I am a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland's interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

I was named as one of only three Washington State Amazing Lawyers in International Law, I am AV rated by Martindale-Hubbell Law Directory (its highest rating), I am rated 10.0 by AVVO.com (its highest rating), and I am a SuperLawyer.

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.

International lawyers

Got two emails this morning that were similar and yet could not have been more different.

They both were in response to yesterday’s seemingly neutral blog post The 101 on Overseas Manufacturing Contracts (OEM, CM and ODM), in which we talked about what should go into your manufacturing agreements around the world, and did not mention China even once (other than in the form of one link to a previous post).

The first email I read was the following, from a self-described “China consultant who has been living in Shanghai for the last seven years” and “resents” how we are “lying about the situation on the ground in China because we are “hell-bent on bad-mouthing China at every opportunity.” This person said: “I see what you did with yesterdays’ blog post and I see what you have been doing for the last few months. You are trying to scrub China from your blog and I know why you are doing this and I resent it.” He went on to accuse us of bad-mouthing China to “build up” our business “in Vietnam and Thailand and everywhere but China.”

The second email was from a lawyer who “spent six years in Thailand and 11 years in Taiwan” and “very much appreciates” our writing about countries other than just China and suggests we change our blog’s name to “International Law Blog.” He especially wants us to write more about the EU and Spain because his “life-long dream is to live in Malaga.” I responded to him by saying that even though we write an incredibly widely read blog about China, we get 1-3 emails every month from someone writing to tell us for a job with us in Spain because it has been their dream to live and work there but I do not recall having ever gotten an email (at least not for many years) that contained “dream and China in the same sentence.”

Both of these emails by essentially challenging us on taking the right path going forward.

Okay….

We get it. Trust us, we get it. And hardly a day goes by without our China Law Blog team of international lawyers (note how I said international lawyers and not China lawyers) think about these sorts of things, email or no email.

These sorts of emails have become fairly typical since the start of the US trade war. Hardly a day goes by without our receiving an email from someone who is absolutely furious about our not speaking about China in consistently exalted terms or an email from someone pushing us to broaden the blog beyond “just China.”

This morning I went back and read our blog’s Mission Statement, written on our very first day in the China blogging biz, way back in January, 2006, and barely revised since then. It reads as follows, with the key sections highlighted (just now):

Why are we doing this?

What exactly will we be doing?

There are more than 4 million blogs. Many of these are about China, including some very good ones. Some of our favorites include Talk Talk China and Simon World for general China information, The China Stock Blog for Chinese stock market information, China Tech Stories for information regarding China’s technology sector, and Journey Around China for travel information.  [3-6-2012 Update: None of these blogs still exist so we removed the links]

There is even a superb Chinese law blog, The Chinese Law Prof Blog, but it has a distinctly academic bent and we will not.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you about what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy. We want to start a conversation with, for and about the person who wants to know “what is what” in China and the practical aspects of starting and growing a business in or involved with China.

We are not writing for those who want to know more about Section (A)viii of a particular piece of Chinese legislation or the history of that act or the policy reasons behind it. Our site is not focused on the legal scholar or the China lawyer.

We want to initiate a discussion regarding the changing laws in China. We will constantly be challenging the various misconceptions the West has about law in China, including that the law in China does not really matter or that guanxi can supplant it.

We will provide information to those who conduct business with or in China as to how they can use the law as both a shield and as a sword. We will give you our insights to achieve practical solutions, while doing our best to entertain.

We know lawyers are not popular, and though we are ourselves really quite likable, we recognize the need to avoid those things that incite lawyer hatred. In other words, we will strive to avoid legal jargon and namby-pamby language that attempts to camouflage our views or to avoid controversy.

We want this blog to be a place for conversation and even controversy. We expect many of you will disagree with us much of the time and we do not care. We will always strive to avoid boring you or being unwilling to take a stand. We are not going to be afraid of being wrong — in fact, we want you to tell us when and how we are wrong. If you want “lawyer language” or long strings of caveats, you are going to have to pay exorbitant legal fees to get that elsewhere.

Though our focus will be on the interaction of law and business in China, we most certainly will be personalizing this page with our own experiences. We will tell you more than just that the law is this and this is what needs to be done to comply. We will discuss how the laws as written may say one thing, but our experience dictates something else. We will tell you when you need to do more than just follow the law to succeed and we will set out exactly what that something else is. We will estimate the chances for success if one does one thing as opposed to another. You will hear what we have done to succeed for ourselves and for our clients in China and you will hear about where we failed. We will regale you with stories about the Chinese lawyers with whom we work, the foreign and Chinese businesspeople with whom we deal, and even the places we go. There will be times where our lawyer ethical rules will make us unable to name names, but we will always work to tell the full story.

In addition to our discussions regarding what we are seeing on the ground in China, we will post articles and postings from elsewhere, to which we will, when appropriate, add our own comments. We will also post events, like seminars, conferences and trade shows, that we believe will advance our readers’ grasp of China law and business.

It has become a blog cliché to implore readers for their input, but it is so important we must join the crowd on this. We do not purport to know everything about Chinese law. That is impossible.  China is anything but monolithic and the differences in the legal situations between the various regions are no less pronounced than the cultural differences.

The strengths of our China attorneys who will be writing for this blog are in forming companies in China (WFOEs and Joint Ventures and Representative Offices, mostly), in drafting international contracts with Chinese companies (in English and in Chinese), in intellectual property protection, in technology licensing agreements, in media and entertainment, and in litigation. We welcome your comments, suggestions, and ideas on any area of law relating to doing business in China.

In plain language, we ask that you write us early and often. We will review your comments before we post them, but that does NOT mean you should not criticize us or disagree with us. Our review will be to filter out “comment spam” and comments that are without substance and/or are personally abusive. We want to encourage a high level of discussion but we will not ban or delete your comments just because you come after us — at least not the first few times.

So why are we doing this? The short answer to this initial question is that we are doing this to — in our own small way — advance the dialogue regarding Chinese law and business.

In summation then, our job is to always strive to tell it like we see it and that will not change. Well before we started this blog, our law firm did a huge amount of legal work with Russia, particularly with the Russian Far East. We represented a huge percentage of American and European businesses involved with the Russian fishing, timber and mining industries. These businesses dealt constantly with Asia (first mostly Japan and Korea) and then China and to a lesser extent Vietnam and Thailand, and it was on these countries that our international lawyers focused.

Eventually Russia became incredibly inhospitable to foreign businesses and I can remember after going on national television after one particularly egregious and large-scale and very public Russian asset seizure and being asked whether this would lead foreign businesses to start avoiding Russia and Russian businesses. My answer was (as best as I recall and I recall it quite well) something like the following: “Of course it will. How can it not? Any foreign company looking to do any business involving Russia now must ask themselves whether they too will get their assets seized. There is no way this recent action will NOT caste a pall on doing business with Russia.”

Before I had even stepped into the door at my office, one of our lead Russia lawyers — a lawyer from Russia and licensed to practice law in both Russia and the United States — was waiting for me ready to pounce: She quite angrily said to me “How could you have said what you said about Russia. You just destroyed our Russian business. What were you thinking?” I responded with something like the following: “I told the truth. There was no way I was going to sit there and act like this [asset seizure] was nothing. Two reasons: One, I am not going to lie. And two, had I lied, everyone who knows anything about Russia would have known I was lying or just thought I am a complete idiot. And for you to blame me for foreign companies being afraid to do business in Russia is ridiculous. It is not some stupid lawyer in Seattle [me] saying they will be afraid of doing business in Russia that will make them afraid. They will be afraid because of what Russia has done. Our only hope to keep up our business is to tell people the truth because if people think we are lying to them they will flee us in droves.

Our Russian business went into a free-fall because business with Russia went into free-fall, but nearly all our clients who stayed in business stayed with us as they moved their business to the rest of the world, and we represent many of them around the world today, including in China.

So yeah, all of us are going through great changes with China today and those changes are making many tense and uncomfortable and I get that. But we have always tried to avoid being China bears or pandas and we will continue with that. It’s just a lot easier for us to do our best to call things as we see them and let the chips fall where they may.

We really don’t have any other choice.

Oh, and at least for the immediate future, we have no plans to change our blog’s name but we will continue to write about what we think our readers want and need to know.

But what do you think? Are we being too hard on China these days? Too soft? Just right? Please explain.

 

Foreign Manufacturing Contracts

This post outlines how creating a clear manufacturing agreement can alleviate the various legal issues inherent in manufacturing overseas. Before we discuss the key terms for your manufacturing contract, we will briefly address why it is so important to have such a contract at all, even in countries with weak legal systems. There are three reasons why it makes sense to have a contract with your manufacturer and only one of those reasons is enforceability in court:

  1. Clarity. Having a well-written contract in the language of the manufacturing country will ensure that your manufacturer understands exactly what you want. For example, including a clause in your contract that fines the supplier for each day late will let your supplier know that you are serious about your manufacturing deadlines. At least half of the disputes we see between foreign manufacturers and their buyers from different countries stem more from cultural-linguistic misunderstandings as opposed to animus.
  2. Prevention. A well-crafted manufacturing contract with well-crafted damages provisions will convince your manufacturer that it will be better off complying with your contract than violating it. If your contract has clear and strict written deadlines, your manufacturer will give your products priority over its buyers without clear and strict written deadlines when it is facing a production crunch.
  3. Enforceability. Our law firm has written hundreds of manufacturing contracts and yet we have never been called to litigate any of them. This means that we cannot speak regarding enforcement of our own manufacturing contracts, but we can say that when our firm’s international litigators have sued or threatened to sue or arbitrated or threatened to arbitrate on well-written manufacturing contracts drafted by other law firms, we have seen the benefits of having a quality contract, even in countries notoriously bad at contract enforcement.

If your foreign manufacturer believes your manufacturing contract will be enforced it likely will act accordingly. Similarly, if your foreign manufacturer believes no court will enforce your manufacturing contract, it likely will act accordingly.

Most manufacturing contracts we draft involve one of three different types of manufacturing arrangements: Original Equipment Manufacturing (OEM), Contract Manufacturing (CM), and Original Design Manufacturing (ODM). This post examines how these three different arrangements influence various legal issues inherent to overseas manufacturing.

Type 1: Original Equipment Manufacturing (OEM). In this arrangement, the foreign buyer purchases a product from a foreign country factory that is already being manufactured by that factory. The product buyer then “packages” this product with its own trademark and logo. The buyer and the factory may agree to certain cosmetic changes (color, shape, minor added features) that further customize the product for the buyer.

In this sort of OEM arrangement, intellectual property (IP) is usually clear: the buyer owns its branding (trademarks, logos and packaging) and the factory owns the product. Difficulty arises once the product is customized. Who owns the IP once the buyer has made changes to the product? An OEM agreement can provide clarity here. Usually, the buyer seeks to restrict the factory from using the customization in selling the base product to third parties.

Type 2: Contract Manufacturing (CM). In this arrangement, the foreign buyer has a fully developed product design. Traditionally, this design was of a product that had been manufactured by the buyer in its home country. More recently, the product is a new design being manufactured for the first time overseas. In a CM arrangement, ownership may seem simple: the foreign buyer owns all the IP, both in design and branding, and the factory owns nothing. In practice, however, the division is not always so clear. For example, your factory may change your product’s design and use those design changes to modify its own products it sells in direct competition with your products. Difficulties exist in every contract manufacturing project and they can be resolved with a clear, written agreement.

Type 3: Original Design Manufacturing (ODM). As outsourced factories are becoming more technically competent, foreign buyers have started entering into arrangements in which their overseas factory does some or all the design work for the product. There are many variations on this ODM approach. In its most fundamental form, the foreign buyer provides drawings and a specification sheet and the overseas factory does the rest of the work in consultation with the buyer.

Under this sort of arrangement, the obvious question is who owns the design of the product? Both the foreign buyer and its overseas factory will claim ownership of the design using conflicting arguments. The overseas factory will agree to make the product on an exclusive basis for the foreign buyer, but the foreign buyer does not have the right to have the product made by a third party factory. This position can come as a bad surprise to the foreign buyer, particularly when its overseas factory suddenly announces it will be doubling the price for manufacturing the product. These issues can get even more complex when the product incorporates or is based on technology clearly owned by the overseas factory. In this setting, the factory will often state that the buyer can go anywhere it wants to manufacture the buyer’s own portion of the product design, but no third party factory can make use of the factory’s proprietary technology in the manufacturing process. Consider this case for a foreign buyer who has spent considerable time and effort to develop a product design only to learn after a year that its overseas factory has decided to terminate the manufacturing agreement.

Once again, the only way to resolve these issues is to confront them in advance with a detailed written ODM agreement that sets out a resolution to these issues that is fair to both sides. There is no simple, legal default answer to any of these difficult issues. Or, rather, the legal default in most countries will favor the position of the overseas factory. Absent a clear agreement on how to proceed, the foreign buyer will lose pretty much every time.

Asia has become the main location for start-up companies with an innovative product concept but no manufacturing facility. The most common form of ODM for foreign start-ups in Asia is some form of co-development. Under the old model of co-development, IP ownership was clear: the foreign entity paid the fee and had 100% ownership of the product. The issue our manufacturing lawyers keep encountering is that the legal consciousness of the parties to these transactions is stuck in the old model of straight development for a fee. But the issues that arise under the new, co-development model are quite different from the former “straight” development model.

The basic issues to consider in an overseas co-development project are as follows:

  1. Will your overseas factory do the development work at its own expense or will you pay for the development work?
  2. What is the time schedule for the product development work?
  3. What is the final price goal for the product?
  4. What exactly are the “deliverables” and what is the process for determining whether the deliverables meet your goals?
  5. Who will design and manufacture the molds and tooling? For more on molds check out Overseas Manufacturing: How To Hang On To YOUR Molds

Though these five issues are normally difficult to resolve, they are actually the easy part of the process. The more difficult issue is who owns what with respect to the intellectual property in the product. Determining that your overseas factory owns 50% and you own 50% may be relevant for allocating income from commercialization of the IP, but it does not tell you anything useful on the practical level of manufacturing the product.

A foreign buyer that wishes to move its production to a different factory can legally do so only if it owns 100% of the IP; if the overseas factory owns part of all of the IP, the foreign buyer cannot legally switch its production to a new factory without a license or permission from its overseas factory.

Overseas factories will usually take the following positions regarding IP:

  • The foreign buyer owns the exterior design (design patent) for the product. The customer owns its trademarks and logos.
  • The overseas factory owns the core intellectual property for the product.
  • The overseas factory agrees to manufacture the product for the foreign buyer on an exclusive basis. However, the overseas factory is free to continue using the core intellectual property in manufacturing for itself and in manufacturing products for other customers. This includes the overseas factory manufacturing products that will directly compete with the foreign buyer’s product. The only limitation on the overseas factory is that it cannot employ its IP to manufacture a product that uses the exterior design, trademark or logo of the foreign customer.
  • The foreign buyer cannot take have its product made by any other factory.

If your overseas factory takes the “you cannot go anywhere else” approach you will need to consider critical issues that arise at the production stage. Specifically, you will need to consider what will happen in the following common situations:

  • The overseas factory raises its price to an unacceptable level.
  • The overseas factory cannot meet your quantity or time of delivery requirements.
  • The quality of the product is not acceptable. There are consistently too many defects.
  • The overseas factory decides to stop manufacturing for you because it decides to manufacture a similar product for itself or for a larger company that generates larger or more consistent orders.

When these things happen, the remedy is to move to a different factory. Your ability to switch to a new overseas factory is what keeps your existing overseas factory “under control.” Now consider the situation where you cannot move your production to a different overseas factory. This puts you at the mercy of the factory and this is a situation you must avoid. For more on why it is so important to avoid this sort of situation, check out China and The Internet of Things and How to Destroy Your Own Company, where we talk about companies that have come to our law firm too late.

The international standard for dealing with the above intellectual property manufacturing issues is as follows:

  • The overseas factory must make your product for you for so long as you are interested in the product. If the factory chooses to stop making your product for you, it must provide you with a royalty free license to the technology necessary for you to be able to manufacture your product in a different factory. If the factory wants to avoid this result it must continue to manufacture your product for you.
  • The overseas factory is locked into a specific price for a specific period. Assuming a long term production arrangement there probably will be valid reasons for the factory raising or lowering the price. For example, exchange rate fluctuation can be a good reason to go in either direction on price. To provide for reasonable price changes, your contract should provide a mechanism for annual price adjustments. This mechanism can range from a simple index to a complex formula that accounts for multiple factors.
  • There are two primary mechanisms for dealing with the quantity/time issue. The first is to develop a production schedule that binds both parties. The second is to provide that if your factory is unable to meet your requirements it is contractually required to license production at an alternative location in the quantity necessary to meet the excess requirements.
  • Your manufacturing contract should provide for the situation where your overseas factory consistently violates your quality standards by giving you the right to terminate the manufacturing contract for breach. Your contract should state that if you terminate your manufacturing contract because of a breach by your overseas factory, your factory automatically licenses you to manufacture your product in a different factory. Some overseas factories will claim this rule allows you to claim breach simply to switch to a new factory. If this is a genuine concern, your agreement can provide for dispute resolution focused solely on this issue.

Though the above provisions are both fair and standard in international custom design and manufacturing, many overseas manufacturers refuse to discuss these matters or to accept a reasonable solution. The overseas factory knows its foreign buyer will be stuck and stuck is exactly where it wants its foreign buyer to be. Being stuck with a factory that behaves unreasonably is an unpleasant and usually very expensive experience. You should consider carefully whether you want to proceed in that kind of situation.

You do not want to be ambushed by these critical issues after you have spent considerable time and money in developing a product with a factory that will then hold you hostage at the production stage. See China and The Internet of Things and How to Destroy Your Own Company for a taste of what this can look like.

You need to get clear on these design and manufacturing and pricing and production and intellectual property issues from the start. This means you need an ODM agreement that sets forth how they will be resolved.

 

Closing a China WFOE
Closing a China WFOE: Just fading away is a bad idea.

For reasons that ought to be apparent to anyone who reads the news, our China lawyers have of late been getting a whole host of emails from foreign companies looking to shut down or just flee from their China WFOEs. Reduced to their essence, these emails usually focus on one of the following questions:

  1. How do I do it correctly?
  2. If I don’t do it correctly, what are the possible repercussions? Will I be safe in China?

We will answer both questions in this post.

PRC law requires all corporations (foreign and domestic) follow a formal de-registration procedure be followed. When a WFOE is simply abandoned, the annual registration procedures and tax filings will not be conducted. As a result, the business license of the WFOE will be revoked (吊销). Abandoned WFOEs typically have their licenses revoked for failing to complete their annual registration requirements (such as the annual audit and payment of fees) or for failing to file their annual tax return and paying the taxes due. In most cases, the revocation is for both.

When a license is revoked, the following is required:

  • The WFOE must immediately cease doing business. All websites and other public announcements where the company offers to do business in China must be taken down.
  • The official company seals must be collected and deposited with the licensing authority.
  • All taxes and fees owed to the national and local governments must be paid.
  • All salary owed to employees must be paid.
  • The WFOE’s legal representative and directors must immediately liquidate the company in accordance with China’s Company Law and local procedure. All company assets must be used to pay creditors in accordance with the liquidation procedure. Use of the company assets for any other purpose is a crime.

Though liquidation can be used to equitably extinguish the debts of normal creditors, it is usually impossible to formally liquidate a WFOE if it owes taxes or employee salaries.

Failing to properly liquidate a WFOE results in penalties imposed on the management and the shareholder(s) of the company. The legal representative and the other directors (but not the general manager) are personally liable for any damages caused to creditors by the WFOE’s failure to comply with China’s WFOE liquidation requirements.

For improperly liquidated WFOEs, the first step by the Chinese government is to put all potentially liable parties on a “black list.” This includes the legal representative, the directors and the shareholders. Though the general manager is technically not liable, the name of the general manager often goes on the blacklist as well and we have seen instances where random high level employees make it on the list too. This blacklist goes to all SAIC (State Administration for Industry and Commerce) offices in China and to the PRC border control authority. Being placed on this blacklist usually means the following:

  • The legal representative will not be permitted to act as a director, manager or supervisor of a Chinese company for three years from the date of the WFOE’s revocation.
  • The shareholders of the WFOE will not be permitted to invest in another Chinese company for three years from the date of the WFOE’s revocation.
  • The name of the WFOE cannot be used for a period of three years from the date of revocation.

The above is happens when the WFOE does not owe any taxes, fees, salaries or debts. If the abandoned WFOE owes any taxes, fees, salaries or debts, the situation is far more serious. In this situation, the PRC authorities may criminally prosecute the legal representative and the directors of the company for having failed to make the required payments. Failing to pay taxes is a crime in China and failing to properly liquidate is also a crime when that failure involves not properly paying creditors as provided by China’s WFOE liquidation rules.

Even if no crime has been committed, it is nearly impossible for a person or entity put on the blacklist to engage in investment or company management in China and it is also common for Chinese border authorities to refuse entry to the named person. If a crime has been committed, China will usually allow the person to enter China and then immediately arrest him or her for remand to the local authorities for prosecution. Our China attorneys have heard of many instances where key WFOE personnel were held hostage by their China creditors until their debts were fully paid. See How to Avoid Being Detained in China.

Fortunately, the process for proper WFOE de-registration and liquidation has become more systematic and easier to handle in China. For WFOEs that have paid their fees, do not owe taxes, and have paid their employees and their creditors, de-registration and liquidation is now a relatively straightforward process.

Bottom Line: If you need to shut down your China WFOE, follow the rules. If you ever want to set foot in China again, there is no alternative.

China lawyers

Got a great email the other day from a veteran China lawyer. This is someone who has spent about half his life living and working in China. He certainly does raise some interesting issues, so here goes:

I read your posts on not getting arrested in China and I wanted to give you a few of my thoughts on that.

1. It is pretty strange to have to write a post that says: you as a foreigner are required to comply with Chinese law. But I understand that as there are still a few “old China hands” who will tell you to just ignore Chinese law. So your statement is required. You and I both know though that even most of these people no longer believe it. I had someone tell me the other day that he always encourages his clients to avoid lawyers “because the more they spend on lawyers the less they have to spend on me.”

2. Here is an important point that I find I often have to drill into people’s heads here. In the U.S or the EU or pretty much any country with a well developed legal system, if you are hired by a properly registered company, you can assume that company will follow the various laws. You can assume that because the penalties for not doing so are so extreme it is only the shiftiest of companies that do not. In China, it is truly the opposite, at least when it comes to hiring foreigners as employees. Here you should assume the company will not follow Chinese law. Paradoxically, it is the foreigner (not their Chinese employer) who usually gets in trouble over this. Any foreigner who comes to China to work without making double-sure that what they are doing is 100% kosher is asking for trouble.

3. In the U.S. or the EU if you hire an accountant or a bookkeeper, you can assume that professional will instruct you on how to pay all of your taxes and how to follow all applicable laws. In China, if you hire a local professional (including many local lawyers as well), you cannot assume that person will advise you to follow Chinese law. Often they will instead advise you on how to violate Chinese law by telling you that “no one actually follows this law or pays those taxes.”

It is no wonder so many foreigners get into criminal trouble in China. The problem is that until around ten years ago, the “don’t worry about the laws” statements were pretty much true and those statements are still in many cases true for Chinese companies and for Chinese nationals, But foreigners are in a different category and they have to take a different attitude.

Despite the recent number of high profile arrests, you and I both know that when it comes right down to it, 99+ percent of the time when a foreigner gets arrested in China it is for actually violating the law. I mention this because the last thing I want people to believe is that they following the law does not matter in China either because doing so is not necessary or because they will get arrested anyway because China has gotten so out of control of late. As I believe you wrote somewhere, the important thing is not to act in such a way as to make it easy for the Chinese authorities to arrest and convict you. It is still the case that if you do that, you will almost certainly be fine.

Chine employment law webinar

Our law firm’s lead China employment lawyer, Grace Yang, will be leading a 90 minute webinar on what HR departments need to know about China employment law. Spoiler alert: It’s a lot.

Way back in September, 2008, we wrote a post on what was then China’s new employment law regulations: China’s Brand New Labor Law Regulations. It’s All Here. A client (no less) got angry with me for even writing about it because they would never be enforced and our post would scare foreign companies into complying with the law and thereby further damage their ability to compete against their China company peers. I insisted that these laws would be enforced and I most definitely have been proven right.

In the early days of China’s employment laws, we divided the work among our team of China lawyers, but as enforcement increased and as so many employment rules became highly localized, it became apparent we needed a lawyer who would focus on China employment law. See China Employment Law: Local and Not So SimpleGrace Yang is that lawyer for us. Grace has law degrees from leading law schools in China and the United States and last year she wrote a well-received book on China employment law: The China Employment Law Guide: What You Need to Know to Protect Your Company. If you are doing HR in China and you want English language help, you absolutely should buy the book.  

Our China employment law team mostly works on the following these days:

  1. Helping foreign companies in China avoid employment law problems. We do this mostly by performing employer audits and then remedying the mistakes we find. See China Employment Compliance and Audits: THE New Big Thing.
  2. Helping foreign companies with a specific and urgent employee problems. These problems range from fending off a lawsuit or a government regulator to figuring out what to do with employees that will be brought on via a merger deal or will be terminated due to an office or company shut-down.
  3. Helping expats negotiate enforceable contracts with their China employer.

Now about this upcoming China employment law webinar. It’s called China Employment Law: What HR Needs to Know and it’s going to be on Tuesday, January 29 at 1 p.m. Eastern Time and it has been approved for 1.5 general recertification credit hours toward PHR, SPHR, and GPHR recertification through the HR Certification Institute. It also will get you 1.5 PDCs for the SHRM-CP or SHRM-SCP.

It will be geared towards “HR, in-house counsel, financial officers, and company presidents.” It is being put on by HR Webinar Company and they describe it as follows:

China’s employment laws are complicated and highly local. Foreign companies doing business in China face complex China labor and employment issues and questions every day – often without even realizing it. What works in the United States has very little in common with what works in China. Employment compliance has become one of the most important issues foreign companies face in China and it is the rare foreign company that gets it right. Employee disputes are becoming considerably more common and government enforcement is getting significantly more stringent. It virtually always costs less for your company to deal proactively with China employment law issues than to wait to address them only after they devolve into a dispute. It is therefore imperative that you understand the framework of China employment law and steps you can take to mitigate risk.

Please join Grace Yang as she helps you better understand the China employment law landscape. She will focus on helping you recognize key China employment issues and on giving you guidance on how to solve real-life China employment law issues and problems.

WHAT YOU’LL LEARN

This webinar will cover the following:

YOUR CONFERENCE LEADER

Your conference leader for “China Employment Law: What HR Needs to Know” is Grace Yang. Grace heads Harris Bricken’s China employment law practice and contributes a weekly column about China employment law issues for the multi-award winning China Law Blog. Grace received her B.A. degree in law from Peking University and her J.D. degree from the University of Washington School of Law. She represents both China employers and employees in their China employment law matters. Grace published a book entitled The China Employment Law Guide.

If you have China employees, you really do not want to miss this webinar!

Spain lawyersTwo of my firm’s Spain lawyers are in town this week and they yesterday explained to us the advantages for foreign countries to form Spain entities before going into Latin America and the Caribbean. They explained how Spain has long-standing, well-tested agreements with 19 such countries that not only provide favorable treatment, but require these 19 countries to in all respects treat Spanish companies exactly as they treat domestic companies. This privileged position for Spanish companies has led companies from all around the world to set up a Spain business entity for going into the Caribbean and Latin America.

At the start of the e-commerce boom, our international lawyers did a steady business with mostly European companies that wanted us to set up United States companies for them so that they would appear more trustworthy to American consumers shopping online. Over the years we have also formed U.S. companies for many service companies (especially in the global construction industry) that want to bid on big projects as an American company rather than as a company in a country whose construction prowess is not viewed as highly,

And then there was the period in which we formed countless companies for Chinese businesses that wanted to return to China as a U.S. company so as to be able to secure various tax and other benefits China was giving to foreign companies to spur foreign direct investment. See China’s New Foreign Investment Law — Less Than Meets the Eye. My personal favorite is forming United States companies for foreign companies in countries where domestic businesses are far more likely to get shaken down by government agencies and/or local gangs than foreign companies.

What’s all this got to do with China though?

Let me explain….

If you have not been living under a rock for the last year you know that relations between China and the United States/most EU nations/Australia/Japan/South Korea/Vietnam (just to name a few) have not exactly been great of late. But the frostiness of those relationships is nothing as compared to the tension between China and Canada. Earlier this week, China imposed the death penalty on a Canadian convicted of drug smuggling, after previously having sentenced this person to 15 years and yesterday, China threatened reprisals if Canada bans Huawei from its 5G networks. If you are a Canadian company and you need to realize that “business as usual” in China or even with China is no more.

So let’s just say you are a Canadian company looking to form a WFOE in China today. Do you go into China as a Canadian company or do you at . least consider forming a new company in some other country first and then using that third country company to go into China? Six months ago, our China WFOE lawyers would not even have pondered this question but now we do. This is not a simple question because forming a new company in a third country has all sorts of costs and because China requires you reveal ownership of your WFOE forming entity, forming a new third country company must be done in such a way so as to comply with China’s WFOE laws while at the same time not revealing the downstream Canadian ownership. How to Form a China WFOE: Revealing Investor Ownership is NOT Optional.

What if you are a Canadian company that has for the last five years successfully sold your factory equipment into China? Should you form a new sales entity in a third country so as to increase the likelihood of being able to maintain sales? No way to answer that in a blog post, but certainly this should be considered. If you have a Canadian and a Costa Rican passport, which one do you use on your next trip to China? This one is easy: welcome to China señor.

Welcome to the frenemy era. Welcome to the New Normal.

 

 

China criminal law

Yesterday we wrote on how our China attorneys were hearing (mostly by email) of increasing arrests of foreigners in China and of how clients and readers were writing asking if they should go to China or not. Yesterday’s post, Five Things to do to Avoid Getting Arrested in China, was an effort to address those issues. At the end of that post, we pointedly solicited reader help on what more people can do to avoid arrest in China. We have received a number of emails from people, most of which said little more than “just don’t go.”

But we also received a very thoughtful comment here, expertly detailing the risks of working in China without dotting all of the i’s and crossing all of the t’s.

As someone who has lived and worked in China for a number of years, I do not think that being American or Canadian escalates the situation. We have seen recently a number of South Africans and people of other nationalities get caught too.

It is important to remind people that they are subject to Chinese law while in China and that the authorities can impose consequences including that of having issues for one to leave the country if the consequences are not served. The officer usually has control as to the consequences given. The embassy or consulate can just make sure that you have not been harmed physically but do not have any other power to remove you from the situation.

While the working illegally issue commonly happens to teachers, it is not limited to them, but also people in other professions. This comes in the form that you mentioned regarding not holding a work permit and residence permit, but also in the form of working for a company that is not the one tied with such documents (such as an agent puts you under their books).

I would add the caution regarding contracts that mention that the individual can come on any visa and that it can be converted to be allowed to work because that is a huge red flag. These days most non-“Z visa”s cannot be converted within China to a work permit and residence permit type of visa, the only one that allows working legally.

In addition, the job title is important as it regards to teachers. Many people have started English language companies which is basically a consulting or a culture company and will hire a teacher in another position because of not being able to legally employ them as a teacher and if the company is inspected, then this can create an issue for them.

There is also some basic information I would recommend that people keep in mind, besides those that you mentioned –

(a) Binding language is Chinese. English is a convenience.
(b) Only their employer can assist with cancellation of work permit receipt and release documents for the employee to move on to another job in the future. Leaving the country and starting again isn’t necessarily an option anymore because often times these release documents are still required.
(c) Implementation of many laws differs down to the city and/or district level.
(d) In your text when you say “the wrong visa” this is supposed to mean a visa that is different from the purpose of your visit

If one has set up a company and has a company to company agreement with another firm and they are the subject of providing the service to the client, I would say that this is usually a suitable method of working with multiple companies, BUT if there are special provisions for the industry then it is VERY risky (e.g. teaching related). It’s important to note here that freelancing is not allowed in China.

To summarize this comment from a China lawyer’s perspective: your China employment relationship is very complicated and done wrong you can end up in jail. The only relevant portion of your employment contract is the Chinese portion and if you do not speak Chinese you have no clue what it says and, most importantly, you have no clue whether the English language portion accurately translates the Chinese portion (I can tell you right now that the odds are about 100 to 1 that it doesn’t). And even if you are able to read the Chinese portion, unless you have a comprehensive knowledge of China’s employment laws and the employment and employment related laws that relate specifically to your potential new employer and to the specific locale in which you are working, you really do not know what you are doing and you should seek out qualified assistance in the form of a China employment lawyer fluent in both Chinese and in whatever language in which you are comfortable communicating.

I will now respond below to specific portions of this comment, all of which I have italicized.

“As someone who has lived and worked in China for a number of years, I do not think that being American or Canadian escalates the situation. We have seen recently a number of South Africans and people of other nationalities get caught too.” I 100% agree that the risks apply to foreigners of all nationalities in China. I only highlighted Canadians and Americans because of the recent spat of people from these countries being arrested for what many view as retaliation for the US-China Trade War and for the Huawei arrests. If your country is in China’s disfavor, you are at increased risk.

“It is important to remind people that they are subject to Chinese law while in China and that the authorities can impose consequences including that of having issues for one to leave the country if the consequences are not served. It is very important to remind people that they are subject to Chinese law while in China and I would also mention that Chinese criminal law is very different from US or EU or Canada or Australia criminal law. Last month I guest lectured for two days (and had a blast) at Warsaw University Law School. My second day lecture (4.0 hours!) was on Chinese laws that differ Western laws and how those differences impact foreign companies doing business in China. One of the things I briefly discussed was how China criminalizes certain things that are not crimes in the West. The following slides provide three examples of this.

 

If you are going to be living and working and doing business in China, you must know the laws and you must not violate the laws. I would also add that it can be relatively easy to face criminal charges as an individual for the wrongdoing of your company. We most often see foreign businesses get into criminal trouble in China is for violating China’s customs laws (See China’s Detention Of Foreigner For Alleged Customs Violation Should Be A Strong Warning), doing business in China without a legal entity (See Doing Business in China Without a WFOE: Will the Defendant Please Rise). For foreign individuals, it is undoubtedly for not having a proper employment visa.

“While the working illegally issue commonly happens to teachers, it is not limited to them, but also people in other professions. This comes in the form that you mentioned regarding not holding a work permit and residence permit, but also in the form of working for a company that is not the one tied with such documents (such as an agent puts you under their books).” I 100% agree. The only reason I highlighted foreign English language teachers is because they are so susceptible to being duped into working illegally in China, either because they do not even realize they are doing so or because they buy into the idea that they are somehow safe because “everyone else is doing it.”

“I would add the caution regarding contracts that mention that the individual can come on any visa and that it can be converted to be allowed to work because that is a huge red flag. These days most non-Z visas cannot be converted within China to a work permit and residence permit type of visa, the only one that allows working legally.” Very true. Our China employment lawyers constantly receive emails from foreigners planning to go to China to work and then, if it works out, their employer will help them get a Z visa. Our advice is that you should generally not go to China as an employee unless and until you are certain that you will be working there legally from day one. Many Chinese companies LOVE bringing on illegal employees because this gives them tremendous power over these employees. I explained how this can play out in Trust Your China Employer. Just Kidding:

Our China employment lawyers often get requests from individuals looking for help negotiating an employment contract with a Chinese domestic company. The first thing we like to do in this sort of situation is to make sure hiring our client by the Chinese company can and will be done legally. But when we suggest the necessity of our making sure of this, the response is often that we have nothing to worry about because the Chinese company would not be doing this illegally.

WRONG.

Truth is many Chinese companies prefer to hire foreigners illegally to legally because doing so can save them a ton of money and is usually pretty low risk — at least for them.

I thought of this when I read a very thoughtful and well-written article today, entitled, The detention of two Irish women who were working side jobs at an unlicensed school in Beijing shines a spotlight on the illegal English education market in China. The article (as you probably have guessed from its very long and descriptive title, is about two teachers from Ireland who were detained in prison for more than a week for working illegally in China. Both these teachers had visas that allowed them to work full-time in China, but only with their one employer who secured these visas for them. These two teachers had taken lucrative part-time teaching jobs on the side and it was those jobs that got them arrested.

The big takeaway for anyone looking to take a job in China though should be the sections entitled, “Illegal employers have no qualms about hiring foreigners illegally” and “when the illegality is discovered, it is the foreign worker who gets the blame.”

The article talks about someone who “ran an experiment” by applying for every English language teaching job listed in Beijinger Magazine and clearly stating he could not qualify for a work visa. Only one out of the twenty potential employers declined his application! In other words, 19 out of 20 were happy to have this foreigner work for them illegally. The article notes that under  China’s immigration law, foreigners who work illegally in China can be fined 5,000 to 20,000 yuan and detained for between 5-15 days and then deported. “A lot of the burden and blame falls” on the employee who works illegally in China and therefore, as the US Embassy website makes clear, “it is up to each individual to evaluate potential employers before signing a contract.”

Binding language is Chinese. English is a convenience. Correct. The binding/official language of a dual language contract will almost always be the Chinese portion, no matter what the English language portion of your contract might say. We discussed this in Dual Language China Contracts: Don’t Get Fooled!

Can’t believe this is still happening, but it does, and in numbers that would likely surprise many people. The “this” to which I am referring is foreign companies signing dual language contracts without knowing exactly what the Chinese language portion of their contract says. This is really risky dangerous and below I explain why.

Many dual language Chinese-English contracts are silent on which language controls. For some unknown reason, foreign companies far too often just assume that the English language portion controls or they just assume that it does not matter because the meaning of both the English and the Chinese portions is exactly the same. Wrong, wrong, wrong.

What language controls when you have a dual-language contract?  If both languages say the same one language controls, that one language will control. If both the English language and the Chinese language portions say the Chinese language portion controls, the Chinese language portion will control. Similarly, if both the Chinese language and the English language portions say the English language portion controls, the English language portion will control. These are the easy and safe examples.

It is everything else that so often cause problems for American and European and Australian companies in  trouble.

If both your English language and your Chinese language portions are silent as to which portion controls, the Chinese language portion will control in Chinese courts and in China arbitrations. In real life this means that if the English language portion of your joint venture contract says that you get 10 percent of the joint venture’s revenue  but the Chinese portion says you get 10 percent of the profits (which will of course be way less than revenues) you will have no legal basis for claiming anything more than 10 percent of the profits. Not surprisingly it is joint venture contracts and licensing agreements where our China lawyers most often see this sort of meaningful dichotomy between the English and the Chinese portions of the contract.

Of the hundreds of dual language contracts proposed by Chinese companies and reviewed by one of my firm’s China attorneys, we’ve never seen a single one where the Chinese portion was less favorable to the Chinese company than the English portion. But we’ve seen plenty where the Chinese portion is better or much better for the Chinese company than the English portion. Chinese companies love using a contract with an English portion that is more favorable to the foreign company than the Chinese portion and then relying on the English speaking company to assume that the English language portion will control.

But what if the English language portion explicitly states that it will control? This works right? Not necessarily. If the Chinese language portion also explicitly states that it will control, the Chinese language portion will control under Chinese law. If the Chinese language portion is silent or says that the English language portion controls, the English language portion will control.

As we noted in China Contracts: Make Them Enforceable Or Don’t Bother, it usually makes sense to draft contracts with Chinese companies in Chinese with an English language translation. But this also requires that if that contract is going to be enforced in China (as should usually be the case), you absolutely positively need to be certain that you know exactly what the Chinese language portion of that contract actually says. No matter what the English language portion of your contract says, it behooves you to know exactly what the Chinese language portion says as well.

In other words, if you are not truly able to read and understand Chinese, you probably do not know what your contact says. And if it is an employment contract that you do not fully understand, you could be putting yourself at serious risk.

“Implementation of many laws differs down to the city and/or district level.” Again, correct. And this is particularly true of China’s employment laws. See China Employment Law: Local and Not So Simple.

Bottom Line: Living and working and doing business in China is way more legally complicated than ten years ago. This means that the likelihood of you going astray of Chinese law is considerably higher as well. When you then add in that China’s ability and desire to catch foreign companies and foreigners operating illegally in China is higher now than it has ever been, you can see why it is so critical that you make sure that both your company and you are operating in China within the law. If you are not already operating legally, you need to start doing so now and if you cannot, you probably should leave China or not go there at all.

What are you seeing out there?

 

 

 

China lawyersWith all the arrests of Canadians and Americans and English teachers (we are getting 1-2 emails from arrested English teachers every week), our China lawyers have been getting a slew of emails from clients and readers asking whether they should or should not go to China and what they should do to avoid arrest if they do go.

I personally am never quite sure how to answer clients who ask me this question. I cannot tell them “just go and don’t worry” because even though the odds of their having a problem are exceedingly low, the last thing I want to do is have someone get arrested and then blame me for not having “told them so.”  So what I usually say is that they need to balance their need to go to China against the risks. How though do you calculate the risks?

There is no one way to calculate the risk of getting arrested in China, but the following are what can change that calculus one way or the other.

  1. Going to China on a U.S. or a Canada passport increases your risk.
  2. If you have a China WFOE that has not paid all its taxes and or is otherwise not in full compliance with China’s laws or has announced that it will be closing down, your risks are higher.
  3.  If you should have a WFOE in China but you don’t have a WFOE in China See Doing Business in China Without a WFOE: Will the Defendant Please Rise.
  4. If you go to China on the wrong visa or you overstay your visa, your risks will increase. WARNING: The English teachers who write us are from all over the world but what they all have in common is that their employer did not properly hire them. Two years ago, we absolutely never heard of English teachers getting arrested for this, but nowadays we hear about this all the time, even though the bad actors are their Chinese employers. Fortunately, these teachers are being jailed for only a week or two and then they are allowed to leave.
  5. Do not do anything illegal while you are in China. Do not buy or consume illegal drugs, including cannabis. Do not get into a fight, even if provoked. If your taxi driver or your bartender or anyone else tries to rip you off, seriously consider just paying the overcharge and move on.

The risks are really low, but it does pay to be careful.

What else?

China Template Contract

One of the most important things our China attorneys do with every contract we write is to determine who exactly it is on the other side. Oftentimes, this is no small feat.

If things go smoothly, our client asks us to write a contract with XYZ Mainland Chinese Company and we research XYZ Mainland Chinese Company and determine there is such a company and once we’ve done that, there is rarely an issue. This sort of smoothness happens around 85% of the time.

The other 15% of the time we find really funky things. Oftentimes we find there is no XYZ Mainland Chinese Company and in that situation we tell our client to go back to the alleged XYZ Mainland Chinese Company and ask them why there is not. Their usual answer is that their company is actually XYZ Hong Kong Company or XYZ Taiwan Company. This difference can make the entire transaction illegal for the simple reason that doing business in China without a Chinese company can itself be illegal. See Doing Business in China Without a WFOE: Will the Defendant Please Rise. This difference can also mean that you have zero contractual protection against whatever the HK or Taiwan or whatever company might do. See e.g., Hong Kong: Toto, We’re Not in Mainland China anymore.

With the downturn in China’s economy, our China lawyers are increasingly having to parse China deals that do not have a legitimate Chinese company on the other side? Why is this? Tax avoidance. The new thing we are seeing is individuals from companies wanting to be the signatories to deals with foreign companies. When we question why this is being proposed and make clear that our clients cannot do this, the individual sometimes responds by claiming that he (so far it’s been only males) is registered with the local tax authorities as a sole proprietor or 个体户. If true, this registration would likely solve the problem but so far it has not once been true.

If you do business with an individual not registered as a sole proprietor or with a foreign company without its own China company entity, you expose your company to the following real risks:

  1. If you do business with an individual not registered as a sole proprietor you will likely be deemed to be that person’s employer. This means you must pay approximately 40% in employer taxes and benefits and you must withhold and pay to the government an additional 25% (or so) in employee withholding.
  2. You could be deemed to be doing business in China illegally and that means you need to pay company income taxes and even worse can happen. See Doing Business in China with Deportation or Worse Hanging Over Your Head.
  3. The individual or foreign company can likely breach your contract without any legal repercussions, at least in China. For example, if this individual or company steals your IP, are you really going to sue in China based on a clearly illegal contract?

This is one (of many) reasons why whenever someone requests that we sell them a template contract our answer is ALWAYS the same: Not going to do it. Not at any price. Too risky for you and for us. See China Contract Templates for $99 Each.

Sinosure lawyer

Like clockwork, the downturn in China’s economy is leading to a big uptick in American companies contacting our international litigators for help in fending off Sinosure threats. For the full import of what I mean by Sinosure threats, I urge you to check out Owe Money to China? Meet Sinosure, Leviton Law Firm, and Brown & Joseph and China Sinosure: What You NEED to Know. To summarize, Sinosure is China’s Export and Credit Insurance Corporation and what that means in real life is that it insures most of China’s exports. It insures those exports by paying its policyholders when a foreign company fails to pay for product it has received from its Chinese supplier.

So how does an increase in Sinosure cases against American companies reflect the downturn in China’s economy? Well over half of the many Sinosure cases our lawyers have seen over the years arise from bad product delivered by the Chinese manufacturer. The typical Sinosure case involves a Chinese company sending over (let’s say) $500,000 in bad product. The American company cannot sell that product for its usual $950,000, but instead is forced to unload it for $350,000. The American company tells all this to the Chinese company and seeks to resolve its alleged $500,000 debt to its Chinese supplier with a one time $250,000 payment. The Chinese company goes silent and a few weeks later, the American company receives an aggressively threatening letter from one of Sinosure’s U.S. lawyers. So again, how does this link to China’s recent economic troubles?

With every China economic downturn, Chinese companies (logically enough) change their behaviors. I first wrote about this phenomenon for the Wall Street Journal way back in 2012, China’s Slowdown and You: The effects for foreign companies extend beyond merely slack sales. This latest economic slowdown greatly worries Chinese manufacturers and these worries have caused many of them to try to get what they can, NOW.  See China Trademark Theft. It’s Baaaaaack in a Big Way and On SMEs Trusting China Manufacturers. Don’t. Just Don’t. In 2011, in China. Smells Like 2008, Gloom And Doom Edition, I wrote the following on what our China lawyers were seeing from Chinese manufacturers during that downturn:

We are getting those 2008 and 2011 calls (and emails) again now. Pretty much every single day now we get an email from a foreign company (usually U.S. or European) asking for our help in recovering anywhere from $20,000 to $2 million paid to a Chinese manufacturer that shipped clearly bad product or no product at all. Unfortunately, in most cases, we have to tell the sender that without a really good China manufacturing contract the odds of their getting their money back are not so good. See China Manufacturing: Bad Contracts and Bad Times Lead to Bad Products. To make matters worse, some of these companies that want their initial payment back from a Chinese manufacturer that has provided bad product end up getting dunned by Sinosure for failing to pay the remainder allegedly due.

So what should you do when Sinosure comes knocking on your door threatening you and your company with all kinds of harm? One thing for certain: Do not go to China to try to resolve the matter with your Chinese manufacturer. Please, please, please do not do this. For why not, see Maybe Owe Money To China? Don’t Go There. Second, do not believe for even one second that Sinosure’s lawyers or collection agencies care about anything but getting money from you. In particular, do not believe that they care at all that the Chinese manufacturer sent you unusable product. And why should they? If you don’t have a China-centric contract with your Chinese manufacturer that clearly specifies the quality of product you are to receive, Chinese law is almost certainly on the side of your Chinese manufacturer in any event.

Truth is there is no one good way to deal with a rampaging Sinosure. The best way for you to deal with Sinosure will depend on your specific contracts, situation, and goals. When our lawyers are retained to represent a Sinosure victim, we typically begin by asking them the following questions:

  • How much is being claimed against you? There is no point in hiring a lawyer if the amount at stake is too low to warrant it.
  • Why have you not paid? This greatly influences our initial strategies.
  • To whom do you owe the money? We usually follow up by asking how important the creditor is to the debtor’s business.
  • Do you have other suppliers in China in addition to the one (or more) that claim you owe them money? We are trying to figure out how important it is that the Sinosure problem be solved quickly?
  • Is it important that you be able to continue doing business in China? Exactly what sort of business? These are important questions for determining strategy.
  • Is it important that you or anyone else in your company be able to go to China? This is an important question for determining strategy.
  • Do you have any brand names or logos or other IP that you use on any products or packaging made in China? If so, have you registered those brand names or logos in China? It is very common for Chinese companies to register their debtor’s brand names and logos as China trademarks so as to gain leverage. Often, the first thing we do is shore up the IP registrations of a company involved in any sort of business dispute in China. You do not want to go into battle without first patching up a gaping wound.

But what about Sinosure wanting your first born? Is that a real thing? Of course it’s not; that was just for effect. Well, sort of. I say “sort of” because we have been hearing of late that Sinosure is threatening to go after American business owners personally. Can Sinosure do that? Probably not, but maybe. That Sinosure has apparently now added this threat to its arsenal is troubling nonetheless. Sinosure is tough and relentless and a big problem and that problem is growing.