South Korea has become one of the fastest-growing defense markets on the planet. Korea’s defense exports reached $15.4 billion in 2025, surging 60% year-on-year, driven largely by major contracts with Poland and other NATO-aligned buyers. The country’s four largest defense firms — Hanwha Aerospace, Hyundai Rotem, Korea Aerospace Industries, and LIG Nex1 — are expanding aggressively, and their expansion requires something Korean industry has historically been pragmatic about acquiring: U.S. technology, components, and partnership.
At the same time, the administration’s shipbuilding initiative and the broader U.S.-Korea technology partnership have created a parallel pull in the other direction. HD Hyundai and Cerberus Capital Management have announced a $5 billion investment program to upgrade U.S. shipyards, while Hanwha Ocean unveiled a $5 billion infrastructure plan to expand Pennsylvania’s Philly Shipyard and boost production capacity. American companies that understand how to structure technology partnerships, teaming arrangements, and export-compliant transactions with Korean defense firms are well positioned in both directions — selling into Korea and partnering with Korean companies on U.S. Navy programs simultaneously.
We recently returned from Seoul, where we presented on U.S. government contracts law to Korean deep tech companies and investors at the Innopolis Project 2026. The conversation in that room was as much about what Korean companies need to understand about the U.S. legal framework as it was about what U.S. companies need to understand about engaging Korean defense partners. We have addressed the former in a companion piece that covers the structural, compliance, and market entry questions Korean companies face when pursuing U.S. government contracts. This post addresses the other side of that equation: what U.S. companies need to know before they walk into the Korea defense market.
Link to The Opportunity Is Structural, Not Cyclical The Opportunity Is Structural, Not Cyclical
Korean defense companies have adopted a philosophy of “own the brain, share the body” — controlling integration and software while integrating best-in-class components from global partners, including long-standing U.S. relationships. The KF-21 fighter uses U.S. engines. Korean destroyers incorporate U.S. combat systems. Hanwha has maintained a strategic partnership with Boeing for over a decade. This is not accidental openness — it is deliberate policy, and it creates recurring opportunities for U.S. component suppliers, technology licensors, and teaming partners.
The deal flow reflects that reality. South Korea’s air force recently tapped L3Harris Technologies for a $2.3 billion program to build an airborne warning and control aircraft — an agreement expected to support more than 6,000 U.S. jobs and a clear example of the bilateral defense trade relationship operating at scale. Huntington Ingalls Industries and HD Hyundai Heavy Industries have signed an MOU to pursue strategic teaming opportunities for U.S. Navy auxiliary shipbuilding programs. HD Hyundai and Anduril have partnered on autonomous unmanned surface vessel development for U.S. Navy programs. These are not one-off transactions — they are the leading edge of a sustained structural shift in how U.S. and Korean defense firms are organizing their relationship.
For U.S. companies, the opportunity falls into four categories: component supply into Korean defense programs; technology licensing and transfer arrangements; teaming on U.S. government programs where Korean firms are entering as subcontractors or co-primes; and MRO and sustainment partnerships for Korean-origin platforms operating in the U.S. or with U.S.-allied forces.
Link to Export Controls Are the Starting Point, Not a Technicality Export Controls Are the Starting Point, Not a Technicality
The single most important step a U.S. company must take before any commercial discussion with a Korean defense firm is export control classification. ITAR governs defense articles and services on the U.S. Munitions List; EAR governs dual-use items on the Commerce Control List. Most U.S. defense technology falls under one or both frameworks, and sharing controlled technical data with a Korean counterpart — even in a preliminary business discussion — constitutes a regulated export requiring prior authorization.
Korea is a Major Non-NATO Ally and a close security partner, which streamlines certain licensing processes and makes Korea a favorable destination under ITAR compared to many other countries. But favorable does not mean unregulated. The State Department’s Directorate of Defense Trade Controls administers ITAR licenses, and the Commerce Department’s Bureau of Industry and Security administers EAR authorizations. Lead times for licenses vary — routine commercial item authorizations can be obtained relatively quickly, while licenses for sensitive military systems, advanced electronics, and dual-use technology with clear defense applications require more time and documentation.
The practical starting point for any U.S. company entering the Korea defense market is a classification analysis: what technology is being shared, does it appear on the USML or CCL, and what authorization pathway is required. This analysis should precede any term sheet, MOU, or letter of intent with a Korean counterpart.
Link to Technology Transfer: Opportunity and Obligation Technology Transfer: Opportunity and Obligation
Korean defense companies are increasingly moving beyond purchasing finished products toward technology transfer, local assembly, and supply chain development — localization has become, in the words of one Hyundai Rotem executive, not an option but a requirement. For U.S. companies, this creates real commercial opportunity: Korean buyers who want the technology, not just the product, are willing to pay for it and structure long-term partnerships around it.
It also creates legal obligation. Technology transfer agreements with Korean defense firms must be structured to comply with ITAR and EAR transfer requirements, including end-use and end-user restrictions, re-transfer prohibitions, and mandatory reporting of violations. The agreement must specify what is being transferred, in what form, to whom, and for what purpose — and it must prohibit the Korean partner from re-transferring controlled technology to third parties without U.S. government authorization.
Two additional considerations apply specifically to technology transfer in the Korean context. First, Korean defense firms frequently have government as a significant shareholder or customer — DAPA, the Defense Acquisition Program Administration, is both regulator and buyer, and it actively participates in structuring major technology transfer arrangements. U.S. companies should understand that their Korean counterpart may be negotiating on behalf of, or in close coordination with, the Korean government. Second, the question of IP ownership in jointly developed technology must be addressed explicitly — Korean firms are sophisticated about IP and their contracts reflect it.
Link to Teaming on U.S. Government Programs Teaming on U.S. Government Programs
The most rapidly growing segment of U.S.-Korea defense cooperation involves Korean companies entering the U.S. government market — not just as exporters to Korea, but as teammates and subcontractors on U.S. Navy, Army, and DOD programs. For U.S. prime contractors structuring these arrangements, the legal issues are distinct from export control.
FAR flow-down requirements apply to all subcontractors regardless of nationality — a Korean subcontractor is subject to the same FAR clauses as a domestic one, including Buy American Act compliance, small business subcontracting plan requirements where applicable, and DFARS cybersecurity and supply chain security requirements. CMMC requirements are now flowing down to subcontractors on DOD contracts, and Korean firms without a U.S. subsidiary and certified CMMC compliance will face increasing barriers as a result.
U.S. prime contractors should also address FOCI considerations explicitly in teaming arrangements. Where a Korean subcontractor has ownership, board-level influence, or significant contractual relationships with the Korean government or state-linked entities, that FOCI must be analyzed and disclosed appropriately. The increasing depth of Korean government involvement in Korean defense firms’ U.S. market entry makes this analysis more important, not less. For Korean companies navigating these same requirements from their side of the table, our companion piece addresses the structural and compliance questions in detail.
Link to The Bilateral Moment The Bilateral Moment
The legal framework has been stable for years; what has changed is the political and strategic environment. The administration’s explicit prioritization of Korea as a shipbuilding and technology partner, the White House Technology Prosperity Deal MOU, and the scale of Korean investment commitments to the U.S. industrial base have created a bilateral moment that makes commercial engagement between U.S. and Korean defense firms not just legally permissible but strategically encouraged.
U.S. companies that move now — with proper export control classification, well-structured technology transfer and teaming agreements, and FAR-compliant subcontract arrangements — are positioning themselves at the front of a queue that is going to get longer. The legal groundwork is not complicated, but it is essential, and it is far easier to build correctly from the outset than to remediate after a deal is done.
Aron Beezley and Nathaniel Greeson are government contracts partners in Bradley’s Washington, D.C. office. They were featured speakers at the Innopolis Project 2026 in Seoul on March 20, 2026. If you have questions about U.S.-Korea defense cooperation, technology transfer, or U.S. government contracting, please contact Aron or Nathaniel directly.