Includes typical use of agents and distributors and how to find a good partner, e.g., whether use of an agent or distributor is legally required.
Before entering a contractual relationship with the representative (agent) of a Korean manufacturer or distributor, U.S. firms should conduct a thorough due diligence check on their prospective business partner.  U.S. firms should prepare to enter a contract with the assistance of an attorney.  CS Korea provide U.S. firms with assistance through the preparation of an International Company Profile (ICP).  For detailed financial and related business information on the company with which you seek to work, please consult   https://2016.export.gov/southkorea/servicesforuscompanies/index.asp.
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 manufacturer’s representative or agent; or
  • Establishing a branch sales office, managed by home office personnel, along 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.  These are typically larger firms involved in both exports and imports.  However, these firms can be less attentive to building the U.S. supplier's business, even though they can be influential and well-known in the marketplace.
The performances of your agent and distributor should be regularly monitored. Underperformance by either party should be addressed promptly, and guidance should be provided to improve performance.  If performance continues to lag, then termination of the contract should be considered.  When considering contract termination, all legal and contractual obligations must be thoroughly reviewed.  Once termination is legally binding, the U.S. firm should begin searching for a new distributor or manufacturer.

Finding a Good Partner in Korea
CS Korea offers the Gold Key Service (GKS) to assist U.S. firms in establishing relationships with potential business partners.  Please consult https://2016.export.gov/southkorea/servicesforuscompanies/index.asp#P22_1131.

U.S. exporters are encouraged to contact one of over 100 U.S. Export Assistance Centers (USEACs; please contact the USEAC closest to your business).  Please consult http://export.gov/usoffices/index.asp to begin the process.

U.S. exporters of food and agricultural products can also find assistance from one of USDA’s State Regional Trade Groups (http://www.fas.usda.gov/programs/market-access-program-map/state-regional-trade-groups) or the Agricultural Trade Office in Seoul, Korea (www.atoseoul.com/).
The GKS provides:
  • A customized schedule of face-to-face meetings with carefully-selected prospective candidates;
  • Market briefing, interpretation service, and transportation (fee based); and
  • Information regarding 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 arbitrators 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, trademarks, and patents with the Korean Intellectual Property Office (KIPO). Please consult https://www.kipo.go.kr/en/MainApp.
A local Korean or U.S. attorney in Korea can easily perform these tasks.  Under Korean law, applications to KIPO must be completed and submitted in Korean.  This should be done in the U.S. company’s name and not the Korean agent/representative’s name.  Since the passage of the KORUS FTA, there are now numerous U.S. law firms with offices in Korea.  Additionally, there are more than 20,000 Korean lawyers practicing in Korea.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.