Legal implications for Asian businesses expanding into the United States

LEGAL IMPLICATIONS for INTERNATIONAL EXPANSION INTO USA of Business CURRENTLY ESTABLISHED in THAILAND, MALAYSIA, HONG KONG, SINGAPORE & AUSTRALIA

PRESENTATION to BOARD of DIRECTORS

The purpose of this presentation is to familiarize the board with the legal implications for expansion of a business currently established in Thailand, Malaysia, Hong Kong, Singapore and Australia into the United States. Toward this end the first section of this presentation will be comprised of a brief review of trade negotiation agreements between each of these countries and the United States then followed by information that is relevant to expansion into the United States marketplace.

United States Trade with Thailand, Malaysia, Hong Kong, Singapore and Australia

Malaysia- U.S. Trade

In June 2006 negotiations on a Free Trade Agreement were initiated between the United States and Malaysia. U.S. goods and services trade with Malaysia is stated to have totaled approximately $48 billion in 2007 and Malaysia is current the 17th largest goods trading partner with the United States. In 2007 Malaysia's Foreign Direct Investment (FDI) in U.S. stock was $355 million.

B. Thailand -- U.S. Trade

Free trade negotiations were launched between the United States and Thailand in 2004 but these were suspended in 2006 after the dissolution of the Thai Parliament and the following military-led coup. Presently Free Trade negotiations are suspended between Thailand and the United States although discussions of bilateral issues and the advancement of the Doha negotiations, the APEC and ASEAN agendas are still on the table. The United States and Thailand are reported to have held "informal consultations... [in what was]... A formal dialogue on trade and investment issues in Washington D.C. In June 2008 and informal meetings in March 2009." (Office of the United States Trade Representative, 2009) Concerns raised by the United States included those regarding Thailand's: (1) customs practices; (2) labeling requirements and other technical barriers to trade; (3) market access for U.S. beef and live cattle; and (4) the deterioration of intellectual property rights protection in Thailand over the past several years. (Office of the United States Trade Representative, 2009)

The United States reports that it will continue monitoring and evaluating the political situation in Thailand, and will "as appropriate...consider steps to further strengthen bilateral economic relations." (Office of the United States Trade Representative, 2009)

C. Singapore -- U.S. Trade

The U.S. -- Singapore Free Trade Agreement (FTA) is reported to have been the first "comprehensive FTA with an Asian country." (Office of the United States Trade Representative, 2009) This FTA went into force in 2004 and export from the U.S. To Singapore is stated to have increased approximately 73% with a steady growth reported in "...medical devices, electrical and non-electrical machinery and construction equipment, and pharmaceuticals." (Office of the United States Trade Representative, 2009)

The United States announced in September 2008 that its intention was to begin negotiations in joining the "Trans-Pacific Strategic Economic Partnership (TPP) agreement, a high-standard FTA between Singapore, Chile, New Zealand, and Brunei Darussalam, intended to serve as a vehicle for Trans-Pacific economic integration. Shortly after the U.S. decision to join the negotiations, Australia, Peru, and Vietnam indicated their interest in participating as well. A public hearing on TPP was held on March 4, 2009." (Office of the United States Trade Representative, 2009)

Singapore is reported at the 27th largest import market for the United States as of 2008 with importation of agricultural products from Singapore totaling $133 million in 2008. Singapore FDI in the United States was reported at $10.2 billion in 2007 which was a 90.3% increase over 2006. Primary Singapore FDI in the U.S. is in the real estate and rental and leasing and banking sectors.

D. Australia-U.S. Trade

The United States and Australia Free Trade Agreement (FTA) went into effect on the first day of January 2005. Australia is reported as the 24th largest goods trading partner of the United States with $32.8 billion in total goods trade during 2008.

E. Hong Kong -- U.S. Trade

The goods and services trade with Hong Kong and the United States totaled approximately $40 billion in 2007. Hong Kong is presently the 26th largest goods trading partner with the U.S. with $28.0 billion in total goods trade during 2008.

II. Business Expansion into the U.S. And Trademarks

The work of Kenneth Suzan and Hodgson Russ (2004) entitled; "Expand Your Brand Into the U.S." states that central to brand expansion into the United States is the strategic development of a strong trademark/service mark portfolio that sufficiently protects the source identity of a company's important intellectual property assets." (Suzan and Russ, 2004) Suzan and Russ additionally state that competitors "....are likely to keep a close watch on marks used (or anticipated to be used) in a particular industry. Inclusion of a company's marks in a government database accessible by anyone worldwide at USPTO.GOV should send a strong signal to competitors to avoid choosing a similar brand name that is likely to cause confusion in the marketplace. This advantage starts several weeks after filing an application as records of newly filed trademark and service mark applications are constantly added to the database at USPTO.GOV." (Suzan and Russ, 2004)

Stated as other benefits of registering marks with the United States Patent and Trademark Office include those as follows:

(1) Nationwide trademark and service mark priority rights,

(2) Presumption of validity and exclusive rights to use the mark in the United States,

(3) Availability of "incontestable" status after five years of continuous use (a type of immunity from many types of challenges that can be filed by third parties against the registration),

(4) Reliance by the USPTO upon a federal registration in rejecting a third party's application that is confusingly similar,

(5) Ability to use the registration symbol, ," to give nationwide notice of trademark rights, (6) potential availability of recovering treble damages and attorneys' fees in an infringement proceeding, and (7) Ability to block the importation of infringing goods through the assistance of the U.S. Customs Service by recording the trademark registration details. (Suzan and Russ, 2004)

Suzan and Russ (2004) report that prior to "...rolling out new products or advertising services in the United States, it is recommended that companies conduct a full U.S. trademark/service mark search. With the assistance of U.S. trademark counsel, companies should assess whether a particular brand name, slogan, or logo is available for use and registration in the United States. A thorough search should include research and analysis of pending and registered federal trademarks and service marks, state trademarks and service marks, common law marks, filings made pursuant to the Madrid Protocol, Internet domain names, and Web sites. Receiving the green light from counsel is only a preliminary step for brand expansion into the United States...companies seeking to conduct business in the United States should also consider registering their trademarks and service marks with the USPTO. The benefits of registration will likely outweigh the initial costs of obtaining the registration. Presently, the official filing fee charged by the USPTO is U.S.$335.00 per class of goods or services listed in the application. It is possible to file a multiple class application covering a wide range of goods and services. Companies should also budget for legal fees and costs associated with the preparation and prosecution of the application." (Suzan and Russ, 2004)

Securing of valuable priority rights in the U.S. makes it "...essential that trademark or service mark applications be filed early on in the development of the product or service." (Suzan and Russ, 2004)

III. International Financial Reporting Standards (IFRS)

International Financial Reporting Standards (IFRS_ have been adopted in 100 countries throughout the world. Because of this a thorough knowledge of IFRS is required for businesses that are internationally active. Because international expansion is likely to result in cross-border acquisitions and joint ventures as well as raising international debt finance and development of relationships with private equity houses and rising of capital from the equity markets and other such transactions, an increased requirement exists for a detailed understanding of the International Reporting Standards (IFRS).

Australia is reported to have been one of the first OECD members to adopt the International Financial Reporting Standards (IFRS). Hong Kong is working toward the provision of audit and IFRS conversion services and Singapore is also in the process of integrating these standards. Member firms are also in existence in Hong Kong and Malaysia.

V. Thailand and Labor Standards Adjustment for U.S. Compliance

The Journal of Corporate Citizenship report dated March 22nd, 2004 states that Thai labor law and the perception of factor management of economic realities are that which "often prevent the adoption and implementation" of Voluntary Labor Standards. In fact, "conflicting labor standards, a low minimum wage and the dire financial needs of workers often result in adverse working conditions for employees in the garment industry." (Journal of Corporate Citizenship, 2004)

The Thai Labor Protection Act of 1998 makes 36 hours of overtime permissible while the Voluntary Labor Standards state 12 hours of overtime as being permissible. Stated as another major obstacle to compliance with Voluntary Labor Standards are human resource policies and management attitudes toward the workforce. The Voluntary Labor Standards corporate codes of conduct make the use of monetary fines and penalties in applying disciplinary measures illegal however; these methods are used regularly in applying employee discipline in Thai businesses.

Discrimination against and mistreatment of women in factories in Thailand is rampant and pregnancy testing is conducted in the employers initiative to avoid paying maternity leave. It is stated that under the 1998 Thai Labor Protection Act, mothers who are regular employees are entitled to 90 days of paid leave, a cost shared by the MOLSW and the employer). As a result, women job applicants are frequently asked to give urine samples and are asked if they are married. Those becoming pregnant during the four-month probationary period risk being fired." (the Journal of Corporate Citizenship, 2004)

VI. Privacy and Data Protection Laws

As already noted in this work there have been some issues with Thailand in regards to intellectual property violations. An aspect of these laws is the privacy and data protection laws, regulations and guidelines that exist at the federal and state levels in the United States and which are known to have a significant impact on business operations. The Federal Trade Commission has regulations in the area of unfair acts or deceptive practices in order to: (1) ensure that a company or other entity does what it says it will do with regard to privacy and security and (2) create general de facto standards of care for an entity collecting and using personal information. (the Journal of Corporate Citizenship, 2004) Specific federal statutes that must e considered when doing business in the United States are the following:

Gramm-Leach-Bliley Act

HIPAA

COPPA

Privacy Act

Bank Secrecy Act

Computer Fraud and Abuse Act

CANSPAM

Drivers Privacy Protection

Electronic Communications Privacy Act

Electronic Fund Transfer Act

Fair and Accurate Credit Transactions Act

Fair Credit Reporting Act

Federal Communications Act

Telephone Records and Privacy Protection Act of 2006