Ministry of SMEs and Startups - Fair Trade Commission Communicate On-site Ahead of 'Delivery Payment Linkage System'

Introducing companies can use the standard integration contract
Various benefits available for voluntary adoption by October

Companies adopting the payment linkage system can now use the standard linkage contract prepared by the Ministry of SMEs and Startups and the Fair Trade Commission. If companies voluntarily implement the linkage system by October and demonstrate excellent linkage performance, they will receive various benefits, including a temporary exemption from next year’s surveys on consignment and subcontract transactions.

Minister Lee Young of the Ministry of SMEs and Startups (left) is holding a meeting with Han Ki-jung, Chairman of the Fair Trade Commission, on March 21 at the Seoul Creative Economy Innovation Center in Yongsan-gu, Seoul, to jointly promote the on-site establishment of the payment linkage system for supply prices.
[Photo by Yonhap News]

Ministry of SMEs and Startups and Fair Trade Commission Introduce Standard Linkage Contract

On the afternoon of the 11th, Minister Lee Young of the Ministry of SMEs and Startups and Chairman Han Ki-jung of the Fair Trade Commission held a communication session with partner companies voluntarily participating in the payment linkage system at LG Science Park in Seoul. The payment linkage system will be implemented from October 4th.

At this meeting, the Ministry of SMEs and Startups and the Fair Trade Commission introduced a unified standard linkage contract that companies can use when adopting the linkage system. This aims to enhance understanding among companies introducing the system for the first time and to facilitate smooth contract signing. The standard linkage contract includes details such as the price index of raw materials that serves as the basis for price fluctuation and linkage, the main raw materials subject to linkage, adjustment conditions and linkage formulas, how to prepare the linkage table, linkage procedures, methods for raw materials exempt from linkage obligations, and prohibition of illegal acts.

They also distributed a standard non-linkage contract for cases where both parties agree not to link certain major raw materials subject to linkage, specifying the purpose and reasons. When concluding a non-linkage contract, the names of the non-linked raw materials, an overview of consultations between parties, and reasons for non-linkage must be clearly stated. It also specifies that illegal acts such as abusing transactional positions to force non-linkage agreements are prohibited.

Based on the “Act on the Promotion of Mutual Cooperation between Large Enterprises and SMEs” enacted last July, the Foundation for Large, Small, and Medium Enterprises and Agriculture and Fisheries Cooperation, designated as the linkage expansion support headquarters, will continuously promote various support projects for the establishment of the payment linkage system, including pilot projects for cost verification and consulting, legal advisory support in case of disputes after linkage contract signing, and enhanced promotion of partner companies.

Various Benefits Provided to Excellent Companies Voluntarily Participating

Prior to the system’s implementation, additional incentives and support plans from the Payment Linkage Expansion Support Headquarters were announced for excellent companies voluntarily participating. Among consignment companies or original contractors participating by October, partner companies with outstanding participation performance, such as the number of participating subcontractors and the number of linkage contracts signed, will be temporarily exempted from consignment or subcontract transaction surveys for one year starting next year. However, companies that have been subject to sanctions through this year’s surveys or have ongoing cases are excluded from the exemption.

Business representatives attending the meeting requested a sufficient guidance period considering trial and error in the field. They also asked for strengthened education and promotion across companies to ensure thorough preparation, such as providing cost information for linkage contract signing, not only for consignment companies (original contractors) but also for small subcontractors (subcontractors). They urged continuous attention and the establishment of detailed guidelines on linkage system specifics, such as setting the raw material price index, which are concerns in the field.

Minister Lee said, “Although the number of partner companies voluntarily participating in the linkage system has recently increased sharply, participation from many large companies and affiliates is still insufficient. We have prepared additional incentives that large companies can also feel. The concerns from the SME sector about misuse of small contracts, short-term contracts, and non-linkage agreements should also be kept in mind by large and medium-sized companies.”

Chairman Han emphasized, “It is important that large and small enterprises grow together to stay ahead in competition and that SMEs receive fair compensation corresponding to their efforts. We will strictly respond to illegal acts such as contract splitting and forced non-linkage agreements to ensure that the efforts of companies faithfully fulfilling linkage obligations are not wasted.”

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