International Business Transactions

Arbitral Clause

"Arbitration is now the most common and most effective means to resolve international business disputes" - broad or narrow clause - ad hoc or institutional (ICC, AAA-ICDR, SCC, LCIA, CIETAC, WIPO) - Legal situs of arbitration - lex arbitri - Sovereign immunity issues - Arbitral award exception - FSIA exception

Chaos Theory in economics

"Does the flap of a butterfly's wings in Brazil set off a tornado in Texas?" Now: Does someone spilling something in a Wuhan lab lead to global economic crisis?? - Significant economic, political, and social cross-currents - market disruptions - nature/environmental-driven risks - disease

WTO Dispute Settlement (DSU)

"The dispute settlement system of WTO is central element in providing security and predictability to the multilateral trading system" WTO members commit themselves not to take unilateral action against perceived violations of trade rules but to seek recourse in a multilateral dispute settlement system and to abide by its rules and findings Dispute Settlement Body (DSB) deals with disputes arising across WTO-covered agreements

Trade Law Considerations: Tariffs and Quotas

*Tariff* is a border tax: increases cost of imported goods *Quota*: quantitative limit on imports How do we calculate a tariff? - *Classification* of imported product - The *product's value* (for ad valorem tariff) - Place of *origin of product*

Arbitration Agreement: What should be involved?

- Choice of law - broad or narrow clause - rules & procedures - location - language - arbitrator(s) - number - confidentiality - interim measures / expedited procedures - Waiver of sovereign immunity - costs and interests - finality IMPORTANT: Input: Enforceable Arbitration Agreement Output: Enforceable Award

Issues that impact International Business

- Currency differences/issues - War - Climate issues - Data privacy / National security - INFLATION - Political change

A business wants to expand into a new country. What are your issues/tasks

- Draft/negotiate joint ventures agreements and numerous other agreements - deal with government authorities; file reports; seek approvals from supervisory authorities - TAX issues and filings; export and import regulations - Trademark & patent applications - Review all the advertising - Review and draft all sorts of contracts, including sales and purchasing contracts for local materials - IP and piracy / counterfeiting issues - issues related to real estate, land, zoning - Human resources issues

FDI stakes for developing countries

- FDI is often best source of finance for capital needs - FDI is effective form of technology transfer - higher involvement, know-how and skills training - Competition for FDI among developing countries is now fierce - Means of training local workers [May lead to change in identity of company as it becomes a Multinational Enterprise (MNE)]

What is international Economic/Trade Law?

- Framework of institutions and rules that govern international economic relations including trade between nations. - Most important: *WTO* - Framework in which international businesses must operate; impose some order (harmonization) on way governments regulate business - *IBT lawyer ignores it at his/her peril*

Hierarchy of valuation methodologies

- Price actually paid: transaction value - Transaction value of identical goods - Transaction value of similar goods - Deductive value - Computed value

USMCA

- Replaces NAFTA - First treaty since WW2 to build up rather than break down trade barriers (except BREXIT) - tariff rate quotas - trade remedies; reserves right to deploy domestic measures - Investor-State dispute settlement

Business wants to expand into China. What are some issues IBT lawyers would confront?

- What kind of business entity do we want to be / can we be in that country? - What law(s) govern our activities in China? - Negotiation barriers? How do our customs differ respectfully and effectively? - What do we need to do to get government approval? - Is the country politically and financially stable???? Businesses do not want wars, they want *STABILITY*

Things to understand when asked by supervisor to research an IBT issue

- do your research first! - Maybe through doing your research, you learn that your supervisor's instincts/opinion is correct. Maybe you learn that his idea has worked poorly for other companies who tried it. - Document your evidence and consider how you will communicate it.

Explain how a single IBT for a sale of goods with party A in U.S. and party B in a foreign country can implicate: Private international law analysis public international law dealing with private law issues domestic law dealing with private law issues domestic law dealing with public law issues

1) Private international law analysis: This would mean that the parties did not put a *governing law clause* in their contract which states which country's laws would govern their transaction so they would have to do a private international law analysis _________________________________________________________________________________________ 2) Public international law that deals with private law issues This is referencing a treaty. An example is the CISG (convention on contracts for the international sale of goods) _________________________________________________________________________________________ 3) Domestic law dealing with private law issues If CISG does not apply, domestic court (Massachusetts for example) will apply _________________________________________________________________________________________ 4) domestic law dealing with public law issues USA's (for example) laws on imports/exports

Top FDI investor countries ("out-flows")

1. USA 2. Germany 3. Japan 4. China

Top FDI locations ("In-flows")

1. USA 2. China 3. Hong Kong, China 4. Singapore 5. Canada 6. Brazil why USA? Americans are huge consumers, favorable corporate laws, huge market, stable economy, stable politics

Choice of Law Principles:

1.) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law. 2.) When there is no such directive, the factors relevant to the choice of the applicable rule of law include: (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.

Bill of lading

3 different legal aspects to bill of lading: 1) BoL is a *carriage contract* between shipper (almost always seller) and carrier for transport of goods (for a price) 2) it is a *receipt for goods* (and goods may be described with a greater or lesser degree of particularity -- CLEAN ON BOARD) - Therefore, carrier is contractually obligated not only to deliver goods at destination, but also to deliver goods as described in BoL -- unless carrier can and does disclaim these obligations 3) BoL is a *document of title* in that person entitled to delivery of the goods is determined by the BoL

Multi-National Enterprises (MNE's)

78,000 MNE's - 73 million people 69 of the world's 100 largest economies are MNE's, not countries

Federal Arbitration Act

A court having jurisdiction under this chapter may direct that arbitration be held in accordance with the agreement at any place therein provided for, whether that place is within or without the United States. Such court may also appoint arbitrators in accordance with the provisions of the agreement. The court SHALL confirm the award.

Stolt-Nielson S.A. v. AnimalFeeds International Corp. (2010)

A party may not be compelled under the Federal Arbitration Act to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so in the arbitration agreement. AnimalFeeds International Corporation (AnimalFeeds) (plaintiff) used maritime shipping company Stolt-Nielsen, S.A. (Stolt-Nielsen) (defendant) to ship its goods pursuant to a standard maritime contract known as a charter party. The specific charter party used by AnimalFeeds was called the "Vegoilvoy." In 2003, the U.S. Department of Justice found that Stolt-Nielsen had engaged in an illegal price-fixing conspiracy. When AnimalFeeds learned of this it brought a putative class action suit against Stolt-Nielsen in federal district court, asserting antitrust claims. Thereafter, AnimalFeeds provided notice to Stolt-Nielsen that it demanded class arbitration. The parties agreed to allow a panel of three arbitrators to decide whether class arbitration was permitted under the contract, which was "silent" with respect to class arbitration. After a hearing, the arbitrators concluded that the contract's arbitration clause permitted class arbitration. The district court vacated the decision, concluding that the arbitrators had disregarded aspects of federal maritime law. AnimalFeeds appealed. The court of appeals reversed and found that because Stolt-Nielsen failed to cite any authority applying the federal maritime rule of custom and usage against class arbitration, the arbitrators' decision was not in manifest disregard of federal maritime law. The United States Supreme Court granted certiorari to review. May a party be compelled under the Federal Arbitration Act to submit to class arbitration if there is no contractual basis for concluding that the party agreed to do so in the arbitration agreement? No. A party may not be compelled under the Federal Arbitration Act to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so in the arbitration agreement. In an arbitration agreement, the parties' intentions control. Arbitration is a consensual process, not a coercive one, and a court interpreting the arbitration agreement must give effect to the intent of the par

*Arbitration*

A procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court

ADR as an "umbrella term"

ADR covers dispute resolution processes that are basic alternatives to court litigation - Negotiation - Mediation - ad-hoc (mini trial, med-arb) - arbitration

Tariff / sourcing Hypothetical

Acme Tool needs to buy supplies from foreign suppliers Prices quoted are FOB and Acme must handle importation Where is the best source of the screw drivers? - (Peru, Israel, Belgium, Mexico, US) *Screw drivers* - Goods fro all countries except Belgium are tariff-free - Because prices are quoted FOB, need to add in cost of freight and Insurance (CIF) prices - Peru might be best if CIF costs (=$110 + CIF) are less than those for Israel (=$115 + CIF) [Issues of product quality, dependability, reputation and even consumer attitudes are more important than penny pinching]

Arbitration vs mediation/negotiation

Adjudicatory nature vs seeking settlement binding vs non-binding third-party involvement Role of courts - only in enforcement (and no appeal)

Standard ICC arbitration clause

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

Customs Classification and Valuation

All goods that enter US are categorized according to Harmonized Tariff Schedule of the US (HTSUS) 3 key issues in implementing tariff policy: 1) Customs Classification: in which commodity classification does the good fall? 2) Tariff valuation: what is the price of the good against which the tariff is applied? 3) Country of origin: From what country does the good come for customs purposes? also: country of origin for marking purposes

IMPORTS

All imports must be cleared through customs Key issue: What tariff must be paid?? - Tariffs can be determining factor in decision to buy goods sourced from countries subject to different tariff rates Why might there be opposition to imports? - Imports have adverse effect on trade balance for each country - Imports may pose threat to local (domestic) industry - Local industry more likely to challenge customs classification as resulting in too low a tariff other issues: - Many FTA's - where goods have connections to both FTA and non-FTA country; this becomes issue as to whether goods are duty free - Determining country of origin of goods for FTA purchases (E.g., what about product assembled in Mexico but with parts from other countries??)

Foreign Direct Investment (FDI)

An investment made to acquire lasting interest in an enterprise operating in a country and economy other than that of the investor the investor's purpose being to have effective choice in management of local enterprise and become more competitive in that local market. why? larger market share competing against competitors, could make shipping cheaper and easier. Example: A U.S.-based cell phone company buys a chain of phone stores in China. Amazon opens a new headquarters in Vancouver

Anvil Knitwear v. Crowley (2001)

Anvil Knitwear, Inc. (Anvil) (plaintiff) contracted with Crowley American Transport, Inc. (Crowley) (defendant) to ship containers of shirts from Central America to the United States. The bill of lading covering the shipment incorporated the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1300, et seq., and included an exceptions section setting out various causes of loss for which Crowley could not be held liable. One exception waived losses caused by thieves, hijackings, and armed robberies. While en route, the shirts were lost to thieves during a truck hijacking. Both parties agreed that Crowley's agent, the truck driver, was not involved in the theft. Anvil brought suit in the United States District Court for the Southern District of New York for damages from the loss of shirts. Crowley moved for summary judgment. Is a waiver of carrier liability for damages to goods within a bill of lading where the waiver is not enumerated within the Carriage of Goods by Sea Act only effective if there is no proof that the carrier was negligent? Yes. A waiver limiting liability for damages to goods in a bill of lading where the waiver is not set out as an exception to liability within COGSA is only effective to the extent that there is no proof the carrier was negligent in contributing to the damage. COGSA provides that carriers of goods are not liable for certain enumerated causes of loss to goods in the carrier's possession for transportation, regardless of whether the loss is caused by the carrier's own negligence. One enumerated cause for which a carrier may not be liable is any cause that is not due to the negligence of the carrier. In other words, a carrier may not be liable for either (1) a specific cause listed within COGSA or (2) any loss not due to negligence. If the carrier claims that the loss was not due to negligence, the carrier has the burden of proof to show the absence of negligence. Additionally, COGSA provides that a carrier cannot disclaim liability for a loss caused by the carrier's own negligence. Thus, if a bill of lading waives liability for a cause of loss not enumerated within COGSA, the bill of lading cannot be effective. However, the waiver can be effective under COGSA if the waiver is o

Foreign Corrupt Practices Act

Applies to U.S. businesses' conduct around the world Any payment to a government official to obtain or retain business is ILLEGAL contains an exception for "facilitating payments" to secure performance of routine government action * If a company does not have an adequate FCPA compliance program, it should consider carefully doing business in high risk environments both civil and criminal penalties (they like to make examples)

Anti-Boycott Laws

Apply to US persons (companies), US residents and "controlled-in-fact" foreign affiliates - Refusing to do business with Israel - Providing boycott-related information (or failure to report) Must report receipt of requests to take any action supporting boycotts Civil and criminal fines Economic Espionage Act Foreign Corrupt Practices Act (FCPA)

Why choose arbitration?

Arbitration is a private procedure in which dispute is submitted, by agreement of parties, to one or more arbitrators who make binding decisions Why choose arbitration? - single forum & procedure - consensual - enables party autonomy - parties choose arbitrator(s) - arbitration is neutral - can be cost-effective/efficient/flexible - less adversarial - eliminates appeals - decision of arbitration is FINAL FAA (1925): courts used to not enforce arbitration decisions. - Seeks to overcome judicial hostility to arbitration agreements

New York Convention

Article II 1. Each contracting State shall recognize an agreement in writing under which the parties undertake to submit arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning subject matter capable of settlement by arbitration Article III 2. Each contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles.

New York Convention: refusal to reward arbitral award

Article V 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: a) The subject matter of of the difference is not capable of settlement by arbitration under the law of that country; OR b) The recognition or enforcement of the award would be contrary to the public policy of that country

Dealing with cultural differences/issues

BE: - direct, open, honest, polite DON'T BE: - arrogant, rude, insulting, impatient

Bestfoods v. US (2001)

Bestfoods (plaintiff) prepared peanut butter in Arkansas from peanut slurry. A majority of the slurry originated from the United States, and the remainder was from Canada. The United States Customs and Border Protection (Customs) (defendant) ruled that Bestfoods's peanut butter needed to be marked as partially of Canadian origin. Customs ruled that even if the value of the Canadian peanut slurry used in the final product would otherwise be small enough to fall within the de minimis exception, which would allow for not marking a country of origin, the de minimis exception did not apply to agricultural products. Bestfoods successfully sued in the Court of International Trade, which held that the exception to the de minimis rule for agricultural goods was arbitrary and capricious. Must agricultural goods sold in the United States and made with a de minimis amount of imported ingredients bear a country-of-origin marking for the foreign ingredients? *RULE:* Yes, Agricultural goods sold in the United States and made with a de minimis amount of imported ingredients must bear a country-of-origin marking for the foreign ingredients.

Better Home Plastics v. US (1997)

Better Home Plastics Corporation (Better Home) (plaintiff) imported shower curtains for resale in the United States. The curtains were sold in sets consisting of three parts: a decorative-textile outer curtain, a water-resistant plastic liner, and hooks. The duty to be paid on the sets under the Harmonized Tariff Schedule of the United States (HTSUS) was 12.8 percent if the set was classified based on the textile curtain but only 3.36 percent if classified based on the plastic liner. The United States Customs and Border Protection (Customs) (defendant) imposed a duty based on the textile curtain. Better Home successfully challenged the decision of Customs in the Court of International Trade, which classified the set based on the plastic liner under the essential-character test. Customs appealed to the United States Court of Appeals for the Federal Circuit, arguing that the Court of International Trade erred in the application of the essential-character test. For purposes of classifying imported goods for tariff purposes, may the indispensable function of a good be considered when applying the essential-character test under the Harmonized Tariff Schedule of the United States? *RULE:* Yes, For purposes of classifying imported goods for tariff purposes, the indispensable function of a good may be considered when applying the essential-character test under the Harmonized Tariff Schedule of the United States.

Tariff's effect on Trade: example

Bicycles from France were 27% tariff in 1945 Today the tariff is 3% France in 1945: Should I even try to import the bicycle if I need to make up an extra 27% from the tariff?? Should I increase the price of the bicycle to compensate for the tariff? Lower/Less tariffs make the market more competitive because there is less reason for companies to be concerned with import costs US tariff rate has been decreasing steadily; first rise in 2018 since 1970's [Countries should be aware of tariff implications when choosing where to assemble and sell product]

Clemens Horst Company v. Biddel Brothers

Biddell Brothers (plaintiff) was assigned the rights under two contracts to purchase 150 bales of hops from E. Clemens Horst Company (Clemens) (defendant). The contracts stated that the shipment was C.I.F. to London or Liverpool. When the time arrived for Clemens to ship the hops, the parties disagreed as to whether payment was due when the hops were delivered or when the bill of lading was provided to Biddell Brothers. Ultimately, Clemens refused to ship the hops because Biddell Brothers would not make payment until receiving delivery of the hops. Biddell Brothers brought suit against Clemens for breach of contract, and Clemens counterclaimed for breach of contract. The trial court entered judgment in favor of Clemens. The court of appeals reversed and entered judgment for Biddell Brothers. Clemens appealed. Does a contract for the international sale of goods C.I.F. require the buyer to make payment to the seller upon receipt of a bill of lading? Yes. A C.I.F. contract for the international sale of goods requires the buyer to make payment upon receipt of the bill of lading. The receipt of the bill of lading is equivalent to the receipt of the goods. If a C.I.F. contract is silent as to when the seller may deliver the bill of lading, the seller is not required to wait until the goods have arrived before delivering the bill of lading. The bill of lading may be delivered at any reasonable time. When the bill of lading is delivered, the obligation of the buyer arises to make payment as though the buyer has received the goods. In this case, there is a valid C.I.F. contract between Biddell Brothers and Clemens. The contract is silent as to when Clemens may deliver the bill of lading or when Biddell Brothers must make payment. Therefore, Clemens had the right to deliver the bill of lading at any reasonable time before the goods were delivered. Biddell Brothers did not have a right to withhold payment until the goods were delivered, because the obligation to make payment arose upon receipt of the bill of lading. The judgment of the court of appeals is reversed, and the trial court's judgment in favor of Clemens is restored. RULE: A contract for the international sale of goods C.I.F. requires the buyer to make pay

International Commercial Disputes

Business Context: Inevitable that disputes arise in domestic and international business transactions How do we help our clients prepare for this possibility? *Advise your clients on how to plan for disputes and using appropriate dispute resolution methods*

Dispute resolution: opportunity to exercise "practical and fair control"

Business context: control is most important for minimizing and allocating risks Bring that perspective to dispute resolution Dispute resolution: exercise "control" - practical and fair control - through choices parties make to resolve complex international disputes - Extension of parties' exercise of post-deal business cooperation "Control your own destiny or someone else will"

Transport Terms

C&F and CIF basically signify little more than an FOB contract but with an added obligation for seller to (i)arrange for carriage and (ii) insurance Two critical points: - Passing of risk in both cases (FOB and CIF) passes at port of departure for the shipment ("on board the vessel") - CIF: point for costs of carriage and insurance -at port of destination CIF is a contract for sale of goods to be performed by delivery of documents

What law normally goversn Bills of lading?

COGSA (1936) is mandatory law: deals with those aspects of BL concerning carriers obligation to transport and protect goods during carriage - Provides statutory liability scheme - issue of liability for lost or damaged goods during carriage in international shipping covered by COGSA (which incorporatesHague Rules 1921 as embodied in Brussels Convention - US became party in 1937) - Carrier's liability limited to $500 per package (unless shipper declares higher value) Other countries - Hague-Visby Rulers - Rotterdam Rules - US signed in 2009, but not yet ratified - Clause paramount - incorporates COGSA? - Himalaya clause + Responsibility clause Multimodal transport - NVOCC / VOCC - "Through bills of lading"

Century Importers v. US (2000)

Century Importers, Inc. (Century) (plaintiff) entered an agreement with Molson Breweries of Toronto, Canada (Molson) to import beer into the United States. During negotiations, a trade dispute caused the United States to impose a duty of 50 percent of the value of the imported beer. Molson agreed to reimburse Century for the import duties. When the beer was imported, the United States Customs and Border Protection (Customs) (defendant) imposed the 50 percent duty based on the invoice price of the beer, and Molson later reimbursed Century for the amount of duties paid. The invoice provided to Customs showing the price of the beer did not indicate the agreed-upon reimbursement for duties. Century sued in the Court of International Trade for a partial refund of duties paid, arguing that the price of the beer was not the invoice price but was rather the invoice price minus the reimbursement for the duties. Customs argued that a reduction in price after import that was not indicated on the invoice as a reimbursement for duties was, in fact, a rebate. Therefore, the reduction was properly ignored when Customs determined the price of the beer. For purposes of determining the value of goods for calculating import duties, must an invoice identify a deduction in price to cover payment of duties for the deduction to be considered in calculating the duties owed? *RULE:* Yes, For purposes of determining the value of goods for calculating import duties, an invoice must identify a deduction in price to cover payment of duties, or the deduction will not be considered in calculating duties owed.

International sale of goods: what's going on?

Christmas Decorations Globo Products (Brazil) [*seller*] ----> Rio, Brazil [port] ---> Newark, NJ [port] Value Industries (Ohio) [*buyer*]

Classification: Harmonized Tariff Schedule

Column 1: Includes general and special rates of duty - General = applies to all members of WTO - Special = (normally 0) applies to countries with which US has entered FTA Column 2: Rates from old Smoot-Hawley tariff rates (1932) - High rates discouraged trade - Applied today only to a few countries (Cuba, North Korea) - Shows why problems existed and why strong push for WTO

"The Julia" (1949)

Comptoir d'Achat et de Vente du Boerenbond Belge (Boerenbond) (plaintiff) arranged for the purchase and shipment of 500 tons of rye to Antwerp, Belgium from a seller, Luis de Ridder Limitada (Ridder) (defendant). Boerenbond made a full payment of $5,000 to Ridder's agent, Belgian Grain, and received the delivery order. In order to take delivery of the goods, a multi-step procedure was required. The delivery order would be given to Boerenbond's agent, along with money for freight charges. Both would be delivered to Belgian Grain, which would endorse the delivery order and return it to Boerenbond's agent. The delivery order would then be taken to Ridder's agent, Van Bree, who would keep the order and authorize delivery to himself. However, the rye would not be released from the ship until the captain issued a release document to Van Bree, who would then allow Boerenbond's agent to take possession. The ship never arrived in Antwerp due to a German invasion. Instead, the ship sold the rye in Lisbon, Portugal at a reduced price. Boerenbond demanded the return of the full $5,000, but Ridder would only agree to return the amount realized from the sale in Lisbon. In an arbitration dispute, Boerenbond claimed that there was a complete failure to perform on the contract. The umpire of the arbitration dispute found that Ridder had performed under the contract because the delivery order was delivered to Boerenbond. The court of first instance and the court of appeals upheld the umpire's ruling. Boerenbond appealed. In the international sale of goods, if the delivery of shipping documents is merely a preliminary step to performance under a C.I.F. contract, will title to the goods pass from the seller to the buyer? No. Under a C.I.F. contract, a seller's title to goods will not pass to the buyer upon the receipt of shipping documents, and tender of payment to the seller upon delivery of the documents is merely a preliminary step to performing the contract. Normally, when shipping documents are delivered pursuant to a C.I.F. contract, a seller has performed under the contract, and title to the goods has passed to the buyer. However, this is not true when delivery of the documents is merely a preliminary step to performanc

Tax Considerations

Conduct of IBT's is shaped by tax law: it is complex U.S. has treaties with 68 countries; share tax revenue and avoid double taxation Devise ingenious methods to minimize tax liability $3 Trillion is off-shore for tax purposes

Economic Nationalism (since 2016)

Countries are starting to focus more on internal trade, internal production, internal investments 2016; Donald Trump focused on USA; Economic Nationalist 2016; Brexit (UK withdrew from EU to focus on their own economy and trade and investments)

Disputes: your choice

Dispute arises and client indicates that it needs action and relief What are your client's options? Seek relief: - Court - ADR & Arbitration (ADR = alternative dispute resolution)

Basic International Transaction

Domestic (or face to face) sale v. international. Compare risks? what does seller want? what does buyer want? Risks: - Primary risk to seller? NOT getting paid - Primary risk to buyer? non-conforming goods (quality and quantity), or damage or theft during shipping - Other factors? Distance between parties & time zones Different laws and regulations Increased risks associated with transportation of goods Different cultures, countries, currencies, economic/political risks Transaction is essentially about how parties allocate these risks - Who bears risks at each step in transaction - and why?

European Union

EU is a *customs union*: common commercial and economic policy toward non-member states: common tariffs and customs requirements Common economic union - Customs union - Pillar One Common foreign and security policy - Pillar Two Common justice and home affairs policy - Pillar Three

Import classification Hypothetical

Everlast importing tools to China Tools are taken out of crates Some tools are sent to specialty tool manufacturers who "break down, reshape, and rebuild tools" as specialty tools Then these are sold as "Proudly made in US" Some tools incorporated into Everlast toolbox kit Sold as "Everlast Tool CO. Indiana, USA" - legal?? - Should have been marked "Made in China" when sent to tool manufacturers - Product marketing problem: because manufacturers are ultimate purchasers - Was there a *substantial transformation* for specialty tools? If so, then it should have been marked as China by the specialty manufacturers - Toolbox should be marked that *some* tools were made in China

Risk: Exogenous vs Endogenous

Exogenous: risks relating to external factors Endogenous: risks related to internal factors - more contracts result in breach due to external factors, not the two parties themselves

Mitsubishi Motors v. Soler (1985)

FACTS: - Dispute between Mitsubishi / CISA vs. Solar (distributor) - Distributor Agreement / Sales Procedure Agreement - Mitsubishi moved in federal court for arbitration and also filed request for arbitration with Japan Commercial Arbitration Association - Solar counterclaimed, alleging anti-trust claims - Federal Court of Appeals reversed District Court, which had ordered arbitration of all claims. Court of Appeals held anti-trust claims should be heard in court _________________________________________________________________________________________ ISSUE: - Whether statutory anti-trust claims are arbitral - "arbitrability" - Are anti-trust claims too important to be left to private arbitrators

Compare FOB (free on board) and CIF (cost, insurance, and freight)

FOB (free on board): Price to be paid: - Price includes only cost of goods and packing for transport. Does not include freight or insurance after goods "pass the ships rail" When payment made: - Not determined by FOB term, but cash on delivery is a constructive term unless credit is separately agreed Inspection of goods: - Buyer normally has right to inspection before payment Delivery: - Seller required to deliver goods toCarrier at place of shipment Risk of Loss: - Risk of loss shifts to Buyer as goods are delivered "on board the vessel" at port of shipment Title: - Pass to Buyer at time and place of shipment _________________________________________________________________________________________ CIF (cost, insurance, and freight) Price to be paid: - Price includes cost of goods, packing, freight and insurance to named destination When payment made: - Payment of full price due upon presentation of documents unless credit term agreed Inspection of goods: - Buyer has no right to inspect before payment Delivery: - Seller required to deliver goods to Carrier at place of shipment Risk of Loss: - Risk of loss shifts to Buyer as goods are delivered "on board the vessel" at port of shipment (even though Seller must procure insurance) Title: - Passes to Buyer at time and place of shipment

Transport Terms cont...

FOB: Free on board - A FOB (free on board) contract is where the seller has the duty to deliver the goods on board ship at his own expenses for carriage to the buyer. CFR: Cost and Freight - a legal term used in foreign trade contracts. In a contract specifying that a sale is cost and freight, the seller is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. CIF: Cost, Insurance, and Freight - an international commerce term and only applies to goods shipped via a waterway or ocean. With cost, insurance, and freight, the seller covers the costs, insurance, and freight of a buyer's order while in transit.

What is a relevant legal framework for international private business transactions today?

First and foremost, rely on *contract* - National (local) law by i. Choice (governing law clause), ii. private international law analysis, or iii. mandatory public law - Regional law (European Union - Directives/Regulations) - Multilateral (or bilateral) treaties (and/or customary international law) - Uniform codes / model codes (lex mercatoria) ; incorporated into contract

Transaction Pattern for Sale of Goods

Four logical parts to transaction flow: 1st: formation of sales contract (between buyer and seller) 2nd: arrange financing - i.e., letter of credit 3rd: make goods available & arrange shipment using intermediaries (carrier) - obtain bill of lading 4th: buyer pays for goods before they arrive by paying against documents of title, as called for in letter of credit, then takes delivery of goods

Country of Origin

From what country do the goods come for customs purposes? - Countries treat similar imported goods differently according to where they originate; thus, companies have incentives to circumvent the spirit of rules of origin - specific tests? Non-Preferential rules of origin *Substantive transformation test*: primary test - Country where last substantial transformation takes place - 'name, character, or use" test Preferential rules of origin *regional value contest test* (RVC) - eg; autos must be less than 75%

WTO vs GATT

GATT was set of rules with no institutional foundation WTO is a permanent institution with its own secretariat GATT was applied on a "provisional basis" WTO commitments are full and permanent GATT rules applied to trade in merchandise goods WTO covers trades in goods, services, IP, and investments

What subject matters can/do IBT's cover?

Goods, services, capital (investment), technology, IP Both tangibles and intangibles

Role of an IBT lawyer

Hallmark of private law: Parties have the freedom to contractually set their own freedoms between them Competence and ethics the lawyer is the *support* for the business

Polytek Engineering v. Jacobson Companies (1997)

If a contract containing an arbitration clause is incorporated in a purchase order, the seller agrees to the arbitration clause by accepting the purchase order. Polytek Engineering Co., Ltd. (Polytek) (plaintiff) negotiated with Jacobson, Inc. (Jacobson) (defendant) to purchase rubber-recycling equipment. Polytek was simultaneously in negotiations for the sale of the equipment to Hebei Import & Export Corp. (Hebei), to occur after the equipment was purchased from Jacobson. Polytek and Jacobson waited to enter an agreement until the contract between Polytek and Hebei was finalized. In February 1993, Jacobson sent a message to Polytek stating that it expected the Hebei contract to be attached to the purchase order that Polytek was to send to Jacobson for the equipment purchase. In May 1993, Polytek sent a purchase order to Jacobson with the Hebei contract attached. The purchase order incorporated the terms of the Hebei contract, and the Hebei contract contained an arbitration clause setting the forum in the Chinese International Economic and Trade Arbitration Commission (CIETAC). After receiving the purchase order, Jacobson refused to agree to a provision in the Hebei contract requiring a letter of credit be issued to Polytek, but Jacobson agreed to different letter-of-credit terms. The equipment was delivered to Hebei, but Hebei sued Polytek, claiming the equipment did not meet the agreed-upon specifications. Hebei was awarded damages from Polytek. Polytek then sought recovery against Jacobson for breaching the Hebei contract incorporated in the purchase order. Polytek was granted an award in an arbitration action by the CIETAC. Polytek then sued in the United States District Court for the District of Minnesota to have the Chinese arbitration award confirmed under the Federal Arbitration Act. Jacobson claimed that it never agreed to arbitrate disputes with Polytek. If a contract containing an arbitration clause is incorporated into a purchase order, does the seller agree to the arbitration clause by accepting the purchase order? Yes. If a contract containing an arbitration clause is incorporated in a purchase order, the seller agrees to the arbitration clause by accepting the purchase order. A United States

Globalization

In the economic sphere: The relatively free movement of goods, services, money, people, technology, information, and communication over the entire planet Since 2016: economic nationalism

*MIDTERM ENDS* Trade Law Considerations

International sale of goods: This is both an export and import of goods -who deals with these issues? - seller must comply with export laws - buyer must comply with all import laws most countries encourage exports, so export regulations less onerous *Imports generally more difficult - importer responsible for compliance with customs laws and regulations; examples?* - Tariffs: (i) ad valorem, (2) specific or (3) mixed - Import licenses - Country of origin for marking purposes - Quotas: quantitative restrictions, now subject to GATT 1994 - Currency controls - Non-Tariff Barriers: procedures, formalities & charges

JVC Co. of America v. US (2000)

JVC Company of America (JVC) (plaintiff) imported video camera recorders known as camcorders. The camcorders were electrical machines with two independent functions that worked together: a television camera and a videotape recorder. The United States Customs Service (Customs) (defendant) classified the camcorders under Harmonized Tariff Schedule of the United States (HTSUS) section 8525.30.00 as "television cameras," which were dutiable at a rate of 4.2 percent ad valorem (i.e., 4.2 percent of the value of the imported item). The explanatory notes to heading 8525 expressly provided that the heading covered television cameras and portable cameras with or without a built-in video recorder. The McGraw-Hill Encyclopedia of Science & Technology's entry on television cameras indicated that television cameras could be portable and combined with a detachable or built-in video recorder to form a camcorder. JVC challenged Customs' classification, asserting that the camcorders should have been classified under HTSUS section 8543.80.90 or 8479.89.90, which were dutiable at lower rates. If imported goods are prima facie classifiable under two or more tariff-schedule headings, should the goods be classified under the more specific heading? *RULE:* Yes, If imported goods are prima facie classifiable under two or more tariff-schedule headings, the goods should be classified under the more specific heading.

Norfolk Southern railway v. Kirby (2004)

James Kirby (plaintiff) contracted with International Cargo Control (ICC) to deliver goods from Australia to Alabama. ICC, which was an intermediary forwarding company, outsourced physical transportation of the goods to Hamburg Sud (Hamburg), a shipping carrier. ICC issued a bill of lading to Kirby, and Hamburg issued a bill of lading to ICC (Hamburg bill). The Hamburg bill incorporated the default rule of the Carriage of Goods by Sea Act, which limited Hamburg's liability for damages to $500 per package, and also contained a Himalaya Clause. This clause extended the $500 liability limit to Hamburg's agents and independent contractors. Hamburg hired independent contractor Norfolk Southern Railway Company (Norfolk) (defendant) to transport the goods by train once the shipment arrived in a port in Savannah, Georgia. During transportation en route over land by Norfolk, a train derailment caused $1.5 million in damage to the goods. Kirby brought suit against Norfolk based on tort and contract claims. Norfolk contended that its liability to Kirby was limited by the Hamburg bill. The district court granted partial summary judgment to Norfolk, limiting liability to $500 per package, and certified the decision for interlocutory review. The United States Court of Appeals for the Eleventh Circuit reversed, holding that the Himalaya Clause could not extend limited liability to Norfolk. The United States Supreme Court granted certiorari. Is a person who delivers goods to an intermediary forwarding company bound by limited-liability provisions contained in contracts entered into between the intermediary and a downstream shipping carrier? Yes. An intermediary forwarding company has the power to bind a cargo owner to limited-liability provisions that the intermediary enters into with a shipping carrier, even when those provisions extend to the carrier's subcontractors. Great Northern R. Co. v. O'Connor, 232 U.S. 508 (1914), established the general rule that when a cargo owner engages an intermediary for the shipment of goods, the owner's recourse against the shipping company is limited to the terms agreed upon by the intermediary and the shipping company. The rule established by Great Northern does not require a classic a

Statutory Interpretation: tools

Kawasaki (K Line) case involved Supreme Court engaged in statutory interpretation How to do this fast, efficiently and accurately? - Read the statute's plain language Look for on-point treatise addressing statute - Research and read cases that have interpreted statute's language - Review law review (or other) articles addressing the statute - Legislative history for the statute

Marine Insurance

Law of marine insurance remarkably uniform... - In CIF or FOB transactions, risk of loss passes to buyer once goods are "on board the ship" - so buyer is normally named "insured" - CIF: seller must arrange insurance on behalf of buyer in CIF transaction (see A5) - buyer (insured) is usually able to decide what scope of coverage (and will end up paying for it) - "minimum" insurance - covers contract price plus 110% - but does not extend to war, strikes, riots, etc. - "All risks" cover is broader - must pay higher premium - but still may not cover political risk coverage, war, riots, etc. - Law of marine insurance is quite uniform -influenced by London insurance underwriters - Marine Insurance Act 1906 - Institute Cargo Clauses, p 136 - US Supreme Court has stated US courts should look to English law

Dispute Resolution: advice to corporate/commercial lawyers

Look at every transaction from a perspective of what happens if a dispute - Time for dealing with possibility of dispute is at outset of relationship, NOT after dispute erupts Fundamentals: - Choice of law - Choice of forum - Choice of dispute settlement procedures - negotiation/mediation (ADR) court litigation or arbitration

****OVERARCHING GOAL OF IBT LAWYER****

Minimize risk while maximizing value (to your client) Setting the stage: What is relevant legal framework for international private business transactions? - First and foremost, rely on contract? - National (local) law? (Choice of law) (Public mandatory laws) - Regional law? - Multilateral (or bi-lateral) treaties - Uniform codes / model laws (lex mercatoria) Emerging law for IBTs is often an amalgamation - no clear distinction between domestic / international aspects of practice & sources

Tariffs and Most Favored Nation

Most favored Nation: Non-discriminatory treatment between products of WTO members (If France and US agree to lower the banana tariff, the countries must extend that lowered tariff to other WTO nations) National Treatment: Non-discriminatory treatment between imported and domestic products (Cannot implement other measures beyond the tariff to punish the foreign goods coming in)

End product of *mediation*?

New contract: settlement agreement If you don't reach an agreement during mediation, you just walk out. You do not lose anything or gain anything. Any settlement reached is legally binding Mediations are quick, cost effective, and successful (over 70% of cases settle) Informal and flexible process

Manufacturing tariffs hypothetical

Nihon Auto selling automobiles Nihon set up manufacturing facility in Mexico Nihon would import parts from Japan to take advantage of Mexico's low tariff for autoparts, assemble cars then ship the finished cars to US and Canada Plan to establish factory in France, import parts and assemble cars to sell in the 25 EU countries Issues for both parts? - Before cars can be shipped duty free into US, Nihon will need to meet the USMCA rules of origin - Tracing principle: no matter how much transformation, vakue of any non-originating material remains non-originating. Must meet RVC (net cost method) - France: pay a common external tariff on any imported parts, but then autos are sold duty free within EU countries. Compare vs. cost on finished car

North American Processing v. US (2001)

North American Processing Company (North American) (plaintiff) imported bovine fat trimmings that were 35 percent lean and 65 percent fat. The fat component of the trimmings adhered to the lean component. The United States Customs Service (Customs) (defendant) originally classified the import under Harmonized Tariff Schedule of the United States (HTSUS) heading 1502.00.00 as "fats of bovine animals," which was dutiable at a rate of 0.95 cents per kilogram. However, Customs subsequently reclassified the import under HTSUS heading 0202.30.60 as "meat of bovine animals, boneless, other," which was dutiable at a rate of 4.4 cents per kilogram. The explanatory notes to HTSUS chapter 2 indicated that animal fat adhering to meat was properly treated as meat. Additionally, United States Department of Agriculture (USDA) regulations defined "meat" as muscle of cattle, sheep, swine, or goats, "with or without the accompanying and overlying fat." The USDA also considered trimmings to qualify as "fat" only if the trimmings contained less than 12 percent lean. Webster's Dictionary defined "fat" to mean parts of animal tissues consisting mostly of greasy or oily matter. North American filed a protest with Customs to challenge the reclassification, but Customs denied the protest. Is imported merchandise properly classified under a tariff provision if the merchandise comes within the provision's terms as construed based on the tariff's language and the terms' common and commercial meaning? *RULE:* Yes, Imported merchandise is properly classified under a tariff provision if the merchandise comes within the provision's terms as construed based on the tariff's language and the terms' common and commercial meaning.

Is choosing the familiar governing law in an IBT always the solution?

Not always. You should never go with something you are unfamiliar with, but you should familiarize yourself (research) the potential of which law would be better suited for your side of the deal. Think: Maybe Ohio law is less helpful to you as the seller in a transaction to an Argentinian company than the Argentina laws are.

American National Fire Insurance v. Mirasco (2003)

On December 31, 1998, the M/V Spero set sail from Texas for Egypt, carrying containers of beef livers. Mirasco, Inc. (Mirasco) (plaintiff) had an insurable interest in the livers. The livers were purchased from I.B.P. Corporation (IBP). The shipment was insured by a marine-cargo insurance policy underwritten by America National Fire Insurance (National Fire) (defendant). On January 3, 1999, Egypt issued Decree #6, which banned the import of IBP's goods into Egypt. The M/V Spero arrived in Egypt on January 23, 1999. Egypt refused to allow the import of the livers, despite the fact that the ship had set sail before the issuance of Decree #6. The livers were returned and sold in the United States at a significantly lesser price than if delivered to Egypt. National Fire denied Mirasco's claim for losses under the insurance policy. Mirasco brought suit in the United States District Court for the Southern District of New York for payment under the policy. Both parties filed motions for summary judgment. Although goods covered by a marine-insurance policy are considered rejected even if there is no official final-rejection certificate issued by the destination county, is coverage excluded due to loss of market if the goods are sold in another country? No. Goods covered by a marine-insurance policy are considered rejected even if there is no official final-rejection certificate issued by the destination county, and coverage is not excluded due to loss of market if the goods are sold in another country. First, marine insurance that covers losses due to the rejection of goods from import by the destination county does not require a final-rejection certificate to be issued for the goods to be considered rejected. A rejection certificate is normally issued after a failed lab test and an unsuccessful appeal for the rejection. If

Legal framework: Sources of law

One of the most basic tasks for any lawyer engaged in IBT's is to determine what substantive law or laws apply to an IBT in order to advise clients and to structure transactions + Choosing *procedures* and *forums* for disputes

US Institutions

President: USTR Court of International Trade (CIT) International Trade Commission (ITC) Homeland Security US Department of Commerce US Treasury Department

Trade Law Considerations: Property-based controls

Property-based controls: what is the focus on? Export Control Act (ECA) Export Administration Regulations (EAR) International Traffic in Arms Regulations (ITAR) Commodity Control List (CCL) [Focus on "US Origin" goods or tech, not identity of exporter] - Produced in US or entered US customs territory - Foreign goods that incorporate US origins parts or tech - Consumer goods = EAR - Military goods = ITAR Applies to re-exports and deemed exports Prohibition also exists *if there is knowledge (or reason to know)* that goods are ultimately bound for embargoed destination.

Hypothetical: non-conforming goods?

Question: what happens if documents are in order, but when buyer picks-up goods at port of destination, they are nonconforming? Back to basics - must sue seller for breach of contract: - More complicated because seller is at a distance - Inspection certificate provided by neutral third-party can help - Due diligence in identifying suitable sellers continues to be important

Zuniga v. US (1993)

Refractarios Monterrey, S.A. (Refractarios) (plaintiff) produced kiln furniture in Mexico using raw materials from the United States. Specifically, Refractarios added dry clay and talc from the United States to water and dispersing agents to make casting slip, which was then placed into molds, dried, and fired in kilns. When Refractarios and F. F. Zuniga (plaintiff) sought to import the furniture into the United States, the United States Customs Service (Customs) (defendant) said that the furniture was dutiable at a rate of 7.5 percent. Refractarios and Zuniga argued that the dry clay and talc from the United States had been substantially transformed into a new and different article of commerce (i.e., the casting slip) during the manufacturing process and thus could be treated as materials produced in Mexico. Customs rejected that argument and denied duty-free status. For United States-originating materials to qualify as materials produced in another country, must there be a substantial transformation of the materials into a new and different article of commerce? *RULE:* Yes, For United States-originating materials to qualify as materials produced in another country, there must be a substantial transformation of the materials into a new and different article of commerce.

Kawasaki (The K-line case)

Regal-Beloit Corporation (Regal) (plaintiff) arranged for Kawasaki Kisen Kaisha, Ltd. and its agent "K" Line America, Inc. (K-Line) (defendants) to ship goods from China to the inland United States. A single through bill of lading was issued to cover both the overseas and the inland legs of the shipment. The bill of lading contained a forum-selection clause setting jurisdiction in Tokyo, Japan. The goods arrived in California by ship and were then loaded for rail shipment by the Union Pacific Railroad Company (plaintiff). During the inland rail transportation, a train derailment destroyed the goods. Regal brought suit for damages in California state court. K-Line removed the case to the United States District Court for the Central District of California and filed a motion to dismiss based on the forum-selection clause contained within the through bill of lading. The district court granted K-Line's motion to dismiss. The United States Court of Appeals for the Ninth Circuit reversed and remanded, holding that the rail shipment was subject to the Carmack Amendment (Carmack), 49 U.S.C. § 11706(a), which preempted the forum-selection clause. The United States Supreme Court granted certiorari. Is the domestic-rail transportation of goods in the United States under a single through bill of lading issued by a foreign carrier subject to the Carmack Amendment? No. The domestic-rail transportation of goods under a single through bill of lading issued by a foreign ocean carrier is not subject to Carmack. Under Carmack, a rail carrier may be a receiving rail carrier, a delivering rail carrier, or a connecting rail carrier. A receiving rail carrier obtains the shipped goods for domestic-rail transportation at the shipment's point of origin. If a shipment originates in a foreign country with an ocean carrier, there is no receiving rail carrier, because the goods are obtained at their point of shipment for ocean transportation, not domestic-rail transportation. This Court held in St. Louis, I.M. & S.R. Co. v. Starbird, 243 U.S. 592 (1917), that only a receiving rail carrier is required to issue a Carmack-compliant bill of lading. Pursuant to the text of Carmack, if Carmack does not require a bill of lading to be issued for

Bills of Lading

Reminder: three different legal aspects to bill of lading: 1st: B.L. is a *carriage contract* between shipper (almost always seller) and carrier for transport of goods (for a price) 2nd: it is a *receipt for goods* (and goods may be described with a greater or lesser degree of particularity - "CLEAN ON BOARD") - Therefore: carrier is contractually obligated not only to deliver goods at destination, but also to deliver goods as described in B.L. - unless carrier can and does disclaim these obligations 3rd: B.L. is a *"document of title"* in that person entitled to delivery of the goods is determined by B.L. - *Straight (non-negotiable) B.L.*: carrier obligated to deliver goods to person named in bill - *An "order" (negotiable) B.L.*: carrier obligated to deliver goods to person in possession (holder) of BL, but only if BL has been "duly negotiated" - i.e., endorsed by an authorized person who has obtained bill through chain of proper endorsements

Documentary sale: risks adressed?

Risk of non-payment? - letter of credit Risk that buyer will not obtain goods? - negotiable bill of lading (issued only after goods are loaded on boat - represents legal title to goods) Risk of damage to goods during shipment - marine insurance: insurance certificate Risk of non-conformity of goods? - Inspection certificate: quality / conformity of goods

WTO System (1995)

Single package system: - State wishing to become a member of WTO must agree to all of the multilateral agreements Today: 164 members GATT lives on as "GATT 1994" - amended and updated version of GATT 1947, which is integral part of WTO agreement and continues to provide key rules for international trade in goods. WTO administers 4 principles: 1) General Agreement on Tariffs and Trade (GATT 1994) 2) General Agreement on Trades in Services (GATS) 3) Agreement on Trade Related IP Rights (TRIPS) 4) Agreement on Trade Related Investment Matters (TRIMS) plus Dispute Settlement Understanding (DSU)

Mitsubishi Motors v. Soler (quimbee)

Soler Chrysler-Plymouth, Inc. (Soler) (defendant) entered an agreement to sell cars in the San Juan area with Chrysler International, S.A. (CISA), a joint venture involving Chrysler and Mitsubishi Motors Corporation (Mitsubishi) (plaintiff). The agreement contained an arbitration clause to resolve disputes in Japan. Soler canceled orders for approximately 1,000 vehicles because of a downturn in sales. Mitsubishi sued in district court to compel arbitration under the Federal Arbitration Act. Soler counterclaimed with claims under various antitrust statutes, including the Sherman Act. The district court ordered all claims to be arbitrated. The court of appeals reversed the district court's order to the extent it required the antitrust claims to be arbitrated. The appellate court adopted the holding of American Safety Equipment Corp. v. J.P. Maguire & Co., 391 F.2d 821 (2d Cir. 1968), which held that antitrust laws were not appropriate for arbitration. May claims under American antitrust laws arising out of agreements involving international transactions be arbitrated if the parties had agreed to a valid arbitration clause? Yes. Claims under American antitrust laws arising out of agreements involving international transactions may be arbitrated if the parties had agreed to a valid arbitration clause. The Federal Arbitration Act requires a court to determine whether there has been an agreement to arbitrate a dispute in light of the fact that federal policy favors arbitration. It is no longer the case that courts are skeptical of the ability of arbitration to resolve dispute fairly. It makes no difference that a claim one party seeks to enforce against the other party is based on statutory rights creating a private cause of action. The rights afforded by a statute are left intact even if the dispute is arbitrated, because it is merely the forum that changes in arbitration. If Congress had wanted to protect a party's right to enforce a statutory right in court, as opposed to through arbitration, there would be some indication of that intent in the text or history of the statute. Here, Soler's claims arise under the antitrust statutes. In ruling that Soler's claims cannot be arbitrated, the court of appeals reli

Country of Origin: tariff-shift test

Specified change in tariff classification - Shifts in classification from raw material to finished product "tariff shift requirement" [steel billets and bars are turned into pipes]

Summary: General Rules of Interpretation

Start with headings of HTSUS: *look at headings using common sense and commercial meanings and any relevant explanatory notes* Where goods can be classified under 2 or more headings: - Choose heading that is more specific; *relative specificity* - If 2 or more headings refer only to part of an item then classify goods according to *"essential character"* - If not possible to classify under 2 above tests, *then classify under heading that occurs last in numerical order*

Steel Coils v. M/V Lake Marion (2003)

Steel Coils, Inc. (Steel) (plaintiff) contracted to have coils of steel shipped from Russia to the United States. Lake Marion, Inc. (defendant), the owner of the ship M/V Lake Marion (defendant), which was operated by Bay Ocean Management, Inc. (Bay Ocean) (defendant), was chartered to ship the coils. However, the defendants failed to test whether the ship's hatches were watertight. The coils were damaged by sea water while in transit. The damage was determined to have been caused during transit because the bills of lading and a cargo survey noted the good condition of the coils at the time of loading. Additionally, tests were conducted on the coils once the ship arrived in the destination port, showing that the damage was caused by sea water. Steel brought suit for damages under the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1300, et seq., against the defendants. The district court entered judgment for Steel. The defendants appealed to the United States Court of Appeals for the Fifth Circuit, contending that the district court erred in applying the burden of proof and defenses under COGSA. In a suit for damages caused to goods in transit subject to the Carriage of Goods by Sea Act, may an international shipping carrier shift the burden of proof to the plaintiff to prove that the carrier's negligence was a cause of the damage? Yes. A plaintiff bringing suit for damages to goods subject to COGSA during shipment must make a prima facie case that the goods were in good condition when loaded and were in a damaged condition when unloaded from the ship. If a prima facie case is established, the defendant can shift the burden back to the plaintiff by proving either that (1) care was used to prevent the damage or (2) the damage was caused by one of the exceptions provided under COGSA. If one of the exceptions is proven, the plaintiff must show that the defendant's negligence was a cause of the damage in order to recover. Here, Steel has made a prima facie case by showing that the coils were in good condition at the time of loading based on various documents noting the condition of the cargo at the time of loading. Steel has proved that the coils were damaged at the time of unloading based on several surveys

Private Resolution of international disputes

Supposed business dispute has arisen and parties have not planned ahead - what issues might arise? - Choice of forum? - Concern: "rate to court house" ("forum shopping") - Multiple proceedings going forward simultaneously in different countries: "parallel litigation" - Choice of law? - Courts will engage in choice of law (conflicts of law) analysis - Jurisdiction? - Personal and subject matter jurisdiction?

What are INCOTERMS? What contractare they relevant to?

The Incoterms fall into 2 different groups: Group 1 - Incoterms that apply to sea and inland waterway transport only: - EXW Ex Works - FCA Free Carrier - CPT Carriage Paid To - CIP Carriage and Insurance Paid To - DAP Delivery at Place - DPU Delivered at Place Unloaded - DDP Delivered Duty Paid Group 2 - Incoterms that apply to sea and inland waterway transport only: - FAS Free Alongside Ship - FOB Free on Board - CFR Cost and Freight - CIF Cost, Insurance, and Freight

Five channels of economic exchange:

Trade in: - goods - services - transfer of technology/knowledge - FDI - digital trade

Tech Transfer

Transfer of technology and know-how from one company to another (often incorporating important IP) Tech payments rose over $300Billion since 1980 [royalties]

Relationship between Domestic & International Law

US Constitution Article VI - US Constitution, federal laws and treaties "the supreme law of the land" Treaties - two types 1) Self executing - no need to implementing legislation (e.g.,"CISG" - Convention on Contracts for International Sale ofGoods) 2) Non-self-executing - requires implementing legislation passed by Congress (e.g., WTO agreements) Conflict between treaty and federal statute - the one later in time controls

Trade Law Considerations: Person-based controls

US Regulation of exports ("export" broadly defined) Person-based controls: Department of Treasury, Office of Foreign Assets Control (OFAC) "Covered persons" applies to: - Companies organized under US law (including foreign branches and US subsidiaries) - US citizens and residents (even if living abroad) - Foreign companies owned or controlled by US company - any "person" in the US Explicit prohibition against evasion: Approving, facilitating, or supporting transaction to targeted country by restructuring contract or assigning performance to non-covered foreign firm

Anti-Boycott hypothetical

Universal Electronics was offered a multi-billion dollar contract to sell oil refinery services to Cuba Universal suggests that Cuba hire Universal (Indonesia); Universal has no ownership interest but several overlapping directors on Boards. ADVICE? - OFAC maintains trade and investment embargo against Cuba - Universal is "covered" person and has recommended Universal (Indonesia), an uncovered entity - Covered persons are prohibited from *facilitating* transactions with targeted countries, and "evasion" through restructuring transactions to avoid US jurisdiction - Several Universal directors are also directors of Universal (Indonesia); is Universal (Indonesia) controlled by Universal? - Universal director is "resident" of US - Cannot discuss deal

What is PIL? (private international law)

Using domestic conflicts of law principles to determine which country's law (country A or B) applies Consider a number of factors to make this decision: Choice of law Principles

Bills of lading

What are key contract clauses and what do they do? - Clause paramount: governing law clause - Responsibility clause - Himalaya clause - Exceptions clause Key issue: how does the validity of these contractual clauses stand in the face of COGSA? - When dispute is heard in another (foreign) forum or in arbitration, will judge or arbitrator apply COGSA or contract terms?

World Trade Organization

What is Most-Favored Nation status? - Extend same treatment given to any country to all countries - Countries agree to extend what was then called MNF (most-favorable nation status) to all other countries in GATT in 1951, President Truman revoked the MFN status from communist countries (soviet union in particular) National Treatment? - non-discrimination principle

Tariff Valuation

What is the price of the good against which the tariff is applied? Basic principles were spelled out in the GATT, Art VII: "actual value" is used: The value for Customs purposes could no longer be based on arbitrary or fictitious values; it has to be based on the actual value of imported merchandise (goods) or of like merchandise Where quantity is a factor, price should be related to comparable quantities What is actual value - the "transaction value"

Letter of Credit: purpose and requirements

What is the purpose of this document and who sent it? - Difference between contract for sale of goods and and contract for sale of documents? What documents does it require to be submitted? - Negotiate bill of lading - insurance policy - commercial invoice - [inspection certificate]

International Sale of Goods

White & Summers: "it is a sad fact that many sales contracts are not fully bargained, not carefully negotiated" International Transaction Context: risks of non-performance are greater. How to manage risks? Three basic contracts: 1) Sales contract [seller -> buyer] (state/domestic law / CSIG) 2) Letter of credit [seller -> buyer's bank] (UCP or UCC) 3) Bill of Lading [seller -> carrier] (COGSA / Pomerene Act) *compare*: open-account arrangements

What if carrier sinks to bottom of ocean and goods are lost- must bank still pay seller?

Yes! This reflects "independence principle" - Rights and obligations created by LC are independent of sales contract Why do we have "independence rule"? What problems if banks were required not to pay if there is problem in underlying performance of sales contract? - Delay - banks would be unwilling to pay until sales contract had been performed - High costs - LCs would become more expensive if banks had to investigate and be concerned with underlying contract performance - Document merchants - banks are not experts in every area of commercial contracts

Can you opt-out of CISG when making a contract?

Yes, but it must be a *CLEAR OPT-OUT* example that does NOT work: "This contract is to be governed exclusively by the laws of Illinois" This does not work because CISG is a federal law, so it technically is a part of the law in all states example of a GOOD opt-out: This contract is governed by Illinois law and NOT by CSIG" CSIG is self-executing, so it MUST be opted-out of to not apply

The Dell theory of conflict prevention

no two countries that are both part of the same global supply chain will fight a war as long as they are each part of that supply chain

Global trade trends

trade treaties + political changes + information technology + developing country advances + improved transactions = *explosion in trade*