Concept

1. Major raw meterials

• It includes raw materials (Natural material, compound, processed material and intermediate goods but not limited thereto) to be used for production of goods by comissioned enterprise, and means the raw materials of which cost are over 10% of the delivery price.

  ① Natural materials

  <Examples of natural material>
  Natural Materials : Gold, copper, aluminum, natural rubber, lead, zinc, tin, nickel, coal, crude oil, hardwood etc.

  ② Compounds

  <Examples of compounds>
  Polyethylene, polypropylene and polyvinyl chloride chloride (PVC) etc.

  ③ Substances made of natural materials or compounds for industrial supplies

  <Examples of natural material or compound which is processed for industrial purpose>
  Metal, metal plate, aggregate, Timber cement, ready-mixed concrete, concrete, pig iron, asphalt, chemical fiber, synthetic resin and etc.

  ④ Intermediate goods purchased by the comissioned enterprise for use in the process of carrying out entrusted manufacturing

  <Examples of Intermediate goods purchased for use in the manufacturing process>
  Automobile parts, electric and electronic parts, mechanical parts, petrochemicals, steel, screws, tires, electric sensors and lamps, system semiconductors, electric motors, generators, transformers, modules, semi-finished goods etc.

2. Transaction effected on consignment and commission

• The term "transaction effected on consignment and commission" means a trade in which anyone who runs business of manufacture, construction work, processing, repair, sales, or services commissions the manufacture, construction work, processing, repair, services, or technology development (hereinafter referred to as "manufacture") of goods, parts, semi-finished goods, raw materials, etc. (hereinafter referred to as "goods, etc.") to any other small-medium enterprise and the commissioned small-medium enterprise manufactures the goods, etc. in a specialized manner

  (Clause 4 Article 2 in Act On The Promotion Of Mutually Beneficial Cooperation Between Large Enterprises and Small and medium Enterprises)

• A middle-standing enterprise prescribed by Presidential Decree, in a transaction relationship created on consignment and commission with a company belonging to an enterprise group subject to the limitations on mutual investment under Article 31 (1) of the Monopoly Regulation and Fair Trade Act, shall be construed as a commissioned enterprise under Articles 21 through 23, 25 (1), and 27 (1) of the Act on the Promotion of Mutually Beneficial Cooperation between Large Enterprises and Small and Medium Enterprises.

  (Article 13 in 「Special Act On The Promotion Of Growth And The Strengthning of Competitiveness Of Middle-Standing Enterprises」)

“Middle-standing enterprises prescribed by Presidential Decree” means middle-standing enterprises, the average turnover or annual turnover of which (hereinafter referred to as “average sales, etc.”) is less than 300 billion won.
(Article 6 in 「Enforcement Decree Of The Special Act On The Promotion Of Growth And The Strengthning of Competitiveness Of Middle-Standing Enterprises」)

• The following examples are included in the scope of "providers for doing business on production, construction, processing, repair, selling and service."

• "Doing as a business" means the continuous and repetitive conduct of economic activities, regardless of whether they are for profit or non-profit purposes. This involves engaging in economic actions in response to the supply of certain economic benefits and receiving corresponding economic benefits in return.

• For this matter, business registration, sales creation from such business and whether independent goods and services are supplies in business are comprehensively considered for decision.

• "Commissioning enterprise" is an enterprise doing business for production, construction, processing, repair, sales and service by comissioning production of goods, parts, semi-products and raw material, construction, processing, repair, service or technology development to small and medium companies.

• Foreign Corporations are allowed, and bigger annual sales turnover than subcontracting company is not required.

• "Commissioned enterprise" means specialized small and medium companies in production, construction, processing, repair, service and technology development by comissioning production of goods, parts, semi-products and raw material, construction, processing, repair, service or technology development from contracting company.

• The enterprises classified for group of enterprises restricted from mutual investment according to ｢Special Act on Expediting Growth and Strengthening on Competitiveness of Middle Standing Enterprises」), and middle standing enterprises related to contracting·sub-contracting trade less than average sales turnover or annual sales turnover in 300 billion Korean Won are included.

※ Commissioning enterprise may not describe the details on delivery price indexation on the agreement in case of the reasons defined in Clause 3 Article 21 of Act On The Promotion Of Mutually Beneficial Cooperation Between Large Enterprises and Small and medium Enterprises