Reasons for Proposal

Recently, as the price of raw materials such as iron ore, crude oil, pulp, etc. continues to rise, the financial difficulties of small and medium-sized enterprises that process raw materials to deliver them to large enterprises are increasing.

The current law provides a system to adjust delivery costs in accordance with changes in supply costs, but only a few SMEs actually apply for adjustment due to the vertical relationship between large enterprises and SMEs and complicated procedures, and so SMEs still bear the burden of rising raw material prices.

This is the same in the case of an increase in labor costs. Even if labor costs change due to an increase in the minimum wage, in most cases the SMEs have to shoulder the change.

In the event of a change in supply cost, the consignment enterprise shall reissue an agreement to pay the adjusted delivery price, the Minister of SMEs and Startups shall prepare the standard agreement, and enterprises that faithfully implemented the payment adjustment according to changes in supply costs shall be included in the list of exemplary mutually beneficial cooperation enterprises to be selected, and thereby ease the burden on SMEs due to changes in supply costs.

Major Provisions

A. Include those who faithfully implemented the adjustment, payment, etc. of delivery price due to changes in supply cost in the selection of exemplary mutually beneficial cooperation enterprises, etc. (Article 16 (1)).

B. If the supply cost changes due to an increase in raw material prices and labor costs due to an increase in the minimum wage during the contract period, the consignment enterprise shall reissue an agreement reflecting the change and pay the delivery price accordingly (Article 21 (1) through (3) and Article 22 (7)).

C. The Minister of SMEs and Startups shall prepare a standard agreement for the fairness of entrustment and consignment transactions (Article 21 (4)).