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Permalink Reply by Eun-Shil Park on June 21, 2011 at 10:16pm

Dear Kent Shi,

 

First a very warm welcome to our Experts Corner. Your involvement is very much appreciated.

 

Quite often people especially entrepreneurs who wants to do a business start-up with Korean Companies bumps into difficulties with the koreans concerning; written contracts. As said earlier the koreans likes very much an oral agreement after a long time of -courting- each other. But for western entrepreneurs(SME) its very difficult to proceed the business deal without a written contract. And even if the koreans are willing to sign an agreement they often wants to be written with a lot of -grey area- in the content.

 

Personally I adviced several times to SME-companies to go for a sort of receiving a (single use) -Certificate- by the koreans which they(european counterpart) could show to their european bankers in order to show the reliablity of the korean business-contact in order to receive a -go- for financial investment. Also I advised in cases according to import/export business to write an extended L/C to exclude the -grey area- between Western & Korean Companies. Also the same with working with INCO-terms.

 

My question for you is what you can advise as a lawyer some additional info or different info then written here above to improve dealing business between western & korean companies(SME)?

 

Gamsahamnida.

 

Eun-Shil

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Permalink Reply by Kent Wong on June 25, 2011 at 9:44am

Eun-Shil,

 

I appreciate you kicking off with a thoughtful and interesting question concerning Western companies doing business with Korean companies.  Foreigners doing business with Korea can often encounter disputes with the Korean counterparty (but no more than say, China or other parts of Asia).

In most Western jurisdictions, a contract involves "a meeting of the minds". In Korea, a contract can seem to equate to a rough working agreement, subject to change depending on the circumstances. Many Koreans don’t view deviations from a contract as a breach of contract. Rather, Koreans tend to see contracts as always being flexible and subject to further negotiation. Culturally, a written contract is not the real contract; the unwritten or oral agreement one is the real contract. However, many Korean sellers will unilaterally change terms or renege on verbal promises or understandings if they feel that they can. Therefore, any written contract should be executed with these factors in mind. So, for a foreign company, how do you avoid getting ripped off?

From the buyer’s side, the following pointers are recommended:

• Due diligence. At least carry out an asset check before you send someone your hard-earned money.
• L/Cs will add an element of safety for both parties. A seller that doesn’t want to use a L/C is someone that you would need to scrutinize. A solvent seller should be able to easily obtain credit on the L/C.
• A contract shouldn’t be a one pager. I’ve come across this far too many times. There are a whole host of risks and potential problems which arise in these types of deals, so get some legal advice (this may seem self-serving, but think about it, litigating for breach of contract after the fact is far more stressful and costlier).

If you’re a European company selling product into Korea, the following might decrease your chance of getting burnt:

• Secure full payment in advance. Typically, sophisticated buyers won’t accept this unless you put up a performance bond or open a standby L/C so that they can get their advance payment back.
• Carry out due diligence on the buyer.
• Secure some of the payment in advance. Obviously, this won’t guarantee full payment, but it’s better to lose some as opposed to all from a sale.
• Secure a Documentary L/C. You’ll be paid when there’s documentary evidence you’ve shipped the product according to the terms and conditions of the L/C. Prudent buyers will usually require an inspection certificate to ensure the product complies with the specs in the contract or the PO. This kind of letter of credit will mitigate your risk because your buyer's bank has irrevocably guaranteed to pay upon presentation of the required docs. Finally, make sure you secure this L/C from a major Korean bank or a branch of an international bank. The US and many European countries make it easy and cheap to purchase insurance to cover improper non-payment on the L/C.

Hopefully, noting these basics will help to facilitate business between foreign companies and Koreans and save parties from a lot of angst.

-- Kent

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Permalink Reply by Steven S. Bammel on June 25, 2011 at 10:33am

Kent - Thanks a lot for the thoughtful and helpful advice. 

 

I'll also suggest Peter Bartholomew's recent KBC interview as a resource. About two thirds of the way though, he discusses contracts and Koreans and how to approach this sensitive topic wisely.

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Permalink Reply by Eun-Shil Park on June 26, 2011 at 6:16pm

Dear Kent,

 

Thank you very much for your reply.

The main reason i liked to start with this question is that several KBC members asking me all the time the same question. They usually start a negotation with the koreans and got along the way the idea that the whole conversation is going nowhere

;-) I do hope sincelery that your answer will fill in their question. Thank you again.

 

 

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Permalink Reply by Christine Lynch on July 5, 2011 at 9:04am

Hi Kent,

I originally messaged William with this question and he suggested I contact you.  Any advice you have would be greatly appreciated!: 

 

I'm currently here teaching English on an E2 visa, but have made some contacts throughout the past couple years and have been offered an entry level position at a Korean company. (I'm really excited about this opportunity, as this was what I had eventually imagined happening when I first came to Korea!!)

However, there have been problems with how to go about getting me a visa so that I can go to work for this company.  They say they can't hire me as an E-7 because I'm just entry level, not a "specialist" and they can't hire me as an E-2 because their company isn't set up with special training facilities.  I'm looking into getting an F2-7 visa but that seems like it's going to take a long time.

Now, William suggested looking further into the E7 and seemed to think that even though I'm entry level, it would still be a possibility.  I think I'm going to contact the company and ask them to look further into this option.

Do you have any other suggestions?

 

Thanks for your time,

 

Christine

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Permalink Reply by Kent Wong on July 6, 2011 at 11:10am

Hi Christine,

 

If the F2-7 option seems too long and troublesome, I would second William's advice and take another look at the E-7.  I'm not an immigration guru by any stretch, but even if the position you've been offered is entry-level, your past experience in your field/industry will be relevant, i.e. your E-7 visa will be assessed on your experience and credentials in the field/industry for which you're applying.  In addition, it doesn't matter if your position doesn't fit into the typical "specialist" positions of accounting, law etc.  You could have a Master's degree or several years' experience in, for example, marketing, which could satisfy the E-7 criteria. 

 

Not sure if this is enough to go on, but hope it helps.  Good luck!

 

Regards,

Kent

 

 

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Permalink Reply by Kyle Thomas on August 4, 2011 at 7:41pm

Hello Kent, 

 

Right now me and my partner are looking to sell our current business and move on to a future venture. I was wondering if you have any legal advice regarding Korea and the real estate market. Currently we live in Guri-si, Gyeonggi-do. Any advice would be helpful. We are especially curious about the average real estate commission rates, market trends for this time of year and possibly selling privately without the use of a broker.

 

Your assistance is much appreciated!

Thank you in advance for your help.

 

Kyle Thomas

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Permalink Reply by Steven S. Bammel on August 5, 2011 at 12:57am

Kyle - Are you trying to sell real estate? Or a business? 

 

For real estate, here's a discussion that's pertinent - http://www.koreabusinesscentral.com/group/koreaeconomicforum/forum/...

 

And here's a relevant discussion on selling a business - http://www.koreabusinesscentral.com/forum/topics/seeking-a-business...

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Permalink Reply by Kyle Thomas on August 5, 2011 at 4:00am

Hey Steven, 

 

Thanks for your swift reply.

We are trying to sell a business, more specifically a bar. We have quite a few resources and many contacts but I am just trying to gather as much information as possible before going through with the process. I guess my main concern is with commission rates for real estate agents. I have talked to a few agents and I feel some of them are trying to cheat me because I am both young and foreign. 

 

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Permalink Reply by Kent Wong on August 7, 2011 at 3:45am

Hi Kyle,

 

I believe that real estate agent commission rates are pretty standard throughout the industry and a set formula is applied.  Even so, like most things, such rates may be negotiable, depending on the agent.

 

A good reference on KBC for real estate is an article written by Robert Eberenz in the original Korea Economic Slice:

 

http://www.koreabusinesscentral.com/group/koreaeconomicforum/forum/...

 

This information is probably more general in nature, so please feel free to contact me directly via PM for any specific legal pointers you may need for your situation.  Good luck.

 

--Kent

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Permalink Reply by Steven S. Bammel on August 10, 2011 at 11:21am

Kyle - I don't know the legal commission rates, but my wife was telling me that if selling an apartment worth, say, W300 million, both the seller and the buyer will each pay about W2 million in commissions.

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Permalink Reply by Kyle Thomas on August 13, 2011 at 4:41am

Thank you Kent and Steven for your advice. I will PM you if I have any further questions.

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