1/02/2015

Establishing a Manufacturing Business in South Korea: Top 14 Things to Know Before you Go

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

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

However, before going into any manufacturing arrangement in Korea here are the Top 14 things you need to know before investing money in Korea in a manufacturing venture or like Korean venture.

The list assumes that you will have a local company as your JV partner in this manufacturing venture in Korea:
  1. Register all Intellectual Property including your trademarks and patents in Korea.  No - your E.U., U.S., Indian, Japanese etc. registrations are not enough (See: Don't Just Trust US: Trademarks in Korea); 
  2. Due Diligence, Due Diligence, and More Due Diligence (See: Listen to My Mother: JVs in Korea; Listen to my Mother: Minority Shareholder Rights);
  3. Complete a decent feasibility study and get someone, in Korea, to perform the study. This does not mean simply running a cost estimate;
  4. Consult a technical adviser in Korea;
  5. Checkout and go through my Stock Purchase/JV Due Diligence Check List;
  6. Meet the Anticipated JV Partner and learn about the partner.  A discussion on the phone is not enough - either is a meeting over dinner.  Have a local help with feeling the person out; 
  7. Execute a Non Disclosure Agreement (NDA) and a Non-Circumvention Agreement in English and Korean (Liquidated Damages in NDAs in Korea);
  8. Execute OEM, Manufacturing, JV, Supplier, Shareholder Agreements, as the case may be, in English and Korean.  Don’t get them drafted by hacks or those who don't have experience in Korea.  No, the lawyer you use in NY is not good enough .  ;
  9. Research or have researched benefits to manufacturing in Korean Free Trade Zone (FTZ); and
  10. Research or have researched benefits to manufacturing or employing people in certain areas of the country.  Example: Seoul government subsidizes new hires in certain industries.
  11. Understand Korea's Labor Laws.  Check-out our Korean Labor Law Checklist.
  12. Get a Compliance Adviser/Compliance Attorney in Korea to give you a comprehensive rundown on the risks of doing business in Korea.  Check-out my Compliance Checklist.
  13. Never forget obligations under your nation's laws.  You can succeed in Korea without Resorting to Bribery?
  14. Ensure that your lawyer understands (or cares) that some companies in Korea are difficult to obtain realistic judgment against in Korea courts.  Ways exist, for many companies, to enforce arbitration awards outside of Korea.  Enforcement of Foreign Judgments in Korea.
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SeanHayes@ipglegal.com

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.