Article 20 (Offset Trade)

• Where the Minister of the Defense Acquisition Program Administration purchases munitions from overseas under Article 19 (1) (including where munitions are purchased by concluding a contract with a foreign government), the Minister of the Defense Acquisition Program Administration shall, in principle, promote offset trade for unit projects of at least the amount prescribed by Presidential Decree.
• 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).

Article 26 (Standards for Offset Trade)

• 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.