Bet You Didn’t Think of This Before Your First Overseas Business Trip

These are simple things, among the countless, that you can do to help make a difference when interacting with potential business partners in a foreign country:

Translate your name on business cards.  Having your name printed in the native language, especially in countries that do not speak a Romance language, is extremely beneficial for both you and your in-country business prospects.  Prepare for your visit in advance by printing business cards, and be sure to take plenty of cards with you.  You do not want to run out on your first evening in-country.

Learn “military time” and brush up on the Metric System.  Most of the world uses the 24 hour clock and the Metric System.  Learning to use both will help you stay on the same page as others in the foreign countries you visit.  Knowing the Metric System is just as important as knowing exchange rates when negotiating price.

Be prepared for others to smoke during a meeting.  Smoking in public does not carry the same taboo in much of the world as it does here in the U.S.  350 Million Chinese and 112 Indian people smoke.  After a handful of meetings and social gatherings in either of these countries, you can expect to have someone light up in your face.  Waving the smoke violently away from your face is not the best way to tell your in-country contacts that you want to do business.

Be mindful of superstitions.  Just like in our culture, other countries have superstitions of their own such as “unlucky” numbers, phrases, or chance events. Some of the countries that are most involved in international trade are also the most superstitious.  The numbers 4 and 14 are unlucky numbers in both China and Korea because their pronunciation rhymes with the word for death.  On the other hand, anyone who was paying attention during the 2008 Summer Olympics also knows that the number 8 is considered lucky in China because it rhymes with the Chinese word for prosperity.  So before your business signs that long term lease at a too-good-to-be-true rate in Hong Kong, make sure the Suite number is not 444 lest you will have trouble scheduling client meetings at your office.

In another case in point, many Japanese are superstitious of being photographed in a group of three because the person in the middle is expected to die soon. In a world full of digital cameras and smart phones, be mindful of this when you are taking the next photo op with your new Japanese partners.

All countries, and often regions within countries, have different cultural norms, standards of behavior, and superstitions.  Your best bet is to do your homework on the areas you plan to visit far in advance.  We at Country Intelligence Group want your company to put its best foot forward when representing America in the global economy. We will be happy to open up our network of in-country contacts and foreign area experts to help you plan your next overseas business venture.


Learn more about The Country Intelligence Group here

Corruption Risk Exposure in Latin America

Recently an executive of a large multinational corporation shared his thoughts with us about the corrupt operating environment in Latin America.  He was amazed at how there can be such differences in the level and perception of corruption among countries in the same region.  He witnessed how his own company had two very different experiences in two separate countries where managers, who have since been relieved of their duties, were operating similar bribe schemes.

When phony invoices were discovered in Country A, the company’s manager barely escaped with his life and is likely still serving time in a not so hospitable Latina American prison.  Shockingly, when the same scheme was uncovered in Country B, the foreign government and local employees were completely disinterested in prosecuting the scam.  In fact, they gave the manager a farewell party and provided a private jet flight to his destination of choice after he was fired by the company.

The executive speaking with us was pretty sure that whoever replaced his corrupt manager in Country A would likely not make the same mistakes so long as the consequences were known.  But how would he prevent future acts of corruption by managers when they are assigned to countries known to allow or encourage bribery like Country B?

Obviously, the company’s mandatory “check-the-box” compliance training did not work, and once a new manager “goes native” he will likely be exposed to the same pressures his predecessor experienced in Country B.  He knew that he would need to take the issue seriously and would likely need to audit each overseas office one at a time.

The first task for a company of its size was to prioritize their anti-corruption efforts to focus upon countries with the greatest risk first.  Clearly, they needed to identify countries more like the second country and less like the first in which they operate.  So the hunt began for some common market level indicators of an environment ripe for corruption.

The most obvious difference between the operating environments of the two countries was the level of competition in each.  Specifically, the level of foreign competition was significantly different.  To test whether there is a correlation between corruption and foreign competition, Table 1 below was created by using Transparency International’s Corruption Perception Index (CPI) to rank all of the countries in the Western Hemisphere by their perceived level of corruption and cross reference each country with their top three import partners.  The number in parentheses next to the foreign importer name is the Bribe Payer Index (BPI) score that measures the likelihood for importing firms from that country to pay bribes on a scale of 1 to 10 (1 is most likely to pay and 10 is least likely to pay).

Table 1: Competition-Corruption Matrix for Western Hemisphere Countries

A quick analysis shows that typically countries with both the United States and China among the top three importers are likely to have a worse CPI rank than countries who have only the United States or only China among the top three. Also as expected, countries with only the United States, but not China, among the top three importers are perceived to be less corrupt than countries with only China but not the United States. There is also a subtle, but none the less, downward slope for the combined average BPI scores of the top three import partners as a country’s CPI rank worsens.

In short, the table shows that corruption is more likely to occur where foreign competition is stiff, and the risk of corruption increases where American firms are competing against firms from countries like China who are more likely to pay bribes than when competing against firms from countries like Singapore or Japan.

Aside from the competitive landscape that shapes the business culture in a specific country, it is also commonly known that some economic sectors are also more prone to corruption than others. Some sectors are relatively free from corruption where others are plagued by corrupt practices. Table 2 below cross-references the same list of Western Hemisphere countries with the BPI for firms in different economic sectors. Using the table, a company can plot their general exposure to corruption by identifying where the country in which they operate intersects with the economic sectors in which they participate. The top-left corner of the table will experience the least amount of exposure to corruption, while the bottom-right corner will experience the greatest amount of exposure to corruption. For example, a company in the Agriculture industry in Canada could expect to operate with near absolute freedom from corruption whereas a company operating in Venezuela’s Public Works and Construction Sector should expect with near certainty they will be pressured to pay bribes.

Table 2: Corruption Risk by Country and Economic Sector for the Western Hemisphere

Exposure to corruption increases dramatically when operating in developing countries like those in Latin America, and companies of all sizes will feel the pressure if they stay in the international realm for an extended period.  For companies already doing business abroad, the above tables can be used as a tool to help determine their exposure to corruption and to help determine in which markets to focus their anti-corruption initiatives.  For companies looking to break into a new geographic market or wishing to diversify into a new sector, the tables provide a heuristic measure that can help prioritize corruption risk among other risk factors when entering a new market.

Think Before You Ship: Who, What, and Where?

Congratulations! You received your first order from a foreign customer. You want to fulfill and deliver it as soon as possible to encourage repeat business. But before you package and slap on the shipping label, you might want to consider exactly what you are shipping, what its possible uses are, and which countries it will travel through en-route to its final destination.

Recently, a small U.S. manufacturer and exporter of metal alloys posed the question: “Are there any specific re-export controls of a U.S. sourced zirconium alloy used as a component in a finished product manufactured in Canada which in turn is exported to its ultimate destination in China?” If your jaw hit the floor as mine did, you might be thinking they would only be asking such a specific question for one reason. It already happened.

The root problem in the above scenario is the U.S. supplier was asking the wrong questions at the wrong time. Before fulfilling the order, they should have asked whether zirconium is controlled by any U.S. export regulations.  They would have discovered that zirconium is controlled by the International Trafficking in Arms Regulations (ITAR) as a Category V item (Explosives & Propellants) and by the Missile Technology Control Regime (MTCR) Annex to the ITAR as a Category II item when it is granulized to a certain size. They also would have discovered that zirconium is controlled by the Export Administration Regulations (EAR) when it is in a form that can be used as a component in a nuclear reactor.

As for the question about re-export controls, that should have been asked before shipping too. The U.S. supplier would have learned that their export license should contain the following statement as outlined under ITAR section 123.9 paragraph b:

‘‘These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end user].  They may not be transferred, transshipped on a non-continuous voyage, or otherwise be disposed of, to any other country or end-user, either in their original form or after being incorporated into other end items, without the prior written approval of the U.S. Department of State.’’

Translated, that means an ITAR controlled item without Department of State approval cannot be shipped to a Canadian customer who intends to use it as a component in a manufactured product which will then be exported to China.

Companies who export products overseas must be aware of the ITAR, MTCR, and the EAR and know how they relate to their exports.  As a rule of thumb, companies should consider the following before fulfilling a new overseas order:

1.  Is the product you’re shipping a possible dual-use item that can be used for both civilian as well as military purposes?  If so, is the possible military application related to missile, nuclear, or unmanned aerial vehicle technology? This is not always clear. For example, the same microchips used in a video game console could be considered dual-use if encased in a hardened exterior.

2.  What is the specific classification (Commodity Jurisdiction) of the item on the Commerce Control List (CCL) of the EAR, and does the item appear in the United States Munitions List (USML) of the ITAR or in the MTCR Annex?  A quick check of the following lists might help to quickly identify items that are clearly covered:

If still unsure about the classification of a specific item, exporters can submit a Commodity Jurisdiction (CJ) request to the State Department. Information about CJ requests is available on the State Department’s Directorate of Defense Trade Controls (DDTC) web page.

3.  Where is the final destination of the export and who is the end-user? Compliance is not just about the initial transaction between the U.S. supplier and their immediate customers. Due diligence on the ultimate destination and possible intermediaries is vital. Some countries, entities, and individuals are off-limits for doing business with U.S. companies, and some of those entities may also have available exemptions.

So before you say bon voyage to your next overseas shipment, it might be a good idea to think about how your product fits into the big picture of the supply chain beyond the transaction between just you and your immediate foreign customer.  The above suggestions are not meant to substitute for legal advice, but rather they are meant to highlight the importance of considering export compliance before shipping seemingly benign products overseas. Please share your thoughts on this topic below.

Sources for Planning Business Operations in Africa

Every country and region has unique challenges and risks that can significantly impact business operations. Africa is arguably the most complex continent with at least 1,000 different languages, 400 major ethnic groups, 54 countries, and nearly all the major world religions represented within. It has the greatest disparities in income between demographic groups and countries, and it is also the poorest continent in the world as measured by per capita GDP. Doing business in Africa can be challenging to say the least, but for those already operating in the country or planning to do so, this week’s lessons learned provides some sources of information that business planners, traveling teams, and logisticians may want to consult for information about Africa.

As mentioned above, African countries have complexities that other countries do not. When preparing to do business on the continent, planning and research must be more extensive than if doing business in more developed countries in Europe and Asia. Not only should planning be more extensive, but your plans will also likely be significantly different compared to non-African countries.

How will environmental conditions, low literacy rates, lack of infrastructure, human health problems, and widespread disease impact your business plans in Africa? For example, if your company will be operating manufacturing equipment or diesel machinery in the dusty conditions of the Harmattan-affected countries in West Africa, maintenance costs and downtime will be significantly higher than almost anywhere else. Also, literacy rates below 50% in most sub-Saharan countries will require user manuals and training materials that include more graphics and pictures when the audience is local.

The factors mentioned above may also affect business in non-African countries too and sources of information listed below can be helpful outside of the continent.  For simplicity sake and to offer sympathy for those confronted with planning a new venture in Africa, the sources below will direct readers to information specifically on Africa when possible.

Resources for general country information:

Library of Congress –
The Library of Congress website provides access to video, sound recordings, maps, manuscripts, newspaper articles, and other publications that can provide a genuine understanding of African art, culture, geography, politics, and other information.

U.S. Department of State’s Bureau of African Affairs –
The State Department’s website provides general country information that you can search by topic or bureau.  It includes information from the Overseas Security Advisory Council (OSAC) on crime, safety, and current travel warnings.  It also provides historical information and fact sheets for specific countries.

Central Intelligence Agency’s World Factbook –
The Factbook is very user-friendly, and its database allows for instant cross-comparison of statistics by country.  It is an excellent source for general information regarding the history, society, government, economies, infrastructure, militaries, and transnational issues of individual countries.

U.S. Department of Commerce website –
The U.S. Department of Commerce provides economic data on their website, and they post information on existing and pending foreign trade agreements, guides on how to conduct business transactions in various countries, and economic statistics and forecasts on both countries and regions.

Country and Regional Travel and Logistical Information:

Lonely Planet Guides –
The Lonely Planet Guides are usually updated every few years and are available for the entire African continent, specific sub-regions (i.e., the East Africa Guide), and some individual countries; these feature cultural and language tips, information on local and seasonal weather patterns, brief country histories, hotel recommendations, country and city maps, and a wide range of other information.

Michelin Series Maps –
Michelin Maps often provide the most detailed information on African road networks for many countries.

Socio-economic, health, disease, and country assistance program information:

U.S. Agency for International Development (USAID) –
USAID provides country program data linked to particular assistance programs, and it has wealth of information about socio-economic issues impacting specific countries.

United Nations –
The UN provides mission reports and statistics on past and ongoing peace support operations in Africa.

African Union –
The African Union provides mission reports and statistics on past and ongoing peace support operations in Africa.

Joint United Nations Program on HIV/AIDS –
The Joint UN Program on HIV/AIDS publishes statistics, descriptions, and other data concerning the effects of endemic African diseases that may be useful for developing or justifying humanitarian assistance programs or Defense Health Program efforts.

Centers for Disease Control and Prevention (CDC) –
The CDC provides detailed information on various types of African diseases such as Trypanosomaisis and Ebola, and they provide information on countermeasures used to treat and prevent such diseases.


Learn more about The Country Intelligence Group here

Making the Right In-Country Contacts

Making the right in-country contacts is probably one of the first things you consider when you want to enter a new overseas markets. Making those connections can certainly be a major barrier to entry, and many companies rely heavily on international trade shows and trade missions to promote their products to potential buyers and distributors. However, if you rely too heavily on international trade shows to make contacts, you could be wasting a lot of time and money chasing down unfruitful leads.

For most CEOs, the primary sticking point with trade missions should be that there are no concrete statistics showing that trade missions actually increase the amount of trade between countries. This is important to consider when maximizing your return on investment for international business development. In fact, it is just as likely that a rising prevalence of international trade shows and missions are a symptom of increased trade between countries rather than the cause.

This is not to say that businesses do not make contacts that lead to future business deals during trade shows, but you must remember that you are just as likely to walk away with a bunch of “promising” new contacts that in reality can do little to help you establish a foothold.

If you want to increase the odds of breaking into a new market, you must make the right in-country contacts and build a meaningful relationship with them. Needless to say, it is difficult to make that type of connection during a trade mission, especially if you go overseas without someone who knows the dynamics of the target country.

Rather, it is better to be personally introduced to the right in-country contacts by someone they know and trust.  Enlisting the services of a seasoned foreign area expert with on-the-ground business experience in the country you want to do business is more productive than trying to make your own appointments during a trade mission and will lead to more business deals.

Besides introducing you to contacts, a foreign area business expert will also know the details of the market and business environment that you cannot find in off the shelf market research reports. An expert can quickly help you determine the needs and concerns of the in-country contacts and identify the best strategies for you to close deals with them.

Moreover, if you are only looking at countries that have trade missions on the schedule, you are missing opportunities in other countries. There is no need to allow the schedule of a trade association or government bureaucracy decide when is the best time for you to seek out in-country contacts. As with most business decisions, timing is key, and making the right contacts at the wrong time is simply not helpful.

If you have an overseas market in your crosshairs, we would enjoy hearing your thoughts and experiences with making meaningful contacts at trade shows (or otherwise).  Please reach out to us if you would like assistance finding a foreign area business expert in your target country. We are happy to leverage our network to make connections that will help grow American businesses.

Open Letter From Colonel Steve Huffman (USAF, ret.)

I’m increasingly amazed how the world is coming together, but still so far apart. Technology has transcended geography and the unique problems of overseas operations. We can now talk, communicate, work together, and work for people thousands of miles away. It happens at the speed of electrons (in most cases). It’s easy and getting easier…If you’re willing to keep pace…and pace is both important and necessary.

However, with all the technology available today there is still a barrier to engaging in overseas activities. Cultural differences, for the most part are a very real encumbrance to anyone seeking to enlarge the scope and scale of operations into the international arena. The most obvious hurdle is language. While computer translators have come a long way toward eliminating the language gap, there are still numerous problems that any corporate professional must overcome to both open a business venture, and keep it open. Digital translators do indeed help us with the written word for correspondence and contract writing and development, but they do very little with the “last three feet” of any deal. Typically, this is the hardest and probably most important part of any transaction where your potential customer doesn’t speak the language(s) that you speak. Therefore, having someone readily available who is well versed in both languages is necessary, but that still might be insufficient. Being able to speak the language doesn’t mean that the person understands or comprehends the cultural meaning and nuances of the language.

Let me give you an example. A while back I had the opportunity to sit on a National Security Council committee which had a mission to develop strategic messages for deployment in Iraq, and specifically in Baghdad. At one of our committee meetings I had a Joint Staff desk officer for the Middle East accompany me. He happened to be born and raised in Egypt and was fluent in Arabic. At the meeting State Department representatives wanted to present a brochure listing the positive outcomes of our presence in Baghdad, which in turn would be distributed to the residents in and around the city. They had copies of the brochure in both English and Arabic for us to review. As they came around the table, I reviewed the English version and just glanced at the Arabic. The brochure looked high quality. The text and the pictures looked fine from my standpoint as well. My friend, who was not only a desk officer, but a skilled Middle East Foreign Area Officer (FAO) from the Army ignored the English version and scrutinized only the Arabic brochure. He turned to me and said, “This will absolutely not work! It reads like a Coke commercial and is just another American marketing piece being spread across an Arabic community which right now they abhor. While the language is Arabic it doesn’t read like people of Iraq would talk nor write, and there are no references to Allah which is offensive to omit in their culture. This simply just won’t work.” I was more than floored since the brochure was the product of the State Department, the very people who were supposed to be the most culturally aware in the Government. I asked him to address the committee with his concerns. Of course, the State Department developers were disappointed and said they would go back to the drawing board…a good decision.

This is a simple illustration where knowing the culture is a must when dealing in the international arena. The ability to speak the language of the customer is always a positive, but not always sufficient. Having someone who truly knows and understands the culture is the best alternative. Keep this in mind as you search out new opportunities overseas, interact with foreign partners, and develop strategic marketing campaigns and you will bridge the “last three feet” of any international venture. Good luck.

Very Respectfully,
Col. Steve Huffman (USAF, ret.)