Doing business with China
Leaders of the TPP countries. What no China?

Far too many on Facebook and Twitter keep describing the Trans-Pacific Partnership as a “secret” document and then use that as a reason for opposing it. Go ahead and oppose TPP — that’s your right — but it is factually wrong to claim it is a secret document as you can find its full text right here on the Office of the United States Trade Representative’s website.

And if the straight text is not enough for you, or if you are interested in how the TPP (if it passes, which is looking increasingly unlikely) will impact China businesses and foreign companies doing business in China or with China, check out the following:

China importsLast month I wrote about how importers from China need to be on their guard since U.S. Customs and Border Protection (CBP) has implemented new regulations to investigate allegations of antidumping (AD) and countervailing duty (CVD) evasion. See Importing From China: One More (New) Thing You Need To Know.

It didn’t take long, as U.S. Customs has already begun its first wave of investigations: Wheatland Tube, a US steel pipe producer, on September 14, 2016 announced it had filed with CBP an allegation of duty evasion on imports of Chinese circular welded steel pipe.

CBP has published a timeline for conducting its investigations and a process diagram (EAPA Investigation Timeline) and this newly filed allegation will be a test case to see how CBP will conduct its new duty evasion investigations. Hopefully, CBP will soon address many of the questions raised by the new regulations. How will parties be allowed to participate? What information from the investigation will be made public? How will CBP define “reasonable suspicion” of duty evasion?

This steel pipe investigation is likely to be the first of many CBP duty evasion investigations that are to come, many (probably most) of which will target Chinese products subject to AD/CVD duties. For how to figure out the risk quotient for the products you import from China, check out China Imports: Know Your Risks.

The new antidumping and countervailing duty regulations will unquestionably require an increased number of importers and foreign manufacturers to formally respond to CBP’s questions in response to allegations. Given the strong political pressure by domestic U.S. industries calling for tougher enforcement of US trade laws (not to mention the rising opposition to free trade among the American populace), Chinese producers and exporters and US importers should be prepared for increased CBP activity. CBP is likely looking to punish someone hard to set an example of their improved enforcement.

 

Negotiating with Chinese CompaniesIn this series of posts I am looking at themes explored by Lucian Pye in his work Chinese Commercial Negotiating Style and how they relate to negotiating with Chinese companies. Pye concludes that most Sino-American negotiations are initiated in a way that helps the Chinese side achieve its preferred strategies and tactics. My first post, Contract Preliminaries and Courtship Rituals, looked at how Chinese companies tend to control the preliminaries during what I have called the “courtship” phase. In this post we will see what Pye has to say about the Chinese tendency to prefer agreements on generalities.

Pye observes that Chinese culture traditionally shuns legal considerations and instead stresses ethical and moralistic principles. By contrast, Westerners are thought to be highly legalistic. The Chinese tend to reject the typical Western notion that agreement is best sought by focusing on specific details and concrete matters while avoiding discussions of generalities or rhetoric. The Chinese prefer to agree on general principles before dealing with details. They can, Pye says, be tenacious in holding to their principles but surprisingly flexible about details. The Chinese focus is on the “spirit” of the deal. Agreement on principles usually takes the form of letters of intent or protocols, the purpose of which often mystifies the Westerner. The Chinese attach great importance to symbols and symbolic matters. Symbols such as the spirit of the agreement have a reality for the Chinese and there is a distinct Chinese bias in favor of the publicity or “face” these symbols can generate.

The Chinese, Pye says, conceive of their business relationships in longer and more continuous terms than Westerners. They expect an agreement to set the stage for a growing relationship in which it will be proper for the Chinese to make increasing demands. A proclivity for seemingly unending negotiations can even make the Chinese insensitive to the possibility that “canceling” contracts may cause trouble in the relationship with the foreign party. From the Chinese perspective, nothing about a contract is ever final. Westerners usually think a contract will provide for a given period of fixed and predictable behavior but the Chinese look for continuous bargaining and regard this bargaining itself as suggesting an enduring relationship. For Westerners there can be a great deal of give and take before agreement is reached, but afterwards the expectation is that neither party should lean on the other to seek further advantages. For the Chinese, the very achievement of a formalized agreement, like the initial agreement on principles, means that the parties now understand one other well enough that each can expect further favors. They will therefore not hesitate to suggest changes immediately on the heels of an agreement. They tend not to treat the signing of a contract as signaling a completed agreement.

Pye advances several explanations for the Chinese tendency to seek early agreement on general principles. First, he says, it is easier to extract concessions when details are to be worked out later on. Second, agreement on principles can easily be turned into agreement on goals. This can in turn support a later insistence that all discussion of concrete issues must support these goals. Finally, Pye says, agreement on general principles can be used later to substantiate tactical claims of bad faith.

More on tactics in the next post in this series.

One final point: Pye never moralizes or suggests there is anything wrong with the Chinese approach. He merely points out how different it is from the typical Western approach, leaving readers to conclude that foreigners ignore or disregard the Chinese negotiating tactics at their own peril. This is certainly consistent with our view that one should not rush to blame the Chinese when things go wrong.

Negotiating with Chinese CompaniesIn the early 1980s the US Air Force commissioned Lucian Pye, an eminent sinologist, to write a report on how Chinese negotiate with foreigners. Published in 1982, it was called Chinese Commercial Negotiating Style.

A friend of mine recommended Pye’s work to me recently, saying he wished he had read it twenty years ago when he first started working in China. Based on extensive interviews with Americans engaged in China trade, Pye’s paper analyzes the negotiating style the Chinese use with American businesspeople. To control for American cultural bias, Japanese traders were also interviewed. Pye’s overall conclusion was that the way most Sino-American negotiations are initiated usually sets in motion a process that helps the Chinese side achieve its preferred strategies and tactics.

Though some of Pye’s political and economic observations are, quite understandably, now rather dated, I was nonetheless struck by his report’s enduring relevance and, like my friend, I now recommend it to anyone interested in doing business with China. To merely summarize his work would be to do it a disservice so I have attempted to draw out some of his major themes and look at them in a series of posts. A recurring theme is Chinese mastery of contractual preliminaries.

In Pye’s view, foreigners often follow the historical practice of coming as guests seeking permission to do business in China. This naturally casts them in the role of supplicants asking for Chinese beneficence. They are visitors from afar and their hosts call the tune on the procedures and the timing of meetings. Problems associated with visas, invitations and access to officials or business leaders contribute to foreign anxiety about “doing the wrong thing” when doing business in China. So when problems arise, the foreigners are prone to suspect they are somehow at fault. In this way, the Chinese hosts gain the advantages of surprise and uncertainty in agenda arrangements.

According to Pye, the Chinese tend to limit preliminary exchanges to generalities so as to size up the foreign party and to determine its vulnerabilities, especially any lack of patience. At the same time, foreign business leaders tend to jump straight in. The novelty and status associated with visiting China frequently compel foreign CEOs to be the first to engage in talks with the Chinese, without waiting for subordinates to prepare the ground. The graciousness and bountifulness of Chinese hospitality can make the foreign visitor feel awkward about being too businesslike. Consequently, foreign CEOs tend to be very obliging in following the Chinese practice of seeking initial agreement on very general principles, without clarification on the specific details. Much of what occurs at the preliminary stage has a tacit quality and foreigners frequently misjudge their progress. In taking this approach, Pye says, foreigners violate one of the first principles of negotiations and diplomacy — summit meetings should never take place without extensive preliminary spadework by subordinates.

When mid level executives are later sent in to work out the details of a contract they usually discover that the Chinese want to rely on the agreed “principles” that were put in place by the CEO. Such principles were often taken by the foreigners to be no more than ritual statements but the Chinese tend to use them to practical advantage by suggesting the other party has not lived up to their “spirit.” See China LOI and MOU: Don’t Let Them Happen to You. Instant authorities on China, these CEOs returned from their initial visits to report success, saying they found the Chinese to be cooperative and gracious. The mid level executives and others tasked with working out details then come under great pressure. They are constrained to avoid acting in ways that might irritate the Chinese and spoil relationships established by the boss. So, when the big guns are sent in first the foreigners lose the advantage of dispatching their highest people for critical negations at the consummation of the deal. Their second appearances must now be limited to generalities where civilities prevail.

I found Pye’s observations both persuasive and broadly consistent with my own experience. Having said that, he is clearly more concerned with the affairs of government and large corporations than he is with SMEs or creatives who may not have support available from a middle level of management or administration. The pitfalls Pye identifies can be minimized, he says, if foreigners recognize that in the initial stages of negotiations, the Chinese usually only want highly generalized in-principle agreement to the effect that a relationship is possible.

In my next post I will look at what Pye has to say about Chinese attitudes to contract formation.

China Business LicenseChina lawyers love China business licenses and we frequently use them to make sure that the signing party to a China contract actually exists and is an officially registered entity. We also love them because they are often a fast and cheap treasure trove of helpful information. Reviewing a China business license is usually the first thing we do by way of due diligence in any M&A deal, and in most other deals as well.

The below is an email from one of my firm’s China attorneys to a client, explaining what we were able to garner from the China business license of a Chinese WFOE our client was interested in purchasing.

  1. Company name: _____________.

No English language equivalent is given in the documents (which is unusual), but this translates as _____________(Beijing) International Trading Company Limited.

  1. Company address: Beijing City, Dongcheng District, ________Number ____, Unit ____.

This is a prestigious location in the center of the high‐end retail/office district.

  1. Registered Capital: $600,000 US.

The amount is relatively high because high registered capital is typically required for trading companies. A Chinese CPA must verify all registered capital contributions. You should obtain a copy of the verification. Note also that all WFOEs must undergo an annual audit and file an annual tax return. We should obtain a copy of the audit and the filed tax return(s).

  1. Representative Director: ____________

This person has primary authority for all company operations. We should ensure that you have complete control over this person together with the company seals/chops, bank accounts/bankcards and primary company documents. We should also immediately determine 1) who is the general manager and 2) who are the members of the board of directors.

  1. Formation date: __/__/2011. Inspected and approved: __/__/2012.

It is good that the company has been formally inspected. It means someone is trying to follow proper procedure.

  1. Scope of Business: Wholesale for various consumer goods; financial and business management; import and export of goods and technology, including export‐import agency.

This is a very broad scope of business that allows you to do consulting business in addition to trading. This is somewhat unusual and is a very good thing for you since it maximizes the flexibility of the WFOE. However, this scope of business does NOT allow the WFOE to operate as an advertising agency (see discussion below). On the other hand, the existing scope of business allows you to advise your customers on where and how they should place advertising and you can charge a fee for the service. You can also act as an intermediary in arranging with an advertising agency for placement. However, you cannot contract directly place the advertising. Only an advertising agency can do that.

  1. Shareholder: _______________Holding Company.

This appears to be the proper shareholder.

Advertising Agency Issue. Here is a brief review of the advertising agency rules. To place advertising in China, a company must be a licensed advertising agency. Foreign companies are permitted to form a wholly foreign owned advertising agency but the rules for doing so are quite strict. The primary rule is that you must prove that 85% of your income over the last 3 years comes from advertising. How you “prove” this is not stated in the rules. There are also special rules related to staffing and registered capital that add extra burdens.

The main issue, however, is the one I raised above. You cannot simply amend your current scope of business to add operation as an advertising agency as an additional item within the scope. Instead, you must form an entirely separate company, with a separate office address, staff, registered capital and the rest. As we discussed, you can, of course, enter into contracts between your Chinese entities that would allow you to offer an integrated package of services to your customers. But beneath that integrated package you will need to maintain a strict separation between the entities. Thus the person who formed the existing WFOE trading company did not make a mistake with respect to the scope of business. Rather, no one has taken the additional step of forming the additional company that would act as an advertising agency in China.

The Economist Magazine (some of the absolute best writing on China, BTW) just came out with an article, entitled, The Innovation Game. It is on the recently issued Global Innovation Index, published by Cornell University, INSEAD, a business school, and the World Intellectual Property Organisation. The index ranks 140 countries and, “not surprising: Switzerland, Britain, Sweden, the Netherlands and America lead the pack.”

What I (and the Economist) found most intersting about this work, was some of the breakout analysis looking at how countries do relative to their wealth. As the Economist noted from the below graph, “many countries in Africa punch above their weight.” What is also apparent from the below graph is that Arab countries — with Qatar the worst of the worst — fare quite poorly. China does very well on this innovation to wealth measure, as does Vietnam.

China innovation

The Economist also graphed out some of the countries based on the quality of their innovation and their wealth and in this China soundly ranked at the top of the list of “middle-income countries,” as can be seen from the below:

China Innovation

So is China innovative? Based on this report, I think the answer has to be yes, at least relative to its wealth. Your thoughts?

For more on China innovation, check out Can China Innovate? and Does China lack “A reliable way to protect valuable inventions”? Hold on there . . .

China IPPreviously on China Law Blog…

In Part 1 of this three-part series, we discussed the background of the Talpa-Canxing dispute over The Voice of China. Now we’ll see what happened after Canxing broke Talpa’s heart.

Undeterred by Talpa finding a new licensee, Canxing announced that it would keep producing a singing show. The format would be different, Canxing claimed, but the name would be virtually the same: The Voice of China 2016 and 2016中国好声音. Because – surprise! – Canxing’s distribution partner Zhejiang Television was the registered owner of the 中国好声音 trademark.

Talpa sought a preliminary arbitral award in Hong Kong against STAR Group Limited, Canxing’s Hong Kong affiliate. But the Hong Kong International Arbitration Centre (HKIAC) denied Talpa’s request (at least insofar as it pertained to the Chinese name) because Talpa had no rights to the Chinese name. Did we mention that Talpa should have registered the Chinese-language trademark?

More or less at the same time, Tangde filed suit in a Beijing IP court against Canxing, claiming trademark infringement and unfair competition, and seeking a preliminary injunction. To the surprise of some, on June 20, 2016 the Beijing court ruled in Tangde’s favor insofar as the name of the program, holding that Canxing could not call its program either The Voice of China or 中国好声音. Canxing appealed the ruling, but changed the English name to “Sing! China.” On appeal, Canxing lost again, and complied with the ruling by changing the Chinese name of the show to中国新歌声, which roughly translates as China’s New Singing Voice.

Around June 13, 2016, while all of these legal proceedings were ongoing, SAPPRFT issued a directive curtailing the airing of television programs based on foreign formats. The directive clarified that programs produced in a foreign country (like The Big Bang Theory) and programs based on a foreign format (like The Voice of China) would both be considered foreign content, and that television channels (1) would have to secure prior government approval to air such programs, (2) could only show two foreign content programs during prime time each year, and (3) could only show one new foreign content program each year, and not during prime time in the first year.

On July 15, 2016, the first season of 中国新歌声 began on Zhejiang Television. It had the same judges as last year’s season of中国好声音 and an almost indistinguishable format. As of this writing, the season is about half over, and the main difference appears to be that during the blind audition phase, instead of swiveling 180 degrees, the judges’ chairs slide down a long ramp. Everyone I know who watches the show (including my entire family) agrees it is virtually the same show. And it seems to be as popular as ever, both with the viewing audience and with the sponsors.

The coverage to date has focused on this story as a contract, copyright, and trademark dispute. That’s true enough, and as far as that goes it’s not a particularly noteworthy dispute by Hollywood standards. Indeed, the fact that this dispute is the subject of multiple legal proceedings could even be seen as a sign of China’s maturity as a media market. Twenty years ago, if a Chinese production company copied an American or European television program, no one in the West would have cared (much), because (1) the rights owner would not have had a plausible remedy in China, (2) the Chinese company never would have paid for the rights, and (3) even if it had paid, the amount paid would have been a pittance.

But there’s another story here. By making a few superficial changes to the show and changing the name, Canxing and Zhejiang Television are trying to skirt the restrictions on foreign content. According to them,中国新歌声 is a 100% Chinese content show. Canxing has also stated that it won’t purchase any more foreign formats in the future.

If Canxing and Zhejiang can get away with such copyright infringement — and thus far they have – this becomes a cautionary tale for foreign content owners licensing to China. Chinese companies may still see value in licensing foreign formats, because just copying a show isn’t as easy it looks. Indeed, that’s why Canxing and other Chinese production companies have been paying serious money for the most popular formats. But once they have received the production bible and produced a season or two, what incentive do they have to keep paying a license fee, if they can make a couple changes and call the show 100% Chinese?

It will be interesting to see how (or if) Canxing and Zhejiang Television are held accountable for 中国新歌声. Licensors of content have to look at this case and think seriously about frontloading any payments. They might not get a second bite.

Stay tuned for the thrilling conclusion, where I’ll discuss how content owners can better protect themselves when licensing to China to avoid the sort of trainwreck Talpa appears headed for.

Negotiating with Chinese companiesJust read a great post over at Andrew Hupert’s ChinaSolved Blog, entitled, Lessons from the G20 for “Regular” Negotiators. Hupert, who I count among the foremost experts at negotiating with Chinese companies, uses China’s recent dissing of President Obama as the springboard for explaining how foreign companies should negotiate with Chinese companies.

Hupert starts out his post by saying that no matter how seriously you view China’s treatment of the American entourage, it was “real” and mitigating or glossing over a conflict as “unimportant” is counter-productive and dangerous. “This was a significant event, and if you are negotiating with a Chinese counter-party then you need a plan for dealing with similar encounters.”

I completely agree with Hupert’s point and I have to say that our China lawyers too often encounter minimizing or tortured explanations of Chinese behavior from our clients. Chinese company didn’t pay on time? Must be because it didn’t understand the contract? Chinese company said it would do X and then did the exact opposite? Must be because of Chinese cultural differences. We hear these sorts of explanations all the time and our response to them is always something along the following lines: these are smart people who know exactly what they are doing. They are testing you and if you let them get away with it this time, you will be opening up the door to future incidents.

Or as Hupert so aptly puts it:

Ignoring them or pretending that they are immaterial to your business is a major blunder. Your negotiating counter-party is a serious person with experience, values, and attitudes that are very different from yours. Culture gaps are real, and they are not going away. If you are going to work with counter-party, then these differences will be part of your business — and part of your life.

Say “thank you”. The Chinese side is supplying your with free information. They are illustrating who they are, what they care about, and how they react to situations. Accidental honesty is the most significant kind. Behaviors are deeply rooted and consistent. Ignore them at your own risk.

Hupert then counsels you to take the free lesson and use it to analyze your Chinese counter-party: “It is your job to understand his attitudes, his values, and his culture.” And then you need to make any necessary adjustments in your own behavior, your deal structure and your business plan to reflect what you just learned.

Doing the right thing in these conflict-ridden situations is a tough thing because “it is human nature to do just the reverse – analyze us and attempt to adjust our counter-parties, but this only leads to conflict, failed deals, and value destruction.” Hupert concludes by calling on “breaking the cycle” by building “a negotiating plan that acknowledges (and even leverages) cultural differences.”

Great advice. Do you agree?

For more on what it takes for successfully negotiating with Chinese companies, check out the following:

China IPA strange and fascinating story is unfolding right now in the world of Chinese reality television programming. One of the most popular shows in China, The Voice of China, is embroiled in legal controversy, and the outcome could affect every single content license in China. Okay, that might be a bit of hyperbole, but still, this is one episode you won’t want to miss.

The story begins back in 2012, when Shanghai Canxing Culture & Broadcast Co. (上海灿星文化传播有限公司) licensed the format for The Voice from Dutch media entity Talpa. Talpa had originated the format back in 2010 with The Voice of Holland and has since licensed the hugely popular singing competition to more than 60 countries, including the U.S. where it is simply known as The Voice.

The Voice of China began airing in July 2012 on Zhejiang Television, and quickly became one of the most popular television shows in China. Though the English name followed the usual naming convention, the Chinese name of the show was 中国好声音, which translates, more or less, as “China’s Best Voice.”

Guess who didn’t register the Chinese name of the show? That would be Talpa. It’s depressing how often we have to repeat this: please, please, please register both your English-language trademark AND the Chinese version. By now, any company that gets caught flat-footed on this issue only has themselves (or their IP counsel) to blame.

Meanwhile, starting in 2012, the Chinese government agency overseeing media and censorship (currently known as SAPPRFT, for State Administration of Press, Publication, Radio, Film and Television), which had always restricted foreign content in China, began to announce even more directives regulating foreign film and television content, including specific limitations on when and how often foreign content shows could air on television and on streaming sites, and even specific limitations on singing competition programs. News stories and commentary about these directives often singled out The Voice as a possible target, but Zhejiang vowed that the show would remain on the air, and so it did — and continued to be a ratings powerhouse.

In early 2016, license renewal talks broke down between Canxing and Talpa. According to Canxing, Talpa asked for an exorbitant royalty percentage and also tried to get Canxing to take a package of shows when all Canxing really wanted was The Voice. This latter negotiating ploy, if true, is hardly unique to this situation; the dismal choice faced by Canxing is familiar to anyone who’s been a cable subscriber.

After Canxing ended the talks unilaterally, Talpa quickly licensed the format to another Zhejiang-based Chinese production company, Zhejiang Tangde Film & TV Co., Ltd. (浙江唐德影视股份有限公司), and Talpa and Tangde announced plans to produce seasons 5-8 of The Voice of China.

You think this story’s over but it’s ready to begin. Tune in the day after tomorrow for part two.

Hanjin vessels in ChinaThis is on the Hanjin Shipping situation. We see this matter as China relevant because so many who ship their products to and from China have been impacted by it and the fact that we have received so many emails from our readers and our clients confirms this.

My firm has a strong international maritime practice, and as our website says, “we have handled hundreds of vessel repossessions and arrests involving yachts, fishing boats, cargo ships, and cruise and casino ships, and have successfully resolved corporate maritime cases in the Bahamas, the US, Canada, China, Denmark, Hong Kong, Japan, Korea, Norway, Poland, Taiwan, Turkey, and Vietnam.” Needless to say, with the Hanjin Shipping matter happening, this has been a busy time for us.

Here is what we know so far and what we are advising our clients.

Hanjin Shipping has filed for bankruptcy in South Korea and indications are this will lead to liquidation of Hanjin assets, with creditors getting the proverbial “pennies on the dollar.” The Korean Court is requiring all creditors file their claims against Hanjin by October 4, 2016 (Korea time!) and a failure to get your claim in by that date will almost certainly mean you will get nothing at all from the Hanjin liquidation.

Recognizing the likelihood of its claims being severely reduced in the Korean bankruptcy, many large or just aggressive creditors are looking to avoid this situation by seeking to seize Hanjin assets, including Hanjin vessels, all around the world. There is word of Hanjin vessels having been arrested in China, in Singapore, and in the United States. We have so far been advising our clients (whose situations and goals may be very different from yours!) not to initiate any vessel arrests themselves, but rather to monitor the arrests and join in on them if — and most especially — when that makes sense. Just as is true of the Korean bankruptcy action, vessel arrest actions all around the world have their own deadlines and a failure to file a timely claim in those vessel arrest actions can lead to the vessel being sold without your getting anything at all from the sale proceeds.

However, our prior involvement in international bankruptcies involving vessels tells us that that it is only a matter of time before Hanjin secures bankruptcy protection in additional countries and then it will be able to use that protection to block vessel arrests and sales. It is a waste of money to arrest  a vessel (or even to join in a vessel arrest) if the bankruptcy court of the country in which the vessel is under arrest will soon order the arrested vessel to be released. The key is to have a good idea of those countries that will honor Hanjin’s bankruptcy filing by giving Hanjin bankruptcy protections in their country as well. This is just another example of where conflict of laws becomes so important. See China Conflict of Laws: The Book.

But some countries are notoriously unfriendly to foreign or just Korean bankruptcies and are not likely to provide Hanjin Shipping with any respite from asset seizures and vessel arrests via bankruptcy court protections. It remains to be seen exactly which countries will fill out this list, but if past performance is any gage of future performance (and we all know that it is), we can expect China to figure prominently at the top of this list. For this reason, we plan to track down and closely monitor the Hanjin vessel arrest situation within China. If — as expected — China does not provide any bankruptcy protection to Hanjin vessels arrested in China’s ports, the most likely outcome is that those vessels will be sold at auction and the proceeds from those sales will be divided (based on claim priority) among those who filed claims against the specific vessels in China’s courts. What will be interesting is whether the Korean court will bar those that engage in arrest actions outside Korea from collecting at all from Hanjin proceeds in the Korea court action.

Many years ago, the international maritime lawyers at my firm represented a massive Korean chaebol in an action against a large American vessel owning company that had declared bankruptcy. Our plan was to arrest the American vessels in Russia and/or Korea and/or China and/or Japan and not worry at all about collecting the small amounts that might be available to our client in the American bankruptcy action. But when our plan went up the flagpole at the Korean company, one of its U.S. subsidiaries successfully lobbied against it, fearing that it would irrevocably harm its reputation and standing in U.S. courts going forward and maybe even in the U.S. as a whole. Our explanations about how the U.S. courts (no matter how much they might think otherwise: See Who Needs International/Foreign Law? Not Us, We’re Americans) do not have worldwide jurisdiction failed to win the day and our client backed down from doing anything that might go against even the spirit of the U.S. bankruptcy court rulings. I mention this case only to show how complicated these international maritime bankruptcies can be and how one must think and act strategically at all times, and not just merely jump in at what looks to be a potential collection opportunity.

That is especially likely to be true with respect to collecting from Hanjin, for the additional reason that many vessels that bear the Hanjin name are not owned by Hanjin at all; some are merely chartered by Hanjin and some are said to no longer have any connection with Hanjin at all. This means that anyone who arrests a “Hanjin” vessel not owned by Hanjin could conceivably be subjecting themselves to a damage claim for wrongful arrest. Those whose cargoes are delayed by such a wrongful arrest may even have their own damages claims to bring against the party that initiated the ill-fated vessel arrest.

Then on top of those owed money by Hanjin, are those with cargo tied up on Hanjin vessels. These cargo situations are so situation-specific and so fluid, it is nearly impossible to provide blanket advice beyond that they stay on top of both the situation involving Hanjin overall and the situation regarding their own cargo and the specific vessels carrying their cargo.

If you have any breaking information regarding Hanjin or any of its vessels, I encourage you to share it via the comments below or on Linkedin here, where I have written another version this article.