The Korea Fair Trade Commission (KFTC) recently said that the agency has issued a corrective order and imposed a fine of 96 million won (about $70,700) on Korea DH Shipbuilding (formerly Daehan Shipbuilding) for passing workers’ compensation costs to subcontractors.
According to KFTC, during the period from July 2018 to May 2021, DH Shipbuilding commissioned a total of 56 subcontracting companies to carry out refitting and retrofitting operations related to shipbuilding. In this process, DH Shipbuilding established a special agreement to transfer the costs of worker accidents and safety accidents borne by the main contractor to the subcontractor through the supplementary agreement to the basic transaction contract signed with the subcontractor and the safety and health agreement issued in the subcontract.
In addition, the KFTC found that in a total of 6,700 transactions, contracts containing work details and related payments for subcontracting were not issued until at least 1 to 219 days after the subcontracting firms began the work, or until the work was completed.
Therefore, the KFTC ordered DH Shipbuilding to prevent the same or similar behavior from recurring in the future and imposed a fine of 96 million won (about $70,700) for violating the obligation to issue a contract.
In response, the KFTC explained that this move is a revelation of pre-construction and post-construction contracts and unfair special contract transactions that are common in the shipbuilding industry. An agency from the official said, “By raising the awareness of main contractors and preventing the same and similar behavior from recurring, we will contribute to preventing subcontracting companies from suffering from unfair subcontracts in the future.”
DH Shipbuilding, a mid-sized shipbuilder that has been growing in the liquefied natural gas (LNG) dual-fuel carrier market and the mid-sized container ship market, was acquired by South Korean private equity fund KHI Group in September 2022 and renamed DH Shipbuilding with a 95 percent stake.
The shipbuilder, which previously focused on Aframax and Suezmax tankers, has been diversifying its ship types in recent years, taking on its first shuttle tanker in 2020, its first LNG dual-fuel-powered Aframax tanker in 2021, and its first mid-sized container ship in 2022.
The shipbuilder, which previously focused on Aframax and Suezmax tankers, has been enriching its ship types in recent years, for undertaking its first shuttle tanker in 2020, undertaking its first LNG dual-fuel-powered Aframax tanker in 2021 and undertaking its first medium-sized container ship in 2022.
On April 23, DH Shipbuilding made significant progress on its first medium-sized container ship project since its establishment. The shipbuilder held a same-day naming ceremony for three 8,000 TEU container ships built for Greek container shipping company Danaos Shipping. The order was signed on April 1, 2022, with deliveries starting from April 2024.
Data from the Korea Export-Import Bank’s (KEXIM) Overseas Economic Research Institute show that in 2023, South Korea’s medium-sized shipbuilders took orders for a total of 33 new ships valued at $2.24 billion. Among them, DH Shipbuilding took orders for 14 new ships worth $1.15 billion, meeting 130% of its annual order target and becoming the only mid-sized shipbuilder in Korea to achieve profitability. The company’s consolidated operating profit and net profit last year amounted to 35.9 billion won (about $26.44 million) and 38.3 billion won (about $28.21 million), respectively.
