Q: What are the protocols concerning gift-giving at business meetings in China, and how can U.S. businesses avoid potential violations of the Foreign Corrupt Practices Act (FCPA)?

A: U.S. companies operating in China must maintain a delicate balance by responding to local cultural and business practices without finding themselves on the wrong side of the U.S. Foreign Corrupt Practices Act ("FCPA").

It helps to be aware of certain basic social principles governing business relationships in China, as well as specific things to do-and to avoid-when giving gifts. Recognizing and respecting seniority, avoiding anything that can cause a business partner to lose face, showing courtesy and restraint, and recognizing the importance of networking or third-party involvement ("guanxi") are key to successful participation in business discussions. Gifts should be of modest value and within the recipient's ability to reciprocate (high-value gifts, in any case, should and must be avoided for obvious reasons). Things like office accessories, pens, and ties are safe bets, but food items should be avoided as they may imply need. In addition, avoid gifts that come in sets of four or bear the number four, and don't give clocks-these words have a similar sound to the Chinese word for "death." Red wrapping is acceptable because it's a lucky color in China, although red writing and red ink are off limits. White and black are associated with death and should be avoided.

How you give a gift is also important. Gifts should be presented with both hands, but don't be surprised if it is refused at first as the refusal conveys modesty. Gifts should be offered beginning with the most senior person present but be sure not to leave someone out-the junior person in a delegation today may be the senior person tomorrow. Gifts given to a group can ensure that no one is left out. One must also distinguish between informal meetings for networking or marketing purposes, where small gifts may be exchanged, and formal meetings involving public officials where gift giving is discouraged.

U.S. companies of course must be cautious when giving gifts. The ubiquitous government involvement in business operations (many of the largest companies in China are state-owned), and government officials' involvement in many routine business activities, complicate gift giving. The FCPA prohibits the giving of anything of value intended to influence a government official. Although the coverage of the FCPA is intended to be broad, it does not extend to courtesy gifts of nominal value. How one defines the value and the intent of the gift, however, can be a matter of debate in specific circumstances and it is therefore best to err on the safe side of gift giving. For instance, one common concern is the potential pressure of expectations from individuals who may regard a business relationship as an opportunity to enjoy travel or entertainment, or even as a way to boost earnings. Necessary travel for a specific and legitimate business interest may be appropriate; travel as a means of reward or influence, however, clearly is not. As with all gift giving each is judged on a case by case basis, but a good check is to keep the spirit and intent of the FCPA in mind while viewing the gift with the healthy skepticism of a regulator.

The China market continues to be dynamic and an area of opportunity, especially for engineering and construction companies. A faux pas in gift giving can be an embarrassment but one that can be rectified; a violation of the FCPA, however, will be a source of greater embarrassment (both inside and outside of China) and could have significant negative financial implications. A little homework about what to expect, both in terms of culture and law, can go a long way to developing strong business relationships while avoiding embarrassments.

Thanks to George J. Pierson, P.E., Esq. He is Senior Vice President, General Counsel and Corporate Secretary of Parsons Brinckerhoff (PB), a global infrastructure development firm headquartered in New York City, with an active presence in the Asia market. A former practicing engineer, he is an expert in construction and contract law with extensive experience in resolving international construction disputes. His e-mail address is PiersonG@pbworld.com.

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