American companies face tough obstacles as they promote their products overseas.

In the film “Midnight Express,” Billy Hayes is caught smuggling drugs out of Turkey. The Turkish government decides to make an example out of him. He receives a long sentence in a dismal prison with sadistic warders. Now, you don’t go to Turkey, and you don’t smuggle drugs—how does Billy’s plight affect you?

Let’s say you sell products used in cleaning up polluted building sites and handling the hazardous materials typically found at such locations. You sell a few dozen hazmat protection suits and dosimeters to a customer in a country whose name has a lot of consonants. The next thing you know, you’re talking to a bunch of grim-faced guys who arrived in black Crown Victorias and assault Hummers.

These representatives of the Department of Homeland Security inform you of your right to an attorney. Your crime? You violated a dual-use export law when you sold items that can be used both for environmental clean-up and military purposes to Tyrgyztan’s Department of Environmental Safety.

But let’s say you sell iPods, widescreen televisions, or products labeled Rolex or Courvoisier. Here come those black Crown Vics again. In late 2006, the US government prohibited shipping a wide range of luxury consumer goods to North Korea, turning these accouterments of the soft life into “strategic” items denied to North Korean leader Kim Jong-Il and the 600 loyalist families running the country. Be careful when you see a North Korean e-mail address on an order form, or you may find yourself asking for MP3 privileges at Club Fed.

Of course, first-time offenders who didn’t know that they were breaking the law probably won’t end up in prison, and small companies face less scrutiny than large, highly visible companies that a government might choose to make an example of. But there are several things you could do that would cause legal action by a foreign government, especially if you violate consumer law.

Avoiding Homeland Security
Perhaps unintentionally, and even without being fully aware of the implications, businesses that once marketed their goods or services domestically now sell them to the world. They sometimes do so with little understanding of the domestic and international legal issues associated with having an international presence. We suggest a few simple steps to avoid unpleasant conversations with Homeland Security, unexpected bills from the tax police in any of several countries, and cultural standoffs.

Step 1: Get a lawyer. Let’s take the “simple” case: you want to sell something online. This seemingly straightforward plan requires knowledge of national laws governing e-commerce transactions and interactions, especially as it relates to your market sector. Call your corporate legal counsel and get him on your team. If you have business units in other countries, add their number to your speed dial. Your internal attorneys may not have the requisite experience for a given country’s laws, but they can call on their networks and affiliated firms that do. If they’re doing their job, they will also contact international shippers and customs agents for details about duties, invoices, and other international shipping practices for each country.

If you plan to establish a business presence in other countries, the issues get more complex. Your legal advisors will need a multi-jurisdictional practice, a network of contacts, intellectual property expertise, and country-specific expertise in laws regulating whatever it is you plan to do in that country.

Will the attorney who helped your firm get financing or deal with a discrimination suit be the same one who advises you on international issues? Maybe, but probably not. As you look for an attorney, ask questions about his/her expertise in the field. For example, do they have clients in the area? Have they written articles on the subject? In other words, make sure you do same type of due diligence as you would in hiring an accountant.

Step 2: Educate yourself. The lawyers will attempt to educate you in things that they find fascinating—and billable (especially if they’re not on your payroll). Do a little research on your own to gain some basic familiarity with the issues most relevant to the countries
you’re targeting. This knowledge will help in your conversations with your attorneys. (Legal disclaimer: see step 1. What follows is not a complete list of things to worry about, but it is a good place to start.)

First, think about taxes. Web transactions across state boundaries in the US can be problematic for less sophisticated shippers, given the patchwork of state sales tax. However, American Internet taxation is relatively simple when compared to selling in multiple countries with different tax structures and consumption taxes such as VAT in Europe or GST in Canada.

In Europe, these taxes average 20% of overall tax receipts for each European Union member state and fund about 44% of the total EU budget. If national governments feel entitled to extracting their pound of flesh, expect them to do so. Comply. Tax frauds are sometimes pictured in news coverage being led off in shackles to not-so-nice detention centers.

Second, be careful about establishing any physical presence, including hiring employees in another country. You will likely find that you have achieved “permanent establishment” of your company in that country. This status will subject you to foreign taxes plus foreign labor, welfare, and benefits laws as well. That could be expensive.

As you settle into other countries, protect your intellectual property rights in product design, trademarks, and other information. For example, if you don’t register your trademark in a given country, someone else could, depriving you of hard-won brand equity.

Third, pay attention to consumer protection laws. Laws implementing the EU directive on online selling tell you what to do before and after a sale. Other laws on privacy specify how you can use information that you collect. And that’s just the beginning of a raft of consumer protection issues, such as privacy, that you must resolve on a country-by-country basis. Which nation’s laws govern the sale and whether your contract is enforceable if not translated will certainly show up in your research and your lawyer’s itemization of billable hours. Add a provision about dispute resolution to your terms and conditions, being careful not to disclaim all liability and thus make it a target for litigation.

Fourth, watch out for what you say and post. By virtue of your company’s international selling activity, you could be sued in a foreign court for a number of causes of actions, including such things as defamation of character, copyright infringement, or posting content that’s illegal (as evidenced by classic cases of selling Nazi memorabilia in France, pornography in Singapore, or various popular cultural or religious issues in China). And it’s not just what you write: If you post visitor-written content on discussion boards, you may find yourself indirectly insulting the state. Monitor postings closely.

Follow the EU’s lead
Our advice on doing anything internationally is always to look for the country that has the most stringent laws or regulations. Then follow that guidance as you design your selling processes. For international marketing via the Web, that quest will likely lead you to Europe.

Over the last few years, the Europeans have defined a comprehensive legal foundation for online activities, predicated on a strong belief in individual privacy and the rights of the consumer. You will find that other countries typically have regulations that are a subset of what you will find in Europe.

On top of all this legal arcana, remember that you are dealing with people in other cultures. What is appropriate in your country may not play well in another country with different religious traditions and cultural attitudes. Being sensitive to how and what people in other countries think is part of your basic marketing job. Just make sure that you have a good lawyer watching your back.

Donald DePalma, Ph.D., is president of Common Sense Advisory, Inc. E-mail him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or visit www.commonsenseadvisory.com to tap into comprehensive and valuable market research for a global economy.