Chapter 7

The U.S. Constitution provides in Article I, Section 9, that "No Tax or Duty shall be laid on Articles exported from any State." Thus, Congress cannot impose any export taxes. Congress can, however, use a variety of other devices to restrict or encourage exports, including the following:

1. Export quotas. Congress sets export quotas on various items, such as grain being sold abroad. 2. Restrictions on technology exports. Under the Export Administration Act,5 advanced products and technical data can be restricted. the flow of technologically 3. Incentives and subsidies. The United States (like other nations) also uses incentives and subsidies to stimulate certain exports and thereby aid domestic businesses. Example 7.7 Under the Export Trading Company Act,6 U.S. banks are encouraged to invest in export trading companies, which are formed when exporting firms join together to export a line of goods. The Export-Import Bank of the United States provides financial assistance, primarily in the form of credit guaranties given to commercial banks. These banks, in turn, lend funds to U.S. exporting companies.

Under the New York Convention, a court will compel the parties to arbitrate their dispute if all of the following are true:

1. There is a written (or recorded) agreement to arbitrate the matter. 2. The agreement provides for arbitration in a convention signatory nation. 3. The agreement arises out of a commercial legal relationship.

A foreign state is not immune from the jurisdiction of U.S. courts in the following situations:

1. When the foreign state has waived its immunity either explicitly or by implication. 2. When the foreign state has engaged in commercial activity within the United States or in commercial activity outside the United States that has "a direct effect in the United States." 3. When the foreign state has committed a tort in the United States or has violated certain international laws. 4. When a foreign state that has been designated "a state sponsor of terrorism" is sued under the FSIA for "personal injury or death that was caused by an act of torture" or a related act of terrorism.

- Subsidiaries - Joint ventures

A U.S. firm can also expand into a foreign market by establishing a wholly owned subsidiary in a foreign country. When a wholly owned subsidiary is established, the parent company, which remains in the United States, retains complete ownership of all the facilities in the foreign country, as well as total authority and control over all phases of the operation.

Choice-of-Law Clause

A clause in a contract designating the law (such as the law of a particular state or nation) that will govern the contract.

distribution Agreement

A contract between a seller and a distributor of the seller's products setting out the terms and conditions of the distributorship.

Franchising

A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor.

act of state doctrine

A doctrine providing that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory.

sovereign immunity

A doctrine that immunizes foreign nations from the jurisdiction of U.S. courts when certain conditions are satisfied.

Treaty

A formal international agreement negotiated between two nations or among several nations.

Expropriation

A government's seizure of a privately owned business or personal property for a proper public purpose and with just compensation.

confiscation

A government's taking of a privately owned business or personal property without a proper public purpose or an award of just compensation.

Normal Trade Relations Status

A legal trade status granted to member countries of the World Trade Organization.

Quota

A limit placed on the quantities of a product that can be imported

Forum-Selection Clause

A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.

International Organizations

An organization that is composed mainly of member nations and usually established by treaty—for example, the United Nations.

Direct versus Indirect Exporting

In direct exporting, a U.S. company signs a sales con-tract with a foreign purchaser that provides for the conditions of shipment and payment for the goods. If sufficient business develops in a foreign country, a U.S. corporation may set up a specialized marketing organization in that foreign market by appointing a foreign agent or distributor. This is called indirect exporting.

space law

Law consisting of the international and national laws that govern activities in outer space.

national law

Law that pertains to a particular nation.

International Customs

One important source of international law consists of the cus-toms that have evolved among nations in their relations with one another.

tariffs

Taxes on imported goods

international law

The law—based on international customs, organizations, and treaties—that governs relations among nations.

Comity

The principle by which one nation defers and gives effect to the laws and judicial decrees of another nation. This recognition is based primarily on respect.

Export

The sale of goods and services by domestic firms to buyers located in other countries.

Dumping

The sale of goods in a foreign country at a price below the price charged for the same goods in the domestic market.

Treaties and International Agreements

Treaties and other explicit agreements between or among foreign nations provide another important source of international law. A treaty is an agreement or contract between two or more nations that must be authorized and ratified by the supreme power of each nation.

Agency Relationships versus Distributorships

When a U.S. firm engaged in indirect exporting wishes to limit its involvement in an international market, it will typically establish an agency relationship with a foreign firm. The foreign firm then acts as the U.S. firm's agent and can enter into contracts in the foreign location on behalf of the principal (the U.S. company). When a foreign country represents a substantial market, a U.S. firm may wish to appoint a distributor located in that country. The U.S. firm and the distributor enter into a distribution agreement. This is a contract setting out the terms and conditions of the distributorship, such as price, currency of payment, availability of supplies, and method of payment. Disputes concerning distribution agreements may involve jurisdictional or other issues, as well as contract law.

Exporting can take two forms:

direct exporting and indirect exporting.

Basically, there are three sources of international law:

international customs, treaties and international agreements, and international organizations.

a nation is a sovereign entity

meaning that there is no higher authority to which that nation must submit.

The major difference between international law and national law is

that government authorities can enforce national law.

Licensing

the legal process whereby a licensor allows another firm to use its manufacturing process, trademarks, patents, trade secrets, or other proprietary knowledge