1. Look Before You Leap – Legal Considerations When Doing Business in Dynamic International Markets Boston, February 7, 2007 Jonathan M. Epstein Partner, Holland & Knight LLP Tel: 202-828-1870 E-Mail: jonathan.epstein@hklaw.com

2. 2 Legal Considerations US Government Legal Issues –Foreign Corrupt Practices Act –U.S. Export Controls –Customs/Import Requirements Export Clearance –Anti-Boycott Laws –Anti-Trust Laws –Environmental Laws Laws of Foreign Jurisdiction –Import Restrictions –Marking/Certification Requirements for Products –Foreign Taxes –Laws Restricting Foreign Companies –Foreign Environmental Laws –Foreign Privacy Laws –Employment Laws Commercial Legal Issues –Intellectual Property Protection –Setting Up Joint-Ventures –Foreign Agents/Distributors –Logistical Arrangements for Import/Export

3. 3 The Foreign Representative with “Connections” For a high commission, he can get that major foreign government contract for your company –Payments to a person to induce a foreign official to obtain or retain business –Foreign Corrupt Practices Act violation is probably one of the most lethal statutes to violate –Criminal penalties, debarment from certain exports, government procurement, etc. –U.S. companies can be held liable for the actions of their agents, representatives, and foreign subsidiaries

4. 4 The Joint Venture/Exclusive Distribution Agreement High percentage of joint ventures/distribution arrangements fail within a few years If you give exclusive distribution rights: –Tie it to performance criteria/minimum sales –Limit the “exclusive” territory –Limit the term Joint ventures –Protection/retention of intellectual property –Clear rights upon dissolution

5. 5 The Unnamed Principal: Know Your Customer/Business Partner Distributor in Middle-East who didn’t disclose purchaser, but then... Business Partner in domestic real estate partnership that was designated by Treasury on Anti-Narcotics Trafficking list Tailor due-diligence to the transaction/product Checking the various government lists

6. 6 Backing Unknowingly into Exports (Export Violations) Small to mid-size software companies are often unaware of complex restrictions on exports of software containing encryption functionality –Use of offshore (Indian) developers –Hiring of non-U.S. nationals in the U.S. to work on software –Foreign sales via the Internet –Compliance with rules is not particularly onerous

7. 7 We Don’t Make Any Products Subject to the International Traffic in Arms Regulations (ITAR) Our last three voluntary disclosures involved companies, some large, that didn’t realize they were manufacturing military items Electronics subcontractor may not have any idea of end-use of product, and either send it offshore for production or fill a foreign order If specifically designed for a military/satellite equipment, then it is controlled under the ITAR

8. 8 Workarounds for Customs Duties/Country of Origin Import of goods where the final packaging or minimal steps are done in a particular country for: tariff reduction/ WTO procurement agreement reasons –Bulk of production, product origin in non-WTO or non procurement agreement country –If no substantial transformation/tariff shift in final stage this won’t work

9. 9 Conclusion No company would/should commit resources to overseas markets without a business plan. That plan must include solid legal planning and due diligence.