Kyusung Lee Attorney at Law

Hello, I am Kyusung Lee, Attorney at Law.

As global supply chains continue to diversify, Korean companies are increasingly partnering with overseas manufacturers. To minimize the risks of building their own production facilities and maximize operational efficiency, many are turning to OEM (Original Equipment Manufacturing) arrangements.

However, in cross-border manufacturing relationships where language barriers and differing legal systems intersect, even a single ambiguous contract clause can have far-reaching consequences — enough to determine a company’s survival. Today, I will walk you through the essential checkpoints for drafting an English OEM agreement and illustrate key risk management strategies through real-world scenarios.

👤 Attorney Profile — Kyusung Lee

• Graduate of The Hotchkiss School (USA)
• Honors Graduate, Economics, Brown University (Ivy League)
• Registered Startup Specialist Attorney, Korean Bar Association
• Certified Anti-Money Laundering Specialist (CAMS)
• Former Legal Team, Samsung C&T Corporation — Construction Division (International Contracts & Dispute Resolution)

1. Why Do Companies Prefer OEM Arrangements?

In an OEM model, the ordering party handles design and planning while outsourcing production. The benefits are clear:

• Minimized Investment Risk: Companies can enter markets without committing to large capital expenditures on production facilities.
• Cost Competitiveness: Leveraging infrastructure in countries with lower labor and material costs reduces overall expenses.
• Consistent Quality: Partnering with specialized manufacturers who operate advanced production lines ensures reliable, high-quality output.

2. Key Risks in English OEM Contracts — Lessons from Real Cases

In international transactions, vague contractual language often leads to unexpected losses. Here are the most critical areas to watch, illustrated by scenarios drawn from actual practice.

① Intellectual Property (IP) Leakage and Unauthorized Sales Risk

One of the most common disputes arises when a manufacturer misappropriates the ordering party’s technology or design to produce and sell similar products in third-party markets.

📌 Case Illustration

A Korean company (Company A) contracted a Southeast Asian manufacturer (Company B) to produce home appliances based on Company A’s proprietary design. After the contract ended, Company B launched a nearly identical product under its own brand and distributed it to neighboring markets.

✅ Solution

The English contract must include not only a robust ‘Intellectual Property’ clause, but also explicit ‘Non-Compete’ provisions and a ‘Return or Destruction of Confidential Information’ clause. These provisions ensure that proprietary technology cannot be exploited after the manufacturing relationship concludes.

② Title and Risk of Loss

Whether you are supplying raw materials or purchasing finished goods, it is essential to clearly define the moment at which ownership of the goods transfers.

⚠️ Tip

Without explicit language establishing that title to the products belongs to the ordering party, a manufacturer may assert a lien over the goods due to alleged non-payment — or may even dispose of them unilaterally.

③ Warranty and Inspection Clauses

In international trade, the physical distance between parties makes returns and repairs particularly difficult when defects arise.

📌 Practice Note

Under common law systems, it is critical to verify whether implied warranties of ‘Merchantability’ and ‘Fitness for a Particular Purpose’ have been disclaimed. If a manufacturer has inserted broad disclaimer language, obtaining compensation for defects discovered after importation can be extremely difficult.

✅ Solution

Ensure that the contract includes a sufficient ‘Warranty Period’ that covers Latent Defects discovered within a defined period after passing inspection — not just visible defects found at the time of inspection.

3. An English OEM Contract Is a Strategy — Not Just a Translation

An English OEM agreement must go far beyond translating a Korean contract into English.

• Governing Law & Dispute Resolution: The choice of whether to litigate in Korean courts or pursue arbitration in Singapore or Hong Kong is a strategically significant decision that will shape the entire dispute resolution process.
• Payment Terms: Payment Terms must be carefully structured to ensure that full payment is not released until after satisfactory inspection of the goods.
• Removing Poison Pill Clauses: Favorable disclaimer provisions and unreasonable termination clauses drafted by manufacturers must be identified and neutralized in advance.

🛡️ Attorney Kyusung Lee — Protecting Your Global Business

Entering into a cross-border manufacturing contract means committing your company’s most valuable assets — technology and capital. Drawing on my economics background from Brown University and my hands-on experience in Samsung C&T’s legal team handling international contracts and disputes, I am committed to providing contract advisory services that maximize your company’s interests.

• Drafting and in-depth review of international contracts
• Analysis and revision of poison pill clauses in English agreements
• Intellectual property protection strategy

The foundation of safe international trade starts with the right counsel. Let us help you turn risk into opportunity.

📧 Email: kyusungii@gmail.com

📞 Tel: 02-6264-7604

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