Home -> Law Blog Directory -> International Law Blogs -> The FCPA Blog

International Law

: The FCPA Blog

A Little Help From Our Friends

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. It's the Department of Commerce. The DOC's mission is "to foster, promote, and develop the foreign and domestic commerce" of the United States. It achieves its mission by helping -- that's right, helping -- American companies do business overseas. And what interests us is how the DOC 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 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 the DOC'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 the DOC has to offer.

Finding a partner. The DOC helps U.S. companies find business partners or agents overseas. Its Commercial Service -- a group of DOC 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 the DOC 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 the DOC 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 the DOC 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 satisfies 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 DOC 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 reputable foreign partner or agent unlikely to bribe foreign officials to get business. In most cases, evidence like that goes a long way to protecting U.S. companies and executives who find out later that an overseas partner or agent has caused FCPA problems.

Our recommendation. We've dealt with people from the DOC's Commercial Service in a number of countries. Overall, the Commercial Service 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 known some with a great sense of humor. That's always an appreciated trait in unstable countries and developing economies, where there's plenty of tension and stress.

In fact, we can't think of any reason why straight-shooting smaller companies wouldn'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.

View the DOC's website for the International Company Profile Program here.

Full post as published by The FCPA Blog on February 25, 2008 (boomark / email).