Class Rreflection 2

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ACC 150
THE LEGAL ENVIRONMENT OF BUSINESS

With Doreen Smith, Esquire

Chapter 10

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INTERNATIONAL BUSINESS

Conducting business overseas

  • Direct sale-export sales
  • no presence in foreign country
  • Agent
  • Use an agent (person or firm) to sell abroad
  • Foreign distributorship
  • This entity takes title to goods
  • Licensing
  • Transfer of technology
  • Wholly Owned Subsidiary
  • US entity controls the business abroad.

FORMS OF BUSINESS ORGANIZATIONS

Export Sales

Domestic business works with foreign business to sell or produce product.

Foreign Distributorship

Licensing and Franchising

Wholly Owned Subsidiary

Joint Venture

Agency

Direct sales from business to international customer – no “middleman.”

Domestic business sets up a business in a foreign country & maintains control.

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Chapter 7

INTERNATIONAL LAW

  • What Law Applies?
  • Which country’s laws will govern the transaction?
  • Choice-of-law clause—a contract clause designating what law will apply if there is a dispute.
  • Alternative Dispute Resolution (ADR)
  • Parties designate ADR to resolve disputes
  • Financing International Trade
  • There is no international currency
  • The parties can also designate currency in a contract.
  • Letter of Credit
  • Commercial devise used to guarantee payment-bank makes payment to seller

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Chapter 7

SALE OF GOODS

In the United States when a good is sold between two parties in different states, the Uniform Commercial Code (UCC) would typically apply

Applies to both commercial and personal contracts (such as a consumer contract)

Uniform laws apply in states that enact the law. Every state has enacted the UCC with some minor exceptions.

The United Nations Conventions on Contracts for the International Sales of Goods (CISG) applies to international transactions.

Applies to two parties both of which live in countries that have ratified the CISG

Applies to commercial contracts (not to personal, family or household contracts).

GOVERNMENTAL REGULATION

  • Barriers to Trade.
  • Tariff Barriers
  • A tariff is a tax on goods as they move in or out of a country. Most common barrier to trade.
  • NonTariff Barriers: e.g., import quotas
  • Export Controls as Instruments of Foreign Policy
  • The Export Administration Act controls certain goods and technical data from being exported by a US company when the export can threaten the national security of the US

INTERNATIONAL TRADE ORGANIZATIONS, CONFERENCES & TREATIES

GATT and WTO.

The General Agreement on Tariffs and Trade (GATT), is a multilateral trade treaty, signed by 126 countries including U.S.

GATT created the World Trade Organization.

All member nations are treated equally.

WTO is a dispute resolution body to remedy GATT violations.

Avoids trade wars

WTO-INTELLECTUAL PROPERTY

  • Protection of Intellectual Property Rights
  • Intellectual property includes trademarks, copyrights and patents.
  • Trade Related Aspects of Intellectual Property (TRIPS)
  • TRIPS provides a minimum level of protection each government must provide to other members of WTO.
  • Berne Convention for the Protection of Literary and Artistic Works
  • This law is administered by the WTO and provides copyright protection to WTO members.

REGIONAL AGREEMENTS

EU: European Council, European Commission, Parliament, Court of Justice

Was initially established to remove trade barriers to member countries and to unify their economic policies

  • The North American Free Trade Agreement (NAFTA): U.S., Canada, or Mexico
  • Eliminates tariffs among the three countries.
  • Opens markets between Mexico, Canada and US

ANTIDUMPING, SUBSIDIES AND SAFEGUARDS

  • Antidumping Actions
  • WTO allows governments to take actions against dumping (selling goods in another country at less then fair value).
  • Subsidies
  • This is when a government provides a subsidy for using domestic goods instead of foreign goods. This is prohibited by the WTO.
  • Safeguards
  • This allows a WTO member to temporarily restrict an import that is causing serious injury to a domestic industry.

GOVERNMENTAL REGULATION

  • Foreign Corrupt Practices Act (FCPA)
  • Federal law that prohibits any payments or gifts to high-ranking officials to influence a decision. Individuals may be personally liable.

NOTE: the act does not apply to low-level officials to expedite performance of routine government services.

  • The FCPA can result in criminal penalties and fines.