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Doing Business in China? Consider These 5 Things

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By Casey C. Sullivan, Esq. on July 09, 2015 12:59 PM

If your company is looking to do business in China, it's not alone. China has quickly become one of the world's largest consumer markets and manufacturing nations, making business in China ever more common -- despite the Chinese market's recent turmoil.

When a company starts looking towards China, its legal department needs to prepare. Doing business with China is unique in many respects and poses particular issues and challenges for American in-house counsel. Here are five considerations to keep at the forefront when preparing to do business in China:

1. Protecting Your Intellectual Property

When doing business with a company in China, particularly in manufacturing, it's important to protect your company's intellectual property. This means executing IP protection agreements and registering your IP in China. Consider expanding your typical nondisclosure to include non use, non compete and non circumvention terms -- a so-called NNN Agreement.

2. Creating Your Own Reporting Systems

Structured reporting systems are rare in China, meaning that information on who does what, at what volume and for what price can be difficult to understand. Working in China means doing a lot of intense market research beforehand and potentially setting up your own reporting systems to monitor and analyze your business operations, costs, and compliance once your work has begun.

3. Revising Your Negotiating Strategy

Don't expect that your typical negotiation strategy will work in China. In-house counsel should be prepared to respond to a different set of negotiating tactics, such as claims that government regulators require changes right before a signing deadline, or attempts to renegotiate material issues after signing. Thankfully, there are plenty of resources available to help you prepare.

4. Remembering Formalities When Contracting

It's been a long time since our legal tradition has required a wax seal to make a contract valid. We've generally limited legal formalities to requiring certain written memorials. Not so in China, though, so get ready for several formal requirements -- and yes, that includes the use of an official seal.

5. Paying Attention to Compliance

As in-house counsel, you'll want to make sure that any venture in China -- or any foreign country for that matter -- complies with the laws of both the United States and your host country. For example, if you're doing business in China for more than a few weeks, you may need to form a legal entity there. You will also want to make sure that none of the company's agents are greasing palms in violation of both U.S. and Chinese anti-bribery laws. Compliance review should focus on import-export, environmental, antitrust, employment, and tax laws, at the very least.

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