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Selling U.S. Products and Services

Using an Agent or Distributor (Return to top)

Before entering into a contractual relationship with a Korean manufacturers/commission representative (agent) or distributor, U.S. firms should conduct a thorough due diligence on a prospective business partner. A contract with an agent or distributor should be handled with care and with the assistance of an attorney. The Commercial Service in Korea can assist by providing an Individual Company Profile http://export.gov/southkorea/servicesforuscompanies/icp/index.asp (ICP) report which provides detailed financial and related business information on the company you seek to work with.

The most common means of product or service representation in Korea are:

  • appointing a registered commissioned agent or “offer agent” on an exclusive, or non-exclusive basis
  • naming a registered trading company as the manufacturer’s representative or agent, or
  • establishing a branch sales office managed by home office personnel with Korean staff.

Additionally:

  • Any businessperson registered with the Korean government can import goods in his/her own name.
  • A ‘registered trading company’ can manage all import documentation. They are larger firms involved in both exports and imports. However, these firms can be less attentive to building the U.S. supplier's business although they can be influential and well known in the market.

Performance of your agent/distributor should be regularly/frequently monitored. An under-performing or non-performing agent/distributor should be counseled and worked with. If, after a period of time the performance is still poor and only after careful consideration of all legal and contractual obligations, a termination of contract should be considered. Once a termination is legally binding the U.S. firm should begin searching for a new distributor.

Finding a Good Partner in Korea

The U.S. Dept. of Commerce, Commercial Service (CS) in Seoul, like our offices around the world, offers the Gold Key Service http://export.gov/southkorea/servicesforuscompanies/gks/index.asp (GKS) to assist U.S. companies in finding a good partner in Korea. Contact the nearest U.S. Export Assistance Centers http://export.gov/usoffices/index.asp (USEACs) to begin the process.

The GKS provides:

  • A customized schedule of face-to-face meetings with carefully selected prospective candidates,
  • A briefing, translation service, and transportation (fee based), and
  • Information on each meeting, focused market research and insights gained by CS Specialists in the process of setting up the GKS.

CS Korea strongly recommends that:

  • U.S. companies seek legal counsel prior to signing a contract or making major business decisions with Korean companies.
  • Any distribution or agency contract should include a termination clause. If not, Korean commercial arbitration bodies may specify the terms for termination, including compensation claims against the principal. A mutually signed contract between a supplier and an agent/distributor with termination provisions would take precedence and avoid placing the U.S. company at-risk.
  • U.S. companies should protect their intellectual property, trademark and patents with the Korean Intellectual Property Office http://www.kipo.go.kr/kpo/user.tdf?a=user.english.main.BoardApp&c=1001 (KIPO) as a minimum safeguard of your intellectual property rights. A local Korean attorney can easily perform all these tasks as under Korean law applications to KIPO must be done and submitted in Korean. This should be done in the U.S. company’s name and not the Korean agent’s/representative’s name.

Establishing an Office (Return to top)

The dynamism and maturity of the Korean market, coupled with its strategic location in East Asia, may lead U.S. companies to consider opening an office in Korea. The following options exist:

  • Subsidiary Office: Established as a local company, a subsidiary has a closer relationship with the local business community and can provide the local firm the opportunity for Korean government investment incentives as it would be eligible to receive corporate income tax incentives (Special Tax Treatment Law STTCL), if it meets certain requirements. These tax incentives are not available to branch or liaison offices.
  • Branch Office: Not subject to audits by external auditors in Korea, a branch office’s net income is automatically viewed as being included in the headquarters balance sheet. A company expecting to grow large enough to require the establishment of a subsidiary in the future should consider doing so at the beginning rather than starting as a branch operation.
  • Liaison Office: A liaison office can only conduct marketing and support and cannot conduct direct sales. A liaison office is subject only to the tax code of the headquarters country and is the simplest form of conducting business in Korea.

Basic guidelines to setting up an office in Korea include:

Korea has a large pool of conscientious and highly educated workers. Female employees are especially strong candidates given their educational achievements, language abilities, and the prevalence of traditional Korean cultural attitudes towards female employees which have historically prevented them from progressing as quickly as they would in a U.S. company.

Due to differences in U.S. and Korean employment practices CS Korea recommends consulting a Korean employment agencies before hiring.

  • Contact the Seoul Global Center website for Seoul Metropolitan Government’s program which occasionally offers free or reduced rent office space to provide foreign residents. http://global.seoul.go.kr/.

Franchising (Return to top)

The franchise market in 2009 was valued at an estimated USD 70.2 billion (franchise, sub-franchise fees and royalties, product and service revenues, consulting fees, and related product sales, and equipment; Ministry of Knowledge Economy).

Nearly 2,400 franchises were registered in Korea in 2010 of which 14,000 were convenience stores (2010 Yearbook of Retail Industry), 1400 were food service franchises, and 252 were education-related franchises. On average, a franchise operates 70 stores across its industry sector in Korea.

Franchisors interested in this market must:

  • meet the rules promulgated under Korea’s Fair Transactions in Franchise Business Act,
  • be registered with the Korea Fair Trade Commission, and
  • comply with the sub-franchisee’s Fair Trade Act which stipulates the need for disclosure of all business information to potential sub-franchisees at least 14 days before signing an agreement. This Act closely parallels the rules that exist for sub-franchisees in the U.S.

The Korea – U.S. FTA will positively affect this industry in many ways, to include:

  • Expedited Customs Procedures: Improved transparency through the publication of customs measures will ensure U.S. companies have access to customs laws and regulations. In addition, the trade agreement requires simplified customs procedures for timely and efficient release of goods.
  • Protected U.S. Investment: A stable, legal framework will protect all forms of U.S. investment. The KORUS FTA promises U.S. investors national treatment which means they will be treated as well as Korean investors in the establishment, acquisition, and operation of their investments in Korea.

Korea’s large retail players report (2012) interest in opening numerous mega malls outside the Seoul metropolitan area in the next three to five years. These highly respected (mostly chaebol) retailers seek retail anchor stores, franchise food service, and restaurants with a unique concept or theme for their expansion projects. Several companies are interested in becoming master franchisors of U.S. franchise brands as well as wanting U.S. franchise tenants for their new stores.

Opportunities exist for franchises in: wellness/well-being, environmentally friendly products, sports and leisure activities, personal service, green growth, children’s services, education laundry service, auto maintenance, hair, senior day care, homecare, home delivery services (all sectors), home child care, child care, human resource training and pet service providers, to name a few.

Korean franchisees are reluctant to pay the high franchising fees (USD90,000 to 180,000) and royalties required by U.S. companies. Domestic chains are popular because they do not require much capital or large royalty fee payments.

Minimum facility size and number of store openings required by U.S. franchisers are also a challenge for the Korean franchisee. The unique and expensive nature of the commercial real estate sector in Korea can affect the feasibility of a project that may offer great promise in other markets.

Korean franchisees prefer to do business with U.S. franchisers that offer established brand names to Korean consumers as well as offering American-style, systematic operations and management skills.

There are three different types of franchise investors in Korea:

  • Investors, some who have no experience in the franchise they seek to own/start,
  • Individuals with real experience with franchising brands, and
  • Retirees, with a strong business background but downsized, age 40 and above who wish to own their own business.

U.S. investors should seek an experienced work force they can mentor and monitor in this mature market.

Direct Marketing (Return to top)

According to the Overview and Forecast of Online Shopping Industry 2011 published by the Korea Online Shopping Association (KOLSA), there were over 30,064 online shopping websites in 2011, and Korean consumers spend nearly USD 27.6 billion (US 1$ = KRW 1,150) in purchases. This is a 16 percent increase vis-a-vis 2010 (USD 23.7 billion). Direct marketing primarily takes the form of catalog sales, TV home shopping, Internet shopping, and the mobile commerce market. Korea also has a large market for door-to-door sales and a robust multi-level marketing sector. Internet shopping sales account for 80 percent among the four direct marketing sales (catalog sales, TV home shopping, internet shopping, and mobile commerce market)

Door-to-Door Sales

The major door-to-door sales items include home education materials, books, household consumer goods, cosmetics, health foods, sporting goods, and service products, such as insurance counseling. According to the Korea Direct Selling Association (KDSA: http://www.kdsa.or.kr/), the Korean door-to-door sales market is approximately USD 6.8 billion (US 1$ = KRW 1,150) in 2010. Updated figures on 2011 will be released in May 2012.

Multi-level Marketing (MLM)

Korea’s multi-level sales for 2010 approached USD 2.2 billion (US 1$ = KRW 1,150). Nearly 80 multi-level marketing (MLM) registered companies employed about 3.5 million active distributors.

The Korean government reduced restrictions on MLM companies by passing legislation eliminating most existing market barriers against MLM products, such as the obligation to disclose retail prices on the MLM product label. Oversight of the MLM industry is the responsibility of the Fair Trade Commission (FTC).

MLM activities by U.S. firms in the cosmetics, cleaning products, and kitchenware industries have been expanding. MLM activities by U.S. firms in these sectors should promote their products and services appropriately and efficiently by analyzing Korean market trends. Knowledge of the market can prevent unnecessary conflicts with government officials, consumer ‘watchdog’ groups, or industry groups.

Joint Ventures (JV) /Licensing (Return to top)

Koreans prefer to maintain local control of JV operations with foreign entities. Thus, the financial goals, internal organization and key management issues of a JV must be agreed upon by all involved parties as early as possible.

Foreign direct investment (FDI) is encouraged and promoted by the Korean government. With the ratification and implementation (Spring 2012) of the KORUS-FTA greater cooperation and encouragement of FDI is expected.

When considering a FDI in Korea it is important to consider the following:

  • The decreasing influence of (some) chaebols, the governments promotion of SMEs, the governments interest in seeking anti-monopolistic, and more diversified JVs,

  • Korean’s prefer to maintain local control, regardless of the percentage invested by foreign entities, and
  • Management control should be evaluated on three levels: 1) shareholder equity; 2) representation on the board of directors; and 3) active management (representative director and subordinate management). Legally, Korean board meetings require the physical presence of all JV members as well as a quorum of the directors. If a foreign investor intends to exercise day-to-day management of an operation a representative director who resides in Korea must be appointed. The director requires the support of and access to key functional areas of the company in order to manage in accordance with the foreign investor’s wishes.

Contractual agreements in Korea

Well-written, well-understood, and well-executed contractual agreements are the basis and backbone to a U.S. firms’ success in Korea. Cultural differences surrounding the expectations of a contractual agreement, and how you successfully arrive at a mutually agreed upon agreement is often the basis of consternation and problems.

For Koreans:

  • A contract represents the ‘current understanding’ of a "deal." It is the beginning, rather than the end, to a negotiation,
  • Any change in the contract (omissions, invalid issues, new leadership, non-existent issues) will cause problems to arise,
  • Koreans may regard a contract as a "gentlemen's agreement" subject to further negotiation should conditions change; Americans regard the same written agreement as legally binding,

Contract negotiations in Korea, must be viewed as an on-going process of dialogue and should have the following objectives:

  • reaching a common understanding about the deal/contract
  • reaching an understanding about each party’s responsibilities
  • recording the detailed understandings
  • being prepared to modify the terms of the agreement should there be a change in circumstances (leadership, issues).

Additionally the following precautions should be addressed:

  • Technology transfers, raw material supplies, marketing, and distribution should be agreed upon, in detail, in the JV agreement.
  • A company’s IP may not be protected and could be vulnerable in the later stages of a JV business relationship especially if the Korean company depends on this transfer of technology. (See Protecting your IP in this Chapter).
  • Korea’s legal system is lengthy, cumbersome and expensive. When dealing with contracts the best strategy is to -- prevent conflicts.
  • FD investors should consult the Korean Commercial Arbitration Board http://www.kcab.or.kr/servlet/kcab_adm/memberauth/5000. KCAB advises foreign companies on contract guidelines.

Selling to the Government (Return to top)

Government Procurement

Korea is an established member of the World Trade Organization’s Government Procurement Agency (GPA) protocols establishing non-discriminatory government procurement procedures.

Korea’s GPA’s commitments include:

  • “threshold” amounts by certain Korean government agencies and provincial
  • procurement commitments in the services and construction industries
  • a prohibition against offsets as a condition for awarding contracts
  • a provision allowing suppliers to pursue alleged violations through GPA-defined bid challenge procedures
  • an International Contract Dispute Settlement Committee
  • annexes specifying certain thresholds below which GPA rules do not apply (approximately USD 180,000, and for construction services approximately USD 7 million), and
  • Korea’s exempted from GPA coverage items related to national security and defense, Korea Telecom’s purchases of telecommunications commodity products and network equipment, procurement of satellites, and purchases by the Korea Electric Power Corporation (KEPCO) http://www.kepco.co.kr/eng/ of certain electrical transmission and distribution equipment.

U.S. companies interested in Korean government procurement must also work with Korea’s Public Procurement Service (PPS). Consult: http://www.pps.go.kr/english/.

PPS supports domestic equipment and supplies, and is responsible for the purchase of goods and incidental services required by central and sub-central government entities, government construction contracts and the stockpiling of raw materials.

Bidders must register with PPS one business day prior to the date of an opening bid. Foreign bidders can register with PPS (Korean language only) prior to entering into a contract. Failure to register constitutes cause for rejection of the bid.

Korea launched a Government e-Procurement System (GePS) at http://www.pps.go.kr/english/. In part, the process includes:

  • a single window for public procurement showing the entire process
  • bids which are valid at least 45 days
  • where bids must be published with a summary in English, including the subject matter of the contract, the deadline for submission of tenders, and the address and contact point from which full documents relating to the contracts may be obtained.
  • the procurement process with specifications or requirements. Biases against imported products and services are rarely overt, if they occur they should be brought to the attention of the U.S. Embassy.

The soon to be implemented (March 15, 2012) KORUS-FTA has a chapter devoted to government procurement. Consult: http://www.ustr.gov/.

Defense Procurement

Defense procurement is an active part of CS Korea’s portfolio. U.S. companies who sell both to foreign and U.S. military should be cognizant of the importance given to military procurement in the Korean peninsula.

The Defense Acquisition Program Administration (DAPA: http://www.dapa.go.kr/eng/index.jsp) is responsible for Korean defense procurement and was established to ensure transparency in defense procurement. DAPA consolidates eight procurement and technology development organizations under the Ministry of National Defense (MND: www.mnd.go.kr/mndEng/main/index.jsp) and various military services. Although a civilian agency under the authority of the Executive Office of the President of Korea, DAPA works with the Minister of Defense and the service branches.

U.S. defense industry equipment standards are accepted in Korea as most Korean defense systems are based on American standards. Interoperability of systems is critical in what is now a sixty year U.S./ROK defense partnership.

Defense equipment is marketed by direct purchase, sales agents, and importer channels. U.S. manufacturers/suppliers of defense equipment should use a well-qualified/vetted Korean agent who is familiar with the ROK defense system and knowledgeable of key members of the country’s Air Force (ROKAF), Navy (ROKN), Army (ROKA), and Agency for Defense Development (ADD). Former ROKAF, ROKN, and ROK A officials have good potential as commissioned representatives in Korea. Local representatives must register and be certified by DAPA to supply their products and services to the MND.

In 2011 the Korean Importers Association (KOIMA: http://www.import.or.kr/) became DAPA’s sole source for legacy supplies and parts.

A well-selected representative can provide U.S. suppliers with information about the status of defense bids and procurement plans. Companies wanting to supply their products/systems to DAPA are required to register with DAPA; a 10 day process. Consult: https://www.d2b.go.kr/English/jsp/pcb/HI_PCB_Main.jsp.

Distribution and Sales Channels (Return to top)

South Korea is 70 percent mountains forcing it’s nearly 50 million people into key population centers: Seoul metro area: 11 million, Busan metro area: 4 million, Daegu metro area: 3 million, and Daejeon metro area: 2 million.

Most freight forwarders use an extensive network of first-class railways, the 3,000 kilometers of highways, and air routes that criss-cross the country.

Incheon, Gimpo, and Busan’s first class airports and ports are POEs for most products. Products are then transferred by first tier roads and railways to major modern distribution centers in Seoul, Busan, Incheon, Daegu, and Gwangyang.

South Korea has eight international airports and seven domestic airports including the world-class Incheon International Airport. About 70 international passenger and cargo airlines operate frequent flights between Korea and many nations around the world.

Distribution methods and the function of intermediaries vary widely by product in this mature market. Traditional retail distribution networks of small family-run stores, stalls in markets, and street vendors are being replaced by large discount stores.

Korea’s major cities have numerous extremely fashionable and expensive large department stores and boutiques. Thousands of second-tier and third-tier retail stores also abound. Full-Line Discount Stores (FDS) have gained popularity as have U.S.-based Price Costco which entered the Korean FDS market 10 years ago and is successfully competing against Korean rivals E-mart and Lotte mart.

Rapid expansion of discount chain stores is planned nationwide, with suburban satellite cities attracting the greatest number of stores.

Distribution of goods through large discount chains is one of the best ways to market foreign products to Korean consumers.

Parallel imports can legally enter Korea.

Many U.S. companies continue to give exclusive contracts, since territorial limits in neighboring countries enhance the value of an exclusive area in any one country. Any parallel importer in Korea not receiving the support of the OEM, and does not deal in a meaningful volume, cannot be guaranteed a steady source of supply. The legitimate exclusive distributor still has considerable advantages in Korea.

Selling Factors/Techniques (Return to top)

Korea is a country with intense, demanding and eager consumers. U.S. companies wanting to sell into this market should follow these guidelines.

  • Adapt company products and procedures to Korean tastes and conditions
  • Communicate regularly with both your Korean business partner and customers
  • Exhibit a consistent, firm and long-term commitment to the Korean market
  • Work at building long-term relationships
  • Augment the efforts of your local representative by visiting Korea frequently
  • Invite Korean representatives back to the home office periodically to ensure they are fully informed, motivated and up-to-date on the supplier and its offerings
  • Allow the distributor/agent to select from all of the U.S. company’s full product lines
  • Hold demonstrations, seminars and exhibitions of products in Korea
  • Increase the distribution of technical data and descriptive brochures
  • Assist local representatives with the follow-up of sales leads.

Electronic Commerce (Return to top)

E-Commerce is a key component of the overall consumer market. Korea is a country where 98 percent of its population (15 million households) is connected to the web making E-commerce a key component of Korea’s overall consumer market (See the previous section Direct Marketing)

Characteristics of E-Commerce in Korea include:

  • Over 30,000 B2C Korean cyber shopping malls in Korea.
  • B2B, B2G, B2C and C2C transactions in 2009 accounted for 88.2, 8.8, 1.8 and 1.2 percent of the E-Commerce sector respectively.
  • Major factors driving the growth include national broadband infrastructure with 37 million Internet users, and the introduction of 4G Long Term Evolution (LTE), Wireless Broadband (WiBro) as well as wide coverage of WiFi services utilized by mobile computers and smart communication devices.
  • New social commerce services led by local companies like Ticket Monster, We Make Price, One a Day, etc spur demand for Ecommerce solutions, the equipment, networking, software, and services.
  • Manufacturing industries account for 68 percent of all B2B transactions and are investing in E-Commerce in order to have reliable, efficient and secure E-Commerce tools.
  • U.S. based E-Commerce companies should monitor the Personal Information Protection Act and Ministerial data privacy/SPAM regulations (2007) which may restrict E-Commerce for firms managing user-data on international servers.

Trade Promotion and Advertising (Return to top)

The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) and the Commercial Service (CS) section of the U.S. Embassy in Korea is the U.S. government’s primary trade promotion agency. Consult: http://www.export.gov/southkora

In Korea, the USDOC/CS works with numerous trading and commercial entities to include:

  • Korea International Trade Association (KITA): http://www.kita.org/. KITA organizes trade missions, conducts market surveys, assists potential foreign buyers or sellers, offers consultation and personalized advisory services regarding trade rules and regulations, export and import procedures, business management, market research, technology development, and taxation. KITA has offices in Washington D.C. and New York.
  • Korean Chamber of Commerce and Industries (KCCI): http://english.korcham.net/. KCCI is Korea’s largest private economic organization with 71 regional chambers and approximately 135,000 members. Since its establishment in 1884, KCCI has contributing to the growth and development of the national economy, and also to enhancement of Korea's status in the international community.
  • Korean Importers Association (KOIMA): http://www.import.or.kr/. KOIMA is Korea’s importers association and represents over 8,000 businesses.

Korea hosts many trade shows and exhibitions every year. Historically however, many shows are highly focused on B2C activities and are thus not attractive to U.S. firms interested in meeting qualified companies, not end-users.

Advertising

A geographically small country, Korea is an exciting place to launch effective, sophisticated, state-of-the-art advertising. Korean advertisers are highly creative and utilize a host of mediums to capture the consumers’ attention.

Aspects of Korea’s advertising market include:

  • More than 80 mega LED screens strategically pepper commercial areas with 24/7 promotions; monthly advertising opportunities exist.
  • Thousands of excellent promotional sites on Korea’s well-used bus stops, subway stations, rail and airports should be considered by U.S. firms, but aren’t to date.
  • The presence of over 495 foreign (to include all major ad agencies) and Korean ad agencies. Foreign equity participation is permitted at 100 percent.
  • Hundreds of TV and radio stations consisting of:
  • KBS I, KBS II: TV and radio owned/operated by the Korean government,
  • MBC, SBS: independent operated but with ROK influence. Consult: www.kobaco.co.kr/eng/index.asp
  • The Korea Advertising Review Board (KARB: www.kobaco.co.kr/eng/business/publication.asp controls advertising censorship procedures and the Korean Fair Trade Commission (KFTC): http://eng.ftc.go.kr/) assures accuracy in advertisement.
  • The Korean cable industry, serves 15 million households with over 100 system operators offering over 150 programs. Korea Digital Broadcasting (KDB), a subsidiary of the state-run Korea Telecom (KT): http://www.kt.com/eng/ broadcasts more than150 satellite channels to 2.31 million households.
  • Five popular shopping channels CJ, Hyundai, GS, Lotte, and Nongsusan grossed over USD 3.5 billion in 2009.
  • Internet advertising offers significant market growth potential. Currently 15 million households, or 98 percent of all households use the Internet.

Pricing (Return to top)

In Korea’s export-driven, raw-material dependent economy -- ‘price’ competitiveness is a serious driver. Korean manufacturers believe it essential to buy the lowest priced raw materials or equipment, even at the expense of quality. Manufacturers often offset labor costs with low-cost inputs. Japanese goods are considered to be ‘better buys.’

Korean buyers believe that U.S. goods:

  • have an overall good reputation
  • are of high quality and excellent to good performance
  • are very expensive

Pricing in Korea:

  • Includes a 10 percent sales tax for taxable items (usually termed as VAT)
  • Includes a 10 percent VAT on services,
  • Is often dependent on ‘bundling’
  • Is often undervalued for software, engineering and other services
  • Should take into account price quotations with the likelihood of repeat business for spare parts and auxiliary equipment. Commissions in Korea are dependent on the type of product and the transaction amount:
  • 10 percent (avg.) for ‘spot-basis’ transactions
  • 5-7 percent for general machinery, packaging, construction, and material handling equipment
  • 15-18 percent for sophisticated products, i.e. medical, laboratory, and scientific analytical instruments and for products with after-sales service considered to be very important. For larger valued contracts, commissions decline as the contract value for a major purchase/acquisition/contract increases.

Sales Service/Customer Support (Return to top)

Considered secondary to product and price considerations, after-sales service often lacks attention; it shouldn’t. A carryover from pre-Korean war times Koreans often use improvisation, and self-reliance, when handling service issues. This should be discouraged especially given the competition of third countries in this market. Servicing is/should be an important component of the ‘sale.’

The best approaches to after sales service and customer support include:

  • Resident or offshore engineers (Japan or Taiwan) working with local engineers. Services contracts should be considered
  • Establishing a regional servicing facility that can effectively service and support equipment sold in Korea
  • Training service and customer-service personnel through U.S.-based programs.

Protecting Your Intellectual Property (Return to top)

Introduction on Intellectual Property Rights in Korea

In Korea, registration of patents and trademarks is a first-in-time, first-in-right basis. Consider applying for trademark and patent protection before selling your products or services in Korea.

For U.S. small and medium-size companies, the Department of Commerce provides one hour of free legal advice for "SME IP Advisory Program" through the American Bar Association. Consult: http://apps.americanbar.org/intlaw/intlproj/iprprogram_consultation.html.

Protecting Your Intellectual Property in the Republic of Korea:

Several general principles are important for effective management of intellectual property (“IP”) rights in Korea. First, it is important to have an overall strategy to protect your IP. Second, IP is protected differently in the Korean market than in the U.S. Third, rights must be registered and enforced in Korea, under local laws. Your U.S. trademark and patent registrations will not protect you in the Korean market. There is no such thing as an “international copyright” that will automatically protect an author’s writings throughout the entire world. Protection against unauthorized use in a particular country depends, basically, on the national laws of that country. However, most countries do offer copyright protection to foreign works under certain conditions, and these conditions have been greatly simplified by international copyright treaties and conventions.

Registration of patents and trademarks is on a first-in-time, first-in-right basis, so you should consider applying for trademark and patent protection even before selling your products or services in the Korean market. It is vital that companies understand that intellectual property is primarily a private right and that the U.S. government generally cannot enforce rights for private individuals in Korea. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IP consultants who are experts in Korean IPR law. The U.S. Commercial Service can provide a list of local lawyers upon request. Please consult: http://export.gov/southkorea/usefullinks/lawfirms/index.asp.

While the U.S. Government stands ready to assist, there is little we can do if the rights holders have not taken these fundamental steps necessary to securing and enforcing their IP in a timely fashion. Moreover, in many countries, rights holders who delay enforcing their rights on a mistaken belief that the USG can provide a political resolution to a legal problem may find that their rights have been eroded or abrogated due to legal doctrines such as statutes of limitations, laches, estoppel, or unreasonable delay in prosecuting a law suit. In no instance should U.S. Government advice be seen as a substitute for the obligation of a rights holder to promptly pursue its case.

It is always advisable to conduct due diligence on potential partners. Negotiate from the position of your partner and give your partner clear incentives to honor the contract. A good partner is an important ally in protecting IP rights. Consider carefully, however, whether to permit your partner to register your IP rights on your behalf. Doing so may create a risk that your partner will list itself as the IP owner and fail to transfer the rights should the partnership end. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in Korea require constant attention. Work with legal counsel familiar with Korean laws to create a solid contract that includes non-compete clauses, and confidentiality/non-disclosure provisions.

It is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IP and stop counterfeiting. There are a number of these organizations, both Korea-based or U.S.-based. These include:

  • The U.S. Chamber and local American Chambers of Commerce
  • National Association of Manufacturers (NAM)
  • International Intellectual Property Alliance (IIPA)
  • International Trademark Association (INTA)
  • The Coalition Against Counterfeiting and Piracy
  • International Anti-Counterfeiting Coalition (IACC)
  • Pharmaceutical Research and Manufacturers of America (PhRMA)
  • Biotechnology Industry Organization (BIO)

IP Resources

A wealth of information on protecting IP is freely available to U.S. rights holders. Some excellent resources for companies regarding intellectual property include the following:

  • For information about patent, trademark, or copyright issues -- including enforcement issues in the U.S. and other countries -- call the STOP! Hotline: 1-866-999-HALT or register at http://www.stopfakes.gov/.
  • For more information about registering trademarks and patents (both in the U.S. as well as in foreign countries), contact the U.S. Patent and Trademark Office (USPTO) at: 1-800-786-9199.
  • For more information about registering for copyright protection in the U.S., contact the U.S. Copyright Office at: 1-202-707-5959.
  • For more information about how to evaluate, protect, and enforce intellectual property rights and how these rights may be important for businesses, a free online training program is available at http://www.stopfakes.gov/data/us/menu/index.htm.
  • For U.S. small and medium-size companies, the Department of Commerce offers a "SME IP Advisory Program" available through the American Bar Association that provides one hour of free IP legal advice for companies with concerns in Brazil, China, Egypt, India, Russia, and . For details and to register, visit: http://www.abanet.org/intlaw/intlproj/iprprogram_consultation.html
  • For information on obtaining and enforcing intellectual property rights and market-specific IP Toolkit for Korea visit: http://export.gov/southkorea/iprtoolkit/index.asp as linked from www.StopFakes.gov This site is linked to the USPTO website for registering trademarks and patents (both in the U.S. as well as in foreign countries), the U.S. Customs & Border Protection website to record registered trademarks and copyrighted works (to assist customs in blocking imports of IP-infringing products) and allows you to register for Webinars on protecting IP.

Due Diligence (Return to top)

Conducting a thorough due diligence check is critical when selecting a local partner for JV, licensing, and distribution.

A due diligence check should include:

  • an evaluation of the company’s financial and operational history
  • accounting practices
  • hidden ownership interests
  • corporate relationships with other Korean companies
  • position in the market for the product(s) you are exporting

CS Korea offers a fee-based service named the International Country Profile (ICP) http://export.gov/southkorea/servicesforuscompanies/icp/index.asp. The ICP includes the above information obtained by CS Seoul trade commercial specialist who visit the office of the Korean company as well as obtaining financial information from D&B Korea Co., Ltd. (http://www.dnbasia.com/kr/english/sitemap/) and Kroll International, Inc. (http://www.kroll.com/) both which also provide due diligence reports.

Local Professional Services (Return to top)

Korea has a highly developed economy with a full range of professional services.

Agents/distributors: http://export.gov/southkorea/usefullinks/usefulcontactsregardingagentsdistributors/index.asp

Law firms: http://export.gov/southkorea/usefullinks/lawfirms/index.asp

Major banks: http://export.gov/southkorea/usefullinks/majoruskoreanbanks/index.asp

Major real estate and real estate consultancy firms, accounting companies and human resources firms: http://export.gov/southkorea/usefullinks/majorrealestateaccountinghrfirmsinkorea/index.asp

Major newspaper contacts: http://export.gov/southkorea/usefullinks/majornewspapersbusinessjournals/index.asp

The “Featured US Exporters (FUSE)” site provides information on how you can advertise your products on our worldwide website in various languages for a small fee. Click on http://export.gov/fuse/.

Web Resources (Return to top)

Busan Exhibition and Convention Center (BEXCO):
http://www.bexco.co.kr/english/main/main.jsp

Agents or Distributors in Korea: http://export.gov/southkorea/usefullinks/usefulcontactsregardingagentsdistributors/index.asp

Banks in Korea:
http://export.gov/southkorea/usefullinks/majoruskoreanbanks/index.asp

Convention and Exhibition Center (COEX):
http://coex.co.kr/eng/index.asp

Daegu Exhibition and Convention Center (EXCO Daegu):
http://www.excodaegu.com/

Defense Acquisition and Procurement Agency (DAPA):
http://www.dapa.go.kr/eng/index.jsp

Dun and Bradstreet, Korea:
http://www.dnbasia.com/kr/english/sitemap/

Featured US Exporters (FUSE):
http://export.gov/fuse/

Government e-Procurement Service (GePS):
http://www.pps.go.kr/english/

International Company Profile:
http://export.gov/southkorea/servicesforuscompanies/icp/index.asp

Invest KOREA:
http://www.investkorea.org/

KITA NY Office:
http://www.kita.net/ny/eng/01/index.html

KITA Washington Office:
http://www.kita.net/ny/eng/02/index.html

Korea Broadcast Advertising Corporation (KOBACO):
http://www.kobaco.co.kr/eng/index.asp

Korean Commercial Arbitration Board:
http://www.kcab.or.kr/servlet/kcab_adm/memberauth/5000

Korea Importer’s Association (KOIMA):
http://www.import.or.kr/

Korea Intellectual Property Office (KIPO):
http://www.kipo.go.kr/kpo/user.tdf?a=user.english.main.BoardApp&c=1001

Korea’s Main Distribution Centers:

Busan: http://busanpa.com/Service.do?id=engmain

Daegu: http://english.daegu.go.kr

Gwangyang: http://www.gwangyang.go.kr/02en/

Incheon: http://www.incheon.go.kr/icweb/html/web39/039.html

Korea Trade Investment Promotion Agency (KOTRA):
http://english.kotra.or.kr/wps/portal/dken

KINTEX:
http://www.kintex.com/client/_eng/index.jsp

Kroll Korea:
http://www.krollworldwide.com/

Public Procurement Service (PPS):
http://www.pps.go.kr/english/

Law Firms in Korea:
http://export.gov/southkorea/usefullinks/lawfirms/index.asp

Newspaper Agencies in Korea:
http://export.gov/southkorea/usefullinks/majornewspapersbusinessjournals/index.asp

Real Estate Consultants, Accounting Firms and Human Resource Agencies:
http://export.gov/southkorea/usefullinks/majorrealestateaccountinghrfirmsinkorea/index.asp

Seoul Trade Exhibition Center (SETEC):
http://www.setec.or.kr/main.do

World Federation of Direct Selling Associations:
http://www.wfdsa.org/