business law helps

6th_edition_ch_9.ppt

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Quotes of the Day

“What affects men sharply about a foreign nation is not so much finding or not finding familiar things; it is rather not finding them in the familiar place.”

G.K Chesterton, British Author

“The greatest meliorator of the world is selfish, huckstering trade.”

Ralph Waldo Emerson,
American Philosopher and Poet

Trade Regulation -- Export Controls

Export Administration Act of 1985
This act balances the need for free trade with important requirements of national security.
Allows the federal government to restrict exports if they endanger national security, harm foreign policy goals or drain scarce materials.

Controlled Commodities List
Made by the Secretary of Commerce; lists restricted items, which may not be exported without a license.

Arms Export Control Act
Permits the president to make a second list of controlled items, all related to military weaponry.

Tariffs
A duty (tax) imposed on goods entering a country.
Tariff is calculated based on classification and valuation of the item being imported.

Duties for Dumping and Subsidizing
Dumping is selling goods in a foreign market for less than normal price to drive out local competition.
The US Department of Commerce will impose a dumping duty when they suspect that the low prices are intended to harm American companies.
Subsidized goods are those for which the home government has given a benefit (such as low taxes).
Subsidized goods are charged a countervailing duty to equalize the prices.

Trade Regulation -- Import Controls

Quotas
A quota is a limit on the quantity of a particular good that may enter a nation.
Quotas may grow a certain percentage per year, or stay the same.

Trade Regulation --

Import Controls/ Nontariff Barriers

Import Ban
An import ban means that certain goods are flatly prohibited.

General Agreement on Trade
and Tariffs (GATT)

History of GATT
GATT is an international treaty which dates back to the 1940’s, with its most recent version signed by 126 nations in 1994.
In the 1940’s, tariffs on industrial goods averaged about 40% ; this figure is now about 4%.
The latest round of cuts should drop tariffs to about 3.7% and create more categories of duty-free goods.
Even with the perceived benefits, opponents claim that the US will not be able to compete with countries that have under-paid workers.

GATT -- (cont’d)

World Trade Organization
The WTO is an international ‘court’ created by GATT to stimulate international commerce and to hear complaints about violations.
A panel of judges will review WTO decisions, and recommend withdrawal from the WTO if excess unfounded decisions are made against the US.

Issues raised by and addressed by GATT
GATT opponents fear environmental problems due to uncontrolled growth in developing nations.
Child labor is not adequately limited by GATT.
GATT increases protection for intellectual property.

Regional Agreements

The European Union (EU) – 25 countries of Europe
Sets standards for tariffs, dumping, subsidies, antitrust, and transportation.
Most of the members have adopted a common currency, called the Euro.
North American Free Trade Agreement (NAFTA) -- Mexico, Canada, USA
Eliminates almost all trade barriers between the three member nations.

International Sales Agreement

Direct Sales -- domestic manufacturer to foreign store
Must decide which of three potentially conflicting laws will govern the transaction.
The United Nations Convention on Contracts for the International Sale of Goods (CISG) governs contracts between two parties from two signatory countries, unless they specifically opt out.
Must also decide where disputes will be settled and in what language and currency the transactions will take place.
Parties may require a letter of credit, which is a bank’s guarantee of payment.

International Sales Agreement

Indirect Sales -- through a distributor in the foreign country
Choice of law, legal forum, language and currency are same as with direct sales.
Must also determine if your distributor will be an exclusive dealer, meaning they will not carry any competing lines of goods.
You may have to agree to let them be the exclusive distributorship, and not let any competing distributors sell your goods.
Be careful not to violate antitrust laws!

Investing Abroad

Repatriation of Profits -- some countries allow profits made by foreign investors to be taken back home; others do not.

Expropriation -- in some cases, private businesses can be bought (for a fair price) by the government without consent.

Investing Abroad (cont’d)

Most nations respect the principle of sovereign immunity in which courts of one nation lack the jurisdiction (power) to hear suits against foreign governments.
In the United States, the Foreign Sovereign Immunities Act (FSIA) states that American courts cannot hear cases against a foreign country, even in expropriation cases.
There are three exceptions: when the country waives this protection, when the suit is over commercial activity, and when the foreign country has illegally confiscated property which has ended up in the United States.

Investing Abroad (cont’d)

Act of State Doctrine
Requires an American court to abstain from any case in which a court order would interfere with the ability of the president or Congress to conduct foreign affairs.
Investment insurance is often a wise business expenditure when investing abroad.
In 1971, Congress established the Overseas Private Investment Corporation (OPIC) to insure U.S. investors against overseas losses due to political violence and expropriation.

Investing Abroad (cont’d)

Foreign Corrupt Practices Act -- makes it illegal for an American business person to give “anything of value” to a foreign official in order to influence an official decision.
In many countries, bribery is commonplace (but foreign bribery is still against the FCPA).
Small payments to speed up, but not change the result of, processes may be acceptable.
If a country’s written laws allow bribery (but few do), it is not a violation of the FCPA.

“Overseas investment, like sales abroad, offers potentially great rewards but significant pitfalls. A working knowledge of international law is essential to any entrepreneur or executive seriously considering foreign commerce.”