AIM Quarterly Seminar July 24, 2008 Market Access Issues: Due Diligence Resources Virginia Economic Development Partnership Division of International Trade

Due Diligence = Doing Your Homework Control/Mitigate Risks Related to: Country (Market) Export Compliance Customer- Know Your Buyer Bank/Finance What is Due Diligence? Due Diligence is a Continuous Process

What is the target market’s overall risk? Corruption (Foreign Corrupt Practices Act) Capital Controls (getting paid) Private Property Protection Intellectual Property Protection Does the US have a Trade Embargo/Sanctions against the country? Macroeconomic Conditions (defaults) Verifying Country Risk

Resources (free) Country Commercial Guides Portal of free online resources Industry-specific risks for over 150 countries Transparency International annual publication Verifying Country Risk

Who Regulates US Exports? US Dept of Commerce   Bureau of Industry & Security (BIS)   Export Administration Regulations (EAR) U.S. State Department U.S. Dept of Agriculture U.S. Drug Enforcement Administration Who Will Receive Your Product? Make sure individual buyer, company, and/or country not prohibited What Will Your Product be Used for? Dual-use goods Export Compliance- Know Your Buyer

Red Flags Customer or its address is similar to someone on a list Product usage does not fit buyer’s business Customer willing to pay cash for expensive items Customer unfamiliar with product details Routine installation or training denied by customer Customer evasive regarding whether product is for domestic use, export, or re-export Export Compliance- Know Your Buyer

US Government VEDP – –Subscriptions – –Program Partners – –Overseas Trade Managers Other Resources: Free and Fee Export Compliance- Know Your Buyer Resource Review

Denied Persons List – by name of company and/or person Unverified List – by name of company and/or person Entity List – by country, then company name or address Specially Designated Nationals List – by name of company and/or person Embargoed Countries List- by country and type of sanction imposed Debarred List- by name of company and/or person Nonproliferation Sanctions- by name of person, entity, or government General Order 3 to Part 736 (page 9)- by name of company and/or person All conveniently located on ONE website! Export Compliance- Know Your Buyer “Bad Guy” Lists

One Website Has All Lists Export Compliance- Know Your Buyer

Denied Persons List (USDoC)

Unverified List (USDoC)

Entity List (USDoC)

Specially Designated Nationals List (US Treasury)

Debarred List (US State Dept)

Nonproliferation Sanctions (US State Dept)

General Order 3 to Part 736 (USDoC) Page 9

One Website Has All Lists Export Compliance- Know Your Buyer

**NOTE** Some freight forwarders offer to verify all government lists for a specific client/buyer for a fee. Check with them for rates and availability.

VEDP Subscriptions (fee) Hoovers – –Dunn & Bradstreet Company – –Limited financial information on some companies – –By company name – –5.7 million entries – –Mainly US and UK Kompass – –By company name – –1.9 M in 70 countries Interdata and Other Online Networks – –By company name – –Self-reporting Export Compliance- Know Your Buyer

Also can include: Recent sales data, key players, major competitors VEDP Subscriptions- Hoovers Export Compliance- Know Your Buyer

Codes unique to Kompass help specify a company’s product(s) VEDP Subscriptions- Kompass Export Compliance- Know Your Buyer

Law Firm LECLAIR RYAN Peer Segelke: Banking SUNTRUST:Marsha Sompayrac: Hai nah Ellison: Web Optimization ACTIVE MEDIA Laszlo Horvath: Language Services TNB LANGUAGE Ralph Bosen: Program Partners TNB LANGUAGE SERVICE Export Compliance- Know Your Buyer

Freight Forwarding, Logistics CVIMike Coleman: Venetia Huffman: Linda Norman: U.S.Export Compliance ALLEGHENY James Loux: Susan Kovach: Strategic Planning CAPSTONE John Dearing: Gretchen Johnson: m Partners may be able to provide: Access to other databases Foreign offices for reference Industry experience & expertise Export Compliance- Know Your Buyer

VEDP Overseas Trade Managers One-on-One Export Marketing and Counseling* Five VEDP offices worldwide China, Japan, South Korea, Mexico, Brazil Able to contact companies directly May have experience with target company * Availability of OTMs will depend on VEDP trade schedule Export Compliance- Know Your Buyer

Other Resources U.S. Department of Commerce – –International Company Profile (≈$ ) American Chamber of Commerce – –Foreign Affiliates - 94 AmChams in 82 countries Business & Trade Associations – –List on MAP #4B for target market Export Compliance- Know Your Buyer

Foreign company titles (Inc, llc, etc.) Background checks (fee): Other Resources Export Compliance- Know Your Buyer

Verifying Financial Risk Contracts with Clients/Buyers INCOTerms Foreign Currency Exchange Overseas Banks Taxes

Contracts Are there common pitfalls to contracts in your target market? Goal: A contract with opportunity for legal recourse and clearly defined roles for both parties Are there legal issues surrounding representative or distributor agreements? Does the target market uphold intellectual property rights? Goal: Avoid an overseas relationship that leaves you open to liability Verifying Financial Risk

INCOTerms Universal set of rules for conducting international trade Exporter communicates INCO Term details before sale Goal: Negotiate with client/buyer for the least risky INCOTerms for the sale Verifying Financial Risk

Foreign Currency Exchange Can US$ circulate in the country? Does it ever leave? Goal: Make sure that your sale terms can be upheld in your target market, and get paid what you negotiated! If you’re being paid in another currency, what is the exchange rate? What bank fees will be applied in the U.S. to convert it? Verifying Financial Risk

Overseas Banks Determine the banking structure of the target market. Is your client/buyer’s bank large or small? Risk receivable insurance US bank acceptance of wire transfer, intermediaries Verifying Financial Risk

Taxes Do VAT or GST taxes apply? What kind of incentives are in place in the U.S. to recover taxes? Frequent changes to tax law, incentives for recovery available Staff / offices overseas could lead to taxes spent overseas Verifying Financial Risk

Resources (free) The Economist.com International Monetary Fund World Bank Verifying Financial Risk

Due Diligence = Doing Your Homework Control/Mitigate Risks Related to: Country (Market) Export Compliance Customer- Know Your Buyer Bank/Finance What is Due Diligence? Due Diligence is a Continuous Process

What is Due Diligence? Questions?