Marketing Fear
June 12, 2010 by Frank
I have never liked to use fear as a means of marketing my services. Other lawyers, insurance companies, consultants – they do. I came across this article in the South China Morning Post today and it irks me when I read this or hear about lawyers frightening their clients into retaining them or paying them. While this new law coming out of England is similar to the U.S. Foreign Corrupt Practices Act and should be taken seriously, there is no need to lose sleep or be afraid that you and your company are doing the wrong things in China. Best to consult your legal advisor who will tell you when the final regs and guidance are published and then take a careful and measured approach.
| Britain’s strict bribery law may hit local firms | |||||||
| Irene Jay Liu Jun 13, 2010 |
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Britain is cracking down on corruption among British companies worldwide, and its efforts could have a far-reaching impact on Hong Kong and mainland firms. After years of legislative inaction against corporate corruption, Parliament in April passed the 2010 Bribery Act – the world’s strictest on bribery. The legislation affects not only British firms but any company that conducts any part of its business in the country, as well as those that provide services to British companies. This law is similar to the Foreign Corrupt Practices Act in the United States which not only applies to U.S. Companies but also to companies with ties in the U.S as is mentioned below. “It is a very wide net – particularly when you look at Hong Kong, with the historic British connection,” said Richard Tollan, a partner at law firm Mayer Brown JSM and a former detective inspector in Hong Kong’s commercial crime bureau. It could be a wide net as countries like England, who are broke and are at the same time trying to level the playing field for domestic firms, use laws like this to get a piece of the action without the specter of raising taxes. It also is conveniently referred to “as a very wide net” by lawyers like Mr. Tollan who often use fear to generate additional billings. “It’s a hot topic among professionals and the more astute corporates in Hong Kong,” Tollan said of the new law. “It is not unheralded – it comes in the wake of three or four years of Hong Kong attuning itself to increased answerability to long-arm overseas jurisdictions for domestic bribery.” This is even more reason to move corporate entities and headquarters to Hong Kong where they are out of the “long-arm” reach of nearly bankrupt countries like the U.K. and the U.S. Until the British law was passed, the United States had the strongest anti-corruption legislation in the world in the shape of the Foreign Corrupt Practices Act, or FCPA. It may appear to govern only US companies, but in recent years it has affected a number of non-US firms. German carmaker Daimler-Chrysler, Berlin-based Siemens and Britain’s BAE Systems have all agreed to settlements after being investigated for bribery by authorities in the US and other countries. Look for the US to increase FCPA enforcement and proceedings as another tool to collect revenue and supposedly level the playing field for domestic manufacturers. Britain’s Bribery Act has upped the ante, no longer limiting the definition of bribery to foreign officials. More significantly, the legislation creates a separate offence for a company that fails to prevent a bribe being paid for or on its behalf. “As compliance officers, and counsel, there is a positive obligation on corporates to put in place adequate procedures designed to prevent people from committing bribery,” Tollan said. I’d guess that their firm puts these procedures in place. Firms can defend themselves against bribery charges if they can show that they have “adequate procedures” in place to prevent bribery. “Suddenly, these corporates are taking a look at themselves and their policies. That’s what is causing the interest among the savvier corporates,” Tollan said. “There is [now] a positive obligation on corporates to put in place adequate procedures specifically designed to prevent people being involved in corrupt practices.” Hong Kong and mainland firms should look at their procedures, as they may find themselves subject to the British legislation, Tommy Helsby, chairman of Eurasia at global risk consulting firm Kroll, said. I think they used “procedures’, ‘in place’ and ‘adequate procedures’ more times than was necessary. A large Chinese manufacturer with a European marketing office in Britain could fall under the law’s jurisdiction, he said. Hong Kong firms that act as agents for foreign corporations wanting to source manufacturing in China should also be aware of the new law, Helsby said. I don’t believe that Chinese companies that are domiciled in the mainland are subject to foreign judgments in the U.K. “I think they should be expecting to find a lot more concern on the part of their foreign clients about how they do business. And it will become a competitive advantage to show that you have a robust compliance system on bribery. Because if I’m Marks & Spencer or Primark, a big UK purchaser of Chinese manufactured goods, I want to make sure that I’m not caught out by the actions of my agent. In my humble opinion it will be difficult to extend the obligation to the acts of independent agents, especially when there are contractual agreements between the company and agent which outline responsibility and indemnify the company against their illegal acts. “If I’m looking at two intermediaries, and one is talking about the UK anti-bribery, and another one is busy winking about `getting the job done’, I know which one I’m going to choose,” he said. Winking about getting the job done is not acceptable anymore in China and if your employees or agents tell you otherwise than you should replace them. So far, it’s unclear how much outreach has been done to spread the word among local companies in Hong Kong. The British government is expected to publish guidelines for “adequate” anti-bribery procedures. Many companies are waiting for those guidelines before moving ahead, Tollan said. But for many Hong Kong companies, anti-corruption procedures could be an entirely new concept. A survey released in April of top firms in Hong Kong, Singapore and South Korea found nearly half “failed to display any evidence of taking significant steps to counter bribery”. Experts in Responsible Investment Solutions studied anti-bribery policies of nearly 2,000 FTSE All-World Developed Index firms for the survey. A spokesman for the Hong Kong Trade Development Council, the statutory body tasked with connecting companies with opportunities in Hong Kong and on the mainland, said it had not yet issued any guidelines to local companies. “Our London office is monitoring the situation concerning the introduction of the anti-bribery bill in the UK and whether there is any possible impact on Hong Kong companies doing business with the UK,” the spokesman said. The danger of running afoul of this legislation could hurt business not only in Britain, but also in the European Union. The EU has a directive banning companies convicted of bribery from doing business with its governing body. “The potential liability of the senior executive to be sent to jail, it’s like a rifle shot,” Helsby said. “If you’re hit, you’re dead, but you have some chance of dodging the bullet. The EU procurement issue is a like an artillery barrage. The damage is much broader. The breadth of that ban could be catastrophic.” Senior executives going to jail for unknown acts of their agents or employees, not likely and it is irresponsible to use fear as a means for generating revenue, especially when prudent financial decisions and good management are what have always led foreign corporations to success in this part of the world. Is it a good idea to discuss this with your lawyer or advisor when the final regulations and guidance are published – yes, but, I wouldn’t lose any sleep worrying about going to jail. |
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Customs to the rescue
April 19, 2010 by Chinatex
Fake products in China are nothing new and I have been advising clients on protecting Intellectual Property matters for many years here. As I wrote in my previous blawg “Misconceptions about China” http://chntxlaw.com/2010/03/misconceptions-about-china/ “as more Chinese companies file for IP protection in China and in the West, and they have an expectation of enforcement and a rule of law, those same principles will extend to foreign companies and individuals who apply for IP protection in China.” I thought this below article was interesting and while you can never be quite sure if the numbers are accurate, I can assure you from personal experience that Chinese Customs will enforce the IP rights of those who have IP – this means Patents and Trademarks that have been filed in China. So, the best thing you can do is file often and file early as the first to file has the IP in China and then file your IP rights with Customs and establish a good relationship with Customs (you would be surprised how far a nice sincere lunch will go). So, I hope you learn something from the below article and as always, Yeeha! Chinatex.
Fake goods in mail up 7-fold
By WANG YAN (China Daily) Updated: 2010-04-20 08:24
http://www.chinadaily.com.cn/china/2010-04/20/content_9750480.htm
Drastic increase due to rapid development of e-business: Customs
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BEIJING — The country’s customs officials seized as many as 37,000 pieces of mails and express mails containing counterfeit items from June to December of last year, seven times the figure in the same period of 2008, the General Administration of Customs (GAC) said on Monday. |
On July 20, 2009, Beijing Customs stopped a batch of outbound express mail for random inspection.
Each of the 75 boxes, with “digital accessories and parts, digital cassettes and electronic accessories” written on them, weighed 30 kg. The parcels were headed to 10 countries.
On opening the boxes, officers found more than 50,000 mobile phones, SD cards, flash drives and memory banks involving 12 brand names.
The smuggling bid opened the customs department’s eyes to the seriousness of the infringement of intellectual property rights in the country.
The case is now been transferred to the public security department for further investigation.
The drastic increase in the practice is due to the development of e-business, said Meng Yang, director of the policy and regulations department of GAC, at a press conference in Beijing.
“Intellectual property protection in export trade faces new threats as e-business develops. With online trading gaining popularity, we’re seeing more and more cases where tort goods are shipped through mail, express mail, or carried by individual passengers across the border,” Meng said.
But she said the department would not regard it as an infringement of property rights if tort goods carried by passengers were within “range of reasonable self-use”.
Zhao Fudi, spokesperson for the GAC, said mails and express mails had become a major channel in the cross-border circulation of tort goods. Zhao said the GAC launched a special campaign from July to December last year, where inspection was focused on mail and express mail.
“The number of batches of goods seized through mails and express mail in 2009 has jumped by 738 percent compared with 2008. “The number of items has increased by 28 percent, and the total value by 402 percent,” he said. China’s e-business transactions reached 530 million yuan ($77.6 million) in 2009, an annual increase of 248.7 percent, iResearch said in its report on Thursday.
It said China’s e-business market is stepping into an explosively increasing stage. “In the next two to three years, the country’s e-business customers will maintain an annual growth rate of 70 percent. Scales of real goods will reach an annual increase of up to 400 percent,” the report said.
According to the GAC data, a total of 280 million items were seized last year because of intellectual property infringement, where 99.9 percent were exporting goods and 99 percent were trademark infringement. Tobacco products, light industrial products, cosmetic and care products, hardware and mechanical products, and clothes topped the list of goods categories in terms of the number of items seized in 2009. Among the five, only tobacco products saw a decrease in number compared with last year, from 560 million in 2008 to 180 million in 2009.
Misconceptions about China
March 12, 2010 by Chinatex
My mother thinks that people in China still ride around on bicycles wearing those green army suits and green hats with the red star in the middle. While there are still a lot of bicycles, especially in Beijing and Shanghai – where they are proud to wear their silk pajamas while riding their bicycles and smoking at the same time – there are not many people wearing those green outfits. In fact, to most people in the U.S., China would be unrecognizable from what they remember in the news clips from the last few decades. There are many misconceptions about China and Old Chinatex is here to clear up a big one.
I have had several clients recently tell me that their lawyer from _______ (insert the country here cause they are all the same) told them that there “wasn’t any need to file a trademark or patent application in China because China doesn’t recognize intellectual property rights anyway and people still ride around on bicycles wearing those green army suits and hats” (I added that part). This is a big misconception that could potentially cost someone a lot of money.
First of all, China has something called the State Intellectual Property Office of the Peoples Republic of China “SIPO”. They even have a website if you want to pay them a visit: http://www.sipo.gov.cn and if you can read Chinese you would understand what they are saying. If you can’t read Chinese, they have an English version at: http://www.sipo.gov.cn/sipo_English/ From the website you can see they are legitimate, SIPO is similar to the US Patent and Trademark Office (USPTO), and takes Intellectual Property filing and enforcement very seriously.
Secondly, as more Chinese companies file for IP protection in China and in the West, and they have an expectation of enforcement and a rule of law, those same principles will extend to foreign companies and individuals who apply for IP protection in China. I have personally watched IP filing and protection improve dramatically in the past 7 years and most of the problems in enforcing intellectual property rights arise when foreign companies have not filed in China.
Thirdly, China does not recognize US and other patents in the same way as other countries. China recognizes Chinese patents filed with the SIPO and China is a first to file jurisdiction. This means the first person to file usually gets the IP rights. I say usually because there are circumstances where internationally recognized brands have spent a lot of money to enforce their trademark rights from people who have filed first in China or similarly they have spent a lot of money to buy the rights from those same clever individuals who filed first.
Finally, filing Trademark and Patent applications in China is relatively straight forward and not prohibitively expensive. In fact, the costs compare with those in the U.S. and are lower than in the E.U. When filed and approved by the SIPO you then have Intellectual Property rights and an asset in the IP that you didn’t have in China previous to filing. The certificate then allows you to use expanding legal channels to enforce your IP.
So, why wouldn’t you file!!!! Because your lawyer, who has never been to China, told you it wouldn’t make a difference. While Old Chinatex doesn’t make a bunch of money on helping clients file Trademarks and Patents in China, it is a service we offer because we simply wouldn’t be doing everything we can to help our clients navigate the business jungle in China – if we didn’t.
For more information on Intellectual Property protection in China please contact Chinatex or his staff at info@chntxlaw.com
As always, yeeha! Chinatex
Badmitten
November 9, 2009 by Chinatex
Of course i know i spelled it incorrectly, but the first time i spelled it i didn’t even know that it was spelled badminton. Doesn’t make much sense as in Texas we always called it “badmitten”. In fact we only played this game once every few years at family reunions and picnics and usually beer was involved and it could get ugly as some inebriated and not so athletic relative fell on his big fat behind while trying to smash the birdie. That’s what we called em – birdies, we didn’t even know it’s called a shuttlecock and if we did we probably we would have laughed so hard at the name we wouldn’t have even got to playing.
That brings me to the point of this blawg post. Old Chinatex tried his hand at Badminton tonight and boy was it an awakening. I was going to write about one of my favorite subjects which is the hiring of chinese/taiwanese/hong kong managers by western companies and the company executive management trusting them to give legal advice just because they studied somewhere in the U.S. or the U.K. and speak good English. I realized that i didn’t need to waste my time when Old Dan Harris over at Harris & Moure took the words right out of Old Chinatex’s mind and posted it on his award winning China Law Blog. This gave me some time to try my hand at badmitten. Here is the link to the blog post.http://www.chinalawblog.com/2009/11/first_lets_kill_all_the_nonchi.html
Now back to badmitten! I now have an acute understanding why the Chinese are infatuated with this game. If you have ever watched them play it seems they get an inordinate amount of joy out of smashing that little birdie. I’m talking really smashing it and they get even more joy when their opponent or just the other person smashing it back to them, misses it. I can only imagine that they are thinking about their boss or husband or coworker or professor or who knows when they take aim at that little rubber head on the birdie and give it a resounding whack. So, tonight i played and thought about the rude taxi drivers, the clients who don’t listen to me and hire crooked managers anyway and say “but i trust him, he went to the University of Wisconsin”, and the bad service at restaurants and the noisy people in the elevators talking on their cell phones and a plethora of other unmentionables. Every time i took a swipe at that little birdie i imagined one of their faces – now i know why it is their national sport. With 1.6 billion of them, they have to take their frustrations out on something and those poor little birdies are the perfect foils for their anger.
So, if you hire a manager who went to the University of Wisconsin or some other school and professes to be an expert on China and international law and you trust him and then later you realize that Dan Harris and Old Chinatex were right, i suggest you take up Badmitten. As always, yeeha!! Chinatex
The IP shoe is on the Google foot
October 20, 2009 by Chinatex
In the country known for overt violations of intellectual property and where copying is not really considered unethical or taboo, it seems that the shoe of Intellectual Property is now on the other foot. The Chinese government has made a formal complaint on behalf of its writers and authors to end unauthorized copying and online publication of Chinese literary works – by Google. It seems that Google thought they could scan thousands of Chinese books into its searchable database without seeking permission or compensating the copyright owner. The recent article from the China Daily at: http://www.chinadaily.com.cn/china/2009-10/21/content_8822335.htm and also below with my comments. The tables are indeed turning. As always yeeha!! Chinatex
Google violating copyrights, authors say
By Xie Yu (China Daily) Updated: 2009-10-21 07:49
Search engine giant Google is facing accusations that its employees, illegally and without permission, scanned Chinese writers’ works into its digital library, Google Books.
“Google’s infringement to Chinese authors is very severe,” said Zhang Hongbo, deputy director-general of China Written Works Copyright Society (CWWCS), the only domestic administration of written works copyrights.
Chinese government departments, such as the National Copyright Administration, will push the US government to handle the issue properly, considering Google is such a major force in the online world and has acted arbitrarily in this issue, he said. According to a rough estimate from CWWCS, nearly 18,000 books from 570 Chinese writers have been scanned by Google and included in its digital library, which is only open to netizens within the US borders. This was done without informing or paying most of the writers.
“So far, no writer we reached said he or she has authorized Google to do the scanning,” Zhang said. Google has not yet replied to the accusation. Its spokesman was not available for comment yesterday. Hmm, no authorization and nobody available to reply to the accusations. Looks like Google is learning from the Chinese.
Google has been scanning millions of books under US copyright since 2004. Under a tentative settlement with US authors and publishers, that will cover all books unless the copyright holders object. Google is in the final stages of reaching a settlement with two US copyright organizations, which brought copyright infringement lawsuits against the search company for its book-scanning project.
A US court has given the parties until early next month to revise their current settlement agreement and ensure its compliance with antitrust and copyright laws. According to the settlement offered by Google, authors who accept Google’s scan could get $60 per book as compensation, as well as 63 percent of the income from online reading. Readers of the books online would pay a fee for digital access to the book.
According to the settlement, if the author rejects Google’s right to scan, he or she should appeal before Jan 5, 2010. Authors should approach Google authorizing the scanning and get the compensation before June 5, 2010. But Zhang said this settlement is not acceptable to Chinese writers. Of course it’s not acceptable to Chinese writers.
“First of all, Google violated Chinese writers’ copyright. Actually this is a difficult issue and one for the lawyers to work out. Did Google violate Chinese copyright? It doesn’t make sense for them to set a deadline for Chinese writers to protect their interests. “Secondly, the company should show a clear attitude to admitting its infringement and then negotiate with Chinese authors sincerely,” he said.
The US often criticizes China’s inefficiency in protecting property rights, Zhang said. Indeed they do.
“But you see what their company is doing in China? Many of our writers are infuriated,” Zhang said. Zhang Kangkang, a prominent writer and also vice-president of the Chinese Writers’ Association, said she was “surprised” and “angry” at Google’s copyright infringement. “It’s one-sided agreement to scan the work without permission from the author. It is illegal to enjoy the writer’s work in the name of knowledge sharing,” said Zhang, whose books have been scanned by Google.
Chen Cun, another well-known Chinese writer who lives in Shanghai, said Google is “day-dreaming” if it wants to buy copyright from him for $60. “The price should be set by both sides. It is impossible to buy an object with your bid only,” he said. I love it when I hear Chinese speaking in reasonable business terminology and standards that we have been playing by for years. Yes Google is daydreaming and this could turn into a nightmare although Google has probably performed a financial risk assessment and made a strategic decision to violate copyright and sort it all out later. $60 dollars, you have got to be kidding!!
Google Books is planning to turn millions of books into electronic literature available online.
Google’s head of Print Content Partnerships in Britain, Santiago de la Mora, earlier said that Google is solving one of the big problems in the print world – that some books are pretty much dead in the sense that hard copies can no longer be found. “We’re bringing these books back to life, making them more visible to 1.8 billion Internet users in a very controlled way,” de la Mora said. Thank goodness for Google bringing these dead books back to life – perhaps they should be awarded the Nobel Prize. However, Google Books is facing big legal problems in the US, Europe and elsewhere around the globe over the issue of copyrights.
Tax Amnesty Scheme
October 11, 2009 by Chinatex
In March of this year, the IRS came up with a program similar to the guns for cash program popular in many U.S. states. This time, instead of turning in an old rusty handgun or rifle – for cash (mind you we didn’t have this program in Texas), individual taxpayers with offshore accounts could voluntarily disclose these accounts to the IRS in exchange for amnesty (not cash), as set forth by the IRS as follows: Under the special provisions issued in March, taxpayers with these accounts originally had until Sept. 23, 2009, to come forward. Those taxpayers who do not voluntarily disclose their accounts by Oct. 15 face harsh civil penalties, where applicable, and possible criminal prosecution. Here are two sections from the IRS’ website concerning voluntary disclosure with my comments:
Q2. What is the objective of these steps?
A2. The objective is to bring taxpayers that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws. The objective is to get more money because we are broke and cannot print anymore without risking the dollar becoming worthless. Additionally, the information gathered from taxpayers making voluntary disclosures under this practice will be used to further the IRS’s understanding of how foreign accounts and foreign entities are promoted to United States taxpayers as ways to avoid or evade tax. Further the IRS’s understanding?? This is like the government hiring criminals to tell them how to catch criminals. Data gathered will be used in developing additional strategies to inhibit promoters and facilitators from soliciting new clients. Data gathered will be used to strongarm citizens and financial institutions into paying high taxes to fund government debt and expansion.
Q3. Why should I make a voluntary disclosure?
A3. Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Because it enables them to become compliant – what kind of answer is this??? They are threatening criminal prosecution where none really exists. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution.
For more nonsense from the IRS here is the link to the relevant part of their website concerning this issue:
http://www.irs.gov/newsroom/article/0,,id=210027,00.html
Check out Question 12 where it talks about how to figure out how to pay the back taxes owed. Now Old Chinatex likes how the Brits call things a scheme. In Texas we consider a scheme to be something fishy that we don’t want to get involved in. Looks like the IRS didn’t get enough people to take part in their scheme so they are extending the deadline to turn in your guns and then pay them lots of money. Sounds schemy to me. Here is an excerpt from a recent article in the Hong Kong English language newspaper. It’s relevant because as you might remember from Chinatex’s blawg entitled Tax Man Cometh Part II http://chntxlaw.com/2009/06/tax-man-cometh-part-ii/ the U.S. government recently tried to force Hong Kong and Macau banks into disclosing account holder information. As I told y’all China told em no and it should stay that way as long as China continues to hold almost a trillion dollars of our worthless currency.
Americans in HK rush to beat this week’s tax deadline
Nick Westra South China Morning Post Oct 12, 2009
Americans living in Hong Kong are rushing to ensure their tax affairs are in order ahead of Thursday’s deadline for them to voluntarily disclose unreported income in offshore accounts. The US government is casting its shadow across the Pacific and stepping up efforts to catch tax cheats and expand overseas enforcement.
The so-called amnesty scheme was initiated earlier this year by the US Internal Revenue Service (IRS) following a UBS settlement over allegations of abetting tax evasion. The programme was designed to gather information that would widen an ongoing investigation into a suspected web of wealthy tax cheats. But many ordinary Americans have been caught out as well because they were either unaware of stringent US tax-filing requirements or completed them incorrectly.
In addition to paying local taxes, the 60,000-plus Americans living in Hong Kong must regularly declare their earnings to the IRS. They are allowed an exclusion of as much as US$91,400 in locally earned income for 2009 if they can prove they spent most of the year abroad. But they must complete a filing regardless of whether they are under the threshold or not. US citizens must also report whether the combined value of their personal overseas bank accounts, or even those for which they have signatory power, has exceeded US$10,000 at any time in a given year.
Robert Keys, a partner at PricewaterhouseCoopers (Hong Kong) said: “There is an incredible amount of additional complication that affects the tax filing for an American living abroad. The foreign issues on a return are much more complex than those for a typical guy sitting in San Francisco.”
This is because the IRS has pledged to tighten its enforcement of international taxation amid growing suspicions that wealthy Americans have been exploiting loopholes in foreign tax codes and been stashing cash overseas. Those fears were fanned in February when UBS struck a US$780 million settlement with the US government to avoid facing charges of assisting wealthy Americans with tax evasion.
Highlighting the gravity of the allegations, the Swiss bank also broke from the centuries-old banking tradition of guarding customer secrecy and identified some clients who may have been involved. The number of named clients has since reportedly expanded to more than 4,000. But the IRS’ push to beef up its overseas presence is not just a reaction to recent events. It is also part of a long-term effort to adapt to an increasingly global business environment.
In its Strategic Plan 2009-2013 released in April, the IRS said some taxpayers may be dropping off the radar as more wealth shifted overseas. It estimated that the percentage of US citizens’ income coming from abroad had doubled from 2001 to 2006 and that the number of multinational firms worldwide had increased by 20 times to 63,000 since 1990. The IRS also published an announcement that month entitled “Reaching out to Americans abroad”. It said there were 7 million US citizens living overseas and included information for them to learn more about tax requirements.
The growing reach of the IRS was something that Americans living abroad must take note of, said Richard Weisman, a tax partner at Baker & McKenzie in Hong Kong. “While the basic US tax laws themselves have not materially changed, the tax enforcement climate in the US has totally changed in the last year or so,” Weisman said.
The US economy has been battered by the global downturn and is facing slower growth and mounting debts. Its budget deficit for the financial year climbed to a record US$1.38 trillion in August and unemployment has ballooned to a 26-year high. Against this backdrop, the US government has eagerly pumped more resources into the IRS in the hope that it can collect more revenue to fill the coffers. US President Barack Obama outlined a plan in May which he said would recoup US$210 billion over the next decade in part by hiring 800 new IRS agents for overseas assignments.
The growing footprint of the US taxman has sparked consternation among Americans overseas given the IRS’ harsh rhetoric in the wake of the UBS settlement. Keys said: “People don’t want the IRS to put their financial affairs under a spotlight, whether they are completely compliant or not.”
The growing footprint of the taxman is right!!! There are legal ways to avoid paying the high taxes that American companies and individuals pay to fund our bloated and nearly bankrupt government, especially for those of you doing business in Asia Pacific. Big companies with lots of money that donate to the political parties know how to avoid taxes, you should too. We help our clients from all over the world set up legal business structures where they are willing to pay reasonable amounts of tax and no capital gains on income or dividends. If big companies can do this, you can too. As always yeeha! Chinatex.
Did you say “Occupational Safety”?
August 16, 2009 by Chinatex
Y’all might have read about the town in Hunan province where it was recently discovered that at least one factory had been polluting the ground, water and air so badly that people were actually dying as a direct result of the pollution. As China continues to develop and evolve there will undoubtedly be more of these stories – similar to our Love Canal in New York state in the 1970’s where 21,000 tons of toxic chemical waste was buried. Anyway, it seems that this recent event in Hunan province has given the government good reason to look at and implement some new measures on occupational hazards and safety. While this is probably good, nobody knows what the law means or how far the government or local governments will go to enforce the law. Please notice that in the the article below it doesn’t just mention “polluting factories” but also “businesses”. Remember with the labor law how Old Chinatex told you that the ambiguity in the law was one of the ways that the burgeoning legal trade here in China was going to find sources of revenue. Looks like this new regulation will be a bonanza for disgruntled employees, competitors and hungry lawyers. Yee ha!! Chinatex
Companies now required to monitor workplace hazards
(China Daily)
Updated: 2009-08-14 09:33
Beginning next month, Chinese businesses and factories that violate occupational hazard regulations will be shut down and face a maximum penalty of 300,000 yuan ($44,000).
“If an employee’s health has been affected by dust, toxic substances and other harmful factors during occupational activities, those harms can be defined as occupational hazards,” according to a temporary provision released recently by China’s work safety watchdog.
The provisions were formulated by the State Administration of Work Safety (SAWS). SAWS is in charge of monitoring and inspecting work safety practices, halting work hazards, issuing licenses, investigating accidents and stopping illegal work practices.
Businesses and factories should faithfully inform employees about possible occupational hazards and their consequences, and provide occupational hazards prevention knowledge training. Also, employers are required to give their workers necessary health checkups. They also should buy protective gear for employees working around hazards and ensure that equipment remains safe and in good repair.
Businesses that violate the provision will receive a warning from SAWS, ordering them to correct the practice within a time limit. Enterprises that do not correct the problem within the time limit will be fined 20,000 yuan.
Businesses that seriously violate a relevant law, regulation, or industry standard, causing grave damage to employees’ life and health, will be closed and required to pay a fine of between 100,000 and 300,000 yuan.
Moreover, companies are obliged to report any occupational hazards in construction projects to their local work safety department. They also must periodically monitor work safety procedures and make reports to the department. Occupational hazards should be monitored at least once a year, and be evaluated at least once every three years.
Chinese Court et al.
August 13, 2009 by Chinatex
It’s been a slow and steamy summer here in the Pearl River Delta. Anytime I think of Delta’s: Mississippi, Me Kong, Delta Dawn, I think of humidity and other things. It’s been all of those here recently but it hasn’t slowed down the pace of business or life in Southern China. On a non legal note, it doesn’t seem like the world is in a recession when you walk around here. People are moving and spending money and buying stuff like crazy.
Onto a legal hodgepodge from the Delta:
1. Stay away from Court in China (or anywhere else for that matter).
Old Chinatex had an opportunity to attend a hearing in the Shenzhen Peoples Court the other day and it was once again an interesting experience. As I always tell y’all “stay out of court at all costs”. Even in China, the only ones who win in court are the lawyers – who conveniently get their fees paid up front. Anyway, I was observing a hearing between a Chinese national and a foreigner and although the result seemed to come out fairly, it didn’t seem to be based upon law, precedent, logic or much else. I also don’t think the foreigner thought it came out fairly. The judge was basically a mediator and he listened to both sides of the story, then he met with both sides separately and after a few hours in a hot and steamy court room, he issued his order. My advice to y’all is to make sure that you have everything in order so that you don’t need to go to court. How many times do I have to hear about the foreigner who trusted his Chinese factory or partner and then ended up with an expensive lesson. Have agreements and do things legally and you will undoubtedly avoid court.
2. The taxman striketh again.
I’ve been telling y’all how our governments are all broke and printing money and that the only way to even attempt at lowering the deficits is to get back lost tax revenues from citizens and corporations operating offshore. You can see my previous blawgs for more information. Well, seems that the UK government just reached an agreement with Liechtenstein to end banking secrecy which will undoubtedly churn out substantial tax bills to UK citizens who have been legally keeping their money in Liechtenstein banks. While many of these are “super” wealthy people, for those of you who are “kinda” wealthy and want to be more wealthy, there are alternative and legal tax havens here in the PRD that you can take advantage of. Here is an excerpt of the article on the UK – Liechtenstein agreement, pay attention to the last line:
The UK is expected to sign a deal to recover lost tax from Britons holding bank accounts in Liechtenstein.
HM Revenue & Customs (HMRC) has agreed with the Alpine tax haven to start exchanging information. Up to 5,000 British investors have an estimated £3bn stashed away in secret accounts in the country.
Investors are expected to be offered the chance to volunteer details of their deposits in return for limited penalties and low risk of prosecution. More details of the deal with Liechtenstein’s royal family and its government will be announced later on Tuesday.
Pressure has mounted on tax havens to share information since April’s G20 Summit and similar deals have already been struck with the US and Germany. The small principality between Switzerland and Austria is renowned for the secrecy that shrouds the financial affairs of rich investors.
It was once considered to be among the most secretive jurisdictions in the world. Governments are particularly keen to trace and recover unpaid revenues as tax receipts fall in the global recession.
Well, that’s all for now. As always yeeha! Chinatex.
Convertible Yuan
June 29, 2009 by Chinatex
Old Chinatex had a convertible once. It was a Jeep CJ-7 and I used to ride around without a top and I thought i was cool. So I’m not sure about this article about the Yuan (Chinese money) being a convertible, but, I remember telling y’all that this was coming soon and it would make it much easier to do business in China, while avoiding high foreign corporate tax rates – if your business is structured properly. Now that’s the important part. We’ve been advising our clients on proper corporate structure in Asia-Pac and the Pearl River Delta for years. If you’d like to know more about convertibles or proper corporate structure and tax avoidance and cool stuff like that, give Old Chinatex a call. Check out this article for more. Yeeha!! Chinatex
Deal signed on yuan settlement |
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Chinese currency may be used for cross-border trade from next month |
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Maria Chan, Neil Gough and Enoch Yiu |
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Trade between Hong Kong and the mainland could be settled in yuan from as early as next month after the two sides yesterday signed an agreement expected to help further internationalise the Chinese currency. The memorandum of understanding between People’s Bank of China governor Zhou Xiaochuan and Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong will allow companies on both sides of the border to settle trade in yuan as well as other currencies. That move will boost Hong Kong’s ambitions to become a yuan offshore centre and reflects Beijing’s ultimate desire to make the currency freely convertible. Bilateral trade between Hong Kong and the mainland totalled an estimated US$203 billion last year. Chief Executive Donald Tsang Yam-kuen said the agreement was a milestone in the city’s role as an international financial centre. Financial Secretary John Tsang Chun-wah said the scheme would provide Hong Kong enterprises with more flexibility in their operations. Mr Zhou said it was more important for countries in the Asia region to have closer co-operation since the global financial turmoil began. “Enhancing co-operation in trade and finance between the mainland and Hong Kong is a way to cope with the global financial crisis,” he said, adding that it could also help firms reduce exchange risks and lower costs. Mr Yam said he hoped yuan settlement could begin in July. Banks in Hong Kong could also provide trade finance, a form of lending, to customers under the scheme. Hong Kong yuan deposits stood at 53 billion (HK$60.2 billion) at the end of May. Hong Kong banks have been allowed to offer yuan deposit, remittance, exchange and credit card services since 2004 but have not been allowed to provide yuan lending. The PBOC and HKMA in January agreed on a 200 billion yuan currency swap agreement to bolster short-term local liquidity of the yuan. The State Council said early in April that it would allow traders in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan to settle their cross-border business in yuan. In December, the council said Hong Kong and Macau would be permitted to use yuan for the settlement of trade with designated partners in Guangdong and the Yangtze River Delta under a pilot scheme. Mr Zhou said how many mainland enterprises participated in the scheme would depend on the governments of the two delta regions but “there will be at least a few hundred”. Mr Yam said all Hong Kong exporters and importers could settle trade with their designated mainland counterparts, but the scheme could only be implemented after the PBOC issued administrative guidelines. He said companies from other countries could also use Hong Kong as a platform to settle their trade with their mainland trading partners. Goldman Sachs said the move reflected the mainland’s efforts to further internationalise the yuan. “Our long-standing view has been that the increase in yuan circulation would pave the way towards the ultimate endgame of” the Hong Kong dollar being linked with the yuan, the brokerage said in a report. Mr Zhou stopped in Hong Kong on his way to Beijing after a forum in Switzerland where he also held talks with his Brazilian counterpart that could pave the way for the two sides to recognise each other’s currency. |
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Intellectual Property
June 17, 2009 by Chinatex
You would think that the term “Intellectual Property” would be significant enough to cause businesses to really try and protect it. I mean it is a fairly significant word just by itself. But maybe it is just an oxymoron like military intelligence or maybe it just causes moronic behavior or inaction – which is worse. Consider that for many companies, IP is one of their main assets. While Old Chinatex doesn’t know a whole lot about GAAP and FASB and other complicated bean counter stuff, I do know that if you want to sell your company, raise money, get loans, or go public you can count IP in your valuation and it is even better if it is real and protected and enforceable IP. So, Chinatex wonders why companies that operate outside of the seemingly safe confines of U.S. IP law and legal system don’t do more to protect their IP? Anyway, this issue has come up as I receive more enquiries from foreign companies asking for help protecting and enforcing IP rights. Here is the bottom line:
- IP in China is governed by the State Intellectual Property Office (SIPO)
- China is a first to file jurisdiction. This means the first one to file and have the application approved is the IP holder.
- China does not recognize IP rights from other jurisdictions such as the U.S., the EU and those filed under the Madrid Protocol.
- Patents and Trademarks are valid for 10 year periods and are renewable.
- Intellectual Property rights must be registered with the SIPO and other government organizations each year in order to remain effective and to increase the chance of enforcement.
- Damages in litigation are not based upon precedent but on judges discretion.
Well, there’s a little more to it than that, but hopefully you get the point. If you don’t file you don’t have any rights and you don’t have any intellect or intellectual property! If you are thinking about protecting and/or enforcing your IP, we can help you. If you are thinking about bringing your products to the China market, you better darn sure protect your IP before you start showing your products and ideas to factories and partners and distributors.
As always yeeha!!! Chinatex
