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Jan 31, 2012

North Korea Amends Foreign Investment Law

In a move to attract more investment from abroad, North Korea has amended the foreign investment law. The amendment has been reported by the North Korean main news agency.

The details of the revisions have not, yet, been publicly announced by the North Korean government, but previous changes have been less substantive and more political in nature.

The amendments seem nothing more than a reaction to the Chinese dismissal of North Korea's efforts to entice China to invest in a free trade zone near the border between North Korea and China.

North Korea can learn a great deal from the Chinese manner of developing the economy, however, in the past - North Korea has quickly retreated after brief periods of hopeful developments that the nation will open up to the South, China and the West. Maybe China has finally found a rationale ear.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Philippines, Myanmar, Vietnam and the U.S.

Jan 26, 2012

IPG Leading Law Firm in Entertainment Law for Korea and International Entertainment Businesses

IPG attorney KS Chong is one of the leading lawyers in Entertainment Law in Korea. He represents one of the leading entertainment businesses in Korea and many international artists and intellectual property owners. KS Chong has, also, published the first book on Korean Entertainment and Media Law and numerous articles on entertainment and intellectual property law.

The IPG has strengthened its position in the Korean market by being the only full member of the International Association of Entertainment Lawyers in Korea.

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

Jan 24, 2012

The End of Tax Exempt Bonds in Korea?

Some bad news for the Korean bond market.  A law passed in 2011 entitled the Special Tax Treatment Control Law of Korea makes, for many investors, the Korea bond market much less attractive when compared to the bond market of regional rivals.

Non-Korean currency denominated bonds issued in 2012 will no longer receive tax exempt status in Korea if they are payable to any company with an establishment in Korea or were issued in Korea. 

This and other punitive-like taxes were passed in 2011 as a populist reaction to foreign-currency established companies doing business in Korea that were alleged to not be paying enough taxes in Korea and were gaining too much profits from doing business in Korea.  Many of these targeted companies were responsible for turning around failing companies. 

The alleged foreign-friendly Lee Administration has proven not to be as foreign friendly as alleged by the more liberal media sources.

Recent articles on Korean Tax Law:
IPG will be updating the readers of The Korean Law Blog, The Asian Law Blog and The China Law & Business Blog on updates to China, Bangladesh, Cambodia, Korea the Philippines, Vietnam tax law over the next couple of weeks on the IPG's blogs.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

Jan 22, 2012

Mastering Business in Korea: A Practical Guide by IPG's Senior Commercial Adviser

IPG is proud to, again, recommend a book written by the Tom Coyner a Senior Commercial Adviser for IPG. 

The following is recommendations from the foreward to Mastering Business in Korea: A Practical Guide.

Nick Reilly
Former President of GM Asia-Pacific

This book is written with the expatriate business professional in mind. Korea is reputed to be a tough place to do business, but much of that reputation is unfair. Well-meaning and experienced foreign businesspeople routinely make serious errors that ultimately impede their success in the world’s eleventh strongest economy. This is the first such book written in collaboration by a Korean and a Westerner – both of whom have built their careers in international business between Asia and the West. The authors do not pretend doing good Korean business is easy – but it can be much easier than how many foreign businesspeople go about their business. This book is a result of many interviews with both seasoned expatriate executives and highly experienced Korean managers and directors. The reader will discover both opinions and objective observations. As such, it reflects the international business community in Korea – and not simply the perspectives of a Korean and an American.

South Korea is in a state of flux. Given these modern times, one may say that about many countries. But, Korea is probably more so than most – and it has come a much further distance than most countries in the past half century.

From virtual to actual dictatorships and on to being one of the strongest democracies in Asia, the Republic of Korea has a political track record that is in direct competition with it literal rise to riches from the ashes of a devastating war. In the process, the Korean people are not longer recipients but donors of foreign aid. With, at times, ostentatious displays of wealth, comes a deep political struggle from being the government’s people to having a government of the people. Today there are stronger human and civil rights within South Korea than in anytime of Korea’s multi-millennia history. Coming part and parcel with democratic development, various interest groups and NGOs add a new dynamism to both the public and private sector arenas.

Korean consumers are no longer satisfied with cheap products, they demand – and get – quality. They also are more vocal about products and services in context of their rights as citizens of this republic. Stockholder and consumer rights are coming to the forefront. For example, product liability is no longer a subject studied as something that is a feature of overseas, advanced economies. Such issues and concerns are now part of daily Korean life.

Not so long ago, Koreans looked enviously of what others achieved with advanced technologies. Today, Korea not only emulates but even advances beyond the most advanced nations in cutting edge application of the latest technologies – most notably in the practical integration of broadband networks into daily home and business life.

Through rapid economic growth of the recent past and now through steady progress of a mature economy, Korea holds its own as an OECD nation. Mercantile protectionism is not yet fully an issue of the past, but the Korean markets have opened considerably. Korea recognizes that its long-term growth is dependent upon being an active member of a globalize economy. At the time of this book’s writing, Korea had completed its first Free Trade Agreement (FTA) with Chile, with other FTAs in mid negotiations.

Koreans have often and rightly described as being “frogs in a deep well.” And yet, some ten million South Koreans travel abroad for pleasure per year. On a per capita basis, that means more South Koreans are getting out and exploring the world than their wealthier and more urbane neighbors, the Japanese.

With one of the strongest physical infrastructures in the world, the Koreans continue to improve. The recent bullet trains, the KTX, have within a year of its opening, have changed the consumer patterns of the nation. Hospitals and department stores in regional hubs are now in direct competition with the best that Seoul has to offer.

Given South Korea’s amazing modern history and how much the nation continues to dynamically grow; even Korean marketing analysts are struggling to keep pace with their nation. Even harder is their task to forecast future trends. Even more so is the case for foreign managers and executives who accept expatriate positions to work in Korean or foreign multinational organizations.

In the end, it matters not if one be a Korean or a non-Korean. Once one has grabbed the Korean tiger by its tale, it can be an amazing adventure of simply hanging on. But for those who wish to ride the tiger, this book’s authors have written this book from a combined century’s managerial experience -- from both a Korean and an American perspective. There are other, excellent books on the market dealing with narrower perspectives on doing business in Korea. There has not been a general survey book, however, on this subject for almost twenty years.

While no single volume will provide the business reader with all the answers, the authors endeavored to provide practical, street-wise knowledge one cannot readily find on the Internet and from other public information sources. Together with other aids in understanding Korean business, the authors wish the reader the best of success in doing business in Korea.

Endorsements to
Mastering Business in Korea: A Practical Guide

"The authors have written a superb book that is a "must read" for any foreigner doing business with Koreans or working amidst Korean colleagues. The book is full of insightful recommendations on a broad range of topics as well as practical, common sense tips useful for all expatriates. Moreover the book's insightful advice is underscored with a deep and nuanced understanding of modern Korean culture that is as invaluable as it is rare. Quite simply, this is an authoritative book that demystifies Korea and offers comprehensive advice to anyone interested in living in the country, working with or for Korean managers or doing business with Korean counterparts."

Robert Fallon
Chairman of the Board
Korea Exchange Bank

Song-Hyon Jang and Tom Coyner's book is a "must-have" for expatriates who currently conduct or have interest doing business in Korea. The book cogently presents comprehensive and authoritative advice not only regarding nuts and bolts business topics such as labor negotiations, but also on more subtle cultural topics such as business etiquette. I recommend this book as a welcome addition to the burgeoning literature helping foreigners better understand Korea's business environment.

Dr. Ku-Hyun Jung
President & CEO
Samsung Economic Research Institute

For a foreigner, learning about Korean social and business ways can take a lifetime. Certainly after three decades here I am still discovering what I did not know I didn't know and re-learning what I misunderstood in the past. But even the smallest effort pays a dividend and with this excellent book the reader has a chance to tap into the insight of a Korean businessmen who has spent a whole career relating to foreign managers as well as of a Western consultant who has integrated himself into Korean society almost as much as it is possible for an outsider.

We, the guests in this country, will never be insiders, and so we should always recognise that the business relationship is not going to be equally balanced. But a lot of our frustrations will be eased if we understand some of the reasons, motivation, and cultural and historical background which lie behind behaviour which otherwise seems unfathomable.

I thoroughly recommend this book, not only for the newcomer to Korea but also to long-term expat residents who may think they know it all already. As they will discover, modesty is not just a virtue, it can be a very useful state of mind.

Alan Timblick, OBE
Senior Advisor

“It’s all here! This is a superb effort to help expat executives deal with the tremendous complexities of Korean business. Lots of examples and practical advice grounded in the experience of the authors and their corporate colleagues. This book will save you years on the learning curve if you really take it to heart.”

Jack G. Lewis, PhD
Associate Dean, IBEAR MBA & International MBA Alumni Outreach
Marshall School of Business
University of Southern California

A great primer for all newcomers to Korea, as well as a refresher course for those of us who have spent a lot of time in Korea. The authors focus on the keys to business success in Korea – regardless of industry, business sector, or job title. The book demystifies much of the Korean business culture and practices. It is a must for anyone who wants to be successful doing business in Korea.

William (Bill) Oberlin
Former Chairman
The American Chamber of Commerce in Korea - AMCHAM-Korea.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

Jan 20, 2012

Jan 19, 2012

Korea Central Bank to Buy China Yuan-denominated Assets

Heung-sik CHOO, director-general of the Bank of Korea (BOK) stated to Bloomberg that the BOK may purchase RMB-denominated (Chinese yuan) assets. 

The news may trigger most Asian economies to consider more investments in China-currency denominated assets. At present, the only other developed country that has announced plans to invest in RMB-denominated assets with foreign currency reserves is Japan.

The Director General noted that the BOK will begin by only investing in Chinese government bonds.  The investment is expected to be modest.

The China Daily has reported on this issue today and noted:
The BOK obtained a Qualified Foreign Institutional Investor (QFII) license in late December and has gained the approval of its counterpart, the People's Bank of China, to buy bonds, Choo was quoted by Bloomberg as saying.

The National Pension Service, the largest investor in South Korea, recently said that it received approval from China to invest in the Chinese securities market. Korea Investment Corp, the country's sovereign wealth fund, also said that it had received a QFII license.

Last month, Japanese Prime Minister Yoshihiko Noda announced plans during his visit to China to buy Chinese government bonds. Media reports said that the investment might be worth about $10 billion.

Japan's investment would be the first time that a developed economy used its foreign reserves to buy yuan-denominated assets.

Analysts said that Japan's move represented a significant step for the internationalization of the yuan, transforming it from a trade settlement currency to a reserve unit.

Chen Zhiwu, economics professor at Yale University, said that the purchase of Chinese government bonds by Japan and South Korea reflected China's increasing investment and trade relationships with the two countries.

However, Chen said, "the increasing foreign purchase of the yuan-denominated assets could put a burden on China's own huge foreign reserves.

"So it is unlikely for the yuan to become a true global reserve currency as long as China's trade surplus remains high."

The China Daily article may be found at: South Korea's Central Bank Weighs Purchase of Yuan Assets.
Will the RMB be a reserve currency?
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Beware the VIE Structure in China

The Chinese Securities Regulatory Commission (CSRC) has warned investors, through an internal memo, of the use of variable interest entities (VIEs).

The VIE structure has been used by foreign investors to enter industries where China has restricted or prohibited investment by foreign nationals. Typically, Chinese founders of a Chinese company who hold the license to do business in China in a heavily regulated industry will invest in an offshore company along with foreign investors. The offshore holding company will, then, create a wholly-owned subsidiary of the holding company in China. This company will enter into agreements with the original Chinese company holding the business licenses. The offshore holding company, thus, may control the domestic companies via the contracts.

The memo has alleged that VIEs may be a threat to national security. The memo has not, yet, been officially endorsed by the CSRC or the State Council, but if the memo is (could be going through the procedure now) we could see a quick backlash by the government. The backlash could include the invalidation of agreements between the subsidiary of the offshore holding company and the China company holding the licenses.

The backlash is not likely to come soon and the memo seems to insinuate that present VIEs will be safe, but structuring any new deals in a VIE structure is dangerous business than can be handled in other less risky manners.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Philippines, Vietnam and the U.S.

Jan 18, 2012

Eastern China City to Become Private Capital Center of China?

Wenzhou, late in 2011, made a proposal to the provincial government to commence regulating private financing. The cities hopes to become the leader in China in private capital financing.

The Wenzhou government intends to create private banking and financing institutions including private capital management, micro-finance and private equity distribution centers.

The city was motivated to reestablish itself, after numerous debtors have turned to an underground market for financing to solve short-term liquidity issues caused by the world financial crisis.

The city, however, may be a role model for the country. The underground financing market is well-known. The market has prospered because of the inability of these type lenders to gain business licenses. A more liberal approach to these lending sources could increase transparency and act as a catalyst for the creation, in China, of more legal and transparent lending sources for SMEs.

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

Amended Korea Trust Act to be Effective in July 2012

The 1961 Korea Trust Act has been criticized as being an archaic law that does not reflect generally accepted international trust standards and practices.

The revised trust law was passed to alleviate many of the problems of the old law.  The new law in Korea will come into effect in July of 2012.   The most significant changes are listed below.
  • The new Korea Trust Law allows the designation of a settlor as a trustee.  The trustee, however, will be unable to windup the trust and will be required to meet specific formalities when executing the powers as trustee.
  • The new Trust Law of Korea allows for beneficiary certificates to be issued by the trust.
  • The new law allows the the trust to issue bonds.
  • The new Korea Trust Law allows for a trust to obtain a limited liability status.  
  • The new Korea Trust Law allows for a trustee to designate a third party to manage the trust if the beneficiary approves in writing and a justifiable ground exists.
  • The new Trust Law in Korea allows for a trust to be forced to return assets that are part of a trust if the trust is being utilized simply as a tool to protect the assets from creditors.
Most of the major criticisms have been addressed, however, the application of law in Korea is often less predictable than the west, thus, we will have to see how the court and the bureaucracy interprets and applies the new Korean trust law.  
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Countering the Counterfeiters in China

Geoff Nairn of the Wall Street Journal wrote a great article entitled the Patents are Virtue: Countering the Counterfeiters.  He notes in the article that: "China is not the only source of pirated goods but it is by far the worst offender, accounting for 85% of counterfeit goods seized in the European Union last year, according to the European Commission."
The article has great advice on some of the reasons why companies doing business in China are plagued with IP issues.  The article quotes advice from Dan's china law blog on the ABC of Losing Your IP in China.
A: Failing to use employee invention agreements. These specify that any invention made using the company's time, material or facilities belongs to the company, not to the employee.
B: Thinking that patents are the only IP that matters. Western companies underestimate the importance and value of trademarks and trade-secret agreements in China.
C. Neglecting the three Ns. Non-disclosure agreements stop suppliers disclosing IP to third parties. Non-use agreements stop Chinese contract manufacturers setting up as your competitors. Non-circumvention accords stop contractors selling direct to your customers.
What do you think?
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Jan 17, 2012

Understanding the Korea-U.S. Alliance by Tom Coyner

Given that it has been almost a year without significant anti-American demonstrations, this may be a good time to disclose some surprising realities in United States-Korea relations. Otherwise, in the heat of future demonstrations, the following could be misconstrued as some kind of knee-jerk defense by an American. So, allow me to try to set up and knock down some misconceptions about the South Korea-U.S. relationship.

Myth: Anti-Americanism is a significant force within the Korean political and social environment.

Reality: While there is a core of die-hard anti-American Koreans who have adopted this ideology for whatever reason, almost all participants in anti-American demonstrations are not anti-American. Rather they tend to be anti-ruling class. At the same time, Koreans are acutely sensitive to any sign their government is kowtowing to the U.S. on any given issue, but seem to be less so when their government makes a concession to most other countries.

Why so?

Attacking the foreign partner of the elite is infinitely safer while still pressing home the same demands. During the years of the prior authoritarian governments, taking on the Republic of Korea’s government was risky business. Also, during most of the republic’s history, the government has been ruled by the conservatives who are generally perceived to represent the interests of the rich. Given the upper class’s business ties with America, the South Korean government has often been accused of being the Americans’ government. So, demonstrating against America can be a convenient foil, due to America’s extremely close relationship with the Korean establishment.

Myth: America is responsible for the division of Korea.

Reality: In a sense, this myth is true since had the U.S. not rushed to South Korea’s defense during the Korean War, the country would have been unified. But from a broader view this is a myth. For example, the liberation of Korea from the Japanese was an accident.

Even the American Forces’ role was directly insignificant other than forcing the Japanese government and its military to globally surrender. For 35 years, Korea had not politically existed, having been absorbed into Japan as a colony from 1910. During the closing days of the Second World War, American senior commanders are said to have had to look in an atlas to determine Korea’s location. The Soviet Union, belatedly and cynically leveraging the principles of the Cairo Declaration, declared war on Japan, a few days after Hiroshima’s atom bombing, rushing troops into Manchuria and later northern Korea. Hoping for nationwide free elections, the U.S. agreed with the Soviets for a temporary division of the peninsula. After repeated U.S. efforts to reach agreement with the U.S.S.R. on a formula for pan-Korea elections and unification, the elections were held in the South, but were never held in the North. In fact, in all but its formal name, the Democratic People’s Republic of Korea was up and running prior to Aug. 15, 1948.

Myth: The American government and, by extension, the U.S. Army control the government and military of the Republic of Korea.

Reality: Except for the three-year period of the U.S. military occupation following World War II, the Republic of Korea has maintained independence, often bordering on defiance, from the United States.

During the Korean War, the autonomy of the ROK government with its Army from the UN Command and the U.S. government was obvious when then President Syngman Rhee released POWs rather than forcing their repatriation to the communists as the UN had agreed at Panmunjeom. Earlier, in September 1950, the ROK Army’s chief of staff Lieutenant General Chung Il-kwon told President Rhee that he thought he needed UN Forces’ approval to send his troops north of the 38th Parallel. The ROK general was curtly told by Rhee that, as Korean Army chief of staff, he should obey the Korean president. “I gave General MacArthur authority over the Korean Army temporarily. If I want to take it back, I can take it back today.”

Myth: The American government and its military have had at least a tacit if not a complicit involvement in political coups.

Reality: In all cases, the Americans have been given too much credit for possible involvement in Korean internal affairs.

by Tom Coyner. Appeared in the Joongang Daily.  Senior Commercial Adviser for IPG and the president of Softlanding Consulting.

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

Opportunities in the Chinese Real Estate Bubble

IPG has seen great development in China over the past decade, but worries that many recent developments projects are occurring too quickly and without proposer feasibility studies.

Opportunities abound in China, but the recent issues with retail and residential space notes an issue that can kick investors in the butt - China has a real estate bubble that may be ready to pop.   The bubble may be bringing opportunities to the more creative investors.
As crowds shouted and pushed for the latest iPhone in Beijing on Friday, a glitzy mall across the street was bathed in silence, with just a handful of shoppers hunting for bargains.

The frenzy at the Apple store underscored the rise of the Chinese consumer, a development that analysts say is needed to support the global economy and make China’s growth more sustainable.
But the empty SOHO complex cast a different light on what is happening in the world’s second-largest economy: consumption is rising, but not nearly as fast as vast shopping centres are being built. 
A boom in the number of malls without a matching increase in actual shopping gets to the heart of what analysts see as the fundamental problem of the Chinese economy: too much investment, too little consumption.

“There was an exponential two or three years where record numbers of malls were built around the country,” said Frank Marriott, senior director for Asia at property consultant Savills. “It has to take a bit of a breather.”

Within a half-hour walk from Beijing’s fashionable Sanlitun district, eight shopping complexes have opened in recent years. While one mall called the Village – home to the Apple store that was pelted with eggs on Friday – is bustling, many of the others are visibly struggling.
We will be posting articles, in the near future, for investors interested in capitalizing on the Chinese real estate bubble.
_________ IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Free Access to Korean Laws in the English Language

The most complete site for access to Korean statutes in the English language is the Korean Legislative Research Institute.  The Korean Legislative Research Institute is a government-funded research institute.

KLRI, previously, charged for access to the database.  In order to obtain free access to the database, please read and follow the directions of the KLRI's Press Release below.

We would like to notify you that the Korea Legislation Research Institute will provide free online services on the English Acts and subordinate statutes of the Republic of Korea from April 1, 2010, aiming to raise understanding of the nation's Acts and subordinate statutes and result in an increase in the total amount of foreign investment in Korean businesses.

The details are provided as follows:

1. Provision of extended services : Extended services will be provided as follows: from approximately 800 statutes of the Republic of Korea to approximately 1,000 statutes of the Republic of Korea

2. Service charge : Annual paid memberships are converted to free memberships.

3. How to use service :
- After logging on to, go to the menu of "Search for Statutes of the Republic of Korea.” After you create your profile and become a member, you can easily enjoy the services.
* It is unnecessary that all existing members sign up again.

4. Copyright of English Acts and Subordinate Statutes of the Republic of Korea :
- The Korea Legislation Research Institute owns the copyright of the English Acts and subordinate statutes of the Republic of Korea, and the existing terms and conditions regarding the use of the copyright apply.

5. Refund for existing paid memberships :
Members who have already paid us excess fee for this period after April 1, 2010 will be given a refund according to a separate procedure. Please feel free to contact us for dealing with a fund individually.

6. Contact details:
Hyun-Gyoung Kim, Planning and Coordination Office, KOREA LEGISLATION RESEARCH INSTITUTE
TEL : +82-2-3498-8763
__________ IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, Vietnam and the U.S.

Jan 16, 2012

Looking for a China Business Expert? Get a China Old Hat

Dan Harris, of one of china law blogs, had a post on Chinese students in the United States that was commented on by Hidden Harmonies, a blog I follow.  The Hidden Harmonies blog notes that:
Dan Harris over at China Law Blog made a bold post today relaying complaints students at the University of Washington have for their fellow international students from Mainland China. He qualified that the complaints were directed at students from China and not of students with Chinese ethnicity. He also qualified the students whom he got the complaints were “sophisticated, intelligent, and well-traveled.”  . . .
Harris could have found a few Mainland Chinese students and get their take. Why doesn’t Harris have some Mainland Chinese students at University of Washington who he can readily talk to as he did others – after-all, his firm specializes in doing business in China.
You’d expect his firm smart enough to have Mainland Chinese students who understands Chinese law and studying international law (or something related) at University of Washington to intern for his firm. Without balance from the Mainland Chinese students perspective, the article panders to the nasty views in America towards ‘China.’ The complaints read a lot like the China bashing that exists in the mainstream American press; ignorant, some truths, and some lies.
I agree with Hidden Harmonies.  The post by Dan shows the problem with most "experts" on China.  Most experts are sitting in America and occasionally catches a flight to China.  To be fair, Dan does have one American lawyer living in China who speaks fluent Chinese.    However, without a presence in China and without living and breathing China, how can one understand the unique nature of doing business in China?  You must have an understanding of the Chinese from more than just books, blogs and a few visits each year.

This is not meant as anything negative to Dan.  Dan is wonderful at what he does and I have a great deal of respect for him because of what he built.  However, the problem reflected in the quote above is a problem common with those that take, primarily, an American viewpoint (because of, often, a lack of Chinese experience) to issues related to China.  This viewpoint, sometimes, leads to issues for clients of law firms.

I don't pretend to be an "expert" on Chinese Law.  However, my partner is a true China expert.  As you can see from the profile to the right, you can clearly see what my function is with regard to this blog.  I am the minion of a true expert on China Law - Frank Caruso.

I am not an expert, because I have been sitting in Korea for the last decade.  Like Dan, I don't speak Chinese (I have been with Dan and his Chinese is as good as mine -bad), don't spend much time in China (like me, I fly out from Korea a few times a year to China)  and have few interactions with Chinese other than the many "westernized" business flock.  I have met few Chinese law students and had few interactions with the Chinese (other than businessmen).

My partner (head of China Practice Team), however, speaks Mandarin, has Chinese staff, has lived in China for over a decade and even represents Chinese clients.  He has even been an adviser to the Chinese government.  He lives and breeds China and is, thus, a true China Law expert. 

Read Frank's posts and you will see the less textbook approach to issues and also more nuanced understanding of the Chinese and the unique way they do business.  Frank, as he likes to say, lives, works, loves and hates the "jungle."  His affectionate name for Shenzhen, China. 
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Fraudulently Obtained Subsidies Returned by Employer in Korea Must be Now Returned by Government

The Seoul Administrative Court ruled, late in 2011, that the provision of the Enforcement Decree of the Employment Insurance Act (article 56(2)) requiring the return by an employer to the Korean government of all fraudulently obtained vocational training funds (and other like funds) collected by the employer in Korea was unconstitutional (2011 gu-hap 14852). The law required, in most cases, the return of all vocational training funds received if any were received fraudulently.

The holding of the Administrative Court of Korea noted that the "“Article 56(2) of the Enforcement Decree of the Employment Insurance Act, before amendment, has failed to properly apply to the matter the concepts of "minimal intrusion" and "balance of legal interests,"" violating the Korean Constitution because it unduly infringes the ‟property rights” of companies in Korea obtaining the fraudulent funds.

If your company has been required to return subsidies/grants to the Korean government for any reason, please contact an attorney immediately. You may be able to receive a refund from the Korean government.

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

Jan 14, 2012

Korea Fair Trade Commision Acceptance of Consent Orders in Korean Competition Cases

Late last year the Korean National Assembly passed, along with the Korea-U.S. FTA and related bills, a law that will allow the Fair Trade Commission of Korea (KFTC) to accept consent orders. Consent orders have been a mainstay of most developed economies for decades.

The consent order allows the KFTC to punish without the admission of guilt of the company. This will likely decrease the burden on the KFTC, lead to more efficient enforcement proceedings, speed up M & A deals and also alleviate the burden on companies, while allowing companies doing business in Korea to more adequately gauge the risk of a certain action.

The disposition is similar, in a criminal matter, to a nolo contendere (no contest). The accused accepts the proposed punishment, however, doesn't admit guilt. Thus, the company may save a little face and time, while the government is alleviated of most of the burden of having to investigate the alleged violation of law.

In order to apply for a "consent order proceeding," the company involved should apply to the Korean FTC with a statement of the alleged conduct in question and a remedy for the alleged violation of the Korean Antitrust/Competition laws.

I assume any multinational companies involved in any matters concerning the Korean FTC will know enough that they need to hire an experienced international attorney that works with an experienced Korean antitrust lawyer.
IPG works with one of the leading Korean antitrust attorneys on all matters concerning antitrust/competition and actions by the Korean Fair Trade Commission.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Jan 13, 2012

Adjusting a Customs Value in Korea. Transfer Price vs. Customs Valuation

Late last year the Korean Tax Tribunal ruled that the "Customs Value" shall not be effected by a "Transfer Price Adjustment." The holding will make it more difficult for those importing products into Korea where the product may be paid for by the importer only after the sale of the item.

The case involved the import of motorcycles and auto parts by a foreign parent of a local company. The transfer prices were set in 2009 based on exchange rates in 2009. The transfer price was in Euros. Because of currency fluctuations, the company intended to change the transfer price to more adequately reflect market realities and allow for profit by the local company. The agreement between the companies allowed for a retrospective decrease in price based on changed circumstances, since imported items are not immediately sold. Time is needed to sell the goods and the time needed to sell can lead to currency fluctuation risks ("changed circumstances")

The local company and the parent agreed to a 5 percent decrease in the export price, thus, also seemingly decreasing the amount of custom duties owned. The catch was that over 15 million Euro worth of product was, already, reported as imported and duties were already paid by the local company.

Thus, the local company requested a refund of custom duties already paid on the 15 million Euro worth of goods (based on decrease in import price).

The Korean Customs Agency denied the request claiming, inter alia, that a price adjustment may not occur after the reporting of the importation of the item.

The company appealed to the Tax Tribunal of Korea.

The tribunal ruled that the calculation method for determining an arm's length price (transfer price issue) under the Law for Coordination of International Tax Affairs is an issue separate from the rules to determine a value for customs purposes. Thus, the transfer price is not a determining factor (or even a factor) in the determining the customs value of an imported item. Odd?

The case does contain some good news for importers.

The Korean Tax Tribunal noted that Commentary 4-1 of the World Customs Organization (WCO) states, in part, that where "price review clauses" has been effective or not is critical in determining whether an adjustment of the customs value should occur. When the price is already paid, then, the issue is moot and the price is set, but when an importer only pays after the item is imported and sold and then the exporter is paid - then a price adjustment is possible and thus the customs value shall be adjusted.

The Tax Tribunal, however, noted that the clause that allows the price adjustment must have a detailed method to calculate the decrease in price and the present clause was not detailed enough. The Tax Tribunal noted that the price review clause between the is vague and contains no method to determine how to adjust the price.

Seems like bootstrapping, but, still, include in all your agreements with your importer detailed clauses and adjustment calculation methods to reflect numerous contingencies, however, I fear that even if you had a precise formula, the Tax Tribunal would find some other argument to deny the refund. The case may be appealed.

What do you think?
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Jan 12, 2012

Starting a Business in Korea?: Read SERI Report for Feasibility Study

The European Chamber of Commerce in Korea published a great article by Mr. Chang-mok SHIN of the Samsung Economic Research Institute.   The article is very useful for companies wishing to establish an business in Korea and have based their feasibility study on less reliable forecasts.  SERI is not perfect, but they tend to be neutral and candid. 

Mr. Shin predicts, in short, that:
  1. Korean Growth Rate in 2011 will be 3.6%.  This "low growth"  rate will be caused by the European debt issues, a slowing economy in Europe, and that the Korean government is unable to further stimulate the economy because of a high (recently increasing) sovereign debt and the inability to consider quantitative easing because of, already, high inflation.
  2. Korean Private Growth in Consumption will increase by 2.7 percent and Consume Prices will increase by 3.4 percent from 4.4 percent.  This lower than normal consumption growth is caused by "slower income growth, high inflation and an economic slowdown."
  3. Korean Facilities Investment will grow to 4.5 percent (6.7 percent in 2011).  "Strong exports of information technology products and automobiles have contributed to a favorable investment climate, but both products will inevitably face declining outbound shipments going forward." 
  4. Korean Export Growth will decrease to 11.9 in 2012 from 20.9 percent today.  Same basic reasons as above.  
  5. Korean Won will strengthen to 1,060 to the U.S. dollars.
The full report can be found in the December 2011 issue of Infomag.  Infomag is the monthly magazine of the European Union Chamber of Commerce. 

What do you think?
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Jan 11, 2012

Operating a Business in China Just Got a Little More Difficult: Labor Law Risks in China

This past week the Supreme People's Court of China officially announced that it will impose much more serious criminal punishment on those that are involved in violations of workplace safety laws that leads or may lead to harm to workers.

We expect to see lengthy jail sentences handed down to more corporate executives and, also, higher fines.

The announcement comes at no surprise to us at IPG because of increased media exposure of work place accidents and, also, demands by Chinese employees.

Foreign companies operating in China that are in industries that are perceived as having a dangerous working environment should immediately do a complete compliance workplace safety audit by either a law firm or a business consultancy with significant experience doing this type of business in China.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Jan 10, 2012

Did you Hire a Good Defense Lawyer in Korea?

There are few great criminal lawyers working in Korea, because of the nature of the Korean criminal justice system and other Korean realities.

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

As I mentioned in a post entitled Criminal Defense Lawyers in Korea: Who to Hire - Who Not to Hire:

"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)"
Here are a few signs that you may have hired a good Korean Defense attorney.
  • Your lawyer is operating based on a success/contingency fee (bonus for not going to jail).  If your Korean lawyer is not operating based on a contingency/success fee he may not be motivated to win the case.   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 lawyer doesn't work for one of the ubiquitous firms working for foreign clients.  Some of these firms are more concerned with their reputation than yours.   Many are notoriously bad in criminal cases.
  • Your Korean lawyer is between the age of 40 and 60.  If the 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.
  • You talk directly with your Korean lawyer every time you meet the lawyer.   If you lawyer is directing you, consistently, to talk with a less experienced lawyer - run.  The less experienced lawyer is likely, only, doing the work and the more experienced lawyer is simply a rainmaker.
  • Your Korean lawyer has great 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 many 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 Korean 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 contacts you often, meets you in jail often and leads the conversation.  A lawyer that never speaks, never contacts you and never visits you 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 speaks, but, also, listens when you talk.  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 seems busy, but not overwhelmed.  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.
NY Attorney Sean Hayes is the only non-Korean to have worked as a government attorney for the Korean court system and one of the first to be a regular member of a Korean law faculty.

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