Do you Sell Buggy Whips? Succeeding in a Competitive Korean Market

In many ways, the 19th century continued until the outbreak of World War I. The 20th century ended with the fall of Lehman Brothers.  In confusing times such as these, it is natural for people to draw parallels as a way to understand current events surrounding us. They hope to gain some insight on an uncertain future. Here are some examples: A recent issue of BusinessWeek suggested that America of 2009 may learn from Japan of the 1990s. In Korea, journalists, businesspeople and even some economists refer to the 1997-98 Asian financial crisis as a case study from which they may forecast a future. But America is not Japan. In so many cultural and political ways, such comparisons defy making accurate projections. And the “IMF Crisis” was a regional event. It was relatively isolated from the global economy, compared to the worldwide crisis we face today. Today, several public figures

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Business Opportunities in Korea for Entertainment Companies

I just read a blog post by my friends over at the China Law Blog that motivated me to write the following post.  Korea is an excellent testing ground to determine the feasibility of your business for other Asian markets such as China or Japan.  The country has, also, proven more profitable, for many businesses, than the often too hard to catch “Chinese Middle Class.” The following is a list of some industries that are successful in Korea: 1.  Franchises.  The franchise market in Korea is booming.  All major players are in Korea and most are doing very well.  Many of the lesser-known franchises have also succeeded.  2.  Education.  Koreans have a thirst for education that seems insatiable.  Much of the market, however, is closed to foreign competition.  3. Military Technology.  Korea is one of world’s largest purchasers of military technology.  All major players have a solid footing in Korea

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Negotiating a Joint Venture Agreement in Korea: Shareholder Agreements in Korea

We recently had a client with a myriad of joint venture issues.  The issues were caused, primarily, because of the joint venture agreement being drafted, only, in English without a review my client or a competent lawyer and most of the negotiations occuring through a translator.   For example, the American company believed that the joint venture agreement mandated that all disputes were to be handled via arbitration in Hong Kong.  The American company SEVP noted this to the interpreter as non-negotiable.  The agreement was drafted in Korean and the American SEVP never reviewed the joint venture agreement in anything but the Korean language.   Oddly enough, the law firm drafting the agreement never even mentioned this to the American Company. Because of this issue the SEVP and the in house attorney that assisted on this deal were fired.   The international law firm operating out of Hong Kong was, also, fired.  Please

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Distribution Agreement in Korea: Factors to Always Keep in Mind

Prior to going into any relationship with a distributor/agent in Korea, please read my post entitled: Finding a Korean Distributor: The Top 10 Things to Know Before Going to Bed with a Distributor in Korea. Please read that post in combination with this post, prior to engaging a distributor. We see too many distribution agreements that are mere spun U.S. agreements. Please have your distribution agreement and all agreements you have in Korea drafted by an experienced and proactive attorney that has on-the-ground experience in Korea. We see too many issues that could have been easily resolved by a carefully drafted agreement and a little due diligence. Issues to consider for your Korean Distribution Agreement: Will your distributor in Korea be your agent? If the distributor is an agent, generally, you will, only, be paying your agent a commission and you will be directly invoicing the client. Liability and other

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12 New Items Prohibited from Export from Korea by Overflow of Core National Technology Law of Korea

The following is the list of the 12 new items that have been newly prohibited from export from Korea without an export license/acceptance of report of export from the Ministry of Knowledge Technology of Korea.  The export prohibition was implemented by the Overflow of Core National Technology Law of Korea.   The prohibition takes affect from the beginning of 2011. Electric /ElectronicProducts Foundry process & device technologies of less than 31 nms. Design/process/manufacturing technologies of AMOLED panels (except for module assembly process technology). Design technologies of lithium secondary batteries with high-energy density (200Wh/Kg or more)  & high-temperature safety for electric cars. Information Technology  Products          Design technologies of system for Advanced LTE/LTE. Design/process technologies of Mobile Application Processor SOC. User Interface (UI) technologies for Smart Phone Devices. Design technologies of Baseband Modems for Advanced LTE/LTE. Design technologies of RFIC and PAM for Advanced LTE Terminals. Design technologies of Base Station for Advanced

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Nine Musts for a Succesful License Agreement in Korea

License Agreements in Korea are too often, simply, a spinning of license agreements used in the West.  Your foreign license agreement, in most cases, is not adequate for your needs in Korea.  Our 9 Musts before Engaging in a License Arrangement in Korea 1.  Due Diligence Say it three times and read my posts:  Doing Business in Korea:  Due Diligence, Agreements, Attorneys and Street Smarts 2.  Royalty Clause  Include in your license agreement a royalty clause.  The clause should detail, at a minimum:  Currency conversion rate or payment in the currency of your home nation  Payment terms  Accounting and audit particulars  Tax treatment 3.   Inspection  An inspection of the first batch of goods is a necessity and periodic inspections are recommended for most products.  Agents are available to conduct these inspections. 4.  Choice of LawIf the license is for a smaller value, often, it is best to simply utilize Korea as

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Finding a Korean Distributor: Top 10 Things to Know Before you Jump into Bed with an Agent in Korea

Too often we deal with clients looking to collect on unpaid invoices to distributors/customers in Korea and resolve IP and other disputes between these distributors/customers because of clients rushing into relationships without vetting out the anticipated distributor or having a very poorly drafted distribution agreement.  Many distributors in Korea are fantastic, while, others are nothing more than order processors -they, simply can’t or don’t want to sell.   Additionally, in these tough economic times, too many companies, in Korea, are struggling to stay afloat.  If your distributor doesn’t know the market, you will find yourself with unpaid invoices from customers and issues with your distributor.   Do yourself a favor and consider the following before engaging a local company to distribute your products. 10 Ten Things to Consider Prior to Doing Business with a Distributor in Korea Has the Korean distributor worked with other foreign companies?  If not, you are dealing

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Is K-Pop Sustainable? Tom Coyner by IPG’s Senior Adviser

For the past five years I have monitored with detached interest how Hallyu, or the Korean Wave has grown from a local pop phenomenon into an international trend. There is no denying it. The Korean Wave is huge. But by living in Korea, one could easily get the impression that the Korean Wave has taken the entire planet by storm and there is no telling where Korean culture will make its next global impact. But is this really the case? I know as a fact there is creative team in a major Korean tourism bureaucracy that is divided into two camps. One camp tries to shoehorn the Korean Wave into just about everything they touch. The other camp is about ready to scream if they hear “Hallyu” yet one more time. And that pretty much sums it up. Either one believes the entire globe is hooked on the Korean Wave

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Sales of Imported Cars Increase in Korea: American Cars Still Not Popular in Korea

The sale of imported cars increased over 16% percent in August of 2012 when compared to August of 2011 in Korea.  The increase is attributed to the aggressive sales promotions by local dealers and increased interest in luxury foreign cars.  The free trade agreements may have, also, made more mid-income consumers consider purchasing a foreign cars. The U.S. (7.1% of foreign car market in August) is still lagging way behind European (77.9%) and Japanese (15%) competitors even, though, American car companies offer the best deals in the market. Why are Americans cars not popular in Korea?  __________ Sean Hayes, IPG’s Co-Chair of the Korea Practice Team, may be contacted at: [email protected] (c) Sean Hayes – SJ IPG. All Rights reserved.  Do not duplicate any content on this blog without the express written permission of the author. [email protected]

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Why do Some Foreign Companies Fail and Some Companies Succeed in Korea?

The Chosun Ilbo posted an interesting article on why some multinational companies fail in the Korean market.  The article notes, in part, that: Struggling in Korea. Swiss multinational Nestle has achieved stellar performance in global sales of its mainstay coffee and powdered milk. Not so in Korea, where the market for coffee mix is worth around W1.3 trillion (US$1=W1,128). Nestle entered the Korean market in the 1980s with its Taster’s Choice brand of instant coffee and maintained the No. 2 spot for 30 years. But it fell to third place in January this year after ceding the No. 2 spot to Namyang Dairy’s popular French Café brand. The gap between the No. 2 and 3 players grew wider with Nestle’s market share plummeting to just 5 percent. In 2001, Nestle started selling its NAN baby formula products in Korea, but it pulled out altogether in 2008 after maintaining barely a

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Korea’s GDP Per Capital Reaches USD 30,000 PPP

Hyundai Research Institute has announced in its report “Nominal Income 20,000 (U.S.) Dollars, Standard of Living 30,000 Dollars,” that “Korea’s per-capita GDP without considering price levels was 22,778 dollars last year, but its per-capita GDP based on purchasing power amounted to 31,714 dollars.” Thus, the report notes that because of the lower cost of living in Korea compared to other industrial nations, Korea standard of living is on par with the most developed nations in the world.   From my perspective, it seems like the report fails to adequately evaluate the cost of living in Korea. For example, the report fails to adequately equate for the higher cost placed on families for education and  healthcare.   Additionally, some of the price comparisons seem to be based on peculiar data-sets.   For example, the report notes that clothing and shoes cost 10% less than the OECD average, however, a trip to a retail store

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No Court Apprasial Necessary in Korea for In-Kind Contribution to Company

The Presidential Decree of the amended Korea Commercial Code notes that an appraisal by the Korean courts is no longer necessary when issuing equity stocks in exchange for an in-kind contribution in a company if: 1.  The amount of the in-kind contribution is less than KRW 50,000,000 and accounts for less than 20% of the entire equity of the company;2.  The value of the in-kind contribution is less than the book value listed in the balance sheet of the issuing company; and3.  Listed securities are contributed at a price equal to or less than the market price. Other posts on the amended Commercial Code of Korea: Korean Commercial Code Revisions Make Capital Reductions in Korea Easier Classification of Directors in Korea under the Korean Commercial Code: Inside, Outside and Other Directors in Korea Establishing a Company in Korea: New Corporate Forms Available under Revised Korean Code Squeezing-out Minority Shareholders under

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Importing and Selling Wine in Korea Just got a Little Easier

The Korea Times has posted an article about changes in the Korean wine market because of changes in Korea’s distribution law and the implementation of free trade agreements with the United States and the European Union .  We have seen more interest from major wine producers in the Korean market and we expect to see a few of the major players in the market enter the market soon.  The Korea Times notes that: Korea’s wine boom peaked in 2008 when $166.5 million worth was imported. However, since the economic downturn, the country’s imports fell by 32.5 percent the following year to $112.45 million. Imports improved moderately last year to $132 million. Industry people here believe that the wine market is ripe for a rebound. The Italians, however, could prove to be the casualties of the renewed wine wars. Korea’s wine market has been dominated by products from France, Chile and

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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

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Korea’s Starting a Company in Korea: Read:Economic Forecast by the European Chamber of Commerce in Korea and SERI

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: 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. 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

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Maximize Benefits of Korea’s FTAs with U.S. and EU via Legal and Business Consultants in Korea

IPG Legal is happy to announce 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

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FTC of Korea: All Bark and No Bite?

The Korea Times published an article, last week, on Korea’s Fair Trade Commission (FTC) that sheds light on a business and, also, consumer-friendly program offered by the FTC. The FTC has been, strongly, criticized by the main-stream for using the powers of the Commission to fight inflation in Korea in order to appease the Administration and the citizens.  Some of the most liberal, now, are even claiming that the FTC is not going far enough.  The FTC has no friends other than the Administration in near sight. No main-stream antitrust/competition law scholar, international practitioner or Korean lawyer, that I know of, believes that one of purposes of an antitrust enforcement agency is to fight inflation. I have been quoted, in depth, on this issue in articles in the Global Competition Review.   If you are interested in antitrust law, the GCR is a must have journal. Even with this fact

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Beware the Grey Market Trap in Korea: Due Diligence, Agreements and Street Smarts

Many of my clients operate, in Korea, through relationships with agents. The local agent, normally, holds an exclusive right to sell the client’s product in Korea. For example, one of my clients sells medical lasers. The company has relationships with agents throughout Asia. The relationships guarantee the agent an exclusive right to sell the lasers in the nation the agent is located in. The agent, also, is responsible for managing technical, warranty and other after-sale matters in the jurisdiction. One Korean company approached my client and noted that they are a Korean company with an office in the Philippines. My client has no agent in the Philippines. The client, thankfully, smelled a rat and called me.  If you hear of a Korean, Chinese or other nationality doing business in a country other than their own country, please smell a rat. After doing a little investigating it became clear that this

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KOR-US FTA Passed the Korean National Assembly Today

Great News. The Korea-United States Free Trade Agreement (KOR-US FTA) passed the Korean National Assembly today. The Agreement, previously, was passed by the U.S. Congress. The Agreement will be implemented on January 1, 2012. I will write more on the specifics of the Agreement over the next few [email protected] (c) Sean Hayes – SJ IPG. All Rights reserved.  Do not duplicate any content on this blog without the express written permission of the author. [email protected]

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Acquiring Shares in Closed Korean Corporation in Exchange for Product at Discount: Don’t Forget the Due Diligence in Korea

I just received a phone call from a prospective client with a wonderful product that has been offered a sweetheart deal.  Whenever I hear that someone has received a no risk or sweetheart deal in Korea, a red flag immediately goes up in my head and I immediately request the client to let me do a couple of weeks of due diligence. The, ubiquitous, sweetheart deal is ownership of shares in company in exchange for some benefit from the foreign partner.  Too often, the Korean company is a shell.  The shell is broke with liabilities that far exceed assets.  The shell, however, is paying his management handsomely through a variety of interested transactions and access to the expense account.  In one case I regrettably saw, the company was under investigation of the prosecution. Thus, your sweetheart deal may lead to unexpected liabilities, the deterioration of your brand image, the eyes

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