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Why Suing Chinese Companies In The US Is Usually A Waste Of Time.
2009-09-02 07:31:00
Ft.com has a fascinating and extremely sad story, entitled, "An accident shows how China treats consumers." (h/t This is China!) It's a great article, but the title is all wrong, at least if you are a lawyer. The title should be "An accident illustrates why it is (almost always) a complete waste of time to sue Chinese companies in United States Courts." I am sure that most of you will read this article and get all angry and ask, how can this be? I read this article and nod my head and think, been there, done that. That is because just about every month, I get a call from some lawyer, somewhere in the United States, calling me and expecting me to be really interested in the great case he or she is offering me. The case usually goes something like this: 1. I have a $16.5 million judgment against this Chinese company for securities fraud. We got the judgment from such and such US court and "all we have to do now" (I swear they nearly always say this as though they just did ...
More About: Companies , Time , Waste

China And Doing It By Heart. One Day You Are In And The Next Day You Are O
2009-08-31 06:48:00
Just read a great post over at Seth Godin's blog. The fact it was a great post is not the least bit unusual for that blog, but that I can relate it to legal work in China (well sorta, anyway) is. The post is entitled "The problem with doing it by heart" and its gist is that people sometimes become such creatures of habit that they fail to question and analyze and maybe even modify the way they do things. The post concludes with the following lesson: The next time you or one of your people starts rattling off the obvious truth by heart, wonder about whether it's obvious because it's true, or true because it's obvious. So true. Many years ago at my old firm, a young immigration lawyer (who was always to angry about something) complained to me how a litigation lawyer in the firm had been dissing him. The immigration lawyer had gone to the litigation lawyer with a question on court procedure and the litigation lawyer told the immigration lawyer he did not know the answer and ...
More About: Heart

China Honey, You Are An Adulterer. Can You Stand By YOUR Labels?
2009-08-29 18:28:00
A couple of Chinese "executives" were recently found guilty in Seattle Federal Court of having imported and distributed adulterated (well it at least sounds like adulterer) and mislabeled honey into the United States. The honey contained "ciproflaxin, an antibiotic that is used to fight bacterial infections but in rare cases can cause tendon damage and is barred from the food supply." The honey was also mislabeled as having come "Russia, Ukraine and possibly Poland" even though it really came from China . This all reminds me of a couple very good clients who were subjected to full on federal investigations. To camouflage the client, I am going to be very vague here, but I assure you that you will get the gist. Here are the stories: Client 1 is engaged in a very profitable business shipping food product to China, where it is combined with other product, processed, and then shipped to the United States. One day, around a dozen federal agents (from various agencies) show up, ...
More About: Labels , Honey , Stand

Manufacturing In China. Because There Are 1.3 Billion People There.
2009-08-26 17:38:00
I expected the routine this morning from a Wall Street Journal article entitled "LG Display Plans Plant in China ." I expected it would say that LG was going to be manufacturing in China either to save costs or, more likely, to diversify its manufacturing. But the following line from the article gave me an ah-ha moment: "China's LCD market is growing rapidly, so we felt it's necessary to manufacture LCDs from the region in the long run," said LG Display spokesman Park Sang-bae. Ah-ha! Now I know many of you have already realized this (and on one level, so had I), especially those of you in the business of buying and selling product, but China manufacturing is in its second wave. China's first wave was strictly for cost savings; its second wave is for internal consumption. In a backward analysis brought on by this article, I realized that many (maybe as many as three quarters of them) of my firm's clients who we have been helping go into China are going there more to sell t...
More About: People , Manufacturing , Billion

China: Where East Eats West.
2009-08-26 00:38:00
Whirlwind China entrepreneur and friend Sam Goodman has a great and blissfully short book out on how to do business in China. I say blissfully short not because I did not like his book (because I did), but because its shortness is one of its strengths. Most people wanting to learn the ins and outs of doing business in China neither want to nor have the time to read an encyclopedia on the subject. They want something that gives them a full overview of the basics in a hard-hitting and relevant way. Sam's newly released tome, Where East Eats West , is that book. Sam is a somewhat rare beast in China: an experienced and successful expat entrepreneur. Sam started a chain of cafes in 1997, called Beijing Sammies. Sam built these cafes into a real business and then sold them in 2003. His book does a great job distilling what he learned from those experiences. The book consists of a series of many very short, very informative, chapters. Though I see this book's highest and bes...

Foreign Corrupt Practices Act in China. September 3, 2009, Teleconference.
2009-08-25 17:43:00
Stafford Publications is putting on a teleconference on the Foreign Corrupt Practices Act (FCPA) in China . Before I talk about that though, there is one thing I have to get out of the way. Every time I see a very British name like Stafford, I cannot help but smile and remember a hometown friend of mine who named his business "Tafford." My friend's business has become quite successful on a national level and my friends and I still always effect a very British accent whenever we discuss it. Now here's the funny part, my friend came up with the name from an expression we back then: Take a Flying F--k On a Rolling Donut. That equals TAFFORD. Get it? Sorry. Anyway, this teleconference will be on September 3 and it features really good people and it will be focusing on the following: This seminar will examine recent FCPA enforcement focused on business activity in China, discuss the unique FCPA challenges of conducting business in China, and outline strategies for effective ...

China's Big Political Picture Writ Small For Business.
2009-08-23 19:18:00
I am not generally a fan of extrapolating the way a country conducts its politics to the way its enterprises conduct its businesses even in China where so many businesses are government owned. I am not saying it cannot be done, but I generally find it too complicated for too little value. David Dayton, a guy who truly knows the way China conducts its manufacturing, just came out with an analogy laden post, entitled, "Rio Tinto and Urumqi as Corporate Culture Lessons,"linking China's recent handling of its Western region with how its factories treat foreigners. Though I am dubious of the value (beyond entertainment) of making this linkage, I am convinced Dayton is spot on regarding Chinese factories and I am going to focus on that. Dayton sees China using the following four step process to deal with its problems out West: 1. Round them up. 2. Insist everything is okay. 3. Identify a common enemy. 4. Show them the money. 1. Round them up. Anyone against the factory will be...
More About: Business , Political , Picture , Small

China's Border Disputes And Use Of Force. A Serious Analysis.
2009-08-23 17:48:00
The Sun Bin blog has a fascinating and thoughtful post analyzing how China handles border disputes and when it uses its military. The post, entitled "China's Policy in Border Disputes ," mostly consists of an interview with Professor M. Taylor Fravel of MIT, whose academic focus has been on Chinese territorial disputes and its use of force. This is an interesting and important post and I highly recommend it.
More About: Analysis , Force

China Food Safety. Don't Blame Legal.
2009-08-22 10:37:00
Thought provoking post over at TwoFish's Blog, entitled, "Best and the worst – The Sanlu Settlement." The thesis is that China 's handling of payments to those injured by the Sanlu dairy food poisonings was handled better than would have been the case had Sanlu been in the United States and been subject to a class action suit. TwoFish makes some valid points, which points are certainly more sophisticated than some commentators who fly over to China for a week and come back proclaiming that if only China allowed tort claims (it does) just like in the United States, all (or at least nearly all) food safety problems would be solved there. TwoFish says China handled Sanlu "quite well" and he challenges those who are "critical" to "explain what the Chinese government could have done better:" As I said above, as far as the actual settlements and consequences, I do think that the Chinese government handled things quite well, and I’d like for people that are critical of the leg...
More About: Safety , Food , Legal , Food Safety

China: No Brands No Cry. What Does Peoria Say?
2009-08-22 08:22:00
Since my using references to Bob Marley songs seems to play so well (see here and here)..... Anyway, just read an excellent and blunt blog post on Chinese brands over at the perpetually insightful Silicon Hutong Blog, entitled, "Brand Reality Check." The post uses a Tom Doctoroff article in AdAge (subscription required) as the starting point for arguing China will "not be producing a bevy of global brands at any time in the near future." I completely agree. Silicon Hutong convincingly makes the following argument against those those who might list the few fairly well known Chinese companies as proof that China can develop great brands: Those who disagree with Tom (and manage to eschew ad hominem attacks) point out that Haier has managed to build a global brand entirely without marketing. While that point would be debatable (if you could buy a Siemens fridge for the same price as a Haier fridge, which would YOU buy, and why?), let's not go there. Instead, let us grant fo...
More About: Brands

Hiring In China. The Seminar. September 24, 2009. Seattle.
2009-08-20 04:26:00
On September 24, 2009, I will be speaking on China labor law issues at Seminar International's Hiring in Asia Seminar in Seattle . I will be sharing the podium with Dave Parker, CEO of 9spaces, a leading China-focused human resources research and services company. Together we will be discussing hiring and retention in the Software Engineering, Manufacturing Services, and Shipping industries. Dave will focus on the business side and I will cover the legal side. In addition to our talk on China, Chris Gootherts, Microsoft's Staffing Manager for China and Thailand will be presenting with Darryl N. Johnson, the Former U.S. Ambassador to Thailand, on "Choosing the Right Country and the Right Services: Recruiting West to East." Chandrakiran Malarapa of Prithvi Information Solutions, Shaalu Mehra of Perkins Coie LLP, and Madhu T. Rao, an Associate Professorat Seattle University's Albers School of Business, will all be talking on Hiring in India. Davis Bae, immigration lawyer extr...

The King Of Diplomacy On China-US Relations.
2009-08-19 20:56:00
I have always loved the television commercials where some cheesy guy wearing a crown (presumably the owner of the appliance store or whatever else it is that is being advertised) screams out the discounts you can expect to get by shopping at his store. If my memory serves me right, I've been witness to the King of Cars, the King of Discounts, and the Appliance King. John Grisham wrote a book called the King of Torts and who can forget Rupert Pupkin as the King of Comedy? Like him or not, Henry Kissinger is the King of Diplomacy and he has a Washington Post op-ed out today, entitled, "Rebalancing Relations With China " (h/t China Hearsay, who also thinks highly of the op-ed) setting out how the United States should be dealing with China. And again, like him or not, the guy does know whereof he speaks and this is his own summary of what should be done: While the center of gravity of international affairs shifts to Asia, and America finds a new role distinct from hegemony yet com...
More About: The King

China's Rio Tinto Arrests. A Rapid Fire Historical Perspective.
2009-08-19 19:22:00
Sometimes big events can be so complicated, controversial and unwieldy, there is hardly any point in reading current reports because they are likely to be so biased and/or inaccurate as to be of no value. In those instances, particularly when the underlying topic is not of huge interest to me, I generally pretty much stop reading articles on it and just wait for the dust to settle. I think the common wisdom is that real dust settling (and releasing of key documents) and gaining of perspective usually takes around 50 years. And though I would love to be able to look at China 's recent Rio Tinto arrests from the perspective of fifty years hence, that is obviously not possible right now. So instead, I will turn to an excellent FT.com by Arthur Kroeber, somewhat mis-titled, "Rio Tinto arrests reveal China has growing-up to do." The thrust of the article is that China is a relatively safe place in which to do business, particularly as compared to Russia. I agree. China has done...
More About: Fire , Historical , Arrests , Rapid

Business Taxes In China. Feels Just Like Home.
2009-08-18 02:18:00
Ernst & Young is out with a very informative online publication on indirect taxes in China (h/t All Roads). The publication is entitled, "Navigating Chinese Indirect Taxes ," and it provides a great overview of these taxes and how they can, and almost certainly will, impact your China business. It starts out with the following general comments regarding indirect taxes in China: Indirect taxes (specifically Value Added Tax, business tax, customs duty and consumption tax) play an important role in China, accounting for almost 60% of the government’s tax revenue. Newly revised regulations are changing how indirect taxes are treated in China. But these are often the forgotten tax on business. Tax directors may overlook these costs as they are above the line and usually not directly visible within the accounts or financial statements. We are often surprised to learn that many companies have yet to grasp the significance of the indirect taxes passing through the organization. More of...
More About: Business , Home

Representative Offices In China. Things Just Got More Difficult/Expensive.
2009-08-17 17:28:00
My wildly unscientific observations tell me that about nine out of ten companies that go into China legally end up succeeding. My wildly unscientific observations also tell me that about eight out of ten companies that go into China illegally end up failing within a couple of years. Of the other two companies that went into China illegally, one usually becomes legal within a few years and ends up suceeding and the other one ends up failing a few years later. I have no idea on the accuracy of my statistics, but I truly do make an effort to keep up with every company that contacts my law firm. I do this by every six months or so sending an email asking them how things are going in China. These emails go to those companies that chose not to retain my law firm, but instead to do things illegally in China, and to those that did. No science here, but a bit more than a feeling.... I thought of all that today when I read in the highly respected Economic Observer of how China is cra...
More About: Things , Offices , Representative

China's Food Chain. Nobody Trusts Nobody.
2009-08-17 11:18:00
The Eileen Eats blog did an excellent, though very disquieting, post on the state of Chinese food. The post is entitled, "Food Safety– Can’t let your guard down," and it has the following money quote: Hung Huang, chief executive of the China Interactive Media Group in China, said recently in an article in the New York Times that China as a nation of food lovers is going on a diet. “Not because we don’t love to eat anymore,” she said, “but because we just don’t know what is safe to eat.” CLB's own Steve Dickinson wrote a Wall Street Journal column earlier this year, entitled, "Food Fumble," discussing how China's new food safety laws will do little to solve China's food safety problems. What will work? When will it work? What do you think?
More About: Chain , Trusts

A Western Woman In China....Sex, Sex, Sex????!!!!
2009-08-17 09:21:00
Not me, of course. But Gina in Shanghai, who on her blog, Gina in Shanghai, has written a very thought provoking piece, entitled, "Peter Hessler and laowai nuzi," on how Western women are viewed in China (h/t China Beat). To grossly summarize, Chinese view Western women to be like the women in "Sex in the City." Western women are envied for their independence and strength, but looked askance at for being "a bit too morally degenerate." Gina very nicely explains her frustration with these stereotyped views in a post that is well worth a read. Just added the Sex, Sex, Sex part both to draw in more readers (trust me, putting sex in a post works for this EVERY time), but also because I just came across a very interesting, and related, post on China Geeks, "Li Yinhe: Criticizing the Sex Double Standard." The post translates a Li Yinhe post on THE double standard in China when it comes to sex: "the more sexual a man is, the better; the less sexual a woman is, the better." The post c...
More About: Woman

An "American" Law School In China. Explanations Sought.
2009-08-16 18:34:00
My tiny firm must receive at least ten resumes every day. About a third of these come from students who, even in the best of of times, would likely never be hired as a law firm associate. Go ahead and get mad at me if you want, but those who are in the bottom half of the class from fourth tier ranked or unaccredited law schools are just not going to get hired by a law firm without exceptional circumstances. The United States is producing way more lawyers than jobs. I do not have the numbers on this, but I KNOW this to be true. Just ask Loyola 2L. And yet (usually with self-generated fanfare) new law schools just keep on coming. Why? I could talk about college presidents wanting to extend their fiefdom (and that would be true), but what it really comes down to is that law schools tend to be very profitable. I thought of all this today when I read an excellent article on the USC US-China Institute's website, entitled, "China Legal." The article is on Peking University's new...
More About: Law School , School , American

Got A China Criminal Matter. I'll Get Barack....
2009-08-15 01:11:00
One of the interesting things about the exposure that comes from this blog is that my firm gets contacted by all sorts of people with China law problems. This is mostly good because it can lead to real work. This is also good because even when it does not lead to real work, it provides great blog fodder. Like today. A while ago (I am going to be really vague on everything here for obvious reasons) I got an email from someone whose relative had been arrested in China on a criminal law violation. The email went something (again, I am changing things to hide any potential identifier, but the gist is there) like this: A family member was doing business with China as a middle man. He was getting his goods from all over Europe and the United States and then selling them in China. They turned out to be fakes. Without knowing this, he went to China on other business and some of the businesses that got the fakes from him had him arrested. There is no way to reach the people that sold...
More About: Barack , Matter , Criminal

China Retail As Piracy Prevention.
2009-08-14 18:11:00
One of the things I love about being a lawyer is what I learn from clients. I recently started working with a company that makes a high end consumer good. In the US, this company sells its products to high end retail outlets, including department stores. It has no retail outlets. This company has been doing more and more of its manufacturing in China and, like so many, it has recently decided the time has come for it to sell its product line in China as well. They have told me that "in order to maintain exclusivity and to prevent piracy," it will be setting up retail stores in China and selling its product only from those stores. That way it will be obvious both to them and to consumers that any of its product that is not in these stores is not the real deal. Now I am sure this is nothing new to many of you (so go ahead and call me out if you wish), but this is actually the first time I have heard of a company going into China retail to protect product integrity. What do...
More About: Piracy , Retail , Prevention

Cross Cultural Dating -- China Style.
2009-08-14 04:51:00
I normally hate this sort of thing, but "Steve" over at Fool's Mountain does such a great job with it, I cannot resist posting on it. The post is entitled, "Cross Cultural Dating ," but I think it goes way beyond that and that is my point. The post does a great job explaining the need to be sensitive to other cultures and the advice given definitely translates to the business world and even to dealing with another person within the same culture. What do you think?
More About: China , Style

China's Migrant Workers. The Revolution Will Have To Wait.
2009-08-14 01:03:00
Robert D. O'Brien (have I linked to the right person?) over at China Beat has a great post up on the impact China's manufacturing downturn is having and will have on China's big picture. The post is entitled, "China’s Migrant Workers in the Wake of the Economic Crisis: Unemployed, Undeterred," and it basically concludes that the macro impacts on China will be micro. I tend to agree. What do you think?
More About: Revolution , Wait , The Revolution

The WTO's China Video/Media Ruling. Shedding Some Light....
2009-08-13 15:48:00
Yesterday, I wrote how it was too early to proclaim repurcussions from the WTO ruling on foreign media in China . It is still too early and I still know too little, but I have seen a few things which shed a bit of light. The first is Businesweek's Eye on Asia post on the ruling, entitled, "Hollywood's Small WTO Victory Over China," in which Bruce Eichorn questions whether the ruling is as big a deal as Hollywood is making it out to be: The top lobbyist for the major Hollywood studios is hailing yesterday’s news that the World Trade Organization has ruled in favor of the U.S. government’s complaint against China’s restrictions on foreign films. After years of getting nowhere in China, the movie industry understandably is celebrating this WTO win: Dan Glickman, chairman and CEO of the Motion Picture Association of America, called the ruling “a major victory” and said in a statement it “points a way forward that will begin to even the playing field in this important mar...
More About: Video , Media , Light , Ruling

China's Labor Laws. Find Me That Company.
2009-08-13 12:12:00
Spoke with a reporter last week regarding China 's labor laws. The conversation went sorta like this: Reporter: I want your views on how enforcement of China's labor laws is holding up despite the economic downturn. I am also wondering how representative are the stories we've all heard of one bad-egg employee winning a huge lawsuit against a foreign company that is basically in full compliance with the labor laws, with every other employee running to join in. My Response: All I can tell you is what we are seeing as one small law firm that represents exclusively foreign companies doing business in China. 1. I am definitely "feeling" a loosening of labor law enforcement by Chinese government officials and even employees. This starting happening when the economy turned and it really has not changed much despite press reports of China's economy holding up well. Having a job seems to be taking greater precedence and, with that, comes a concomitant decre...
More About: Laws , Company , Find , Labor

China Guest Blogger Sought. Must Read AND Understand WTO Rulings.
2009-08-13 07:38:00
Got an email today from a leading finance magazine asking me whether the World Trade Organization's (WTO) ruling today "against" China meant "piracy is now dead in China." I told him I would review it, figure out the answer to his question, then call him. WRONG. I read a few news articles on the ruling and they all said pretty much the same thing. They said the US won on some items and China won on others. They then proceeded to quote someone from some film organization stating this was a huge victory for US film companies and that was pretty much it. So I went to the WTO site and read the "findings and conclusions." and understood pretty much none of it. There were so many cites to various WTO provisions that I realized to understand the ruling would probably take days (I am not kidding) of review and analysis. I briefly checked out the full decision, but that is 491 pages. Hell, if I am going to read 491 pages without billing for it, I am going to read An Evil Cradling, ...
More About: Blogger , Read , Guest , Understand

Six More Keys To Quality Product Made In China.
2009-08-12 20:45:00
The other day, I did a post entitled, "The Six (Not Five) Keys To China Quality ." In response to that post, Rich Brubaker, over at the All Roads Lead to China blog left a long and very thoughtful comment adding six additional things that should be done to better ensure quality Chinese manufacturing. I found those six items so spot-on that I am turning them into a post to give them greater play: 1. Take the time to establish the right partners and processes. Don't come to China with a list of three suppliers found on Alibaba and don't work on a time line. Get it right from the start, and if need be, take a short term hit and continue producing in the US/ EU until the China platform is ready. Should things fail, it will cost a lot more than a few months of the existing process. Dan: This is so true. Everything in China manufacturing takes longer than you think and way longer than your Chinese manufacturer will tell you. Your manufacturer is key; choose it wisely and not und...
More About: Product , Made

Easy Jobs For Foreigners In China. Everyone I Know Begs To Differ.
2009-08-12 17:28:00
New York Times article, entitled, "American Graduates Finding Jobs in China ," makes it seem that all a young American needs to do to get a job in China is to show up. Wow! When I read that article, it did not seem to jibe with what I was seeing out there, but from my perch at a tiny law firm, I figured I just was not seeing enough. Guess my perch is not so bad after all. Danwei has a great short post on this that very concisely calls bullshit on the whole idea: Danwei received email from two old China hand journalists yesterday regarding the New York Times story linked here: Wise Hack A: Here's one of those great stories that the ever lazy hack pack recycle every so often - floods of Yanks coming to China for jobs. No evidence whatsoever for this but it gets churned out again every couple of years I note. Wise Hack B: Please please mention the NYT "no Mandarin required" article and what an absolute crock of shit it is. Thanks. Stan Abrams at China Hearsay concurs: Sorr...
More About: Easy , Foreigners

China's Rio Tinto Case. Everyone Move Along....
2009-08-12 12:12:00
Okay, so the title is a bit of an exaggeration, but I do think the Rio Tinto case is being blown out of proportion, at least somewhat. From my perspective (which is based on ZERO inside information and absolutely no idea whether anyone is guilty of anything or not), this matter has always been a lot more about what the Chinese government is trying to say to its own populace than what it is trying to say to foreigners. I was just interviewed on this case and this is essentially what I had to say: It is my understanding that China just issued its charges against the Rio Tinto employees and they have been charged with bribery and with stealing commercial secrets. The government is not bringing spying/stealing of state secrets charges. The talk of bringing state secrets charges made foreign investors very nervous because it is not clear to anybody what constitutes a state secret, especially when so many businesses are government owned. My understanding is that if there had been a ...
More About: Case , Move

Made In America. Not China.
2009-08-12 01:15:00
Fascinating collection of articles over at Forbes Magazine on America n manufacturing and how it does and should compete with China . The introduction gives a good description of the themes the articles. Made in America meant something very different 30 years ago. It will mean something very different 30 years from now. All we can do is make good guesses. The facts are that 12 million adults make something for a living in the U.S., and their output accounts for $1.6 trillion, one-fifth of world manufacturing, more than that of any other nation. Yet our unprecedented manufacturing muscle is, to many, and justifiably so, in a state of crisis. Those 12 million jobs were once 19.5 million jobs. Since its peak in 1979, factory employment has never stopped falling. The hard truth? It never will. Manufacturing is always in crisis. Productivity eliminates jobs here, in China, in Mexico and everywhere. Making goods will continue to play an important part in our economy, but it will employ ...

The Six (Not Five) Keys To China Quality
2009-08-11 12:33:00
A client sent me an article the other day to ask me if it was accurate. I replied that it was, but that it left out one important element. The article is entitled, "5 Keys to Quality when Working with Chinese Suppliers." and it sets forth the following as the five keys: 1. Detailed Documents "The number one key to quality when working with factories in China is documentation. Having bi-lingual, detailed, factory agreed upon checklists in place that document an item’s specifications and the criteria for inspecting the product before shipment, is essential to controlling product quality. One can not say for sure, but I would be willing to bet that the factories responsible for products recently recalled for lead paint did not have bi-lingual documentation on hand from their customer stating the type of paints that could and could not be used. Sure, this type of documentation takes time and hard work to create, but putting such processes in place is the first and most important ...