Market entry and counterparty risk: enhanced due diligence

1. Decision reviewed

The operating framework assesses the conditions required for an Italian company to sell, distribute, produce or invest in Algeria and, conversely, for an Algerian operator to establish a reliable presence in Italy. The analysis does not assume that an institutional relationship or expression of interest is equivalent to an authorisation, an order or ability to pay.

The decision is broken down into six checks: eligibility of the product or investment; standing and reliability of the counterparty; authorisations and bank domiciliation; availability of foreign exchange; logistics and customs sustainability; and the practical ability to perform and enforce the contract.

2. Market structure

Algeria combines demographic scale, energy availability, infrastructure needs and productive-diversification objectives. Dependence on hydrocarbons nevertheless remains decisive for public revenues, foreign-exchange reserves, imports and the economic cycle. As a result, a commercially sensible project can become non-executable for administrative, FX or industrial-policy reasons.

• In 2025, the European Union accounted for 49.6% of Algeria’s foreign trade; EU-Algeria trade in goods amounted to €43.4 billion. The figure confirms the importance of the relationship but does not eliminate disputes over trade restrictions.
• The World Bank highlights the weight of hydrocarbons and recent reforms concerning investment, banking, economic land and mining activities.
• Algeria should not be described as a member of the World Trade Organization: the WTO’s official page continues to classify it within the accession process. This affects the interpretation of applicable trade disciplines.

3. Commercial access and imports

Before making an offer, it is necessary to establish whether the goods may be imported, by whom, under which licences, specifications, certifications and banking formalities. Restrictions may take different forms: prohibitions, prior authorisations, technical requirements, bank domiciliation, sector limits or priority for local production.

Product controls

• customs classification and consistent commercial description across contract, invoice, certificate of origin and transport documents;
• technical rules, labelling, conformity, inspections and certificates required by the competent authority;
• up-to-date verification of prohibitions, quotas, lists of controlled goods and importer conditions;
• preferential origin, where applicable, and documentary retention of proof of origin;
• possible safeguard measures, quantitative restrictions or procedures affecting customs-clearance timing.

Checks on the importer

• registration and authorised activity consistent with the product;
• documented experience with customs and banking requirements;
• no use of intermediary companies lacking personnel, capital or infrastructure;
• availability of warehousing, inland transport, support and sector permits.

4. Investment and local presence

Algerian Law No. 22-18 of 24 July 2022 governs investments in the production of goods and services. The official AAPI page states that limits on foreign participation remain concentrated in activities considered strategic and in certain import operations for resale in the country. The precise qualification of the activity must therefore be confirmed before defining ownership, governance and financing. No incentive replaces verification of land, authorisations and the conditions for transferring dividends, royalties or divestment proceeds.

5. Payments, banks and foreign-exchange risk

The buyer’s economic capacity is not the same as the administrative and FX ability to pay. The payment structure must be validated with banks familiar with the specific transaction and required documents.

• Documentary credit: define issuing bank, confirmation, applicable ICC rules, presentable documents, tolerances, deadlines and discrepancy risk.
• Advance payment: verify admissibility, amount, refund guarantee and treatment in the event of non-authorisation or delay.
• Documentary collection or open account: use them only after an assessment of commercial, FX and transfer risk consistent with the exposure.
• Currency: clarify contractual currency, availability, conversion, transfer timing and which party bears the differential.
• Guarantees: verify guarantor, wording, governing law, place of demand, duration and independence from the underlying obligation.

Commercial documentation must be built around what banks and customs can actually verify. Sophisticated but non-documentable clauses increase non-payment risk.

6. Counterparty, integrity and decision chain

In Algeria, verification cannot stop with the signatory. The actual decision and execution chain must be reconstructed, avoiding confusion between relationship access, claimed influence and legal authority.

• identity, beneficial owner, capital, directors, delegations and signature authority;
• licences, authorisations, tax registrations and customs status;
• financial statements, banking relationships, ability to obtain foreign exchange and payment history;
• role of intermediaries, consultants, local sponsors and sub-agents, with verifiable contracts, remuneration and activities;
• politically exposed persons, sanctions, disputes, proceedings and relevant reputational information;
• consistency between corporate purpose, personnel, premises, warehouses, equipment and promised volumes;
• final recipient, end user and prohibition on diversion to unauthorised parties or territories.

7. Contract and execution

The contract must translate identified risks into conditions, documents, responsibilities and remedies. Essential clauses include:

• effectiveness conditional on authorisations, bank domiciliation and agreed guarantees;
• technical specifications, inspection, acceptance, Incoterms 2020 delivery term, transfer of risk and title;
• realistic timetable separating production, licences, shipment, customs clearance and commissioning/testing;
• prohibition on third-party payments and control of changes to bank details;
• treatment of taxes, duties, certificates, force majeure, regulatory change and suspension;
• governing law and dispute resolution compatible with enforcement and recovery;
• right to terminate or suspend if preliminary conditions are not satisfied.

Applied example: pharmaceutical supply chain between Italy and Algeria

An Italian company is considering the recurring supply of a medicinal product, medical device or line intended for pharmaceutical production. The first step is not to find a distributor but to qualify the product and transaction precisely: sale, registration, import, distribution, productive investment or technology transfer require different safeguards.

Publicly available checks

• product classification and identification of the competent authority, required authorisation and responsible holder;
• requirements applicable to the importer or local producer, including powers, licences, quality, warehousing, cold chain and traceability where applicable;
• consistency between registration, import programme, contractual quantities and end user;
• bank domiciliation, payment currency, presentable documents and guarantees compatible with the specific transaction;
• for an investment, qualification of the activity against strategic sectors, ownership structure, land, incentives, transfers and exit;
• responsibility for vigilance, complaints, product recall, technical support and continuity of supply.

Decision

Proceeding solely on the basis of an institutional contact, a letter of interest or a promise of future authorisation is not sufficient. Before commitment, the regulatory path, authorised party, banking payment structure, final destination and post-delivery responsibilities must all be verifiable.

Indicative roadmap

Mandate framing, verification of essential information, qualification of counterparties and transaction structure, decision and implementation support. Sequencing, responsibilities and timelines are defined according to the scope agreed with the client.

8. Conditions requiring a no-go

Preliminary checks are intended to determine whether sufficient conditions exist to continue the transaction. If any of the circumstances below emerge, the review is suspended until the issue has been fully clarified. If the issue cannot be resolved or adequately mitigated, Sentinel recommends not proceeding.

• product, sector or investment without an identified and confirmable authorisation path;
• beneficial owner, signature powers, actual importer or end user cannot be verified;
• request for invoices, classifications, values, origins or documents that do not reflect reality;
• payment dependent on future availability of foreign exchange without a verified banking mechanism;
• intermediary requesting disproportionate fees, offshore payments, cash or generic contractual descriptions;
• land, licence, incentive or authorisation presented as secured without a valid and verifiable document;
• absence of practically enforceable remedies in the event of non-payment, customs blockage or default;
• economic exposure inconsistent with a first relationship or with the counterparty’s financial capacity;
• unresolved sanctions, anti-corruption, anti-money-laundering or reputational issues;
• pressure to ship, invest or advance funds before completion of the checks.

Non-public content

Analytical matrices, parties reviewed, operating sources, documentary checks, FX scenarios, payment structures, blocking conditions and engagement methods are not published. They are prepared exclusively in relation to a qualified need and the specific scope of the mandate.