Article 37 (Operation, Supervision, etc. of Agency for Defense Technology and Quality Assurance)(1)Projects that the Agency for Defense Technology and Quality Assurance executes in connection with the administration, etc. of national defense science and technology shall be the responsibility of technological assistance relating to the prior research, offset trade, improvement of performance, etc. that the Administrator of the Defense Acquisition Program Administration commissions.
(2) Contributions by the Government to the Agency for Defense Technology and Quality Assurance pursuant to the provisions of Article 32 (7) of the Act shall be made annually by the Administrator of the Defense Acquisition Program Administration paying funds to the budget.
(3) The President of the Agency for Defense Technology and Quality Assurance shall formulate an annual business plan and budget plan and submit them to the Administrator of the Defense Acquisition Program Administration by not later than ten months prior to the commencement of the relevant business year, and obtain approval from him/her. The same shall apply where an approved business plan and budget is modified.
(4) The President of the Agency for Defense Technology and Quality Assurance shall report the quarterly results of the execution of business plans to the Administrator of the Defense Acquisition Program Administration within one month from the completion of the quarter.
(5) The President of the Agency for Defense Technology and Quality Assurance shall have the settlements of each business year audited by a certified public accountant designated by the Administrator of the Defense Acquisition Program Administration, and submit the results to the Administrator of the Defense Acquisition Program Administration by the end of March of the following year.
(6) Details of settlement relating to national secrets and matters directly related thereto in the case of paragraph (5) shall be excluded from the subject matter of audits by the certified public accountant.
CHAPTER Ⅵ FOSTERING OF DEFENSE INDUSTRY
Article 38 (Formulation, etc. of Basic Plan for Fostering of Defense Industry)(1) A basic plan for fostering of the defense industry pursuant to the provisions of Article 33 of the Act shall be formulated every five years, and may be corrected and supplemented on an annual basis where necessary.
(2)Where the Administrator of the Defense Acquisition Program Administration intends to formulate a basic plan for fostering of the defense industry pursuant to the provisions of paragraph (1), he/she shall consult with the Minister of Knowledge Economy for matters falling under Article 33 (2) 2, 4, 5 and 7 of the Act. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 39 (Designation of Defense Materials)(1) Materials that can be designated as defense materials from among those that are not classified as weapons systems pursuant to the provisions of the proviso to Article 34 (1) of the Act shall be as listed in the following subparagraphs:
1.The materials involved in the process of research and development for military purposes, which are expected to be selected as weapons systems after the completion of research and development; and
2.Other materials that satisfy the standards prescribed by Ordinance of the Ministry of National Defense.
(2) Materials falling under the subparagraphs of Article 35 (2) of the Act shall be the major defense materials pursuant to the provisions of Article 34 (2) of the Act, and other defense materials shall be general defense materials.
(3) Anyone who manufactures, or intends to manufacture munitions may request the Administrator of the Defense Acquisition Program Administration to designate such munitions as defense materials. In this case, the Administrator of the Defense Acquisition Program Administration shall decide within three months whether the designation of those munitions as defense material is appropriate and notify the applicant with regard thereto.
(4)Where the Administrator of the Defense Acquisition Program Administration has designated defense materials pursuant to the provisions of paragraph (3) of this Article or Article 34 (1) of the Act, he/she shall notify the Minister of Knowledge Economy. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 40 (Restrictions, etc. on Designation of Defense Materials)(1) The Administrator of the Defense Acquisition Program Administration shall designate defense materials by reference to the unit of the finished product or the main unit comprising the item: Provided, That where necessary for the swift procurement of munitions, the combination or parts may be designated as defense materials.
(2) Repair parts used for defense materials shall be deemed as having been designated by being included with defense materials: Provided, That where the relevant repair parts are not manufactured by the relevant defense contractor, or are used for materials that are not defense materials, the same shall not apply.
(3)The Administrator of the Defense Acquisition Program Administration may not designate as defense materials for which it is deemed that two or more enterprises are able to manufacture them, in consideration of domestic technological standards.
Article 41 (Designation of Defense Contractors)(1)Anyone who intends to be designated as a defense contractor pursuant to the provisions of Article 35 (1) of the Act shall apply to the Minister of Knowledge Economy along with the following documents: Provided, That where a defense contractor who has already been designated intends to be designated to also manufacture other defense materials, he need only apply with the documents falling under subparagraphs 1 and 4 through 7: <Amended by Presidential Decree No. 19507, Jun. 12, 2006; Presidential Decree No. 20675, Feb. 29, 2008>
1.An application form;
2.The articles of incorporation (limited to corporations);
3.A balance sheet and income statement;
4.Details and a description of the capacity of manufacturing facilities and the main annexed facilities;
5.The results of use of raw materials and plans for procurement;
6.The kinds and specifications of products, and the results and plans for the manufacture and sale thereof;
7.A business plan;
8.Plans for upskilling engineers and technicians and a description of technical capability; and
9.Plans for safety measures and explanation thereof.
(2) Where the Minister of Knowledge Economy has received an application pursuant to the provisions of paragraph (1), he/she shall inspect the manufacturing facilities, etc. in accordance with the standards for facilities pursuant to the provisions of Article 42, and request the Administrator of the Defense Acquisition Program Administration to inspect security requirements pursuant to the provisions of Article 44. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
(3) Where the Minister of Knowledge Economy has received an application for designation of defense contractors pursuant to the provisions of paragraph (2), he/she shall decide whether to designate the applicant as defense contractor within six months and notify the applicant and the Administrator of the Defense Acquisition Program Administration of the results and deliver the certificate of designation to the applicant if he/she designates. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
(4) A public official, who received an application for the designation under the provisions of paragraph (1), shall verify a certified copy of register of incorporation (limited to corporations) through administrative information sharing under the provisions of Article 21 (1) of the Act on Promotion of the Digitalization of Administrative Affairs, etc. for Creation of Electronic Government: Provided, That the applicant does not agree to such verification, he shall attach a certified copy of register of incorporation to the application. <Amended by Presidential Decree No. 19507, Jun. 12, 2006>
Article 42 (Standards for Facilities)(1) The standards for facilities of defense contractors pursuant to the provisions of Article 35 (1) of the Act shall be based on standards that are prescribed by the Minister of Knowledge Economy regarding the following personnel and material facilities: <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
1.The general facilities and special facilities necessary for the manufacture of defense materials;
2.The facilities to inspect the quality of defense materials;
3.The technical manpower necessary for the manufacture of defense materials; and
4.Other facilities recognized as necessary by the Minister of Commerce, Industry and Energy.
(2) Where the Minister of Knowledge Economy prescribes the standards for facilities pursuant to the provisions of paragraph (1), he/she shall consult with the Administrator of the Defense Acquisition Program Administration. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 43 (Modification of Standards for Facilities)(1) Where idle or surplus manufacturing facilities come into existence and are recognized as placing an undue burden on management, the defense contractor may apply for the modification of standards for facilities pursuant to the provisions of Article 42 (1) to the Minister of Knowledge Economy along with the relevant documentary evidence. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
(2)Where the Minister of Knowledge Economy intends to modify standards for facilities pursuant to the request in paragraph (1), he/she shall consult with the Administrator of the Defense Acquisition Program Administration. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 44 (Requirements for Security, Inspection, etc.)(1) The requirements for security pursuant to the provisions of Article 35 (1) of the Act shall be as listed in the following subparagraphs:
1.Measures for security regarding areas and facilities where defense facilities are fully protected;
2.Measures for security regarding personnel employed by defense contractors;
3.Measures for security regarding the treatment, keeping and management of secret documents;
4.Measures for protection of defense materials and raw materials;
5.Measures for protection of equipment and facilities;
6.Measures for security regarding communications facilities and method of communications;
7.Measures for procedures for processing all kinds of data and data arising from data processing;
8.Means of organic communications with relevant intellectual agencies in preparation for security accidents; and
9.Other measures for security recognized by the Administrator of the Defense Acquisition Program Administration as necessary for the maintenance of security.
(2) The Administrator of the Defense Acquisition Program Administration shall request to the Minister of National Defense to investigate and verify the requirements for security listed in the following subparagraphs relating to the designation, etc. of defense contractors, and the Minister of National Defense shall notify the Administrator of the Defense Acquisition Program Administration of the result of investigation and verification:
1.Inspection of requirements for security following the designation of defense contractors pursuant to the provisions of Article 41 (2) and the commissioning of specialized research institutes pursuant to the provisions of Article 46 (1); and
2.Verification of conditions necessary for the revocation of a designation as defense contractors pursuant to the provisions of Article 48 (1) 2 of the Act and the termination of commission of specialized research institutes pursuant to the provisions of Article 63 (1) 1.
Article 45 (Sale, Acquisition, etc. of Defense Contractors)(1)The standards for changes in substance in the governance of management of defense contractor pursuant to the provisions of Article 35 (3) of the Act shall be based on the instances falling under any of the following subparagraphs:
1.When the stocks, etc. (including equities or all other property rights; hereinafter the same shall apply) of a defense contractor are intended to be disposed of or taken over en bloc by means of sale and acquisition, exchange or merger between enterprises, execution of security rights, receipt of payment in kind or by other means;
2.When a new corporation is established by spinning off the manufacturing sector of a defense contractor, or such manufacturing sector is intended to be disposed of or acquired en bloc by means of sale and acquisition , exchange or merger between enterprises, execution of security rights, receipt of payment in kind or by other means;
3.When the same person intends to possess 50/100 or more of the stocks, etc. of a defense contractor independently or jointly with a person (hereinafter referred to as a "person related to the same person") falling under any of the following items (including when the same person possesses not more than 50/100 but becomes a major stockholder, and is able to exercise controlling influence over the selection of officers or management of the defense contractor directly or through a person related to the same person):
(a)Spouse, blood relatives as far as third cousins and relatives as far as cousins of in-laws;
(b)A company where the same person exercises controlling influence over major decision making or conduct of the business, such as the organizational change of the company concerned, investment in the new business, etc. directly or through a person related to the same person; or
(c)A company where the same person appoints or dismisses the representative director, or appoints or dismisses 50/100 or more of the directors by contract or agreement with other major stock holders; or
4.When a defense contractor is intended to be managed by means of acquisition by transfer, hire or entrustment of management of all or part of the business.
(2) Anyone who intends to obtain approval from the Minister of Knowledge Economy in acquiring the controlling rights in a defense contractor pursuant to the provisions of Article 35 (3) of the Act shall submit an application for approval prescribed by the Ministry of National Defense along with the documents falling under Article 41 (1) 2 and 3 and the documentary evidence regarding acquisition of stocks, etc. of a defense contractor to the Minister of Knowledge Economy: Provided, That where a person intends to manage a defense contractor with modifying the manufacturing facilities or requirements for security after the acquisition of the defense contractor, he shall also submit the documents falling under Article 41 (1) 4 through 9. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
(3) Where the Minister of Knowledge Economy has granted approval pursuant to the provisions of paragraph (2), he/she shall notify the applicant and the Administrator of the Defense Acquisition Program Administration of the fact. When the name, representative, address, etc. of the defense contractor is modified following such approval, he/she shall renew the certificate of designation of defense contractor. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 46 (Commissioning of Specialized Research Institute)(1) The Administrator of the Defense Acquisition Program Administration
shall commission a specialized research institute from among the organizations with the requirements for security pursuant to the provisions of Article 44 (1) in consideration of the research facilities and level of technology: Provided, That in the cases of commissioning of specialized research institutes to implement projects for research and development other than those involving military secrets, the requirements for security pursuant to the provisions of Article 44 (1) may not apply.
(2)Where the Administrator of the Defense Acquisition Program Administration intends to commission a specialized research institute pursuant to the provisions of paragraph (1), he/she may cause the relevant organization to submit the documents in the following subparagraphs. In this case, the provisions of Article 41 (4) shall apply mutatis mutandis to the commission procedure of specialized research institutes: <Amended by Presidential Decree No. 19507, Jun. 12, 2006>
1.The articles of incorporation (limited to corporations);
2.The details of research facilities and main annexed facilities, and a description of capacity;
3.A business plan and business outcomes; and
4.A description of technical capacity.
(3) Where the Administrator of the Defense Acquisition Program Administration intends to commission a research institute operated by the Government or a local government, or a government-funded research institute as a specialized research institute, he/she shall consult with the supervising organization in advance.
(4)Where the Administrator of the Defense Acquisition Program Administration has commissioned a specialized research institute, he/she shall deliver a certificate of commission of specialized research institute to the specialized research institute. In this case, he/she shall notify the supervising organization in charge of the fact where he/she has commissioned pursuant to the provisions of paragraph (3).
Article 47 (Measures by Fair Trade Commission)
Where the Fair Trade Commission has been requested to take measures
against unfair trading activities pursuant to the provisions of Article 36 (3) of the Act, and the relevant large enterprise is recognized as having engaged in unfair trading activity pursuant to the provisions of Article 23 (1) of the Monopoly Regulation and Fair Trade Act, the Commission shall take necessary measures without delay.
Article 48 (Methods, etc. of Inquiry into Facts)(1) In inquiring into facts for the purpose of coordination, etc. of business pursuant to the provisions of Article 36 (4) of the Act, the Administrator of the Defense Acquisition Program Administration shall notify the relevant large enterprises, small or medium enterprises or defense contractors of the time and date, place, purpose, etc., and the fact finding public official at the Defense Acquisition Program Administration shall display any certificate indicating his authority.
(2) Where the inquiry involves entering an office or place of business of large enterprises, small or medium enterprises or defense contractors, the interested persons of the relevant office or place of business shall be present and when the statements by the interested persons are heard in the course of inquiry into fact, the details thereof shall be recorded in writing.
Article 49 (Details and Methods, etc. of Publicly Announcing Recommendations)(1)The details of recommendations for execution pursuant to the provisions of Article 36 (5) of the Act shall be as listed in the following subparagraphs:
1.The name of the enterprise which is the object of recommendations for execution;
2.The details of recommendations for execution;
3.Follow-up measures accompanying the nonperformance of recommendations for execution; and
4.Other matters necessary for the performance, etc. of recommendations.
(2)Where the Administrator of the Defense Acquisition Program Administration announces in public pursuant to the provisions of paragraph (1), he/she shall cause it to be published in a nationwide daily newspaper at least twice, and notify the relevant large enterprises, defense contractors, etc. of the details thereof in writing.
(3)Where the Administrator of the Defense Acquisition Program Administration orders the execution of recommended matters to the large enterprises or defense contractors pursuant to the provisions of Article 36 (5) of the Act, he/she shall notify the large enterprises or defense contractors of the details in writing and confirm the status of execution.
Article 50 (Protection and Fostering of Defense Contractors)(1) The Government shall purchase the defense materials manufactured by defense contractors in the first instance.
(2) The Administrator of the Defense Acquisition Program Administration shall notify the relevant defense contractors annually of the quantity of defense materials planned for manufacturing.
(3)Where the defense contractor intends to manufacture the annual quantity before the procurement contract of the year from among the planned manufacturing quantity notified pursuant to the provisions of paragraph (2), he shall obtain approval therefor from the Administrator of the Defense Acquisition Program Administration.
(4)The defense contractor may request the Administrator of the Defense Acquisition Program Administration for a quality certification of the materials manufactured with the approval pursuant to the provisions of paragraph (3), and the Administrator of the Defense Acquisition Program Administration shall comply with it insofar as there are no special grounds otherwise.
(5) Where there are materials manufactured pursuant to the provisions of paragraph (3) which are difficult to keep or they are prone to safety accidents, etc., the defense contractor may deliver or keep the materials in the place indicated by the relevant Chief of Staff after consultation with the service where such materials are to be delivered.
Article 51 (Loaning of Funds)(1) Where an enterprise intends to have funds loaned pursuant to the provisions of Article 38 of the Act, it shall apply for a loan to a financial institute handling the relevant fund after obtaining a recommendation of loaning from the Minister of Knowledge Economy. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
(2)Where it is recognized as necessary for the balanced fostering of defense contractors, the Administrator of the Defense Acquisition Program Administration may recommend the loaning of funds to the Minister of Knowledge Economy. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 52 (Grants, etc. of Subsidies)(1) The expenses that can be subsidized for the fostering of the defense industry pursuant to the provisions of Article 39 (1) 4 of the Act shall be as listed in the following subparagraphs:
1.Expenses of transferring defense facilities in accordance with orders under Article 49 (1) of the Act;
2.Interest on funds required for reserving raw materials pursuant to the provisions of Article 55 of the Act;
3.Maintenance expenses for exclusive use equipment kept idle due to the suspension of procurement of defense materials by the Government or marked decreases in the placement of order, and labor costs for employees;
4.Expenses for the restoration of destroyed or lost defense facilities or defense materials or purchase of new ones due to natural disaster or other accidents; and
5.Expenses for removal or scrapping of the facilities, machinery and tools used exclusively for the manufacture of defense materials, which have become idle due to a restructuring plan of the Government for the defense industry.
(2) The Administrator of the Defense Acquisition Program Administration shall determine the standards, etc. for grants of subsidies pursuant to the provisions of Article 39 (1) of the Act and other necessary matters after consultation with the Minister of Commerce, Industry and Energy.
(3) Those who intend to receive subsidies shall apply to the Administrator of the Defense Acquisition Program Administration along with the documents listed in the following subparagraphs:
1.An application form;
2.A business plan; and
3.Details of the funds required.
(4) Where substantial profits are made by the defense contractor or specialized research institute out of their subsidies, the Administrator of the Defense Acquisition Program Administration, in granting subsidies, shall attach conditions that an amount equivalent to all or part of the subsidy should be refunded to the State.
Article 53 (Transfer, etc. of Assets by Subsidies)(1) Anyone who intends to receive approval for disposal of assets acquired with subsidies or whose utility has been increased pursuant to the provisions of Article 39 (2) of the Act shall apply to the Administrator of the Defense Acquisition Program Administration, along with documents as listed in the following subparagraphs:
1.An application form; and
2.A statement of grounds.
(2)Where the Administrator of the Defense Acquisition Program Administration has received an application for approval of disposal pursuant to the provisions of paragraph (1), he/she shall decide whether to approve the same within two months after consultation with the Minister of Knowledge Economy, and notify the applicant and the Minister of Knowledge Economy of the outcome. <Amended by Presidential Decree No. 20675, Feb. 29, 2008>
Article 54 (Payment of Bounty to Technical Manpower, etc.)(1) The technical manpower pursuant to the provisions of Article 40 (1) of the Act shall be the persons engaged in the duties of research and development or the localization of parts, etc., and recognized by the Administrator of the Defense Acquisition Program Administration as the requisite officials of the Agency for Defense Development, the Defense Agency for Science and Quality Assurance, defense contractors, specialized research institutes, military repair units or military procurement units.
(2) The standards and procedures for payment of bounty to the technical manpower, researchers and developers, and other necessary matters shall be prescribed by the Administrator of the Defense Acquisition Program Administration: Provided, That for securing financial resources and determining the standards for payment of bounty, he/she shall consult with the Minister of Planning and Budget.
Article 55 (Assistance to Defense Industry)
Where a defense contractor or specialized research institute intends to obtain technical assistance or manufacturing assistance pursuant to the provisions of Article 41 of the Act, it shall submit an application for such assistance including the matters in the following subparagraphs to the Administrator of the Defense Acquisition Program Administration, the Chief of Staff of each service, the President of the Agency for Defense Development, the President of the Defense Agency for Science and Quality Assurance, or the head of the military repair units:
1.The terms and period of assistance; and
2.The terms and conditions for the share of expenses.
Article 56 (Establishment, etc. of Association, etc.)(1) The association or organization pursuant to the provisions of Article 42 (1) of the Act shall have 20 or more members and have the object of fulfilling the duties in the following subparagraphs:
1.The duties of survey and research regarding the defense industry;
2.The duties to improve the competitiveness of the defense industry;
3.The duties to promote exports by the defense industry; and
4.Other duties recognized as necessary by the Administrator of the Defense Acquisition Program Administration.
(2) The association or organization established pursuant to the provisions of paragraph (1) shall obtain approval from the Administrator of the Defense Acquisition Program Administration by drafting its articles of incorporation including the matters in the following subparagraphs. The same shall apply when amending the articles of incorporation:
1.Purpose and title;
2.The address of its main office;
3.Matters regarding duties and the execution thereof;
4.Matters regarding officers;
5.Matters regarding the qualifications for membership;
6.Matters regarding the amendment of the articles of incorporation; and
7.Other matters necessary for the operation of the association or organization.
(3) Where necessary for the guidance and supervision of the association or organization established pursuant to the provisions of paragraph (1), the Administrator of the Defense Acquisition Program Administration shall cause the matters regarding its duties to be reported or request the submission, etc. of information.
Article 57 (Designation, etc. of Guarantee Organization)(1) Anyone who intends to be designated as a guarantee organization pursuant to the provisions of Article 43 (1) of the Act shall satisfy the requirements in the following subparagraphs:
1.The paid-in capital (an endowment in the case of a nonprofit corporation) shall be five hundred million won or more;
2.To have sufficient manpower and material facilities for conducting guarantee businesses in the each of subparagraphs of Article 43 (2) of the Act; and
3.To secure funds (hereinafter referred to as "guarantee funds") necessary for conducting guarantee business for defense contractors, etc.
(2) Anyone who seeks to be designated pursuant to the provisions of paragraph (1) shall apply to the Administrator of the Defense Acquisition Program Administration after preparing the documents listed in the subparagraphs. In this case, a relevant public official shall verify a certified copy of register of incorporation through administrative information sharing under the provisions of Article 21 (1) of the Electronic Government Act, and if the applicant does not agree to such verification, he shall submit a certified copy of register of incorporation: <Amended by Presidential Decree No. 20120, Jun. 28, 2007>
1.An application for designation;
2.Deleted; <by Presidential Decree No. 20120, Jun. 28, 2007>
3.Documents that can verify the qualifications in the subparagraphs of paragraph (1); and
4.Documents regarding guarantee regulations, such as the limits on guarantees, the terms of guarantee contracts, the limits on guarantees, guarantee fees, etc.
(3) Where the Administrator of the Defense Acquisition Program Administration has designated a guarantee organization pursuant to the provisions of paragraph (1), he/she shall announce it in public.
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