(1) The term "subcontract transaction" in this Act means an act to manufacture, repair, construct or provide services of what has been entrusted (hereinafter referred to as "subject matter, etc.") and to deliver, transfer or provide the subject matter (hereinafter referred to as "delivery, etc.") to a prime contractor and receive a consideration in return (hereinafter referred to as "subcontract price") where a prime contractor entrusts a subcontractor with such tasks as manufacturing (including processing; hereinafter the same shall apply), repair, construction, or service or where a prime contractor, who is entrusted with such tasks (hereinafter referred to as "manufacturing, etc.") by another business entity, re-entrusts a subcontractor with what he or she has been entrusted.
(2) The term "prime contractor" in this Act means any of the following persons: <Amended on Mar. 29, 2011; May 28, 2014; Jul. 24, 2015>
1. A business entity, other than small and medium business entrepreneurs (referring to those specified in Article 2 (1) or (3) of the Framework Act on Small and Medium Enterprises, including small and medium enterprise cooperatives under the Small and Medium Enterprise Cooperatives Act; hereinafter the same shall apply), who entrusts small or medium business entrepreneurs with manufacturing, etc.;
2. A small and medium business entrepreneur whose annual sales in the immediately preceding business year (referring to the total sum of the assessed amount of construction capability published [referring to the most recently published total sum thereof) as at the time a subcontract is concluded in cases of a transaction in which the assessed amount of construction capacity shall apply as prescribed in related Acts, and referring to the total amount of assets in cases of an absence of the annual sales or the assessed amount of construction capability; hereafter in this subparagraph, the same shall apply] is more than the annual sales of the other small or medium business entrepreneur who is entrusted with manufacturing, etc., by the former small or medium business entrepreneur; provided, this shall not apply to a small or medium business entrepreneur whose annual sales are equal to the amount prescribed by Presidential Decree.
(3) The term "subcontractor" in this Act means a small or medium business entrepreneur who is entrusted with manufacturing, etc. by a prime contractor under the subparagraphs of paragraph (2).
(4) Where a business entity entrusts an affiliate company prescribed in subparagraph 12 of Article 2 of the Monopoly Regulation and Fair Trade Act with manufacturing, etc., and the affiliate company re-entrusts a third person with whole or considerable part of manufacturing, repair, construction, or performance of service that have been entrusted, and where the third party falls under paragraph (3) if he or she is deemed to have been entrusted with manufacturing, etc. directly from the business entity who has entrusted an affiliate company, even though the affiliate company does not fall under any of the subparagraphs of paragraph (2), the affiliate company and the third person shall be deemed a prime contractor and a subcontractor under this Act, respectively. <Amended on Dec. 29, 2020>
(5) Where a member company of a business group subject to limitations on cross shareholding under Article 31 (1) of the Monopoly Regulation and Fair Trade Act entrusts or is entrusted with manufacturing, etc., it shall be governed by the following subparagraphs: <Amended on Dec. 29, 2020>
1. Even though the company which entrusts manufacturing, etc. does not fall under any of the subparagraphs of paragraph (2), it shall be deemed a prime contractor under this Act;
2. Even though the company entrusted with manufacturing, etc., falls under paragraph (3), it shall not be deemed a subcontractor under this Act.
(6) "Entrustment with manufacturing" in this Act means entrustment, by a business entity engaged in a business falling under any of the following subparagraphs, of manufacturing of goods from such business to another business entity. In such cases, the scope of goods resulting from such business shall be determined and publicly notified by the Fair Trade Commission:
1. Manufacturing of goods;
2. Sale of goods;
3. Repair of goods;
4. Construction.
(7) Paragraph (6) shall apply to the goods prescribed by Presidential Decree, limited to regions prescribed by Presidential Decree, including a Special Metropolitan City and Metropolitan City, notwithstanding paragraph (6).
(8) The term "entrustment with repair" in this Act means entrustment, by a business entity engaged in the business of repairing goods upon receipt of an order or the business of repairing goods that he or she is using, of all or part of his or her repair activities to another business entity.
(9) The term "entrustment with construction" in this Act means entrustment, by a business entity falling under any of the following subparagraphs (hereinafter referred to as "constructor"), of all or part of construction work from his or her business to another constructor, or entrustment, by a constructor, of the construction work prescribed by Presidential Decree to another business entity: <Amended on May 24, 2011; Apr. 30, 2019>
1. A construction business entity under subparagraph 7 of Article 2 of the Framework Act on the Construction Industry;
2. A constructor under subparagraph 3 of Article 2 of the Electrical Construction Business Act;
3. An information and communications construction business entity under subparagraph 4 of Article 2 of the Information and Communications Construction Business Act;
4. A person who has obtained a registration of fire-fighting system installation business pursuant to Article 4 (1) of the Fire-Fighting System Installation Business Act;
5. Other business entities prescribed by Presidential Decree.
(10) The term "person placing an order" in this Act means a person who gives a contract for manufacturing, repair, construction, or service to a prime contractor; provided, in cases of re-subcontract, it means a prime contractor.
(11) The term "entrustment with service" in this Act means that a business entity (hereinafter referred to as "service provider") which engages in the business of preparing knowledge and information-related products or of supplying labor (hereinafter referred to as "service") entrusts all or part of performance of the service to another service provider.
(12) The term "knowledge and information-related products" in this Act means any of the following subparagraphs: <Amended on Apr. 12, 2010; Jun. 9, 2020>
1. Information programs (referring to software under subparagraph 1 of Article 2 of the Software Promotion Act, and those which are a combination of a series of instructions and commands embedded in a device having information processing capability, such as computer and electronic calculator, in order to obtain specific results);
2. Results comprised of movies, broadcasting programs and other images, voices or sounds;
3. Results comprised of a combination of characters, diagrams, and signs or of a combination of the foregoing and colors (including drawings under subparagraph 3 of Article 2 of the Certified Architects Act and drawings from among the engineering works under subparagraph 1 of Article 2 of the Engineering Industry Promotion Act);
4. Others corresponding to subparagraphs 1 through 3, determined and publicly notified by the Fair Trade Commission.
(13) The term "labor" in this Act means an activity corresponding to any of the following subparagraphs: <Amended on Apr. 12, 2010>
1. Engineering works (excluding design) under subparagraph 1 of Article 2 of the Engineering Industry Promotion Act;
2. Transporting cargo by making use of trucks or intermediating cargo, as prescribed by the Trucking Transport Business Act;
3. Maintaining and managing buildings, as prescribed by the Building Act;
4. Preventing danger, etc. to facilities, places, goods, etc. or preventing harm to the life and body of people and protecting them from danger, as prescribed by the Security Services Industry Act;
5. Other activities of providing labor to carry through the business entrusted by a prime contractor, which have been determined and publicly notified by the Fair Trade Commission.
(14) The term "means of payment in place of a bill" in this Act refers to the means of payment that is used in substitution for a bill when a prime contractor pays subcontract price, which falls under any of the following subparagraphs:
1. Exclusive-use card for business purchases: Credit card or debit card that a credit card company under the Specialized Credit Financial Business Act issues to a prime contractor for the payment of subcontract price, which is not usable at general credit card member stores, but is issued for the sole purpose of payment of subcontract price to the relevant subcontractor according to a contract among the prime contractor, subcontractor, and credit card company;
2. Loan against security of credit sales claims: Where a subcontractor lends money from a financial institution by offering the claims on credit sales to the prime contractor as security in order to receive subcontract price, and the prime contractor redeems the loan of the subcontractor from the financial institution with the subcontract price, in which case money is lent according to the terms and conditions determined by the Governor of the Bank of Korea;
3. Purchase loan: Where a prime contractor makes a contract of credit line with a financial institution and lends money therefrom, pays subcontract price to the subcontractor by means of information processing system, and redeems the loan to the financial institution on the due date;
4. Other means of payment used in place of a bill in the payment of subcontract price, which are determined and publicly notified by the Fair Trade Commission.
(15) The term "technical data" in this Act means data on the methods of manufacture, repair, construction, or performance of service that are kept confidential and other data prescribed by Presidential Decree which are useful for business activities and have independent economic value. <Added on Jan. 25, 2010; Jan. 16, 2018; Aug. 17, 2021>
(16) The term "major raw materials" in this Act means raw materials used for manufacturing, repairing, or constructing subject matters, etc. or performing services for them in subcontract transactions, the cost of which is at least 10/100 of the subcontract price. <Added on Jul. 18, 2023>
(17) The term "subcontract price adjustment system" in this Act means a system of adjusting subcontract price in proportion to the fluctuation of the prices of major raw materials, in cases where the prices vary by at least the ratio determined by negotiations between a principal contractor and a subcontractor as not more than 10/100. <Added on Jul. 18, 2023>[This Article Wholly Amended on Apr. 1, 2009]