Policy

[Enforcement date May. 4, 2022]
[Act No. 18805, Feb. 3, 2022, Partial Amendment]

Where the Minister of the Defense Acquisition Program Administration purchases munitions from abroad pursuant to the provisions of Article 19 (1), the promotion of offset trade for a unit project worth more than the amount prescribed by Presidential Decree shall be the principle.
Where the Minister of the Defense Acquisition Program Administration selects technology, etc. that can be secured through offset trade, he or she shall have it linked with basic plans and implementation plans for defense science and technology innovation under Article 6 of the Defense Science and Technology Innovation Promotion Act. <Amended on Mar. 31, 2020>
Where the Minister of the Defense Acquisition Program Administration intends to promote offset trade, he or she shall satisfy any of the following conditions: <Amended on Apr. 1, 2009>
- Securing technology necessary for defense force improvement projects;
- Securing logistic support capability for the purchase of weapons systems;
- Participation in the development and manufacture of weapons systems manufactured in the country of the contracting party;
- The export of munitions, such as defense materials, etc.;
- Securing maintenance materials for the weapons systems from the country of the contracting party;
- Implementation of matters prescribed by Presidential Decree, such as export linkages for commodities other than munitions
  (limited to cases where the conditions under any of subparagraphs 1 through 5 are satisfied).

[Enforcement date Oct. 4, 2022]
[Presidential Decree No. 32934, Oct. 4, 2022, Amendment by Other Act]

The amount of each unit project of munitions for which offset trade shall be promoted pursuant to Article 20 (1) of the Act shall be at least 10 million US dollars: Provided, That offset trade may be omitted in any of the following cases:
- Where parts for repair are purchased;
- Where core parts are purchased to be used for the defense research and development projects under Article 8 of the Defense Science and Technology Innovation Promotion Act;
- Where raw materials, such as petroleum, are purchased;
- Where munitions are purchased under a contract concluded with a foreign government;
- Where a purchase is made after deliberation by the Committee, in consideration of national security, economic efficiency, etc.
"Matters prescribed by Presidential Decree, such as export linkages for commodities other than munitions"
in Article 20 (3) 6 of the Act means the following:
- Export linkages for commodities, other than munitions, selected by the Minister of the Defense Acquisition Program Administration upon recommendation of the Minister of Trade, Industry and Energy or the Minister of SMEs and Startups;
- Inducement of foreign investments (limited to foreign investments defined in Article 2 (1) 4 of the Foreign Investment Promotion Act) determined by the Minister of the Defense Acquisition Program Administration, in consultation with the Minister of Trade, Industry and Energy for the improvement of the competitiveness of the defense industry.

Transition into more practical policy (manufacturing and export parts of weapons systems, etc.) to accelerate virtuous cycle of economic growth
such as export boost, job creation, etc. since foreign contractors' tend to protect core technologies and to avoid the technology transfer
Introduce and Facilitate Industrial Cooperation Quota system Execute the pilot program in the form of consortium between local company and foreign company since the Industrial Cooperation Quota system is about
to be introduced; in which foreign contractor shall use Korean parts at a certain ratio for its weapon system when DAPA procures foreign weapon system.
Facilitate "Banking" system

Take advantage of offset programs to enhance the competitiveness of SMEs serving as supply sources of defense parts · materials Provide foreign companies with Offset Promising Item List and requirements with expanding SMEs’ items
Strengthen defense competitiveness based on the mutual growth between large-middle standing enterprises and SMEs (Mutual Cooperation)
Grant the multiplier of 2 to SMEs' export volume which is two times more by comparison with large and middle standing enterprises to scale up the support of SMEs' defense export

Work process for foreign companies’ participation in a new offset program

Implementation Management
- Establishment of Performance Bond and Signing TAA
- (when change of agreed content requested) Negotiation / Review / Approval
- Completion of Implementation / Performance analysis

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