by the ministry last month, items such as the goods subject to adjustment, main raw materials, raw material price reference indicators, reference and comparison points in time, adjustment conditions, adjustment cycles, adjustment dates, timing of reflecting adjusted payments, and the formula for linkage of delivery payments are not separately provided but are left for the contracting companies to mutually decide. This could make it difficult to establish fair contracts due to the unequal power structure between primary contractors and subcontractors. The ministry intends to derive a specific formula that serves as the basis for reflecting raw material price fluctuations in payments.

The Ministry of SMEs and Startups plans to complete this research within the year and coordinate with political circles to ensure smooth passage of the bill. However, since a six-month pilot operation of the linkage system is underway starting this month, the bill's passage may occur after the pilot ends. Regarding this, a ministry official said, "The pilot operation and legislation are separate matters," and added, "We do not know when any law will pass, but we are preparing with the expectation that it could happen by the first half of next year."

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