What is a replacement-refund system?

It is a system to enable replacement or refund via “arbitration” between the manufacturer and the consumer in case a defect of the same problem is repeated in a new motor vehicle and is impossible to repair.

Subject

Motor vehicles (excluding two-wheeled motor vehicles) that are self-authenticated and sold in the domestic market shall be subject to the replacement-refund system. However, if a transportation service provider owns two or more vehicles for business purposes under the “Passenger Transport Service Act” or “Trucking Transport Service Act”, such vehicles shall be subject to the system.

Conditions for replacement and refund

• Shall be sold according to a written contract, including guarantee of replacement or refund.
• Safety concerns, loss of economic value, or difficulty of usage are expected due to the defect.
• Within one year after delivery, less than 20,000 km of travelling distance, failure to correct after two repairs for serious defects or three repairs for regular defects, and exceeding 30 days of accumulated repair period- only repairs done by the manufacturer or maintenance companies consigned by the manufacturer are applicable.

Proceedings of replacement and refund

• Arbitration proceedings shall be initiated once the arbitration of replacement and refund is registered to the Committee for Deliberation on Safety and Defects of Motor Vehicles by an owner within two years after delivery.
• Arbitration tribunal shall be comprised of three members, and it shall be appointed by the committee chairperson for each case from among the members of the Committee for Deliberation on Safety and Defects of Motor Vehicles, but the members whom the parties agree to select shall be appointed as arbitrators, and the chief of an arbitral tribunal shall be selected by agreement among arbitrators.

Effects of arbitration award for replacement and refund

Effects of arbitration award are equally as binding as a final court judgment

Notes

• Upon the initiation of arbitration proceedings, any other proceeding cannot take place under the same case.
• When calculating the number of repair attempts, corrective measures of manufacture defects (recall) under Article 31 of the “Motor Vehicle Management Act”, or any gratuitous repair performed according to Article 32-2 of the same Act shall be excluded from the calculations. However, if the consumer recognized the defect in advance and requested repair and inspection, it shall be included in the calculating.
• Shall be rejected if conditions of arbitration application are not satisfied, or defect corrections are declined.