[2024 National Audit] Overseas Defense Companies Not Keeping Promises

Low Implementation Rate of Offset Trade by 32 Overseas Companies
14 Companies Fail to Meet Commitment Deadlines

The offset trade fulfillment rate of overseas defense companies has been found to be insufficient. Offset trade refers to reciprocal trade in which technology transfer, etc., is demanded when purchasing weapons from a weapon-selling country.

Our Air Force also obtained international certification for the Joint Terminal Attack Controller (JTAC) course in December last year, becoming the second in Asia to do so. This means it can control U.S. air firepower during wartime situations.

According to the 'Offset Trade Implementation Details' submitted by the Defense Acquisition Program Administration to Yoo Yong-won, a member of the National Assembly's National Defense Committee from the People Power Party, as of September this year, the total number of overseas defense companies required to provide technology transfer or purchase goods from domestic small and medium-sized enterprises (SMEs) as part of offset trade is 32. Among them, 24 companies were supposed to fulfill offset trade by this year, but less than half have done so. In particular, 14 companies have not fulfilled their offset trade obligations even though the implementation period has already passed.

U.S. company L3 Harris is required to provide a total of $70 million (approximately 95.2 billion KRW) as offset trade while conducting projects such as performance measurement of the Identification Friend or Foe (IFF) equipment for maritime patrol aircraft and the Joint Terminal Attack Controller (JTAC) target video receiver with South Korea. However, they have only fulfilled offset trade worth $44 million.

Lockheed Martin of the U.S. also shows a low fulfillment rate. The Republic of Korea Air Force invested about 7.77 trillion KRW to introduce a total of 40 F-35A aircraft starting with the first unit in March 2018. Through this contract, Lockheed Martin agreed to provide military communication satellites ($2.1 billion), KF-X technology transfer ($1.4 billion), and SME exports ($300 million) as offset trade to South Korea. However, it is known that Lockheed Martin refused to transfer four core technologies, including radar. The SME export fulfillment rate this year is only 26.9%.

European companies are in a similar situation. Through the Air Refueling Aircraft (KC-X) project, the Air Force introduced four Airbus A330 MRTT air refueling aircraft starting in November 2018. Airbus, which delivered the air refueling aircraft at that time, agreed to provide $662.6 million as offset trade (technology transfer $84.3 million, SME exports $536.3 million, military support $6.3 million) to South Korea. However, only $5.15 million of offset trade was achieved this year. Airbus must fulfill offset trade by 2026, but the industry believes that 100% fulfillment is practically impossible.

Assemblyman Yoo said, "It is necessary to effectively utilize the offset trade obligations secured through the introduction of overseas weapon systems for the development of the domestic defense industry by improving the fulfillment rate of offset trade by foreign companies." He also pointed out, "The relevant authorities should carefully examine the possibility of timely fulfillment of the agreed value and take multifaceted measures to address potential issues during the implementation of offset trade to ensure that the project proceeds as agreed, strengthening project management."

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