International Business Transactions

What is a Gray Market Good?

"A gray-market good is a foreign-manufactured good bearing a valid U.S. trademark, that is imported without the consent of the U.S. TM holder." Unlike counterfeits and pirated goods, gray-market goods are genuine products and the market for these goods is lawful.

GRI 1

"Classification shall be determined according to the terms of the headings and any relevant section or chapter notes."

UCC s 1-105

"When a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this Act applies to transactions bearing an appropriate relation to this state"

Fighting Bank Against Arbitration

(0) Cancel the validity of the arbitration agreement. (1) Nullify/Vacate the award at the court at the seat of arbitration. This applies the national law on arbitrability. (2) Fight enforcement of the award, thus any decision by the arbitrators, at the enforcement court. This uses the Article 5 defenses. However, if you win in one enforcement court, that does not mean that you will win in the other enforcement courts.

Rules of Origin Tests

(1) "Substantial Transformation" Test (2) NAFTA Tariff Shift (3) Regional Value Content (RVC) (4) Generalized System of Preferences (GSP)

Prototypical Situations for Gray Market Goods

(1) (U.S. Owner of a Foreign Trademark). (2) (Affiliated Companies Under a Common Ownership): (i) U.S. Subsidiary; (ii) U.S. Parent (3) (Licensed Manufacturing Abroad).

Investment Arbitration Substantive Claims

(1) Full Protection and Security; (2) Fair and Equitable Treatment (3) National Treatment; and (4) Expropriation.

Types of Rates of Duty

(1) General (2) Special (3) Smoot-Hawley

CISG Article 7(1)

(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

Possible Red Flags for Fair & Equitable Treatment

(1) Inconsistency: One person says A, another says B; (2) Failure to act in a transparent manner, especially among administrative bodies; (3) Discrimination or arbitrary treatment; (4) Investor relief on de facto promises (vs the law as it is found by a host official), and the official then changed his mind; (5) Investor takes the law as he finds them: legitimate expectations at the time of investment, and then the law changes.

Determinations to Asses a Tariff

(1) The classification of the imported article; (2) The valuation of the article; and (3) The country of origin of the article.

Factors that do NOT breach Fair & Equitable Treatment

(1) There is an objective basis for this decision taken by the State. (2) No disproportionate impact on the foreign investor, as it affects both national and international alike. (3) The alleged right is not found in international or domestic law. (4) Failure to investigate your own conduct has resulted in a loss.

Article 25 of the ICSID Convention

(1) You must make a contribution to the host-state; (2) There must be a certain duration of performance of the contract; (3) You must participate in the risks of the transaction; (4) You must contribute to the economic development of the host state; AND (5) There is a certain regularity of profit and return.

Article V of the NY Convention

(1) it was under an incapacity at the time the agreement was made; (2) the arbitration agreement was not valid under the law which the parties have subjected it, or under the law of the country where the award was made; (3) the party was not given proper notice of the proceeding; (4) the award concerned an issue which did not fall within the arbitration agreement; (5) the arbitration panel was invalid; or (6) the award has not yet become final.

CISG Article 7(2)

(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principle on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

CISG Article 1(2)

(2) The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or information disclosed by, the parties at any time before or at the conclusion of the contract.

CISG Article 10(b)

(b) If a party does not have a place of business, reference is to be made to his habitual residence.

CISG Article 1(1)(b)

(b) When the rules of private international law lead to the application of the law of a Contracting State.

Affiliated Companies Under a Common Ownership: (i) U.S. Subsidiary Gray Market

(i) If A is a U.S. subsidiary of B, the foreign parent company and the owner of a foreign TM, and A manufactures and sells the goods in the U.S., but B also imports the goods into the U.S., or a third party does so.

Affiliated Companies Under a Common Ownership: (ii) U.S. Parent Gray Market

(ii) A is a U.S. parent and has established B, a foreign subsidiary, and B manufactures the goods abroad, but they are purchased abroad by a third-party who then imports them into the U.S.

Lever Brothers Co. v. United States

15 U.S.C. § 124 (Lanham Act § 42), which bars the importation of physically different foreign goods bearing a trademark identical to a valid U.S. trademark, regardless of the trademark's genuine character abroad of affiliation between the producing firms. Thus if there is a common ownership or control, they are still barred.

Common Control Exceptions

19 C.F.R. § 133.21(b) does not apply if: (1) Both the foreign and the U.S. TM or trade name are owned by the same person or business entity; or (2) The foreign and domestic trademark or trade name owners are parent and subsidiary companies or are otherwise subject to common ownership or control..

What is an "investment"?

2-step Process: (1) Look to the BIT for a definition of investment; AND (2) Look to the 5 factors in Article 25 of the ICSID Convention

Manifest Disregard

3 components to the manifest disregard standard; (1) Whether the law that was allegedly ignored was clear, and in fact explicitly applicable to the matter before the arbitrators. (2) If the law is clear and plainly applicable, was it improperly applied, leading to an erroneous outcome? (3) if the first two inquiries are satisfied, is there intentional disregarding of the law? Did the arbitrator know of the law's existence, its applicability to the problem, and intentionally disregard it?

Nationality of a "Legal Person" (Corporation)

3 possible tests: (1) The place of incorporation if the nationality; (2) Control Test: The nationality of the Shareholders leads to the corporation's nationality; (3) Management Seat Test: Where is management to be located? Similar to PPB.

Enforcement of Commercial Arbitration Awards

A Contracting State must recognize as binding an arbitral award. The United States has made a reciprocity declaration, where they must only recognize the award if the award was made in the territory of another Contracting State. The award must be enforced under the procedural rules of the territory where the award is relied upon, under the Convention's conditions, and the enforcement conditions must not be substantially more onerous than the conditions for enforcing a domestic award.

CISG Article 96

A Contracting State whose legislation requires contracts of sale to be concluded in or evidence by writing may at any time make a declaration in accordance with Article 12 that any provision of Article 11, Article 29, or Part II of this Convention... does not apply where any party has his place of business in that State. The U.S. has NOT done this.

Gita Sports Ltd. v. SG Sensortechnik

A FSC can be either mandatory (providing the designated forum with exclusive jurisdiction over any disputes), or permissive (providing the designated forum with jurisdiction over the parties, but not necessarily exclusive jurisdiction). As a general rule, a FSC will not be enforced as a mandatory selection clause without some further language that indicates the parties' intent to make jurisdiction exclusive.

Licensed Manufacturing Abroad Gray Market

A U.S. company licenses the manufacture of its products in a foreign country to B, who then imports the goods into the U.S., or sells the products to a third-party distributor who imports the goods into the U.S.

U.S. Owner of a Foreign Trademark Gray Market

A U.S. company purchases the U.S. rights to a foreign trademark from a foreign corporation. But then the foreign company begins to import the good into the U.S., thus creating a gray market for the goods that competes with the U.S. company's goods.

Regional Value Content (RVC)

A certain percentage of the value of the product must be attributable to a NAFTA country in addition to any applicable tariff shift test.

Refusing Recognition of an Arbitral Award

A competent authority in a country where recognition and enforcement of the arbitral award is sought may also refused recognition if it finds: (1) the subject matter is not capable of settlement by arbitration under the law of that country; or (2) Recognition or enforcement would be contrary to the public policy of that country.

CISG Article 11

A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.

Recognition and Enforcement of an Arbitral Award.

A party has three years after the making of an award to seek confirmation. Article V of the Convention lists reasons for why the recognition and enforcement of an award may be refused, if the party against whom it is invoked furnishes proof that:

Stabilization Clause

A stabilization clause freezes the law at that time.

Straight Letter of Credit

A straight letter of credit can run only to the named beneficiary, and not to any other endorser or purchaser of the draft and documents. This does not involve nominated banks, nor confirming banks.

Fair and Equitable Treatment under a BIT

A typical BIT spells out in detail what is meant by fair and equitable treatment and minimum standards of treatment. These include "full protection and security", providing police and security protection, and applicable customary law standards for the protection of aliens.

BITs and FDI

All BITs provide for admission of FDI in accordance with the party's rules and regulations.

Advising Bank

An advising bank, if hired by the issuing bank, has an obligation to make reasonable efforts to check the authenticity of the credit that it advises, but it has NO obligation to make payment under the credit

Assignment of Credit

An assignment of the credit mean that the assignee acquires only the right to receive all of some portion of the payment under the credit after all of the conditions for payment under the credit have been satisfied by the assignor or another party who is entitled to satisfy the conditions. This does not need to be expressly authorized by the terms of the credit.

CISG Article 95

Any State may declare at the time of the deposit of its instrument of ratification... that it will not be bound by Article 1(1)(b).

Circular/Open Negotiation Credit

Anyone can take the credit. The language used is: "We hereby engage with drawers, endorses, and bona fide purchasers..."

CISG Article 14

Article 14: Offer has 3 requirements: (1) A contract addressed to one or more specific persons; (2) An offer is sufficiently definite (indicate goods, mention of quantity or price); and (3) Indicates the intention to be bound If the three criteria above are not met, this is merely an invitation to make an offer.

CISG Article 16

Article 16: Revocation May be revoked before dispatched acceptance. But, it CANNOT be revoked if: (1) It indicates that it is irrevocable; and (2) There is Reasonable and Reliance

CISG Article 18

Article 18: Acceptance ("Assent") Silence does not in and of itself = acceptance Effective when it reaches the offeror Not effective if not reaching in time Oral Offers must be accepted immediately Past dealings can modify these rules.

CISG Article 19

Article 19: Alterations/Modifications of the Contract Different terms = rejection and counter-offer. Non-material altering is not a rejection. Acceptance of non-modified terms = acceptance Clarification of material terms is NOT a material altering.

Enforcement of ICSID Awards

Article 53(1) of the ICSID Convention provides that ICSID awards shall be binding on all parties and shall NOT be subject to any appeal or to any other remedy except those provided in the Convention.

Remedies to ICSID Awards

Article 53(1): remedies are limited to those in the ICSID Convention, NOT national law. These remedies are limited to: annulment, revision, and interpretation of an award.

CISG Article 15

Articles 15: Withdrawal Effective when it reaches the offeree. May be withdrawn if before or at the same time as the offer reaching the party. (This is the opposite of the mailbox rule.)

Prime Start Ltd v. Maher Forest Products Ltd.

Because not all of the parties are from countries that signed the CISG, the CISG cannot apply to this dispute, even if a traditional choice-of-law analysis leads to the application of the law of the United States.

Mode of Transportation for COGSA

COGSA on its own applies only to ocean-travel, but you CAN make it apply elsewhere.

New York Conflict of Laws

Conflicts of Law questions in New York is "the law of the jurisdiction having the greatest interest in the litigation will be applied and that the facts or contacts which obtain significance in defining state interests are those which relate to the purpose of the particular law in conflict." Basically, NY courts balance NY's interest in having NY law apply against a foreign state's interest in having foreign law apply. Kristinus v. H. Stern Com. e Ind. S.A.

Harmonized Convention (HTSUS)

Consists of 97 chapters covering all goods. This is a harmonization of taxonomy and classification, but not of the duties.

Hanil Bank v. PT Bank

Contains the Beyene Insignificant Variations concept. Also, even if a party is no longer involved in the contract, so they have already been paid, nonconforming documents with a significant spelling error can still prevent the need to pay others based on these documents.

New York Convention

Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This is enforceable in the U.S. by the Federal Arbitration Act (FAA). This governs disputes regarding arbitration agreements between parties to international commercial transactions.

Generalized System of Preferences (GSP)

Courts first apply the "substantial transformation" test, and then impose a RVC requirement, where the RVC is 35% regional value contest.

Century Importers, Inc. v. United States

Customs determines the value of imported merchandise by looking at the transaction value, which is "the 'price actually paid or payable for the merchandise.'" This is usually the invoice price. But Century's mistake was not a clerical error or a mistake of fact, but was an error or law, and thus they acted negligently.

19 C.F.R. § 133.21(b)

Customs recreated a regulation (19 C.F.R. § 133.21(b)) clarifying that "foreign-made articles bearing a TM identical with one owned and recorded by a citizen of the U.S. or a corporation or association created or organized with the U.S. are subject to seizure and forfeiture as prohibited importations."

Commercial Arbitration Agreement

Each Contracting State shall recognize an agreement in writing if there is a legal relationship. The U.S. requires that the Convention applies only to differences arising out of commercial legal relationships. A court of a Contracting State, at a party's request, shall order arbitration "unless the agreement is null and void, inoperative, or incapable of being performed."

Clause Paramount

Even if COGSA would NOT normally apply to that carriage, you can incorporate it.

Himalaya Clause

Extends COGSA to the different parties to the transaction, such as to those who take the goods off the boat.

Business Problems and Expropriation

Feldman v. Mexico Not every business problem experienced by a foreign investor is an indirect or creeping expropriation. Just because an activity is now less profitable or even uneconomic to continue, this does NOT mean that there is an expropriation.

National Treatment Analysis

Feldman v. Mexico: (1) Which domestic investors, if any, are in "like circumstances," with the foreign investor; (2) Whether there has been discrimination (de facto or de jure) against the foreign investor; AND (3) The extent to which the different treatment must be demonstrated to be a result of the foreign investor's nationality. There MUST be a nexus between the discrimination and the status as a foreign investor.

Multiple Substantive Claims

For International Investment Arbitration, you can file as many substantive claims as you would like.

NAFTA Article 1102

For National Treatment, NAFTA Article 1102 suggests that it is sufficient to show less favorable treatment for the foreign investor, than for the domestic investor in like circumstances. But there MUST be a nexus between this discrimination and being foreign.

Presentation Under a Straight Credit

For a straight credit, presentation does not occur until the negotiating bank presents the documents to the issuing bank. The beneficiary must, therefore, ensure that there is enough time for the drafts to reach the issuing bank before the expiration of the credit.

GRI 3(c)

For goods that are NOT classifiable under either GRI 3(a) or 3(b), GRI 3(c) directs that such goods be classified "under the heading which occurs last in numerical order among those which equally merit consideration." Better Home Plastics Corp. v. United States

CISG Article 10(a)

For the purposes of this Convention: (a) if a party has more than one place of business, the place of business in that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract.

Direct Expropriation

Forcibly taking tangible or intangible property by state authorities, usually with the intent to transfer it to someone else.

M/S Bremen v. Zapata Off-Shore Co.

Forum-Selection Clauses (FSC) are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be "unreasonable" under the circumstances, or violating public policy of the forum. b. But a contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or judicial decision.

General Duty

General reflects the rate that is applied to more imports from other WTO countries or contracting parties to the General Agreement on Tariffs and Trade (GATT). This is the rate given to most developed countries.

Finding a Forum-Selection Clause Unreasonable

Gita Sports Ltd. v. SG Sensortechnik A FSC is unreasonable if: (1) their formation was induced by fraud or overreaching; (2) the complaining party will for all practical purposes be deprived of his day in court, because of the grave inconvenience or unfairness of the selected forum (procedural differences and costs of litigation are insufficient); (3) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy ("A" remedy, not the same remedy); or (4) the enforcement would contravene a strong public policy of the forum state.

Responsibility Clause

Gives COGSA legs. It allows COGSA to apply in land if it is properly incorporated into the bill of lading.

GRI 3(b)

Goods that are NOT classifiable under GRI 3(a) are classified by the "component which gives them their essential character." Better Home Plastics Corp. v. United States

Manifest Disregard Prong (2) Notes

If an arbitral award contains more than one plausible reading, manifest disregard cannot be found if at least one of the readings yields a legally correct justification for the outcome. Even where explanation for an award is deficient or non-existent, we will confirm it if a justifiable ground for the decision can be inferred from the facts of the case.

NAFTA Tariff Shift

If an article enters a NAFTA country under one HTSUS tariff classification and then leaves the country under a different HTSUS tariff classification, then the Tariff Shift Test will apply. If the tariff classification has changed, or "shifted", then the product is deemed to be a product of the second nation, and enters under that country's rate of duty.

GRI 3(a)

If goods are prima facie classifiable under two or more headings, the court should determine which heading is the most specific, comparing only the language of the headings and NOT the language of the subheadings. JVC Co. of America v. United States

Forestal Guarani S.A. v. Daros International Inc.

If one party has made an article 96 declaration, and the other has not, we must conduct a choice-of-law analysis based on private international law principles to determine which state's law governs contract formation, and then apply that law to a party's claim.

Ways to void a Forum Selection Clause

If the FSC is "unreasonable" under the circumstances, such as fraud, undue influence, or overweening bargaining power. Or if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or judicial decision.

Issuing Bank NOT reimbursing Confirming Bank

If the confirming bank has properly paid the credit, then the issuing bank must reimburse the confirming bank, and if they fail to do so, then they are liable for wrongful dishonor.

Transfer of Credit

If the credit expressly so provides, it may be transferred, i.e., the transferee acquires the right to perform all or some of the obligation of the credit, to receive all of a portion of the payments due under the credit, and to enforce the right of payment under the credit.

Negotiation Letter of Credit

If the credit is a negotiation credit, the undertaking from the bank runs to the beneficiary and to any nominated (authorized) bank that negotiates or purchases the credit.

Nominated Bank

If the issuing bank authorizes another bank to pay under the letter of credit, they can do so for a fee, unless they are a confirming bank, in which case they MUST do so.

Issuing Bank's Improper Payment

If the issuing bank makes an improper payment, such as for paying the letter of credit against nonconforming documents, then the issuing bank loses its right to receive reimbursement from the buyer-applicant.

Issuing Bank Refusing to Honor a Demand

If the issuing bank refuses to honor a demand for payment that complies with the terms of the credit, then the issuing bank may be liable to the presenter of the draft for wrongful dishonor.

Confirming Bank making wrongful payment

If, however, the confirming bank has made a wrongful payment, then the confirming bank loses the right to receive reimbursement from the issuing bank.

Manifest Disregard Prong (3) Notes

In determining an arbitrator's awareness of the law, we impute only knowledge of governing law identified by the parties to the arbitration. Absent this, we will infer knowledge and intentionality on the part of the arbitrator only if we find an error that is so obvious that it would instantly be perceived as such by the average person qualified to serve as an arbitrator.

Country of Origin Marking

In order to import goods into the U.S., goods must be marked with a country of origin marking. This does not have anything to do with the assessment of the tariff.

Restatement 2d of Conflicts s 188(2)

In the absence of an effective choice of law provision by the parties, the contacts to be taken into account to determine the law applicable to an issue include: (a) the place of the contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation, and place of business of the parties. These contacts are to be evaluated according to their relative important with respect to the particular issue. This must be made with regard to each issue concerning the contract.

Filanto S.p.A. v. Chilewich International Corp.

In this case the "agreement in writing" requirement of the Arbitration Convention must be read in light of, and with reference to, the substantive international law of contracts embodied in the CISG.

Irrevocable Letter of Credit

Irrevocable letters of credit will be subject to expiration if not exercised within a stated period.

Maurice O'Meara Co. v. National Park Bank of NY

It does NOT matter if the goods do not conform, all that matters is if the documents conform. If there is no quality of assurance required in the letter of credit, there this is NOT an issue for the bank.

Requirements if part of the New York Convention

It specifically requires courts to recognize any "agreement in writing under which the parties undertake to submit to arbitration." The term "agreement in writing" is defined as "an arbitral clause in a contract or an arbitration agreement signed by the parties or contained in an exchange of letters or telegrams."

"Reasonable Expectations" for Fair & Equitable Treatment

LG&E Corp. v. Argentina P 130: (1) Expectations based on conditions offered by the host state at the time of an investment; (2) Expectations may NOT be established unilaterally and read in; (3) Expectations must exists and be enforced by law; (4) If infringed, there is a duty to compensate, absent a state of necessity; (5) The expectations CANNOT ignore business patterns, such as market fluctuations or other business risks.

State of Necessity

LG&E Energy Corp. v. Argentina State of Necessity must be in the BIT and under international law The U.S. finds that there must be three concurrent circumstances to claim this defense: (1) A danger to the survival of the State, and not for its interests; (2) The danger must not have been created by the acting State; (3) The danger should be serious and imminent so that there are no other means of avoiding it. Article 25 requires that the act must be the only means available to the State in order to protect an interest The interest subject to protection also must be "essential" for the State. "Essential" is not limited to those interests referring to the State's existence.

When can a party bring Investment Arbitration

Lanco International, Inc. v. Argentina (1) Look to the BIT to see if there is an investment dispute. (2) Then we look to Article 25 of the ICSID Convention

Revocable Letter of Credit

Letters of credit can be revocable (capable of termination at any time by the applicant).

High Bar of Manifest Disregard

Manifest Disregard is a very high bar, and has been interpreted to mean more than error or misunderstanding with respect to the law. A court will not set aside an arbitration panel's award because of an arguable difference regarding the meaning or applicability of laws urged upon it. Misconstruing a contract is not open to judicial review.

Methods for Regional Value Content (RVC)

Methods: (importer can choose either) (1) Transaction Value Method: 60% or more of the transaction value of the product must be attributable to a NAFTA country. (2) Net Cost Method: All of the costs of producing the product, including labor, materials, etc., 50% of the net cost of the product must be attributable to a NAFTA country.

Fair & Equitable Treatment

Model Article 5(2)(a) Violating an investor's legitimate-backed investment expectations. This is similar to a Takings Clause and we use a domestic company as a point of comparison.

Full Protection and Security

Model Article 5(2)(b) Incorporates customary international law and puts it into a treaty. Failure to exercise due diligence from the police damaging our property. This must be in the normal procedures of the country, but we look to CIL instead of national law. This is generally causing liability by an omission: what did you not do when you had an obligation to do it?

National Treatment

Model BIT Article 3 Foreign Investors CANNOT be discriminated against compared to their domestic counterpart. (1) The treatment of the foreign investor must be compared to that of the domestic competitors in the same market/section; AND (2) Differences are presumptively bad unless a government nexus justifies this, such as a national policy that: (i) does not facially distinguish domestic and foreign competitors; and (ii) does not otherwise unduly undermine that trade regime.

Language specifying which type of Bill of Lading

Non-negotiable: The Bill of Lading lists a specific person; Negotiable: "To Order of Shipper."

Applying the GRIS of the HTSUS

North America Processing, Co. v. U.S.: We must apply the GRIs in numerical order.

Determining Classification for Tariffs

North American Processing Co. v. United States. Two-Step Process for determining Classification: (1) Ascertaining the proper meaning of specific terms in the tariff provision; and (2) Determining whether the merchandise at issue comes within the description of such terms.

International Investment Arbitration

One party is a private party (foreign investor), and the other is a sovereign state. Unlike commercial arbitration, the alleged violation is one of international law, typically promises in an investment treaty.

Acceptance Credit

Payable within a stipulated period of time, such as 60 days. The beneficiary submits a time draft, which requires payment by the date specified in the draft.

United Technologies Int'l v. Malev Hungarian Airlines

Plaintiff provided an opportunity to choose a certain type of engine or jet engine at the time of the acceptance of its offer. Because these offers were for alternative options, there was not the requisite specific for an Offer under Article 14. Thus there was no sales contract established between the Parties.

Tariff Product Classification

Product Classifications get a 4-digit "subheading". First 2 numbers are the chapter. The next 2 are the grouping.These first 4 numbers are the heading. The next 2 add specificity

Zuniga v. United States

Rules of origin dictate which classification of rates of duty we get. A substantial transformation occurs "when an article emerges from a manufacturing process with a name, character, or use which differs from that of the original material subjected to the process."

Smoot-Hawley Duty

Smoot-Hawley, represented under Column 2, represent the old tariffs in the period leading to WW2. These rates generally only apply to pariah nations. This column is generally referred to as the "statutory rates".

Special Duty

Special rates are for countries with which the U.S. has a free trade agreement (FTA). These rates are lower than the general rate, and are often zero, so the imports enter the U.S. duty free.

Class Arbitration

Stolt Nielsen (SCOTUS) SCOTUS reversed stating that a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.

Amco Ukrservice v. American Meter Co.

The CISG does not apply to joint venture agreements, distributorship agreements, or otherwise "framework agreements", but only sales contracts.

What parts of the contract are governed by the CISG?

The CISG governs two basis aspects of the contract: (1) Formation of the Contract; and (2) Obligations of the parties to the contract. But these can be excluded through an Article 92 declaration.

CISG Article 1(1)(a)

The Convention applies to the contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States.

Stolt-Nielsen SA v. AnimalFeeds Int'l Corp.

The FAA (§ 10(a)) allows vacatur of an arbitral award if any of the following is met: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. Or Common-law "Manifest Disregard"

Polytek Engineering Co., Ltd. v. Jacobson Companies

The New York Convention requires a court to conduct a four-part inquiry when deciding whether to confirm an award: (1) Is there an agreement in writing to arbitrate the subject of the dispute? (2) Does the agreement provide for arbitration in the territory of the signatory of the Convention? (3) Does the agreement arise out of a legal relationship whether contractual or not, which is considered as commercial? (4) Is a party to the agreement not an American citizen, or does the commercial relationship have some reasonable relation with one or more foreign states?

Urquhart Lindsay v. Eastern Bank

The Sales Contract is between the Buyer and Seller. The Letter of Credit is between the Bank and the Beneficiary. They are two separate documents and we do not impute the former into the latter. The Bank must accept the invoices as correct if they are facially correct, and any dispute i the goods is between the buyer and seller.

Policy behind Country of Origin Marking

The U.S. believes that consumers have the right to know the country of origin for consumer protection purposes.

Issuing Bank

The applicant's bank is the issuing bank, and will honor the letter of credit against the presentation of a specified set of documents (typically a bill of lading, commercial invoice, insurance certificate, packing list, etc.). For doing so, the issuing bank will be repaid, plus a fee, by the applicant.

Payment Credit

The bank must honor the draft immediately. The beneficiary submits a sight draft payable instantly. UCP 600 Articles 14(b) and 15(a) allow the bank 5 banking days to do so.

Payment Under a Negotiation Credit

The beneficiary submits a draft to a nominated bank, and the draft will usually be drawn on the issuing bank (not the nominated bank) and will be made payable to the beneficiary. The nominated bank will then purchase the draft from the beneficiary who endorses it to the nominated bank. The nominated bank is now the beneficiary. This is then forwarded to the issuing bank who must purchase the drafts.

Confirming Bank

The confirming bank independently assumes all of the obligations of the issuing bank by adding its own undertaking that it will pay the seller upon the presentation of documents.

Bestfoods v. United States

The federal marking statute requires articles of foreign origin imported into the United States to be marked in a conspicuous manner to indicate to an ultimate purchaser the English name of the country of origin of the article. There is the "de minimis exception", where reporting is not required if less than 7% of the total overall value of the good (or 10% of the value for a good of Chapter 22 in the Harmonized System) is foreign material, but this exception is generally not applicable to most agricultural products.

Quality King Distributors, Inc. v. L'anza.

The first-sale doctrine in 17 U.S.C. § 109(a) applies to the first sale of goods, and any subsequent purchaser, whether form a domestic or from a foreign reseller, is obviously an "owner" of that item, and cannot be barred from importing goods (and later reselling them) under § 602(a) (which bars importation into the U.S. without the authority of the copyright owner, of copies of the work that have been acquired outside the U.S.).

Letter of Credit Definition

The letter of credit is an undertaking (i.e., a contract) by the issuing bank to honor drafts drawn on it if the draft is accompanies by specified documents.

Washington Convention

The other name for the ICSID Convention

CISG Article 6

The parties may exclude the application of this Convention, or subject to Article 12, derogate from or vary the effect of any of its provisions.

Beneficiary Definition

The party entitled to payment under the credit is the beneficiary (usually the seller).

Applicant Definition

The party establishing the credit is the applicant (usually the buyer).

c. Wena Hotels, Ltd. v. Arab Republic of Egypt

The purpose of the BIT is to expand jurisdiction in cases where a company incorporated in the host State is controlled by nationals of the non-host State, in accordance with Article 25(2)(b) of the ICSID Convention. They expand ICSID jurisdiction by permitting parties to a dispute to stipulate that a subsidiary of a national of another contracting state which is incorporated in the host state (and therefore arguably a 'local national') will be treated itself as a national of another contracting state.

Restatement 2d of Conflicts s 188(1)

The rights and duties of the parties with respect to an issue int he contract are determined by local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties.

Back-to-back Credits

The seller can set up a back-to-back credit by using the credit established by the buyer as the basis for a second letter of credit. The documents of the second letter of credit must be tailored to meet the requirements under the first letter of credit.

Ad Valorem Tariffs

The three possible rates of duty are all expressed as ad valorem tariffs, i.e., a percentage of the value of the imported article.

Transaction Value

The touchstone test for determining the value of the import, which will serve as the basis to which the applicable rate of duty will be applied, is the "transaction value," defined as the price actually paid or payable for the goods at the time of exportation.

Exceptions Clause

There are general exceptions for liability that you can include in your insurance provisions, such as for theft or piracy. The Hague-Visby Rules state that there are certain things that are ALWAYS exempt.

Beyene Insignificant Variations

There could be insignificant variations that would NOT relieve the issuer to pay. These must be unmistakably clear despite a typo: "Smithh" vs. "Smith," is okay, but "Sofan" vs. "Soran" is too different.

Defenses for Full Protection and Security

There is no defense that you did not protect your own people as well, as there is no point of comparison for a domestic. But State of Necessity is still a defense.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.

There is no presumption against arbitration of statutory claims. National courts still have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed. Article V(2)(b) of the Convention allows a court to refuse if it would be contrary to the public policy of that country.

b. AAPL v. Sri Lanka:

There is no strict liability stand under ICSID, but there was no full protection and security as the nation did not warn the company. This is a due diligence standard set by customary international law.

Lanco International, Inc. v. Argentina

There must be consent to go to ICSID, and this consent must be in writing, and once given, it may not be withdrawn unilaterally. The investor consented by going to ICSID, and Argentina consented by signing the BIT which said they would go to ICSID. The dispute must be legal in nature and arise directly from an investment

"Substantial Transformation" Test

This is a subjective test as there is room for discretion. Under U.S. law, a product has been substantially transformed when it is transformed into a new and different article having a distinct (1) name, (2) character, OR (3) use. The country where the LAST substantial transformation takes place is the country of origin.

Standby Letter of Credit

This is used to guarantee the performance of some obligation.

Documentary Credit

This provides a mechanism for payment.

Tariff Act s 526 of 1930

This statute prohibits importing: "into the U.S. any merchandise of foreign manufacture if such merchandise... bears a TM owned by a citizen or, or by a corporation or association created or organized within, the U.S., and registered in the PTO by a person domiciled in the U.S.,... unless written consent of the owner of such trademark is produced at the time of making entry."

J.H. Rayner and Co, Ltd. v. Hambros Bank

Though terms may be synonymous, or just as good, the documents are still NOT conforming, and thus the letter of credit need not be paid on. There must be EXACT compliance, there is no room for documents which are almost the same, or will do as well. Nor are banks required to have special knowledge that the two terms are synonymous. If the buyer chooses certain words, then the bank cannot just ignore that. They MUST accept the terms.

Expropriation

Two Types: (1) Direct Expropriation (2) Indirect ("Creeping") Expropriation

Independence Principle

UCP-600 Article 4(a): The letter of credit is independent from the underlying sales contract. See Urquhart and Maurice O'Meara.

Strict Compliance Principle

UCP-600 Article 5: The documents submitted for payment must conform to the terms of the credit. See J.H. Rayner and Hanil Bank.

CISG and Market Analyses

UNCITRAL CLOUT Case 122 The agreement to prepare a market analysis is not a sale of goods within the meaning of the CISG.

CISG and Software

UNCITRAL CLOUT Case 131 The CISG applies to software

Presentation Under a Negotiation Credit

Under a negotiation credit, the submission by the beneficiary of the draft and documents to the nominated bank before the expiration of the credit satisfies the presentation requirements.

Payment Under a Straight Credit

Under a straight letter of credit, the beneficiary submits a draft to the issuing bank, and the issuing bank must purchase the draft (i.e. pay the face amount) from the beneficiary if the documents comply with the terms of credit.

What is NOT governed by the CISG?

Validity of the contract, third-party rights, and property rights in the goods are not governed by the CISG, and must instead be governed by another substantive law. This substantive law, if not clarified in the contract, will require courts to do a choice of law analysis.

Nationality of a Natural Person

We simply ask where they are from.

Effect of the CISG if applicable

When the CISG applies, it displaces domestic law. For the United States, the CISG often displaces the UCC in international sales contracts. The CISG is mandatory and default, but parties can choose not to apply it, but they must do it expressly. This is done via CISG Article 6.

New Jersey Conflict of Laws

Which forum has the most significant relationship with the parties and the contract? They have adopted the principles in § 188 of the Restatement (Second) of Conflicts of Laws.

Letter of Credit as Negotiable Instrument

While this is a straight credit, it is still a negotiable instrument, which means that an parties can choose to purchase it, but the issuing bank need not repay them. Thus they will reduce the fee so they will pay less than the face value of the credit.

Creeping Expropriation

You may still retain title to the property and assets, but something has happened that has reduced your enjoyment of the property. This is generally for regulator issues.

AMT v. Zaire

Zaire's police caused damage post-riots.

FAA § 202

§ 202 covers any commercial arbitration agreement or award "unless it is between two United States citizens, involves property located in the United States, and has no reasonable relationship with one or more states."

Authorization to Compel Arbitration

§ 206 of the Convention gives broad authority to the district court to compel arbitration, even if this is outside of the United States. iBut this applies only if the arbitration agreement identifies a place for the arbitration. The district court cannot select an arbitral forum when the agreement fails to do so, nor can a court order the parties to arbitrate in a location they did not designate.