Regulatory Free Zones Expanded to Basic Local Governments... Approval of 'Regional Special Zone Act' Amendment

Expansion of Eligibility for Regulatory Free Zone Applicants
Extension of Demonstration Exception Validity Period by 2 More Years

The eligibility for applying to the Regulatory Sandbox Special Zones will be expanded from heads of metropolitan local governments to heads of basic local governments.

The Ministry of SMEs and Startups announced that the partial amendment bill of the "Act on Regulatory Exceptions for Regulatory Sandbox Special Zones and Regional Specialized Development Zones" (hereinafter referred to as the Regional Special Zones Act) for improving the Regulatory Sandbox Special Zones system was approved at the Cabinet meeting on the 30th.

The Regulatory Sandbox Special Zones are areas where all or part of existing regulations are not applied to develop products and services using new technologies in the region, allowing regulatory exceptions such as demonstration exceptions and temporary permits. First implemented in 2019, 34 special zones were designated across 14 non-metropolitan cities and provinces, and currently, 28 special zones are in operation.

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The main content of this amendment to the Regional Special Zones Act includes expanding the eligibility to apply for Regulatory Sandbox Special Zones from heads of metropolitan local governments to heads of basic local governments. This expansion of eligibility is an improvement to maximize the utilization of regional resources and capabilities, and it is expected to discover a wider variety of special zone types.

Additionally, to provide companies with sufficient demonstration opportunities, the validity period of demonstration exceptions in Regulatory Sandbox Special Zones will be extended from the current maximum of 4 years to 6 years (from 2+2 years to 4+2 years). The initial validity period of demonstration exceptions will be extended from 2 years to 4 years, allowing companies to receive a maximum demonstration period of 6 years (4+2 years) going forward.

This extension is based on requests that the current 4-year (2+2 years) demonstration period is insufficient for large-scale projects or industries requiring long-term observation, such as carbon neutrality and the medical field, to prove safety and technological feasibility.

Furthermore, to enable prompt legal revisions upon proving safety through demonstrations, regulatory agencies will be required to submit legal revision plans. When a special zone operator proves safety through demonstrations to resolve regulations quickly, the regulatory agency must establish a legal revision plan and submit it mandatorily to the Minister of SMEs and Startups.

Also, if legal revisions are delayed, the Regulatory Sandbox Special Zone Committee will be able to recommend prompt legal revisions to the regulatory agencies, thereby strengthening the enforceability of legal revisions.

Other improvements include ▲establishing re-examination procedures for demonstration exceptions and temporary permits ▲shortening procedures for special zone plans and designation changes (public notice and ministry consultation each reduced from 30 days to 15 days) ▲providing grounds for participation of businesses outside the special zone area (upward legislation) ▲updating regulatory exceptions ▲extending the initial validity period of temporary permits (from 2+2 years to 3+2 years) ▲and introducing an exemption clause for proactive administrative actions.

The Ministry of SMEs and Startups expects that this legal amendment will strengthen the regional characteristics of the Regulatory Sandbox Special Zones, improve convenience for companies using demonstration exceptions, and enhance the enforceability of regulatory improvements. As the bill for system improvement is enacted, they plan to promptly revise subordinate statutes and prepare accordingly.

The amendment to the Regional Special Zones Act will be promulgated on February 6 and will take effect six months later.

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