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Korea's Defense Offset Guidelines Revised

Updated: Apr 1, 2023

The Republic of Korea's Defense Acquisition Program Administration (DAPA)published its revised version of the Offset Program Guidelines in December 2021.

Key changes made are as follows:

  • Offset ratio (Article 10):

    • Competitive contracts: No less than 50% of the estimated main contract amount (no change)

    • Non-competitive contracts: no less than 30% of the estimated main contract amount (from no less than 10%)

  • Penalty for contract violation (Article 23):

    • 10% of the unfulfilled portion of obligation within the implementation period (no change)

    • additional 50% of the unfulfilled portion of obligation and extinguish obligation after 1 year upon expiration of implementation period (added)

  • Offset Requirement and Banking (Article 13 & 28): Middle standing enterprises, along with SME, to be considered (added)

  • Receipt and Review of Offset Proposal and Offset Valuation (Articles 15 & 16): The portion of weapon system production that a Foreign Contractor allocates to a KIP to be deducted from offset value (added)

  • Definitions (DAPA Standard Operating Procedure)

    • Contractor or Foreign Supplier: a foreign company engaged in a contract with Contracts Team of DAPA or domestic company in order to supply equipment or goods (added)

    • Main Contract: includes contract between a domestic company and a foreign manufacturer when DAPA signs supply contract with the domestic company which then signs a contract with the foreign manufacturer (added)

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