Chapter 12

Laws Affecting International Business and Travel

12-2Copyright © 2014 Pearson Education, Inc.

2

Topics

• Home Country and Host Country Laws

• Contracts• Ethics and the Law• International Laws• Global Patents• Nonwritten Law• International Travel and Law

12-3Copyright © 2014 Pearson Education, Inc.

3

The world has numerous laws that affect international business.

When a company is engaged in international business, what the company representatives can legally do is controlled by both their nation and the foreign nation with which they wish to conduct business.

12-4Copyright © 2014 Pearson Education, Inc.

4

Terms• Act of State Doctrine - Each country can

do as it wishes within its own boundaries.• Home Country Laws - Laws, treaties, or

acts that govern business within your own country (and those governing business with other countries).

• Host Country Laws - Laws, treaties, or acts that govern business within the foreign country with which you wish to conduct business.

12-5Copyright © 2014 Pearson Education, Inc.

5

Legal Requirements that Govern U.S. Citizens' Actions During Negotiations

• Antidiversion Requirement - Bill of lading and invoice must clearly display that the carrier cannot divert the shipment to a country the U.S. government considers restricted.

12-6Copyright © 2014 Pearson Education, Inc.

6

• Antiboycott Regulations - Prohibits U.S. companies from participating in boycotts between two foreign countries by refusing to do business with a friendly nation to comply with a foreign boycott.

• Antitrust Laws - Designed to ensure fair competition and low prices to U.S. consumers; these laws affect exporters in such areas as mergers and acquisitions of foreign firms, raw material procurement agreements, knowledge licenses, distribution channels, etc .

12-7Copyright © 2014 Pearson Education, Inc.

7

Written Information Laws

• The Export Administration Act of 1985 - requires federal licensing of technical information in business correspondence.

• The Arms Export Control Act of 1968 and Trading with the Enemy Act of 1917 - prohibit the transfer of information on military material or defense-related materials.

• The International Emergency Economic Powers Act of 1977 - governs information that is research oriented from being communicated to foreigners.

12-8Copyright © 2014 Pearson Education, Inc.

8

Technology Laws

• The World Intellectual Property Organization (WIPO) of the United Nations promotes intellectual property rights worldwide and currently administers 23 treaties for 185 member nations.

12-9Copyright © 2014 Pearson Education, Inc.

9

Technology Laws

• Berne Convention Implementation Act of 1988 - recognized the copyrights of all the signatory nations to the act; 165 countries were signatories in 2011.

• Madrid Convention - trademarks are protected by the 35 countries that are signatories. (The U.S. is not a signatory.)

12-10Copyright © 2014 Pearson Education, Inc.

10

Employment Laws

• Most nations have legislation governing wages, hours, union-management relations, residence visas, and work permits.

• Some nations require a certain ratio of nationals to foreigners.

• Legal questions that may be asked of a potential employee differ by country.

12-11Copyright © 2014 Pearson Education, Inc.

11

Maquiladora Law

• International maquiladora program in Mexico allows the duty-free import of equipment, machinery, and materials to assemble parts of products that are then returned to the home country.

Presidential Decree for the Development and Operation of the Maquiladora Industry Program of 1983

12-12Copyright © 2014 Pearson Education, Inc.

12

• The U.S. Tariff Code allows the final product to be brought into the country with only the final value added to the goods being taxed.

• An important consideration in this program is the difference in form of law. The U.S. (except Louisiana) practices common law (based on what has been traditionally accepted as right over many years); Mexico practices civil law (body of laws of a state or nation related to private matters). The difference is that civil law rather than precedent is considered during litigation.

12-13Copyright © 2014 Pearson Education, Inc.

13

International Law

• International Court of Justice (also known as the World Court) - body of the United Nations that provides a way to settle international disagreements between countries rather than corporations.

• The three legal bodies in the United Nations are: United Nations Commission on International Trade Law (UNCITRAL), The International Commission, and the Sixth Committee of the General Assembly.

12-14Copyright © 2014 Pearson Education, Inc.

14

A movement by institutions concerned with international business has encouraged the development of agreements and laws that are uniformly accepted in world trade. These institutions are:

– International Chamber of Commerce– International Commercial Terms

(Incoterms)– ECE Standard Conditions– The Hague Convention– The Vienna Agreement

12-15Copyright © 2014 Pearson Education, Inc.

15

• Quasi-international Law - rules for the relationship between legal entities and states that do not have national status, such as private corporations.

• Sanctions – prohibit U.S. companies from doing business in targeted countries. When the U.S. government does not approve of a country’s policies, they implement sanctions to try to reform the country.

12-16Copyright © 2014 Pearson Education, Inc.

16

• Macaulay's Thesis - considers long-term relationship more important than contracts.

• Thematization - process by which a framework for mutual communication and satisfaction is reached; process could be related to the law, economies, power, or religion.

12-17Copyright © 2014 Pearson Education, Inc.

17

Governance Structures

• Market governance - contract based• Trilateral governance - adds an

arbitrator• Bilateral governance - may not spell

everything out but implies a continuing relationship

• Unified governance – no details are negotiated in advance; maximum flexibility is provided - only one party sets terms for both parties; appropriate for subsidiaries of a single organization

12-18Copyright © 2014 Pearson Education, Inc.

18

Contracts

• Contract - an agreement between parties to do something that is oral, written, or implied through conduct.

• How are contracts viewed in the U.S.? Very important; oral contract is legally enforceable.

12-19Copyright © 2014 Pearson Education, Inc.

19

• How are contracts viewed in Japan? May be made verbally, in writing, or by conduct but are always open to renegotiation.

• How are contracts viewed by the Russian Federation? In the past little need existed for contracts; goods were allocated and firms accepted what was sent. This practice is now changing, but they still have problems with the concept.

12-20Copyright © 2014 Pearson Education, Inc.

20

Global Patents• Company files patent application with the U.S.

Patent office; limitation to file abroad is one year from the date of the U.S. application.

• Patent Cooperation Treaty - when patents are filed in other countries, the new patents claim priority to the date on the U.S. patent thus prevailing over competing rights of other investors.

• Treaties override all other domestic laws; nations need to be aware of their sovereignty and remember that treaties should be based on good science, rather than on wishful thinking or bad politics.

12-21Copyright © 2014 Pearson Education, Inc.

21

Unwritten Law• Unwritten business laws are called

drawer regulations in Brazil because they operate from unwritten operational codes rather than laws. Many drawer regulations are disappearing with countries joining free trade markets.

• In high-context cultures (Japan), little emphasis is given to the written word; the situation would determine whether to adhere to the law. Oral agreements would be considered binding, and written contracts would be considered flexible.

12-22Copyright © 2014 Pearson Education, Inc.

22

Ethics and the Law

• profit• competition• justice• advertising

Four motivations for unethical conduct in business:

12-23Copyright © 2014 Pearson Education, Inc.

23

The three dimensions of negotiation ethics are:

• Means/ends – measured by utility• Relativism/absolutism – considers

two extremes: either everything is relative or everything is without deviation from the rule

• Truth telling – considers whether concealing information, conscious misstatements, exaggeration, or bluffing during negotiations is dishonest

12-24Copyright © 2014 Pearson Education, Inc.

24

Laws Related to Ethicsin Business

• Foreign Corrupt Practices Act of 1977 - requires U.S. companies to account for and report international transactions accurately and prohibits bribes (including gifts and entertainment) that are used to gain a business advantage.

12-25Copyright © 2014 Pearson Education, Inc.

25

• The Doctrine of Sovereign Compliance - an international legal principle that can be used as a defense in your home country for work carried out in a host country when the two countries' legal positions are different.

• Export Trading Company Act of 1982 - allows companies that normally would not be allowed to participate in joint ventures to develop trading companies similar to those in Britain and Japan (e.g., GM, Ford, and Chrysler make parts with European and Japanese car manufacturers to jointly produce and sell cars).

12-26Copyright © 2014 Pearson Education, Inc.

26

Legal and Ethical Practices are Viewed Differently

The word "contraband" in the U.S. suggests breaking the law by smuggling. In Latin America, however, the Spanish word is contrabando (from the word contrabandido, which means "against the bandits,") and is viewed in a positive way.

12-27Copyright © 2014 Pearson Education, Inc.

27

International Travel and Law

• A Passport - proof of citizenship; need a copy of your birth certificate and current photos.

• Citizenship - the state of being vested with certain rights and duties as a native or naturalized member of a country.

• Visa - gives you the right to enter and stay in a country for a period of time for a specific purpose.

12-28Copyright © 2014 Pearson Education, Inc.

28

• Consulate - made up of individuals sent by the government to other countries to promote commercial interests of their home country.

• Customs Agents - enforce export and import laws of the country; have the right to search and confiscate anything you may have with you.

• Duties - import taxes

12-29Copyright © 2014 Pearson Education, Inc.

29

Suggestions for International Travel

• Register with the U.S. Embassy or consulate when you arrive.

• Turn to the Embassy or consulate for legal, medical, or financial problems.

• Contact the American Consul for a list of attorneys, to notify your family, and to protest any mistreatment. The Consul can visit you in jail but cannot get you released or provide for bonds or fines.

12-30Copyright © 2014 Pearson Education, Inc.

30

• Remember that you are subject to the laws of the country while you are there.

• Register with the local authorities if you plan a prolonged visit. You may be asked to leave your pass-port overnight or to complete certain forms.

• Use authorized outlets for cashing checks and buying airline tickets; avoid the black market or street money changers that you will see in many countries.

12-31Copyright © 2014 Pearson Education, Inc.

31

• Ask before you photograph anything to be sure it is permissible.

• Avoid these common infractions of the law: trying to take historical artifacts or antiquities out of the country, customs violations, immigration violations, drunk or disorderly conduct, and business fraud.

• Obtain an International Driver’s License if you need to drive. Travel agents can assist with this. Many countries require proof of insurance while driving.

12-32Copyright © 2014 Pearson Education, Inc.

32

• Do not deal in drugs; this is a serious offense in all countries, and penalties can be much more serious than in the U.S., including death.

• Keep a list of credit card/traveler’s check numbers in a safe place in case they are lost or stolen.

• Obtain a copy of Safe Trip Abroad.

12-33Copyright © 2014 Pearson Education, Inc.

33

• Make a list of such useful telephone numbers as the U.S. State Department, Amnesty International (New York), and the International Legal Defense Counsel (Philadelphia).

• Your health should be a concern; get a copy of Health Information for International Travel by the Center for Disease Control and Prevention.

• Be trustworthy, helpful, kind, friendly, courteous, obedient, cheerful, brave, and reverent.

12-34Copyright © 2014 Pearson Education, Inc.

34

Country-Specific Travel Tips

• Brazil – Passports are required and should be valid for six months from the date of entry. Since hotel accommodations vary widely, amenities should be confirmed. Public transportation includes subways in larger cities as well as buses and taxis.

• Canada – Since 9/11/01, passports for U.S. citizens entering from the U.S. or another country are required. Hotel accommodations in large cities are similar to those in the U.S. Public transportation systems in Montréal and Québec City are very good.

12-35Copyright © 2014 Pearson Education, Inc.

35

Country-Specific Travel Tips• China – U.S. citizens need a passport and a visa.

Hotel accommodations in large cities are available. Public transportation systems exist throughout the country. Bicycles are the main mode of transportation.

• Germany – Passport required, but U.S. citizens do not need a visa to travel in Germany for up to three months. No vaccinations are required. Hotel price generally includes a continental breakfast; heat may be an extra charge. Not all hotel rooms have a bath inside the room. Public transportation includes buses, trains, streetcars, subways, and taxis.

12-36Copyright © 2014 Pearson Education, Inc.

36

Country-Specific Travel Tips

• Japan – Passport needed, but no visa is needed for visits of less than 90 days. No vaccinations are required. Large cities have numerous Western-style hotels with private baths. Restroom facilities are usually unisex. Public transportation includes trains, subways, and buses. The “bullet train,” which runs between major cities, offers regular and first-class accommodations.

12-37Copyright © 2014 Pearson Education, Inc.

37

Country-Specific Travel Tips

• Mexico – Proof of citizenship needed; U.S. citizens may stay up to three months in Mexico with no visa. No vaccinations are required but may be advisable when traveling in certain parts of the country. Resort towns and larger cities have numerous excellent hotel accommodations. Public transportation varies greatly from crowded buses to the subway of Mexico City. Driving in many parts of Mexico is not advisable.

12-38Copyright © 2014 Pearson Education, Inc.

38

Country-Specific Travel Tips

• The Netherlands – U.S. citizens need a passport but no visa. Hotels are comfortable. Public transportation is very good.

• Singapore – U.S. citizens need a passport; visas are needed after 90 days. The Mass Rapid Transit subway serves most areas; many major U.S. hotel chains have hotels in the city.

12-39

Country-Specific Travel Tips

• South Korea – U.S. citizens need a passport but no visa for 30 days or less. Public transportation is very good. No vaccinations required. Both Western and yogwan hotels are available.

• United Kingdom – Passport required; U.S. citizens do not need a visa for visits up to six months. Public transportation includes the underground and taxis.

Copyright © 2014 Pearson Education, Inc.

39

12-40Copyright © 2014 Pearson Education, Inc.

40

Travel Advice

• Obey the laws of the host country.

• Be courteous and helpful. • Remember that it is their

country. • If you cannot speak positively

about the country, remain silent.

12-41