Police Investigate Supplier of 'Military Truck Engines' Over Price Inflation Allegations

Suspicion of Inflated Import Prices Through Label Switching

The police are investigating Kwangrim Co., Ltd. and Wooyoung Industry, which supply trucks equipped with military weapons. On the 4th, a government official stated, "After investigating the engines of trucks equipped with weapons for the Air Force and Navy aircraft last year, it was found that new engines had labels of discontinued old engines attached, and the case was referred to the police for investigation." There are also suspicions of inflated supply prices.

Kwangrim Co., Ltd. was designated as a defense contractor in 1991. From 2009 to 2022, it signed 15 contracts totaling 40.8 billion KRW and supplied about 400 trucks equipped with weapons to the military. The issue was with the engines. The truck engines were produced by Deutsche AG in Germany, and Wooyoung Industry secured exclusive domestic distribution rights and supplied them to Kwangrim Co., Ltd. Deutsche ceased production of the old engines in 2008 and started producing new engines. However, the new engines supplied to the military afterward had old engine labels attached. The Defense Technology Quality Institute has stated that there is no problem with quality for now. However, the police plan to investigate on suspicion that a so-called 'label swapping' was done to maintain the existing engine price.

If the new engine is cheaper than the old engine, it could be a case of cost inflation. Wooyoung Industry has not disclosed the prices of the old and new engines, citing trade secrets. The Defense Acquisition Program Administration (DAPA) also does not have direct contracts with Wooyoung Industry, so it cannot verify import declaration certificates. However, according to import declarations submitted by the Customs Service to the National Assembly, Wooyoung Industry imported engines from Deutsche in 2014 at 4.3 million KRW (2,090 euros) per unit and supplied them to Kwangrim at 7.8 million KRW. From 2015, the engine supply price was raised to 8 million KRW.

A military official said, "According to cost contract regulations, overseas imports under 500 million KRW do not require submission of cost data," adding, "The regulations should be revised to mandate importers to submit cost data."

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