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Look Before You Leap – Legal Considerations When Doing Business in Dynamic International Markets Boston, February 7, 200

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

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Look Before You Leap – Legal Considerations When Doing Business in Dynamic International Markets Boston, February 7, 200

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

  2. 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 Legal Considerations

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

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