Chapter 7 The Legal Environment of International Trade

1. Twomey  JenningsAnderson’s Business Law and the Legal Environment, Comprehensive 20eAnderson’s Business Law and the Legal Environment, Standard 20eBusiness Law: Principles for Today’s Commercial Environment 2e Chapter 7 The Legal Environment ofInternational Trade

2. General Principles • Legal Background: 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?

3. General Principles • 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.

4. International Trade Organizations, Conferences & 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.

5. International Trade Organizations, Conferences & Treaties • The World Trade Organization (WTO) took over policing GATT in 1995. WTO provides international dispute resolution.

6. International Trade Organizations, Conferences & Treaties • CISG provides uniform rules for international sales contracts between parties in contracting nations. • UNCTAD represents lesser developed countries.

7. International Trade Organizations, Conferences & Treaties • EU: European Council, European Commission, European Parliament, European Court of Justice. • NAFTA. • OPEC.

8. International Trade Organizations, Conferences & 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

9. International Trade Organizations, Conferences & 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. facilitate expansion and balanced growth of international trade International Monetary Fund (IMF) Organization of Petroleum Exporting Countries (OPEC) control oil production and exploration

10. International Trade Organizations, Conferences & Treaties Direct sales from business to international customer – no “middleman.” Export Sales Domestic business works with foreign business to sell or produce product. Agency Foreign Distributorship Licensing and Franchising Domestic business sets up a business in a foreign country & maintains control. Wholly Owned Subsidiary Joint Venture

11. Governmental Regulation • Export Regulations. • Determine if License is Needed. • Export Control Classifications Numbers. • Criminal Sanctions. • Export licenses needed for high-technology.

12. Protection of Intellectual Property Rights • Counterfeit Goods. • Gray Market Goods.

13. Antitrust • Jurisdiction. • The “Effects Doctrine”: U.S. courts assume jurisdiction if foreign conduct has substantial effect on U.S. commerce. • Jurisdictional Rule of Reason: foreign state may have jurisdiction over conduct if it has a significant interest.

14. Antitrust • Defenses. • Act of State Doctrine. • Sovereign Compliance Doctrine. • Foreign Trade Antitrust Improvements Act. • Foreign Antitrust Laws. • EU: Treaty of Rome.

15. 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.

16. Barriers to Trade • Tariffs are the most common barrier to trade. • Tariff Barriers. Tariff is a tax on goods as they move in/out of a country. • Non-tariff barriers- e.g., import quotas. • Export Controls as Instruments of Foreign Policy.

17. Relief Mechanisms • Antidumping Laws and Export Subsidies. • Selling goods in a foreign country below the fair value. • Uruguay Round Agreement Act of 1994. • Retaliation and Relief Against Foreign Unfair Trade Restrictions. • U.S. Trade Representative can retaliate under the Ominibus Trade and Competitiveness Act.

18. Expropriation • 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.

19. Government Assistance • Export Trading Company Act of 1982. • Promotes formation of U.S.-based export companies. • Foreign Sales Corporation Act of 1984. • Tax incentives for qualified businesses. • U.S. Export-Import Bank. • Foreign Corrupt Practices Act.

20. FCPA • The Foreign Corrupt Practices Act: • Places restrictions on U.S. firms doing business abroad. • May not make payments to foreign officials for getting business from foreign government.