"Core of Finished Product Manufacturing 'Geumhyeong': Pre-Notification and Cost Settlement Before Recovery"

Fair Trade Commission Establishes 'Guidelines for Establishing Model Subcontract Mold Transaction Practices'

[Asia Economy Reporter Moon Chaeseok] The Fair Trade Commission announced on the 21st that it has refined the cost-sharing standards and retrieval procedure system to prevent the original business operator from unilaterally retrieving molds or shifting maintenance and repair costs to subcontractors.

The "Subcontract Mold Transaction Guidelines" will be established on the 22nd. The guidelines were created to present management and cost settlement-related matters that the original business operator must observe when entrusting subcontractors with the production of finished products using molds.

First, prior consultation matters and cost-sharing standards for mold use and management were presented.

To prevent unfairly shifting costs to subcontractors, the party responsible for mold costs must be consulted in writing in advance. Specific cost-sharing standards for various situations were presented.

Maintenance and repair costs, storage costs, and other mold management cost responsibilities, methods of mold cost settlement, and settlement deadlines must be agreed upon in writing in advance.

Additionally, specific cost-sharing standards between the original and subcontractors were presented for situations where disputes may arise during mold use and management.

For example, if mold use is suspended due to a product design change by the original business operator, the original business operator must bear all mold storage fees, maintenance and repair costs, and remanufacturing costs incurred during the subcontractor's maintenance and storage process.

Procedures and compliance requirements for mold retrieval and return were also established.

The original business operator is obligated to notify the subcontractor in writing in advance of the retrieval timing and method, increasing predictability regarding mold retrieval.

The original business operator must notify the subcontractor of the retrieval timing at least 30 days before the mold usage period expires or immediately after contract cancellation or termination.

When the contract is canceled or terminated and the original business operator retrieves the mold, the original business operator must set the retrieval timing with a grace period from the cancellation or termination date to minimize damage to the subcontractor.

Furthermore, if mold cost settlement between the original and subcontractors is not completed or if the subcontractor exercises a lien on the mold due to disputes over subcontract payments, the original business operator is prohibited from retrieving the mold.

Other compliance matters during mold use and management stages were also established, such as the party to whom ownership of the mold belongs upon production and the subcontractor's duty of care as a good manager.

Jung Changwook, Director of the Corporate Transaction Policy Division at the Fair Trade Commission, explained, "This guideline is significant in that it is the first time the Fair Trade Commission has presented standards and procedures for mold transactions in the subcontracting field and resolved issues by inducing exemplary transaction practices in the form of a soft rule rather than regulatory measures."

Director Jung added, "It is expected that the possibility of disputes will decrease as a result of this guideline."