Lawmaker introduces bill to stop prime contractors from delaying subcontractor payments through inspection delays

Rep. Heo Seong-mu of the Democratic Party of Korea, who represents Changwon's Seongsan District in South Gyeongsang Province, said Thursday he had introduced a bill on June 23 to amend the Act on Fair Transactions in Subcontracting. The bill aims to prevent prime contractors from delaying payment by dragging out inspections after subcontractors have already delivered goods.

Under current law, the date on which a prime contractor "begins an inspection" counts as the official date of receipt. The 60-day statutory deadline for subcontract payment starts running from that receipt date.

In practice, however, industry observers say it is common for prime contractors to unreasonably postpone on-site visits and inspections — citing staff shortages or inventory management concerns — even after a subcontractor has completed delivery and formally requested an inspection. This effectively pushes back the official "receipt date" itself.

Because any delay in conducting the inspection shifts the legal receipt date by the same amount, small and medium-sized partner firms that have already delivered their goods are left waiting for payment, exposing them to cash-flow problems and the risk of cascading insolvencies — a gap in the existing regulatory framework.

To close that gap, the bill would legally require prime contractors to begin an inspection within seven days of receiving a subcontractor's request, absent a legitimate reason for delay. It also adds a provision deeming goods to have been properly received on the eighth day if the prime contractor has not started an inspection within that window without justification.

If passed, the legislation is expected to block prime contractors — including large conglomerates — from deliberately stalling inspections to defer payment, and to significantly reduce the number of cases in which subcontractors are left bearing the burden of unjustified delivery delays.

"This amendment is a piece of livelihood legislation aimed at blocking prime contractors' arbitrary inspection-delay tactics, protecting the legal rights of subcontractors and improving their cash-flow predictability," Heo said. "We will push to pass this bill quickly so that small and medium-sized enterprises can be paid on time for the work they do in a fair environment, and so that a sound subcontracting ecosystem can take root."