© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. Twomey & Jennings BUSINESS LAW Chapter 7 The Legal Environment of International Trade Chapter 7 The Legal Environment of International Trade

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 2 General Principles Parties may choose the parameters of their agreement. –Which country’s laws will govern the transaction? –Where and how will disputes be resolved? –What currency or monetary system will be used for the transaction? A large number of international trade organizations exist to help facilitate multinational transactions in goods, services and investments. Arbitration is the norm for international disputes. Parties may choose the parameters of their agreement. –Which country’s laws will govern the transaction? –Where and how will disputes be resolved? –What currency or monetary system will be used for the transaction? A large number of international trade organizations exist to help facilitate multinational transactions in goods, services and investments. Arbitration is the norm for international disputes.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 3 Major Organizations, Laws & Treaties The General Agreement on Tariffs and Trade (GATT), subscribed to by the United States and most of the industrialized countries of the world, is based on the principle of trade without discrimination. The World Trade Organization (WTO) took over policing GATT in WTO provides international dispute resolution. The General Agreement on Tariffs and Trade (GATT), subscribed to by the United States and most of the industrialized countries of the world, is based on the principle of trade without discrimination. The World Trade Organization (WTO) took over policing GATT in WTO provides international dispute resolution.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 4 The United Nations Convention on Contracts for the International Sale of Goods (CISG) provides uniform rules for international sales contracts between parties in contracting nations. Major Organizations, Laws & Treaties Asante Technologies, Inc. v PMC- Sierra, Inc. (2001) International Intrigue: Whose Law Applies?

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 5 Goals of International Trade Organizations and Treaties GATT/WTO promote world trade United Nations Convention on Contracts for the International Sale of Goods (CISG) establish uniform rules for international sales contracts United Nations Conference on Trade and Development (UNCTAD) redistribute income inter- nationally through trade European Economic Community (EU) remove trade barriers and unify economic policies

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 6 Goals of International Trade Organizations and Treaties United States - Canada Free Trade Agreement (FTA) increase trade between these countries North American Free Trade Agreement (NAFTA) eliminate tariffs between Mexico, Canada, and U.S. International Monetary Fund (IMF) facilitate expansion and balanced growth of international trade Organization of Petroleum Exporting Countries (OPEC) control oil production and exploration

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 7 Forms of Business Organizations Export Sales Domestic business works with foreign business to sell or produce product. Foreign DistributorshipLicensing and Franchising Wholly Owned SubsidiaryJoint Venture Agency Direct sales from business to international customer – no “middleman.” Domestic business sets up a business in a foreign country & maintains control.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 8 Governmental Regulation Export Regulations. –Determine if License is Needed. Export Control Classifications Numbers. –Criminal Sanctions. Export licenses needed for high-technology. Export Regulations. –Determine if License is Needed. Export Control Classifications Numbers. –Criminal Sanctions. Export licenses needed for high-technology.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 9 Intellectual Property Protections. –Counterfeit Goods. –Gray Market Goods. Intellectual Property Protections. –Counterfeit Goods. –Gray Market Goods. Governmental Regulation Lever Brothers Co. v U.S. (1992) Barring Imported Soap!

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 10 Antitrust Considerations In choosing the form for doing business abroad, U.S. firms must be careful not to violate the antitrust laws of host countries. Anticompetitive foreign transactions may have an adverse impact on competition in U.S. domestic markets. In choosing the form for doing business abroad, U.S. firms must be careful not to violate the antitrust laws of host countries. Anticompetitive foreign transactions may have an adverse impact on competition in U.S. domestic markets.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 11 Securities Regulation Illegal securities transactions affect U.S. economy. Jurisdiction: federal courts have jurisdiction over securities fraud cases that impact Americans--here or abroad. Foreign Secrecy Laws. Illegal securities transactions affect U.S. economy. Jurisdiction: federal courts have jurisdiction over securities fraud cases that impact Americans--here or abroad. Foreign Secrecy Laws. SEC v Banca Della Suizzera Italiana (1981) The Long Reach of the SEC.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 12 Barriers to Trade Tariffs are the most common barrier to trade. Tarriff Barriers. Tariff is a tax on goods as they move in/out of a country. Tariffs are the most common barrier to trade. Tarriff Barriers. Tariff is a tax on goods as they move in/out of a country. Sabritas v United States (1998) Customs Crunch! Nontarrif barriers- e.g., import quotas.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 13 Relief Mechanisms Antidumping Laws and Export Subsidies. –Selling goods in a foreign country below the fair value. –Uruguay Round Agreement Act of Retaliation and Relief Against Foreign Unfair Trade Restrictions. –U.S. Trade Representative can retaliate under the Ominibus Trade and Competitiveness Act. Antidumping Laws and Export Subsidies. –Selling goods in a foreign country below the fair value. –Uruguay Round Agreement Act of Retaliation and Relief Against Foreign Unfair Trade Restrictions. –U.S. Trade Representative can retaliate under the Ominibus Trade and Competitiveness Act.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 14 ExpropriationExpropriation U.S. business have legitimate concern about foreign government seizing assets. –Businesses in defense, natural resources, banking and communications are susceptible. Insurance of businesses will minimize loss. Overseas Private Investment Corporation is under policy control of U.S. Secretary of State. U.S. business have legitimate concern about foreign government seizing assets. –Businesses in defense, natural resources, banking and communications are susceptible. Insurance of businesses will minimize loss. Overseas Private Investment Corporation is under policy control of U.S. Secretary of State.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW Twomey Jennings 1 st Ed. 15 Government Assistance Export Trading Company Act of –Promotes formation of U.S.-based export companies. Foreign Sales Corporation Act of –Tax incentives for qualified businesses. U.S. Export-Import Bank. Foreign Corrupt Practices Act. Export Trading Company Act of –Promotes formation of U.S.-based export companies. Foreign Sales Corporation Act of –Tax incentives for qualified businesses. U.S. Export-Import Bank. Foreign Corrupt Practices Act.