The timing has rarely been better for Korean companies to pursue U.S. government contracts. The White House and the Republic of Korea signed a Technology Prosperity Deal MOU in October 2025 covering AI, semiconductors, quantum computing, and space. Korean companies committed $350 billion in U.S. investments. And the administration’s America’s Maritime Action Plan — issued in February 2026 pursuant to Executive Order 14269, “Restoring America’s Maritime Dominance” — explicitly names the Republic of Korea as a key partner in revitalizing U.S. shipbuilding capacity, reflecting Korea’s position as one of the world’s foremost shipbuilding nations.
South Korean shipbuilders, including Hanwha Ocean and HD Hyundai, are already deepening their footprint in the U.S. defense industrial base, from MRO work on U.S. Navy vessels to partnerships on autonomous surface ships. The ROK’s long-standing designation as a Trade Agreements Act country means Korean-origin products are generally eligible for U.S. federal procurement without the tariff and sourcing complications that affect many other foreign entrants.
The geopolitical and strategic alignment is real. But alignment at the government level does not automatically translate into market access at the contract level. The U.S. government contracts market operates under a distinct legal and regulatory framework — one that routinely surprises sophisticated commercial companies, including those with strong existing U.S. commercial operations.
In March, we had the opportunity to present on this topic in Seoul as featured speakers at the Innopolis Project 2026, a Korea-U.S. bilateral initiative funded by the Korea Innovation Foundation to prepare high-potential Korean startups and scale-ups for engagement with U.S. public-sector, defense-adjacent, and regulated markets. What follows is a summary of the legal framework every Korean company should understand before pursuing U.S. government work.
The Threshold Structural Question
Before any compliance analysis begins, a Korean company must answer a foundational question: How will it participate in the U.S. government contracts market? The three primary structures are direct prime contracting, subcontracting through a U.S. prime, and forming or acquiring a U.S. subsidiary.
Each structure has a different compliance burden, risk profile, and ceiling on market access. Direct prime contracting is possible for unclassified work involving commercial items and TAA-compliant products, but it carries the full weight of FAR compliance and FCA certification risk. Subcontracting is the most common entry point — easier, with compliance burden partially absorbed by the prime — but False Claims Act liability still attaches to subcontractors who make or cause false certifications. A U.S. subsidiary is the highest structural investment but opens the most doors: GSA Schedule access, eligibility for certain set-aside teaming arrangements, and the possibility of facility security clearances for cleared work.
The right structure depends on the nature of the technology, the target contract type, and the company’s long-term ambitions in the market. Getting this decision right at the outset avoids expensive restructuring later.
Export Controls Come First
Korean companies frequently underestimate the importance of export control compliance — not because they are unfamiliar with export restrictions generally, but because they are often not aware that sharing controlled technology with a U.S. prime contractor partner, or even with a foreign national employee inside the United States, can constitute an “export” under U.S. law.
ITAR governs defense articles and services on the U.S. Munitions List and carries criminal penalties of up to 20 years and $1 million per violation. EAR governs dual-use items and requires classification analysis before any U.S. government discussion involving controlled technology. While ROK-U.S. defense cooperation agreements can streamline certain licensing processes, they do not eliminate the classification obligation. The practical rule is simple: Classify your technology before any U.S. government conversation begins, not after.
The Five Structural Mistakes That Stall Korean Companies
In advising foreign companies entering the U.S. government market — and in the questions we fielded from the Innopolis Project audience in Seoul — we see the same structural errors recur. For Korean companies specifically, the five most common are:
- Supply chain TAA risk. Korea’s TAA-designated status is an advantage, but only if the end product’s full supply chain is compliant. Components sourced from non-designated countries — most commonly China — can disqualify an otherwise Korean-origin product. Hardware-intensive Korean technology companies must audit their full supply chain before any government sale.
- Compliance program under-investment. CMMC, ITAR/EAR, SAM.gov registration, and FedRAMP are ongoing obligations, not one-time certifications. Foreign subcontractors frequently achieve initial compliance and then fall out of it — triggering contract termination, debarment risk, or criminal referral. Budget for continuous compliance operations from Day 1.
- The FedRAMP gap. Korean SaaS and cloud providers consistently underestimate the FedRAMP authorization timeline — typically 12 to 18 months — and the investment required, which commonly exceeds $500,000. Entering the federal cloud market without a FedRAMP roadmap means stalled sales. Partnering with a FedRAMP-authorized provider as an interim path is a common workaround while the authorization process runs.
- FOCI non-disclosure risk. Foreign ownership, board-level influence, or contractual obligations to foreign state-linked entities must be disclosed. Failing to do so is a false statement risk and a potential debarment trigger. FOCI analysis must be thorough and updated as ownership structures evolve. Proactive disclosure and mitigation are always preferable to discovery.
- Assuming commercial success translates. The U.S. government contracts market is a distinct buyer ecosystem with multi-year acquisition timelines, past performance requirements, and compliance-first evaluation criteria. Commercial market success — even in the U.S. commercial market — does not substitute for SAM.gov registration, cleared personnel, or a compliance program. Korean companies that treat government contracting as an afterthought to their commercial strategy consistently underperform those that build it as a parallel track from the outset.
A Phased Approach to Market Entry
For Korean companies that are ready to move forward, we recommend a three-phase approach:
- The first phase — assessment and preparation — involves ITAR/EAR classification, FOCI analysis, SAM.gov registration, compliance gap analysis, and identification of target contracts and vehicles. This phase is typically completed in six to 12 months and is a prerequisite for everything that follows.
- The second phase — market entry via partnership — involves identifying and approaching U.S. prime contractors, executing teaming and subcontract agreements with appropriate IP protections, pursuing GSA Schedule access through a U.S. entity if one has been formed, and beginning FedRAMP authorization for cloud and SaaS offerings. This phase builds the past performance record that is essential for any direct government contracting.
- The third phase — direct participation and scale — involves forming a U.S. subsidiary if cleared work is a priority, pursuing facility security clearances, achieving CMMC certification, and building direct program office relationships. For some companies, this phase also includes acquiring or merging with an established U.S. government contracting company to accelerate past performance, clearances, and existing contract vehicles.
The Opportunity Is Real — But So Is the Complexity
The ROK-U.S. alliance, Korea’s deep tech capabilities, and the current bilateral investment moment create a genuine opening for Korean companies in the U.S. government market. But the legal and regulatory framework governing that market is unforgiving of companies that move without preparation. The companies that succeed are those that treat government contracting compliance as a foundational investment — not a checkbox to address after contract award.
