International trade rules

Export controls

What export controls limit international trade in defence and security articles? Who administers them?

The DAPA is the agency responsible for administering the export of defence and security articles. In order to export defence and security articles, the exporter must file a report with the DAPA as a defence article exporter or agent, and obtain approval of each export transaction from the DAPA.

Domestic preferences

What domestic preferences are applied to defence and security procurements? Can a foreign contractor bid on a procurement directly?

In defence and security procurements, the DAPA has an obligation to apply domestic preferences to defence and security articles manufactured domestically. Procurement of foreign articles is only allowed in exceptional cases where domestic articles are not available. Accordingly, if there are domestic defence articles with the same performance and price as foreign articles, the DAPA must purchase domestic articles over foreign ones. However, procurement of certain defence articles with low relevance to the national security interests can be carried out through international bidding, and foreign contractors can bid directly on such procurements.

Favourable treatment

Are certain treaty partners treated more favourably?

In principle, the Korean government does not treat any country more favourably in the purchase of defence and security articles from foreign contractors. The government has concluded treaties to cooperate with various countries concerning the defence industry. It is not bound by any treaty to apply preference to weapons of a specific country.

Sanctions

Are there any boycotts, embargoes or other trade sanctions between this jurisdiction and others?

According to the resolution of the United Nations Security Council, the Korean government does not engage in any defence transactions with North Korea concerning the defence industry or other related industries. It also bans the export of weapons to countries subject to arms embargo under international treaties, or countries threatening international peace and security such as those assisting in international terrorism and drug supply, or countries that may develop or proliferate weapons of mass destruction.

Trade offsets

Are defence trade offsets part of this country’s defence and security procurement regime? How are they administered?

The Korean government promotes defence trade offsets when purchasing defence articles of more than US$10 million from overseas. However, defence trade offsets may not be used in certain circumstances. For example, they are not used:

  • when the government purchases repair parts, key parts for use in R&D for the development of core weapon systems in Korea or basic raw materials, such as oil;
  • when the government procures defence articles through a contract with a foreign government; and
  • when the Defence Acquisition Program Promotion Committee decides not to proceed with offset trades in consideration of national security and economic efficiency.

Defence trade offsets must:

  • secure the technology necessary for defence improvement projects;
  • secure logistics support capability for weapon systems to be procured;
  • allow the Korean government to participate in the development and production of weapon systems;
  • enable the Korean government to facilitate the export of domestic defence articles to foreign countries; or
  • secure maintenance of the weapon systems of the contracting partner.

They must also meet at least a certain percentage of the main contract amount. (Offset Program Guidelines can be found at www.dapa.go.kr/mbshome/mbs/dapa_eng/index.jsp).