Companies, especially small exporters, often need to check out potential customers in other countries. You likely do a cursory Internet search first, but Google doesn’t always turn up the information you need. You might ask your bank if they have a correspondent in the foreign country that could check up on the likely customer. If the potential business is sizable, you might decide to use a credit check, through firms like Dun & Bradstreet or Creditreform, to check out the client. Or you might turn to whatever assistance your national government might offer to make sure the buyer is legit. For U.S. exporters that would be the U.S. Commercial Service’s International Company Profiles.
Each of those methods of vetting a new customer can be effective. I remember an International Company Profile that warned that the CEO of the company we were checking out had been arrested for impersonating a local general. We took a pass.
I’ve got another idea to add to the due diligence arsenal. I was having a conversation about export licensing when it dawned on me that the various denial or cautionary lists maintained for licensing purposes could be a useful tip-off for companies not sure about a prospective foreign partner. It is amazing how many such lists there are, but the Commerce Department provides a composite list you can download and use in your office. These are lists of companies or individuals that, for one reason or another, U.S. federal agencies suspect of committing crimes or being otherwise unreliable. There are three such lists maintained by the Commerce Department, two by the State Department and one by the Treasury Department. Most are used to determine if you can get export licenses to send sensitive products overseas. But there is no reason that companies that don’t need export licenses shouldn’t use them simply as an indicator that something might not be quite right about a potential client.
The Denied Persons List is useful if you have been approached by a middleman, probably in the United States. The list is of individuals and entities that have been denied the right to export for previous violations of U.S. law. While they can’t export themselves, some of these folk are devious enough to try to find work as a buyer’s agent whose name would never appear on export documents. I would look askance at anybody on this list.
The Unverified List is composed of people or firms that Commerce has not been able to verify in previous transactions. While these may not be doing anything out of the ordinary, their presence on the list certainly raises a “red flag” that there could be something unusual going on. Be careful and have your eyes wide open.
The Entity List may be less important for general, non-license exporting. These are foreign entities whose purchases Commerce has determined should get extra examination before export licenses are granted. The list typically includes militaries or police forces in dodgy countries. You can sell to them, but how are they really going to use your product? The use is often benign and the sale can go forward. (I once helped sell condoms to the Moroccan Army, which swore they would be used to cover rifle barrels on desert maneuvers. Really.)
The State Department maintains the Nonproliferation Sanctions List. These are individuals, companies, other private entities and governments that have been caught violating international controls on spreading nuclear weapons. What you may be selling them may be perfectly innocent, but do you really want to deal with these people?
State also runs the Arms Export Control Act (AECA) Debarred List. These are people and companies who have been banned from exporting arms or most anything related to weapons of war, including technical data or related services. What you are doing with them may be fine, but be aware that they have a record of not playing nice with others.
The Office of Foreign Assets Control at Treasury maintains the Specially Designated Nationals List. These are individuals, firms or other entities that have violated embargoes on trade with particular countries. Just because they have ordered two container loads of your furniture to be delivered to a consignee in Belgium, doesn’t mean they aren’t really acting as a contractor for some noted dictator somewhere.
Checking each of these lists can be daunting, so the Commerce Department makes it easier for you. You can download a Consolidated Screening List here that combines the bad news from all the other lists in a single format.
Don’t panic if your potential customer appears on these lists. As you can see above, some lists are more incriminating than others. But if you do find them, proceed with caution until you are comfortable that the proposed transaction is absolutely legitimate. Cross check these companies elsewhere. This is a case of “seller beware”.