The following five basic steps will greatly reduce your problems with Chinese manufacturers, while improving your chances of recovering should any problems arise.

1. Create and properly register your intellectual property rights in United States. If you do not have a firm basis for your IP rights under U.S. law, you will have nothing to protect in China. Before you go to China, be sure your intellectual property is protected under U.S. law. Protect your brand identity by creating and registering your trademark, slogan and logo with U.S. Patent and Trademark Office. Register your important copyrights with U.S. Copyright Office. Carefully identify and protect your trade secrets, proprietary information and know how.

2. Register your trademarks in China. Registration can protect your future access to Chinese market, prevent export of counterfeit goods from China, and prevent a competitor from registering your mark in China, which would prohibit you from exporting your own product from China.

In Pre-Budget Report of December 2003 Chancellor Gordon Brown announced proposals to levy an Income Tax charge from 6th April 2005 in those circumstances where transferor of an asset retains and interest or continues to benefit from that asset. In instance of real property, 'benefit' envisaged is transferor continuing to reside in property he/she has allegedly given away.

How Charge Applies =======================

The Government refer to such assets as 'pre-owned assets' and, broadly speaking, its intention is to tax 'annual value' of such assets as a benefit-in-kind on former owner still enjoying use of asset. The annual value on which charge is based will be open-market rental for a property or a fixed percentage of capital value of most other assets to which new charge applies. Any amounts which transferor pays for use of asset - rent for example - will be deducted from annual value in arriving at taxable benefit. The charge will also apply if a person provides funds to purchase an asset which they go on to enjoy benefit of after 5th April 2005.

Rationale Behind Charge ============================

The charge is intended to counter many Inheritance Tax planning schemes, but unfortunately, it will also impact many innocent and unintended victims. Thankfully, legislation has included some exceptions to application of charge. The charge will not apply if;

The asset was gifted before 8th March 1986

The asset is owned by transferor's spouse

The asset is, in fact, still caught by 'Gifts with Reservation' rules and as such Inheritance Tax applies instead (hence, Income Tax charge will not be levied on top).

The asset was sold at an arm's length price for cash (even if to a connected party).

The transferor of asset had themselves inherited it and their ownership had ceased as a result of a Deed of Variation affecting that inheritance.

The transferor's continued enjoyment of asset is merely incidental or has arisen only as a result of an unforeseen change in family circumstances.

The annual taxable benefit (after deducting any contributions by transferor, where necessary) does not exceed £2,500.