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Dec 29, 2011

Hiring a Criminal Defense Attorney in Korea

In all cases, in Korea, where you are accused of a crime and you fear that you may be sentenced to time in jail, may be deported or the conviction may harm your future, hire, quickly, an experienced and proactive Korean criminal attorney prior to any interrogations by the Korean police or prosecution.

Sadly, few lawyers, in Korea, are useful for criminal matters, since few lawyers are proactive when it comes to matters concerning the Korean government, experienced in criminal matters for foreigners or willing to upset the status quo (aggressively engage the prosecutor).

Please do your future a favor,  forgo any options provided at no or low cost unless you have no other options.

If you can't afford an attorney, the court, normally will appoint an attorney to assist you.  In most cases, the appointment of the Korean government-appointed attorney will be useless for your defense/sentence, since the appointment will be after interrogations, after the decision of the prosecutor to indict and often is an attorney that will only be going through the basic processes necessary for him to complete the matter and go on to the dozens of other matters that he has in front of him.

If you are in the U.S. military, the military will appoint you an attorney.  Also, the attorney will be appointed too late in the investigation stage.   The attorney appointed, overwhelmingly, in the cases that I have seen will simply going through the motions.

The handful of attorneys picked by the military are some of the least proactive attorneys I have seen in Korea and want, in the majority of the cases, to simply be on the good graces of their bread-and-butter (a Korean employee of the U.S. military).  If you are convicted of a crime, you will be discharged from the military.   This was not true a decade ago, but the military, even for "minor" violations of law have been quick to discharge soldiers.

Signs that you May Have Hired the Wrong Korean Lawyer
  • Your Korean lawyer is not operating based on a contingency fee (success fee: not guilty/no time served in jail etc.).   The best arrangement is a discounted hourly fee combined with a success fee, since you will receive a bill noting what the attorney is doing and the attorney will be motivated to do work on the matter even when the chance of "success" is slim.
  • Your Korean lawyer is too young (Early 30s) or too old (70s).  The lawyer will, likely, not have the experience necessary to handle the matter or will, simply, not be handling the matter.
  • Your Korean lawyer is directing you, consistently, to talk with a less experienced lawyer.  The less experienced lawyer is likely, only, doing the work and the more experienced lawyer is simply a rainmaker.
  • Your Korean lawyer has poor English language skills.  Without someone fluent in English, you run the risk of never getting your side of the story heard. 
  • Your Korean lawyer has few non-Korean clients.  Handling criminal matters for foreigners is vastly different than handling a typical criminal matter for a Korean.  Often, deals can be obtained with the prosecutor in non-violent crimes for foreigners, that are unavailable to Koreans.  Also, violent and public crimes, often, need to be handled with a decree of media and cultural savvy, since judges and prosecutors are heavily affected when the victim is a Korean and the perpetrator of the crime is a foreigner. 
  • Your lawyer never speaks.  A lawyer that never speaks is, typically, not a proactive lawyer.  Criminal cases are best handled with strategy and a proactive counsel willing to engage the police investigators, prosecutor and judge.  If your lawyer won't speak to you, he won't be speaking to anyone else and will likely simply go through the process, receive a guilty verdict and the typical sentence.
  • Your lawyer seems not to be listening.  Too often, lawyers, ignore clients.  Great defense lawyers  in Korea develop great defenses by listening and responding to clients.  If you have a lawyer that is not listening, he will likely just go through the process, receive a guilty verdict and the typical sentence.
  • Your lawyer in Korea has too many cases.  If he seems too busy he probably is too busy.  Criminal cases, often, need a great deal of time.  If the lawyer is not able to spend the time to talk with you, you may never be able to get the attorney to provide the time necessary to handle the matter.
  • Your lawyer in Korea hates you.  Koreans are passionate people.  If the lawyer hates you, he will likely take your money and do nothing for you.    Passion, too often, can lead Korean lawyers to be less than reasonable.   As we know, this is not only a Korean trait.
Related Articles
What do you think?
NY attorney Sean Hayes is the only non-Korean to have worked as a government attorney for the Korean court system.  He leads the Korea Practice Team at IPG.

Dec 24, 2011

Merry Christmas from IPG Legal

IPG Legal wishes you a happy and safe holiday season.  Our offices will be closed, worldwide, until December 27, 2011.

Dec 19, 2011

Limited Liability Companies under Amended Korea Commercial Code

Yuhan Hoesa is a form of a company in Korea similar to a western Limited Liability Company.  It has only been utilized, to date, by small privately held corporations and some financial companies under the Korean Asset-Backed Security Act, Korean Capital Markets Act or the Financial Investment Services Act. The revised Korean Commercial Code (KCC) allows for the more efficient and effective utilization of the Yuhan corporate entity.  I will be advising the use of this company form for some of my clients.  In the past, few clients would be advised to form a Yuhan Hoesa. 

The new Korean Commercial Code is scheduled to be implemented in April 2012.  No benefits from the amended KCC may be availed of prior to the implementation of the amendments. 

Major Revisions KCC Respecting Yuhan Hoesa:
  1. Unlimited Number of Members.  Prior to the amendments only 50 members was authorized without the express approval of the courts. (KCC Article 545);
  2. Liberalized Restrictions on Transfer of a Unit.  Units may be transferred under the amended KCC even without a Special Resolution being adopted at the General Members' Meeting. The present KCC allows for the minimum procedure for transfer to be a Special Resolution at a General Members Meeting. (KCC Article 556);
  3. No Minimum Capital Requirements.  Under the present KCC, the minimum capital contribution needs to equal or exceed KRW 10 million. The amended KCC eliminates this requirement. However, foreign companies will still be required to comply with the Foreign Investment Promotion Act which requires a KRW 100 million capital contribution to establish a foreign-capital invested company. (KCC Article 546);
  4. Yuhan to Chusik (Joint Stock Company).  Prior to the amended KCC in order to convert a Yuhan Company to a Chusik Company the unanimous vote at a General Members' Meeting was required. The amended KCC allows conversion to a Chusik through a special resolution with 50% of total members in agreement and 75% of the members voting.  (KCC 607)
I would welcome an amendment that would allow Yuhan's to issue bonds.  What is the rationale behind not allowing Yuhan's to issue bonds?  Can fiduciary duties be respected through enforcement of commercial law and criminal law and not simply tying up company management because of the perception that a breach is likely?
I wrote other updates on the Korean Commercial Code which may be found below:
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

North Korean Leader Jong Il KIM dead at 69: Son Takes Control of North

Jong il KIM is reported by the local and North Korean media as having died of a heart attack this last Saturday morning. 

The death has caused the Korean currency to decline by around 1.5% to the USD.  There are no signs that the change of power from the father to the son will lead to any issues in the North or South.  The political elite in the North are well taken care and are, thus, unlikely to consider disrupting the status quo.

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

Dec 18, 2011

Christmas in Asia: Do we Decorate Christmas Ferns?

One of our senior advisers (Tom Conyer) and his wife (Yeri) hosted a wonderful Christmas party in Seoul last night where we trimmed the tree.  This is a rare occasion to see me in casual attire and a house plant in Christmas attire.

Only in Asia.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

Dec 14, 2011

Setting Up a Manufacturing/Textile Plant in Bangladesh Through a Joint Venture: Top Ten Things to do Before You Go

Bangladesh is one of the world's largest exporters of textile/garments, rice, jute, potato, pineapple, mango, onion, banana, tea and tropical fruit. The nation, also, has a growing middle-class with an increasing appetite for western products.  The nation is, also, a oil and natural gas producing nation with the resources, mainly, being developed by foreign companies.

To date, most foreign companies operating in Bangladesh are from other South Asian countries and India, but more Western companies are finding the growing middle-class a great market and the low-cost and highly-skilled labor an opportunity for companies that are being squeezed for margins because of the increased labor costs in China, Vietnam, India and Thailand.

The IPG assists mainly American, Australian, British, Canadian, Korean and Chinese companies to enter the Bangladesh market either through JVs, OEM agreements or as 100% foreign-invested enterprise. The following advise is related, solely, to manufacturing in Bangladesh as a JV.  Please take the list as the beginning of your due diligence on doing business in Bangladesh.

Top Ten Musts Before Starting a Manufacturing/Garment Industry in Bangladesh:
  • Register all intellectual property including your trademarks and patents in Bangladesh.   Your E.U., U.S., Indian, Japanese etc. registrations are not enough to protect your IP in Bangladesh;
  • Due Diligence, Due Diligence, and More Due Diligence. Read our many posts on this issue;
  • Put systems in place to protect trade secrets;
  • Complete a decent feasibility study. This does not mean simply running a cost estimate;
  • Consult a technical adviser;
  • Checkout and go through IPG's Stock Purchase/JV Due Diligence Check List;
  • Meet the anticipated JV partner many times 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;
  • Execute a Non-Disclosure Agreement (NDA).  Have this done by someone who does business in Bangladesh not you lawyer in Hong Kong, the states or the U.K.; and
  • Execute OEM, Manufacturing, JV, Supplier, Shareholder Agreements as the case may be.  Don’t get them drafted by hacks or those who don't have experience in Bangladesh. No, the lawyer you use in NY is not good enough.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

IMF Statement on Bangladesh Needed Reforms

The following is a press release by the IMF. For the good of the people of Bangladesh, hopefully, the issues reflected in the following statement by the IMF Mission to Bangladesh will be accomplished by the government.

Bangladesh is a wonderful country to live and do business in, because of its vibrant and dedicated population and rich and proud history. However, deep government and systematic problems has allowed the country to fester in poverty. The size of the population (160 million) should allow the nation to be on par in GDP per capita with neighboring nations including Thailand, Vietnam and India.

The IMF is not always correct, but the basic issues facing Bangladesh are well-known and have not been properly addressed for decades. Hopefully, the government has the power to get the system in order to allow the middle-class to grow and thus fuel a vibrant economy with the assistance of experienced Bangladesh and foreign businesses fueling the export, service and resources industries.
An International Monetary Fund (IMF) mission visited Dhaka during November 30–December 13, 2011 to discuss a reform program with the government of Bangladesh for possible support under the IMF’s Extended Credit Facility (ECF).

The mission met with the Honorable Prime Minister Sheikh Hasina, her economic and energy advisors, the Minister of Finance, Finance Secretary, Bangladesh Bank Governor, and other senior officials, as well as private sector, development partner, and civil society representatives.

Discussions centered on near-term macroeconomic policy priorities and growth-critical structural reforms, which could form the basis for a program arrangement under the ECF.

The mission noted that well-coordinated policy adjustments were needed to mitigate balance of payments, fiscal, and inflation pressures and contain macro-financial risks faced by Bangladesh. It stressed the need for forceful policy actions on both the macroeconomic and structural fronts in light of a recent weakening in the global economic environment, rapid rise in oil imports and subsidy costs, and a pronounced increase in government borrowing from the banking system.

In this context, agreement was sought on a range of measures needed to reduce external and domestic imbalances, restore macroeconomic stability, and rebuild foreign reserve buffers. Discussions focused on policy moves to engender moderate monetary and fiscal tightening, backed by greater exchange rate and interest rate flexibility. In keeping with the government’s reform plans, commitments were also sought on more deep-seated measures needed to bring lasting adjustment, mainly to tax policy and administration, public financial management, financial sector oversight, and the trade and investment regime.

A finalization of program understandings awaits further consultation among officials and with the IMF over the near term to ensure timely implementation of envisaged policy adjustments.

10 Must Dos Before Engaging in a OEM Relationship with a Chinese Company

A blog, I just discovered, because of reading a post at the China Law Blog, details a strategy to assist in guaranteeing that your products coming from China are worth more than the box they are shipped.

We agree, generally, with the advice, however, we hope that clients wishing to engage in an OEM/Manufacturing relationship with a Chinese manufacturer will not neglect to:
  •  Have Professionally Drafted OEM/Manufacturing Agreements in Chinese and English;
  •  Register all IP in China;
  •  Protect your Trade Secrets;
  •  Choose the Right Chinese Manufacturing Partner Through Due Diligence; and
  •  Build Internal Quality Control and Compliance Processes at the Chinese Company.
Please do your company a favor and think (be systematic) before you jump. 

The post can be found at: China Success Stories
1. Detailed Documents
"The number one key to quality when working with factories in China is documentation. Having bi-lingual, detailed, factory agreed upon checklists in place that document an item’s specifications and the criteria for inspecting the product before shipment, is essential to controlling product quality. One can not say for sure, but I would be willing to bet that the factories responsible for products recently recalled for lead paint did not have bi-lingual documentation on hand from their customer stating the type of paints that could and could not be used. Sure, this type of documentation takes time and hard work to create, but putting such processes in place is the first and most important step in avoiding quality issues. QC Checklists should describe in detail:

a) Item Packaging
b) Item Defect Classification (what is considered an defect and at what severity)
c) Item Size and Other Specifications
d) Item Functionality and How it is Checked"

2. Factory Presence
Having a presence at the factory ensures that both factory staff and management really know who you are. Either through a 3rd party QC company or your own staff, ensure that you are being represented at the factory in person on a regular basis, and that the factory clearly connects your presence there with your production.

3. Inspection
Perform regular product inspections (either with your staff or a via 3rd party), not only on the final product shipment, but also during production (otherwise knows as DUPRO). Ensure these inspections are consistent and based on clear inspection criteria. Always review the inspection results with factory management and their own QC team.

4. Keep Approved Samples
Some say that a picture is worth a thousand words. I say that a sample is worth a thousand headaches! Items often get revised and modified several times in the sourcing process, and then again after production begins. Keeping an approved sample in your office, and also one in the factory that can be used to verify the production product by the QC team, is essential in seeing eye to eye with your Chinese suppliers.

5. Take Responsibility
Nothing will alienate your Chinese suppliers more than a mistake on your side for which you take no responsibility, and blame their misunderstanding. I’ve seen hard-headed buyers make this mistake more than once, to the demise of their hard earned factory relationships. So, make sure you have all the facts before you start to blame. Recognize when it’s possible that a mistake or production issue may have been caused by your own fault, or your own team’s mis-communication. Take responsibility when this happens, even if it means a financial loss. If you are working with the factory on a long term basis, the credibility you will gain will outweigh what you have given up.
Again, please don't forget (link to article on matter in red):
          6.  OEM/Manufacturing Agreements: Do Contracts Matter in China?
          7.  Register IP: IP Protection Strategies Work in China
          8.  Protect Trade Secrets: Keep Your Trade Secrets Secret in China
          9.  Partner Due Diligence:  Due Diligence or Get Robbed by the Bar Sisters
         10. Build Processes: Developing Trust in China by Building Processes

Protecting China Trade Secrets: The Liu Xiucai Saga

The New York Times, recently, posted an article bringing attention to one of the most common potential pitfalls of promising companies here in China. The article relates to the plight of Cathay Industrial Biotech and the need to keep your trade secrets completely secret in China.

Cathay’s founder, Mr. Liu Xiucai earned his Ph.D. in chemistry at the University of Wisconsin before returning to China to develop China’s domestic market for biotech innovation. In 1997, Mr. Liu developed a new and more efficient method of using microbe fermentation to produce diacid, an essential building block of nylon. After taking Dow Chemical as its largest customer, Cathay attracted $120 million in investments structured by Goldman Sachs with a plan toward an IPO in the states in the summer of 2011.

While, today, Cathay produces half the world’s diacid, its prices, profits and margins have been slashed and the IPO postponed indefinitely. What happened, of course, is that the Chinese manager of Cathay’s diacid plant, Wang Zhizhou, quit and took 6 employees with him to start his own company to compete directly with Cathay in the production of diacid.

What made this interesting enough for the New York Times is that Wang’s coup was made possible by the financial and political support of the Chinese government. Wang’s new company, Hilead, secured $300 million in financing from the state-owned China Development Bank.  Hilead partners have strong ties with the Shandong government.

Having a factory manager that runs off with secrets to start a competing firm is a well-known occurrence in China. Successful businesses here know that a great deal of resources need to be reserved for preventing the theft of whatever makes them profitable.

Employees leave with production methods, client lists, patents, trademarks, and other employees. Sometimes, legal action can be taken after the fact, but often, as in Cathay’s case, the prospects are quite grim.

Mr. Liu acted quickly, filed a lawsuit with the local government and sent the police to investigate Hilead’s factory. However, when they arrived, Beijing had declared diacid production a matter of national security, voiding any authority they had to gather evidence and build a case in Cathay’s defense.

Being up against the government is rarely a good idea in China. A legal win for Cathay would mean a loss for the Shandong government, making the matter nearly impossible.

What’s important to note, in this case, is that IP theft is not just committed against foreigners or the carelessly naïve. Foreigners often come with the expectation that Chinese competitors target foreign ideas but are less able to steal from each other. This mindset often leads to the wrong way of dealing with these type problems. A Chinese partner may know more about navigating local laws and politics, but as Cathay’s situation shows, its no guarantee of protection.

Seeing dollar signs, foreign investors in China too often neglect to file the necessary patents and trademarks. We see many cases where long-term relationships with Chinese partners, based on blind trust, leads to poorly written contracts that are difficult to enforce.

We, also, see too many foreigner business operating in China not doing a some good ole self-help by keeping trade secrets secret by implementing strategies to prohibit access to key data. 

Cathay’s case has gained a lot of attention and commentary from various news sources. Some suggest that greater compensation or profit sharing could have persuaded Mr. Wang to stay with Cathay, but there is little evidence that loyalty can be purchased so easily.

It’s quite likely that financial independence may have only accelerated Mr. Wang’s plans to start out on his own. Anywhere in the world, the more there is at stake, the more must be done to protect the stake. Mr. Liu decided to produce diacid in China, like many of our non-Chinese clients, where production costs are lower, but in doing so he gave up many of the legal protections that would have protected him in the West.

His decision to raise money through Goldman Sachs was clearly better for his long-term plan of taking the company public in the US, but by neglecting the Shandong government and not protecting trade secrets, it seems his long-term plan may never come to be.

This is simply a typical case of the poor control of trade secrets, mismanagement of company employees, lack of understanding of the workings of Chinese local politics and, possibly, the poor structuring of a deal.

What do you think?

By Frank Caruso

Dec 13, 2011

Legal and Business News from Asia (12/12/2011)

This is the first of a series of bimonthly updates by IPG Legal.  The updates will, normally, be post on the 2nd and 3rd Tuesday of the month.

India: Opposition parties, regrettably, in India, won a battle as, in the end, the plan to open the retail sector to foreign companies will be suspended. This quick backtracking weakens, even more, the Government and leaves foreign investor leery of the state of local Indian politics and increased fear of foreign capital. “India suspends plan to let in foreign retail companies,” The China Post.

Singapore: According to the PricewaterhouseCoopers Survey, if you want to invest in real estate in Asia, Singapore is the best place to do so. Shanghai comes second. “Singapore remains top market in Asia for property investments: PwC survey.”   IPG doesn't agree.  Straits Times.

East Asia: The third economic bloc, after the USA and the European Union, is on its way. This Friday, China, Japan and Korea will discuss a possible three-way free trade agreement.
“Korea, China, Japan set to conclude study on three-way FTA,” The Korea Herald.

China: To celebrate the tenth anniversary of the entry of China in the World Trade Organization (WTO), Pascal Lamy, its Director General, made some very interesting comments in an article. Mr Lamy explains, in detail, the role China’s accession to the WTO played in its impressive economic growth, the benefits that China’s trade partners received from its WTO membership and the role of China as a key member of the WTO. “China's accession to WTO worth celebrating,” Asia News Network.

Vietnam: The trade agreement between Vietnam and US is quite successful, according to the Viet Nam News, as it boosted the relations between the two countries. According to the Vietnam Prime Minister, the Vietnamese Government will improve its investment environment to attract more foreign investors. “Trade agreement enhances Viet Nam-US relations: PM.” The Viet Nam News.

    Dec 11, 2011

    New Head of the Bangladesh Law Team at IPG Legal

    The IPG is proud to announce the appointment of Mr. Mohammad Ali Akanda as the new Chair of the Bangladesh Practice Team.  The Bangladesh Practice team is engaged by international enterprises for market entry, M & A, partnership dispute, project financing, corporate and compliance and general business transactions throughout Bangladesh.

    Prior to the private practice of law, Mr. Akanda served as the Deputy Attorney General of Bangladesh.  He was often noted by the papers as being a diligent and fair advocate for the government.

    Mr. Akanda graduated, with honors, from the prestigious Dhaka University with a LL.B and LL.M. 

    Mr. Akanda is a member of the Bangladesh Bar Council and is, also, admitted to the High Court and Appellate Division of the Bangladesh Supreme Court. 

    Sean Hayes, a partner at IPG, met Mr. Akanda when Mr. Akanda was on an official tour to the Constitutional Court of Korea.   Both Mr. Hayes and Mr. Akanda, at the time, were both government officials.   We are proud that this impromptu meeting has lead to a lasting friendship and now a professional relationship.

    IPG attorneys and business professionals are proud to be some of the world's most experienced professionals focused on the practice of law in Asia. Our boutique mid-size law firm, through our local connections, six global offices, a cutting-edge case management system and real on-the-ground Asia experience, has garnered a reputation for providing effective and efficient legal solutions in some of the most complex international business matters.

    We are engaged in projects in Bangladesh, Cambodia, China, Korea, Laos, Myanmar (Burma), Vietnam and the United States through the China Practice Team; Dispute Resolution & Litigation Practice Team; Korea Practice Team; U.S. Immigration Team; U.S. Investment & Corporate Law Team; and Southeast Asia Practice Team.

    We work with both Fortune 500 companies and SMEs and are proud of our proactive and cost-effective approach to our business consulting and legal practice.

    Our professionals are often quoted by the New York Times, The Wall Street Journal, CNN, Bloomberg, Financial Times and local news sources. Our Korean Law Blog has been nominated as one of the Top 25 International & Foreign Law Blogs by LexisNexis and our China and Asian law blogs have been extensively quoted by our peers and the news media. Many of our attorneys have been rated Excellent by Avvo and other lawyer rating services and we are, often, consulted by local governments, U.S., British, German, Chinese, Russian and French law firms for matters for their clients.

    Our professionals are proud to have gained over a decade of experience in working with Fortune 500 companies, SMEs and entrepreneurs on projects throughout Asia and the states. Our professional roster includes former politicians, judges, prosecutors, government ministers, senior military officers, in-house attorneys, senior government officers, and directors/executives of multinational companies.

    We never, simply, fly someone in for a project. We live and work in Asia. The chairs of our China, Korea and Southeast Asian practice teams were born in the West, but have worked in Asia for most of their adult lives and deeply understand the legal systems, business practices and local culture of the local jurisdictions that they practice in.

    The IPG is managed by a group of some of the most known American lawyers in Asia and assisted by local politicians, retired judges, prosecutors, in house attorneys, senior government officials, local attorneys and directors/executives of multinational companies. We strive to provide service to a level equal to the best U.S., British, Australian, German and French firms. This is accomplished through a sophisticated case management system, a systematic approach to our practice of law and the active involvement, in all cases, of our American/international attorneys and senior local partners and consultants.

    Our attorneys have significant international experience in: Arbitration, Asset Protection & Management; Corporate Law & Compliance; Dispute Resolution & Compliance; Energy & Mining; International Business Transactions; Infrastructure & Development; FDI & Free Trade Zones; Franchise & Retail; Intellectual Property; Joint Venture Dispute Resolution; Mergers & Acquisitions; Real Estate Development; SME Market-Entry; and Taxation & Customs.

    East Asia FTA Negotiations between China, Japan and Korea

    China, Japan and Korea are set to negotiate, this month, the framework for a trilateral free trade agreement between the countries.  This meeting is the first meeting with the followup meetings to be held in China and Japan.

    The parties will meet in Pyeongchang, Korea this week and in China early next year.  Pyeongchang is the host of the 2018 Winter Olympic games.

    We see major stumbling blocks.
    • China is not likely to agree to a significant decrease in tariffs on automobiles or electronic goods.  Both Korea and Japan are major exporters of automobiles and electronic goods and will likely push China hard on the issue.  However, the good news is that many Japanese and Korean automobile and electronic goods companies are operating in China.  These companies hold overwhelming power in Korea and Japan and, generally, strongly favor the lowering of tariffs.
    • Japan holds a very protectionist attitude over its agricultural industry.  China is a major exporter of agricultural products.   The Japanese rice market is off limits because of political realities in Japan. 
    • Korea holds a large trade deficit with Japan and fears that a decrease in tariffs will widen the deficient.  Korea, however, because of the realization that margins are decreasing in most industries and inflation is a major stumbling block to sustained growth is enthusiastically negotiating free trade agreements.  The KOREU and KORUS FTAs have been signed into law.  The KOREU FTA is in effect and KORUS FTA is likely to be in effect early this coming year.
    This is great news for consumers and businesses, but don't expect any positive updates in the near future.

    IPG Legal: First Legal and Business Practice Team to Offer One-Stop Service on Korea-US and Korea-EU FTAs

    IPG Legal announces the formation of the first team of professionals dedicated to providing clients advice and representation on how to maximize the benefits of the KORUS and KOREU FTAs for EU, U.S. and Korean companies.

    IPG has compiled a team of Korean and international attorneys, senior company executives, patent attorneys, accountants, recruitment professionals, business consultants, custom agents and other professionals to provide services to American and EU companies doing business in Korea under the KOREU and KORUS FTAs. 

    Since, we are not simply a team of lawyers, we are proud to be the first one-stop shop for all companies wishing to import products into Korea, form strategic relationships with Korean companies and entrepreneurs, retain Korean employees, resolve disputes in Korea and obtain approvals to import and export products from and into Korea.

    Our extensive research over the last few months of the US and EU FTAs and extensive experience in advising clients on the risks and benefits of doing business in Korea, has led us to be one, if not the only, group engaged for business in Korea with extensive knowledge of the major issues facing companies entering the Korea market including issues related to:
    • Korean Import Duties & Customs Clearance under FTAs
    • Operating in Free Trade Zones in Korea
    • National Treatment and Korean Market Access
    • Retaining and Terminating Korean Employees
    • Investor-State Dispute Resolution
    • Korea FDA, Government License and Export Restrictions
    • Joint Ventures & Partnership Relationship Building and Dissolution
    • License, OEM and Distributorship Relationship Building and Dissolution
    • Rules of Origin and Export Procedures
    • Arbitration & Dispute Resolution
    • Service Sector & Special Industry Market Entry
    • Korean Government Procurement
    • Korean Agricultural Imports and Exports
    • Textile and Apparel Imports and Exports
    • Pharmaceutical, Cosmetic and Medical Device Imports and Exports
    • Korean Company Formation, Registration and Tax Approvals
    • General Corporate and Compliance Issues in Korea
    The team includes some of the most experienced business professionals and attorneys including:
    • Senior Executive VP of a major Korean Oil Refiner
    • First non-Korean attorney employed by Korean Court System
    • American and other International Attorneys
    • Noted Korean Lawyer and Author of Books on IP and Entertainment Law
    • Author of the Most Known Book on Doing Business in Korea
    • Experienced Korean Accountant with International Experience
    • A Law Professor of International Law & Business
    • Executive from a Major International Cosmetic Company
    • International Recruitment Professional
    • Korean Patent Attorney with International Experience
    • Korean Custom Clearance Professional

    Dec 9, 2011

    Renewing your Chinese Trademarks

    Numerous trademarks are expiring this year in China - are your trademarks expiring? Have you even, filed your trademarks in China?

    As I mentioned in previous posts, China is a first-to-file nation and as you probably heard, Apple is experiencing this the hard way.  If you you registered your trademarks overseas - NO - this is not enough.  You must register your trademarks in China to gain protection.

    The majority of trademarks in China are only protected for ten years from the date the application is approved. 

    If one wish to extend the period of registration, one must file to the China National Trademark Office for renewal at least six months prior to expiration of the trademark (grace period of six months after expiration, but get this done early).  If the registration is approved, the trademark will be registered for ten more years.

    Other posts that may be of interest:

    Dec 8, 2011

    Anti-Foreign Elements in Korea

    Korea has been accused, by many in and outside of Korea, as being overly reticent and reluctant in utilizing its economic power for the world good.

    The Lee Administration has made, seemingly, sincere efforts to raise the reputation of the nation by more active engagement in the international community. At home, he has been wrongly criticized by the liberal elite as being too "friendly to foreigners."

    In a great sign of the government being more in line with the international community, the South Korean government is likely to reduce the imports of crude oil from Iran.

    Korean wire service Yonhap has noted that:
    Imposing bilateral sanctions on Iran is "shaping up as an obligation as a responsible member of the international community, not a matter of choice," Yonhap quoted the source as saying.

    The report added, "If this situation regarding Iran continues, we will have to take a step to change the oil import channel," the source said, adding Saudi Arabia can be an alternative source of imports. South Korea imports about 9% of its crude oil from Iran.
    Hopefully, the next administration will continue on this course. Korea is a nation that heavily relies on exports. The vast majority of the economy is exported driven. However, Korea is one of the most nationalistic and politically fickle nations in Asia. An anti-foreign element exists and this element has a good opportunity to win the presidency and the Korean National Assembly in the next elections.

    A negative image of the nation, in the eyes of non-Koreans, may decrease the ability of the nation to maintain its present "neutral" image in the world, especially in times when domestic markets are faltering. Increasing, the exported products are brand name products. As we are all aware, negative impressions can turn a brand from a winner to a buggy whip in a matter of months.

    What do you think?

    Dec 7, 2011

    White-Collar Crime In China: The Michael Ng Saga and What you Should Know

    The Chinese national government, in order to fight the prevalent perceived local corruption, has sentenced individuals to death for white collar crimes related to the powers of government officials. In recent years, many private disputes are, also, ending in convictions.
    Foreigners, largely, have been off the radar of the Chinese government, until, the last half decade.  In recent years, many international business disputes, in China, have ended in prosecutions, many of which, have lead to international scorn.

    The most recent includes a matter that IPG has been closely monitoring and that the Wall Street Journal has written an interesting article about.

    An Australian businessman, of Chinese ethnicity, has been sentenced, last week, to a 13-year jail sentence for embezzlement and bribery.  The case has the Australian government up in arms.

    Mr. Matthew Ng's friend was quoted by the Wall Street Journal as saying that:
    "Matthew's problem was that he took a Western view of business in China and stood his ground behind the legal system" said Mr Rose, who was an original investor in Et-China and is a close friend of Ng's. "We do not believe justice has been served."
    We see this issue all too often.  When doing business in Asia, a deep understanding of the local landscape and risks are needed.  Going about business in a completely Western manner often leads to
    loses, litigation and in a small minority of cases - criminal prosecutions.

    We, always, advise this to clients and I hope, all, will listen.  Many think it is just typical nihilism in the legal community, however, it is not.  Sure all lawyers are naturally pessimistic, however, these risks exist and are caused, largely, by either employing the wrong counsel or not properly listening to the advice of counsel.

    The Michael Ng saga, fundamentally, is an issue of the poor structuring of deals and a lack of an understanding of doing business in and with China.   Risks can be mitigated, but stubbornness and too quickly jumping into "wonderful opportunities" can land you in the pokey.  Trust me, you don't want to be jail and you especially don't want to be in jail in China.

    This is not intended to scare off businesses from doing business in China.  China is a wonderful place to do business - just listen to good advisers and always think before you jump.

    Here are a few articles that will assist in keeping you on the good side of the Chinese government:
    Our other blogs:
    The Korean Law Blog
    The Asian Law Blog

    Dec 6, 2011

    Securities Fraud Investigation Against China Medical Technologies by U.S. Law Firm

    Faruqi & Faruqui, one of the leading U.S. litigation law firms, has begun to investigate potential U.S. securities fraud violations by China Medical Technologies. China Med is one of the leading in-vitro diagnostic companies in the world. It seems like a few of our clients have purchased from this company and, also, may have been enticed to invest in the company. This post has, also, been sent to clients that we think may have an interest in this litigation.

    The following is from a Press Release by the law firm.
    Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential securities fraud at China Medical Technologies ("China Med" or the "Company")

    The investigation focuses on whether the Company and its executives violated federal securities laws by failing to disclose that: (1) China Med's acquisition of Bio-Ekon Biotechnology Co. Ltd. ("BBE") was from a third-party seller connected to the Company's own chairman; (2) China Med overpaid by an estimated $20 million in the acquisition of BBE; (3) China Med's transaction to acquire BBE involved the Company's use of fraudulent shell companies, including Finnea International Limited ("Finnea") which never owned BBE; (4) according to SAIC filings, BBE actually suffered operating losses prior to China Med's acquisition; and (5) the Company has spent twice as much on "investing activities" as it has purportedly generated from operations.

    On December 6, 2011, Glaucus Research Group ("Glaucus") released a report focusing on the Company's fraudulent acquisition of BBE and initiating a strong sell for China Med. On this shocking news, China Med shares plunged roughly 23% at the end of trading on December 6, 2011.

    Protection of Free Speech in Korea over the Internet

    Evan Ramstad and R. Jai Krishna wrote a good piece for the Wall Street Journal on the freedom of speech in Korea and India.
    Korea has, again, begun to stricly enforce its online censorship laws. Some academics are questiong the means and tactics of the Korean government:
    "Whoever has posted the illegal information can be held responsible that way," said Mr. Park, who is a law professor at Korea University in Seoul. "The commission's answer to shut down or erase the illegal information is virtually impossible to enforce in a constitutional manner."

    South Korea's 1987 constitution guarantees free speech. Even so, the government has created a welter of limits on expression, particularly on political and security topics. South Korea also allows people to be criminally punished for defamation and the country is one of just a few, including Japan, where truth is not allowed as a defense against libel.
    Over the past decade, that atmosphere of limited expression has crept into South Korean cyberspace. For instance, the government requires South Koreans to use real names when they make comments on Internet sites or post videos on Korea-based Web portals. Online game players must also use their real names and provide ages to comply with nightly curfews on children using computer games.
    Is it time to recognize that free speech in Korea will come with many pains, but the benefits of an open and free democracy far outweighs the pain felt by a small minority of the population (usually public figures)?  Are Koreans skin not thick enough, yet, to deal with a free and open society?
    Jai and Evan's article may be found at:  Offensive Content Targeted in Asia

    Toyota to Export U.S.-Made Camry to Korea

    Toyota announced, yesterday, that 6000 Toyota Camrys  will be exported from its Kentucky plant to Korea, early next year, along with a undisclosed number of Toyota minivans.

    Toyota claims that the exports will support over 20,000 American jobs.  At present, Toyota exports over 100,000 American-made Toyota cars and trucks.

    The step, also, is a good move for Korean consumers.  The Camry will, now, likely compete head-on with mid-size Korean family cars.  Now, the price of Toyota cars are not competitive because of trade and non-trade barriers that puts the Camry out of the radar screen of the average Korean consumer.

    I doubt that many Koreans will be buying Camrys in large numbers, but likely the local Korean car manufacturers will be forced to keep their prices in line with the prices they charge consumers in the states.


    Opportunities in China for Green-Technology/Energy Companies?

    China may have the most potential opportunities for companies in the green-technology business.
    The Wall Street Journal in an article this week entitled China Fuels Energy Innovation quotes an SME green- energy company:
    Will Latta, the founder of clean-energy company LP Amina Inc., says he tried last year to interest U.S. power utilities in testing a new technology that reduces pollution from burning coal. Rebuffed, he took his invention to the coal-belt city of Fengtai in eastern China, where he found a partner eager to install the multimillion-dollar technology.

    "In the U.S. there's a resistance to demonstrate new technology," says Mr. Latta, a 42-year-old Miami native who founded LP Amina in 2007. "They don't like to be the first."
    China is, often, more responsive to the voices of its citizens than western democracies because of the fear of protest and the realization that without the support of the people the communist system may perish.
    The government, therefore, listens and responds to the people's demands.  Overwhelmingly, the party does an excellent job in meeting the needs of the people.  The people, for the last decade, have demanded a cleaner environment and the party is delivering.

    I first started doing work in China over a decade ago.  The environment, in most major cities, is much less polluted that it was a decade ago.  The reason stems from the significant investments being made in green technology and more stringent environmental protection measures.

    The largest percentage of the cutting-edge green innovations are imported from the U.S., Canada, Australia and Europe.  The companies licensing their technology to Chinese companies are often not, only, the big players, but business start-ups and entrepreneurs. 

    Our clients, nearly universally, find it much easier to find potential opportunities in China, than in the overly risk averse and complacent West, since in the West most new green-technology initiatives are funded by individual companies with little government support.

    If you are a green-technology company and your are not doing business in China  - you  must ask yourself why.  The big and small are prospering from China's deep pockets and a strong and growing appetite for solutions to environmental issues.

    What do you think?

    Dec 4, 2011

    Business Opportunities in Myanmar (Burma): The Door is Opening

    Myanmar is opening to foreign investment, trade and opportunities.  The next decade will see a far different Myanmar than we see today.  Prior to the present government, Myanmar was the second richest nation in Southeast Asia. 

    As experience in Southeast Asia predicts, these opportunities will be largely won by those that enter the Myanmar market first.  The best JV partners will be, largely, won over the next few years.  Additionally, the best concessions will be given to first comers.

    A visit to a hotel in the capital, that just a few years ago contained only a handful of foreign tourists, is now full of foreign business people mainly from Europe, America and East Asia.   Some hotels are, now, fully occupied.  This situation was unheard of only last year.

    At present, international sanctions in Myanmar prohibit most exports from the country, however, few imports are prohibited from being exported to Myanmar.  However, few companies have been willing to export to Myanmar because of fear that selling to the nation may harm companies brand image and the wrongful impression that few export opportunities exist.

    Once sanctions are lifted, it is expected that American, European, Southeast Asian and East Asian Asian companies will follow the handful of companies doing business in Myanmar at this time. 

    It is expected that the EU will loosen sanctions early next year and the U.S., after the visit of Secretary of State Clinton, will also follow suit this upcoming year if the nation meets the promises made to Mrs. Clinton during her trip.   However, no reason exists to not explore export opportunities at this time and, also, start to contact potential joint venture partners. 
    The nation has large reserves of oil, gas, timber, fish, rice, and precious and semi-precious gems that have not been exploited effectively in decades.  The major challenge to explotitation, as is normally the case in this part of the world, is infrastructure.  The World Bank and Asian development bank are working on projects at this time.

    The nation, additionally, desperately needs basic consumer products, industrial machinery, and skilled professionals in the service sectors.  The country has the resources to purchase these goods and services, but few are selling.

    At present only a handful of international companies are selling products to Myanmar.   The companies include Unilever, Total SA, PTT, CNOOC, and Jebsen & Jessen.  China's CNOOC seems to have a very active presence in Myanmar, but the details of their projects are not known.

    We will be writing more articles on Myanmar on this blog over the next couple of weeks. 
    As a Firm that loves to do work in Myanmar and loves the kind people, we are looking forward to more benefits trickling down to the people, while assisting clients entering a country with a bright future, proud past and an energetic population.


    The Basics of Entering the Chinese Market through a Joint Venture

    A client, a minority shareholder in a company in China, is involved in litigation with another company shareholder over issues the client had with the majority and other shareholders over his three years in this venture.

    The majority shareholder (controls the representative director) has been helping himself to the company profits through creative expenses and interested transactions with the company and his personal company. The majority shareholder is also threatening to block distributions and is possibly increasing the stickiness of his fingers.

    Like situations WILL occur in many cases where a JV is not completed through a carefully drafted shareholder agreement and articles of association. A majority shareholding will not prevent this situation from occurring, because of the nature and power of a China managed company.

    I have said this numerous times, if you don’t want to support my extravagant lifestyle (actually I don’t have an extravagant lifestyle), get an experienced lawyer/solicitor to draft your China shareholder agreement and articles of association. Make sure the attorney knows what the heck he is doing- many of the foreign and Chinese attorneys - don’t.

    Make sure the attorney is not merely going to give you form agreements. Every joint venture agreement in China is different and form agreements are a sign of a lack of care and trouble in the future. Don’t skimp at this stage and thus don’t use form articles, form shareholder agreements, and form by-laws drafted by hacks, attorneys that quote the lowest price and only accountants and agents.

    Joint Venture Basics in China
    • Due Diligence, Due Diligence, Due Diligence; 
    •  Limit the Powers of the Company Directors and Managers;
    •  Retain the Power to Appoint and Remove the Directors; 
    •  Maintain Control over the Company Seal; 
    •  Retain Majority Control or include other Minority Protection Clauses;and
    •  Hire an Independent Accountant and Utilize a Neutral REAL Auditor.

    So you Want to Manufacture in China: Top Ten Things to Know Before You Go

    This list is not intended to be exclusive. The list assumes that you will have a local company as your JV partner in this venture:
    • Register all Intellectual Property including your trademarks and patents in China. No - your E.U., U.S., Indian, Japanese etc. registrations are not enough; 
    • Due Diligence, Due Diligence, and More Due Diligence.  Read our many posts on this issue;
    • Complete a decent feasibility study. This does not mean simply running a cost estimate;
    • Consult a technical adviser;
    • Checkout and go through IPG's Stock Purchase/JV Due Diligence Check List;
    • 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;
    • Execute a Non-Disclosure Agreement (NDA) in English and Chinese;
    • Execute OEM, Manufacturing, JV, Supplier, Shareholder Agreements as the case may be in English and Chinese. Don’t get them drafted by hacks or those who don't have experience in China. No, the lawyer you use in NY is not good enough;
    • Research or have researched benefits to manufacturing in the China Free Trade Zone (FTZ); and
    • Research or have researched benefits to manufacturing or employing people in certain areas of the country.

    Solving China Joint Venture Disputes: Maybe without an Lawyer

    Conflicts are inevitable, but not unresolvable. Since the circumstances surrounding Asian JV/partner conflicts can vary greatly and since the personalities of the involved parties play a major role in the confrontation, there may not be any ready-made prescription for the solution. There are however, some general ideas that may help in resolving conflicts in the local Asian business environment.

    Personal Considerations
    Western logic, alone, is not usually sufficient to influence an Asian counterpart. Re-opening or referring to the exact stipulations of a contract is not desirable; it has been said "don't confuse me with facts." Such a factual confrontation will only raise the defenses of the local partner and even block any attempt at resolution. Once again, the matter of "Feelings" plays a subconscious role in the resolution of conflict. Try to appeal to his emotional common denominator.

    Control Emotions
    Showing one's emotions in a demonstration of anger can only exacerbate the situation; the foreign partner must always keep his own emotions under complete control, while appealing to the local partner's emotions.

    Just as wise parents go to great lengths not to bicker in front of the children, it is even more important that the top executives representing the two companies keep a positive façade for the benefit of the other employees. They can still – and should – let their hair down off site or behind closed doors to get conflicting matters, while still small, out on to the table for resolution.

    Compromise Diplomacy
    In difficult confrontations, the use of some diplomatic procedures such as the give-and-take of a trade-off may prove productive in resolving conflicts. It may require some innovation to generate alternative ideas to try in the resolving process.

    A Chinese, Korean or other Asian joint venture partner may agree to concede the majority share in the company to the foreign partner on condition that he will be granted the right to veto the first executive vice-president appointed by the foreign partner. Though not ideal, perhaps it may be an example of tradeoff.

    The "tit-for-tat" procedure may never create a win/lose situation. One wins only the battle and not the war. If a deadlock arises, however, a valid alternative may be to consider areas of possible tradeoff in order to reach a compromise.

    Home Office Support
    A very important requirement for expatriates representing a foreign company is to secure the full support of the head office for what one intends to propose vis-à-vis the local partner. If such support is not firm, it will be more difficult to resolve the differences.

    Such consultation and approval from the head office has several benefits. First, it offers the opportunity for counsel concerning the proposal. It also takes the foreign partner off-the-hook so that the proposal is not just his or her own idea that might not work. Finally, it adds backing to the foreign partner in presenting his case to the local partner. The wider the support, the better in dealing with knotty problems in an unresolved conflict situation. Such backing adds confidence that can influence the outcome of the consultation.

    Confidential Negotiations
    Not an easy discipline in resolving conflicts, but a crucial one, is to keep quiet about the matter.    Word spreads fast, especially if it is undesirable, unfortunate news. In this case the problem of "blab" is not confined to any one segment of society. So it is important to keep one's mouth shut when partners are trying to resolve a conflict. During World War II we were told that "a slip of the lip can sink a ship." If this is true in war, it is also true that loose lips can sink a business partnership as well.

    Neutral Moderator
    A mediator or go-between has no emotional connection to the situation and can help to reduce tensions and defuse the volatile atmosphere between the partners. Third parties can be used to great advantage. When one is confronted with an uncompromising deadlock, replacing the negotiating party with another may lead to a solution.

    Exceptional Conflicts
    Sometimes the conflict goes beyond personalities. Fundamental differences in the priorities between the two mother companies can and does take place. When the conflict of interests becomes so obvious that most middle managers and above recognize the problem, it may be a good strategy not to try to futilely hide the matter but to amplify the matter so that ultimately the issue, in an extreme case, may go beyond even the board of directors and over to the next shareholders' meeting. Obviously, this is an extreme case. But sometimes this magnitude of conflict can occur beyond the control of the current representative directors – regardless how adroit they may be in handling the issue locally.

    Top 10 Pointers from an Experienced Foreign JV Director:
    1. Whenever possible, make sure your firm has the CFO position. Try to avoid giving up control of the position. In the end, no matter how tempting the current situation may be to negotiate away that position, you will regret it.

    2. The local Chinese CEO is likely to be a god in the eyes of the Chinese employees. Never underestimate your counterpart's power and be extremely careful not to cause him to lose face. It is not easy but you must determine how to walk the line between not being belligerent and being a push over.

    3. The wrong motivation to enter into a JV in China includes forming a partnership simply out of necessity or ease in entering the market. There needs to be a genuine, ongoing and mutual reason for maintaining the JV with the Chinese partner.

    4. The expatriate director must have a clear cut mission and genuine backing from his head office to be successful. Too often the overseas head office looses interest in the Chinese operations and the local expat director takes on an attitude of resignation from not making a real contribution. This sort of matter often appears in JVs created out of convenience rather than of shared purpose with the China firm. When that attitude sets in, it is often the beginning of the end of any chance of a successful joint venture.

    5. It takes at least 18 months even for a fairly experienced and competent foreign director to become truly effective since it so difficult to understand the game.

    6. As soon as a new guy comes in as the new foreign JV representative, almost certainly the Chinese partner will try to revise the relationship with the disappearance of a number of regular meetings, reports and information procedures. It's therefore important that the new  director arrive with a clear agenda as to his role and what information he is to received plus clear delegation of authority such as spending authority, investment authorization, etc.

    7. Most Westerners want about a month to ease into a job before putting their foot down. In China, one is not normally given that luxury. Rather it is much better to approach the job as director with even a dogmatic sense of authority. Otherwise, the China organization will likely marginalize the new director and he or she will be endlessly trying to chase down critical information.

    8. It is critical into immediately establish your authority to be included on important – particularly negative – information.

    9. Networks of relationships are critical. Often the real communication and secrets are shared over beers after work.

    10. Hire a bilingual Chinese  who is totally on your payroll but works within the JV. This person can do much more than be an interpreter. 


    U.S. International Trade Office Rules on the Dumping of China Solar Panels in U.S. Market

    The  International Trade Office (ITC) has ruled unanimously, in a preliminary holding, that China's exports of solar panels are in violation of U.S. and international anti-dumping and related trade laws.

    From experience, the final holding is unlikely to conflict with the present holding.  

    The remedies for the violation will likely be an increased tariff.   We expect a holding on the preliminary remedies by mid-January of next year.

    The complainant, the Bonn-headquartered Solar World AG, claims that China is giving producers of solar panels, in China, low-cost land leases, low-interest loans, and favorable tax treatment.  The U.S. provides similar benefits, but at a much lower level and rate than that provided by China.

    We need to question why we even care that China is subsidizing an industry that we need and that most politicians support.

    Sure we are not on a level playing field with China in this industry because of Chinese government subsidies, but maybe this is an industry that we need the support of the Chinese taxpayer in order for the price of panels to reach a level that leads to widespread usage.

    Maybe without the support the industry would collapse.

    What do you think?

    China Can Make You Money: Don't Trust Us, Trust the Former U.S. Undersecretary of Trade

    A retired U.S. undersecretary of Trade, Frank Lavin, was interviewed by Forbes in an article entitled:  Export to China on the Cheap.  The article sheds light on the great opportunities present in doing business in China for American and European exporters.  American and European companies are, increasingly, seeing China not only as a sourcing option, but as a new market for their exported products. We have numerous clients that have succeeded in entering and selling to the Chinese.

    The Chinese have the largest number of millionaires in the world.  These individuals, overwhelmingly, prefer foreign products over Chinese products.  Often, the price is of no concern, thus, many of my clients find they maintain higher margins in China than in the West.  The middle class is growing quickly and overwhelmingly they wish to follow in the footsteps of Chinese millionaires and thus buy "quality" foreign products.
    "The China market is far more open than is perceived in the U.S., especially in the consumer space,” Lavin says.  It’s also big. Last year alone, just the increase in U.S. exports to China of about $27 billion was as large as the total value of American sales to France, he says.
    Lavin doesn’t know China only from his stint in Washington. He earlier had a banking career in Hong Kong.  And he was chairman of the steering committee of the USA Pavilion at the Shanghai Expo last year. He is currently living in Hong Kong, where he also works as chairman of public affairs at Edelman Asia Pacific.

    Lavin thinks one of the most promising industries in China for U.S. exporters is baby items. “People are willing to pay a premium for safety,” he says. Another: auto accessories.  China has become the world’s largest auto market, and has a growing number of car aficionados.
    What do you think?

    Licensing Your Software in China: Register the Software Often Required

    My friends at the China Law Blog wrote a good post on  the Licensing/Selling of Software to Chinese companies and users.  The post, however, makes the issue seem a little more simple than it really is.

    The article quotes, in length, from an email by Steve Dickson to a client.
    In general, if a contract is characterized as a "license," payments under that contract are characterized as "royalties." Under Chinese law, to receive royalty payments, the contract must be registered as a foreign technology transfer contract. This can be simple or it can be complex, depending on the district in which the paying party is located.
    However, many districts treat software agreements these as normal sale contracts and do not require registration. The decision is made at the foreign exchange bank that will process the payments. If the bank does not require registration, then you do not really have any issues. The way we typically suggest our clients deal with the issue is to have the paying party check with its bank. If the bank will process payments in the ordinary course, then there is no issue. I am sorry to make this so complex, but the issue is quite unsettled in China and so it must be made on a case by case basis.
    Note that this goes back to the issue above: who is actually responsible for making payments to you: your distributor or the end user. This matters because it is the bank of the payer that will make the decision, so it is important to get clear about the responsible party. If your software distributor is always the one who is going to be paying you, then you only need to deal with this issue once. If each end user is the payer, then you have to deal with the issue with each end user separately, increasing your burden and risk. I note that if you have already received a payment without having this issue arise, it is probable that the locals are treating your contract as a normal sales contract, which is good for you.
    I, generally, agree with Steve, but it is, also, a good idea to not simply trust the bank.  The bank could change its "policy" or be forced to change its policy and you could be out a future payment in a transaction with continuing license fees.

    We advise for these matters, for your counsel to contact the local government to inquire how the specific situation will be considered by the government.  Often, a proactive counsel can obtain a disposition that lessens the burden and risk of the transaction. 

    Things change quickly in China.  Your agreement last year may not be treated the same this year.

    Dec 3, 2011

    Registered Capital Needed for Entering the Chinese Market?

    This is the number one question that we receive from the most risk averse of our clients that wish to start a Wholly Foreign Owned Enterprise/Entity (WFOE).  The answer is not as simple as me writing a figure down below.

    Revisions to Chinese Company Law has liberalized the minimum amount necessary to, in theory, start a business in China. The minimum "theoretical" amount is a trivial amount in most industries.  However, the local government has threshold amounts that are often utilized as true minimums.  The necessary amount, thus, will depend on the industry, locale and hopefully your proactive counsels interactions with the local authorities.

    The registered capital of a company includes transferred IP, company assets, and start-up cash.  The registered capital amount can be found by anyone with a computer.  For large amounts (discretionary on part of government) of registered capital the amount can, normally be, remitted over a period of a couple of years.  For smaller amounts, the amount must be contributed to the company's account immediately.

    A few issues to consider:

    1.  Don't begin to value your IP, company assets or structure deals before discussing the matter with your counsel and having them contact the local government.  If your counsel is not proactive, they will not contact the local government - run quickly to another counsel. I had a client that used one of the "leading law firms in China" that didn't discuss with the government the transferred asset value that, in the eyes of the client, was valued at over USD 450,000, but that was only worth, in the eyes of the local government - USD 50,000.  A proactive approach would have allowed a higher sum to be placed on the asset. This led to the company forwarding an unexpected large amount of money into China
    at a time when the amount was needed for a capital investment in the states (replacement of the asset being sent to China).

    2.  The registered capital is public information.  Many of the more careful of Chinese (and WFOEs in China) companies will not do business with companies with low registered capital.  Many Chinese companies know that they are, in most cases, only going to be able to attach the registered capital of the company if things go awry and the "foreign" company will likely close shop and be nowhere to be found when the proverbial horse excrement hits the fan.

    3.   It is true, that in most cases, liability is limited to the registered capital.  However, don't forget exit bans, the criminal "justice" system and the local police.  Legal wind-up is essential.
    See my article: Winding-up/Shutting Down a Company in China.

    4.   Playing with the books in order to show that the company is capitalized is a criminal offense that can land you in an unwelcoming jail.  We have seen this situation and we hate visiting people in jail, thus, don't play this game. 

    5.  Starting a company in China is more expensive than starting a company in the West, since often leases are pre-paid, many areas require "good-will" money in advance of leasing, a capital reserve is often required prior to hiring a significant number of employees and many vendors require pre-payment. 

    6.   If the local government quotes you a ridiculously high number in the eyes of your lawyer in China, then, likely the government believes your involved in a scam, the venture is not feasible or the venture is of a nature that is inherently dangerous to workers, the environment or the reputation of the local government.


    Visa Categories in China

    The visa laws, in China, change regularly.  Please note that these visas are accurate as of December of 2011.   Most of these visas are obtainable without legal assistance.  However, in cases where you will be having foreign staff working in Korea (Z Visa), it is advisable to consult counsel in order to be in compliance with Chinese tax and corporate law.

    D Visa:  Permanent Residency Visa
    The D Visa is, in most cases, only available for those that are married to Chinese or those having lived in China for over five years and has made significant investments in China. 

    L VISA:  Tourist Visa
    A tourist visa needs to be obtained, normally, prior to entering China.  These visas, normally, allow one to stay in the country for no longer than three months.   You are able, in most cases, to obtain a multiple-entry visa that is good for one year.

    F VISA:  Business Visa
    The F Visa, normally, allows for the presence in China for a period of six months and is good for, normally, a period of one year. 

    X Visa: Student Visa
    Student Visa are obtainable by contacting the school that you intend to study with.  The visas are, normally, available for as long as the period of study. 

    Z Visa:  Work Visa/Joining Family
    Upon obtaining the visa abroad, the holder should enter China report residence and receive a residence permit within 30 days of entering China. 

    Dec 1, 2011

    Selling in Asia. Attitude Matters by Tom Coyner

    The following article appeared in the American Chamber of Commerce in Korea Journal.  The article was written by IPG's Senior Commercial Adviser - Tom Coyner.  

    Between the two of us, my partner and I have over a half century of successful sales experience.  Sometimes we were successful by simply being in the right place and time with the right product or service.  Sometime we were blessed to be coached by some remarkable sales managers as we learned and perfected the profession.  Other times, however, we succeeded in spite of our supervising managers. 

    Furthermore, during the course of our consulting practice in dealing with companies grappling with sales issues in Korea, Japan and elsewhere, we have encounter sales professionals struggling with challenges, both large and small, in a wide array of industries.

    Frequently we hear sales managers grousing about salespeoples’ attitudes.  It often comes across as “what are we going to do with the other generation” – even if management and the sales force come from the same age group.

    Salespeople tell jokes about sales managers as a way to vent their frustration of having to meet quotas or potentially finding themselves unemployed without being given much insight on how to sell, other than pitching the product/service’s features, functions & benefits.  And many sales managers come across as if pricing & closing is all there is to selling beyond understanding the products/services' basic components.

    The sorry fact is, more often than many companies care to recognize, the sales management is not of significant higher caliber than their subordinates.  Often today’s sales managers were yesterday’s salespeople when their product was earlier in its life cycle or perhaps during booming economic times. 

    Thanks to hard work as well as once being at the right place at the right time, sales champs of yore are today's sales managers.  And often these sales managers are pulling their hair out, since they do not know how to motivate and coach their sales forces to bring in the numbers.

    As interested third parties, we often see sales managers being agitated by salespeople spending too much time in the office as week by week their sales patches slip behind from making sales quotas.  We also see demoralized salespeople discouraged by poor results while attempting in good faith to do what they have been ordered.

    The worst example we have encountered (and this is indeed extreme) was a retailer who responded to the lack of foot traffic by ordering his sales staff to telephone prior customers.  Given the lack of customers at the counter, the rationale was that product stocking can only take so much time.  So if the salespeople were being paid their hourly wages, they should encourage the customer base to return to the store.  And to make things interesting, all the salespeople were given the very same lists of customers and phone numbers.  The obvious happened.  Not only did the tactic do little to bring in the customers, the redundant phone calls became major irritations of once happy customers.

    Of course most managers and owners are not so foolish.  But the salespeople in the above case were forced to do something that was obviously counterproductive if they wished to keep their jobs.  The obvious question is what other counterproductive activities are other sales managers forcing their salespeople to conduct? 

    Often it is the salespeople who first discover the folly of a bad idea, since they are the first to apply the concept to reality.  But when salespeople report the results, they are usually told they are not doing their jobs correctly or that they have bad attitudes.

    Of course, in some cases, sales staff poor attitudes may be a major factor.  But in many cases, the truly bad attitudes are held by the sales managers who believe they know better and their good ideas are just short of infallible – that is, until executive management tells them to knock it off.  But until the cease and desist order comes from upstairs, many sales managers refuse to believe they are the cause of poor sales and are quick to blame their subordinates, if only to protect their own jobs.

    First, let’s consider the following likely causes of poor sales.

    • Mismatching of product/service with the prospective buyer
    • Applying old strategies that were proven during different economic times
    • Little or no sales training or poor sales training
    • Subordinating training salespeople on how to meet the customers’ needs, as defined by the customers, to sales closing and negotiation technique
    • Over-dependency on brand or company image to sustain sales during tough times
    • “Managing results" rather than professionally coaching and leading the sales force

    Next, it may make sense to have a third party – either from another part of the company or from outside – who understands selling as a profession, which includes experience “carrying a bag” as well as effectively managing “bag carriers.”  Bad sales attitudes within the overall sales team can take on negative lives unto themselves.  Poor morale can be so consuming that the participants may find it difficult to stand back and look objectively at what is really happening.

    An internal or external consultant can help by objectively assessing the situation, both from within and from outside of the company, and may assist in forming remedial strategies, ranging from reassessment of marketing strategies to helping salespeople, including old timers, develop truly professional sales skills.

    There are no quick and easy panaceas for these kinds of challenges.  But when one hears complaints about “bad attitudes,” that may be a red flag for the company to slow down, to reassess, and to consider major corrective action.

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