Korea Tire Ranks First in Delayed Subcontract Payment

Fair Trade Commission Reviews Subcontract Payment Terms Disclosure
Targeting 1,210 Companies in 80 Groups
Hanta and Kumho Petrochemical Show Low Cash and Cash Equivalent Payment Ratios
Korea GM 0% Payment Within 30 Days

Among large business groups, the company that most frequently exceeds the deadline for subcontract payment is Hankook Tire. DN, Hite Jinro, and Booyoung had cash payment ratios for subcontract payments below 30%.

On the 28th, the Korea Fair Trade Commission (KFTC) announced the results of the "2023 First Half Subcontract Payment Terms Disclosure Inspection." The KFTC conducted inspections on a total of 80 groups and 1,210 companies, revealing that the average cash payment ratio for subcontract payments in the first half of last year was 84.02%.

Including cash, checks, and win-win payment and substitute promissory note methods with a maturity of 60 days or less, the cash-equivalent payment ratio was recorded at an average of 97.2%, indicating a relatively high cash and cash-equivalent payment ratio.

[Image source=Yonhap News]

By business group, 23 groups including Hanjin, Kakao, Naver, S-Oil, and Janggeum Shipping paid 100% of subcontract payments in cash.

On the other hand, DN (6.8%), Hite Jinro (27.2%), and Booyoung (27.4%) had relatively low cash payment ratios. Companies with low cash-equivalent payment ratios included Kumho Petrochemical (54.6%), IS Holdings (68.2%), Celltrion (72.4%), and Bando Holdings (74.56%).

The payment period for subcontract payments was most commonly within 10 days at 47.7%, followed by 11?15 days at 20.4%, and 16?30 days at 19.0%. Cases exceeding the 60-day payment deadline stipulated by the Subcontracting Act accounted for 0.4%.

The ratio of payments made within 10 days was highest for LG (87.93%), Korea Aerospace Industries (82.59%), and KT&G (81.70%), while the ratio of payments made within 15 days was highest for Hoban Construction (99.12%), LG (93.84%), and Doosan (93.33%).

The company with the highest ratio of payments exceeding 60 days was Hankook Tire (17.1%), followed by LS (8.6%) and Global Seara (3.6%).

Korea GM had a 0% ratio of subcontract payments made within 30 days, meaning all payments were made more than 30 days after receipt of the goods.

Only 3% (98 companies) of all businesses had established dispute resolution bodies to handle subcontract payment disputes. By business group, Samsung (14), Amorepacific (9), Hyundai Department Store (9), Lotte (6), and Hyundai Motor Company (6) were operating dispute resolution bodies.

The obligation for disclosure of subcontract payment terms by publicly disclosed business groups was first introduced with the 2022 amendment to the Subcontracting Act. This payment terms disclosure is the first implementation case since the system was introduced. Principal businesses subject to disclosure must report the payment amounts by payment method and payment period, as well as matters related to dispute resolution bodies, every half year.

The KFTC imposed fines ranging from 250,000 to 1,000,000 KRW on seven businesses including TRN, TCS, and HD Hyundai Site Solution for delayed disclosure beyond the deadline. For 95 businesses where simple omissions or errors were found in the disclosure content, correction disclosures were guided.

The KFTC stated, "We will continue education and promotion related to the subcontract payment disclosure system to ensure its swift establishment and will continuously monitor compliance."

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