Doing Business in China: The North Korea Guide

North Korea as a guide to doing business in China. It’s a long story, but let me explain.

The other day I got a call from an old client who used to do business with North Korea. Yes North Korea. Many years ago, this fishing company had explored doing a deal with North Korea, during a rare quasi-thaw in U.S. North Korean relations. At that time, we had reached out to Michael Hay, who I have known since his days in South Korea, and who is — as far as I know anyway — THE lawyer to use on any North Korea matter. If there is any other such lawyer, please let us all know in the comments below!

Anyway, this phone call spurred me to Google search Michael and his law firm to see what was up, and really just to see if he was still doing North Korea work in this time of what nobody would call a thaw in US-North Korea relations. Note though that I fully recognize that there are plenty of other countries that do business with North Korea. Well there it is, Micheal’s firm, Hay, Kalb & Associates, all with a website that looks circa 1983 or North Korea, circa 2015.

On the right side of Michael’s law firm’s website, is a scrolling list of “Tips, Myths, and Facts” about doing business in North Korea, which I copied and will discuss below. I did this because so much of the information there applies to doing business in China (really just about every emerging market nation) as well. So without further ado, I list out below the Tips, Myths and Facts from Hay, Kalb and then I discuss their applicability to China in italics.

Starting with the tips:

Tip #1: There is no such thing, person or entity as an ‘expert’ on North Korea, no matter how prestigious their background. 100% true of China as well. See China Experts. Really? 

Tip #2: If you meet someone who calls themselves a North Korea expert …. run – fast. See my comment to Tip #1 above.

Tip #3: The best you can get is those with “experience” – sometimes a great deal – but usually not. There are a lot of people with a lot of China experience. But the good ones virtually always have one area of expertise, be it Chinese business law for foreigners, logistics, marketing, manufacturing, etc. See Your Chinese-American VP Don’t Know Diddley ‘Bout China Law And I Have Friggin Had It.

Tip #4: Identifying — before you go into the DPRK — the correct DPRK entity with which to deal is critical to the success of your visit. It is a fundamental aspect of the preparation required on both sides for your visit. Failure to do so may produce, unintentionally, a ‘mismatch’ and result in you and your company never actually getting the level, quality and depth of introductions to which you otherwise would have had access. This is true of China as well, but finding legitimate companies with which to deal in China is no doubt considerably easier and less government focused than in North Korea. See China Business Basics, where we talk about the undeniable benefits of choosing your Chinese “partner” wisely and Basic China Due Diligence. Is This Chinese Company Legitimate?

Tip #5: The nurturing of mutual trust with the DPRK is a sometimes painstaking, frequently immensely enjoyable, experience, which takes time. The loss of trust, however, can occur with spectacular rapidity. Discretion is the key, both in your preparations for entry and once you are there. Avoid fanfare. The same generally holds true for China and for pretty much every country. See How To Keep Your China Manufacturer Motivated And Why That Matters. 

Now for the myths:

Myth #1:There are no traffic lights or traffic jams in the DPRK. There are plenty of traffic lights and even more traffic jams in China. 

Myth #2: All those huge high-rise buildings you see on documentaries are ‘uninhabited’, and empty shells, put up for show. Total myth. There are plenty of huge high-rise buildings in China that are uninhabited or are empty shells, but they were not put up for show; they were mostly put up either to generate jobs or profits. 

Myth #3: Americans cannot under any circumstances whatsoever travel to the DPR. Americans can freely travel to China. See China 72 Hour Visa Rules for a fast, easy and cheap way to get into and out of China without having to get a visa in advance.  

Myth #4: A foreign company cannot win in the courts or arbitral tribunals of the DPRK in a business dispute with a DPRK entity. Myth. Hays, Kalb & Associates speaks from direct experience. All true for China as well. See Arbitration in China. Different, Yes; Biased, Probably Not. See also Litigating in China and the four part series of China litigation posts mentioned there. 

And lastly, the facts:

Fact #1: Pyongyang is perhaps the safest capital city in the world, in terms of crime, for both adults and children, locals and foreigners. Beijing is generally quite safe as well.  

Fact #2: Air Koryo is the national carrier. It offers business and economy class. A common route, for several reasons, is the Beijing–Pyongyang route, with the flight time around 1 hour and 40 minutes. China has plenty of airlines that offer both business and economy class. Flights in China are, however, often delayed. See China’s Horrible Flight Delays. Makes Doing Business In China Even Tougher.

Fact #3: The DPRK has a surprisingly sophisticated framework of foreign investment and related legislation in place, with dozens of laws and regulations covering numerous aspects of foreign business activity, including a revised dispute resolution law. Same for China. Heck if it didn’t our China lawyers would have little to nothing to do. Just as a for instance, check out this recent long-form post on China NNN Agreements, where we lay out how we write our NNN Agreements to make them work for China’s complicated business and legal realities.  

Thanks Michael.

The post Doing Business in China: The North Korea Guide appeared first on China Law Blog.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you 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.