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

2. 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

3. What is the target market’s overall risk? Corruption (Foreign Corrupt Practices Act) http://www.usdoj.gov/criminal/fraud/fcpa/ 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

4. Resources (free) www.export.govwww.export.gov Country Commercial Guides www.countryrisk.comwww.countryrisk.com Portal of free online resources www.trading-safely.comwww.trading-safely.com Industry-specific risks for over 150 countries www.globalcorruptionreport.orgwww.globalcorruptionreport.org Transparency International annual publication www.worldbank.org Verifying Country Risk

5. 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

6. 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

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

8. Denied Persons List – by name of company and/or person http://www.bis.doc.gov/dpl/thedeniallist.asp Unverified List – by name of company and/or person http://www.bis.doc.gov/Enforcement/UnverifiedList/unverified_parties.html Entity List – by country, then company name or address http://www.access.gpo.gov/bis/ear/pdf/744spir.pdf Specially Designated Nationals List – by name of company and/or person Embargoed Countries List- by country and type of sanction imposed www.treas.gov/offices/eotffc/ofac Debarred List- by name of company and/or person http://www.pmddtc.state.gov/debar059.htm Nonproliferation Sanctions- by name of person, entity, or government http://www.state.gov/t/isn/c15231.htm General Order 3 to Part 736 (page 9)- by name of company and/or person http://www.access.gpo.gov/bis/ear/pdf/736.pdf All conveniently located on ONE website! www.bis.doc.gov/ComplianceAndEnforcement/ListsToCheck.htm www.bis.doc.gov/ComplianceAndEnforcement/ListsToCheck.htm Export Compliance- Know Your Buyer “Bad Guy” Lists

9. One Website Has All Lists Export Compliance- Know Your Buyer www.bis.doc.gov/ComplianceAndEnforcement/ListsToCheck.htm

10. Denied Persons List (USDoC)

11. Unverified List (USDoC)

12. Entity List (USDoC)

13. Specially Designated Nationals List (US Treasury)

14. Debarred List (US State Dept)

15. Nonproliferation Sanctions (US State Dept)

16. General Order 3 to Part 736 (USDoC) Page 9

17. One Website Has All Lists Export Compliance- Know Your Buyer www.bis.doc.gov/ComplianceAndEnforcement/ListsToCheck.htm

18. **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.

19. 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

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

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

22. Law Firm LECLAIR RYAN Peer Segelke: peer.segelke@leclairryan.compeer.segelke@leclairryan.com Banking SUNTRUST:Marsha Sompayrac: marsha.sompayrac@suntrust.com Hai nah Ellison: hai-nah.ellison@suntrust.commarsha.sompayrac@suntrust.comhai-nah.ellison@suntrust.com Web Optimization ACTIVE MEDIA Laszlo Horvath: laszlo@activemedia.comlaszlo@activemedia.com Language Services TNB LANGUAGE Ralph Bosen: tnb_ent@yahoo.comtnb_ent@yahoo.com Program Partners TNB LANGUAGE SERVICE Export Compliance- Know Your Buyer

23. Freight Forwarding, Logistics CVIMike Coleman: mcoleman@cvinternational.commcoleman@cvinternational.com Venetia Huffman: vhuffman@cvinternational.comvhuffman@cvinternational.com Linda Norman: lnorman@cvinternational.comlnorman@cvinternational.com U.S.Export Compliance ALLEGHENY James Loux: jloux@acustomsbroker.comjloux@acustomsbroker.com Susan Kovach: skovach@acustomsbroker.comskovach@acustomsbroker.com Strategic Planning CAPSTONE John Dearing: jdearing@capstonestrategic.comjdearing@capstonestrategic.com Gretchen Johnson: gjohnson@capstonestrategic.co mgjohnson@capstonestrategic.co m Partners may be able to provide: Access to other databases Foreign offices for reference Industry experience & expertise Export Compliance- Know Your Buyer

24. 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

25. Other Resources U.S. Department of Commerce – –International Company Profile (≈$300-500) http://www.buyusa.gov/malaysia/en/intl_company_profile.html American Chamber of Commerce – –Foreign Affiliates - 94 AmChams in 82 countries http://www.uschamber.com/international Business & Trade Associations – –List on MAP #4B for target market Export Compliance- Know Your Buyer

26. Foreign company titles (Inc, llc, etc.) www.export911.com/e911/export/export.htm#xForeign Background checks (fee): www.marsh.com www.krollworldwide.com/services/screening/international/ www.dnb.com/us www.icsworld.com/background_investigations_checks.asp www.coface-usa.com Other Resources Export Compliance- Know Your Buyer

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

28. 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

29. 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

30. 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

31. 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

32. 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

33. Resources (free) The Economist.com www.economist.com International Monetary Fund www.imf.org World Bank www.worldbank.org Verifying Financial Risk

34. 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

35. What is Due Diligence? Questions?