Jun 27, 2013

Non-American Homosexuals in America to Receive Visa Benefits

The U.S. Supreme Court, in a 5-4 holding that was split on the typical ideological camps, declared unconstitutional the U.S. Defense of Marriage Act.

The Defense of Marriage Act denied federal benefits to same-sex spouses. In declaring the law unconstitutional the majority opinion by Justice Kennedy opined that the law simply; "writes inequality into the entire United States code." Justice Kennedy went on to opine that the law, in of itself, is "demeaning" and "humiliating" to gays and lesbians.

Justice Scalia, in dissent, noted that: "Favoring man-woman marriage no more 'demeans' and 'humiliates' other sexual relationships than favoring our Constitution demeans and humiliates the governmental systems of other countries."

The largest affect for non-Americans will be the benefit of a U.S. spousal visa and permanent residency. Thus, for example, a Korean man that marries an American man will be eligible for a K-1 Fiance visa and permanent residency.
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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Jun 25, 2013

Titles of Employees Working for Companies in Korea

The following are the most commonly utilized titles in Korea.

회장 (Hwae Jang): Chairman
대표이사 (Dae Pyo Isa): Representative Director
사장 (Sa Jang): President
부사장 (Bu Sa Jang): Vice President
전무이사 (Jun Mu Isa): Executive Managing Director
상무이사 (Sang Mu Isa): Managing Director
이사 (Isa): Director
부장 (Bu Jang): General (Senior) Manager
차장 (Cha Jang): Manager
과장 (Gwa Jang): Section Chief (Manager)
대리 (Dae Ri): Assistant Manager
사원 (Sa Won): Employee/Clerk (Entry-Level)
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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Jun 20, 2013

Sales Channel of Korea: Distributors and Other Indirect Methods

Indirect selling can be one of the least expensive and lowest risk strategies. Among American firms selling into Korea are offshore companies that use local distributors.

Often, foreign companies organically grow their operations throughout Asia by contracting local companies before setting up a representative office and hiring their own local staff. This approach offers obvious advantages, but also contains many hidden pitfalls. Before entering into any kind of international distribution agreement with a Korean distributor, for example, it may be wise to ask oneself just why one is entering the Korean market rather than using the same resources to expand in existing markets.

If the rationale is purely opportunistic, chances are your firm may not truly exceed beyond getting one or a few customers who are well known to your distributor. While the go or no-go decision criteria for selling through offshore channels may be less demanding than calculating the return on investment through a direct presence, several factors should still be carefully considered. Enthusiasm for Foreign Products Koreans are enthusiastically curious about foreign goods and services.

As may be expected, the more enhancing and least disruptive goods and services will fare best. Other products may be intrinsically disruptive, if only for the overall good of the user, but thereby require much more selling and after-sales support. In this case, Koreans naturally will consider if there are cheaper, local alternatives with sufficient Korean-speaking after-sales support. While price is often an overbearing consideration, there are foreign products that compete in Korea on their unique values--even if they cost more than local competing products or solutions. In any event, it is critical to concretely identify your competitive advantage from the Korean perspective rather than that of your marketing department. Finding a distributor in Korea is easy. But, finding an effective one can be difficult.

The good news is that many individuals and firms can assist you in this task. Since this is a compact business society, one can say that almost everyone knows everyone else, one or two people removed. It is not wise, therefore, to select an English-speaking distributor or market entry specialist primarily because he “knows all the key players.” Most folks who have 10 years or more experience and have been reasonably successful can qualify by that criterion alone.

What actually makes a good distributor may vary from industry to industry. However, a safe bet is to find one that is already selling profitably to market leaders. The ideal distributor should be well known and respected, but not so large as to consider your product as simply another arrow in its sales quiver. I know of any number of war stories—those of foreign firms coming to Korea and being attracted to some of the biggest names in their field. The stories vary but share a common theme. At the beginning, everything looks extremely positive.

The distributor’s staff are very bright, many speak decent or even very good English, and they are already working with or at least very familiar with your target companies. Then one day, the foreign firm receives communication introducing them to a new product manager or even a new product team within their distributor. What the foreign firm did not realize or take into adequate account was that very large distributors often rotate their staff every couple of years—and sometimes even more frequently.

Consequently, prior investment in training the distributor’s sales and after-sales staff can suddenly disappear within one of these frequent organizational reshuffles. On the other hand, it can be equally disastrous to collaborate with too small of a distributor, financially over-dependent on the success of your product. While such a distributor may offer the fullest measure of dedication to your product line, they may not have the financial or human resource capacity to expand once they start selling. More than once I have seen customers delay payments to the distributor for large capital asset sales until the customer is fully satisfied with the purchase.

This has often resulted in enterprise-threatening cash flow problems for these small firms. While there is no magic criteria that applies to all industries, one should evaluate multiple candidates and consider finding a mid-sized firm that has a strong reputation, an appropriate customer base, and one that is already profitably selling complementary, or at least not competing, products. The goal is to find a distributor that has enough skin and flexibility to survive both types of challenges.

The Deal It is not uncommon for a Korean distributor to go to his foreign partner and ask for so-called “one-time, special” pricing discounts on the first deal and to demand that the foreigner to send his support staff for the duration of the project given the lack of product understanding of the local after-sales staff.

This can easily happen even when there has been a clear, prior agreement as to the level of support to be provided by the foreign partner. What often happens is that the foreign firm makes a pricing concession for a market entry deal while not realizing that they may have set the benchmark by which all other deals will be closed in this tight-knit business community. When it comes to sending support personnel to Korea, the foreign partner draws the line and agrees only to send support staff for limited amounts of time during the course of the project. Usually the ensuing confusion from the lack of on-site spot support, regardless of the amount of off-shore phone support, leads both parties to agree in retrospect that it would have been cheaper to have kept a foreign partner’s support staff on-site the entire time.

How Korean firms look at written agreements can be at odds with their foreign partners. Korean firms look at such agreements as generally acceptable guidelines on how to approach an uncertain future. In the Korean businessman’s mind, one must be flexible to deal with discovered realities—even if such accommodation may run against the core of the foreigner’s agreement. If the foreign firm is unfamiliar with doing business in Korea, it becomes exasperatingly difficult to know when to concede in deference to local market requirements and when to say “no.” Usually the vendor-distributor relationship is still green.

The matter of trust becomes a serious issue with both sides where the foreigners start wondering if they are being “taken for a ride,” while their Korean counterparts start fuming that the foreigners are reneging on prior assurances of being competent and worthy partners Normally one can hide from the customers the temporary disruption or suffering of vendor-distributor relations. However, if one does not quickly and sufficiently address the matter, word will leak out into the market. And in Korea, where personal relationships insist that friends share almost everything, businesses may find that there are no secrets.

War Stories In one war story involving partnerships with local distributors, the distributor purposely price gouged their customers while it possessed a monopoly in the market for a high-tech system. Not stopping there, the distributor disabled some of the product’s functionality in order to sell multiples of the product, when a single, fully functional product could have addressed each customer’s multiple needs.

The distributor in the meantime reverse-engineered the core product with the intent of introducing a competing, “Made in Korea” product that would be not only cheaper but more fully functional. In another, the local software distributor provided excessive customized services as a way to sell its services rather than working closely with foreign vendor’s development staff.

After several years, the totally “Koreanized” solution was so overwhelmingly localized that the core product had become barely recognizable. Consequently, while the rest of the foreign vendor’s overseas markets were moving along onto next-generation products, Korean customers lagged behind and often dropped use of the foreign products since there was little incentive to upgrade. In both worst-case scenarios, the common denominator was that there was no one on the ground watching out for the foreign vendors’ best interests.

Sending rescue operatives late into the game can be an exercise in futility since local past practices can position the foreign product as being too expensive, thereby creating major marketing headaches for expanding the customer base. Furthermore, customers may already be accustomed to using the products in inappropriate or inefficient ways. Taking corrective measures may cause a great deal of embarrassment within customer organizations. Therefore, much consideration must be given toward building successful partnerships with distributors. Possible Roles The single, biggest cause of failure in the partnerships between foreign companies and distributors must be conflicting expectations of the each other. Rarely does an in-depth conversation take place. While one would assume that this would be resolved in the course of negotiating a sales distribution agreement, too often does this turn out not to be the case. Take, for example, the role of the distributor.

The two most common types of roles played are the midwife and the full representative.
By midwife, it is meant a distributor who basically knows the marketplace and introduces your sales and support staff to the customers during and following the sales cycle. Commonly found in the case of cutting-edge products and technologies and often expensive, this model allows the foreign company to get close to the customer base and have greater control of how the customer base buys and implements your product. This knowledge can in the end be critical as it may be very difficult--if not impossible--to move the customer base along to the next generation of products and services in the case the distributor improperly sells or implements the product.

A full representative, on the other hand, is a distributor who is fully trained and able to conduct the entire sales cycle and is also capable of providing primary or level-one technical or after-sales support to local customers. It is often applicable to a product or service that may be unique in terms of features and functions, but is already familiar to the market and is composed of qualities or technologies well understood by the after-sales staff. The obvious drawback with the full representative is that it essentially “owns” its share of the market and will often keep the foreign firm away from the customer base out of fear that the foreign partner may go around it in the future. Also, while end-user pricing methods undisclosed to the foreign firm may bring short-term windfalls to the distributor, it may deny the foreign firm of future sales as the local market seeks less expensive alternatives.

Getting Up to Speed In any event, the end goal for foreign firms is to have their distributors be as competent as possible. Too often foreign firms believe that by training the sales and after-sales staff in their product or service they can soon be able to rely on the distributor. Yet, when the first strategic, major sales opportunity takes place, the distributor and the foreign firm suddenly find themselves at odds, no matter how clearly the distribution agreement may have been written. Even if there is full review between the foreign firm and distributor, both sides often underestimate the difficulty in getting the local staff properly trained.

Local employees tend to be a bit overconfident in their knowledge attainment and foreign firms tend to be a bit too eager to accept their Korean partners’ assurances. The biggest cause of disappointment may be the communication barrier between foreign support staff and local line staff. While local employees can read English fairly or extremely well, they usually find themselves at a total loss when it comes to phone conferences. Furthermore, they may seem to understand during product training, when in fact they may be getting less than half of the delivered content. All of which has a nasty way of being revealed when the pressure is on to meet what a foreign firm may consider as an unrealistic or overly aggressive deadline established by (or sales promises given to) the prospective customer.

Keys to Success Given the above, one may wonder how one can be successful in Korea without a direct presence. One way is to limit your expectations of success and allow someone whom you may have met at a trade show or whomever to sell the least difficult product to a small part of the market. The danger with this strategy, of course, is that you may end up with expensive support of one-off sales in Korea while missing a potentially larger and more profitable market. A more effective alternative is to find an agent who has a fair appreciation for the ways of doing business in Korea and abroad and who can actively keep you in touch with your distributor and the marketplace. Working with the distributor at least on a weekly basis, the agent stays up-to-date on the distributor’s staff, prospects and customers in order to advise both foreign firm and local partner on small, conflicting matters before they fester into major issues. A good example of this involves the timeliness of communication.

In a culture that stresses, “Just do it now!” Koreans are often exasperated by the slow response they get from their foreign partners. Time differences in global partnerships can be equally irritating between partners, but often it is difficult for Koreans to appreciate that the foreign partner is trying to systematically service concurrent, multiple market needs and that their demands are not cued to the front upon demand. At the same time, foreign partners are often slow to understand and appreciate the time and emotional demands that customers and prospects routinely place on local distributors.

With concise and timely communication of issues, the agent allows for the foreign firm to make effective decisions, and in the meantime, assists the local distributor to understand the benefits behind certain management practices (frequent sales forecasts, adherence to business plans, etc.). Upgrading performance through experience-based consulting—including the evaluation or suggestion of alternative sales strategies, uncovering hidden conflicting agendas, and provision of results-oriented sales training—is also a possibility. Foreign firms and their distributors tend to spend a great deal of resources on product training and assume the sales staff already possess effective skills from their years of experience.

Also, while “relationship selling” is essential to sales strategy in both Korea (friendship weighted) and the United States (“professionalism” weighted), engaging in just one form of relationship selling may very possibly result in market areas inadequately explored. In the end, the decision to establish indirect sales in Korea must be made in conjunction with the question: “Who is going to keep an eye out on the store?” After all, your local partner will be selling your product, advancing your brand, and largely determining the success of your company in the world’s 11th or 12th largest economy.

by Tom Coyner. Senior Advisor for IPG Legal
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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Jun 18, 2013

Union Leader in Korea Arrested by Police

The head of the Ssangyong Motors union has been arrested and detained by the Seoul Metropolitan Police Department for setting up tents for union protestors in the front of a heavily touristed downtime palace.  The arrest was obtained via a court detention warrant.

The Seoul City, during past demonstrations, has been crippled by demonstrators hellbent on disrupting the lives of fellow citizens.  Protests have even lead to the burning of police buses and the destruction of other city property.

The union leader has violated a law on setting up illegal facilities multiple times and was arrested while on probation.  It seems the purpose of these protests has little to do with the freedom of expression and more to do with attempting to occupy a space in order to disrupt the lives of residents and tourists. 

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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Jun 13, 2013

Check List of 7 Things to Do Before Doing Business in Korea

1.  Do you Have a Registered Company/Business? Operating in Korea is not as simple as just leasing an office.  All businesses whether in the form of a corporation or sole proprietorship in Korea are required to register as business with the tax office and local government offices.  For some businesses the approval of a government agency will be required.  Other articles on Korean corporate forms may be found at:

2.  Do you Have Employment Agreements, Employment Rules, License Agreements, Joint Venture Agreements, OEM agreements, Shareholder Agreements, Lease Agreements Tailored for your Korean Business?
No your U.S. agreements are not good enough.  Other articles on the need for Korean-tailored agreements that may be of interest may be found at:
3.  Are you in Compliance with Foreign Corrupt Practices Act?  The U.S. Foreign Corrupt Practices Act (FCPA) and the British, Canadian, French, German equivalent allows the government to severely punish those for even actions of a Korean partner.  A compliance system must be put in place.  If you do not have a compliance system tailored to your Korean operation - you may be heading down a road that can lead you into the hands of not, only, the Korean prosecution, but the prosecution of your foreign government.  A few more posts that may be of interest:
4.  Have you Protected your Trademarks, Patents, Copyrights and other Intellectual Property Rights?  Registration of your Intellectual Property rights (IP) "internationally" is not good enough for Korea.  You must register your IP in Korea.  Please read the following posts:
5.  Due Diligence?  I wrote so many times about Due Diligence it is painful to type those two D words.
6.  Did you Conduct a Compliance Audit?  You may be in violation of employment, tax, environmental, antitrust/monopoly, currency control, transfer pricing, occupational health and other laws and regulations.
7.  Did you Conduct a Financial Audit by a True Independent Auditor?  Speaks for itself.

Please - this is not to be taken as an exhaustive checklist.  Please scroll the blog for more issues that may arise in your operations in Korea. 
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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Data Theft in China: Often Comes from the Inside

We often discusse Intellectual Property rights and enforcement here in the Jungle and it must be looked at from a different angle than most Westerners are accustomed.

First of all, the inhabitants of the Jungle don’t really consider it infringement and certainly most don’t have the core internal belief that there is anything wrong with taking someone’s information or intellectual property. In addition, they don’t really believe in Win – Win business outcomes and if they can get the upper hand through any means, they will try and it is your fault for letting the playing field remain un-leveled to their benefit.

Finally, there is a long history of companies coming to China and sharing technology in the hopes of doing future business or having a successful Joint Venture only for the technology to be taken by their “partner” – Wahaha and Danone are a fine example as are Siemens and their MagLev high speed train technology. So, it’s no surprise that according to a recent survey of U.S. companies in China that 25% report that they have been a victim of corporate espionage in some form – these are the companies who are willing to admit it. I tell everyone who wants to do business here in The Jungle to make sure you know who you are dealing with before you do a deal and protect your intellectual property at all costs regardless of where you are doing business.

These companies need to beef up their data security and watch out for their own employees because data theft usually comes from the inside.

by Frank Caruso
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info@ipglegal.com

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.

www.ipglegal.com

Jun 12, 2013

Illegal Professions in Korea: Private Investigator, Tatto Artist, Chiropractor

It is illegal to be a private investigator, tattoo artist or chiropractor in Korea. Of course, Korea has private investigators, tattoo artists and chiropractors. Thus, those practicing these occupations in Korea face criminal prosecutions and fines.

Additionally, the clients of those practicing these occupations are not safeguarded by the typical administrative agency regulations that serve to protect these individuals.

Some issues have occurred with regard to private investigators. Some have utilized tactics that many consider less than ethical. These criticisms may be lessened with the regulation of the profession.

I believe in the near future that tattoo artists and private investigators will become legal occupations, but I believe you will see a vigorous fight from massage therapists (anma- blind practitioners), pharmacists and doctors towards legislation of the chiropractic profession.

Some lawyers are against the private investigator profession, but in my own straw pole I found no Korean attorney that is against the profession if the profession is monitored by an agency not controlled by those within the profession.

What do you think?
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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Jun 9, 2013

Contracts in China: Do you Even Have One?

The following is from a blog post I put up a few years ago and although it is brief and not as verbose as my other posts, it is certainly in my top ten favorites.

It is not surprising how many companies and entrepreneurs are in such a hurry to get started in manufacturing, partnering or marketing that they totally disregard the need for a contract, a simple memorandum of understanding or something written on a cocktail napkin.  It’s also not surprising anymore (after 10 years in the Jungle) that people come to me looking to recover losses incurred with Chinese suppliers, factories, or partners and they don’t even have a basic agreement.  Usually I have to tell them that without an agreement, you really have no chance to recover and that there are very few lawyers or legitimate collection agencies in China that are willing to work on a contingency fee basis, including yours truly.

So, as we enter the second quarter of 2013 and try to reach our manufacturing goals and sales targets for the year, it might be time to conduct a thorough review of your contracts.  Do you have them?  Are they written in English and Chinese? Are they written by your U.S.-based lawyer who knows nothing about China?  Are they written by your Chinese lawyer who has little or no obligation to advocate on your behalf and has never even traveled outside of China?

I thought I would share this blog posting from The International Technology Law Blog as a reminder that you shouldn’t start without a contract, and if you have started you must conduct a thorough contract review or you risk not having any recourse for recovery when you get shafted by your Chinese factory, supplier or partner.  There are many factors that must be considered when presenting and negotiating a contract with the Chinese and you better have someone skilled and experienced in China looking out for your best interests.

by Frank Caruso
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info@ipglegal.com

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.

www.ipglegal.com

If it is good for Apple why isn't it Good for your Company

If it is good for China, then, why isn’t it good for your company as well. You might even argue that Apple has billions of dollars and lots of cash and can spend money on high priced lawyers and accountants and you can’t. Well, that is true and they do spend a lot of money on lawyers and accountants, but what is untrue is that you can.

Some of you might remember 2008, just before the economic crisis and shortly after George W. Bush pushed through sweeping changes in the U.S. Bankruptcy laws, Haliburton moved their corporate headquarters out of the U.S. to Dubai.

This didn’t just mean they moved their physical address, which they did, they also changed the jurisdiction of their incorporation. Why did they do this? Simple, Dubai has very low, if any Corporate taxes and Haliburton can be shielded from paying those taxes, from the onerous restrictions of the Foreign Corrupt Practices Act, and from liabilities that they would otherwise be subject to under U.S. law. “Well, that doesn’t sound fair,” you might say. Fair or unfair it is completely legal and companies do it all the time.

I have been promoting Hong Kong as one of the best jurisdictions in the world for protecting your assets and for legally paying less taxes and in fact in the annual Report on Economic Freedom Hong Kong is regularly ranked number 1, well ahead of the U.S.

I often wonder why U.S. individuals and companies that do business in Asia and Europe would not want to incorporate in Hong Kong and invoice out of Hong Kong and instead prefer to generate revenue in a tax system that is wasteful and takes more half of their income. It doesn’t make sense.

So, I thought I would share the below article from Zero Hedge and share it with you and hope it is enlightening. Apple and Taxes Confused why AAPL is opting for the dividend recap route (as we predicted it would in January )?

Simple: as the first chart below reminds us, as of December 31, nearly 70% of the company’s total cash, which has grown to a record $145 billion in the current quarter, was held offshore. This means that if AAPL wanted to repatriate this $100 billion or so in cash, it would have to pay Federal tax on it, amounting to dozens of billions in remittances to Uncle Sam as this is cash which AAPL does not have full access to for US based operations.

Hence: it has opted to raise cash by issuing debt instead of repatriating its cash. Which brings up an interesting point. As we have shown in the past, perhaps the one thing Tim Cook’s company has loathed more than anything in the past, is to pay taxes, which is why it has some of the most convoluted legal tax shelters imaginable. Indeed, in the current quarter, according to the company’s cash flow statement, a tiny $2.4 billion was paid in cash taxes. Putting this number in perspective, the company had an operating profit of $12.4 billion. Or, cumulatively, since December 2008, AAPL has generated a grand total of $149 billion in operating profit, while paying just $21 billion in total taxes. Is it apparent now why some $100 billion in Apple cash is not fully recourse to the company? Unless, of course, AAPL decides to follow Gerard Depardieu’s example, and run away into the tax-amnesty friendly steppes of Russia, where it will be free to do as it wishes with all of its cash…

Read the Article with all the cool graphs.

by Frank Caruso
info@ipglegal.com

Jun 6, 2013

U.S. ITC: Apple Infringed Samsung Patents

The United States' International Trade Commission has overturned ITC Judge James Gildea's September ruling that Apple did not violate Samsung's patents alleged to be utilized in AT&T models of the iPhone 4, iPhone 3GS, iPad 3G and iPad 2 3G.

President Obama has 60 days to review the order that has placed a partial ban on the imports of older versions of Apple IPhone and IPad products.

The ban relates to the use of Apple of "standard essential patents," specifically the 3G wireless technology to transmit multiple services simultaneously that is owned by Korea's Samsung. Three related claims by Samsung were dismissed by the ITC.

The majority of scholars and most U.S. government agencies believe that the damage for violation of these type "patents" should be low-cost licenses - not a ban on imports.

What do you think?

Other articles that may be of interest:
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SeanHayes@ipglegal.com

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.

www.ipglegal.com

Jun 3, 2013

Korea Campaign of PSY Launches in Australia

A great marketing campaign for Korean tourism is underway with Psy at the helm.




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SeanHayes@ipglegal.com

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.

www.ipglegal.com