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Aug 24, 2011

Top Ten Things to Do Before Manufacturing in Korea

Korea, in most cases, is a much better choice for the manufacturing of hi-tech, biotech, chemical, petroleum, skilled crafted (tanned leather), construction, complex metal crafted, specialty steel, automotive, semi-conductor, medical and pharmaceutical equipment and goods than China and most nations in Asia, because of Korea’s skilled work force and increasingly transparent business practices.

In many cases, manufacturing in Korea will not, in the end, be more costly than manufacturing in China, because of the increased efficiency of Korean workers and the, often, lower cost of doing business.  China is no longer cheap and China will never be easy.

However, before going into any manufacturing arrangement in Korea here are the Top Ten things you need to know before investing money in Korea in a manufacturing venture or like Korean venture.

The list assumes that you will have a local company as your JV partner in this venture:

  1. Register all Intellectual Property including your trademarks and patents in Korea.  No - your E.U., U.S., Indian, Japanese etc. registrations are not enough (See: Don't Just Trust US: Trademarks in Korea); 

  2. Due Diligence, Due Diligence, and More Due Diligence (See: Listen to My Mother: JVs in Korea; Listen to my Mother: Minority Shareholder Rights);

  3. Complete a decent feasibility study.  This does not mean simply running a cost estimate;

  4. Consult a technical adviser;

  5. Checkout and go through my Stock Purchase/JV DueDiligence Check List;

  6. Meet the Anticipated JV Partner and learn about the partner.  A discussion on the phone is not enough either is a meeting over dinner.  Have a local help with feeling the person out; 

  7.  Execute a Non Disclosure Agreement (NDA) in English and Korean (Liquidated Damages in NDAs in Korea);

  8. Execute OEM, Manufacturing, JV, Supplier, Shareholder Agreements as the case may be in English and Korean.  Don’t get them drafted by hacks or those who don't have experience in Korea.  No, the lawyer you use in NY is not good enough.  I write a great deal on this issue;

  9.  Research or have researched benefits to manufacturing in the Korean Free Trade Zone (FTZ);

  10. Research or have researched benefits to manufacturing or employing people in certain areas of the country.  Example: Seoul government subsidizes new hires in certain industries;

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SeanHayes@ipglegal.com