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We Get IT! Division of International Trade Due Diligence Resources Virginia Economic Development...
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![Page 1: We Get IT! Division of International Trade Due Diligence Resources Virginia Economic Development Partnership.](https://reader034.fdocuments.net/reader034/viewer/2022051619/56649e045503460f94aef580/html5/thumbnails/1.jpg)
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Division of Division of International TradeInternational Trade
Due Diligence ResourcesDue Diligence Resources
Virginia Economic Virginia Economic Development PartnershipDevelopment Partnership
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We Get IT!What is International Due Diligence?What is International Due Diligence?
Assess risk related to:
• Country
• Client/Buyer
• Bank/Finance
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Verifying Country RiskVerifying Country Risk
What is the target market’s overall risk?What is the target market’s overall risk?
- - CorruptionCorruption
- Default risk on corporate payments- Default risk on corporate payments
- How a country's economic, financial, and - How a country's economic, financial, and political political outlook influences financial commitments outlook influences financial commitments
of local of local companiescompanies
- - Does the US have a trade embargo against Does the US have a trade embargo against the the country?country?
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Verifying Country RiskVerifying Country Risk
Resourceswww.coface-usa.com
www.countryrisk.com
www.trading-safely.com
www.globalcorruptionreport.org
www.worldbank.org
Embargoed Countries: www.treas.gov/offices/eotffc/ofac
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Verifying Client & Country RiskVerifying Client & Country Risk
1.1. Who Regulates US Exports? Who Regulates US Exports?US Dept of Commerce, Bureau of Industry & Security (BIS)
Export Administration Regulations
2.2. Who will receive your product? Who will receive your product?Make sure individual buyer, company, and/or country not prohibited
3.3. What will your product be used for? What will your product be used for?Dual-use goods
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We Get IT!Verifying Client & Country RiskVerifying Client & Country Risk
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
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Check lists/databases:
• US government
• VEDP subscriptions
• Program partners
• Overseas trade managers
• Global Market Research program
Verifying Client & Country RiskVerifying Client & Country Risk
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Commerce Control List – Licensed Cargohttp://www.access.gpo.gov/bis/ear/ear_data.html
Denied Persons List – by namehttp://www.bis.doc.gov/dpl/thedeniallist.asp
Entity List – by country, then company name or addresshttp://www.access.gpo.gov/bis/ear/pdf/744spir.pdf
Unverified List – by namehttp://www.bis.doc.gov/Enforcement/UnverifiedList/unverified_parties.html
Debarred Persons – by namehttp://pmdtc.org/debar059.htm
Specially Designated Nationals & Blocked Persons – by namehttp://www.ustreas.gov/offices/enforcement/ofac/sdn/index.html
US Government Lists OnlineUS Government Lists Online
Or you can find them all conveniently located on ONE website! Or you can find them all conveniently located on ONE website! www.bis.doc.gov/ComplianceAndEnforcement/ListsToCheck.htm
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We Get IT!Commerce Control ListCommerce Control List
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We Get IT!Commerce Control List
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We Get IT!Denied Persons ListDenied Persons List
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We Get IT!Entity ListEntity List
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We Get IT!Unverified ListUnverified List
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We Get IT!Debarred PersonsDebarred Persons
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We Get IT!Specially Designated Nationals & Blocked Specially Designated Nationals & Blocked
Persons ListPersons List
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**Note****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.
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Check lists/databases:
• US government
• VEDP subscriptions
• Program partners
• Overseas partners
• Global Market Research program
Verifying Client & Country RiskVerifying Client & Country Risk
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We Get IT!VEDP SubscriptionsVEDP Subscriptions
• Hoovers International– a D&B Company– Limited financial information on some companies– by company name– 5.7 million entries
• Kompass– by company name– 1.9 M in 70 countries
• Interdata and Other Online Networks– by company name– self-reporting
There is no Dun & Bradstreet “Earth”, but some countries do have an equivalent. The above cover a lot but are incomplete…
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We Get IT!Example from Hoovers International (a D&B Company)Example from Hoovers International (a D&B Company)
Also can include
Recent sales data, key players, major competitors
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Example from KompassExample from Kompass
Codes unique to Kompass help specify a company’s product(s)
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Check lists/databases:
• US government
• VEDP subscriptions
• Program partners
• Overseas partners
• Global Market Research program
Verifying Client & Country RiskVerifying Client & Country Risk
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We Get IT!Program PartnersProgram Partners
• Access to other databases
• Foreign offices for reference
• Industry experience
• Specific partners to call– Law Firms– Merger & Acquisition Firms– Freight Forwarders, Customs Brokers, Logistics– Other Specialized Consultants
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Law FirmsWilliams MullenThomas McVey: [email protected] Global Law Group, PLCJohn Huddle: [email protected] RyanBrian Buniva: [email protected], Monroig & VeveBrian Alperstein: [email protected]
Program PartnersProgram Partners
M & A FirmsVirtual Strategies, Inc.
John Dearing: [email protected] Enterprises
Brad Fleisher: [email protected]
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Forwarders, Customs Brokers, LogisticsUTi USAIan Strachan: [email protected] InternationalWayne Coleman: [email protected] BrokerageJames Loux: [email protected]
Other Specialized ConsultantsChina Channel LtdBonnie Girard: [email protected] & Associates, CPATerri Noll: [email protected]
Program PartnersProgram Partners
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VEDPProgram Partners
People Going Global
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Check lists/databases:
• US government
• VEDP subscriptions
• Program partners
• Overseas partners
• Global Market Research program
Verifying Client & Country RiskVerifying Client & Country Risk
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We Get IT!Overseas Partners
One-on-One Export Marketing and Counseling
• Five VEDP offices worldwideChina, Japan, Mexico, Brazil
• Able to contact companies directly• May have experience with target company• Key to success = Craft specific questions• European Network in ten countries
Germany, UK, Ireland, Poland, Czech Republic, Russia, Spain, Sweden, Finland, Slovakia
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We Get IT!Types of Questions
1. Identify & assist to explain packaging requirements
2. Identify a list of warehousing options
3. Physical site verification of a potential client
4. Provide contact information for key government officials
5. Investigate a specific potential client based on background information you provide
6. Summarize current trends related to a specific industry
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We Get IT!
Check lists/databases:
• US government
• VEDP subscriptions
• Program partners
• Overseas partners
• Global Market Research program
Verifying Client & Country RiskVerifying Client & Country Risk
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We Get IT!Global Market Research ProgramGlobal Market Research Program
• Dedicated, in-country market research, short TaTDedicated, in-country market research, short TaT• Identification, qualification, and survey of potential Identification, qualification, and survey of potential
distributors or end-usersdistributors or end-users• Competitor information on market share & pricingCompetitor information on market share & pricing• Best approaches in the target countryBest approaches in the target country• Local government rules for selling your product/serviceLocal government rules for selling your product/service
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We Get IT!Other OrganizationsOther Organizations
• U.S. Department of Commerce– Intl. Company Profile ($200 - $600)
– http://www.export.gov/comm_svc/intl_co_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
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Resources
Verifying Client & Country RiskVerifying Client & Country Risk
Foreign company titles: www.export911.com/e911/export/export.htm#xForeign
Background checks:
www.marshusa.com
www.krollworldwide.com/services/screening/international/
www.dnb.com/us
www.icsworld.com/background_investigations_checks.asp
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Verifying Financial RiskVerifying Financial Risk
•Contracts with clients/buyers
•InCoTerms
•Foreign Currency Exchange
•Overseas banks
•Taxes
Great market-specific information found in MAP #7 & #8
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Verifying Financial RiskVerifying 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
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Verifying Financial RiskVerifying Financial Risk
InCoTerms
Universal set of rules for conducting international trade
Exporter communicates InCoTerm details before sale
Goal: negotiate with client/buyer for the least risky InCoTerms for the sale
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Verifying Financial RiskVerifying Financial Risk
InCoTermsEx Works (EXW): Title, transportation, and insurance risks pass to buyer at
seller’s door
Free on Board (FOB): Risks pass to buyer once delivered onboard ship by seller
Cost & Freight (CFR): Same as FOB +transportation costs
Cost, Insurance & Freight (CIF): Same as CFR +insurance costs
Delivered Duty Unpaid (DDU): Risks pass to buyer when seller delivers goods at buyer’s point of entry
Delivery Duty Paid (DDP): Risks pass to buyer when seller delivers goods at buyer’s point of entry and cleared for import
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Where does risk transfer from seller to buyer with common InCoTerms?
ExWorks Free on Board
Deliver Duty
Unpaid
Deliver Duty Paid
Cost & Freight = FOB + transport costs
Cost, Insurance & Freight = FOB + transport & insurance costs
Verifying Financial RiskVerifying Financial Risk
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Where do transport costs transfer from seller to buyer with common InCoTerms?
ExWorks Free on
Board
Cost & Freight
Cost, Insurance & Freight
Delivery Duty
Unpaid
Delivery Duty Paid
Verifying Financial RiskVerifying Financial Risk
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What are some InCoTerms preferred by exporters?What are some InCoTerms preferred by exporters?
1. CIP (Carriage and Insurance Paid)1. CIP (Carriage and Insurance Paid)seller obligated to provide insurance coverage and charge buyer for itseller obligated to provide insurance coverage and charge buyer for it
2. CPT (Carriage Paid To…insert destination)2. CPT (Carriage Paid To…insert destination)ideal for container shipments, no insurance requiredideal for container shipments, no insurance required
3. CIF (Cost Insurance and Freight) 3. CIF (Cost Insurance and Freight) marine only, seller’s risk for goods condition ends when vessel is loaded, marine only, seller’s risk for goods condition ends when vessel is loaded, seller selects forwarder and carrier and insuranceseller selects forwarder and carrier and insurance
4. CFR (Cost and Freight…insert destination)4. CFR (Cost and Freight…insert destination)marine only, CIF without the insurance requirementmarine only, CIF without the insurance requirement
Verifying Financial RiskVerifying Financial Risk
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Verifying Financial RiskVerifying Financial Risk
Foreign Currency Exchange
Can USD 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 strength? What bank fees will be applied in the US to convert it?
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Verifying Financial RiskVerifying 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
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Verifying Financial RiskVerifying Financial Risk
Taxes
Do VAT or GST taxes apply? What kind of incentives are in place in the US to recover taxes?
•Frequent changes to tax law, incentives for recovery available
•Staff / offices overseas could lead to taxes spent overseas
•VEDP Program Partner: Piascik & Associates
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Verifying Financial RiskVerifying Financial Risk
Resources
www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_039.htm
www.worldbank.org
International Implications of the American Jobs Creation Act of 2004:
www.exportvirginia.org/newsletter/archive.asp#