AIM Quarterly Seminar July 24, 2008 Market Access Issues: Due Diligence Resources

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

2. Control/Mitigate Risks Related to: Country (Market) Export Compliance Customer- Know Your Buyer Bank/Finance What is Due Diligence? Due Diligence = Doing Your Homework 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. Verifying Country Risk Resources (free) www.export.gov Country Commercial Guides www.countryrisk.com Portal of free online resources www.trading-safely.com Industry-specific risks for over 150 countries www.globalcorruptionreport.org Transparency International annual publication www.worldbank.org

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. 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

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 Export Compliance- Know Your Buyer “Bad Guy” Lists All conveniently located on ONE website! www.bis.doc.gov/ComplianceAndEnforcement/ListsToCheck.htm

9. Export Compliance- Know Your Buyer One Website Has All Lists 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. Export Compliance- Know Your Buyer One Website Has All Lists 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. 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 VEDP Subscriptions (fee)

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

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

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

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

24. 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 VEDP Overseas Trade Managers

25. 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 Other Resources

26. Export Compliance- Know Your Buyer Other Resources 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

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

28. Verifying Financial Risk 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

29. 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

30. Verifying Financial Risk Foreign Currency Exchange Can US$ circulate in the country? Does it ever leave? 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? Goal: Make sure that your sale terms can be upheld in your target market, and get paid what you negotiated!

31. 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

32. 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

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

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

35. What is Due Diligence? Questions?