Implementation of Payment Linkage System for Delivery Fees Begins in Full from the 4th

Minister Lee Young, Ministry of SMEs and Startups. [Photo by Yonhap News]

The delivery price linkage system will be fully implemented starting from the 4th. The delivery price linkage system is a mechanism that mandates the creation of linkage contracts to reflect a certain level of raw material price increases in the delivery price.

The Ministry of SMEs and Startups announced on the 3rd that the revised "Act on the Promotion of Mutual Growth between Large and Small-Medium Enterprises" (Mutual Growth Act), which includes the delivery price linkage system as a key provision, will take effect from the 4th.

The linkage system is the Yoon Seok-yeol administration’s “No. 1 law for walking with the weak.” The revised Mutual Growth Act containing this law was promulgated on January 3rd. The purpose of the linkage system is to prevent subcontractors from bearing losses alone when raw material prices rise after entering into subcontracting contracts and to stop the vicious cycle that leads to supply chain instability.

On February 8th, at the opening ceremony of the linkage system roadshow, the Ministry of SMEs and Startups announced a goal to recruit 6,000 companion companies voluntarily practicing the linkage system by the end of the year to achieve on-site stabilization. Since May, the number of companies applying to become companion companies has surged, and as of the 26th of last month, a total of 6,533 companies have applied. Achieving the goal about three months ahead of schedule appears to reflect the field’s recognition of the necessity of the linkage system. Over the past eight months, the Ministry has visited companies individually and held a total of 143 roadshows, focusing on raising awareness of the linkage system on-site.

The companion companies include 327 commissioning companies and 6,206 subcontracting companies. It has been identified that many commissioning companies, which previously participated with a small number of partners, are increasingly expanding the linkage system to more partners.

Once the linkage system is implemented, companies entering into or renewing subcontracting contracts involving major raw materials must sincerely negotiate matters related to linkage unless they fall under exceptions to the linkage agreement. Commissioning companies must include linkage-related matters in the contract and issue it to subcontracting companies.

If a commissioning company issues a contract without including linkage-related matters, a fine of 10 million KRW and penalty points ranging from 1.5 to 3.1 may be imposed depending on the type of disciplinary action. Furthermore, if a commissioning company evades the application of the linkage system through fraudulent means, a maximum fine of 50 million KRW and 5.1 penalty points may be imposed.

However, the Ministry of SMEs and Startups plans to operate the linkage system focusing on voluntary correction and guidance rather than punitive measures. Penalty points can be reduced by up to 2 points based on the performance of delivery price linkage, and companies selected as excellent linkage companies can receive up to a 50% reduction in fines. The guidance period will run until the end of this year, during which no ex officio investigations related to delivery price linkage will be conducted.

Considering concerns from the SME sector about contract splitting and forced non-linkage agreements, the Ministry will open and operate the “Delivery Price Linkage Anonymous Reporting Center” starting from the 4th. This is to prepare for cases where violations are not properly reported due to fear of retaliation. The anonymous reporting center will be established on the “Comprehensive Portal for Subcontracting Transactions.” Reporters do not need to enter personal information, and IP addresses will not be collected, ensuring anonymity. Additionally, reported commissioning companies will be included in regular or ad hoc investigations to ensure the reporter’s identity is not exposed.

If offline consultation related to the linkage system is needed, inquiries can be made to the “Delivery Price Linkage Consultation Support” at each regional Small and Medium Venture Business Administration. Telephone consultation is also available through the “Integrated SME Call Center 1357” under the “Inquiry on Reporting Unfair Trade between Companies.”

Lee Young, Minister of SMEs and Startups, said, “Beyond legalization, the primary goal of on-site stabilization has been achieved. Now, I hope we can continue this miraculous change together so that the linkage system operates effectively on-site without any blind spots.”

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