twomey & jennings business law

© 2004 West Legal Studies in BusinessA Division of Thomson Learning

BUSINESS LAW BUSINESS LAW Twomey • Jennings 1stEd.Twomey • Jennings 1stEd.

Twomey & JenningsTwomey & Jennings

BUSINESS LAWBUSINESS LAWTwomey & JenningsTwomey & Jennings

BUSINESS LAWBUSINESS LAW

Chapter 7The Legal Environment of

International Trade

Chapter 7The Legal Environment of

International Trade

2© 2004 West Legal Studies in BusinessA Division of Thomson Learning


General PrinciplesGeneral PrinciplesGeneral PrinciplesGeneral 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.



Major Organizations, Major Organizations, Laws & TreatiesLaws & 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 1995. 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 1995. WTO provides international dispute resolution.



• 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.

• 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.



Asante Technologies, Inc. v PMC-Sierra, Inc. (2001) International Intrigue: Whose Law Applies?

Asante Technologies, Inc. v PMC-Sierra, Inc. (2001) International Intrigue: Whose Law Applies?



Goals of International Trade Goals of International Trade Organizations and TreatiesOrganizations and TreatiesGoals of International Trade Goals of International Trade Organizations and TreatiesOrganizations and Treaties

GATT/WTO promote world trade

United Nations Convention on Contracts for the International

Sale of Goods (CISG)

establish uniform rulesfor international sales

contracts

United Nations Conferenceon Trade and Development

(UNCTAD)

redistribute income inter- nationally through trade

European Economic Community (EU)

remove trade barriers and unify economic policies



Goals of International Trade Goals of International Trade Organizations and TreatiesOrganizations and TreatiesGoals of International Trade Goals of International Trade Organizations and TreatiesOrganizations and Treaties

United States - CanadaFree Trade Agreement (FTA)

increase trade between these countries

North American FreeTrade Agreement (NAFTA)

eliminate tariffs betweenMexico, Canada, and U.S.

International Monetary Fund (IMF)

facilitate expansion and balanced growth of international trade

Organization of Petroleum Exporting

Countries (OPEC)

control oil productionand exploration



Forms of Business Forms of Business OrganizationsOrganizations

Forms of Business Forms of Business OrganizationsOrganizations

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.



Governmental Governmental RegulationRegulation


• 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.



• Intellectual Property Protections.– Counterfeit Goods.– Gray Market Goods.

• Intellectual Property Protections.– Counterfeit Goods.– Gray Market Goods.



Lever Brothers Co. v U.S. (1992) Barring Imported Soap!Lever Brothers Co. v U.S. (1992) Barring Imported Soap!



Antitrust Antitrust ConsiderationsConsiderations

Antitrust Antitrust ConsiderationsConsiderations

• 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.



Securities RegulationSecurities RegulationSecurities RegulationSecurities 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.SEC v Banca Della Suizzera Italiana (1981) The Long Reach of the SEC.



Barriers to TradeBarriers to TradeBarriers to TradeBarriers 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!Sabritas v United States (1998) Customs Crunch!

• Nontarrif barriers- e.g., import quotas. • Nontarrif barriers- e.g., import quotas.



Relief MechanismsRelief MechanismsRelief MechanismsRelief 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.

• 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.



ExpropriationExpropriationExpropriationExpropriation

• 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.



Government AssistanceGovernment AssistanceGovernment AssistanceGovernment 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.

• 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.

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