Doing Business Overseas:
The Rules Have Changed
Understand when ‘the cost of doing business’ internationally
can result in fines or jail time By Steven John Fellman
As much of the grow th in retailing moves to overseas market- places including china, India, south
America, and beyond, more and more
retailers and those who supply products
and services for retail environments are
shifting their focus from selling in the u.s.
market to selling in the global market. The
first question is: “how to do business in
Years ago it was difficult to do business in
certain foreign counties, especially in under-
developed countries, without hiring a local
agent or joint venturing with a local retailer
or contractor. Your local agent would explain
that in order to get certain jobs, get your
goods through customs, obtain permits to
do business, and so forth, certain payments
were required. Your local agent would out-
line these “costs of doing business.” often
on a “don’t ask, don’t tell” basis, American
companies would make the payments and
business would move forward. You might
not know where the money was going, but
you did know that the proper government
officials were being paid off and, as a result,
your business could operate with minimal
delays and restrictions. If you wanted to
compete overseas, this was the way that the
game was played in many foreign countries.
THE RULES HAVE CHANGED
today, as retailing takes on a global prospective, those who do business overseas
should know up front that there has been
a dramatic change in the rules. In the mid-
’70s, investigations by the securities and
exchange commission disclosed that more
than 400 major u.s. corporations admitted to making in excess of $300 million
in questionable or illegal payments to for-
eign officials. often these were payments
to ensure that government officials dis-
charged their duties. These were often pay-
ments to ensure that the payor was the
“foreign competitor” that got in the door
and obtained access to the marketplace.
Bribery of foreign officials was simply a
way of doing business.
to stop this practice, congress enacted
the foreign corrupt Practices Act (fcPA).
This statute basically provides that it is ille-
gal for any u.s. business, large or small, to
bribe foreign officials in order to get con-
tracts or obtain commercial advantages.
Violations of the fcPA have serious con-
sequences. under the criminal side of the
Act, businesses can be fined up to $2 mil-
lion or twice the benefit that the company
sought to achieve in making the illegal
payments. Individuals including corporate
officers, agents, directors, and employees
may be fined $100,000 and/or sentenced
to jail for up to five years. the fcPA also
has significant civil penalties.
when the fcPA was passed, the American business community complained that
the fcPA placed burdens on u.s. firms that
were not placed on foreign competitors.
In fact, some countries had provisions in
their tax codes that permitted corporations to deduct bribes made to local officials. congress directed the executive
Branch to negotiate with our major trading partners to enact legislation similar to fcPA. As a result, in 1997, the u.s.
and 33 other countries signed the oecD
convention on combatting Bribery of
foreign Public officials in International
Business transactions, and versions of