RESTRICTEDWORLD TRADE
ORGANIZATIONGPA/W/286
28 November 2003
(03-6339)
Committee on Government Procurement Original:  English
RESPONSES TO QUESTIONS FROM THE EUROPEAN COMMUNITIES (GPA/W/281)
REGARDING THE NOTIFICATION FROM KOREA (GPA/W/250)
UNDER ARTICLE XXIV:6
Communication from the Republic of Korea
The following communication, dated 24 November 2003, is being circulated at the request of
the Delegation of the Republic of Korea.
_______________
Please find below Korea's responses to questions from the European Communities
(GPA/W/281) regarding Korea's notifications to the Committee on Government Procurement on the
withdrawal of Korea Tobacco & Ginseng Corporation (KT&G) and Daehan Printing and Publishing
Co. Ltd. (Daehan) from Annex 3 of Appendix I of the Agreement on Government Procurement (GPA)
(GPA/W/250).
KT&G
1. Please indicate to what extent the Government of Korea, other Korean public entities or
publicly-owned companies may, de jure or de facto, influence the appointment of the directors of
KT&G.
The Government of Korea does not, de jure  o r  d e  f a c t o , influence the appointment of the
directors of KT&G.
As the Government of Korea already mentioned in the Notification (GPA/W/250), the
Government of Korea disposed its entire stocks of the Korea Tobacco & Ginseng Cooperation
(hereinafter referred to as "KT&G") in October 2002, and since then KT&G has been a private
company.  The Act on Corporate Governance Improvement and Privatization of Government InvestedEnterprise (hereinafter referred to as "Privatization Act") which is attached to the Notification
(GPA/W/270) clearly indicates the legal status of KT&G.  The Article 3 of the Privatization Act
stipulates that the KT&G is no longer considered as a government invested institution.  Accordingly,
KT&G is now a private company subject to the Korean Commercial Law, and the Government of
Korea does not have any means to control or influence the appointment of the directors of KT&G.
In addition, the Incorporation of KT&G (Attachm ent A) stipulates that the President and the
executive directors of KT&G shall be appointed at the shareholders' meeting by shareholders with
voting rights present at the meeting under the provision of Articles 20 and 26.
For reference, hereby attached is the Incorporation of KT&G (Attachment A).GPA/W/286
Page 2
2. Please describe all financing, including gran ts, guarantees and loans, that KT&G may have
obtained from the Government of Korea, other Kore an public entities or publicly-owned companies.
As mentioned above in the response to question 1, KT&G is a private company like any other
private companies.  Thus, KT&G does not receive any financial privileges from the Government of
Korea, other Korean public entities or publicly-owned companies.
3. Please indicate to what extent the Government of Korea, other Korean public entities or
publicly-owned companies may, de jure or de facto, influence management decisions of KT&G.
The Government of Korea and other public entities or publicly-owned companies do not,
de jure  or de facto,  influence the management decisions in the KT&G.  The Board of Directors
resolves important matters in respect to the operations of KT&G and the President and the directors of
KT&G manage the overall operations of the KT&G.
The above-mentioned facts are stipulated in the Articles 28 and 34 of the Incorporation of
KT&G (Attachment A).
4. Please describe the main features of the laws, regulations and measures that apply
specifically to tobacco manufacturing companies.
To ensure the sound development of the tobacco industry, the Tobacco Business Act and its
Presidential Decree apply specially to tobacco manufacturing companies, including KT&G, Phillip
Morris (hereinafter referred to as "PM") and British American Tobacco (hereinafter referred to as
"BAT").  They prescribe matters concerning the production and distribution of tobacco such as
licensing, disqualification of license, registration and some penal and fine provisions.
For reference, hereby attached is the Tobacco Business Act (Attachment B) and its
Presidential Decree (Attachment C).
5. Please provide the full text of Article 25 of the Tobacco Business Act and all measures giving
effect to this provision, and explain what can kind of assistance could be required.  Has this provision
ever been used, and if so, please describe how and under which circumstances?
Article 25 of the Tobacco Business Act prescribes the obligation of the tobacco manufacturer.
Articles 25 through 25-4 of the Tobacco Business Act prescribe "Indication of Warning Words and
Restriction on Advertisement on Tobacco (Article 25)", "Indication of Tobacco Ingredients
(Article 25-2)", "Participation of Manufacturer, etc.  in Public Activities (Article 25-3)", "Prohibition
of Money Providing, etc. for Promotion of Tobacco Sales(Article 25-4)".
Regarding assistance requirement for tobacco manufacturers, which is stipulated in section 3
of Article 25 (Participation of Manufacturers in Public Activities) in the Tobacco Business Act, a
tobacco manufacturer is required to contribute 10 won per every 20 pieces of tobacco.  The provisionof contribution is in effect since 1 January 2002.  In the early days of enforcement, only KT&G was
subject to the Act.  However, BAT and PM are also  subject to the provision for their tobacco products
manufactured in Korea since November 2002 and December 2002 respectively upon their
establishment in Korea.
The Korean Government has successfully established the "Tobacco Production Stability
Fund" based on the contribution from tobacco manufacturers for the purpose of assisting
tobacco-producing farms to create a self-supporting agricultural sector.GPA/W/286
Page 3
The following data are forecasts on the receipts from the contributions made by KT&G , BA T
and PM and the expected profits in the Tobacco Production Stability Fund.
CONTRIBUTION RECEIPTS
(Unit:  100 million won)
'02 '03.9 Total
KT&G 336.6 258.6 595.2
BAT 1.3 12.1 13.4
PM 5.8 37.6 43.4
Total 343.7 308.3 652
EXPECTED PROFIT OF THE TOBACCO PRODUCTION STABILITY FUND
(Unit:  100 million won)
2002 2003 2004 2005 2006 2007 2008
Founder's
Contribution0.1
Manufacturers'
Contribution330 370 370 360 360 350 277
KT&G
Contribution1,100
Interest Revenue 9 32 56 81 108 136 161
Subtotal 339 402 426 441 468 1,586 438
Total 339 741 1,167 1,608 2,076 3,662 4,100
6. Please describe the conditions that apply for obtaining a licence to manufacture tobacco, the
customs tariffs that apply to the import of cigarettes and leaf tobacco, and the market shares of all
tobacco manufacturers.
The Minister of Finance and Economy may grant a licence for tobacco manufacturing
business on the following conditions:
(1) equity capital:  to be in excess of 30 billion won;(2) facility standards:  to install the facilities capable of manufacturing tobacco in excess
of five billion pieces per annum (based on 16-hour operation daily), which are
equipped with an assembly line from raw material processing to cigarette
manufacturing and product packing:  Provided , That the processing facilities of raw
material may not be installed not later than the time when the tobacco of 10 billion
pieces per annum is manufactured;
(3) technical manpower:  to have the specialized technology manpower of not less than
five persons who have the career for not less than three years in the field of tobacco
manufacturing and quality control;  and
(4) R&D of tobacco manufacturing technology and quality control for national health
protection:  to be equipped with the testing equipment capable of analysing the
function and quality of products (temperature-resistant and humidity-resistant
equipment, measuring apparatus of smoky ingredients, measuring apparatus ofGPA/W/286
Page 4
air-dilution rate, measuring apparatus of suction-resistance), and to provide the
standards and guidances of quality control.
The relevant provisions are Articles 11 thr ough 11-4 of the Tobacco Business Act and the
Articles 2 through 4 of the Presidential Decree of the Tobacco Business Act.
The customs tariffs that applies to the import of cigarettes is 30 per cent of the CIF price (the
customs tariffs will be changed into 40 per cent since 1 July 2004).
The customs tariffs that applies to the import of leaf tobacco is 20 per cent of the CIF price.
BREAKDOWN OF THE TOBACCO MANUFACTURERS' MARKET SHARES
(January - September 2003)
KT&G BAT PM JT Others Total
Ratio(%) 76.8 12.8 6.4 3.9 0.1 100
Daehan
7. Please indicate if the Government of Korea, other Korean public agencies or publicly-owned
companies own or used to own shares in Daehan.  If yes, please provide details on these
shareholdings, including the number of these shares, voting rights attached to these shares, and
indicate when such shares were sold to private parties.
No.  The Government of Korea, other Korean public entities or publicly-owned companies
have never owned shares of Daehan Printing and Publishing Co. Ltd. (hereafter referred to as
"Daehan").  Since its establishment in 1948, Daehan has been a pure private company.  A specific list
on Daehan's shareholding is as below:
BREAKDOWN OF DAEHAN'S SHAREHOLDERS
Government
of KoreaPublic Entity Domestic
ShareholdersForeign
ShareholdersTotal
Ratio (%) 0 0 100 0 100
A SPECIFIC LIST OF DOMESTIC SHAREHOLDERS
Number of
ShareholdersNumber of
SharesRatio(%)
Individual
Shareholders479 2,637,438 61.40
Private School
Foundations43 184,920 4.30
Scholarship
Foundations16 268,780 6.26
Private Corporations 2 1,204,322 28.04
Total 540 4,295,460 100.00GPA/W/286
Page 5
8. Please indicate to what extent the Government of Korea, other Korean public entities or
publicly-owned companies may, de jure or de facto, influence the appointment of the directors of
Daehan.
The Government of Korea , other Korean public entities or publicly-owned companies do not ,
de jure  or de facto, influence the appointment of the directors of Daehan.
The majority of shareholders with voting right appoint the directors of Daehan at the
shareholders' meeting.
For reference, the relevant provision of the Incorporation of Daehan is as below:
"Article 32 (The Appointment of Directors)
1. The Directors of Daehan shall be appointed at the shareholders' meeting.2. The Director of Daehan shall be appointed by a majority vote of shareholders, provided that
the vote is over a quarter of its issuing stocks.
Article 36 (The Duties of Directors)
1. The President of Daehan shall represent and control the overall operation of company.
2. The Vice-President and other executive directors shall assist the President.Article 38 (Organization and Convocation of Board of Directors)
1. The Board of Directors shall be composed of the President and the directors, and it shall
resolve important matters relating to the operations of the company.
2.3. <omitted>"9. Please describe all financing, including gran ts, guarantees and loans, that Daehan may have
obtained from the Government of Korea, other Kore an public entities or publicly-owned companies.
None.  Daehan hasn't received any financial preferential treatment from the Government of
Korea, other Korean public entities or publicly-owned companies.
10. Indicate to what extent the Government of Korea, other Korean public entities or
publicly-owned companies may, de jure or de facto, influence management decisions of Daehan.
No.  The Government of Korea, other Korean public entities or publicly-owned companies do
not, de jure  or de facto,  influence management decisions of Daehan.
11. Please describe and provide a copy of the Special Regulation of the Enforcement Decree of
the Act relating to Contracts to which the State is a party for specific procurement (Presidential
Decree 15187) and the Accounting Regulation for Government Invested Enterprises (Minister of
Finance and Economy Decree 107).  Please indicate if there are other instruments that apply to
Daehan and not to other printing or publishing companies.
The purpose of "the Special Regulation of the Enforcement Decree of the Act relating to
Contracts to which the State is a party" (hereinafter referred to as "Special Regulation") is to regulateGPA/W/286
Page 6
international tendering applicable to the WTO Agreement on Government Procurement which was
signed in Marrakesh on 15 April 1994.
The Special Regulation covers matters, such as Application (Article 3), Principle of Contract
(Article 4), Method of Contract (Article 7), Qualification of Participant (Article 9) and other relevantprocurement and contract methods.  Hereby attached is a copy of the Special Regulation
(Attachment D).
The purpose of "the Accounting Regulation for Government Invested Enterprises"
(hereinafter referred to as "Accounting Regulation") is to regulate matters concerning the accounting
and contracting standards and procedures applicable to government invested institutions, and
qualification of bidders to participate in the tender.  Hereby attached is a copy of the AccountingRegulation (Attachment E).
As mentioned above in the Notification (GPA/W/250), Daehan is a private company.  Thus,
no particular privilege is applied to Daehan exclusively from the other printing or publishing
companies.
12. Please indicate if the Regulations referred to in question 11 are applicable to National
Textbook Ltd.
No.  Special Regulation and Accounting Regulation are not applicable to National Textbook
Ltd., because National textbook Ltd. was extinguished at its merger with Daehan in 1999.
13. Please explain why the purchase of National Textbook Ltd. – a company not included in
Annex 3 of Appendix I - justifies the withdrawal of Daehan from this Annex 3.
National Textbook Ltd. had been listed in Annex 3 of the WTO Agreement on Government
Procurement since its effective day, until before Daehan was listed in Annex 3.  As described in
question 12, the National Textbook Ltd. was merged with Daehan in 1999.  As a result, the
Government of Korea modified its list in Annex 3 of the GPA by replacing "the National Textbook
Ltd." by "Daehan Printing and Pu blishing Co. Ltd." (GPA/W/128).
14. Please set out on which markets Daehan and its subsidiaries, if any, operate, and indicate to
what extent these markets have been liberalized.  Please describe the structure of the Korean market
for textbooks.
The textbook markets in Korea are usually composed of three categories, covering elementary
and secondary school curriculum.
The first category deals with the textbooks issued by the Ministry of Education and Human
Resources Development (hereafter referred to as "the Ministry") that reserves their copyrights.  The
Deliberation Committee for Publication of Textbooks under the Ministry every three or five years
grants the copyrights of these textbooks to private printing and publishing companies selected througha performance evaluation of their capabilities of printing, bookbinding and publication.  Currently, the
selected companies are Daehan, Hyangwoo Industry Co., Doo-San Co., Kyo-Hak Sa Co.,
Choong-Ang Education Co., Chi-Hak Sa Co., Chun-Jae Education Co.
The second category concerns the textbooks that are published by private printing and
publishing companies with the authorization by the Ministry to use them for the curriculum.  This
system relates to the fact that the school curriculum in Korea has been revised periodically (about
every five years).  At each revision, the Ministry has granted the authorization to private printing andGPA/W/286
Page 7
publication companies to publish textbooks for the curriculum.  As of 2003, there are 84 printing and
publishing companies who publish officially authorized textbooks, including Daehan.
The third and last category is the market relating to the books the Ministry recognizes as
curriculum textbooks by accepting an application by a relevant school to use them for its curriculum.The authority to select printing and publishing companies for the recognized textbooks is, for the most
part, delegated to the metropolitan/provincial offices of education.
BREAKDOWN OF KOREAN TEXTBOOK MARKET
(Unit:  million)
2001 2002 2003
Volume Ratio
(%)Volume Ratio
(%)Volume Ratio
(%)
Daehan 99,526 58.65 108,647 56.22 108,529 46.81
HYANGWO 693 0.41 477 0.25 295 0.13
Doo-San 5,764 2.96 7,294 3.15
Kyo-Hak Sa 877 0.46 5,865 2.53
Choong-Ang 1,988 1.03 3,238 1.40
Chi-Hak Sa 1,212 0.63 2,806 1.21
Chun-Jae 124 0.06 452 0.19Gov’t-
issued
textbook
Sub-Total 100,219 119,059 61.61 128,479 55.42
Gov’t-
authorized
textbookKorean
Authorized
Textbook
Association69,470 40.94 74,186 38.39 103,336 44.58
Total 169,689 100.00 193,245 100.00 231,815 100.00
Statistics of recognized textbooks not available.GPA/W/286
Page 8
ATTACHMENT A1
INCORPORATION OF KT&G
KT&G Corporation
Articles of Incorporation
Amended: 1 April 1989
Amended: 26 February 1993
Amended: 22 March 1995
Amended: 1 October 1997Amended: 9 October 1998
Amended: 17 November 1998
Amended: 2 September 1999
Amended: 29 March 2000
Amended: 27 December 2000
Amended: 23 March 2001Amended: 15 March 2002
Amended: 27 December 2002
Amended: 14 March 2003
Chapter 1 General Provisions
Article 1 (Incorporation and Name)
The company shall be called "CHUSIKHOESA KT&G" and, in English, "KT&G
CORPORATION" (hereina fter the "Company").
Article 2 (Purposes)
1. The object of the Company shall be to engage in the following businesses:
A. Tobacco manufacturing and sales;
B. Red ginseng and red ginseng products manufacturing and sales;
C. Beverages manufacturing and sales;D. Pharmaceutical and non-pharmaceutical products manufacturing and sales (amended
on 15 March 2002);
E. Tobacco business related materials manufacturing and sales;F. Trading business (amended on 27 December 2002);
G. Distribution business (ame nded on 27 December 2002);
H. Broadcasting business (amended on 27 December 2002);I. Real estate business (amended on 27 December 2002);
J. Leaf tobacco cultivation education;
                                                     
1 Attachments A to E are in English only.GPA/W/286
Page 9
K. Activities concerning test, inspection or examination designated or entrusted by the
Korean government;  and
L. Research activity relating to the above items(amended on 27 December 2002).
2. Furthermore, the Company may engage in in vestment, contribution, loan, support, or any
other ancillary businesses necessary in engaging in the above listed businesses.
Article 3 (Location of Offices)
The Company shall have its head office in the city of "Taejeon" and, by the resolution of the
Board of Directors, the Company may have branches, subsidiaries or representative offices within or
without Korea.
Article 4 (Public Notices)
The Company shall make all its public notices in the Korea Daily News published in Seoul.
However, if it is deemed impossible to give such  notices through the Korea Daily News due to any
force majeure event, such notices shall be given by publication in any other daily newspaper
published in Seoul, Korea.
Chapter 2 Shares
Article 5 (Total Number of Shares to be Issued and Par Value)
The total number of shares that the Company may issue shall be 8 hundred million shares and
the par value per share issued by the Company shall be KRW 5,000 per share.
Article 6 (Total Number of Shares to be Issued at the Time of Establishment)
The total number of shares that the Company may issue at the time of its establishment is
274,566,387 shares.
Article 7 (Types of Shares and Share Certificates)
The shares to be issued by the Company shall be common shares, preferred shares or
convertible preferred shares, all of which are in non-bearer form.  The share certificates of the
Company shall be in eight denominations of one, five, ten, fifty, one hundred, five hundred, onethousand and ten thousand share(s) per certificate (amended on 15 March 2002).
Article 7-2 (Number and Characteristics of Preferred Shares)
1. Preferred shares to be issued by the Company shall be non-voting, and the number thereof
shall not exceed the limit prescribed in the Korean laws.
2. Dividend ratio of the preferred shares in Paragraph 1 above shall not be less than nine per cent
(9%) per annum of the par value of the shares as determined by the Board of Directors at the time of
issuance.GPA/W/286
Page 10
3. Notwithstanding the provision of Paragraph 2 above, in case the possible amount of dividends
that can be paid is less than the minimum aggregate amount of dividends for preferred shares,
dividends may not be paid.
4. If dividends on preferred shares under Paragraph 2 above are not paid, the preferred shares
shall have voting rights for a period starting from the general meeting of shareholders following the
general meeting at which the resolution not to pay dividends on preferred shares is adopted to the end
of the general meeting of shareholders at which a resolution to pay dividends for such preferred shares
is adopted.
5. Duration of the preferred shares shall be ten (10) years beginning on the issuance date of such
shares and the preferred shares shall be converted into common shares at the end of such period.
Provided, however, that in case the dividends set forth in Paragraph 2 above are not paid during such
period, such duration shall be extended until the distribution of such dividends is completed.  Withrespect to dividends on the shares issued upon the conversion, Paragraph 4 of Article 8 of this Articles
of Incorporation shall apply mutatis mutandis .
[This Article was newly established on 15 March 2002.]
Article 7-3 (Number and Characteristics of Convertible Preferred Shares)
1. Convertible preferred shares to be issued by the Company shall be non-voting, and the
number thereof shall not exceed the lim it prescribed in the Korean laws.
2. Dividend ratio of the convertible preferred shares shall not be less than nine per cent (9%) per
annum of the par value of the shares as determined by the Board of Directors at the time of issuance.With respect to the dividends on the convertible preferred shares to be issued upon conversion,
Paragraph 4 of Article 8 of this Articles of Incorporation shall apply mutatis mutandis .
3. Convertible preferred shares shall, upon request of holders of such convertible preferred
shares, be converted to common shares at the conversion rate of one convertible preferred share to one
common share.  The conversion period for convertible preferred shares shall be three (3) years from
the date immediately following the date of issuance thereof.  Such period may be adjusted by aresolution of the Board of Directors before the issuance within the period; provided , however , that in
the case of split or consolidation of common shares or other events of change in the shareholding ratio
of convertible preferred shares (the shareholding ratio premised upon the conversion to common
shares), the adjustment of the conversion ratio shall be determined at the time of issuance of
convertible preferred shares by a resolution of the Board of Directors.
4. In case the conversion right on the convertible preferred shares is not exercised within the
conversion period, such shares shall be conver ted into common shares on the date immediately
following the final date of the conversion period;  in this case, with respect to the dividends on theshares to be issued by the exercise of the conversion right, Paragraph 4 of Article 8 of this Articles of
Incorporation shall apply mutatis mutandis .
5. Notwithstanding Paragraph 2 above, in case the possible amount of dividends that can be paid
is less than the minimum amount of dividends for convertible preferred shares, dividends may not be
paid.
6. The convertible preferred shares may have additional rights and characteristics to the extent
that the relevant laws permit prior to issuance of su ch shares as determined by the Board of Directors.GPA/W/286
Page 11
7. In case of the convertible preferred shares, Paragraph 4 of Article 7-2 shall apply mutatis
mutandis .
[This Article was newly established on 15 March 2002.]
Article 8 (Pre-emptive Right and Record Date for Dividends on New Shares)
1. The Company's shareholders shall have the pre-emptive right to subscribe for new shares in
accordance with their respective shareholding ratio.  In case the Company issues new shares by rights
issue or bonus issue, then the new shares issued with respect to the preferred shares or the convertible
preferred shares shall be common shares in the case of rights issue and shall be the shares of sameclass in the case of bonus issue.  However, where a shareholder waives or loses his/her pre-emptive
right, or where fractional shares result from allocation of new shares, the shares which have not been
allocated and/or subscribed shall be disposed of in accordance with a resolution of the Board of
Directors (amended on 15 March 2002).
2. Notwithstanding Paragraph 1 above, new shares may be allocated to persons other than
existing shareholders of the Company by a resolution of the Board of Directors in the following cases:
A. Issuance of new shares by public offering;
B. Issuance of new shares to the members of the Employees Stock Holding Association
(the "ESHA");
C. Where the Company issues new shares to attain its managerial objectives including,
without limitation, introduction of new technologies, improvement of corporate
financial structure(amended on December 27, 2002);  and
D. Where prescribed by pertinent acts and regulations of Korea.
3. Where the Company issues new shares for value, the Company may make initial issuance of
the new shares to the members of the ESHA as set forth in B of the above Paragraph within the limit
prescribed in the Securities and Exchange Act (the "SEA").
4. Where the Company issues new shares by right issue, bonus issue or stock dividend, such
new shares shall be regarded as having been issued at the end of the fiscal year immediately preceding
the fiscal year during which the new shares are issued for the sake of dividends on the shares.
Provided, however, that in case of interim dividends on the shares issued by right issue, bonus issue or
stock dividend after the record date for interim dividends as set forth in Paragraph 3 of Article 43, ofthis Articles of Incorporation, the new shares shall be deemed to have been issued immediately after
such record date (amended on 15 March 2002).
Article 9 (Stock Option)
1. Stock options for the shares of the Company with in the limit of twenty per cent (20%) of the
total number of shares issued by the Company may be awarded in accordance with the Enforcement
Decree of the SEA, and pursuant to a special reso lution of the shareholders' meeting to those officers
and employees of the Company who have contributed or is capable of contributing to improve the
management and the technical innovation of the Company, except for officers or employees in any of
the following cases; provided, however, the Compan y may grant stock options by a resolution of the
Board of Directors, to an extent not exceeding ten per cent (10%) of the total number of issued and
outstanding shares in accordance with the Enforcement Decree of the SEA.GPA/W/286
Page 12
A. The largest shareholder (as defined in Article 54-5, Paragraph 4, Subparagraph 2 of the
SEA) of the Company and those who are specially related to the largest shareholder
("Specially related persons" is defined in Article 10-3, Paragraph 2 of the SEA.Hereinafter, referred to as "Specially Related Persons").  Provided, however, persons
who became specially related persons only due to the fact that they were elected as
officers of the Company shall be excluded.
B. Major shareholders of the Company (as defined in Article 188, Paragraph 1 of the SEA)
and Specially related persons who are specially related to the major shareholders of theCompany.  Provided, however, persons who became specially related persons only due
to the fact that they were elected as officers of the Company shall be excluded.
C. Persons who, upon exercising the stock option, would become the major shareholder.
2. Shares to be issued by the Company upon exercising the stock option shall be common
shares, preferred shares or convertible preferred shares, all of which are in non-bearer form (and these
shares shall be used to calculate the difference between the exercise price and the market price where
the Company pays cash or deliver treasury shares for such difference) (amended on 15 March 2002).
3. The number of officers and employees to whom the stock option will be awarded shall not
exceed 99/100 of the total number of officers and employees in office of the Company, and the stock
options to be granted to an officer or employee shall not exceed 10/100 of the total number of shares
issued by the Company.
4. The purchase price per share to be acquired by the exercise of the stock options shall not beless than the price prescribed in the SEA.
5. The stock options may be exercised, during the period prescribed by a separate agreement,
within seven (7) years from the date when two (2) years have elapsed from the date of the special
resolution of the shareholders' meeting or the resolution of the Board of Director that granted such
stock options.
6. The officers and employees of the Company who are granted stock options must remain in the
office or must have been employed for at least two years since the date of the special resolution of
shareholders' meeting or the resolution of the Board of Directors prior to exercising the stock optionawarded to them.  However, where the officer or employee of the Company who are granted stock
options dies or retires or resigns due to age limit or any other cause not attributable to him/her, the
stock options may be exercised by such officer, employee or their heirs/heiresses during its exercise
period.
7. In the following cases, the stock options may be cancelled by a resolution of the Board of
Directors:
A. where the officer or employee has retired or resigned from his/her office voluntarily
after being awarded the stock options;
B. where the officer or employee has been released or dismissed from his/her office as a
result of his/her wilful misconduct or gross negligence causing significant injury to theCompany;  andGPA/W/286
Page 13
C. where any other events for cancellation stipulated in the stock option agreement occurs.
Article 10 (Deleted on 27 December 2002)
Article 11 (Transfer Agent)
1. The Company shall have transfer agent.
2. The transfer agent, the place where its services are to be rendered and the scope of its duties
must be decided by a resolution of the Boar d of Directors and must be publicly announced.
3. The shareholders registry or a duplicate thereof must be kept at the office where the transfer
agent renders its services, and the activities of making entries in the shareholders registry, pledge
registration and cancellation, trust indication and cancellation, issuance of share certificate, receipt of
reports files, and all other administrative matters relating to the shares must be conducted by thetransfer agent.
4. All procedures relating to the administrative matters stipulated in Paragraph 3 of this Article
shall be performed according to the Regulation on Securities Transfer Agents, etc.
Article 12 (Reporting the Name, Address, Regi stered Seal and Signature of Shareholders)
1. Each shareholder and registered pledgee of the Company shall register his/her name, address
and registered seal signature with the Company, and any changes thereof shall also be reported to the
Company.
2. Shareholders and the registered pledgees residing in a foreign country must designate an
address and an agent in Korea to receive reports and report to the Company thereof.
3. Paragraphs 1 and 2 shall apply even if a change in matters described therein.
Article 13 (Suspension of Alternation of Shareholders' Register and Record Date)
1. The Company shall suspend any entry into the shareholders' register with regard to
shareholders' rights during the period starting from  the day following the last day of the preceding
fiscal period until the close date of the ordinary shareholders' meeting convened for such preceding
fiscal period.
2. The Company shall recognize the shareholders registered on the shareholders' register as of
the last day of each fiscal period as the shareholders who may exercise the shareholder's rights in the
ordinary shareholders' meeting.
3. In case of an extraordinary shareholders' meeting being called or if needed for certain other
cases, the Company may suspend any entry into the shareholders' register for a period not exceeding
three months by a resolution of the Board of Directors or recognize the shareholders registered on theshareholders' register as of a fixed day determined by a resolution of the Board of Directors as the
shareholders to exercise the shareholder rights.  In addition, the Company may arrange both a
suspension of any entry into the contents in the sh areholders' register and designation of a record date
if the Board of Directors finds that the two measures are necessary.  The Company must publicly
notify all such measures no less than two weeks prior to the intended date of the shareholders'
meeting.GPA/W/286
Page 14
Chapter 3 Bonds
Article 14 (Issuance of Convertible Bonds)
1. By a resolution of the Board of Directors, the Company may issue convertible bonds to those
other than the shareholders if such issuance of convertible bonds falls under any of the categories set
forth below;  provided, that the total face value of such convertible bonds does not exceed
KRW 500 billion:
A. where the issuance is in the form of a general public offering in accordance with the
provisions of the Securities and Exchange Act ("SEA");
B. where the Company issues convertible bonds to alliance companies for introduction
of technology or other purposes;
C. where the issuance is for the purpose of soliciting foreign investment necessary for
the management of the Company in accordance with the Foreign InvestmentPromotion Act;
D. where the Company issues convertible bonds to domestic or international financial
institutions for urgent funding;
E. where the issuance is performed overseas in accordance with Article 192 of the SEA;
or
F. where the Board of Directors reasonably decides that the issuance is necessary for
achievement of management purpose of the Company.
2. The Board of Directors may issue the convertible bonds in Paragraph 1 above with the
condition that only a portion of the bonds issued shall be attributed with conversion right.
3. The classes of shares issued upon conversion shall be common shares, preferred shares or
convertible preferred shares, which shall be determined by the Board of Directors at the time of
issuance of bonds.  The conversion price shall be decided by the Board of Directors at the time of
issuance of the relevant bonds, and must not be less than the face value of each share (amended on
15 March 2002).
4. The period during which request for conversion may be made shall be determined by the
meeting of the Board of Directors within the period from the date when one (1) month has elapsed
after issuance of the relevant convertible bonds to the date immediately preceding the redemption date
for such bonds.
5. Distribution of dividend or interest on the shares issued upon conversion shall be made in
accordance with Paragraph 4 of Article 8;  provided , however, that with respect to the interim
dividends on the shares to be issued upon conversion after the record date for such dividends as set
forth in Paragraph 3 of Article 43, the shares shall be deemed to have been issued immediately after
the record date for such interim dividends (amended on 15 March 2002).GPA/W/286
Page 15
Article 15 (Issuance of Bonds with Warrants)
1. By a resolution of the Board of Directors, the Company may issue bonds with warrants to
those other than the shareholders if such issuance of bonds with warrants falls under any of thecategories provided in Article 14, Paragraph (1); provided  that the total face value of such warrant
does not exceed KRW 500 billion.
2. The aggregate price of new shares, which may be subscribed for by the holders of warrants,
shall be decided by the Board of Directors, and must not exceed the total face value of the bonds withwarrants.
3. The classes of shares to be issued by exercising the warrant shall be common shares,
preferred shares and convertible preferred shares, which shall be determined by the Board of Directors
at the time of issuance of warrants.  The issuing pri ce shall be decided by the Board of Directors at the
time of issuance of the relevant warrants, and shall be equal to the face value or an amount exceeding
the face value.
4. The period during which request for the exercise of the warrant may be made shall be
determined by the meeting of the Board of Directors within the period from the date when one (1)month has elapsed after issuance of the relevant warrants to the date immediately preceding the
redemption date for such warrants.
5. Distribution of dividend or interest on the shares issued by exercising the warrant shall be
done in accordance with Paragraph 4 of Article 8;  provided , however, that with respect to the interim
dividends on the shares to be issued by exercising the warrant after the record date for such dividends
as set forth in Paragraph 3 of Article 43, the shares shall be deemed to have been issued immediately
after the record date for such interim dividends (amended on 15 March 2002).
Article 16 (Applicable Provisions regarding the Issuance of Bonds)
Articles 11 through 13 shall apply mutatis mutandis  to the issuance of bonds.
Chapter 4 Shareholders Meeting
Article 17 (Convocation of Shareholders' Meeting)
1. Shareholders' meetings shall be of two categories, ordinary and extraordinary.  The ordinary
shareholders' meeting shall be convened within thr ee months after the close of each fiscal year; the
extraordinary shareholders' meeting may be conven ed at any time when deemed necessary by the
Board of Directors or pursuant to any other relevant laws and regulations.
2. Resolutions of the shareholders' meeting shall be limited to the agenda stated in the meeting
notice only.
3. The shareholders' meeting shall be held either at the place where the head office of the
Company is located or in Seoul.  However, the shareholders' meeting may be held at a nearby place as
determined by a resolution of the Board of Directors when necessary.
4. The President shall convene the shareholders' meeting.  Where the President is unable to
convene due to an unavoidable reason, Paragraph 2 of Article 28, shall apply mutatis mutandis .GPA/W/286
Page 16
Article 18 (Notice and Public Notice of Convocation of Shareholders General Meeting)
1. In convening a shareholders' general meeting, the notice stating the time, date, place and
purposes of the meeting shall be sent, in writing, to individual shareholders two weeks prior to thescheduled date of the meeting.
2. Notices of the meeting to the shareholders  owning less than 1/100 of the total number of
shares may be made by with two or more public notices in the Korean Daily News published in Seoul,
or the Taejeon Times published in Taejeon.
Article 19 (Chairman of Shareholders' Meeting)
The President shall act as the Chairman at the shareholders' meetings.  However, where the
President is unable to do so due to an unavoidable reason, Paragraph 2 of Article 28, shall apply
mutatis mutandis .
Article 20 (Resolution of Shareholders' Meeting)
1. Unless otherwise stipulated in the applicable laws and regulations, the resolution of the
shareholder's meeting shall be adopted by the shareholders representing the majority of shareholders
with voting right present at the meeting and holding no less than one fourth of the total number of
shares issued.
2. Notwithstanding the provision of Article 385, Paragraph (1) of the Commercial Code, the
dismissal of the directors shall be adopted by at least two third (2/3) votes of shareholders present at
the meeting and such votes shall represent at least one half (1/2) of total number of issued and
outstanding shares of the Company; provided, that the dismissal as set forth in Article 26,Paragraph (2) and Article 32-2, Paragraph (4) shall be adopted by a resolution pursuant to Article 434
of the Commercial Code.
3. In case of any amendment to the first sentence of Paragraph (2), notwithstanding Article 434
of the Commercial Code, such amendment shall be  adopted by at least two third (2/3) votes of
shareholders present at the meeting and such votes shall represent at least one half (1/2) of total
number of issued and outstanding shares of the Company.
4. Each share shall be given one voting right.
Article 21 (Exercise of Voting Rights by Proxy)
1. Shareholders may cause their proxy holders to exercise their voting rights.2. Prior to the shareholders' meeting, proxy holders in Paragraph 1 above must submit to the
Company a proof of their proxy rights.
Article 22 (Chairman's Right to Maintain Order)
1. The Chairman may suspend or, cancel a persons' right to speak or order such person to be
removed from the meeting if such person speaks or acts in such manner as to intentionally interrupt
the proceedings or disturb the order of the shareholders' meeting.
2. The Chairman may restrict the allotted time and the number of opportunity allowed for each
shareholder to speak if deemed necessary for the orderly proceeding of the shareholders' meeting.GPA/W/286
Page 17
[This Article was amended on 27 December 2002.]
Article 23 (Minutes of Shareholders' Meeting)
The proceedings and resolutions of the shareholders' meeting shall be recorded in the minutes
and shall be signed by the Chairman and all officers of the Company present at the meeting, and must
be kept in custody of the Company.
Article 24 (Shareholders' Committee)
1. The Company may have the Shareholders' Committee consisting not more than fifteen
shareholders' representatives for the purpose of effective operation of the Shareholders' Meeting.
2. The following persons shall be the members of the Shareholders' Committee, and the
institutional shareholders shall not be more than five members.  If two or more members are included
in the scope of the specially related persons, the next specially related person in order cannot be the
member of the Shareholders' Committee.
A. the largest fourteen shareholders as of the beginning date of the suspension of
alteration of the shareholders' register or the record date;
B. one representative of the ESHA.
3. Any person in competition with the Company or the specially related persons of such person
cannot be the member of the Shareholders' Committee.
4. The Shareholders' Committee shall perform the following functions:
A. to recommend the outside director;
B. to submit the opinion regarding the agenda of the General Meeting of Shareholders,
which was presented to the Shareholders' Committee for its review by the Board of
Directors;  and
C. to provide mutual cooperation among the members of the Shareholders' Committee
for the stabilization of management right of the Company.
5. After the resolution of the Board of Directors regarding the agenda of the General Meeting of
Shareholders, the President shall convene the meet ing of the Shareholders' Committee prior to the
date set for the Shareholders' Meeting.
6. After the composition of the Shareholders' Committee, the chairman of the Shareholders'
Committee shall be appointed from among its members.
7. The matters referred to in Subparagraph 2 of Paragraph 4 shall be adopted by the presence of
a majority of all members and by the affirmative votes of a majority of the members present of the
Committee.  Each member shall have one vote regardless of the number of shares held by him.
8. The Company shall report to the Shareholders' Committee the matters deemed by the Board
of Directors necessary to be reported from among those related to the interests of the shareholders.GPA/W/286
Page 18
Chapter 5 Directors and Board of Directors
Article 25 (Number of Directors)
The Company shall have one President and not more than fourteen directors.  Provided that,
the number of the executive directors, including the President, shall be less than six and 1/2 of thetotal number of directors (amended on 27 December 2002).
Article 26 (Appointment of President and Directors, etc)
1. The President shall be appointed at the Shareholders' Meeting among the persons
recommended by the President Candidate Recommendation Committee according to Article 32 hereof
(amended on 27 December 2002).
2. The executive directors shall be appointed among the persons recommended by the President
with the consent of the Board of Directors at the Shareholders' Meeting.  Upon occurrence of any of
the events set forth below, the President may propose dismissal of an executive director to the
Shareholders' Meeting with consent of the Board of Directors.  The executive directors shall not
participate in the resolution of the Board of Directors:
A. where an executive director contracts a physical or mental disease which may make
such executive director incapable of performance of his/her duties at least one (1)
year;  or
B. where an executive director's achievement is severely unsatisfactory due to
significant deficiency in his/her ability to perform duties.
3. Notwithstanding Paragraph 2 above, if the President Candidate Recommendation Committee
recommends a candidate for president, such candida te shall recommend executive director candidates
with the consent of the Board of Directors.  In such case, the candidates recommended to becomeexecutive directors may not participate in the resolution of the Board of Director.  Provided that, if the
president candidate fails to be appointed as the President at the General Meeting of Shareholders, the
president candidate’s recommendation for executive director candidates shall be void.
4. Members of the Audit Committee who are not outside directors pursuant to Article 34-3 shall
meet the requirements set forth in Paragraph 3 of Article 54-6 of the SEA.  In case of appointing or
dismissing, pursuant to Article 191-11 of the SEA, if the aggregate voting shares owned by the largestshareholder and its Specially Related Persons and other persons as prescribed by the Presidential
Decree exceeds 3/100 of the total voting shares issued by the Company, the shareholders may not
exercise voting rights for such shares in excess of the above percentage (amended on
27 December 2002).
5. Outside directors shall be recommended by the Outside Director Candidates
Recommendation Committee after its examination of qualification of those recommended by the
Outside Director Candidates Recommendation Committee, the shareholders who exercise the right
under Article 191-14, Paragraph (1) of the SEA and the Shareholders' Committee, and shall be
appointed at the General Meeting of Shareholders in accordance with Article 34-5 hereof.GPA/W/286
Page 19
Article 27 (Terms of Directors)
1. The term of the directors shall be determined at the General Meeting of Shareholders not
exceeding three years and the term of a director who is newly appointed as a result of vacancy of anoutside director shall be the remaining term of the predecessor; provided, however, that if the term of
the directors expire after the last date of the last fiscal year during such term but prior to the close of
the ordinary shareholders' meeting for the approval of the settlement of accounts for such last fiscal
year, the term shall be extended until the end of the ordinary Shareholders' Meeting (amended on
27 December 2002).
2. (Deleted on 29 March 2000.)
Article 28 (Duties of the President and Executive Directors)
1. The President shall represent the Company and control the overall operations of the
Company.
2. The directors shall assist the President.  In case where the President is absent, the directors
shall act for the President in the order stipulat ed in the Organization Regulation of the Company.
Article 29 (Deleted on 29 March 2000)
Article 30 (Remuneration for Directors)
1. The remuneration of executive directors including the President shall be determined by the
Board of Directors within the scope set forth by a resolution of the Shareholders' Meeting.  In such
case, the President and the executive directors shall not participate in the resolution of the Board of
Directors (amended on 27 December 2002).
2. (Deleted on 27 December 2002.)3. The Company may compensate actual costs and expenses for outside directors by the
resolution of the Board of Directors.
Article 31 (Retirement Allowances for Directors)
The retirement allowance for the President and executive directors shall be paid in accordance
with the Directors Retirement Allowance Provisions provided by the resolution of the Shareholders'
Meeting (amended on 27 December 2002).
Article 31-2 (Deleted on 27 December 2002)
Article 32 (President Candidate Recommendation Committee)
1. By a resolution of the Board of Directors, the Company shall have a President Candidate
Recommendation Committee, a temporary committee of  the Board of Directors, which is composed
of not more than seven members in the following or der. In such case, the President and the executive
directors shall not participate in the resolution of the Board of Directors (amended on
27 December 2002):
A. No more than six outside directors selected by the Board of Directors;GPA/W/286
Page 20
B. The incumbent President;  provided, however, that where the incumbent President
wishes to become a candidate for the president or where the President is not available
for the committee temporarily, then the Board of Director only consisting of outside
directors shall appoint one outside director as a candidate. Any one who is appointed
as a member of the Committee may not become a candidate for the President;
C. (Deleted on 23 March 2001.)
2. The Chairman of the Committee shall be appointed by the resolution of the Committee.3. The President Candidate Recommendation Committee shall resolve all issues with the
majority votes of the members present.
4. The President Candidate Recommendation Committee shall be established by the resolution
of the Board of Directors within sixty days prior to the expiration date of the President's term and
shall be deemed dissolved upon the resolution of the Shareholders' Meeting to approve the candidate
for the presidency recommended by the President Candidate Recommendation Committee.  However,if a new President is appointed before the full term of the President expires due to dismissal or
vacancy due to any other reason, the Recommendation Committee must be re-established within
30 days from the date of dismissal or vacancy.
5. After identifying the candidates, the Pres ident Candidate Recommendation Committee shall
consider the following factors as the examination standard for evaluating the presidential candidates
in a meeting of the Board of Directors composed of outside directors and shall recommend the
candidate to the General Meeting of Shareholders.  Provided that, the Committee shall report the
results of consideration to the Board of Directors prior to the recommendation to the General Meeting
of Shareholders:
A. Factors such as experience and academic record, etc. that allow an objective
examination on the knowledge of the candid ate regarding business administration and
economics economy;
B. Factors that allow for an objective examination of the individual's business
experiences, such as past business achievements and the period length of the relevantexperiences;  and
C. Other factors that allow for an examination on the individual's qualification and
capabilities as a CEO.
6. The details regarding the operation, etc. of the President Candidate Recommendation
Committee shall be determined by the resolution of the Board of Directors.
Article 32-2 (Contract with President)
1. The President Candidate Recommendation Committee shall consult with the person to be
recommended as the candidate for president about terms and conditions of a contract on themanagement targets as determined by the Board of Directors, and may change the terms and
conditions of such contract determined by the Board of Directors if deemed necessary in the course of
such consultation;  provided that , the President shall not participate in the resolution of the Board of
Directors at which the management targets to the terms and conditions of the contract are determined.GPA/W/286
Page 21
2. The President Candidate Recommendation Committee shall recommend the candidate for
president at the General Meeting of Shareholders pending the results of the consultations as provided
under Paragraph 1 above.
3. In case that the candidate for president is appointed as the President at the General Meeting of
Shareholders under Paragraph 2 above, the Chairman of the President Candidate Recommendation
Committee in such capacity as the representative of the Company shall enter into a management
agreement with the President.
4. The Board of Directors may evaluate the performance of the management agreement with the
President under Paragraph 3 above or request an independent evaluation agency for such evaluation.
If the Board of Directors deems the performance of the President to be unsatisfactory uponconsidering the results of the performance evaluation as compared to the management targets, the
Board of Directors may suggest the dismissal of the President at the General Meeting of Shareholders.
In such case, the President and the executive direct ors shall not participate in the resolution of the
Board of Directors.
[This Article was newly established on 27 December 2002.]
Article 33 (Qualification of Outside Director)
Every outside director must be an independen t expert or experienced person in the field of
economics, business management, law, or relevant technology.  The person falling under one of thefollowing individual category may not become an out side director and shall lose his/her office as an
outside director if he/she falls under one of the following category after becoming an outside director.
1. A person who falls under Subparagraphs 1 through 9 of Paragraph (4) of Article 54-5
of the SEA;
2. An individual or an employee or execu tive of a company who receives support from
the Company, or a former employee or executive who have worked at such company
within the past two years;
3. A government official (excluding educational officials - hereinafter the same) under
the relevant laws or a person who has had been an official within last two years;  and
4. (Deleted on 27 December 2002.)
Article 34 (Organization and Convocation of Board of Directors)
1. The Board of Directors shall be composed of the President and the directors, and it shall
resolve important matters relating to the operations of the Company.
2. Notwithstanding Paragraph 1 above, the Board of Directors will be composed of directors,
after excluding the President or the executive directors if this Articles of Incorporation prohibits the
President or executive directors from participating in the resolution of the Board of Directors.
3. The President may convene the Board of Directors' meeting if any director requests such a
meeting, and if the President is not present, Paragraph 2 of Article 28 hereof shall apply mutatis
mutandis .  Provided, that if the President refuses to convene the meeting of the Board of Directors
without justifiable reason, another director may convene such meeting (amended on
27 December 2002).GPA/W/286
Page 22
4. When convening a Board of Directors' meeting, notice shall be given to the members of the
Board of Directors three days prior to the meeting; provided, if where all the members of the Board of
Directors agree, the procedure for convocation may be omitted.
Article 34-2 (Committee in the Board of Directors)
1. The Company shall establish an Audit Committee and Outside Director Candidate
Recommendation Committee as internal committees of the Board of Directors, and if deemednecessary, the Company may establish any other committee by a resolution of the Board of Directors.
Each Committee shall appoint their respective representative by a resolution thereof.
2. Details regarding the organization, authority, and operation of the internal committees of the
Board of Directors shall be decided by the resolution of the Board of Directors.
Article 34-3 (Audit Committee)
1. The Audit Committee shall be composed of at least three directors, and no more than 2/3 of
the members shall be outside directors.
2. The Audit Committee shall designate its representative by its resolution.  The Audit
Committee may designate several co-representatives.
Article 34-4 (Duty of the Audit Committee)
1. The Audit Committee shall audit the accounting matters and the operation of the Company.
2. After reviewing the agenda and documents to be submitted to the Shareholders' Meeting, the
Audit Committee shall present to the Shareholders' Meeting its opinion as to whether such agenda and
documents violate any relevant laws or this Ar ticles of Incorporation, or include any other
substantially unreasonable matters.
3. The Audit Committee may request for convocation of the extraordinary Shareholders'
Meeting by submitting a letter stating the reasons and agenda for such meeting.
4. The Audit Committee may handle any other matters entrusted to it by the Board of Directors.
Article 34-5 (Outside Director Candidate Recommendation Committee)
1. The Outside Director Candidate  Recommendation Committee shall be composed of no more
than three members, more than one half of which shall be the outside directors.
2. The Outside Director Candidate  Recommendation Committee shall perform the following
duties:
A. Examination of qualification and recommendation of the outside director candidates;
and
B. Other matters delegated by the Board of Directors.GPA/W/286
Page 23
Article 35 (Chairman of the Board of Directors)
1. The President shall be the Chairman of the Board of Directors.  If the President is absent,
Paragraph 2, Article 28 hereof shall apply mutatis mutandis .
2. In case where the President cannot participate in the resolution of the Board of Directors
pursuant to this Articles of Incorporation, the Chai rman of the Board of Directors shall be determined
by the seniority of the outside directors.
Article 36 (Resolution of Board of Directors)
1. The Board of Directors shall be convened by the presence of a majority of the directors and
the resolutions of the Board of Directors shall be adopted by a majority of votes of the members
present of the Board of Directors.  However, resolutions on dismissal of the President and the
executive directors shall be adopted by affirmative votes of 2/3 of the outside directors.
2. The regulations on the Board of Directors shall apply to matters that are subject to review and
resolution by the Board of Directors and matters in connection with operations of the Board of
Directors.
Article 37 (Minutes of the Board of Directors)
With respect to the proceedings of meetings of the Board of Directors, the agenda for the
meeting, course of the proceedings and the results thereof, and the person who opposed thereto and
the reason of such opposition shall be recorded in the minutes to the Meeting of the Board ofDirectors which the Chairman and the directors present shall affix their names and seals or signatures
(amended on 27 December 2002).
Article 38 (Managerial Officers)
1. The Company may have managerial officers for the purpose of efficient performance of the
business of the Company.
2. The executive officers in Paragraph 1 shall be appointed by the President and the terms of
such executive officers shall be no more than three years.
3. Remuneration and bonus for managerial officers shall be determined pursuant to the separate
regulations established by the Board of Directors, and the retirement allowance for the executive
officers shall be paid in accordance with the Executive Officers Retirement Allowance Provisions asadopted pursuant to the resolution of the Shareholders' Meeting.
(Deleted on 27 December 2002.)[This Article was amended on 27 December 2002.]
Article 38-2 (In-house Advisors)
In order to obtain the advice for the material matters related to the business operation of the
Company, the President may appoint as in-house advisors certain persons who were former
Presidents, executive directors and managerial officers having sufficient experiences in the
management of the Company or the persons who are necessary to establish the policy of the
management of the Company.GPA/W/286
Page 24
[This Article was newly established on 27 December 2002.]
Article 39 (Management Committee)
1. The Company may have a Management Committee to review and resolve the matters
entrusted to it there with by the Board of Directors.
2. (Deleted on 15 March 2002.)
Chapter 6 Accounting
Article 40 (Fiscal Year)
The fiscal year of the Company shall be from 1 January to 31 December of each year.  The
last day of the fiscal year shall be the financial settlement date.
Article 41 (Submission, Approval and Announcement of Financial Statements)
1. The President shall settle accounts at the end of each fiscal year and shall prepare the balance
sheet, statement of profit and loss, statement of appropriation of retained earnings (hereinafter referredto as "Financial Statements"), the supporting statements and the business report.  The President shall,
after acquiring the approval of the Board of Directors on the above documents, submit such
documents to the Audit Committee six weeks prior to the starting date of the ordinary Shareholders'
Meeting.
2. The Audit Committee, after receipt of the documents set forth in Paragraph 1 above, shall
prepare and submit an audit report within four weeks to the President.
3. The President shall submit the Financial Statemen ts to an ordinary Shareholders’ Meeting for
approval and report the contents of the business report to the Shareholders' Meeting.
4. The President shall, immediately after the appr oval provided in Paragraph 3 above, notify to
the public of the balance sheets and the independent auditor's opinion.
5. The President shall keep the Financial Statements, the business report and the audit report at
it's the head office of the Company for five years and copies of each document at the branch offices of
the Company three years commencing from date one week before the Shareholders' Meeting.
Article 41-2 (Public Notice of Management Information)
The Company shall publicly announce certain items necessary for the purpose of the
transparency of the operation of the Company.
Article 42 (Appropriation of Earnings)
The Company shall dispose of the unappropriate d retained earnings in the following order;
provided, however, other items that the follow ing may be disposed by a resolution of the
Shareholders' General Meeting:
A. Legal reserves (legal reserves under the Commercial Code);GPA/W/286
Page 25
B. Other statutory reserves;
C. Dividends
D. Discretionary reserves;
E. Other appropriation of retained earnings;  and
F. Unappropriated retained earnings to be carried forward to the subsequent year.
Article 43 (Dividends)
1. Dividends shall be paid in cash or in stocks.
2. In case the dividends are distributed in shares and the Company has issued several classes of
shares, such distribution may be made through shares of different classes by a resolution of a
Shareholders' Meeting (newly established on 15 March 2002).
3. Once a year, the Company may distribute interim dividends in cash with the record date set as
30 June by a resolution of the Board of Directors (newly established on 15 March 2002).
4. When distributing interim dividends, the same dividend ratio as that of the common shares of
the Company shall be applied to the preferred shares set forth in Article 7-2 and the convertiblepreferred shares set forth in Article 7-3 (newly established on 15 March 2002).
5. Dividends in Paragraph 1 above shall be paid to the shareholders or the pledgees registered on
the shareholders' register as of the end of each fiscal year;  dividends in Paragraph 3 above shall be
paid to the shareholders or the pledgees registered on the shareholders register of the Company as ofthe record date for mid-year dividends; provided, the interest on dividends shall not be paid (amended
on 15 March 2002).
Article 43-2 (Redemption of Shares)
1. The Company may redeem the shares within the scope of profits attributable to the
shareholders, by the resolution of the Board of Directors.
2. In order to redeem the shares pursuant to Paragraph 1, the Board of Directors shall adopt the
following resolutions:
A. Types and the total number of shares to be redeemed;B. The total amount of shares to be acquired for redemption;  andC. Acquisition period (the acquisition period shall be before the Ordinary General
Meeting of Shareholders to be held first after the resolution of such redemption).
3. In case of acquisition of treasury shares for the purpose of redemption pursuant to
Paragraph 1, the acquisition shall be made in accordance with the following criteria:
A. To be made in accordance with the method referred to in any of Subparagraphs of
Paragraph 1 of Article 189-2 of the SEA.  In case by the method referred to in the
said Subparagraph 1, the acquisition period and method should be in compliance with
the criteria set forth by the Enforcement Decree of the SEA.
B. The total amount of shares to be acquired for redemption shall not exceed the amount
set forth by the Enforcement Decree of the SEA within the scope of profitsGPA/W/286
Page 26
attributable to the shareholders as of the end of the relevant fiscal year pursuant to
Paragraph 1 of Article 462 of the Commercial Code.
4. When the shares are redeemed pursuant to Paragraph 1, the matters referred to in each
Subparagraph of Paragraph 2 and the purpose of redemption shall be reported to the Ordinary GeneralMeeting of Shareholders to be held first after the resolution of such redemption.
Article 44 (Extinctive Prescription of the Claim for Dividend)
1. The claim for payment of dividends shall expire when it is not exercised for five years.
2. Dividends not paid until the completion of the extinctive prescription period provided in
Paragraph 1 above shall belong to the Company.
ADDENDA (1 April 1989)
Article 1 Enforcement Date
This Articles of Incorporation shall be effective on the date of establishment of the Company.
Article 2 Interim Measure Concerning Government Investment
Any amount invested in the Korea Government Monopoly Corporation ("KGMC") by the
Government before the execution of this Articles of Incorporation shall be deemed investment in the
Company.
Article 3 Interim Measure Concerning Fiscal Year
The first fiscal year of the Company shall count in the fiscal year of the KGMC and shall end
on the last day of the fiscal year of the Korean government.
Article 4 Interim Measure Concerning Budget
During the period of enforcement of this Articles of Incorporation, any budget, which has not
been used by the KGMC during the fiscal year of 1989, shall be assigned to the Company's budget for
the year 1989.
Article 5 Interim Measure Concerning Hiring Employees
1. The employees of the KGMC at the time of execution of this Articles of Incorporation shall
become the employees of the Company.
2. The retirement age of the employees of the Company pursuant to Paragraph 1 above shall be
determined in accordance with the rules for the retirement age of the KGMC.  However, where the
retirement age of the Company is greater than that of the KGMC, these rules shall not apply.
Article 6 Interim Measure Concerning Terms of the Executive Officers
The terms of the executive officers of the Company as of the execution of this Articles of
Incorporation shall be calculated by adding the periods during which they have worked for KGMC in
accordance with the previous rules.GPA/W/286
Page 27
Article 7 Expenses for Establishment
1. The expenses for the establishment of the Company shall not exceed KRW 150,000,000, and
this amount shall be paid by KGMC.
2. The expenses in Paragraph 1 above shall include incorporation (establishment) registration
fee, printing fee, other operational expenses, and expenses for the preparation of the operation of the
Company including the initial cost of business.
Article 8 Names and Addresses of the Establishing Members
1. The names and addresses of the promoters of the Company are as follows.
2. The promoters, having created this Articles of Incorporation pursuant to Article 4 of the
Addenda of the Korea Tobacco & Ginseng Corporati on Act, hereby affix their signatures and seals.
(Promoters)
Address: 100-3 Banpo-2dong, Seocho-ku, Seoul
Name: Doo Pyo Hong
Address: Woosung Apt. #20-905, Chamsil-1dong, Songpa-ku, Seoul
Name: Jong Suk Park
Address: Samick Apt. #D-211, Yeoido-dong, Youngdeungpo-ku, Seoul
Name: Young Jeong Park
Address: 6-39 Hwasoo-dong, Mapo-ku, Seoul
Name: Soo Am Lee
Address: Shinbanpo 3 Apt #25-104, Banpo-1-1 dong,  Seocho-ku, Seoul
Name: Yoon Mok Won
ADDENDUM (26 April 1993)
This Articles of Incorporation shall be effective from the date of the approval of the Minister
of Finance and Economy.
ADDENDUM (22 March 1995)
This Articles of Incorporation shall be effective from the date of the approval of the Minister
of Finance and Economy.
ADDENDA (1 October 1997)
Article 1 Enforcement Date
This Articles of Incorporation shall be effective as of 1 October 1997.GPA/W/286
Page 28
Article 2 Relationship with the Relevant Laws
The Special Act, the Korea Tobacco & Ginseng Corporation Abolition Act and the
Commercial Code shall apply to matters not pr ovided in this Articles of Incorporation.
Article 3 Exceptions for Restriction of Acquisition of Shares
Paragraph 1, Article 10 hereof shall not apply to a person holding shares of the Company in
excess of the limitation at the time when this Articles of Incorporation became effective.
Article 4 Exception for Appointment of the First Non-Executive Directors
The first outside directors shall be appointed at the Shareholders' General Meeting by the
recommendation of the temporary outside directors recommendation committee pursuant to Article 3
of the Addenda of the Special Act.
Article 5 Exceptions for Extension of the Terms of the First President and the Directors
Notwithstanding Paragraph 1, Article 27 hereof, the term of the President and the directors
elected for the first time since the enforcement of this Articles of Incorporation shall be extended until
the last date of the Shareholders' Meeting, which was convened for the first time after the expiration
of their terms.
ADDENDUM (9 October 1998)
This Article of Incorporation shall be effective from the date of resolution by the
Shareholders' Meeting.
ADDENDUM (17 November 1998)
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.
ADDENDUM (2 September 1999)
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.
ADDENDUM (29 March 2000)
1. (Enforcement Date) This Articles of Incorporation shall be effective from the date of
resolution of the Shareholders' Meeting.  However, amended rules of Articles 25, 26 (excluding
Paragraph 4), 27, 29, 30, 31, 34, 34-2(1) (Establishment of the Audit Committee), 34-3, 34-4, 37,
and 41 shall come into force from the day following the expiration date of the terms of the auditorsdesignated under the previous rules or from the day following the date when the auditors resigned for
certain reasons.
2. (Interim Measures) Terms, duties, remunerations for the auditors designated pursuant to the
previous articles shall be governed by the previous articles.GPA/W/286
Page 29
ADDENDUM (27 December 2000)
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.
ADDENDA (23 March 2001)
Article 1 Enforcement Date
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.  However, amended rules of Articles 9 (1), (5) and (6) and 43-2 shall come
into force from the time when the SEA (law no. 6176) is amended and becomes effective; amended
rules of Article 26 (4) shall come into force from the date of the General Meeting of Shareholders to
be held first after this amendment; and amended rules of Articles 26 (1) and (5), 32, 34 (2) and 34-2
(1) concerning the establishment of the Outside Director Candidate Recommendation Committee, andamended rules of Articles 34-5 and 35(2) shall come into force from the date when the Company is
excluded from the companies subject on the provisions of the Law Regarding the Management
Structure Enhancement and Privatization of Public Enterprises.
Article 2 Interim Measure Concerning Outside Directors
Outside directors herein shall be deemed the non-executive directors under the Law
Regarding the Management Structure Enhancement and Privatization of Public Enterprises until the
Company is excluded from the companies subject on the provisions of the same Law.
Article 3 Interim Measure Concerning Functions of Shareholders' Committee
The provisions of Article 24 (4) 1 of this Articles of Incorporation shall not apply if the
Company is excluded from the companies subject on the provisions of the Law Regarding the
Management Structure Enhancement and Privatization of Public Enterprises.
Article 4 Exceptions for Terms of the Executive Officers
The executive officers of the Company to be appointed at the 14th Ordinary Shareholders'
Meeting shall be grouped by the 1st, 2nd and 3rd groups.  Notwithstanding the provisions of
Article 27(1), the term of the executive officers in the 1st group shall be up to the Ordinary General
Meeting of Shareholders to be held first after their appointment, that for the 2nd group shall be up to
the Ordinary General Meeting of Shareholders to be held second after their appointment, and that for
the 3
rd group shall be up to the Ordinary General Meeting of Shareholders to be held third after their
appointment.  The number of executive officers of each group should be properly adjusted so as thatsuch numbers are equal.
Article 5 Interim Measure Concerning Appointment of the Outside Directors
If the outside directors shall be appointed or re-appointed pursuant to the amendment of
Article 25, the number of outside officers to be appointed each year should be properly adjusted so as
that the ends of terms of the outside directors are equally allotted through three years.
ADDENDUM (15 March 2002)
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.GPA/W/286
Page 30
ADDENDUM (27 December 2002)
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.
ADDENDUM (14 March 2003)
This Articles of Incorporation shall be effective from the date of resolution of the
Shareholders' Meeting.GPA/W/286
Page 31
ATTACHMENT B
TOBACCO BUSINESS ACT
Act No. 4065, 31 December 1988
Amended by Act No. 4682, 31 December 1993
Act No. 5453, 13 December 1997
Act No. 5454, 13 December 1997
Act No. 6078, 31 December 1999
Act No. 6460, 7 April 2001
Act No. 6625, 26 January 2002
CHAPTER I GENERAL PROVISIONS
Article 1 (Purpose)
The purpose of this Act is to ensure the sound development of the tobacco industry and
contribute to the national economy, by prescribing matters concerning the production and distribution,
etc. of tobacco.  <Amended by Act No. 6460, 7 April 2001>
Article 2 (Definitions)
For the purpose of this Act, the term "tobacco" means what is manufactured in a state suitable
for smoking, chewing, or smelling by using the leaves of the tobacco plant as principal raw materials.
[This Article Wholly Amended by Act No. 6460, 7 April 2001.]
CHAPTER II Deleted.
Articles 3 through 10 Deleted .  <by Act No. 6460, 7 April 2001>
CHAPTER III MANUFACTURE, SALE, EXPORT AND IMPORT
Article 11 (License for Tobacco Manufacturing Business)
(1) A person who intends to operate the tobacco manufacturing business shall obtain a license of
the Minister of Finance and Economy under the conditions as prescribed by the Presidential Decree.
The same shall  apply to the case where intending to  alter any principal matters as pre- scribed by the
Presidential Decree from among the licensed matters.
(2) The Minister of Finance and Economy shall grant the license in case where any person who
intends to obtain the license for tobacco manufacturing business under paragraph (1) (hereinafter
referring to the "tobacco manufacturing business license") satisfies the criteria for equity capital,facility standards, technological manpower, research and development of tobacco manufacturing
technology, and quality control for the protection of national health, etc.
[This Article Wholly Amended by Act No. 6460, 7 April 2001.]
Article 11-2 (Disqualification for Tobacco Manufacturing Business License)
Any person falling under one of the following subparagraphs shall be prohibited from
obtaining the tobacco manufacturing business license:GPA/W/286
Page 32
1. A person of incompetency, quasi-incompetency or minor;
2. A person who has been sentenced to a bankruptcy and not reinstated as yet;
3. A person who has been consigned to an unsuspended sentence of imprisonment for
violating this Act, and for whom not more than one year has passed after the
completion (including the case of deeming to be completed) of or exemption from itsexecution;
4. A person who is under a grace period after having been consigned to a suspended
sentence of imprisonment for violating this Act;
5. A person for whom two years have not elapsed since a cancellation of the tobacco
manufacturing business license under Article 11-4;  and
6. A corporation whose representative falls under one of subparagraphs 1 through 5.
[This Article Newly Inserted by Act No. 6460, 7 April 2001.]
Article 11-3 (Transfer or Takeover, etc. of Tobacco Manufacturing Business)
(1) A person who has obtained a tobacco manufacturing business license (hereinafter referred to
as the "manufacturer") shall, where he intends to transfer the tobacco manufacturing business ormerge with another corporation, file a report thereon with the Minister of Finance and Economy under
the conditions as determined by the Ordinance of the Ministry of Finance and Economy.
(2) Where there exists a report on transfer under paragraph (1), a person who has taken over the
tobacco manufacturing business shall succeed to the manufacturer's status of the transferor of tobaccomanufacturing business, and where there exists a report on merger of corporations, a corporation to be
established or to survive by such merger shall succ eed to the manufacturer's status of a corporation to
be extinguished by such merger.
(3) In case where a manufacturer has died, if an heir intends to continue the tobacco
manufacturing business, he shall file a report thereon with the Minister of Finance and Economy
within 30 days after the date on which the decedent has died, under the conditions as determined by
the Ordinance of the Ministry of Finance and Economy.
(4) In case where an heir has filed a report on succession under paragraph (3), the tobacco
manufacturing business license for the decedent shall be deemed the tobacco manufacturing business
license for the heir in the period from the date on which the decedent has died to the date of suchreport.
(5) An heir who has filed a report on succession under paragraph (3) shall succeed to the
manufacturer's status of the decedent.
(6) The provisions of Article 11-2 shall apply mutatis mutandis to the report under paragraphs (1)
and (3).  [This Article Newly Inserted by Act No. 6460, 7 April 2001.]
Article 11-4 (Cancellation, etc. of Tobacco Manufacturing Business)
The Minister of Finance and Economy may, where a manufacturer falls under one of the
following subparagraphs, either cancel the tobacco manufacturing business license or order the
suspension of such business by fixing the period of less than one year:  Provided , That where falling
under subparagraphs 1 and 3, he shall cancel such license:
1. Where he has obtained the tobacco manufacturing business license by illegal means;
2. Where he falls short of the criteria for equity capital, facility standards, technological
manpower, research and development of tobacco manufacturing technology, and
quality control for the protection of national health, etc. under Article 11 (2);GPA/W/286
Page 33
3. Where he falls under disqualification of each subparagraph of Article 11-2: Provided,
That it shall not apply to the case where the representative of a corporation falls under
such causes, and he is replaced within six months;  and
4. Where he violates this Act or the orders issued under this Act.
[This Article Newly Inserted by Act No. 6460, 7 April 2001.]
Article 12 (Sale of Tobacco)
(1) Tobacco manufactured by a manufacturer shall be sold by such manufacturer, and tobacco
imported from foreign countries shall be sold by such import and sale business operator (referring to
the person who has registered for a tobacco import and sale business under Article 13 (1); hereinafter
the same shall apply) to wholesalers (referring to persons who have registered for a wholesalebusiness under Article 13 (1); hereinafter the same shall apply) or retailers (referring to persons who
are designated as retailers under Article 16 (1); hereinafter the same shall apply).  <Amended by Act
No. 6460, 7 April 2001>
(2) No person other than a retailer may sell any tobacco to the consumers.
<Amended by Act No. 6460, 7 April 2001>
Article 13 (Registration of Tobacco Sale Business)
(1) Any person who intends to run the business of importing and selling tobacco shall register his
business with the Minister of Finance and Economy, and any person who intends to do the business of
wholesaling tobacco (referring to the business of selling tobacco to other wholesalers or retailers;
hereinafter the same shall apply) shall register his business with the Seoul Metropolitan City Mayor,
Metropolitan City Mayor or Do governor (hereinafter referred to as the "Mayor/ Do governor") having
jurisdiction over the location of his head office or hi s principal office. The same shall also apply to the
case in which he intends to change important matters prescribed by the Ordinance of the Ministry of
Finance and Economy from among registered matters.  <Amended by Act No. 6078,
31 December 1999;  Act No. 6460, 7 April 2001>
(2) Any person who intends to register his business in accordance with the provisions of
paragraph (1) shall meet requirements prescribed by the Presidential Decree.
Article 14 (Disqualifications for Registration of Tobacco Sale Business)
Any person falling under one of the following subparagraphs shall be prohibited from
registering the business of importing and selling tobacco  or the business of wholesaling tobacco
under Article 13 (1):  <Amended by Act No. 6460, 7 April 2001>
1. A person of incompetency, quasi-incompetency or minor;
2. A person who has been sentenced to a bankruptcy and not reinstated as yet;
3. A person who has been consigned to an unsuspended sentence of imprisonment for
violating this Act, and for whom not more than one year has passed after thecompletion (including the case of deeming to be completed) of or exemption from its
execution;
4. A person who is under a grace period after having been consigned to a suspended
sentence of imprisonment for violating this Act;
5. A person for whom two years have not elapsed since a cancellation of the registration
under Article 15(1);  and
6. A corporation whose representative falls under one of subparagraphs 1 through 5.
[This Article Wholly Amended by Act No. 6078, 31 December 1999.]GPA/W/286
Page 34
Article 15 (Cancellation, etc. of Registration of Tobacco Sale Business)
(1) The Minister of Finance and Economy or the Mayor/ Do governor shall, where any import and
sale business operator or any wholesaler falls under any case of the following subparagraphs, cancel
his business registration:  <Amended by Act No. 6460, 7 April 2001>
1. Where he has registered his business in an illegal manner;
2. Where he falls under any subparagraph of Article 14;
3. Where a person who has been subjected to a disposition taken to suspend his business
twice for the recent five years falls again under any subparagraph of paragraph (3);
and
4. Where he is in the business during a period for which his business is suspended.
(2) The provisions of paragraph (1) shall not apply where a juristic per- son replaces its
representative within 6 months from the date on which such juristic person falls under subparagraph 6
of Article 14 or by the date on which 6 months have elapsed since the date on which a successor who
inherited the status of an import and sale business operator or a wholesaler falls under any ofsubparagraphs 1 through 5 of Article 14.  <Amended by Act No. 6460, 7 April 2001>
(3) The Minister of Finance and Economy or the Mayor/ Do governor may, where any import and
sale business operator or any wholesaler falls u nder any of the following subparagraphs, order him to
suspend his business for a fixed period not exceeding one year:  <Amended by Act No. 6460,
7 April 2001>
1. Where he sells tobacco to any consumer in contravention of Article 12 (2);
2. Where a person importing and selling manufactured tobacco fails to report sale prices
in accordance with the provisions of Article 18 (2);
3. Where he commits a violation of the provisions of Article 20 (1);
4. Where he continues to suspend his business for not less than 6 months without filing
a report thereof in accordance with the provisions of Article 22-2 (1);
5. Where he commits a violation of the provisions of Article 25; and
6. Where he commits a violation of this Act or orders given under this Act.
[This Article Wholly Amended by Act No. 6078, 31 December 1999.]
Article 16 (Designation of Retailer)
(1) Any person who intends to do a tobacco retail business (referring to the business of selling
directly to consumers) shall obtain a designation as a retailer of tobacco from the head of
Si/Gun/autonomous Gu (hereinafter referred to as the "head of Si/Gun/Gu") having jurisdiction over
the location of the business place concerned.  <Amended by Act No. 5454, 13 December 1997;  Act
No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(2) Any person falling under any of the following subparagraphs shall be prohibited from being
designated as a retailer of tobacco:   <Amended by Act No. 6078, 31 December 1999>
1. A person of incompetency, quasi-incompetency or minor;
2. A person who has been sentenced to a bankruptcy and not reinstated as yet;
3. A person who has been consigned to an unsuspended sentence of imprisonment for
violating this Act, and for whom not more than one year has passed since thecompletion (including the case of deeming to be completed) of or exemption from its
execution;
4. A person who is under a grace period after having been consigned to a suspended
sentence of imprisonment for violating this Act;GPA/W/286
Page 35
5. A person for whom two years have not elapsed since a cancellation of the designation
under Article 17 (1);  and
6. A corporation whose representative falls under one of subparagraphs 1 through 5.
(3) With respect to a person who intends to sell tobacco at a place which is feared to damage the
quality of tobacco or is deemed inappropriate for the business of selling tobacco, the head of
Si/Gun/Gu may refrain from designating a retailer.  <Amended by Act No. 5454, 13 December 1997;
Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(4) Standards and procedures for the designation of retailers and other matters necessary for the
designation shall be determined by the Ordinance of the Ministry of Finance and Economy.
<Amended by Act No. 4682, 31 December 1993;  Act No. 5454, 13 December 1997;  Act No. 6078,31 December 1999>
Article 17 (Cancellation, etc. of Retailer Designation)
(1) The head of Si/Gun/Gu shall, if any retailer of tobacco falls under any case of the following
subparagraphs, cancel the designation of his retail business:   <Amended by Act No. 6460,
7 April 2001>
1. Where he obtains a designation of his retail business in an illegal manner;
2. Where he falls under any subparagraph of Article 16 (2): Provided , That the same
shall not apply to the case in which a representative of a juristic person falling under
such cause is replaced within 6 months;
3. Where a person who has been subjected to a disposition taken to suspend his business
twice for the recent five years falls again under  any subparagraph of paragraph (2);
4. Where he continues his business during a period for which his business is suspended;
and
5. Where he has failed to do business for not less than 60 days without making any
report on discontinuance or suspension of business.
(2) The head of Si/Gun/Gu may, where any retailer of tobacco falls under any of the following
subparagraphs, order him to suspend his business for a fixed period not exceeding one year:
<Amended by Act No. 6460, 7 April 2001>
1. Where he commits a violation of the provisions of Article 18 (4);
2. Where he commits a violation of the provisions of Article 20;
3. Where he fails to implement any corrective order or measure such as the removal of
advertisements under the provisions of Article 25(3);
4. Where he fails to continuously purchase or sell tobacco without any justifiable
reasons during a period prescribed by the Ordinance of  the Ministry of Finance and
Economy;  and
5. Where he commits a violation of this Act or orders given under this Act.
(3) Matters necessary for the standards and procedures, etc. for the disposition of business
suspension under paragraph (2) shall be determined by the Ordinance of the Ministry of Finance and
Economy.  <Newly Inserted by Act No. 6460, 7 April 2001>
[This Article Wholly Amended by Act No. 6078, 31 December 1999.]GPA/W/286
Page 36
Article 18 (Selling Price of Tobacco)
(1) The selling price of tobacco made by a manufacturer shall be determined by the manufacturer
under the conditions as prescribed by the Presidential Decree.  <Amended by Act No. 6460,
7 April 2001>
(2) Any import and sale business operator who imports tobacco from foreign countries shall
report to the Minister of Finance and Economy on the selling price of such tobacco under the
conditions as prescribed by the Presidential Decree.  This provisions shall also apply if he desires to
change the reported selling price.  <Amended by Act No. 5454, 13 December 1997;  Act No. 6078,
31 December 1999;  Act No. 6460, 7 April 2001>
(3) When a manufacturer or import-distributor has determined or reported the selling price as
referred to in paragraph (1) or (2), he shall announce it publicly under the conditions as prescribed by
the Ordinance of the Ministry of Finance and Economy.  <Amended by Act No. 5454,
13 December 1997; Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(4) A retailer shall sell tobacco at the selling price as announced publicly under paragraph (3).
<Amended by Act No. 6460, 7 April 2001>
Article 19 (Tobacco for Special Use)
(1) A manufacturer may manufacture and sell the tobacco for special use as prescribed by the
Presidential Decree.  <Amended by Act No. 6460, 7 April 2001>
(2) No tobacco for special use as referred to in paragraph (1) shall be sold for any purpose other
than its proper use.  <Amended by Act No. 6460, 7 April 2001>
Article 20 (Prohibition of Sale and Restriction on Purchase)
(1) No person shall sell tobacco with its packing and contents changed.  <Amended by Act
No. 6460, 7 April 2001>
(2) Deleted.  <by Act No. 6460, 7 April 2001>
Articles 21 and 22 Deleted.  <by Act No. 6460, 7 April 2001>
Article 22-2 (Suspension or Discontinuance of Tobacco Sale Business, etc.)
(1) Where any person importing and selling tobacco, any wholesaler of tobacco or any retailer of
tobacco intends to suspend or discontinue his business for a period exceeding what is prescribed by
the Ordinance of the Ministry of Finance and Economy, such person importing and selling  tobacco
shall file a report thereof to the Minister of Finance and Economy, such wholesaler of tobacco to the
Mayor/ Do governor and such retailer of tobacco to the head of Si/Gun/Gu, respectively.  <Amended
by Act No. 5454, 13 December 1997;  Act No. 6078, 31 December 1999>
(2) Upon filing a report as referred to in paragraph (1), the period of business suspension,
procedure of report, and other matters necessary for the report on a suspension or discontinuance of
business shall be determined by the Ordinance of the Ministry of Finance and Economy.  <Amended
by Act No. 5454, 13 December 1997;  Act No. 6078, 31 December 1999>
[This Article Newly Inserted by Act No. 4682, 31 December 1993.]GPA/W/286
Page 37
Article 22-3 (Hearing)
The Minister of Finance and Economy, the Mayor/ Do governor, or the head of Si/Gun/Gu
shall, where he intends to take a disposition falling under any of the following subparagraphs, hold
hearings:  <Amended by Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
1. Cancellation of the license for manufacturing tobacco under Article 11-4;
1-2. Cancellation of the registration for tobacco import and sale business, or of the
registration for tobacco wholesale business;  and
2. Cancellation of the designation of a retailer under Article 17 (1).
[This Article Wholly Amended by Act No. 5453, 13 December 1997.]
CHAPTER IV SUPPLEMENTARY PROVISIONS
Article 23 (Substitute for Tobacco)
Anything which is in a similar form to tobacco and usable for smoking shall be considered as
tobacco and subject to the provisions of Article 11:  Provided , That any smoking products
manufactured, without using tobacco leaves, for the purpose of quitting smoking shall be excluded.
<Amended by Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
Article 24 (Report and Confirmation of Related Books, etc.)
(1) The Minister of Finance and Economy may, when deemed necessary to enforce this Act, have
a manufacturer and import and sale business operator, the Mayor/ Do governor may have a wholesaler,
and the head of Si/Gun/Gu may have a retailer, respectively, file a report on his business.  <Amended
by Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(2) The Minister of Finance and Economy, the Mayor/ Do governor, or the head of Si/Gun/Gu
may have his officials confirm or examine related books or documents, etc. of the manufacturer and
import and sale business operator, wholesaler, or retailer, respectively.  <Amended by Act No. 6078,
31 December 1999;  Act No. 6460, 7 April 2001>
(3) Any official who carries out the confirmation or perusal under paragraph (2) shall carry with
him a certificate indicating his competence and show it to interested parties.
Article 25 (Indication of Warning Words and Restriction on Advertisement on Tobacco)
(1) The warning words clearly expressing the effect that smoking is harmful to health shall be
indicated on the wrapping paper of a tobacco case and in the advertisement as prescribed by the
Presidential Decree (including sales promotion activities; hereinafter the same shall apply).
<Amended by Act No. 6460, 7 April 2001>
(2) The Minister of Finance and Economy may prohibit or restrict any advertisement on tobacco
under the conditions as pre-scribed by the Presidential Decree.  <Amended by Act No. 5454,
13 December 1997;  Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(3) In case where no words of warning under paragraph (1) are in existence or the prohibition of
or restrictions on ads under paragraph (2) are violated, the Minister of Finance and Economy, theMayor/ Do governor or the head of Si/Gun/Gu may order a tobacco manufacturer and import and sale
business operator, wholesaler, or retailer, respectively, to restrict the imports or sales of relevant
tobacco, or to issue orders or to take measures which are required for the corrections such as the
removal of ads, etc.  <Amended by Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>GPA/W/286
Page 38
(4) The Minister of Finance and Economy shall determine the words of warning referred to in
paragraph (1) after consulting with the Minister of Health and Welfare and the Chairman of the
Juvenile Protection Committee.   <Amended by Act No. 5454, 13 December 1997;  Act No. 6078,
31 December 1999>
Article 25-2 (Indication of Tobacco Ingredients)
(1) A manufacturer and an import and sale business operator shall indicate the major ingredients
and their contents in the smoke of one cigarette on the wrapping paper of tobacco packs and the
advertisements as prescribed by the Presidential Decree.
(2) Kinds of ingredients, criteria for measurement, designation of measuring agency, method of
indication, scope of allowable errors, omission of indication of ingredients, which are to be indicated
under paragraph (1), and other matters necessary for indication of ingredients, shall be prescribed by
the Presidential Decree.
(3) The provisions of Article 25 (3) shall apply mutatis mutandis  to a case where there exists no
indication of ingredients and their contents under paragraph (1), and where the contents of indicated
ingredients are in excess of the scope of allowable errors.
[This Article Newly Inserted by Act No. 6625, 26 January 2002.]
Article 25-3 (Participation of Manufacturers, etc. in Public Activities)
(1) The Minister of Finance and Economy may have a manufacturer carry out directly public
activities, such as public health, medical care, protection of environment, etc., and projects such as the
support for tobacco cultivation, within a limit of 20 won per 20 cigarettes which he sells, under theconditions as determined by the Ordinance of the Ministry of Finance and Economy, or make a
contribution to those carrying out such projects.  <Amended by Act No. 5454, 13 December 1997;  Act
No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(2) Any import and sale business operator may carry out directly such public activities as referred
to in paragraph (1), or make any contribution to thos e who carry out such activities.  In this case, the
provisions of paragraph (1) shall apply mutatis mutandis .
(3) The Minister of Finance and Economy shall consult with the heads of related central
administrative agencies about fundamental matters concerning the activities carried out by a
manufacturer or an import and  sale business operator under paragraphs (1) and (2).  <Amended by
Act No. 5454, 13 December 1997;  Act No. 6078, 31 December 1999;  Act No. 6460, 7 April 2001>
(4) A person who intends to run the business dir ectly supporting the development of agricultural
technology of tobacco cultivators with the contribution from manufacturers under paragraph (1) shall
establish a corporation by obtaining an approval  of the Minister of Finance and Economy.  <Newly
Inserted by Act No. 6460, 7 April 2001>
(5) The provisions concerning the foundation in the Civil Act shall apply mutatis mutandis  to the
establishment and operation of the corporation under paragraph (4) except for those as otherwise
provided in this Act.  <Newly Inserted by Act No. 6460, 7 April 2001>
[This Article Newly Inserted by Act No. 4682, 31 December 1993.]GPA/W/286
Page 39
Article 25-4 (Prohibition of Money Providin g, etc. for Promotion of Tobacco Sales)
The manufacturers, import and sale business operators and wholesalers  shall be prohibited
from providing money and other similar activities as prescribed by the Presidential Decree, to the
retailers in order to pro- mote their tobacco sales.[This Article Newly Inserted by Act No. 6460, 7 April 2001.]
Article 26 (Delegation of Authority)
Part of the authority of the Minister of Finance and Economy as pre- scribed by this Act may
be delegated to the head of the local government under the conditions as prescribed by the
Presidential Decree.  <Amended by Act No. 5454, 13 December 1997;  Act No. 6078,
31 December 1999;  Act No. 6460, 7 April 2001>
CHAPTER V PENAL PROVISIONS
Article 27 (Penal Provisions)
(1) Any person who has manufactured tobacco without obtaining a license for tobacco
manufacturing business in contravention of Article 11 shall be punished by imprisonment for not
more than 3 years, or a fine not exceeding 20 million won.
(2) Any attempted crime under paragraph (1) shall be punished.
(3) In cases of paragraphs (1) and (2), the punishment of imprisonment and fine may be
concurrently imposed.  [This Article Wholly Amended by Act No. 6460, 7 April 2001.]
Article 27-2 (Penal Provisions)
Any person who falls under any of the following subparagraphs shall be punished by
imprisonment for not more than one year, or a fine not exceeding ten million won:  <Amended by
Act No. 6625, 26 January 2002>
1. A person who has failed to file a report on transfer, takeover, etc. of tobacco
manufacturing business in contravention of Article 11-3  (1) or (3);
2. A person who has manufactured a substitute for tobacco in contravention of
Article 23;
3. A person who has manufactured or imported tobacco on which the words of warning
under Article 25(1) are not indicated, or such words as violating thereof are indicated;
4. A person who has made any advertisement on tobacco in contravention of
Article 25(2);  and
5. A person who has manufactured or imported tobacco on which the ingredients and
their contents under Article 25-2(1) are not indicated, or the content of each
ingredient is falsely indicated.
[This Article Newly Inserted by Act No. 6460, 7 April 2001.]
Article 27-3 (Penal Provisions)
Any person who falls under any of the following subparagraphs shall be punished by a fine
not exceeding five million won:  <Amended by Act No. 6625, 26 January 2002>
1. A person who has sold tobacco to consumers without obtaining a designation of
retailer in contravention of Article 12(2);GPA/W/286
Page 40
2. A person who has run tobacco import and sale business or tobacco wholesaler
business without making a registration in contravention of Article 13(1);
3. A person who has failed to comply with the orders or measures required for
correction, such as the removal of advertising materials under Article 25(3);
3-2. A person who has failed to comply with the orders or measures required for
correction, such as restrictions, etc. on the import or sale of tobacco under
Article 25-2(3);  and
4. A person who has committed the acts of providing money, etc. in contravention of
Article 25-4.
[This Article Newly Inserted by Act No. 6460, 7 April 2001.]
Article 28 (Fine for Negligence)
(1) Any person who fails to make a report on the selling price (including the report on any
change) in violation of the provisions of Article 18(2) shall be punished by a fine for negligence not
exceeding two million won.  <Newly Inserted by Act No. 4682, 31 December 1993>
(2) Any person who falls under any of the following subparagraphs shall be punished by a fine
for negligence not exceeding one million won:  <Amended by Act No. 4862, 31 December 1993;
Act No. 6460, 7 April 2001>
1. A retailer who sells tobacco in violation of the provisions of Article 18 (4);
2. Deleted;  and <by Act No. 6460, 7 April 2001>
3. A retailer who has suspended his business in excess of the suspension period as
prescribed by Article 22-2(2).
(3) Any person who falls under any of the following subparagraphs shall  be punished by a fine
for negligence not exceeding 500 thousand won:  <Amended by Act No. 6460, 7 April 2001>
1. Deleted;  <by Act No. 6460, 7 April 2001>
2. A person who has sold tobacco for special use for a different purpose, in violation of
the provisions of Article 19(2);  and
3. A person who has sold tobacco after changing the packing and con- tents thereof in
violation of the provisions of Article 20(1).
Article 29 (Procedures for Imposition of Fine for Negligence)
(1) The Minister of Finance and Economy, the Mayor/ Do governor or the head of Si/Gun/Gu
(hereafter referred to as the "imposition right holder" in this Article) shall impose and collect a finefor negligence under the provisions of Article 28 according to their respective jurisdiction under the
conditions as prescribed by the Presidential Decree.  <Amended by Act No. 6078,
31 December 1999>
(2) Any person who is dissatisfied with a disposition of a fine for negligence as referred to in
paragraph (1) may raise an objection to an imposition right holder within thirty days from the date
when he is aware of it.  In this case, the imposition right holder shall notify without de- lay the
competent court thereof, which shall, upon receivin g the notification, bring the case of a fine for
negligence to a trial under the non- contentious case litigation procedures.  <Amended by
Act No. 5454, 13 December 1997;  Act No. 6078, 31 December 1999>
(3) If a fine for negligence is not paid without raising an objection within the period as referred to
in paragraph (2), it shall be collected according to the examples of taking a disposition to collect
national or local taxes in arrears.  <Amended by Act No. 6078, 31 December 1999>GPA/W/286
Page 41
Article 30 (Confiscation and Additional Collection)
(1) Any leaf tobacco and tobacco involved in the crime under Articles 27, 27-2 and 27-3 shall be
confiscated.  <Amended by Act No. 6460, 7 April 2001>
(2) If it is impossible to confiscate those items as referred to in paragraph (1), the value thereof
shall be collected additionally.
(3) Deleted.  <by Act No. 6460, 7 April 2001>
Article 31 (Restriction on Application of Criminal Act)
With respect to those who have committed any crime as prescribed by this Act, the provisions
of Articles 9, 10(2), 11, 16, 32(2), 38(1)2 of the Criminal Act concerning the restriction or
aggravation of the concurrence of fines, and those of Article 53 of the said Act shall not be applied:
Provided,  That this provisions shall not apply to impr isonment in a case where the criminal is to be
punished by imprisonment or by both an imprisonment and fine.
Article 32 (Joint Penal Provisions)
If a representative of a juristic person, or an agent, employer, or other employee of a juristic
person or an individual commits an offense as provided in Articles 27, 27-2 and 27-3 with respect to
affairs of the juristic person or the individual, the fine as provided in the said respective Article shall
also be imposed on such a juristic person or individual, in addition to punishment of the offender.
<Amended by Act No. 6460, 7 April 2001>
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on 1 January 1989.
Article 2 (Repeal of Other Acts)
The Tobacco Monopoly Act shall hereby be repealed.
Article 3 (Amendment, etc. of Other Acts)
(1) and (2) Omitted.
(3) Any citation of the Tobacco Monopoly Act in other Acts and subordinate statutes at the time
when this Act enters into force shall be considered to  have cited this Act, and that of the provisions of
the Tobacco Monopoly Act shall be considered to have cited the provisions of this  Act if they are thecorresponding provisions in this Act.
Article 4 (General Transitional Measures)
(1) What was enforceable under the previous Tobacco Monopoly Act at the time when this Act
enters into force shall be considered to be in forc e, pursuant to the corresponding provisions of this
Act.GPA/W/286
Page 42
(2) Any disposition or other acts taken by the Minister of Finance and Economy under the
previous Tobacco Monopoly Act before the enforcement of this Act, shall be considered as that or
those taken pursuant to the corresponding provisions of this Act.
(3) Any public notice or other acts taken by the Korea Monopoly Corporation, or any application
filed with or other acts taken by the said Corporation, under the previous Tobacco Monopoly Act
before the enforcement of this Act, shall be consider ed as that or those taken by or for the Corporation
pursuant to the corresponding provisions of this Act.
Article 5 (Transitional Measures concerning Cultivation of Tobacco Plant and Purchase
of Leaf Tobacco)
Notwithstanding the provisions of Chapter 2 of this Act, the provisions of the previous
Tobacco Monopoly Act shall apply to the first cultivation of tobacco plants and the first purchase of
leaf tobacco for raw materials of manufactured tobacco after this Act enters into force.
Article 6 (Transitional Measures concerning Designation of Manufactured Tobacco
Retailer)
Any person who is designated as a manufactured tobacco retailer by the Korea Monopoly
Corporation under the previous Tobacco Monopoly Act, before the enforcement of this Act, shall be
considered to have been designated by the Minister of Finance and Economy under this Act.
Article 7 (Transitional Measures concerning Operation of Corporation)
Operations of the Corporation as prescribed by this Act shall be carried out by the Korea
Monopoly Corporation under the Korea Monopoly Corporation Act until the Korea Tobacco andGinseng Corporation Act is enacted and enforced.
Article 8 (Transitional Measures concerning Application of Penal Provisions)
Application of the penal provisions to any act  committed before this Act enters into force,
shall be subject to the provisions of the previous Tobacco Monopoly Act.
ADDENDA <Act No. 4682, 31 December 1993>
(1) (Enforcement Date) This Act shall enter into force on 1 January 1994.(2) (Transitional Measures concerning Applicati on of Penal Provisions) The application of the
penal provisions to any act committed before this Ac t enters into force, shall be governed by the
previous provisions.
ADDENDA  <Act No. 5453, 13 December 1997>
Article 1 (Enforcement Date)
This Act shall enter into force on 1 January 1998.  (Proviso Omitted.)
Article 2 Omitted.
ADDENDUM <Act No. 5454, 13 December 1997>
This Act shall enter into force on 1 January 1998.  (Proviso Omitted.)GPA/W/286
Page 43
ADDENDA  <Act No. 6078, 31 December 1999>
(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2) (Transitional Measures concerning Disqualifications) Any person who has his import and sale
business of manufactured tobacco or his wholesale  business of manufactured tobacco registered, or
his retail business of manufactured tobacco designated under the previous provisions at the time that
this Act is enforced, where he falls under disqualifications as described in the amended provisions of
Article 14 or 16 (2) due to unavoidable reasons that  occurred prior to the enforcement of this Act,
shall be dealt with according to the previous provisions notwithstanding the amended provisions.
(3) (Transitional Measures concerning Registration of Sale Business of Manufactured Tobacco)
Any person who has his wholesale business of manufactured tobacco registered under the previous
provisions at the time that this Act is enforced shall be deemed to register his business in accordance
with the amended provisions of Article 13(1).
(4) (Transitional Measures concerning Designation of Retail Business of Manufactured Tobacco)
Any person who has his retail business of manufactured tobacco designated under the previous
provisions at the time that this Act is enforced shall be deemed to have his business designated in
accordance with the amended provisions of Article 16(1).
ADDENDA  <Act No. 6460, 7 April 2001>
Article 1 (Enforcement Date)
This Act shall enter into force on 1 July 2001.
Article 2 (Transitional Measures Following Abolition of Systems of Tobacco Cultivation
and Leaf Tobacco Purchase)
The Korea Tobacco and Ginseng Corporation (hereinafter referred to as the "Corporation")
under subparagraph 1 of Article 2 of the Act on the Improvement of Managerial Structure and
Privatization of Public Enterprises, which has run tobacco manufacturing business under the previousprovisions at the time of enforcement of this Act, may conclude a con- tract with the tobacco
cultivators on the tobacco cultivation, purchase of leaf tobacco as for raw materials of tobacco, and
support to tobacco cultivators, and perform it.
Article 3 (Transitional Measures concerning Existing Manufacturers)
The Corporation which has run the tobacco manufacturing business under the previous
provisions at the time of enforcement of this Act shall be considered to have obtained a license for
tobacco manufacturing under the amended provisions of Article 11.
Article 4 Omitted.GPA/W/286
Page 44
ADDENDA  <Act No. 6625, 26 January 2002>
(1) (Enforcement Date) This Act shall enter into force on 1 January 2003.(2) (Application Example) This Act shall a pply from the portion of carrying out from the
manufacturing place or bonded area or of advertisement for the first time since the enforcement of this
Act.
(3) Omitted.GPA/W/286
Page 45
ATTACHMENT C
ENFORCEMENT DECREE OF THE TOBACCO BUSINESS ACT
Wholly Amended by Presidential Decree No. 17267, 30 June 2001
Amended by Presidential Decree No. 17761, 23 October 2002
Article 1 (Purpose)
The purpose of this Decree is to prescribe for matters delegated by the Tobacco Business Act
and those necessary for the enforcement thereof.
Article 2 (License for Tobacco Manufacturing Business)
(1) Any person who intends to obtain a license for tobacco manufacturing business under the
former part of Article 11 (1) of the Tobacco Business Act (hereinafter referred to as the "Act")
(hereinafter referred to as the "license for tobacco manufacturing business") shall submit an
application for license for tobacco manufacturing business stating the matters falling under any of thefollowing subparagraphs to the Minister of Fi nance and Economy along with the documents as
determined by the Ordinance of the Ministry of Finance and Economy:
1. Personal details of an applicant;
2. Location of principal office and manufacturing place;3. Equity capital;
4. Types of tobacco to be manufactured;  and
5. Annual manufacturing scale.
(2) The Minister of Finance and Economy may, upon receipt of an application for a license for
tobacco manufacturing business under paragraph (1), and where an applicant for a license for tobacco
manufacturing business possesses the equity capital under Article 4(1)1, grant a license for tobaccomanufacturing business on condition that he is to be equipped with the manufacturing facilities,
technical manpower, testing equipment under subparagraphs 2 through 4 of the same paragraph
within 3 years:  Provided , That the Minister of Finance and Economy may extend such period within
the limit of one year if it is deemed that there exists an inevitable reason.
Article 3 (Alterations in Licensed Matters)
(1) The term "principal matters as prescribed by the Presidential Decree from among the licensed
matters" in the latter part of Article 11(1) of the Act means the alterations in the matters provided in
Article 2(1)3 and 5 (including the case where the processing facilities of raw materials are required tobe additionally installed as he becomes not to fall under the proviso of Article 4(1)2).
(2) Any person who intends to obtain a modified license under the latter part of Article 11(1) of
the Act shall submit an application for modified license for tobacco manufacturing business to the
Minister of Finance and Economy along with the documents as determined by the Ordinance of theMinistry of Finance and Economy.  In this case, if he intends to additionally install the processing
facilities of raw materials as he becomes not to fall under the proviso of Article 4(1)2, he shall submit
the same application within 6 months from the date on which he becomes not to fall under the same
provisions.GPA/W/286
Page 46
(3) Any person who has obtained a modified license for tobacco manufacturing business under
the latter part of paragraph (2) shall install the processing facilities of raw materials within 3 years
from the date on which a modified license has been received: Provided , That the Minister of Finance
and Economy may extend such period within the limit of one year if it is deemed that there exists aninevitable reason.
Article 4 (Criteria for License for Tobacco Manufacturing Business)
(1) The criteria for the equity capital, facility  standards, technical man-power, research and
development of tobacco manufacturing technology and the quality control for national health
protection, etc. under Article 11(2) of the Act shall be as follows:
1. Equity capital: to be in excess of 30 billion won;
2. Facility standards:  to install the facilities capable of manufacturing tobacco in excess
of 5 billion pieces per annum (based on 16-hour operation daily), which are equipped
with as assembly line from the raw material processing to the cigarette manufacturingand product packing:  Provided , That the processing facilities of raw materials may
not be installed not later than the time when the tobacco of 10 billion pieces per
annum is manufactured;
3. Technical manpower: to have the specia lized technology manpower of not less than
5 persons who have the career for not less than 3 years in the field of tobaccomanufacturing and quality control;  and
4. Research and development of tobacco manufacturing technology and the quality
control for national health protection: to be equipped with the testing equipment
capable of analysing the function and quality  of products (temperature-resistant and
humidity-resistant equipment, measuring apparatus of smoky ingredients, measuringapparatus of air-dilution rate, measuring apparatus of suction-resistance), and to
provide the standards, and guidances of quality control.
(2) In computing the quantity of annual tobacco manufactured by manufacturers under the
proviso of paragraph (1) 2, such computation shall  be done by summing up both the annual
manufacturing volume of the relevant manufacturer and annual import quantity of tobacco produced
by the affiliate firms under subparagraph 3 of Article 2 of the Monopoly Regulation and Fair TradeAct (in case where the manufacturer is a domestic business place of a foreign corporation, referring to
the relevant foreign corporation).
Article 5 (Requirements for Registration of Tobacco Sale Business)
(1) Any person who intends to register for the business of importing and selling tobacco under
Article 13 of the Act shall conclude a contract for tobacco supply with a foreign tobacco
manufacturer.
(2) Any person who intends to register for the wholesale business of to- bacco under Article 13 of
the Act shall satisfy the requirements falling under any of the following subparagraphs:
1. To install the storage facilities of tobacco;  and
2. To conclude a contract for tobacco supply with a manufacturer, tobacco import-
distributor (hereinafter referred to as the "import-distributor") or another tobaccowholesaler (hereinafter referred to as the "wholesaler").GPA/W/286
Page 47
Article 6 (Selling Price of Tobacco)
(1) In case where a manufacturer determines the selling prices of tobacco to the consumers, that
are manufactured by him, under Article 18(1) of the Act, he shall make a report thereon by item to the
Min sales.  The same shall apply in a case of altering the selling prices that are already reported.
(2) In case where an import-distributor makes a report on the selling prices of imported tobacco
to the consumers under Article 18(2) of the Act, he shall do so by item 6 days prior to the
commencement of their sales.
Article 7 (Tobacco for Special Use)
(1) Tobacco for special use under Article 19 (1) of the Act shall be as follows:
1. Tobacco to be used by the Head of State as a gift to the members of diplomatic
mission and other persons;
2. Tobacco supplied to the armed forces, members of riot police units, guards or warders
of correctional institutions, or persons of distinguished service to the State and their
bereaved families accommodated in the institutions for the aged under Article 63 of
the Act on the Honorable Treatment and Support of Persons, etc. of Distinguished
Services to the State, which is operated by the Korea Veterans Welfare and Heath
Care Corporation;
3. Tobacco supplied to navy cadets and servicemen on board warships participating in
overseas training;
4. Tobacco supplied to workers in overseas employment and personnel of diplomatic
missions abroad;
5. Tobacco sold at a bonded area;6. Tobacco sold to the crew of an ocean-going ship or deep-sea fishing vessel;
7. Tobacco sold to passengers of aircraft or passenger ships operating on international
lines;  and
8. Tobacco sold in the competent area of foreign armed forces in the Republic of Korea.
(2) The scope of tobacco supply under paragraph (1) and other matters necessary for supply shall
be determined by the Ordinance of the Ministry of Finance and Economy.
(3) The tobacco for special use under paragraph (1) shall be marked separately from the tobacco
sold under Article 12 of the Act. In this case, matters necessary for the separate marking of the
tobacco for special use shall be determined by the Ordinance of the Ministry of Finance and
Economy.
Article 8 (Criteria for Indication of Smoking Warning Words)
The smoking warning words shall be indicated in Korean, in the following articles under
Article 25(1) of the Act:
1. Front and back of packing paper of a tobacco case;
2. Advertisement by stickers or posters posted in the business place of retailers;  and
3. Advertisement in the magazines under Article 9(1)2.
Article 9 (Advertisement on Tobacco)
(1) Any advertisement of tobacco under Article 25(2) of the Act may be made only by the
following means:GPA/W/286
Page 48
1. Act of displaying or posting the advertisin g materials as provided in the Ordinance of
the Ministry of Finance and Economy within the retailer's business place:  Provided ,
That any displaying or posting, whose contents are visible from outside of business
place, shall be excluded;
2. Act of inserting an advertisement by variety group 60 or less times per annum (within
2 pages each time) in magazines [referring to the bound periodicals registered under
the Registration, etc. of Periodicals Act, and published periodically once or less a
week, and foreign periodicals under the Import and Distribution of Foreign
Publications  Act which is regularly published once or more per annum under the
same title (hereinafter referred to as the "foreign periodicals"), but excluding those
intended for women or juveniles]:  Provided , That if the foreign periodicals are sold
domestically in the number of copies less than those as determined by the Ordinance
of the Ministry of Finance and Economy and written only in a foreign language, they
shall be exempted from the restriction of carrying advertisements;
3. Act of sponsoring the social, cultural, musical, sports events, etc. (excluding those
intended for women or juveniles).  In this case, any product advertisement other thanthe use of sponsor's title shall not be made;  and
4. Advertisement made in an airplane and passenger ship operating on an international
line, and other places prescribed by the Ordinance of the Ministry of Finance and
Economy.
(2) A manufacturer or import-distributor may have a wholesaler or retailer conduct the
advertisement under paragraph (1). In this case, any advertisement made by the wholesaler or retailer
shall be deemed to have been done by the manufacturer or import-distributor.
(3) Any advertisement under paragraph (1) 1, 2 and 4 or advertising materials used therefore shall
not exceed an extent of informing the smokers of the name, kind and features of tobacco, and it shall
not directly or indirectly encourage or induce non-smokers to smoke, or depict the figures of women
or juveniles, or include the contents or form contrary to the details and purports of the smoking
warning words indicated under Article 25(1) of the Act.
(4) A manufacturer or import-distributor shall have the advertisement on tobacco so regulated
autonomously as not to violate the provisions of paragraphs (1) through (3).
(5) The Minister of Finance and Economy may request the Minister of Culture and Tourism to
take corrective measures against the importers of foreign periodicals carrying the advertisements
without any indication of the smoking warning words under Article 25(1) of the Act, or those
violating the prohibition or restriction of advertisement under Article 25(2) of the Act.
Article 9-2 (Indication Criteria for Tobacco Ingredients)
Pursuant to the provisions of Article 25-2(1) of the Act, the major ingredients and their
contents in the smoke of one cigarette shall be indicated on what are listed in any of the followingsubparagraphs:
1. One of both sides of the wrapping paper of tobacco pack;
2. Advertisements by stickers or posters to be posted in the business places of retailers;
and
3. Advertisements in the magazines under Article 9(1)2.
[This Article Newly Inserted by Presidential Decree No. 17761, 23 October 2002.]GPA/W/286
Page 49
Article 9-3 (Types of Indicated Ingredients and Their Indication Methods)
(1) Types of ingredients to be indicated under the provisions of Article 25-2(2) of the Act shall be
tar and nicotine.
(2) Matters necessary for the indication methods of tobacco ingredients under the provisions of
paragraph (1) shall be stipulated by the Ordinance of the Ministry of Finance and Economy.
[This Article Newly Inserted by Presidential Decree No. 17761, 23 October 2002.]
Article 9-4 (Criteria for Measurement, etc. of Tobacco Ingredients)
(1) The criteria for measurement under the provisions of Article 25-2(2) of the Act means the
dependence on the test methods of tobacco smoke ingredients as determined by the International
Organization for Standardization (ISO), and its definite measurement criteria shall be stipulated  by
the Ordinance of the Ministry of Finance and Economy.
(2) Measurement cycles of tobacco ingredients under the provisions of paragraph (1), sample
extraction methods for measurements, and other matters necessary for measurements shall be
stipulated by the Ordinance of th e Ministry of Finance and Economy.
[This Article Newly Inserted by Presidential Decree No. 17761, 23 October 2002.]
Article 9-5 (Designation of Measuring Agency)
(1) Any measuring agency under the provisions of Article 25-2(2) of the Act may be designated
by the Minister of Finance and Economy from among the persons authorized as the test or inspection
agency for the field of tobacco smoke ingredients by the Korean Agency for Technology and
Standards designated as the authorizing organizati on under the provisions of Article 23(2) of the
Framework Act on National Standards and of Article 16(2) of the Enforcement Decree of the same
Act.
(2) Matters necessary for the designation of measuring agency under the provisions of
paragraph (1) shall be stipulated by the Ordinance of the Ministry of Finance and Economy.
[This Article Newly Inserted by Presidential Decree No. 17761, 23 October 2002.]
Article 9-6 (Scope of Allowable Errors)
(1) The scope of allowable errors in the indicated values of tobacco smoke ingredients under the
provisions of Article 25-2(2) of the Act shall be as follows:
1. Tar:
In the case of over 5 milligrams: ±within 20%
In the case of under 5 milligrams: ±within 1 milligram
2. Nicotine:
In the case of over 0.5 milligrams: ±within 20%
In the case of under 0.5 milligrams: ±within 0.1 milligram
(2) Whether or not exceeding the scope of allowable errors under the provisions of paragraph (1)
shall be determined on the basis of values obtain ed by an arithmetic mean of each measured value
which has been obtained by 4 consecutive measurings:  Provided,  That when the con-  tents indicated
under the provisions of Articles 9-2 and 9-3 are altered before the measurements over 4 occasions
have been achieved, it shall be determined on the basis of values obtained by an arithmetic mean  of
each measured value before such alterations.GPA/W/286
Page 50
[This Article Newly Inserted by Presidential Decree No. 17761, 23 October 2002.]
Article 9-7 (Ommission of Tobacco Ingredient Indications)
The case where an indication of tobacco smoke ingredients may be omitted under the
provisions of Article 25-2(2) of the Act shall be limited to the cigars, pipe tobaccos, cut tobaccos,
chewing tobaccos, and smelling tobaccos.
[This Article Newly Inserted by Presidential Decree No. 17761, 23 October 2002.]
Article 10 (Prohibition of Providing of Money or Goods, etc. for Promotion of Tobacco
Sales)
The term "providing money and other similar activities as prescribed by the Presidential
Decree" in Article 25-4 of the Act means the acts of  providing the bounty for tobacco sales,
premiums, merchandise coupons and other money or goods:  Provided , That the acts of providing the
goods which are determined by the Ordinance of the Ministry of Finance and Economy and which are
necessary for the tobacco retail business shall be excluded.  <Amended by Presidential Decree No.
17761, 23 October 2002>
Article 11 (Procedure for Imposition and Collection of Fine for Negligence)
(1) In case where a fine for negligence is imposed under Article 29(1) of the Act, a person subject
to a disposition of such a fine for negligence shall be notified to pay such fine for negligence in
writing clarifying the fact of offense and the amount of fine for negligence, etc. after investigating and
verifying the relevant offense.
(2) An imposition right holder under Article 29(1) of the Act shall, where he intends to impose a
fine for negligence under paragraph (1), provide a person subject to a disposition of fine for
negligence with an opportunity to state his opinion orally or in writing by fixing a period of not less
than ten days.  In this case, if he fails to state his opinion by the designated date, he shall be
considered to have no opinions.
(3) An imposition right holder under Article 29 (1) of the Act shall, in determining the amount of
fine for negligence, take into consideration  the motive and consequences therefrom, etc.
(4  The procedure to collect a fine for negligence shall be prescribed by the Ordinance of the
Ministry of Finance and Economy.
ADDENDA
Article 1 (Enforcement Date)
This Decree shall enter into force on 1 July 2001.
Article 2 Omitted.
ADDENDA <Presidential Decree No. 17761, 23 October 2002>
(1) (Enforcement Date) This Decree shall enter into force on 1 January 2003.
(Application Example to First Measurement) The first measurement  of tobacco ingredients shall be
performed beginning from the quarter next to that wherein the measuring agency has been first
designated under the amended provisions of Article 9-5.GPA/W/286
Page 51
ATTACHMENT D
SPECIAL REGULATION OF THE ENFORCEMENT DECREE OF THE ACT
RELATING TO CONTRACTS TO WHICH THE STATE IS A
PARTY FOR SPECIFIC PROCUREMENT
Presidential Decree 15,187 (1996.12.31)
Article 1 (Purpose)
The purpose of these Regulation is to provide for special regulations, with respect to the
Enforcement Decree of the Act relating to Contracts to which the State is a Party(hereinafter referred
to as "Enforcement Decree"), in conducting international tendering under Article 4 of the Act relating
to Contracts to which the State is a Party(hereinafter referred to as "Act"), which is to perform the
Agreement on Government Procurement(hereinafter referred to as "Agreement") executed at
Marrakesh on 15 April 1994.
Article 2 (Definition)
The terms as used in these Regulations shall be defined as follows:
"International tendering" means the tendering in which the participants are national/foreigners and is
conducted in order to procure the goods, construction works and services, including private contracts.
"Special procurement contract" means a contract wh ich is executed in accordance with the Act, the
Enforcement Decree and these Regulations, in order for the state to procure the goods, constructionworks and services through international tendering as provided in Article 4, paragraph (1) and (2) of
the Act.
"Ordering Agency" which executes a contract in order to procure the goods, construction works and
services in accordance with the Act, the Enforcement Decree and these Regulations.
"General competitive tendering" means a tendering in which all qualified persons intending to
participate in tendering for a specific procurement contract may submit tendering documents.
"Selective tendering" means a tendering in which a person designated by the ordering agency for a
specific procurement contract may submit tendering documents.
"Private contract" means a contract where the ordering agency determines the other party in relation
to a specific procurement contract, not through competitive tendering.
"List of qualified persons" means a list which consists of the persons qualified. Such qualification for
participation of tendering on goods, construction works and services for the specific procurementcontracts is determined in advance.
Article 3 (Scope of Application)
(1) These Regulations shall be applied to the specific procurement contract which the State
executes.
(2) "The case as prescribed by the Presidential Decree, "referred to in Article 4, Paragraph(1),
Item 4 of the Act, shall mean the case falling under any Item of the following:GPA/W/286
Page 52
1. When necessary to protect the benefit of important national security in procurement
of arms, ammunition or warfare materials, or procurement in relation to the
performance of the purpose of national safety or national defense;
2. When necessary to maintain the public order and stability, or maintain life and health
of human beings, animals or plants, or intellectual property rights;
3. When procuring goods and services, etc., manufactured by charitable organizations,
the disabled and prisoners;
4. When manufacturing and procuring artificial satellites in accordance with the
Aviation and Space Industry Development Promotion Act;  or
5. When executing a private contract in accordance with the proviso of Article 7 of the
Act and Article 26 of the Enforcement Decree.
(3) The government agency and the scope of goods, construction works and services as
prescribed in Article 4, Paragraph (2) of the Act shall be as described in Attachments 1 and 2,
However, the Minister of Finance and Economy ("MOFE") may notify the matters regarding the
member states of the Agreement and those states restricted from executing a specific procurementcontract, as provided in the Agreement.
(4) In any of the following cases, the head of each central agency or the public official in charge
of the contract may secure procurement through the international tendering process, as provided in
Article 4, Paragraph (3) of the Act:
1. When deemed necessary to prevent improper construction work;
2. When it is impossible to achieve the purpose of procurement through the domestic
tendering process due to difficulty in domestic manufacturing;  or
3. When deemed efficient from the viewpoint of the purpose and nature of the relevant
contract to secure procurement through the international tendering process.
(5) In the case of procurement through the international tendering process, as provided in
Paragraph (4), these Regulations shall be applied mutatis mutandis  to the extent not contrary to the
nature thereof.  In this case, the words "specific procurement contract" shall be read as "international
tendering under the provision of Paragraph(4)".
Article 4 (Principles of Specific Procurement Contract)
(1) The head of each central agency or the public official in charge of the contract shall fairly
select the other party of the specific procuremen t contract, and shall not provide the information
related to governmental procurement with discrimination.
(2) The head of each central agency or the public official in charge of the contract shall comply
with the following, in connection with the specific procurement contract:
1. He/she shall not select the calculation method of the Estimated price or make a partial
ordering for the purpose of avoiding th e application of the Agreement;  and
2. He/she shall not apply the provisions on the country of origin other than those under
the Foreign Trade Law and the Customs Tax Law, which are applied during the
ordinary transaction process, to goods, construction works and services procured
from the other party of the contract from the member states of the Agreement;  and
3. He/she shall not take measures restricting the participation of tendering or the
conditions of procurement of the tendering participants of the member state of the
Agreement through the designation of the ratio of localization of parts, etc.,
technology transfer and counter purchase during the course of screening of theGPA/W/286
Page 53
qualification for participation of tendering, the evaluation of tendering documents or
the determination of a successful tenderer.
Article 5 (Preferential Treatment Measures to a Developing Country)
(1) The head of each central agency or the public official in charge of the contract may take
preferential measures, as provided for in the Agreement, on the goods, construction works and
services procured from the supplier of a developing country in relation to a specific procurement
contract.
(2) The MOFE may determine the states and objects subject to Paragraph(1) and make a public
notice thereof.
Article 6 (Exception of the Preparation of Standard price)
The head of each central agency or the public official in charge of the contract is not required
to prepare the standard price under Article 7-2, Paragraph (1) of the Enforcement Decree, in the casesas shall be provided by the Prime Ministerial Decr ee, including the case that it is difficult to prepare
the standard price in the specific procurement contract of goods and services due to a lack of an actual
example of a transaction price.
Article 7 (Method of Contract)
The method of the specific procurement contract shall be classified into general competitive
tendering, designated competitive tendering, or private contract.
Article 8 (Language to be Used)
(1) In principle, the language to be used in th e specific procurement contract shall be Korean.
However, if deemed inevitable to use foreign languages, such as the supplier of goods to be procured
being limited to a specific area, any one language among the language of the specific state, English,
French and Spanish may be chosen.
(2) If the head of each central agency or the public official in charge of the contract desires to
give public notice on tendering of a specific procur ement contract, he/she shall describe the following
in any language chosen from among English, French and Spanish at the tail end of the public notice:
1. Object of contract;
2. Deadline for tendering documents and the application for tendering;  and3. Name and address of the ordering agency(the agency which delivers the documents
concerning tendering).
(3) If the head of each central agency or the public official in charge of the contract permits the
use of multiple languages in the preparation of tendering documents for a specific procurementcontract, he/she shall include one or more languages from among English, French and Spanish.
(4) If the matters described in the foreign langua ge, in accordance with Paragraphs (2) and (3),
differ from those described in Korean, the matters described in Korean shall prevail.GPA/W/286
Page 54
Article 9 (Qualification of Participants in General Competitive Tendering and Screening
thereof)
(1) If the head of each central agency or the public official in charge of the contract deems it
necessary for a specific procurement contract, he/she may, in consideration of the type and size of thecontract, determine on the qualification, which are required for the participants of general competitive
tendering, with respect to previous contracts of the same type as that of the relevant contract, the
contract ceiling amount, construction capacity, the technological ability and the management status, in
addition to the qualifications under Article 12, Items 1 through 3 of the Enforcement Decree.
(2) Upon application by a person intending to participate in general competitive tendering head of
each central agency or the public official in charge of the contract shall screen the applicant'squalification for the participation of tendering as provided in Paragraph (1), and notify the applicant
of the result.
(3) The head of each central agency or the public official in charge of the contract is not required
to conduct a screening provided for in Paragraph (2),  with respect of the persons listed in a list of
qualified persons.
(4) If a person not having been screened in accordance with Article 10, Paragraph (1), applies for
the participation of tendering, the head of each central agency or the public official in charge of the
contract shall immediately commence the screening of qualification.  If it is determined that there is
enough time to complete the screening by the day preceding the deadline of submitting the tendering
documents, the head of each central agency or the public official in charge of the contract shall allow
the tendering documents to be submitted.
Article 10 (List of Qualified Persons)
(1) The head of each central agency or the public official in charge of the contract may notify the
standard of qualification for participating in tendering provided in Article 9, Paragraph (1), in the
gazette, at the beginning of each fiscal year and, from time to time, screen the qualification of the
applicants who wish to participate in general competitive tendering. Based on the results of such
screening, he/she may prepare a list of qualified persons and allow for any applicant to have access to
the list.
(2) After the public notice on tendering, the head of each central agency or the public official in
charge of the contract shall notify the applicants of the results of screening, whether or not the
relevant applicant satisfies the qualification for participation of the tendering under the provision of
Paragraph (1).  If the effective period of the list of qualified persons expires or if any person isderegistered from the list, such expiration or deregi stration shall be notified to the relevant person.
Article 11 (Public Notice on Tendering)
(1) With respect to a specific procurement contract to be entered into by means of general
competitive tendering, the head of each central agency or the public official in charge of the contract
shall notify the matters set forth in Article 12 in the gazette.
(2) The public notice on tendering under Paragraph (1) shall be given before forty (40) days
immediately preceding the deadline of filing tendering documents.
(3) Notwithstanding the provision of Paragraph (2), if it is deemed that the object of the contract
cannot be procured in time, as in such cases of the following items, the tendering may be publicly
notified ten (10) days before the deadline of filling tendering documents:GPA/W/286
Page 55
1. In emergent cases;  or
2. In the case of re-notification under the provision of Article 20, Paragraph (2) of the
Enforcement Decree.
(4) If any matters concerning tendering are required to be corrected after the public notice has
been given as provided in Paragraphs (1) and (2), the public notice of such correction shall be given
during the period of the remaining days out of the initial period set forth in Paragraph (2) plus an
additional ten (10) or more days.
(5) Notwithstanding the provision of Paragraph (2), in each of the following cases, the public
notice on tendering may be given 24 days immediately preceding the deadline of filing tenderingdocuments:
1. When a public notice was separately given for a period of 40days within the past 12
months, which contains the matters set forth in Article 13, Paragraph 2;  or
2. With respect to the contract in which an individual requirement of procurement is
made in multiple cases or in instalments (hereinafter, "repeating contract"), when the
public notice on tendering for such contract is given after the initial public notice.
Article 12 (Contents of Public Notice on Tendering)
When the head of each central agency or the public official in charge of the contract gives a
public notice on tendering as provided in Article 11, he/she shall include the following matters in
addition to those set forth in Article 36 of the Enforcement Decree:
1. Conditions of any additional procurement which are required in connection with the
relevant procurement, and an expected date of public notice for any subsequent
tendering of any repeating contract;
2. Method of general competitive tendering or selective tendering and whether or not
negotiation procedure is included;
3. Method of procurement by the ordering agency such as purchase, lease, purchase in
instalments, etc.;
4. Address to be used for filing the application for screening of qualification for
participation in tendering, an application for tendering and tendering documents, the
deadline for filing them and the language to be used therein;  and
5. Whether or not the relevant tendering is subject to the Agreement.
Article 13 (Public Notice of Procurement Plan)
(1) The head of each central agency or the public official in charge of the contract may notify in
the gazette, the plan for procurement of goods, construction works and services to be supplied under
specific procurement contracts during each fiscal year.
(2) The public notice on procurement plan shall contain the statements set forth in each Item of
Article 8, Paragraph(2), and those set forth in each Item of Article 12 are recommended to be stated in
the said public notice to the most possible extent.
Article 14 (Technical Specification)
(1) The head of each central agency or the public official in charge of the contract shall prepare
the technical specifications concerning quality, function, etc., in consideration of the function as
important element.  Unless there are any inevitable  reasons, the technical specifications shall beGPA/W/286
Page 56
prepared on the basis of the relevant international standard, if any, and if there is no applicable
international standard, relevant Korean laws and regulations or domestic criteria shall be applicable
thereto.
(2) If no international standard is applicable as provided in Paragraph (1), the head of each
central agency or the public official in charge of the contract may set up the technical specifications
through the test of quality or function.
(3) If it is difficult to sufficiently explain the goods or services to be procured without presenting
a specific trademark/specification thereof, and su ch trademark/specification is designated in the
documents concerning tendering provided in Article 15, the head of each central agency or the public
official in charge of the contract shall include the statement in the public notice on the tendering to theeffect that any goods or services of equal or higher level of such specific trademark/specification are
put up in the tendering.
(4) In the case of Paragraph (3) above, the applicant of the tendering shall evidence the fact that
the specification, quality, etc., of the goods or services to be supplied, correspond to such specificconditions or are at a higher level.
(5) In preparing the specifications, the head of each central agency or the public official in charge
of the contract shall not request or accept any advice, to or from any person who has commercial
interest which may be used to restrict the competition.
(6) If it is deemed to be necessary for fair competition, the head of each central agency or the
public official in charge of the contract may disclose the technical specifications to the participants of
the tendering and make them accessible before the tendering, and allow the participants to present
their opinion thereto.
Article 15 (Delivery of Documents concerning Tendering)
With respect to the specific procurement contracts to be entered into by means of general
competitive tendering, the head of each central agency or the public official in charge of the contract,
at the request of the relevant applicants, shall deliver the tendering related documents as provided in
Article 14, Paragraph(1) of the Enforcement Decree (hereinafter, "tendering related documents"), andshall address any inquiries regarding the tendering related documents without delay.
Article 16 (Filing and Acceptance of Tendering Documents)
(1) With respect to any specific procurement contract, the head of each central agency or the
public official in charge of the contract shall permit the submission of tendering documents by mail.
(2) The head of each central agency or the public official in charge of the contract may, if it is
deemed to be necessary, allow the applicants to  submit the tendering documents and other related
documents by cable, telegraph and fax transmission.
(3) When the tendering documents are filed as provided in Paragraph (2), the head of each central
agency or the public official in charge of the contract shall cause the relevant participant to submit the
copy thereof, with his/her signature for the purpose of confirmation.  In this case, if there is any
discrepancy between the tendering documents submitted by cable, etc., and the copy thereof, with thesignature provided after the deadline for filing for confirmation, the tendering documents submitted
by cable, etc., shall prevail.GPA/W/286
Page 57
(4) When the head of each central agency or the public official in charge of the contract accepts
the tendering documents by mail as provided in Paragraph(1), he/she shall state the date of acceptance
and affix the seal of confirmation on the envelope of the relevant tendering documents and keep it
closed until the opening of tendering. If the tendering documents are delivered to the relevant
department after the date designated in the tendering related documents, due to any reason attributableto the ordering agency, the relevant participant shall not be adversely affected therefrom.
Article 17 (Public Notice of Successful Tenderer and Disclosure of Information)
(1) When the head of each central agency or the public official in charge of the contract selects a
successful tenderer for any specific procurement contract, or decides who the other party of the
private contract shall be as provided in Article 23, he/she shall publicly notify the matters provided inthe Prime Ministerial Decree, in the gazette, within 72 days from the date of such selection or
decision.
(2) When the participants of the tendering requires the head of each central agency or the public
official in charge of the contract to provide any information concerning the relevant tendering, he/sheshall meet such demand if there are no special reasons to avoid such request.
(3) In connection with the provisions of Paragraphs (1) and (2), the matters concerning the scope
of disclosure, and an exceptional case of disclosure, of information relating to successful tendering,
shall be in accordance with the provision of the Prime Ministerial Decree.
Article 18 (Selective Tendering)
When the head of each central agency or the public official in charge of the contract intends
to put up the designated competitive tendering as provided in Article 7 of the Act, for a specificprocurement contract, he/she shall, in consideration of the matters provided in Article 9, establish the
qualification required of the participants of the selective tendering and the standard for designation.
Article 19 (Designation of Participants of Designated Competitive Tendering and Notice
thereof)
(1) When the head of each central agency or the public official in charge of the contract intends
to put up the designated competitive tendering for a specific procurement contract, he/she shall
designate a person having the qualification provided in Article 18, who is deemed to be appropriate
with regard to the standard for designation, and at the same time, give notice stating the matters
concerning public notice of tendering as provided in Article 12 hereof and Article 36 of the
Enforcement Decree, to such designated person.
(2) The notice provided in Paragraph (1) shall be given at the date of public notice under the
provision for Article 20, Paragraph (1).
Article 20 (Public Notice of Selective Tendering)
If the head of each central agency or the public official in charge of the contract intends to put
up designated competitive tendering for a specific procurement contract, he/she shall give public
notice thereof, in accordance with the provisions of Article 11 and Article 12.
(2) Notwithstanding the provision of Paragraph(1), in the case of selective tendering without
using the list of qualified persons, the period for submission of the application for participation in the
selective tendering shall be set up for 25 days or more from the date of public notice as provided in
Paragraph (1).GPA/W/286
Page 58
Article 21 (Screening of Qualification for Participants of Selective Tendering)
(1) If the head of each central agency or the public official in charge of the contract receives any
applications for screening of qualification for participation in designated competitive tendering afterthe public notice thereof, as provided in Article 20, he/she shall, without delay, commence the
screening of qualification as set forth in Article 18.  However, if it appears that the screening cannot
be completed until the deadline for the filing of the application, he/she shall give notice of such matter
in advance to the applicants.
(2) If it is deemed to be necessary, the head of each central agency or the public official in charge
of the contract shall designate the screening period for the application of screening of qualification forparticipation as provided in Paragraph (1), and he/she may publicly notify the period, together with
any other matters as provided in Article 20.
(3) If the head of each central agency or the public official in charge of the contract intends to
prepare the list of qualified persons for selective tendering, he/she shall give public notice of thematters concerning the qualification for participation of the designated competitive tendering as
provided in the Prime Ministerial Decree, in the gazette, each year.
(4) The provision of Article 10 shall apply mutatis mutandis  to the preparation of the list of
qualified persons under the provision of Paragraph (3).
Article 22 (Application of Provision Concerning General Competitive Tendering)
The provisions of Article 9 through Article 17 shall apply mutatis mutandis  to the selective
tendering.
Article 23 (Private Contract)
The specific procurement contracts which may be entered into by means of a private contract
shall be as follows:
1. When there is no participant of the competitive tendering, collaborative tendering
documents are filed, or no tendering documents satisfy the conditions required in the
public notice of the relevant tendering;
2. When the relevant goods may be procured only from a specific supplier such as
works of art with no substitutes thereof, or other goods which are related to anyexclusive rights, including patent rights or publication rights, or which require special
technology;
3. If the procurement cannot be made within the required period by competitive
tendering due to any urgent cause;
4. If the procurement is made for an change of the components of already procured
goods or an expansion of any of the facilities (only if the manufacture and supply of
the relevant goods by others than those which are originally manufactured and
supplied causes lack of compatibility);
5. If the prototype developed by the request of the ordering agency is procured (expect
if the relevant goods continue to be procured after completion of fulfilment of the
relevant contract);GPA/W/286
Page 59
6. If nay additional construction for the construction work for which a contract has been
already executed is required, due to any unexpected circumstances, and an amount
equivalent to the standard price of the additional construction is 50/100 or less of the
contract amount of the immediately previous construction, and if there is a need toexecute a contract with the person performing the relevant work since it is difficult to
separate the additional construction work technically and economically, or such
separation causes considerable inconvenience to the ordering agency;
7. If the new construction work is a repeat of similar construction works according to
the basic plan, and the initial contract was executed as a specific procurement
contract, and the public notice on tendering for the initial contract specifies that thenew construction can be made by a private contract;
8. If any goods are purchased in raw materials market(commodity exchange);9. If any goods are procured in remarkably profitable conditions due to any causes
including asset disposition of any corporation subject to bankruptcy or corporate
reorganization;  and
10. If any contract is executed with the person winning the prize in the design  contest as
specified in the Prime Ministerial Decree.
Article 24 (Records concerning Contract)
When the head of each central agency or the public official in charge of the contract
determines the successful tenderer in the specific procurement contract by competition, he/she shallkeep and maintain the documents concerning the tendering and the contract, and the documents
recording any of the following for five (5) years:
1. Names of participants in the tendering and any person participating in the opening of
the tendering;
2. Name of successful tenderer, amount of successful tendering and reason of
determination of the successful tenderer;
3. In the event any tendering becomes null and void, details of the relevant  tendering
and reason for such nullity;
4. In the event the notice as prescribed by Article 9, Paragraph 2 is given, matters
concerning the notice;
5. Country of origin of goods;  and
6. Other matters as determined by the Prime Ministerial Decree.
(2) When the head of each central agency or the public official in charge of the contract  executes
a private contract for a specific procurement, he/she shall keep and maintain any documents
concerning the contract and the documents recording any of the following for five (5) years:
1. Purpose of the contract;
2. Name of item, size, quantity, unit price, amount, etc., of the goods;
3. Provisions of any applicable laws and specific reason for the application;GPA/W/286
Page 60
4. Name (trade name) and address of the other party in the contract;
5. Contract amount and reason of determination of the other party of the contract;
6. Country of origin of goods;  and
7. Other matters as determined by the Prime Ministerial Decree.
Article 25 (Report on Result of the Contract)
(1) The head of each central agency shall prepare the report on the results of the contract,
consisting of such contents as required by the Prime Ministerial Decree and submit it to the MOFE
within 60 days from the end of the relevant year.
(2) The report on the results of the contract concluded by a government invested institution,
which is subject to the Agreement, shall be submitted by the relevant Minister according to
Paragraph 1 above.
Article 26 (Subject to Submitting Objection)
"Other matters as determined by the Presidential Decree" as set forth in Article 28,
Paragraph 1, Item 5 of the Act shall mean the matters breaching the provisions of the Agreement as
not specified in Article 28, Paragraph 1, Item 1 of the Act.
Article 27 (Application for Mediation)
(1) The person("applicant") who intends to apply for a review in accordance with Article 28,
Paragraph 4 of the Act ("application for mediation") shall sign or affix seals to the application as
determined by the MOFE and then submit it to the International Contract Dispute Mediation
Committee as prescribed by Article 28, together with evidencing documents and any relateddocuments.
(2) Matters concerning any necessary procedures in connection with the application for
mediation, except for the provision of Paragraph 1 above, shall be determined by the MOFE.
Article 28 (Organization of International Contract Dispute Mediation Committee)
(1) The International Contract Dispute Mediation Committee("Committee") as set forth in
Article 29 of the Act, shall consist of 15 or less members, including the Chairman.
(2) The Chairman of the Committee shall be the Deputy-Minister of Finance and Economy.  The
members of the Committee shall be the public officials of the central administrative agency asdetermined by the Prime Ministerial Decree who shall be designated by the head of the relevant
agency and the persons appointed by the MOFE among the persons falling under any of the
following:
1. The person who has held for five (5) years or more, the position as a deputy professor
or a higher level of law, finance, trade or accounting at the university as prescribed by
the Education Law;
2. The person qualified as a lawyer who has engaged in legal works for ten (10) years or
more;  and
3. The person who has much knowledge and experience concerning accounting and
procurement contract affairs of the government.GPA/W/286
Page 61
(3) The term of the member who is not the public official shall be two (2) years and shall be
eligible for re-election.  The term of any subst itute shall be the remaining term of the predecessor.
(4) The member who is not the public official may not be involuntarily removed during the term
of office, except when he is sentenced to imprisonment or more severe punishment, or when he maynot perform his duties due to long -term mental and physical weakness.
Article 29 (Function of the Committee)
When the Committee receives the application for mediation as set forth in Article 27,
Paragraph 1, it shall notify the head of the relevant central agency of the contents of the application,
and then examine and mediate the application.
Article 30 (Suspension of Contract Tendering Procedures)
(1) When the Committee orders a postponement of the tendering procedure or a suspension on
the conclusion of the contract to the relevant central agency, in accordance with Article 30,Paragraph 2 of the Act, the Committee shall make su ch order in writing within seven (7) days from
receipt of the opinion pursuant to Article 33 pursuant to Article 33 unless there is any special cause.
(2) When, in accordance with the provisions of the Agreement, the Committee determines not to
order the suspension of the contract as provided in Paragraph 1 above because it threatens to causeany disadvantageous effect to public interest or the relevant interested party, it shall notify, in writing,
the reason therefore to the applicant and the head of the relevant central agency.
Article 31 (Duties of Chairman of the Committee)
(1) The Chairman of the Committee shall generally coordinate business affairs of the Committee
and represent the Committee.
(2) When the Chairman of the Committee is unable to perform his duties due to unavoidable
causes, the member designated by the MOFE shall act for the Chairman.
Article 32 (Meeting of the Committee)
(1) The meeting of the Committee shall be convened by the Chairman.
(2) A resolution of the meeting of the Committee shall be adopted by the presence of the majority
of all members and then by affirmative vote of the majority of the members present thereat.
(3) The Committee shall have one(1) secretary for its conduction of business.
Article 33 (Investigation)
(1) The head of the central agency to whom the details of the application for mediation according
to Article 29 are notified, in accordance with Article 29, shall submit to the Committee, its opinion, in
writing, within fourteen (14) days from receipt of the notice.
(2) If necessary for examination and mediation, the Committee may demand the applicant and the
head of the relevant central agency to submit the documents relating to the matters subject to the
application for mediation, and may request the relevant professional institution to conduct an
appraisal, a diagnosis and a test.GPA/W/286
Page 62
(3) The Committee shall give the party, or its representative, an opportunity to state his/her
opinion prior to the completion of the mediation.  If necessary, the Committee may cause the
applicant, the head of the relevant central agency, its representative, witness or the relevant specialist,
to be present at the Committee, to state their opinion.
Article 34 (Suspension of Mediation)
If litigation, with respect to the matter which is the same as the matter subject to the
application of mediation with the Committee, is pending at the Court, the Committee may suspend the
examination/mediation.  In such a case, the Committee shall notify the party, who has filed an
application for mediation, of the cause for the suspension.
Article 35 (Mediation)
(1) The Committee shall prepare a mediation plan stating the results of the examination and then
notify the party of the results.
(2) When preparing the mediation plan as set forth in Paragraph (1), if the Committee considers
that the applicant has sustained any disadvantage due to any of the acts as set forth in Article 28,
Paragraph (1) of the Act, the mediation plan shall include revocation or correction of the acts of the
head of the central agency concerned of the public official in charge of the contract, and compensation
for the damage of loss therefrom.
(3) The compensation for the damage or loss as set forth in Paragraph (2) may be restricted to the
expenses incurred in the course of preparation of tendering and application for mediation.
Article 36 (Compensation)
The Committee shall pay compensation to the Committee member and the relevant specialist
who are present at the Committee, within the extent of the budget.
Article 37 (Expenses)
(1) Expenses incurred in connection with the examination/mediation of the application for
mediation shall be borne by the applicant.  However, if there is any agreement between the parties in
connection with the expenses, the expenses shall be borne as agreed in the agreement.
(2) Details on expenses in connection with the application for mediation shall be as set forth in
the Prime Ministerial Decree.
Article 38 (Operation of Committee)
Matters necessary for the operation of the Comm ittee which has not been provided in these
Regulations, shall be set forth in the Prime Ministerial Decree.
Article 39 (Relations with the Enforcement Decree)
In a specific procurement contract, provisions of the Enforcement Decree shall apply to any
matter which has not been specifically provided in the Regulations. However, Articles 21 and 22, and
Article 72, Paragraph (3) of the Enforcement Decree shall not apply to the matters in connection witha specific procurement contract.GPA/W/286
Page 63
Article 40 (Application of International Trade Customs)
If, in the case of specific procurement contracts, it is unavoidable to the performance of
procedures for procurement such as currency, type and period for payment of security deposit, method
of payment of consideration through a letter of credit, and inspection, etc., the head of each centralagency or the public official in charge of the contract may, notwithstanding Article 39, be subject to
the international trade customs within the extent whic h is not contrary to the provisions and nature of
Agreement and these Regulations.
If, in the case of specific procurement contracts of goods and services, it is judged to be
difficult to perform procedures for procurement without complying with the international trade
customs with respect to the adjustment of the contract amount due to price fluctuation, the head ofeach central agency or the public official in charge of the contract shall, notwithstanding Article 64,
Paragraph (1) of the Enforcement Decree, be subjec t to the international trade customs within the
extent which is not contrary to the provisions and nature of the Agreement and these Regulations.
ADDENDA
Article 1 Enforcement Date
These Regulations shall enter into force from 1 January 1997.
Article 2 Validity Period of Application of  these Regulations to the Contract for
Manufacture and Purchase of Artificial Satellite
The effect of the provision of Article 3, Paragraph (2), Item 4 shall be maintained until
31 December 2001.
Article 3 Repeal and Amendment of Other Laws and Regulations
The Regulations on the Contract for Foreign Capital Purchase shall be repealed.
Special Regulations of the Enforcement Decree of the Act Relating to the Contract to Which
the State is a Party for the Procurement of Specific Goods shall be amended as follows: Article 12
shall be deleted.
Article 14, Paragraph (2) shall be amended as follows:
Any person who objects to the measures taken by the head of each central body as referred to
Paragraph(1), may request a review for mediation to the International Contract Dispute Mediation
Committee as Prescribed in Article 28 of the Special Regulations of the Enforcement Decree of the
Act Relating to the Contract to Which the State is a Party for Specific Procurement, within fifteen
(15) days after the head of each central body takes the measures or he/she is aware that such measureshave been taken.
Articles 15 and 16 shall be deleted, respectively.In Article 17, the "regulations on the contract for Foreign Capital Purchase" shall be amended
as the "Special Regulations of the Enforcement Decree of the Act Relating to the Contract to Which
the State is a Party for Specific Procurement".GPA/W/286
Page 64
Article 4 Interim Measures for Execution of Contract for Foreign Ca[ital Purchase, etc.
The tendering, determination of a successful tenderer and execution of the contract which will
occur after the enforcement date of these regulations and with regard to Which a public notice for
tendering was made before the enforcement date of these Regulations in accordance with theRegulations on the Contract for Foreign Capital Purchase, and the contract which is to be executed
after the enforcement date of these Regulations a nd with regard to which a tendering was determined
before the enforcement date of these Regulations, shall be governed by the previous provisions.GPA/W/286
Page 65
ATTACHMENT E
THE ACCOUNTING REGULATION FOR GOVERNMENT INVESTED ENTERPRISES
[Enacted on 21 October 1999 as Decree No. 00107, Ministry of Finance and Economy]
Article 1 (Purpose)
These Regulations (hereinafter referred to as "Regulation") is to regulate the necessary
matters concerning the accounting and contracting standards and procedures applicable to
government-invested institutions and bidders' qualifications for participating in the tender, as
mandated by subsection 3 of Article 20 of the Fr amework Act on the Management of Government-
invested Institutions (hereinafter referred to as "Framework Act").
Article 2 (Relations with Other Laws)
(1) Unless otherwise provided in other laws or ordinances, these Regulations shall apply to the
accounting practices of the government-invested institutions (hereinafter referred to as "InvestedInstitutions") under Article 2 of the Framework Act.
(2) The matters that are not provided in these Regulations concerning contracts entered into by an
Invested Institution shall be subject to the Act on Contracts to which the State is a party, mutatis
mutandis , in such case "state", "government" and "national treasury" in the aforesaid Act shall be
deemed to be an "Invested Institution", "head of any office of the central government" and "public
servant in charge of contract-related affairs" sh all be deemed to be "president of an Invested
Institution" and the "Contracting Officer", respectively.
Article 3 (Accounting Officers)
(1) The president of an Invested Institution shall appoint the accounting officers to take charge of
accounting for each accounting unit, as follows:
1. An officer in charge of the revenue-related affairs;
2. An officer in charge of the expenditure-related affairs;
3. An officer in charge of the contract-related affairs;4. An officer in charge of the cause-of-expenditure-related affairs;
5. An officer in charge of the routine-expense-related affairs;
6. An officer in charge of the securities management related affairs;
7. An officer in charge of the supplies management related affairs,  and
8. An officer in charge of the affairs relating to the management of inventories, fixed
assets and other assets.
(2) Among the accounting officers under subsection (1) above, there shall be no holding currently
the post of a revenue officer and an expenditure officer, an expenditure officer and a contracting
officer or a cause-of-expenditure officer; provided, however, that the foregoing provisions shall notapply to an office overseas or when inevitable, due to the number of personnel far less than required.
(3) The president of an Invested Institution may appoint one of its employees to mandate the
duties of the accounting officers under subsection (1) above, in whole or in part, if deemed necessary.GPA/W/286
Page 66
Article 4 (Consolidated Financial Statements)
The Minster of Finance and Economy (hereinafter referred to as "Minister") may direct the
President of an Invested Institution to prepare consolidated financial statements, if it is deemednecessary in order to ensure proper accounting.
Article 5 (Payment of Expenditure)
(1) Expenditure shall be paid by crediting related payment to the savings account in the financial
institution or a mail transfer account in the post office (for the purpose of this article, hereinafter
referred to as "Crediting to Creditor's Account"), as  designated by the relevant creditor (including the
subcontractors appointed by the creditor, in case a subcontracts has been entered into in the course of
performing a construction, manufacture or purchase contract); provided, however, that expenditure
may be paid otherwise than by Crediting to Creditor’s Account, in the event of:
1. Payment of personnel expenses, travelling expenses or routine expenses;
2. Payment in an amount less than W100,000 per transaction;
3. Payment made by an Invested Institution located in a "Myeon";  or
4. If payment by Crediting to Creditor's Account is deemed particularly inappropriate.
(2) The expenditure in accordance with subsection (1) above shall be effected by check, except
where specific circumstances require payment in cash.
Article 6 (Payment of Routine Expenses)
(1) The President of an Invested Institution may make payment of the necessary expenses that are
likely to adversely affect the Invested Institution's ordinary activities considering its nature, if not paid
in cash as routine expenses.
(2) The scope of routine expenses referred to in subsection (1) above shall be as follows:
1. Expenses to be paid in foreign countries;
2. Expenses required for operation and/or repair of vessels;3. Expenses to be paid in the area where proper transportation and/or communication is
not available;
4. Expenses routinely spent in the office and travelling expenses that do not exceed
W5 million;
5. Expenses incurred by each office to purchase miscellaneous food and related
materials;
6. Expenses incurred by the office whose place of payment is not fixed;
7. Expenses incurred by the office whose expenditure officer is not appointed;
8. Expenses for construction, manufacture or afforestation carried out directly by each
office that do not exceed W20 million;
9. Business promotion expenses;
10. Expenses to be paid to witnesses or surveyors;
11. Salaries to be paid to its officers and employees of an Invested Institution;
12. Various allowances and honorariums;
13. Bonuses;  and14. Expenses for purchasing samples and fees for test and research pursuant to the
provisions of applicable laws and ordinances.GPA/W/286
Page 67
(3) The funds for the expenses under subsection (1 ) above shall be paid in compliance with the
following requirements:
1. The routine expenses of the office shall be paid within the estimated budget of
expenses for one month; provided, however, that the expenses to be paid in foreigncountries or in the area where proper transportation and/or communication is not
available, or incurred by an office whose place of payment is not fixed, may be paid
within the budget of expenses for three months.
2. The extraordinary expenses incurred from time to time shall be paid in instalments as
many as possible, to the extent of not affecting normal business and on the basis of
the expenditure plan reflecting the fund required for such expenses.
Article 7 (Payment in Advance)
(1) The President of an Invested Institution may pay in advance freight, chartreuse, travelling
expenses, considerations for a construction, manufacturing or service contract, etc., that may likelyadversely affect the Invested Institution's ordinary activities or business considering its nature, if not
paid in advance.
(2) The scope of expenses to be paid in advance pursuant to the provisions of subsection (1)
above shall be as follows:
1. Payment for the machinery, books, samples, or testing materials purchased directly
from foreign countries;
2. Payment for periodicals;
3. Rental of land/buildings or chartreuse;4. Freight;
5. Wages and salaries to be paid to those who will be transferred or going on business
trip, participating in an emergency drill or manoeuvre, or going on leave on the date
of record for wages and salaries;
6. Expenses to be paid to the state, a local government or other Invested Institution;
7. Expenses to be paid to those who are engaged in research or survey in foreign
countries;
8. Wages and salaries to be paid to those working in the area where proper
transportation is not available or the crew of vessels, or wages and salaries to be
credited to financial institutions for the purpose of payment thereof through the
savings accounts in financial institutions;
9. Expenses required to entrust certain activities, etc.;10. Subsidies or contributions;
11. Honorariums;
12. Consideration of or compensation for, or transfer cost of the land or objects on it
purchased or expropriated by the Invested Institution;
13. Any amount not exceeding 70/100 of the contract price under a construction or
manufacturing contract with its contract price of W30 million or more, or a service
contract with its contract price of W5 million or more;  or
14. Expenses to be paid in Korea to a foreign nationals invited by the Invested Institution.
(3) The wages and salaries to be credited to financial institutions for the purpose of payment
thereof through the savings accounts in financial institutions pursuant to the provision of item 8,
subsection (2) above may be so credited within three days prior to the date of record.GPA/W/286
Page 68
(4) In paying in advance the expenses under item 13 of subsection (2) above, such expenses shall
be paid within 14 days from the date of request for payment from the other party of relevant contract
after execution thereof; provided, however, that the foregoing provision shall not apply, if the party
liable to pay such expenses has been prevented from payment thereof inevitably and when the said
party has notified the other party thereof in writing.
Article 8 (Payment by Estimation)
(1) The president of an Invested Institution may pay by estimation freight, charterage, travelling
expenses, considerations for a construction, manufacturing or service contract, etc., that may likely
adversely affect the Invested Institution's ordinary activities or business considering its nature, if not
so paid.
(2) The scope of expenses to be paid by estimation pursuant to the provisions of subsection (1)
above shall be as follows:
1. Travelling expenses, business promotion expenses or office operation expenses;
2. Expenses to be paid to the state;
3. Subsidies or contributions;
4. Medical care expenses to be paid pursuant to the provisions of Industrial Accident
Compensation Insurance Act;  and
5. Expenses required for disaster rehabilitation and relief activities.
Article 9 (Accounting for Claims as Bad Debt Expenses)
(1) If anyone of the following events occur, th e President of the Invested Institution concerned
shall account for the claims affected thereby as bad debt expenses, even before conclusion of relevantextinctive prescription:
1. When a corporate entity (debtor) is dissolved or has suspended its business and
deemed unlikely to resume its business and the sum of expenses required for
enforcement and other priority claims to be reimbursed out of the expected revenue
from such enforcement exceeds the value of the properties available for attachment;
2. When claims against a corporate entity (debtor) are concluded to be non-collectable,
as the reorganization plan concerning such claims has been approved pursuant to the
provisions of Corporation Reorganization Act;
3. When a debtor is dead and if the sum of expenses required for enforcement and other
priority claims to be reimbursed out of the expected revenue from such enforcement
exceeds the value of inherited properties;  and
4. When the estimated expenses required for collecting certain claims exceed the value
thereof.
(2) If there exists a third parties other than the de btor, such as a joint debtor or guarantor, who is
obliged to perform such obligations, the provisions of items 1 through 3 of subsection (1) above shall
not apply.GPA/W/286
Page 69
Article 10 (Accumulation of Allowance for Bad Debts)
The President of an Invested Institution shall accumulate allowance for bad debts on accounts
receivable, notes receivable, other receivables, accrued income and claims similar thereto, long-term
trade receivables.  In such case, the amount of claims against the state, a local government or otherInvested Institutions, if any, shall be excluded from the subject on which the estimated bad debt losses
are to be calculated.
Article 11 (Scope of Procurement Contract by an Invested Institution based on
International Tender)
(1) The procurement contract entered into by an Invested Institution shall be through an
international tender, if the contract price is same as or higher than the amount specified and notified
by the Minister in accordance with the Agreement on Government Procurement executed in
Marrakesh, Morocco on 15 April 1994 (hereinafter referred to as "Agreement on Government
Procurement") and other international regulations based thereon.  Notwithstanding the foregoing
provisions, any procurement contract falling into anyone of the category as described below shall beexcluded from the subject of an international tender:
1. Procurement of the goods and services for resale or required for the manufacture of
products for sale;
2. Manufacture and/or purchase of products of small and medium enterprises pursuant
to the provisions of the Act on Promotion of Small & Medium Enterprises and
Encouragement of Purchase of Their Products;
3. Purchase of agricultural, fishery or livestock products pursuant to the provisions of
Grain Management Act, Act on Distribution and Price Stabilization of Agricultural,
Fishery Products and Livestock Industry Act;
4. Purchase by Korea Electric Power Corporation of certain heavy electric products (HS
8504, 8535, 8537 and 8544) pursuant to the provisions of Korea Electric Power
Corporation Act;  or
5. A procurement contract entered into, as a private free contract, pursuant to the
provisions of Article 15 hereof.
(2) If a procurement contract is entered into through an international tender, the matters not
provided for in these Regulations concerning the method and procedures of executing such contract
shall be in compliance, mutatis mutandis,  with the Provisions of Special Cases of the Enforcement
Decree of the Act on Contracts for the specifically designated procurement to which the State is a
party and the Rules of Special Cases of the Detailed Enforcement Regulations of the aforesaid act.
(3) The matters to be announced in course of such an international tender shall be announced
publicly by posting them in the publications as set forth in the Agreement on Government
Procurement.
(4) The president of an Invested Institution or the person taking charge of the contract-related
affairs by mandate or entrustment pursuant to the provisions of Article 14 hereof (hereinafter referred
to as "Contracting Officer") may procure through an international tender an item not falling within the
subject of an international tender under subsection (1) above, if it is deemed necessary to do so, taking
into account the purpose and nature of relevant contract.GPA/W/286
Page 70
Article 12 (Principles of Entering into a Contract)
(1) The contract to be entered into an Invested Institution shall be based on mutual agreement
between the parties thereto, as independent and equal contractors, and each party shall perform such
contract in good faith.
(2) In entering into a contract, the President or Contracting Officer of the Invested Institution
concerned shall ensure that such contract will not contain any of special terms or conditions that may
unreasonably limit the other party's contractual interests under these Regulations or applicable laws
and ordinances.
Article 13 (Method of Entering into a Contract)
(1) When entering into a contract, the President or Contracting Officer of the Invested Institution
concerned shall publicly notify the details of the proposed tender and then put the tender in public
competition;  provided, however, that such a contract may be entered into through a competitive
bidding by qualified or designated bidders or as a private free contract, if it is deemed necessary,
taking into account its purpose, nature and scope.
(2) If such a contract falls within anyone of the following category, the provisions of
subsection (2) above may not apply, if:
1. If an Invested Institution participates in the competitive bidding or public sale;
2. If a transaction involving securities is executed in the manner as stipulated in
Securities Exchange Act;  or
3. If, in case of a contract for purchase or lease of real estate, there exists a specific
circumstance preventing a competitive bidding.
Article 14 (Mandate & Entrustment of Contract-related Matters)
(1) The President of an Invested Institution may mandate contract-related affairs to one of its
employees, or entrust the same to an agency of the state or an agency of a local government, or the
president or one of the employees of other Invested Institution (including Korea Asset Management
Corporation established  pursuant to the provisions of Article 6 of the Act on Efficient Disposal of
Financial Institutions' Non-performing Assets of Financial Institutions and the Establishment of
Korean Asset Management Corporation, in the case of selling non-business real estate).
(2) In the event of entrusting contract-related affa irs pursuant to the provisions of subsection (1)
above, the conditions and fees of such entrustment  and other necessary matters related thereto shallbe clearly prescribed.
Article 15 (Private Free Contract)
The President or Contracting Officer of an Inve sted Institution may enter into a contract, as a
private free contract, if:
1. The contract is entered into with the state, a local government or other Invested
Institution;  or
2. The Invested Institution enters into the contract falling within the category as
described below, with one of its subsidiaries (a " Subsidiary " means a corporation,
the 50/100 or more whose outstanding shares or equity interests is held by the
Invested Institution, and this definition shall apply to these regulations hereafter) or
affiliated companies (a " Affiliated Company " means a corporation the sum of theGPA/W/286
Page 71
shares or equity interests is held by the Invested Institution, other Invested Institutions
or Korea Development Bank is 50/100 or more and this definition shall apply to these
Regulations hereafter:
a. If the Invested Institution concerned entrusts its activities to a third party or 
has a third party perform its activities on its behalf, in compliance with the 
government’s policy for management innovation;
b. If it is required to do so for the purpose of maintaining the installations and 
equipment owned by the Invested Institution concerned or the installations of 
Type I under subsection 2 of Article 2 of the Special Act on the Safety 
Control of Installations;
c. If it is required to do so for the purpose of protection and promotion of the 
specific technologies recognized by the minister concerned;
d. If the minister concerned deem indispensible, in the course of restructuring 
the Invested Institution's Subsidiaries or Affiliated Companies for their 
management innovation;
3. If the office located abroad purchases from a local source supplies for its own use;
4. If the contract is required to be entered into on a confidential basis;
5. If, in order to promote localization, the President of an Invested Institution
manufactures or purchases the product he/she has selected as the item for
development, within 2 years after the manufacturer has completed the development;
6. In addition to the contract described in items 1 through 5 above, if the purpose or
nature of relevant contract requires it to be executed as a private free contract, or such
is allowed under subsection (1) of Article 26 of the Enforcement Decree of the Act on
Contracts to which the State is a party.
Article 16 (Competition by Designated Bidders)
The President or Contracting Officer of an Invested Institution may enter into a contract
through a competitive bidding by designated bidders, if the contract falls within the category as
described in subsection (1) of Article 23 of the Enforcement Decree of the Act on Contracts to which
the State is a party and also in Article 15 of these Regulations.
Article 17 (Incidental Tender)
(1) In putting in tender a construction work specified in subsection (2) of Article 23 of the
Enforcement Decree of the Act on Contracts to which the State is a party, the President or ContractingOfficer of the Invested Institution shall ensure that bidders will describe mention of their bidding price
the details of the proposed subcontracts, including the portion of the work to be subcontracted,
subcontract price, subcontractors; provided, however, that the foregoing shall not apply, if the contract
falls within the category as enumerated in the provision of subsection (1) of Article 19 of the
Enforcement Decree of the Act on Contracts to which the State is a party.
(2) In mentioning the details of such subcontracts pursuant to the provisions of subsection (1)
above, such details of a long-term construction work shall be stated on the basis of the total bidding
price for the whole work; provided, however, that they may be stated on the basis of the bidding priceGPA/W/286
Page 72
for the portion of the work to be implemented in th e first year, if it is deemed necessary considering
the duration of such construction.
(3) The necessary matters concerning the procedures of the incidental tender under subsection (2)
above shall be provided for separately by the President of the Invested Institution concerned.
Article 18 (Exemption from Bid Bond, etc.)
(1) The President or Contracting Officer of an Invested Institution may allow exemption from the
bid bond, if:
1. A Subsidiary of the Invested Institution participates in the tender;
2. An Affiliated Company of the Invested Institution participates in the tender;  and
3. Any person who is exempted from the bid bond in whole or in part pursuant to the
provisions of subsection (3) of Article 37 of the Enforcement Decree of the Act on
Contracts to which the State is a party participates in the tender.
(2) The provisions of subsection (1) above shall also apply, mutatis mutandis,  to the exemption
from performance bond.
Article 19 (Interests on Bid Bond, etc.)
The President of an Invested Institution shall pay the interest on the amount of the bonds
deposited in cash by bidders participating in the tender and/or the other parties of the contract to
which the said Invested Institution is a party, including bid bonds, performance bonds, maintenance
bonds etc., as calculated by applying the interest rate applicable to deposits as stipulated by the
Minister pursuant to the provisions of Article 16 of Government Deposit Management Regulations;provided, however, that the foregoing shall not apply to any of the aforementioned bonds that is
returned within 10 days from the date of deposit thereof.
Article 20 (Establishment of Standards for Screening Eligibility)
In connection with reviewing bidders' capability to perform the relevant contract, the
President of the Invested Institution concerned may establish detailed standards for screeningeligibility of the participants in the tender in acc ordance with the standards for screening eligibility
stipulated by the Minister pursuant to the provisions of subsection (2), Article 42 of the Enforcement
Decree of the Act on Contracts to which the State is a party.  Notwithstanding the foregoing, the
President of the Invested Institution concerned may establish a standard for screening eligibility,
separately from those standards referred to in this Article, if it is deemed necessary taking intoaccount the characteristics of the applicable construction work or goods for which the contract is
entered into.
Article 21 (Payment of Consideration prior to Inspection)
The President or Contracting Officer of an Invested Institution may pay the consideration of a
contract prior to inspection, if it is deemed inevitable as described below:
1. The other party of the contract is the State, a local government or other Invested
Institution;
2. The other party of the contract is a Subsidiary of the Invested Institution;
3. The other party of the contract is an Affiliated Company of the Invested Institution;
4. It is recognized that there exists an inevitable circumstance requiring so, such as
international practices, etc.GPA/W/286
Page 73
Article 22 (Receipt of Consideration)
(1) In the case of the contract  constituting a source of revenue such as the sale or loan of assets,
provision of services or otherwise, the President or Contracting Officer of the Invested Institutionconcerned shall ensure that the other parties of the contract will deposit the consideration thereof in
advance, except where:
1. The other party of the contract is the State, a local government or other Invested
Institution;
2. The other party of the contract is a Subsidiary of the Invested Institution;
3. The other party of the contract is an Affiliated Company of the Invested Institution;4. The other party of the contract has submitted a letter of guarantee issued by a bank or
a performance guarantee insurance policy in an amount equal to or more than the sum
of consideration thereof plus the compensation for the actual cost and expenses
incurred;  or
5. An export contract has been executed on deferred payment basis or on the basis of
payment by remittance after export.
(2) With respect to the contract for sale of assets, the President of the Invested Institution may
allow the purchaser thereof to pay for such assets in instalments over the period not exceeding 5 years
after execution of the contract, together with the interests thereon calculated at the rate equal to theinterest rate applicable to loans from general resources that are offered by financial institutions, if:
1. The other party of the contract is the State, a local government or other Invested
Institution, purchasing the said asset for public use;  or
2. It is deemed impossible to enter into the contract on the terms of payment requiring
the consideration thereof to be deposited in advance, or it is deemed considerably
more profitable to the said Invested Institution concerned to allow the other party to
make payment in instalments.
(3) The President or Contracting Officer of the Invested Institution concerned may not apply the
main text of subsection (1) above and the provisions of subsection (2) above to the merchandises
(being the real estate) among inventories.
(4) When the other party of the contract constituting a source of revenue has delayed payment in
advance of the consideration thereof and if the contract is not cancelled or terminated by the Invested
Institution, the Invested Institution shall ensure that the other party will pay the consideration thereof,
together with the interests thereon, as calculated by applying the default interest rate applicable toloans from general resources that are offered by financial institutions.
Article 23 (Limitation of Unfaithful Bidders' Qualifications for Participating in Tender)
(1) The President of an Invested Institution shall re strict the qualifications for participating in the
tender for the period more than one month but not longer than 2 years, for the other party of a contract
or a bidder participating in the tender (including the representative, manager or other servant of the
aforesaid other party or bidder) that is likely to affect a fair execution of competition or due
performance of the contract, or deemed not appropriate to participate in the tender, and further that
falls within the category described below:
1. The person who has been unfaithful, rude or unreasonable in performing a contract or
committed unjust acts;GPA/W/286
Page 74
2. The person who has subcontracted in violation of the provisions limiting subcontracts
under the Framework Act on the Construction Industry, Electrical Construction
Business Act, Information and Communication Work Business Act or other laws or
ordinances (excluding violation of the obligation to give notice of subcontracts) and
who has subcontracted without the approval of the Invested Institution concerned or
modified the conditions of subcontract already approved by the Invested Institution
concerned;
3. The person who has violated the Monopoly Regulation and Fair Trade Act and Fair
Transactions in Subcontracting Act and whose qualifications for participating in the
tender Fair Trade Commission has requested to be restricted;
4. The person who, in the case of a contract for research design services or cost
calculation services, has failed to properly calculate the estimated amount for
research design or the estimated cost by wilful acts or gross negligence;
5. The person who, in the case of construction work or manufacturing products, has
caused harm to the public by neglecting to take necessary safety measures or caused
critical injury, including death, to employees in the workplace by neglecting to take
necessary safety or health measures under the Industrial Safety and Health Act;
6. The person who has not entered into or performed the contract (including the matters
concerning incidental tenders under Article 17 hereof and the matters concerning
joint contracts under Article 72 of the Enforcement Decree of the Act on Contracts to
which the State is a party), without justification;
7. The person who, in a competitive bidding, has pre-concerted bidding prices by
agreement among bidders or colluded to have a specific person become the successful
bidder.  The person who has counterfeited or forged, or used in an unjust manner any
of the documents related to the tender or contract, or submitted false documents;
8. The person who has wilfully submitted an invalid tender;9. The person who has bribed officer(s) or employee(s) of the Invested Institution, in
relation to the bidding, being awarded the contract, or execution or performance of
the contract;
10. The person who has submitted an application for or a letter of consent to participation
in the tender but has not participated in the tender thrice or more in the then currentfiscal year;
11. The person who has prevented others from participating in the tender or interfered
with the successful bidder’s executing or performing the contract;
12. The person who, during supervision or inspection, has interfered with performance of
such activities;  or
13. The person who has failed to submit the docume nts, in whole or in part, as needed for
reviewing bidders' capability to perform relevant contract without justification;
(2) In the case of a joint contract by a group of bidders, the provisions of subsection (1) above
shall apply to the person who has directly caused the restriction of the group’s qualifications for
participating in the tender.GPA/W/286
Page 75
(3) If the person whose qualifications for participatin g in the tender is restricted is a corporation
or other entity, the provisions of subsection (1) abov e shall also apply to its representative; in the case
of Korea Federation of Small Business, the aforesaid provisions shall also apply to its member who
has directly caused the restriction of its qualification. Notwithstanding the foregoing provisions, theprovisions of subsection (1) above shall not apply to other representative(s) of the aforesaid
corporation or other entity who has not dealt with the affairs related to the said tender or contract, if
there are more than one representative in the abovementioned corporation or other entity.
(4) If a corporation or other entity has appointed as representative a person whose qualifications
for participating in the tender is restricted and the said representative is involved with the tender, then
the provisions of subsection (1) above shall also apply to the representative.
(5) When placing restriction on qualifications for participating in the tender, the President of the
Invested Institution shall clearly specify the inform ation mentioned in each item below and notify the
same to the head of each office of the central government, mayor of Seoul Metropolitan Government,
mayor of each of provincial cities, provincial governors and president of each Invested Institution andshall also post the same on the official gazette:
1. Company name (trade name), address, name (representative's name, if a corporation),
resident registration number (representative's resident registration number, if a
corporation), corporate registration number (only in the case of a corporation),business registration number and license or registration number under applicable laws
and ordinances;
2. Duration of restriction placed on qualifications for participating in the tender;  and
3. Cause of restriction placed on qualifications for participating in the tender.
(6) If the President of an Invested Institution has been informed of the fact that a person's
qualifications for participating in the tender is restricted pursuant to the provisions of subsection (5)
above or such fact has been posted in the official gazette, the president of the Invested Institution shall
ensure that the person whose qualifications are so restricted can not participate in any tender invited
by the said Invested Institution during the duration of such restriction placed.
(7) The President of an Invested Institution shall verify the respective bidders' resident
registration number (representative's resident registration number, if a corporation), corporate
registration number (only in the case of a corporation), business registration number and license or
registration number under applicable laws and ordinances, in order to prevent any person with such
restricted qualifications from participating in the tender during the duration of such restriction placed,
by changing trade name and/or replacing the representative.
(8) Unless circumstances require, the President or Contracting Officer of an Invested Institution
shall not enter into any private free contract with a person whose qualifications for participating in the
tender are restricted (including a person whose qualifications are restricted by other Invested
Institutions).
(9) A person whose qualifications for participating in the tender are restricted may apply to the
President of the Invested Institution concerned for cancellation or alteration of such restriction, if the
person has any objection to such restriction placed.
(10) If the President of an Invested Institution ma y also prohibit from participating in any tender a
person whose restricted qualifications for participa ting in the tender have been notified or posted on
the official gazette under the Act on Contracts to which the State is a party and Local Finance Act;
provided, however, that measures shall be taken by all means to ensure that a person whoseGPA/W/286
Page 76
qualifications for participating in the tender due to the reason as referred to in items 1 through 5,
item 7 and item 8, can not participate in any tender invited by the said Invested Institution at all.
(11) The provisions of subsection (5) above shall apply, mutatis mutandis , where, as a result of
reviewing the objection raised under subsection (9) above, the decision on the restriction placed onthe qualifications for participating in the tender is cancelled or the duration of such restriction placed
is altered.
Article 24 (Procedures for Hearing and Review)
(1) When intending to place restriction on any pers on's qualifications for participating in the
tender pursuant to the provisions of subsection (1) of Article 23 hereof, the president of the InvestedInstitution concerned shall allow the said person or his/her representative an opportunity to represent
his/her opinion in advance and shall hear the opinion from the interested parties, if it is deemed
necessary; provided, however, that the foregoing provisions shall not apply where the subject of such
intended restriction or its representative has not responded thereto, without justification, or such an
opportunity to represent such opinion cannot be allowed due to the person’s whereabouts unknown.
(2) If intending to hear such opinion pursuant to the provisions of subsection (1) above, the
President of the Invested Institution concerned shall give notice to the persons or his/her
representative in writing of the time, date and place of such hearing, together with the reason for such
hearing.
(3) The persons or his/her representative who has been notified of such hearing under
subsection (2) above may be present at such time on such date as designated and represent his/her
opinion, or submit a written statement.
(4) The notice to be given under subsection (2) above shall clearly state that any failure to
respond to such notice without justification shall constitute a waiver of the opportunity to represent
such opinion.
(5) If the subject of the intended restriction represents its opinion pursuant to the provisions of
subsection (3) above, the person in charge of such affairs in the Invested Institution shall keep the
record of the opinion so represented in writing and have the person present verify and sign the same.
Article 25 (Administrative Protest)
(1) The person (for the purpose of this Article, hereinafter referred to as "Protester") who has
suffered any unfavourable treatment from the President or Contracting Officer of an InvestedInstitution, due to the matters as described below, in the course of a procurement contract through an
international tender may lodge a protest with the President of the Invested Institution concerned,
requesting cancellation or correction of such treatment:
1. Matters related to the scope of the procurement contract to be entered into by the
Invested Institution through an international tender;
2. Matters related to qualifications for participating in the tender;
3. Matters related to the tender announcement;
4. Matters related to selecting the successful bidder.
(2) The Protester under subsection (1) above shall lodge a protest with the President of the
Invested Institution concerned, within 15 days from the date when the action constituting the cause of
such administrative protest has occurred or within 10 days after the Protester becomes aware of such
action.GPA/W/286
Page 77
(3) Within 10 days after receipt of such protest as mentioned in subsection (1) above, the
President of the Invested Institution concerned shall examine it and notify the Protester of the result
thereof.
(4) The person having an objection to the result under subsection (3) above may file a petition for
review (hereinafter referred to as "Petition for Review") with the Commission on Mediation of
Disputes over the  International Contracts by a Government-invested Institutions, within 15 days from
the date of receipt of such notice.
Article 26 (Commission on Mediation of Disputes over the International Contract by a
Government-invested Institutions)
(1) The Commission on Mediation of Disputes over  the International Contract by a Government-
invested Institution (hereinafter referred to as "Commission") shall be established, within the Ministry
of Finance and Economy, for the purpose of reviewing and mediating Petitions for Review.
(2) The Commission shall have the right to review the Petition for Review filed with it, through
an administrative protest, by the person having suffered any unfavourable treatment due to the matters
as described in subsection (1) of Article 25 hereof, in the course of a procurement contract to be
entered into by an Invested Institution through an international tender conducted pursuant to the
provisions of the Agreement on Government Procurement and a bilateral agreement by anyorganization other than an Invested Institution among those listed in Schedule 3, Appendix I of the
Agreement on Government Procurement.
Article 27 (Composition of Commission)
(1) The Commission shall consist of not more than 15 members, including the chairman.
(2) The Deputy Minister of Finance and Economy shall be chairman and other members of the
Commission shall be appointed as follows;
1. The persons nominated by the head of the respective organization concerned among
the public servants of Level 2 or 3 recognized as candidates for the Commissionmember by the Ministries of Finance and Economy, Defense, Government
Administration and Home Affairs, Commer ce, Industry and Energy, Information and
Communication, and Construction and Transportation, Public Procurement Office
and the Minister;
2. The persons commissioned by the Mini ster to be a Commission member, among
those satisfying the following requirements:
a. Having been in office as associate professor or higher level specialized in 
law, finance, foreign trade or accounting at a college under relevant Education Act for a period of 5 years or more;
b. Having the lawyer's license and the experience of being engaged in legal 
services for a period of 10 years or more;  or
c. Having sufficient knowledge of and experience in the government’s 
accounting and procurement activities.GPA/W/286
Page 78
(3) The term of office of a Commission member who is not a public servant shall be 2 years and
such a member may be reappointed, provided that the term of office of a member appointed to fill a
vacancy shall be the remainder of the term of office of his/her predecessor.
(4) A Commission member who is not a public servant shall not be discharged from the
Commission membership against his/her own will, unless sentenced to imprisonment or heavier
punishment or unable to fulfil the duty as a Co mmission member due to psychosomatic breakdown
continuing for a long period.
Article 28 (The Role of Commission)
Upon receipt of a Petition for Review, the Commission shall notify the Invested Institution
concerned thereof and shall review and mediate the subject of such Petition for Review.
Article 29 (Suspension of Contracting Procedures)
(1) The Commission has the right to direct the Invested Institution concerned to suspend the
applicable procedures for the tender at issue or stop executing the contract at issue until completion of
mediation concerning the Petition for Review, when it is deems necessary, taking into account the
opinion of the president of the Invested Institution concerned.  In such a case, the aforementioned
suspension or stopping shall be directed in writing by the Commission within 7 days after receipt of
the opinion under Article 32 hereof, unless circumstances require otherwise.
(2) In the event that, in accordance with the terms of the Agreement on Government
Procurement, the Commission elects not to direct suspension of the procedures for the tender to be
suspended or execution of the contract under subsection (1) above since it may be likely to adversely
affect the public interest or the interest of parties concerned  the Commission shall notify the Protesterand the Invested Institution concerned in reason in writing.
Article 30 (Chairman's Responsibilities)
(1) The Chairman shall be responsible for overall management of the Commission’s activities
and represent the Commission.
(2) If the Chairman is unable to perform his/her duties as chairman due to a cause beyond his/her
reasonable control, the member nominated by the Minister shall act on his/her behalf.
Article 31 (The Commission's Meeting)
(1) The Commission's meeting shall be convened by the Chairman.
(2) A quorum for holding the Commission’s meeting shall be the majority of all members in
office.  All resolutions of the Commission shall be ad opted by the affirmative vote of a majority of the
members present at a meeting at which a quorum is present.
(3) The Commission shall appoint an executive secretary to deal with the affairs of the
Commission.GPA/W/286
Page 79
Article 32 (Review)
(1) Upon receipt of the notice as to the content of the Petition for Review under the provisions of
Article 28 hereof, the president of the Invested Institution concerned shall submit to the Commission
in writing his/her opinion about such Petition for Review within 14 days from the date of receipt ofthe notice mentioned above.
(2) If it is deemed necessary, the Commission may request the Protester, the President of the
Invested Institution concerned to submit to the Commission the necessary documents related to the
subject of such Petition for Review and also re quest appropriate professional organizations to
appraise, diagnose or test the same.
(3) Prior to completion of mediation as to the Petition for Review, the Commission shall allow
the Protester or his/her representative an opportunity to represent his/her opinion and may the
Protester, the President of the Invested Institution, witnesses, appropriate experts attend the
Commission’s meeting to hear their opinions.
Article 33 (Suspension of Mediation)
If a lawsuit concerning the matter that is identical to the subject of such Petition for Review as
filed with the Commission is under way in court, the Commission may suspend review and mediation
thereof, in which case the Commission shall notify  the Protester of the reason for such suspension.
Article 34 (Mediation)
(1) The Commission shall prepare a mediation statement based upon the result of having
reviewed the Petition for Review and notify the same to the Protester.
(2) If, in preparing the mediation statement as referred to in subsection (1) above, the
Commission is of an opinion that the Protester ha s suffered any unfavourable treatment due to the
matters as described in subsection (1) of Article 25 hereof, the Commission shall include in such
mediation statement necessary measures for cancelling or correcting such actions of the President or
Contracting Officer of the Invested Institution concerned, or damages or indemnities for loss resulting
therefrom.
(3) The damages or indemnities for loss under subsection (2) above may be limited to the
expenses incurred in the course of preparing for the tender and filing a Petition for Review.
Article 35 (Allowances)
The Commission may pay allowances, within the budget, to the Commission members and
appropriate experts present at the Commission's meetings.
Article 36 (Related Expenses)
The expenses incurred in relation to the review and mediation of a Petition for Review shall
be borne by the Protester, unless otherwise agreed by the parties to such petition.
Article 37 (Detailed Enforcement Regulations)
(1) The necessary matters concerning enforcement of these Regulations shall be prescribed and
notified by the Minister.GPA/W/286
Page 80
(2) The President of an Invested Institution may set forth the necessary  detailed matters
concerning enforcement of these Regulations, within the limit of the notification by the Minister
under subsection (1) above.
ADDENDA <No. 107, dated 21 October 1999>
(1) (Effective Date) These Regulations shall come into effect on the date of promulgation hereof.(2) (Validity) The provisions of Article 17 hereof shall remain valid until 31 December 2000.(3) (Exception in Applying Payment of Interests on Bid Bond, etc.) The provisions of Article 19
hereof shall not apply to any bid bond received on or before 6 July 1995.
(4) (Transitional Measure concerning the Actions done in compliance with previous
Notifications) All the activities done in accordance with the notification prescribed by the Minister
pursuant to the provisions of subsection (3), Article 20 of the previous Framework Act on the
Management of Government-invested Institutions  (meaning Legislation No. 5812 "Framework Act on
the Management of Government-invested Institutions" before revised by an amendment thereto.) shall
be deemed to have been done in compliance with these Regulations.
__________