Our subject is always some aspect of the the Foreign Corrupt Practices Act. So around here the U.S. Department of Justice and the Securities and Exchange Commission get lots of attention. But another U.S. government agency has a role to play in the FCPA — the Department of Commerce. Its mission is “to foster, promote, and develop the foreign and domestic commerce” of the United States. It does that by helping — that’s right, helping — American companies do business overseas. And what interests us is how Commerce helps U.S. companies comply with the FCPA.
First, some background. The Department of Commerce concentrates most of its efforts on small and medium sized U.S. exporters. That makes sense. According to a 2004 USTR fact sheet, in the United States small and medium sized businesses make up almost 97% of all direct exporters, and approximately 65% of exporters are businesses with fewer than 20 employees. As our readers know, smaller companies with fewer resources struggle to comply with the FCPA. Big companies aren’t excluded from Commerce’s programs, but they usually know how to do buisness overseas and comply with the FCPA, and they have the resources to do so on their own. So it’s the smaller companies that need the most help. With that in mind, let’s see what Commerce has to offer.
Finding a partner. The Department of Commerce helps U.S. companies find business partners or agents overseas. Its Commercial Service — a group of trade and business experts stationed in about 80 U.S. embassies around the globe — runs the International Partner Search Program. It actually identifies suitable strategic partners for U.S. exporters. As Commerce says, “You provide your marketing materials and background on your company, and the [Commercial Service] will use its strong network of foreign contacts to interview potential partners and provide you with a list of up to five pre-qualified partners. This information is available in 30 days or less.”
Vetting the candidate. Once a potential overseas partner or agent is found, either through Commerce or otherwise, it’s time for some compliance-oriented due diligence. As we’ve said before, international joint venture partners and sales agents bring very high risks under the FCPA. Unreliable partners and agents — those who might pay bribes to foreign officials to help the business — need to be spotted early and either avoided or controlled. Doing that requires due diligence. And here again Commerce can help.
The Commercial Service’s International Company Profile (ICP) Program provides background reports on foreign companies in about 80 countries. The price is reasonable — around $500 per ICP, depending somewhat on local costs. Be warned, however, that the Commercial Service doesn’t offer ICPs in countries where Dun & Bradstreet or other private-sector vendors already provide a similar service. But where ICPs are available, the Commercial Service specialists deliver a product that helps satisfy at least the basic level of due diligence.
International Company Profiles are assembled by combing the local press, industry contacts and other sources. The result is a financial report on the prospective overseas partner or agent. Some ICPs are more detailed than others, depending on both the amount of information ultimately available and on the resourcefulness of the local Commerce specialist. Delivery time is advertised to be about 10 business days. The final report includes “a list of the company’s key officers and senior management, banking relationships and other financial information about the company; and market information, including sales and profit figures, and potential liabilities.”
Uncle Sam’s opinion. Crucial to FCPA due diligence, the Commercial Service will also provide “an opinion as to the viability and reliability of the overseas company or individual you have selected as well as an opinion on the relative strength of that company’s industry sector in your target market.” It’s not called an FCPA due diligence opinion, but that’s practically what it amounts to. Sure, there are lots of scenarios by which a “reliable” overseas partner or agent might still cause FCPA problems. But the International Company Profile and the viability and reliability opinion are great evidence. They demonstrate how the U.S. company tried to pick a law-abiding foreign partner or agent. In most cases, evidence like that goes a long way to protecting U.S. companies and executives who find out later that an overseas intermediary may have caused an FCPA violation.
Our recommendation. We’ve dealt with people from the Commercial Service in a number of countries. Overall, the specialists are unabashed boosters of American business overseas. They have impressive, even astounding knowledge about local markets, and they’re resourceful as well. We’ve met some with a great sense of humor, which is a welcome relief in countries in transition and under stress.
In fact, we can’t think of any reason why straight-shooting smaller companies shouldn’t check in with a Commercial Service specialist — either in the U.S. or the country of destination. There are literally hundreds of Commercial Service offices — across the U.S. from Akron to Ypsilanti, and around the world from Albania to Zimbabwe. The chats are free and may ultimately contribute richly to successful overseas business development and effective FCPA compliance.
A special acknowledgment to Kathryn Nickerson, Senior Counsel, Office of the Chief Counsel for International Commerce, U.S. Department of Commerce, for some of the information and ideas in this post. See her speech to the American Bar Association, National Institute of the Foreign Corrupt Practices Act, Special Focus: Issues Faced By Small and Medium Enterprises, Washington, D.C., October 17, 2006 here.
View the Department of Commerce’s International Company Profile Program here.