Public Procurement Service Expels 'Nominally' Domestic Products from Excellent Procurement Market

[Asia Economy (Daejeon) Reporter Jeong Il-woong] Items primarily using foreign-made components will no longer be allowed to enter the Excellent Procurement Market.

The Public Procurement Service announced on the 9th that it has established the "Detailed Guidelines for Designating Excellent Procurement Items Using Foreign Components to Promote the Development and Use of Domestic Components," which will be applied starting from the 1st of next month.

The guidelines focus on preventing situations where some companies excessively use foreign components yet receive designation as excellent procurement items and supply them to the market.

This aligns with the original purpose of the Excellent Procurement Item system (introduced in 1996), which supports continuous technological development by designating technology-developed products from small and venture companies as excellent procurement items and concluding direct contracts to support public market access.

The core of the guidelines is to exclude from designation as excellent procurement items those cases where the total amount of foreign components in direct material costs exceeds 50% of the manufacturing cost.

However, the Public Procurement Service explained that basic materials that become finished products or components after certain processing (such as yarn for artificial turf or wood powder for synthetic wood, materials that are difficult to function without processing) will not be included in the assessment of foreign origin.

Additionally, considering companies' production conditions such as supply chain issues, exceptions will be applied on a case-by-case basis. Exceptions apply when domestic companies produce components at overseas factories they own or when domestic production is not possible due to market conditions causing supply shortages.

Furthermore, the guidelines allow flexibility to recognize exceptions after a certain review process if it is difficult to secure performance and quality with domestic components or if companies request exception recognition based on reliable data.

Jong-wook Lee, Administrator of the Public Procurement Service, stated, “For domestic small and venture companies to enhance technological competitiveness and effectively respond to supply chain crises, it is necessary to more actively develop and use domestic components. We expect that the implementation of these guidelines will be an important opportunity to replace foreign components with domestic components in public procurement items.”