5 tips for assessing international business contacts
Getting a clear picture of an unknown foreign company’s potential as a buyer, distributor, agent or supplier has never been as straightforward as entrepreneurs would like. Today’s communication technologies make it dangerously easy to sign business agreements with individuals and corporations you know nothing about—something most Canadian companies would never do for a domestic transaction.
The pandemic—and our increased reliance on remote interaction—might even worsen this trend. Yet, if used strategically, some of those same channels and tools can help avoid misunderstandings, failed deals, reputation loss or fraud. Here are a few ways Canadian businesses can get a clearer picture about a potential trade partner abroad.
1) Use the local context and conditions as a lens
Different markets worldwide have different business and legal practices. Some markets operate under only a fraction of the rules and business conventions we have in Canada. Always keep these differences in mind when analyzing a new business opportunity abroad. That generic e-mail offer from a corporation in an emerging economy—with spelling mistakes and insufficient details—might still be trustworthy, but should be treated with corresponding caution. The claims made by a foreign or Canadian business contact (about existing mandates or business potential, for example) might be accurate, or might not—if the foreign jurisdiction they operate in has different rules and definitions with regards to fraudulent misrepresentation.
If you’re looking for more tips on assessing international business contacts, you want to explore other common international business related topics, or require support for an urgent, export‑related situation, visit the Trade Commissioner Service’s new Exporter Solutions service.
2) Collect and verify basic information before anything else
There has never been a business transaction so urgent that a shortlist of essential details about a foreign business contact could not be obtained and verified. Always request the company’s (and contact’s) full coordinates with postal and physical addresses for both their offices and production facilities. Most of the time, these can be easily checked online, including street-level maps and photos. Outstanding commercial disputes, as well as allegations of bad service or scams, can also be found this way. Make sure to also request the company’s national business number and tax registration number. If you’re dealing with a representative, a mandate letter from the end buyer or seller should also be obtained.
3) Leverage eyes and ears on the ground
This can be a more challenging step during a pandemic, but having details checked locally can go a long way towards clarifying the status and potential of a foreign contact. Local government agencies and chambers of commerce can sometimes be used to validate a company’s status. With a network of trade commissioners in more than 160 cities worldwide, Canada’s Trade Commissioner Service (TCS) can also help qualify potential partners. Although they can never guarantee a foreign partner’s reliability or good business practices, trade commissioners can often confirm a company’s legal status in their jurisdiction as well as its senior management team and core activities. The trade commissioner might also be able to refer you to reputable local consultants you could hire to do a more in depth investigation. You should also ask your foreign contact for international customer references, ideally from Canada or the U.S.
4) Make vetting a regular, continuous process
In many cases, problems with a foreign business partner (i.e. distributor or agent) don’t occur right away or after the first few transactions. Many markets feature few incentives for local companies to report to governing authorities. That means you could see few warning signs before something starts to go wrong. As for criminal activity, remember that anyone trying to scam you will first try to lull you into a false sense of trust, sometimes with several smaller transactions that go smoothly. Therefore, vetting a foreign business contact should not be a one‑time activity—it should be conducted regularly for as long as the commercial relationship is still active. Keep an eye out for urgent and “out of character” requests, abnormal delays, and changes in their communication tone.
5) If it sounds too good to be true, it probably is
It’s a timeworn cliché, but still valid: if something (including a business proposal) sounds too good to be true, it probably is. That little‑known company promising exclusive access and large orders from a continental-scale distributor or retailer is probably exaggerating its abilities (at best)—or being downright fraudulent by misrepresenting the commercial mandates it claims to have. When it comes from a source with whom you are still developing a commercial relationship, remember the potential gain of any new opportunity should always be balanced against the absence of proof or recourse should your foreign partners not uphold their side of the deal.
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