RESTRICTED  ORGANIZACIÓN MUNDIAL  
DEL COMERCIO  GPA/W/286 
28 de noviembre de 2003 
 (03-6339) 
Comité de Contratación Pública Original:   inglés 
  
 
RESPUESTAS A LAS PREGUNTAS FORMULADAS POR LAS COMUNIDADES 
EUROPEAS (GPA/W/281) EN R ELACIÓN CON LA NOTIFICACIÓN 
REALIZADA POR COREA (GPA /W/250) DE CONFORMIDAD 
CON EL PÁRRAFO 6 DEL ARTÍCULO XXIV  
Comunicación de la República de Corea
 
 La presente comunicación, de fecha 24 de novi embre de 2003, se distribuye a petición de la 
delegación de la República de Corea. 
_______________ 
 A continuación figuran las respuestas de Corea a las preguntas formuladas por las 
Comunidades Europeas (GPA/W/281) en relación con la notificación de Corea al Comité de 
Contratación Pública sobre la retirada de Korea Tobacco & Ginseng Corporation (KT&G) y Daehan 
Printing and Publishing Co. Ltd. (Daehan) de l Anexo 3 del Apéndice I del Acuerdo sobre 
Contratación Pública (GPA/W/250). 
KT&G 
1. Sírvanse indicar en qué medida el Gobierno de Corea u otras entidades públicas o empresas 
de propiedad pública co reanas pueden influir, de jure o de facto , en el nombramiento de los 
directores de KT&G. 
 El Gobierno de Corea no influye, de jure  o de facto , en el nombramiento de los directores 
de KT&G. 
 Como ya señaló en su notificación (GPA/W/250), el Gobierno de Corea vendió toda su 
participación en el capital social de Korea Toba cco & Ginseng Cooperation (en adelante, "KT&G") 
en octubre de 2002, y desde entonces KT&G es un a empresa privada.  La Ley de Buena Gestión 
Empresarial y Privatización de Empresas Públicas (en adelante, "Ley de Privatización") que se adjunta a la notificación (GPA/W/270) indica cl aramente la condición jurídica de KT&G.  
El artículo 3 de la Ley de Privatización esti pula que la empresa KT&G ya no se considera una 
institución pública.  En consecuen cia, KT&G es ahora una empresa privada de conformidad con la 
legislación mercantil de Corea, y el Gobierno de Corea carece de instrumentos para ejercer influencia 
o control en el nombramiento de los directores de KT&G. 
 Además, la escritura de constitución de KT&G  (apéndice A) dispone que el Presidente y los 
directores ejecutivos de KT&G serán nombrados en la asamblea de accionistas por los accionistas con derecho a voto presentes en la reunión de conformi dad con lo dispuesto en los artículos 20 y 26. 
 Para facilitar la consulta, se adjunta a la pr esente comunicación la escritura de constitución 
de KT&G (apéndice A). GPA/W/286 
Página 2  
 
 2. Sírvanse describir toda financiación, con inclus ión de donaciones, garantías y préstamos, 
que KT&G pueda haber obtenido del Gobierno de Corea o de otra s entidades públicas o empresas de 
propiedad pública coreanas. 
 Como se ha indicado supra  en la respuesta a la pregunta 1, KT&G es una empresa privada 
como cualquier otra.  Por lo tanto, no recibe ningún privilegio financiero del Gobierno de Corea ni de 
otras entidades públicas o empresas de propiedad pública coreanas. 
3. Sírvanse indicar en qué medida el Gobierno de Corea u otras entidades públicas o empresas 
de propiedad pública co reanas pueden influir, de jure o de facto , en las decisiones de la dirección 
de KT&G.  
 Ni el Gobierno de Corea ni otras entidades públicas o empresas de propiedad pública 
coreanas influyen, de jure  o de facto , en las decisiones de la dirección de KT&G.  El Consejo de 
Administración resuelve cuestiones importantes relacionadas con las operaciones de KT&G y el Presidente y los directores gestionan el funcionamiento global de la empresa. 
 Así se dispone en los artículos 28 y 34 de la escritura de constitución de KT&G (apéndice A). 
4. Sírvanse describir las principales características de las leyes, reglamentos y medidas 
aplicables específicamente a las emp resas fabricantes de tabaco. 
 A fin de lograr el desarrollo estable de la i ndustria tabacalera, la Le y de la Industria del 
Tabaco y el Decreto Presidencial correspondiente se aplican  especialmente a las empresas fabricantes 
de tabaco, con inclusión de KT&G, Phillip Morris (en adelante, "PM") y British American Tobacco 
(en adelante, "BAT").  Estos instrumentos lega les rigen cuestiones relativas a la producción y 
distribución de tabaco, tales como la concesión e invalidación de licencias, el registro y algunas 
disposiciones penales y relativ as a la imposición de multas. 
 Para facilitar la consulta, se adjuntan a la pr esente comunicación la Ley de la Industria del 
Tabaco (apéndice B) y el Decreto Pr esidencial correspondiente (apéndice C). 
5. Sírvanse facilitar el texto completo del artícul o 25 de la Ley de la Industria del Tabaco y de 
todas las medidas que dan efecto a esa disposición,  y explicar qué tipo de asistencia podría hacer 
falta.  ¿Se ha recurrido alguna vez a esa disposición? En caso afirmativo, sírvanse describir cómo y 
en qué circunstancias. 
 El artículo 25 de la Ley de la Industria del Tabaco establece las obligaciones del fabricante de 
tabaco.  Los artículos 25 a 25-4 de la Ley prescr iben la "mención de palabras de advertencia y 
restricción de la publicidad relativa al tabaco (a rtículo 25)", la "indicación de los ingredientes del 
tabaco (artículo 25-2)", la "participación del fabricante, etc., en las actividades públicas 
(artículo 25-3)" y la "prohibición de suministrar fondos, etc., para promover las ventas de tabaco 
(artículo 25-4)". 
 Con respecto a la prescripción en materia de asi stencia aplicable a los fabricantes de tabaco, 
enunciada en la sección 3 del artículo 25 (Participaci ón del fabricante en las actividades públicas) de 
la Ley de la Industria del Tabaco, el fabricante  de tabaco está obligado a aportar 10 won por cada 
20 productos de tabaco.  Esta disposición está en vi gor desde el 1º de enero de 2002.  En un primer 
momento, tan sólo KT&G estaba sujeta a la Ley.  No obstante, la disposic ión también se aplica a BAT 
y PM respecto de sus productos de tabaco fabri cados en Corea desde noviembre de 2002 y diciembre 
de 2002, respectivamente, es decir, d esde su establecimi ento en Corea.  GPA/W/286 
 Página 3 
 
 
  El Gobierno de Corea ha establecido con éxito el "Fondo para la estabilidad de la producción 
de tabaco" con las contribuciones de los fabricantes de tabaco, para ayudar a los productores de tabaco 
a crear un sector agrícola autosuficiente. 
 Los datos que figuran a continuación son pr evisiones de los ingresos derivados de las 
contribuciones realizadas por KT&G, BAT y PM y los beneficios previstos del Fondo para la 
estabilidad de la producción de tabaco. 
INGRESOS DERIVADOS DE LAS CONTRIBUCIONES 
(Unidad:  100 millones de won) 
 2002 9.2003 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 
 
BENEFICIOS PREVISTOS DEL FONDO PARA LA ESTABILIDAD  
DE LA PRODUCCIÓN DE TABACO 
(Unidad:  100 millones de won) 
 2002 2003 2004 2005 2006 2007 2008 
Contribución del 
fundador 0,1       
Contribución de 
los fabricantes 330 370 370 360 360 350 277 
Contribución de 
KT&G      1.100  
Ingresos en 
concepto de 
intereses 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. Sírvanse describir las condiciones a que est á sujeta la obtención de una licencia para la 
fabricación de tabaco, los aranceles aduaneros aplic ables a las importaciones de cigarrillos y tabaco 
en rama y las cuotas de mercado de  todos los fabricantes de tabaco. 
 El Ministro de Finanzas y Economía podrá otor gar una licencia a las em presas fabricantes de 
tabaco en las siguientes condiciones: 
 1) capital social:  superior a 30.000 millones de won; GPA/W/286 
Página 4  
 
  2) normas relativas a las instalaciones:  cr ear instalaciones capaces de fabricar más de 
5.000 millones de productos de tabaco al año (sobre la base de una actividad diaria de 
16 horas), y equipadas con una cadena de producción que incluya desde la transformación de la materia prima a la fabricación de cigarrillos y el embalaje del producto, a condición de que  las instalaciones de transformación de la materia prima 
se instalen antes de que la producción alcance la cifra de 10.000 millones de 
productos al año; 
 3) personal técnico:  contar con un person al técnico especializado de no menos de cinco 
personas con experiencia no inferior a tres a ños en control de calidad y fabricación de 
tabaco;  y 
 4) investigación y desarrollo de la tecnol ogía de fabricación y control de calidad del 
tabaco para la protección de la salud públi ca:  poseer el equipo de pruebas capaz de 
analizar la función y calidad de los productos (equipo resistente a la temperatura y a la humedad, aparatos de medición de lo s componentes del producto, aparatos de 
medición de la tasa de evaporación, aparatos de medición de la resistencia a la 
succión), y proporcionar las normas y directrices relativas al control de calidad. 
 Las disposiciones pertinentes son los artículos 11 a 11-4 de la Ley de la  Industria del Tabaco 
y los artículos 2 a 4 del Decreto Presidencial correspondiente a dicha Ley. 
 El arancel aduanero que se aplica a la importación de cigarrillos es del 30 por ciento del 
precio CIF (pasará a ser del 40 por ciento a partir del 1º de julio de 2004). 
 El arancel aduanero que se aplica a la importación de tabaco en rama es del 20 por ciento del 
precio CIF. 
DESGLOSE DE LAS CUOTAS DE MERCADO DE LOS FABRICANTES DE TABACO 
(Enero a septiembre de 2003) 
 KT&G BAT PM JT Otras Total 
Cuota de mercado (%) 76,8 12,8 6,4 3,9 0,1 100 
 
Daehan 
7. Sírvanse indicar si el Gobierno de Corea  u otros organismos públicos o empresas de 
propiedad pública coreanos poseen o poseían acciones de Daehan.  En caso afirmativo, sírvanse 
facilitar detalles acerca de esas participaciones, incl uido el número de acciones y el derecho de voto 
vinculado a las mismas, e indicar cuándo se vendieron esas acciones a particulares. 
 No.  Ni el Gobierno de Corea ni otros orga nismos públicos o empresas de propiedad pública 
coreanos han poseído nunca acciones de Daehan Pr inting and Publishing Co. Ltd. (en adelante, 
"Daehan").  Daehan es una empresa totalmente  privada desde su establecimiento en 1948.  
A continuación se indican los accionistas de Daehan: 
ACCIONISTAS DE DAEHAN 
 Gobierno 
de Corea Entidad 
pública Accionistas 
nacionales Accionistas 
extranjeros Total 
Participación (%) 0 0 100 0 100 
  GPA/W/286 
 Página 5 
 
 
 INFORMACIÓN DETALLADA DE LOS ACCIONISTAS NACIONALES 
 Número de accionistas Número de acciones Participación (%) 
Accionistas 
particulares  479  2.637.438  61,40 
Fundaciones escolares 
privadas  43  184.920  4,30 
Fundaciones de becas  16  268.780  6,26 
Sociedades privadas  2  1.204.322  28,04 
Total  540  4.295.460  100,00 
 
8. Sírvanse indicar en qué medida el Gobierno de Corea u otras entidades públicas o empresas 
de propiedad pública co reanas pueden influir, de jure o de facto , en el nombramiento de los 
directores de Daehan.  
 Ni el Gobierno de Corea ni otras entidades públicas o empresas de propiedad pública 
coreanas influyen, de jure  o de facto , en el nombramiento de los directores de Daehan. 
 Los accionistas con derecho a voto nombran por mayoría a los directores de Daehan en la 
asamblea de accionistas. 
 Para facilitar la consulta, se reproduce a continuaci ón el texto de la disposición pertinente de 
la escritura de constitución de Daehan: 
"Artículo 32 (Nombramiento de los directores) 
1. Los directores de Daehan serán nombrados en la asamblea de accionistas. 
2. Los directores de Daehan serán nombrados por mayoría de votos de los accionistas, siempre 
que los votos correspondan a más de un cuarto de las acciones emitidas. 
Artículo 36 (Funciones de los directores) 
1. El Presidente de Daehan representará a la empresa y controlará su actividad general. 
2. El Vicepresidente y los otros directores ejecutivos ayudarán al Presidente. Artículo 38 (Organización y convocación del Consejo de Administración) 
1. El Consejo de Administración estará compuesto por el Presidente y los directores, y resolverá 
cuestiones importantes relacionadas con las operaciones de la empresa. 
2.3. <omitido>" 
9. Sírvanse describir toda financiación, con incl usión de donaciones, garantías y préstamos, 
que Daehan pueda haber obtenido del Gobierno de Co rea o de otras entidades públicas o empresas 
de propiedad pública coreanas. 
 Ninguno.  Daehan no ha recibido ningún trato fi nanciero preferencial del Gobierno de Corea 
ni de otras entidades públicas o empresas de propiedad pública coreanas. GPA/W/286 
Página 6  
 
 10. Sírvanse indicar en qué medida el Gobierno de Corea u otras entidades públicas o empresas 
de propiedad pública co reanas pueden influir,  de jure o de facto , en las decisiones de la dirección de 
Daehan.  
 No pueden.  Ni el Gobierno de Corea ni otras entidades públicas o empresas de propiedad 
pública coreanas influyen, de jure  o de facto , en las decisiones de la dirección de Daehan. 
11. Sírvanse describir el Reglamento especial de l Decreto de aplicación de la Ley de contratos 
del Estado (Decreto Presidencial 15187) y el Re glamento de contabilidad de las empresas públicas 
(Decreto del Ministro de Finanzas y Economía 107) y facilitar su texto.  Sírv anse indicar si existen 
otros instrumentos que sean aplicables a Daehan y no a otras empresas de imprenta o editoriales.  
 El objetivo del "Reglamento especial del Decr eto de aplicación de la Ley de contratos del 
Estado" (en adelante, "Reglamento especial") es regul ar las licitaciones internacionales previstas en el 
Acuerdo sobre Contratación Pública de la OMC que fue firmado en Marrakech el 15 de abril de 1994. 
 El Reglamento especial abarca cuestiones tales co mo la solicitud (artículo 3), el principio de 
la contratación (artículo 4), el método de contrataci ón (artículo 7), la calificación de los participantes 
(artículo 9) y otros métodos pertinentes de contrata ción y adquisición.  Se adjunta a la presente una 
copia del Reglamento especial (apéndice D). 
 El objetivo del "Reglamento de contabilid ad de las empresas públicas" (en adelante, 
"Reglamento de contabilidad") es regular las cuesti ones relativas a las normas y los procedimientos de 
contabilidad y contratación aplicables a las instituci ones participadas por el Estado, y la calificación 
de los licitadores para poder participar en la licit ación.  Se adjunta una copia del Reglamento de 
contabilidad (apéndice E). 
 Como se ha señalado supra  en la notificación (GPA/W/250), Daehan es una empresa privada.  
Por lo tanto, no se le aplica ningún privilegio particul ar de manera exclusiva del que queden excluidas 
otras empresas de imprenta o editoriales. 
12. Sírvanse indicar si los Reglamentos a que se hace referencia en la pregunta 11 son aplicables 
a la empresa National Textbook Ltd. 
 No.  El Reglamento especial y el Reglamento  de contabilidad no son aplicables a la empresa 
National Textbook Ltd., dado que ésta dejó de existir al fusionarse con Daehan en 1999. 
13. Sírvanse explicar por qué la adquisición de la empresa National Textbook Ltd. -que no está 
incluida en el Anexo 3 del Apéndice I- jus tifica la retirada de Daehan del citado Anexo.  
 La empresa National Textbook Ltd. había fi gurado en el Anexo 3 del Acuerdo sobre 
Contratación Pública de la OMC desde su fecha de entr ada en vigor hasta la inclusión de Daehan en el 
Anexo 3.  Como se indica en la respuesta a la  pregunta 12, la empresa National Textbook Ltd. se 
fusionó con Daehan en 1999 y en consecuencia, el G obierno de Corea modificó su lista del Anexo 3 
del ACP sustituyendo "the Nationa l Textbook Ltd." por "Daehan Printing and Publishing Co. Ltd." 
(GPA/W/128). 
14. Sírvanse especificar en qué mercados opera Dae han y, en su caso, sus filiales, e indicar en 
qué medida se han liberalizado esos mercados.  Sírvan se describir la estructura del mercado coreano 
de libros de texto.  
 Los mercados coreanos de libros de texto se dividen normalmente en tres categorías, que 
abarcan los programas de estudios de las escuelas primaria y secundaria.  GPA/W/286 
 Página 7 
 
 
  La primera categoría comprende los libros de te xto publicados por el Ministerio de Educación 
y Desarrollo de los Recursos Humanos (en adelante, "el Ministerio"), que se reserva sus derechos de 
autor.  La Comisión Deliberativa para la Publicación  de Libros de Texto de pendiente del Ministerio 
otorga cada tres o cinco años los derechos de autor de estos libros de texto a las empresas privadas de 
imprenta o editoriales seleccionadas sobre la base de una evaluación del rendimiento de sus 
capacidades de imprenta, encuadernación y publi cación.  Actualmente, las empresas seleccionadas 
son Daehan, Hyangwoo Industry Co., Doo-San Co ., Kyo-Hak Sa Co., Choong-Ang Education Co., 
Chi-Hak Sa Co. y Chun-Jae Education Co. 
 La segunda categoría abarca los libros de text o publicados por empresas privadas de imprenta 
o editoriales con la autorización del Ministerio para utilizarlos para el programa de estudios.  Este 
sistema está relacionado con el hecho de que el programa de estudios de las escuelas de Corea ha sido 
revisado periódicamente (aproximada mente cada cinco años).  En cada revisión, el Ministerio ha 
concedido a las empresas privadas de imprenta o ed itoriales la autorización para publicar los libros de 
texto para el programa de estudios.  En 2003, hay 84  empresas de imprenta o editoriales, entre las que 
figura Daehan, que publican libros de texto oficialmente autorizados. 
 La tercera y última categoría es la del merca do relacionado con los libros que el Ministerio 
acepta como libros de texto para el programa de  estudios aceptando la solicitud presentada por una 
escuela pertinente de utilizarlos en su programa de  estudios.  La facultad de seleccionar las empresas 
de imprenta o editoriales para los libros de texto ac eptados se delega, en la mayoría de los casos, en 
los servicios metropolitanos o provinciales de educación. 
DESGLOSE DEL MERCADO COREANO DE LIBROS DE TEXTO 
(Unidad:  millón) 
 2001 2002 2003 
 Volumen Participación 
(%) Volumen Participación 
(%) Volumen Participación 
(%) 
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 0,19  
Libros de 
texto 
publicados 
por el 
Gobierno 
Subtotal  100.219   119.059  61,61  128.479 55,42 
Libros de 
texto 
autorizados 
por el 
Gobierno Asociación 
coreana de 
libros de texto 
autorizados  69.470  40,94  74.186  38,39  103.336 44,58 
Total  169.689  100,00  193.245  100,00  231.815 100,00 
No se dispone de estadísticas relativas a los libros de texto aceptados. GPA/W/286 
Página 8  
 
 ATTACHMENT A
1 
 
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 1997 Amended: 9 October 1998 
Amended: 17 November 1998 
Amended: 2 September 1999 
Amended: 29 March 2000 
Amended: 27 December 2000 
Amended: 23 March 2001 Amended: 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" (hereinafter 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 (amended 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 
 Página 9 
 
 
 K. Activities concerning test, inspection or ex amination designated or entrusted by the 
Korean government;  and 
L. Research activity relating to the a bove items(amended on 27 December 2002). 
 
2. Furthermore, the Company may engage in investment, contribution, loan, support, or any 
other ancillary businesses necessary in e ngaging 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 su ch notices through the Korea Daily News due to any 
force majeure event, such notices shall be given by p ublication 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 Compan y 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 ma y 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, one 
thousand and ten thousand share(s) pe r 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 prescr ibed in the Korean laws. 
 
2. Dividend ratio of the preferred shares in Paragr aph 1 above shall not be less than nine per cent 
(9%) per annum of the par value of the shares as de termined by the Board of Directors at the time of 
issuance. 
 GPA/W/286 
Página 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 aggr egate amount of dividends for preferred shares, 
dividends may not be paid.  4. If dividends on preferred shares under Paragra ph 2 above are not paid, the preferred shares 
shall have voting rights for a period starting from th e general meeting of shareholders following the 
general meeting at which the resolution not to pay di vidends on preferred shares  is adopted to the end 
of the general meeting of sharehol ders 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 fo rth in Paragraph 2 above are not paid during such 
period, such duration shall be extended until the dist ribution of such dividends is completed.  With 
respect to dividends on the shares issued upon the conv ersion, Paragraph 4 of Ar ticle 8 of this Articles 
of Incorporation shall apply mutatis mutandis . 
  [This Article was newly es tablished 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 li mit 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 Ar ticles 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 convers ion 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 issuan ce thereof.  Such period may be adjusted by a 
resolution of the Board of Directors be fore 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 sharehol ding ratio premised upon the conversion to common 
shares), the adjustment of the conversion ratio sh all 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 convert ed into common shares on the date immediately 
following the final date of the conversion period;  in this case, with respect to the dividends on the 
shares 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 po ssible amount of dividends that can be paid 
is less than the minimum amount of dividends for co nvertible preferred shares, dividends may not be 
paid. 
 
6. The convertible preferred shares may have add itional 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 
 Página 11 
 
 
  
7. In case of the convertible preferred shar es, Paragraph 4 of Article 7-2 shall apply mutatis 
mutandis . 
 
 [This Article was newly es tablished 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 pr e-emptive right to subscribe for new shares in 
accordance with their respective shareholding ratio.  In case the Company issu es 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 same class in the case of bonus issue.  However, where a shareholder waives or loses his/her pre-emptive 
right, or where fractional shares result from allocati on of new shares, the shares which have not been 
allocated and/or subscribed shall be disposed of  in accordance with a reso lution of the Board of 
Directors (amended on 15 March 2002). 
 
2. Notwithstanding Paragraph 1 above, new shar es may be allocated to persons other than 
existing shareholders of the Company by a resoluti on 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 va lue, the Company may make initial issuance of 
the new shares to the members of the ESHA as set fo rth 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 is sued 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 divi dends as set forth in Paragraph 3 of Article 43, of 
this 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 w ithin 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 resolu tion 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 Comp any, except for officers or employees in any of 
the following cases; provided, however, the Company may grant stock options by a resolution of the 
Board of Directors, to an extent not exceeding te n per cent (10%) of the total number of issued and 
outstanding shares in accordance with the Enforcement Decree of the SEA. GPA/W/286 
Página 12  
 
 A. The largest shareholder (as defined in Artic le 54-5, Paragraph 4, Subparagraph 2 of the 
SEA) of the Company and those who are speci ally related to the largest shareholder 
("Specially related persons" is defined in  Article 10-3, Paragraph 2 of the SEA.  
Hereinafter, referred to as "Specially Rela ted Persons").  Provide d, 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 defi ned in Article 188, Paragraph 1 of the SEA) 
and Specially related persons who are specially  related to the major shareholders of the 
Company.  Provided, however, persons who became specially related persons only due 
to the fact that they were elected as o fficers 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 shar es, all of which are in non-bearer form (and these 
shares shall be used to calculate the difference betw een 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 em ployees 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 be 
less 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 resolu tion 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 tw o years since the date of the special resolution of 
shareholders' meeting or the resolution of the Boar d of Directors prior to exercising the stock option 
awarded 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 retire d 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 the 
Company;  and 
  GPA/W/286 
 Página 13 
 
 
 C. where any other events for cancellation sti pulated 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 servi ces are to be rendered and the scope of its duties 
must be decided by a resolution of the Board of Directors and must be publicly announced. 
 
3. The shareholders registry or a duplicate thereo f must be kept at the office where the transfer 
agent renders its services, and the activities of maki ng 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 the 
transfer agent. 
 
4. All procedures relating to the administrative matte rs stipulated in Paragr aph 3 of this Article 
shall be performed according to the Regula tion on Securities Transfer Agents, etc. 
 Article 12 (Reporting the Name, Address, Re gistered 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 re siding in a foreign country must designate an 
address and an agent in Korea to receive re ports 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 conv ened 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' mee ting being called or if needed for certain other 
cases, the Company may suspend any entry into the shareholders' re gister for a period not exceeding 
three months by a resolution of the Board of Direct ors or recognize the shareholders registered on the 
shareholders' 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 cont ents in the shareholders' register and designation of a record date 
if the Board of Directors finds that the two me asures are necessary.  The Company must publicly 
notify all such measures no less than two weeks pr ior to the intended date of the shareholders' 
meeting. GPA/W/286 
Página 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 va lue 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 acco rdance with the Foreign Investment 
Promotion Act; 
 
 D. where the Company issues convertible bonds  to domestic or international financial 
institutions for urgent funding; 
 
 E. where the issuance is performed overse as 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 conve rtible 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 conversi on 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 d ecided 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 conversi on may be made shall be determined by the 
meeting of the Board of Directors within the pe riod 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 conversi on 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 
 Página 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 issu ance of bonds with warrants falls under any of the 
categories provided in Artic le 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 mu st not exceed the total face value of the bonds with 
warrants.  3. The classes of shares to be issued by ex ercising the warrant shall be common shares, 
preferred shares and convertible preferred shares, whic h shall be determined by the Board of Directors 
at the time of issuance of warrants.  The issuing price shall be decided by the Board of Directors at the 
time of issuance of the relevant warrants, and sha ll 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 Direct ors 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 inte rim 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 categor ies, ordinary and extraordinary.  The ordinary 
shareholders' meeting shall be conve ned within three months after th e 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 e ither at the place where the head office of the 
Company is located or in Seoul.  However, the shar eholders' meeting may be held at a nearby place as 
determined by a resolution of the Bo ard 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 
Página 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 the 
scheduled 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 no tices 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 th e shareholders' meetings.  However, where the 
President is unable to do so due to an unavoidabl e reason, Paragraph 2 of Article 28, shall apply 
mutatis mutandis . 
 Article 20 (Resolution of Shareholders' Meeting)  
 
1. Unless otherwise stipulated in the applicab le laws and regulations, the resolution of the 
shareholder's meeting shall be adopted by the share holders 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, th at the dismissal as set forth in Article 26, 
Paragraph (2) and Article 32-2, Para graph (4) shall be adopted by a resolution pursuant to Article 434 
of the Commercial Code.  3. In case of any amendment to the first senten ce 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 hol ders to exercise their voting rights. 
 
2. Prior to the shareholders' meeti ng, 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 act s 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 
 Página 17 
 
 
  [This Article was amended on 27 December 2002.] 
 
Article 23 (Minutes of Shareholders' Meeting)  
 
 The proceedings and resolutions of the sharehol ders' 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 eff ective operation of the Shareholders' Meeting. 
 
2. The following persons shall be the memb ers of the Shareholders' Committee, and the 
institutional shareholders shall not be more than fi ve members.  If two or more members are included 
in the scope of the specially related persons, the ne xt 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 th e Shareholders' Committee. 
 4. The Shareholders' Committee sh all 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' Co mmittee for its review by the Board of 
Directors;  and 
C. to provide mutual cooperation among th e 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 mee ting 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 S ubparagraph 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 rega rdless of the number of shares held by him. 
 
8. The Company shall report to the Shareholde rs' Committee the matters deemed by the Board 
of Directors necessary to be reported from among tho se related to the interests of the shareholders. 
  GPA/W/286 
Página 18  
 
 Chapter 5 Directors and Board of Directors  
 
Article 25  (Number of Directors)  
 
 The Company shall have one President and not mo re than fourteen directors.  Provided that, 
the number of the executive directors, including the President, shall be less than six and 1/2 of the 
total 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 Recommend ation 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 pr opose 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 perfo rmance of his/her duties at least one (1) 
year;  or 
 
 B. where an executive director's achieve ment is severely unsatisfactory due to 
significant deficiency in his/her ability to perform duties. 
 3. Notwithstanding Paragraph 2 above, if th e 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 become 
executive directors may not participat e in the resolution of the Board of Director.  Provided that, if the 
president candidate fails to be appointed as the Presi dent at the General Meeting of Shareholders, the 
president candidate’s recommendation for execu tive director candidates shall be void. 
 4. Members of the Audit Committee who are not out side directors pursuant to Article 34-3 shall 
meet the requirements set forth in  Paragraph 3 of Article 54-6 of th e SEA.  In case of appointing or 
dismissing, pursuant to Article 191-11 of the SEA, if the aggregate voting shares owned by the largest 
shareholder and its Specially Re lated Persons and other persons as prescribed by the Presidential 
Decree exceeds 3/100 of the total voting shares issu ed 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 recomme nded by the Outside Director Candidates 
Recommendation Committee after its examination of  qualification of those recommended by the 
Outside Director Candidates Recommendation Committ ee, the shareholders who exercise the right 
under Article 191-14, Paragraph (1) of the SEA a nd the Shareholders' Committee, and shall be 
appointed at the General Meeting of Sharehol ders in accordance with Article 34-5 hereof. 
  GPA/W/286 
 Página 19 
 
 
 Article 27  (Terms of Directors)  
 1. The term of the directors shall be determin ed at the General Meeting of Shareholders not 
exceeding three years and the term of a director w ho is newly appointed as a result of vacancy of an 
outside 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 fi scal 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 Compan y 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 stipulated 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 includi ng 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 order. In such case, the President and the executive 
directors shall not participate in the reso lution 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 
Página 20  
 
  B. The incumbent President;  provided, ho wever, 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 a ppointed 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 Comm ittee 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 th e 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 te rm of the President expi res 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 st andard 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 Shareholde rs.  Provided that, the Committee shall report the 
results of consideration to the Board of Director s 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 candi date 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 relevant experiences;  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 r esolution of the Board of Directors. 
 
Article 32-2 (Contract with President)  
 
1. The President Candidate Recommendation Comm ittee shall consult with the person to be 
recommended as the candidate for president about  terms and conditions of a contract on the 
management 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 te rms and conditions of the contract are determined. 
  GPA/W/286 
 Página 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 appoi nted as the President at the General Meeting of 
Shareholders under Paragraph 2 above, the Chairm an of the President Candidate Recommendation 
Committee in such capacity as the representative of the Company sh all enter into a management 
agreement with the President.  4. The Board of Directors may evaluate the perfo rmance 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 upon 
considering the results of the performance evaluati on 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 director s shall not participate in the resolution of the 
Board of Directors. 
  [This Article was newly esta blished on 27 December 2002.] 
 Article 33 (Qualification of Outside Director)  
  Every outside director must be an independent  expert or experienced person in the field of 
economics, business management, law, or relevant technology.  The person falling under one of the 
following individual category may not become an outs ide 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 executive of a company who receives support from 
the Company, or a former employee or ex ecutive who have worked at such company 
within the past two years; 
 
 3. A government official (excluding educati onal 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 director s 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 Direct ors' 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 direct or may convene such meeting (amended on 
27 December 2002). GPA/W/286 
Página 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 deemed necessary, the Company may establish any other committe e by a resolution of the Board of Directors.  
Each Committee shall appoint their respec tive representative by a resolution thereof. 
 2. Details regarding the organiza tion, 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 re presentative by its resolution.  The Audit 
Committee may designate sev eral co-representatives. 
 
Article 34-4 (Duty of the Audit Committee)  
 
1. The Audit Committee shall audit the accountin g 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 convoc ation 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 recommenda tion of the outside director candidates;  
and 
 
 B. Other matters delegated by the Board of Directors. 
  GPA/W/286 
 Página 23 
 
 
 Article 35  (Chairman of the Board of Directors)  
 1. The President shall be the Chairman of the Bo ard 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 Chairm an 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 of 
Directors which the Chairman and the directors pres ent shall affix their names and seals or signatures 
(amended on 27 December 2002).  
Article 38 (Managerial Officers)  
 
1. The Company may have managerial officers fo r 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 officer s 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 Ex ecutive Officers Retirement Allowance Provisions as 
adopted 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 w ho are necessary to establish the policy of the 
management of the Company. GPA/W/286 
Página 24  
 
  
 [This Article was newly esta blished on 27 December 2002.] 
 
Article 39  (Management Committee)  
 
1. The Company may have a Management Co mmittee 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 referred 
to as "Financial Statements"), the supporting statemen ts 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 doc uments set forth in Pa ragraph 1 above, shall 
prepare and submit an audit report within four weeks to the President.  3. The President shall submit the Financial Statem ents to an ordinary Shareholders’ Meeting for 
approval and report the contents of the busi ness report to the Shareholders' Meeting. 
 
4. The President shall, immediately after the approval 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 Stat ements, 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 follo wing may be disposed by a resolution of the 
Shareholders' General Meeting: 
  A. Legal reserves (legal reserves under the Commercial Code);  GPA/W/286 
 Página 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 shar es and the Company has i ssued several classes of 
shares, such distribution may be made through sh ares 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 sh ares set forth in Article 7-2 and the convertible 
preferred shares set forth in Article 7-3 (newly established on 15 March 2002).  5. Dividends in Paragra ph 1 above shall be paid to the share holders or the pledgees registered on 
the shareholders' register as of the end of each fi scal year;  dividends in Pa ragraph 3 above shall be 
paid to the shareholders or the pledgees registered  on the shareholders register of the Company as of 
the record date for mid-year dividends; provided, th e 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;  and 
  C. Acquisition period (the acquisition peri od shall be before the Ordinary General 
Meeting of Shareholders to be held firs t 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 me thod 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 acquire d for redemption shall not exceed the amount 
set forth by the Enforcement Decree of  the SEA within the scope of profits GPA/W/286 
Página 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 th e purpose of redemption shall be re ported to the Ordinary General 
Meeting of Shareholders to be held firs t after the resolution of such redemption. 
 
Article 44 (Extinctive Prescription of the Claim for Dividend)  
 
1. The claim for payment of dividends shall expi re 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 effec tive 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 Articl es 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 ex ecution of this Articles of Incorporation shall 
become the employees of the Company.  
2. The retirement age of the employees of the Co mpany pursuant to Para graph 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 Co mpany as of the execution of this Articles of 
Incorporation shall be calculated by adding the peri ods during which they have worked for KGMC in 
accordance with the previous rules.  GPA/W/286 
 Página 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 in clude 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 Corpora tion 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, Ch amsil-1dong, Songpa-ku, Seoul 
Name:  Jong Suk Park  Address: Samick Apt. #D-211, Ye oido-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 effectiv e from the date of the approval of the Minister 
of Finance and Economy.  
ADDENDUM (22 March 1995)  
 
 This Articles of Incorporation shall be effectiv e 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 
Página 28  
 
 Article 2 Relationship with the Relevant Laws  
  The Special Act, the Korea Tobacco & Gi nseng Corporation A bolition 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 appointe d 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 T erms of the First President and the Directors  
 
 Notwithstanding Paragraph 1, Ar ticle 27 hereof, the term of th e 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 e ffective from the date of resolution by the 
Shareholders' Meeting.  
ADDENDUM (17 November 1998)  
 
 This Articles of Incorporation shall be e ffective from the date of resolution of the 
Shareholders' Meeting. 
 
ADDENDUM (2 September 1999)  
  This Articles of Incorporation shall be e ffective from the date of resolution of the 
Shareholders' Meeting.  
ADDENDUM (29 March 2000)  
 
1. (Enforcement Date) This Ar ticles of Incorporation shall be  effective from the date of 
resolution of the Shareholders' Meeting.  Howeve r, amended rules of Articles 25, 26 (excluding 
Paragraph 4), 27, 29, 30, 31, 34, 34-2(1) (Estab lishment of the Audit Committee), 34-3, 34-4, 37, 
and 41 shall come into force from th e day following the expiration date of the terms of the auditors 
designated 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 
 Página 29 
 
 
 ADDENDUM (27 December 2000)  
  This Articles of Incorporation shall be e ffective from the date of resolution of the 
Shareholders' Meeting.  
ADDENDA (23 March 2001)  
 
Article 1 Enforcement Date 
 
 This Articles of Incorporation shall be e ffective 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 beco mes effective; amended 
rules of Article 26 (4) shall come into force from th e date of the General Meet ing of Shareholders to 
be held first after this amendm ent; and amended rules of Articles 26 (1) and (5), 32, 34 (2) and 34-2 
(1) concerning the establishment of the Outside Di rector Candidate Recommendation Committee, and 
amended 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 provis ions 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 deem ed the non-executive directors under the Law 
Regarding the Management Structure Enhancement a nd 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 Ar ticles 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 he ld 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 Meeti ng of Shareholders to be held third after their 
appointment.  The number of executive officers of eac h group should be properly adjusted so as that 
such 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 appoi nted 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 e ffective from the date of resolution of the 
Shareholders' Meeting. GPA/W/286 
Página 30  
 
  
ADDENDUM (27 December 2002)  
 
 This Articles of Incorporation shall be e ffective from the date of resolution of the 
Shareholders' Meeting. 
 
ADDENDUM (14 March 2003) 
  This Articles of Incorporation shall be e ffective from the date of resolution of the 
Shareholders' Meeting.   GPA/W/286 
 Página 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 cond itions 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 manuf acturing business under paragraph (1) (hereinafter 
referring to the "tobacco manufacturing business licen se") satisfies the criteria for equity capital, 
facility standards, technological manpower, resear ch 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 Toba cco Manufacturing Business License) 
 
 Any person falling under one of the followi ng subparagraphs shall be prohibited from 
obtaining the tobacco manufacturing business license:  GPA/W/286 
Página 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 its 
execution; 
 4. A person who is under a grace period af ter 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 fa lls under one of subpara graphs 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 or 
merge with another corporation, file a report ther eon 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 manuf acturer's status of the transferor of tobacco 
manufacturing business, and where there exists a report on merger of corporations, a corporation to be established or to survive by such me rger shall succeed 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 ther eon with the Minister of Finance and Economy 
within 30 days after the date on which the deceden t 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 repor t 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 wh ich the decedent has died to the date of such 
report.  (5) An heir who has filed a report on su ccession 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 toba cco 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 ma nufacturing 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 natio nal health, etc. under Article 11 (2);   GPA/W/286 
 Página 33 
 
 
  3. Where he falls under disqualificati on of each subparagraph of Article 11-2: Provided,  
That it shall not apply to the case where th e 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 sha ll be sold by such manufacturer, and tobacco 
imported from foreign countries shall be sold by su ch import and sale business operator (referring to 
the person who has registered for a tobacco impor t and sale business under Article 13 (1); hereinafter 
the same shall apply) to wholesalers (referring to  persons who have regi stered for a wholesale 
business under Article 13 (1); hereinafter the same sh all 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 ma y 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 matter s 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 Regi stration of Tobacco Sale Business) 
 
 Any person falling under one of the followi ng subparagraphs shall be prohibited from 
registering the business of importing and selling to bacco  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 the 
completion (including the case of deeming to be completed) of or exemption from its 
execution; 
 4. A person who is under a grace period af ter having been consigned to a suspended 
sentence of imprisonment for violating this Act; 
 5. A person for whom two years have not el apsed since a cancellation of the registration 
under Article 15(1);  and 
 6. A corporation whose representative falls  under one of subparagr aphs 1 through 5. 
[This Article Wholly Amended by Act No. 6078, 31 December 1999.] 
 GPA/W/286 
Página 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 unde r 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 agai n 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 whic h such juristic person falls under subparagraph 6 
of Article 14 or by the date on which 6 months ha ve elapsed since the date on which a successor who 
inherited the status of an import and sale busin ess operator or a wholesaler falls under any of 
subparagraphs 1 throu gh 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 under an y 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 consum er in contravention of Article 12 (2); 
 2. Where a person importing and selling manufact ured 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 busin ess 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 th is 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 reta il business (referring to the business of selling 
directly to consumers) shall obtain a designa tion 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 the 
completion (including the case of deeming to be completed) of or exemption from its 
execution; 
 4. A person who is under a grace period af ter having been consigned to a suspended 
sentence of imprisonment for violating this Act;  GPA/W/286 
 Página 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 subparagr aphs 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 Ordinan ce 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 repr esentative 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 busin ess 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 pr ovisions of Article 25(3); 
 4. Where he fails to continuously purch ase 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 th is Act or orders given under this Act. 
 
(3) Matters necessary for the standards and pro cedures, 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 
Página 36  
 
 Article 18 (Selling Price of Tobacco) 
 
(1) The selling price of tobacco made by a manufact urer 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 a nnounce it publicly under the c onditions as prescribed by 
the Ordinance of the Ministry of Finance and Economy.  <Amended by Act No. 5454, 
13 December 1997; Act No. 6078, 31 Decem ber 1999;  Act No. 6460, 7 April 2001>  
 
(4) A retailer shall sell tobacco at the selling pr ice 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 t obacco 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 Discontinua nce 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 bus iness 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 Fina nce 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 paragr aph (1), the period of business suspension, 
procedure of report, and other matters necessary fo r 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 
 Página 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 ta ke a disposition falling under any of  the following subparagraphs, hold 
hearings:  <Amended by Act No. 6078, 31 Decembe r 1999;  Act No. 6460, 7 April 2001>  
 
 1. Cancellation of the license for ma nufacturing 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 designati on 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 th e purpose of quitting smoking shall be excluded.  
<Amended by Act No. 6078, 31 Decemb er 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 an d 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 ac tivities; hereinafter the same shall apply).  
<Amended by Act No. 6460, 7 April 2001>  
 
(2) The Minister of Finance and Economy may proh ibit 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 Decem ber 1999;  Act No. 6460, 7 April 2001>  
 
(3) In case where no words of warning under paragr aph (1) are in existence or the prohibition of 
or restrictions on ads under paragraph (2) are violated, the Minister of Finance and Economy, the 
Mayor/ 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 
Página 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 measure ment, designation of measuring agency, method of 
indication, scope of allowable errors, omission of in dication of ingredients, which are to be indicated 
under paragraph (1), and other matters necessary for i ndication 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 pa ragraph (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 ha ve a manufacturer carry out directly public 
activities, such as public health, medical care, protect ion 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 the 
conditions as determined by the Ordinance of th e 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 th ose who carry out such activities.  In this case, the 
provisions of paragraph (1) shall apply mutatis mutandis . 
 (3) The Minister of Finance and Economy sha ll consult with the heads of related central 
administrative agencies about fundamental matter s concerning the activities carried out by a 
manufacturer or an import and  sale busin ess 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 contri bution 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 un der 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 
 Página 39 
 
 
 Article 25-4 (Prohibition of Money Providing, 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 govern ment under the conditions as prescribed by the 
Presidential Decree.  <Amended by Act No. 5454, 13 D ecember 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 para graph (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 follo wing 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 repor t on transfer, takeover, etc. of tobacco 
manufacturing business in contravention of Article 11-3  (1) or (3); 
 2. A person who has manufactured a subs titute 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 advertis ement on tobacco in contravention of 
Article 25(2);  and 
 5. A person who has manufactured or impor ted 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 c onsumers without obtaining a designation of 
retailer in contravention of Article 12(2); GPA/W/286 
Página 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 w ith the orders or measures required for 
correction, such as the removal of a dvertising 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 pr oviding 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 followi ng 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 viola tion of the provisions of Article 18 (4); 
 2. Deleted;  and <by Act No. 6460, 7 April 2001>  
 3. A retailer who has suspended his bus iness in excess of the suspension period as 
prescribed by Article 22-2(2). 
 
(3) Any person who falls under any of the followi ng 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 cha nging 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 fine 
for negligence under the provisions of Article 28 acc ording 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 dispos ition of a fine for negligence as referred to in 
paragraph (1) may raise an objection to an impositi on 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 receivi ng 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 rais ing 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 
 Página 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 re ferred 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 th e 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 ag ent, employer, or other employee of a juristic 
person or an individual commits an offense as provi ded in Articles 27, 27-2 and 27-3 with respect to 
affairs of the juristic person or the individual, th e fine as provided in the said respective Article shall 
also be imposed on such a juristic person or indivi dual, 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 ot her Acts and subordinate statutes at the time 
when this Act enters into force shall be considered to have cited th is 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 the 
corresponding provisions in this Act.  
Article 4 (General Transitional Measures) 
 (1) What was enforceable under the previous Tob acco Monopoly Act at the time when this Act 
enters into force shall be considered to be in fo rce, pursuant to the corresponding provisions of this 
Act.  GPA/W/286 
Página 42  
 
 (2) Any disposition or other acts taken by the Minister of Finance and Economy under the 
previous Tobacco Monopoly Act before the enforcemen t of this Act, shall be considered as that or 
those taken pursuant to the corres ponding 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 Cor poration, 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 cultiva tion 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 concernin g 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 Mi nister 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 and 
Ginseng Corporation Act is enacted and enforced. 
 
Article 8 (Transitional Measures concern ing 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 sha ll enter into force on 1 January 1994. 
 
(2) (Transitional Measures concerning Application 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 
 Página 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 Disqualifi cations) 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 disqualif ications as described in the amended provisions of 
Article 14 or 16 (2) due to unavoida ble reasons that occurred prior to the enforcement of this Act, 
shall be dealt with according to the previous pr ovisions notwithstanding the amended provisions. 
 (3) (Transitional Measures concerning Registration of Sale Business of Manufactured Tobacco) Any person who has his wholesale business of manuf actured tobacco registered under the previous 
provisions at the time that this Act is enforced sh all 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 manufact ured tobacco designated under the previous 
provisions at the time that this Act is enforced sh all 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 Ab olition of Systems of Tobacco Cultivation 
and Leaf Tobacco Purchase) 
 
 The Korea Tobacco and Ginseng Corporation (h ereinafter 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 previous 
provisions at the time of enforcement of this Ac t, 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 co ncerning 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 
Página 44  
 
 ADDENDA  <Act No. 6625, 26 January 2002>  
 
(1) (Enforcement Date) This Act sha ll 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 
 Página 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 licen se for tobacco manufacturing business under the 
former part of Article 11 (1) of the Tobacco Bu siness Act (hereinafter referred to as the "Act") 
(hereinafter referred to as the "license for t obacco manufacturing business") shall submit an 
application for license for tobacco manufacturing bus iness stating the matters falling under any of the 
following subparagraphs to the Minister of Finance 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, up on 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 unde r Article 4(1)1, grant a license for tobacco 
manufacturing business on condition that he is to  be equipped with the manufacturing facilities, 
technical manpower, testing equipment under subp aragraphs 2 through 4 of the same paragraph 
within 3 years:  Provided , That the Minister of Finance and Ec onomy 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 pr ocessing facilities of raw materials are required to 
be 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 the 
Ministry 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 u nder 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 
Página 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 an 
inevitable reason. 
 
Article 4 (Criteria for License fo r 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 fac ilities 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 manufacturing 
and 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 specialized technology manpower of not less than 
5 persons who have the career for not less than 3 years in the field of tobacco 
manufacturing and quality control;  and 
 4. Research and development of tob acco 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, measuring 
apparatus of air-dilution rate, measuring a pparatus 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 subpara graph 3 of Article 2 of the M onopoly Regulation and Fair Trade 
Act (in case where the manufacturer is a domestic business place of a foreign corporation, referring to the relevant foreign corporation).  Article 5 (Requirements for Registra tion of Tobacco Sale Business) 
 
(1) Any person who intends to register for th e business of importing and selling tobacco under 
Article 13 of the Act shall conclude a contr act 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 falli ng 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 tobacco 
wholesaler (hereinafter referred to as the "wholesaler"). 
  GPA/W/286 
 Página 47 
 
 
 Article 6 (Selling Price of Tobacco) 
 
(1) In case where a manufacturer determines the selli ng prices of tobacco to the consumers, that 
are manufactured by him, under Article 18(1) of the Ac t, he shall make a report thereon by item to the 
Min sales.  The same shall apply in a case of alte ring 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 St ate as a gift to the members of diplomatic 
mission and other persons; 
 2. Tobacco supplied to the armed forces, me mbers of riot police units, guards or warders 
of correctional institutions, or persons of di stinguished service to the State and their 
bereaved families accommodate d in the institutions for the aged under Article 63 of 
the Act on the Honorable Treatment and Sup port 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 serv icemen on board warshi ps participating in 
overseas training; 
 4. Tobacco supplied to workers in overs eas 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 fo reign 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 
Página 48  
 
  
 1. Act of displaying or posting the advertising 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 vari ety 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 p ublished 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 th an those as determined by the Ordinance 
of the Ministry of Finance and Economy a nd written only in a foreign language, they 
shall be exempted from the restriction of carrying advertisements; 
 3. Act of sponsoring the social, cultural, mu sical, sports events, etc. (excluding those 
intended for women or juveniles).  In this  case, any product advertisement other than 
the use of sponsor's title shall not be made;  and 
 4. Advertisement made in an airplane a nd 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 c ontrary 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 ha ve the advertisement on tobacco so regulated 
autonomously as not to violate the provis ions 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 wo rds under Article 25(1) of the Act, or those 
violating the prohibition or restriction of a dvertisement 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 i ndicated on what are listed in any of the following 
subparagraphs:   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 Preside ntial Decree No. 17761, 23 October 2002.]  
  GPA/W/286 
 Página 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 Ordi nance of the Ministry of Finance and Economy. 
[This Article Newly Inserted by Preside ntial 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 defin ite 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 measurem ents, and other matters necessar y for measurements shall be 
stipulated by the Ordinance of the Ministry of Finance and Economy. 
[This Article Newly Inserted by Preside ntial 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 ingredie nts by the Korean Agency for Technology and 
Standards designated as the authorizing organizatio n 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 Ordi nance of the Ministry of Finance and Economy. 
[This Article Newly Inserted by Preside ntial Decree No. 17761, 23 October 2002.]  
 
Article 9-6 (Scope of Allowable Errors) 
 
(1) The scope of allowable errors in the indicat ed 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 allowa ble errors under the provisions of paragraph (1) 
shall be determined on the basis of values obtaine d 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 measu rements over 4 occasions 
have been achieved, it shall be determined on the b asis of values obtained by an arithmetic mean  of 
each measured value before such alterations. GPA/W/286 
Página 50  
 
 [This Article Newly Inserted by Preside ntial 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 Preside ntial Decree No. 17761, 23 October 2002.]  
 
Article 10 (Prohibition of Providing of Mone y 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 th e 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 a nd Collection of Fine for Negligence) 
 
(1) In case where a fine for neg ligence is imposed under Article 29(1)  of the Act, a person subject 
to a disposition of such a fine fo r 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 or ally or in writing by fixi ng a period of not less 
than ten days.  In this case, if he fails to st ate 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 neglig ence 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 sh all enter into force on 1 January 2003. 
(Application Example to First Measurement) The firs t 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 
 Página 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 interna tional tendering under Article 4 of the Act relating 
to Contracts to which the State is a Party(hereinafte r referred to as "Act"), which is to perform the 
Agreement on Government Procur ement(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 whic h 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 which is executed in accord ance with the Act, the 
Enforcement Decree and these Regulations, in order for the state to procure the goods, construction 
works and services through international tendering as pr ovided in Article 4, pa ragraph (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 tenderi ng in which all qualifie d persons intending to 
participate in tendering for a specific procur ement 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 orde ring agency determines the other party in relation 
to a specific procurement contract, not through competitive tendering.  "List of qualified persons" means a list which consis ts of the persons qualified. Such qualification for 
participation of tendering on goo ds, construction works and services for the specific procurement 
contracts 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 Decr ee, "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 
Página 52  
 
  
 1. When necessary to protect the benefit of important national security in procurement 
of arms, ammunition or warfare material s, or procurement in relation to the 
performance of the purpose of national safety or national defense; 
 2. When necessary to maintain the public orde r and stability, or maintain life and health 
of human beings, animals or plants, or intellectual property rights; 
 3. When procuring goods and services, et c., manufactured by charitable organizations, 
the disabled and prisoners; 
 4. When manufacturing and procuring artificial satellites in  accordance with the 
Aviation and Space Industry Deve lopment Promotion Act;  or 
 5. When executing a private contract in acco rdance 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 stat es restricted from executing a specific procurement 
contract, 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 th e 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 viewpoin t 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 in ternational 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, th e 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 procurement contract, and shall not provide the information 
related to governmental procurement with discrimination.  (2) The head of each central agency or the public o fficial 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 met hod of the Estimated price or make a partial 
ordering for the purpose of avoiding the 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, c onstruction 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 restri cting 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 the  GPA/W/286 
 Página 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 o fficial in charge of the contract is not required 
to prepare the standard price under Article 7-2, Para graph (1) of the Enforcement Decree, in the cases 
as shall be provided by the Prime Ministerial Decree, 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 langua ges, such as the supplier of goods to be procured 
being limited to a specific area, any one language am ong the language of the specific state, English, 
French and Spanish may be chosen. 
 
(2) If the head of each central agen cy or the public official in char ge 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 a nd the application for tendering;  and 
 3. 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 procurement 
contract, he/she shall include one or more la nguages 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 ma tters described in Korean shall prevail. 
 GPA/W/286 
Página 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 the 
contract, determine on the qualification, which are re quired for the participants of general competitive 
tendering, with respect to previous contracts of th e same type as that of the relevant contract, the 
contract ceiling amount, construction capacity, the t echnological 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 par ticipate in general competitive tendering head of 
each central agency or the public official in char ge of the contract shall screen the applicant's 
qualification for the participation of tendering as pr ovided in Paragraph (1), and notify the applicant 
of the result.  
(3) The head of each central agency or the public o fficial 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 accordan ce 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 pub lic 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 agen cy or the public official in charge of the contract may notify the 
standard of qualification for partic ipating in tendering provided in Article 9, Paragraph (1), in the 
gazette, at the beginning of each fiscal year and, fr om time to time, screen the qualification of the 
applicants who wish to participate in general co mpetitive tendering. Based on the results of such 
screening, he/she may prepare a list of qualified pers ons 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 pa rticipation of the tendering under the provision of 
Paragraph (1).  If the effective period of the list of qualified persons expires or if any person is 
deregistered from the list, such expiration or dere gistration shall be notified to the relevant person. 
 
Article 11 (Public Notice on Tendering) 
 
(1) With respect to a specific procurement contr act 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 
 Página 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 require d 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 immedi ately preceding the deadline of filing tendering 
documents:   1. When a public notice was separately given for a period of 40days within the past 12 
months, which contains the matters set fo rth 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 (h ereinafter, "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 ag ency 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 Artic le 36 of the Enforcement Decree: 
 
 1. Conditions of any additional procuremen t 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 a pplication for screening of qualification for 
participation in tendering, an applicati on for tendering and tendering documents, the 
deadline for filing them and the language to be used therein;  and 
 5. Whether or not the relevant te ndering 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, co nstruction works and services to be supplied under 
specific procurement contracts during each fiscal year. 
 
(2) The public notice on procurement plan shall cont ain 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 o fficial in charge of the contract shall prepare 
the technical specifications concerning quality, func tion, etc., in consideration of the function as 
important element.  Unless there are any inevitable reasons, the technical specifications shall be GPA/W/286 
Página 56  
 
 prepared on the basis of the relevant international standard, if any, and if there is no applicable 
international standard, relevant Kor ean laws and regulations or domes tic 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 centr al agency or the public 
official in charge of the contract shall include the statement in the public noti ce on the tendering to the 
effect that any goods or services of equal or highe r level of such specific trademark/specification are 
put up in the tendering.  
(4) In the case of Paragraph (3) above, the applicant of the tenderi ng shall evidence the fact that 
the specification, quality, etc., of the goods or ser vices to be supplied, correspond to such specific 
conditions or are at a higher level.  (5) In preparing the specifications, the head of each central agency or the pub lic 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 comp etition, the head of each central agency or the 
public official in charge of the contract may disclo se the technical specifications to the participants of 
the tendering and make them accessible before th e tendering, and allow the participants to present 
their opinion thereto. 
 
Article 15 (Delivery of Documents concerning Tendering) 
 
 With respect to the specific procurement cont racts 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 de liver the tendering related documents as provided in 
Article 14, Paragraph(1) of the Enforcement Decr ee (hereinafter, "tendering related documents"), and 
shall address any inquiries regarding the te ndering related documents without delay. 
 
Article 16 (Filing and Acceptance of Tendering Documents) 
 (1) With respect to any specific procurement cont ract, 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 docum ents and other related 
documents by cable, telegra ph and fax transmission. 
 (3) When the tendering documents are filed as provide d in Paragraph (2), the head of each central 
agency or the public official in charge of the contr act 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 the 
signature provided after the deadline for filing fo r confirmation, the tendering documents submitted 
by cable, etc., shall prevail.   GPA/W/286 
 Página 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 tende ring documents are delivered to the relevant 
department after the date designated in the tendering  related documents, due to any reason attributable 
to the ordering agency, the relevant participan t shall not be adversely affected therefrom. 
 
Article 17 (Public Notice of Successful Tenderer and Disclosure of Information) 
 
(1) When the head of each central ag ency or the public official in charge of the contract selects a 
successful tenderer for any specific procurement c ontract, 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 in 
the Prime Ministerial Decree, in the gazette, within 72 days from the date of such selection or decision.  
(2) When the participants of the tendering requir es the head of each central  agency or the public 
official in charge of the contract to provide any information concerning the re levant tendering, he/she 
shall meet such demand if there are no special reasons to avoid such request.  (3) In connection with the provisions of Paragra phs (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 provis ion of the Prime Ministerial Decree. 
 
Article 18 (Selective Tendering) 
 
 When the head of each central ag ency or the public official in charge of the contract intends 
to put up the designated competitive tendering as provi ded in Article 7 of the Act, for a specific 
procurement contract, he/she shall, in consideration of the matters pr ovided in Article 9, establish the 
qualification required of the participants of the sel ective 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 deem ed 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 provide d 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 pr ocurement contract, he/she shall give public 
notice thereof, in accordance with the pr ovisions 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, th e period for submission of the application for participation in the 
selective tendering shall be set up for 25 days or mo re from the date of public notice as provided in 
Paragraph (1). GPA/W/286 
Página 58  
 
  
Article 21 (Screening of Qualification for Participants of Selective Tendering) 
 
(1) If the head of each central agen cy or the public official in char ge of the contract receives any 
applications for screening of qualification for par ticipation in designated competitive tendering after 
the 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 a pplication, 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 for 
participation as provided in Paragra ph (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 te ndering, he/she shall give public notice of the 
matters concerning the qualification for particip ation 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 pr ovision 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 docume nts satisfy the conditions required in the 
public notice of the relevant tendering; 
 
 2. When the relevant goods may be proc ured only from a specific supplier such as 
works of art with no substitutes thereof, or other goods which are related to any 
exclusive 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 faci lities (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 proc ured after completion of fulfilment of the 
relevant contract);  GPA/W/286 
 Página 59 
 
 
  
 6. If nay additional construction for the cons truction 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 add itional construction is 50/100 or less of the 
contract amount of the immediately previous  construction, and if there is a need to 
execute 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 inc onvenience 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 the new construction can be made by a private contract; 
  8. If any goods are purchased in raw ma terials market(commodity exchange); 
 
 9. If any goods are procured in remarkably profitable conditions due to any causes 
including asset disposition of any corpora tion subject to bankruptcy or corporate 
reorganization;  and 
  10. If any contract is executed with the pers on 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 th e public official in charge of the contract 
determines the successful tenderer in the specific pr ocurement contract by competition, he/she shall 
keep and maintain the documents concerning the tendering and the contract, and the documents recording any of the follow ing 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, am ount of successful tendering and reason of 
determination of the successful tenderer; 
  3. In the event any tendering becomes null a nd 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 
Página 60  
 
  4. Name (trade name) and address of  the other party in the contract; 
 5. Contract amount and reason of determin ation 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 ag ency shall prepare the report on  the results of the contract, 
consisting of such contents as required by the Pr ime 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 c oncluded by a government invested institution, 
which is subject to the Agreement, shall be su bmitted by the relevant Minister according to 
Paragraph 1 above.  Article 26 (Subject to Submitting Objection) 
 
 "Other matters as determined by the Preside ntial Decree" as set forth in Article 28, 
Paragraph 1, Item 5 of the Act shall mean the ma tters 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 related 
documents.  (2) Matters concerning any necessary procedur es in connection with the application for 
mediation, except for the provision of Paragra ph 1 above, shall be determined by the MOFE. 
 Article 28 (Organization of International Contract Dispute Mediation Committee) 
 
(1) The International Contract Dispute Medi ation 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 offi cials of the central administrative agency as 
determined by the Prime Ministerial Decree who shall be designated by the head of the relevant agency and the persons appointed by the MO FE 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 e ngaged 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 
 Página 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 substitu te 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 impris onment or more severe punishment, or when he may 
not 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 such order in writing within seven (7) days from 
receipt of the opinion pursuant to Article 33 pursua nt 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 cause 
any disadvantageous effect to public interest or the re levant interested party, it shall notify, in writing, 
the reason therefore to the applicant and th e 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 una ble to perform his duties due to unavoidable 
causes, the member designated by th e 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 sh all 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) secret ary for its conduction of business. 
 
Article 33 (Investigation) 
 
(1) The head of the central agen cy 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 th e 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 
Página 62  
 
 (3) The Committee shall give the party, or its representative, an opportunity to state his/her 
opinion prior to the completion of the medi ation.  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 whic h 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 Co mmittee 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 st ating the results of the examination and then 
notify the party of the results. 
 (2) When preparing the mediation plan as set fort h in Paragraph (1), if the Committee considers 
that the applicant has sustained any disadvantage du e 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 of ficial in charge of the contract, and compensation 
for the damage of loss therefrom. 
 (3) The compensation for the damage or loss as set fo rth in Paragraph (2) may be restricted to the 
expenses incurred in the course of preparation of tendering and appli cation 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 ex amination/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 sh all be borne as agreed in the agreement. 
 
(2) Details on expenses in connection with the app lication for mediation shall be as set forth in 
the Prime Ministerial Decree.  
Article 38 (Operation of Committee) 
Matters necessary for the operation of the Co mmittee 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 with 
a specific procurement contract. 
  GPA/W/286 
 Página 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 cred it, and inspection, etc., the head of each central 
agency or the public official in charge of the contract may, notwithstanding Article 39, be subject to 
the international trade customs within  the extent which 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 w ithout complying with the international trade 
customs with respect to the adjustment of the cont ract amount due to price fluctuation, the head of 
each central agency or the public official in charge of the contract shall, notwithstanding Article 64, 
Paragraph (1) of the Enforcement Decree, be subject  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, Para graph (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 Fore ign 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 Speci fic 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 th e 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 Speci al 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 measures 
have 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 Decr ee of the Act Relating to the Contract to Which 
the State is a Party for Specific Procurement".  GPA/W/286 
Página 64  
 
 Article 4 Interim Measures for Execution of Co ntract for Foreign Ca[ital Purchase, etc. 
 
 The tendering, determination of a successful te nderer and execution of the contract which will 
occur after the enforcement date of these regulati ons and with regard to Which a public notice for 
tendering was made before the enforcement date  of these Regulations in accordance with the 
Regulations on the Contract for Foreign Capital Purc hase, and the contract which is to be executed 
after the enforcement date of these Regulations and 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 
 Página 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 contracti ng standards and procedures applicable to 
government-invested institutions a nd bidders' qualifications for par ticipating 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 ins titutions (hereinafter referred to as "Invested 
Institutions") under Article 2 of the Framework Act.  (2) The matters that are not provided in these Regul ations concerning contracts entered into by an 
Invested Institution shall be subject to the Ac t on Contracts to which the State is a party, mutatis 
mutandis , in such case "state", "government" and "na tional 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" sha ll 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 rela ting 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 not 
apply to an office overseas or when inevitable, due  to the number of personnel far less than required. 
 (3) The president of an Invested Institution ma y appoint one of its employees to mandate the 
duties of the accounting officers under subsection (1) a bove, in whole or in part, if deemed necessary. GPA/W/286 
Página 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 c onsolidated financial statements, if it is deemed 
necessary in order to ensure proper accounting. 
 
Article 5 (Payment of Expenditure)  
 
(1) Expenditure shall be paid by crediting relate d 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 su bcontracts has been entere d 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, tr avelling expenses or routine expenses; 
 2. Payment in an amount less than W100,000 per transaction;  3. Payment made by an Invested In stitution located in a "Myeon";  or 
 4. If payment by Crediting to Creditor's Acc ount is deemed particularly inappropriate. 
 
(2) The expenditure in accordance with subsecti on (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 n ecessary expenses that are 
likely to adversely affect the Invested Institution's or dinary 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 opera tion and/or repair of vessels; 
 3. Expenses to be paid in the area wher e proper transportation and/or communication is 
not available; 
 4. Expenses routinely spent in the offi ce 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 who se 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;  and 
 14. Expenses for purchasing samples and fees for test and research pursuant to the 
provisions of applicable laws and ordinances. 
  GPA/W/286 
 Página 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 sha ll be paid within the estimated budget of 
expenses for one month; provided, however, th at the expenses to be paid in foreign 
countries or in the area where proper tr ansportation and/or communication is not 
available, or incurred by an office whose pl ace 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 th e fund required for such expenses. 
 
Article 7 (Payment in Advance)  
 (1) The President of an Invested Institution ma y pay in advance freight, chartreuse, travelling 
expenses, considerations for a construction, manufac turing or service contract, etc., that may likely 
adversely affect the Invested Institution's ordinary activities or business consid ering its nature, if not 
paid in advance.  (2) The scope of expenses to be paid in adva nce pursuant to the provisions of subsection (1) 
above shall be as follows: 
  1. Payment for the machinery, books, sampl es, 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 t hose 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 lo cal 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 th e 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 forei gn nationals invited by the Invested Institution. 
 
(3) The wages and salaries to be credited to fi nancial institutions for the purpose of payment 
thereof through the savings accounts in financial in stitutions 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 
Página 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 fo r 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, manufac turing or service contract, etc., that may likely 
adversely affect the Invested Institution's ordinary activities or business consid ering its nature, if not 
so paid.  (2) The scope of expenses to be paid by estima tion pursuant to the provisions of subsection (1) 
above shall be as follows: 
 
 1. Travelling expenses, business promoti on expenses or office operation expenses; 
 2. Expenses to be paid to the state;  3. Subsidies or contributions;  4. Medical care expenses to be paid pursu ant 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 de bt expenses, even before conclusion of relevant 
extinctive prescription:   1. When a corporate entity (debtor) is di ssolved 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 exceed s 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 
 Página 69 
 
 
 Article 10 (Accumulation of Allowance for Bad Debts)  
 
 The President of an Invested Institution sh all accumulate allowance for bad debts on accounts 
receivable, notes receivable, other receivables, accr ued income and claims similar thereto, long-term 
trade receivables.  In such case, the amount of clai ms against the state, a local government or other 
Invested Institutions, if any, shall be excluded fro m 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 an yone of the category as described below shall be 
excluded 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 li vestock 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 Corpor ation 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 th rough 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 pr ovisions 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 
Página 70  
 
 Article 12 (Principles of Entering into a Contract)  
 
(1) The contract to be entered into an Invest ed Institution shall be based on mutual agreement 
between the parties thereto, as independent and equa l 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 inte rests 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 c ontract 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 th e state or an agency of a local government, or the 
president or one of the employees of other Invest ed Institution (including Korea Asset Management 
Corporation established  pursuant to the provisions of  Article 6 of the Act on Efficient Disposal of 
Financial Institutions' Non-perform ing Assets of Financial Institu tions 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 a ffairs pursuant to the provisions of subsection (1) 
above, the conditions and fees of such entrustment  and other necessary matters related thereto shall 
be clearly prescribed.  
Article 15 (Private Free Contract)  
  The President or Contracting Officer of an Invested 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 sh all apply to these regulations hereafter) or 
affiliated companies (a " Affiliated Company " means a corporation the sum of the  GPA/W/286 
 Página 71 
 
 
 shares or equity interests is held by the In vested 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 pur pose of maintaining the installations and 
 equipment owned by the Invested Institu tion 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 Subsidiari es or Affiliated Companies for their 
 management innovation; 
  3. If the office located abro ad 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 ma nufacturer 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 En forcement 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 speci fied in subsection (2) of Article 23 of the 
Enforcement Decree of the Act on Contracts to which th e State is a party, the President or Contracting 
Officer 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 pr ovision 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 subcontr acts 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 price GPA/W/286 
Página 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 procedur es of the incidental tender under subsection (2) 
above shall be provided for separately by the Pr esident 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 sha ll pay the interest on the amount of the bonds 
deposited in cash by bidders participating in the tende r and/or the other parties of the contract to 
which the said Invested Institution is a party, including bid bonds, perform ance bonds, maintenance 
bonds etc., as calculated by applying the interest ra te applicable to deposits as stipulated by the 
Minister pursuant to the provisions of Article 16 of Government Deposit Ma nagement Regulations;  
provided, however, that the foregoing shall not appl y 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' capab ility to perform the relevant contract, the 
President of the Invested Institution concerne d may establish detailed standards for screening 
eligibility of the participants in the tender in ac cordance 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 th is Article, if it is deemed necessary taking into 
account the characteristics of the applicable constr uction 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 
 Página 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 Institution 
concerned shall ensure that the other parties of th e 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 subm itted 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 compen sation 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 ass ets, 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 in terests thereon calculated at the rate equal to the 
interest rate applicable to loan s from general resources that are of fered 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 Institu tion 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 provi sions of subsection (2) above to the merchandises 
(being the real estate) among inventories.  (4) When the other party of the contract constitu ting a source of revenue has delayed payment in 
advance of the consideration thereof and if the contr act 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 to 
loans from general resources that ar e offered by financial institutions. 
 
Article 23 (Limitation of Unfaithful Bidders'  Qualifications for Participating in Tender)  
 (1) The President of an Invested Institution shall r estrict 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 th e 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 appropri ate 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 
Página 74  
 
  2. The person who has subcontracted in viol ation of the provisions limiting subcontracts 
under the Framework Act on the Construc tion Industry, Electrical Construction 
Business Act, Information and Communication Work Business Act or other laws or ordinances (excluding violation of the obliga tion 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 Monopol y Regulation and Fair Trade Act and Fair 
Transactions in Subcontracting Act and who se 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 constr uction work or manufacturing products, has 
caused harm to the public by neglecting to  take necessary safety measures or caused 
critical injury, including death, to empl oyees 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 bi dding, 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 applicati on for or a letter of consent to participation 
in the tender but has not participated in th e tender thrice or more in the then current 
fiscal year; 
  11. The person who has prevented others fro m participating in the tender or interfered 
with the successful bidder’s executing or performing the contract; 
 
 12. The person who, during supervision or in spection, has interfered with performance of 
such activities;  or 
  13. The person who has failed to submit the doc uments, in whole or in part, as needed for 
reviewing bidders' capability to perform re levant 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 
 Página 75 
 
 
  
(3) If the person whose qualifications for participati ng in the tender is restricted is a corporation 
or other entity, the provisions of subsection (1) above shall also apply to its representative; in the case 
of Korea Federation of Small Business, the aforesai d provisions shall also apply to its member who 
has directly caused the restriction of its qualif ication. Notwithstanding the foregoing provisions, the 
provisions of subsection (1) above shall not ap ply to other representative(s) of the aforesaid 
corporation or other entity who has not dealt with th e affairs related to the said tender or contract, if 
there are more than one representative in th e abovementioned corporation or other entity. 
 (4) If a corporation or other entity has appoin ted 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 sh all also apply to the representative. 
 (5) When placing restriction on qualifications for pa rticipating in the tender, the President of the 
Invested Institution shall clearly specify the info rmation 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 govern ors and president of each Invested Institution and 
shall also post the same on the official gazette:   1. Company name (trade name), address, na me (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 re gistration number under applicable laws 
and ordinances; 
 2. Duration of restriction pl aced on qualifications for partic ipating in the tender;  and 
 3. Cause of restriction placed on qualifi cations for participating in the tender. 
 
(6) If the President of an Invested Institution h as been informed of the fact that a person's 
qualifications for participating in the tender is rest ricted 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 re stricted 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 regi stration 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 ordina nces, in order to prevent any person with such 
restricted qualifications from participating in the te nder 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 qua lifications 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 can cellation 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 be en 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 take n by all means to ensure that a person whose GPA/W/286 
Página 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 on 
the 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 pe rson's qualifications for participating in the 
tender pursuant to the provisions of subsection (1) of  Article 23 hereof, the president of the Invested 
Institution concerned shall allow the said person or  his/her representative an opportunity to represent 
his/her opinion in advance and shall hear the opini on from the interested parties, if it is deemed 
necessary; provided, however, that the foregoing provis ions shall not apply where the subject of such 
intended restriction or its representative has not res ponded thereto, without justification, or such an 
opportunity to represent such opinion cannot be a llowed 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 concerne d 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) a bove shall clearly state that any failure to 
respond to such notice without justification shall co nstitute 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 a nd have the person present verify and sign the same. 
 
Article 25 (Administrative Protest)  
 (1) The person (for the purpose of this Article, he reinafter referred to as "Protester") who has 
suffered any unfavourable treatment from the Preside nt or Contracting Officer of an Invested 
Institution, due to the matters as de scribed 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 proc urement contract to be entered into by the 
Invested Institution through an international tender; 
 2. Matters related to qualificati ons 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 occu rred or within 10 days after the Protester becomes aware of such 
action.  GPA/W/286 
 Página 77 
 
 
  
(3) Within 10 days after receipt of such prot est as mentioned in subsection (1) above, the 
President of the Invested Institution concerned sha ll 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 G overnment-invested Institutions, within 15 days from 
the date of receipt of such notice.  Article 26 (Commission on Mediation of Di sputes 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 "Co mmission") shall be established, within the Ministry 
of Finance and Economy, for the purpose of re viewing 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 suffe red 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 In stitution through an international tender conducted pursuant to the 
provisions of the Agreement on Government Pr ocurement and a bilateral agreement by any 
organization other than an Invested Institution am ong 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 Commission member by the Ministries of Finance and Economy, Defense, Government Administration and Home Affairs, Commerc e, Industry and Energy, Information and 
Communication, and Construction and Transportation, Public Procurement Office 
and the Minister; 
  2. The persons commissioned by the Minister 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 
Página 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 Commission 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 medi ate 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 st op 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 Instituti on 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 subsect ion (1) above since it may be likely to adversely 
affect the public interest or the interest of parti es concerned  the Commission shall notify the Protester 
and the Invested Institution concerned in reason in writing.  
Article 30 (Chairman's Responsibilities)  
 
(1) The Chairman shall be responsible for ove rall 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 adopt ed 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 d eal with the affairs of the 
Commission.   GPA/W/286 
 Página 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 concerne d shall submit to the Commission 
in writing his/her opinion about such Petition for Revi ew within 14 days from the date of receipt of 
the notice mentioned above. 
 (2) If it is deemed necessary, the Commission ma y request the Protester, the President of the 
Invested Institution concerned to submit to th e 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 Ins titution, 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 th e 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 con cerned, or damages or indemnities for loss resulting 
therefrom.  (3) The damages or indemnities for loss under s ubsection (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 
Página 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 in to effect on the date of promulgation hereof. 
 (2) (Validity) The provisions of Article 17 here of 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 bon d received on or before 6 July 1995. 
 (4) (Transitional Measure concerning the Ac tions done in compliance with previous 
Notifications) All the activities done in accordance w ith the notification prescribed by the Minister 
pursuant to the provisions of subsection (3), Ar ticle 20 of the previous Framework Act on the 
Management of Government-invested Institutions (meaning Legislation No. 5812 "Framework Act on 
the Management of Government-inv ested Institutions" before revised by an amendment thereto.) shall 
be deemed to have been done in  compliance with these Regulations.
 
 
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