Legal 4900 Roessing - Exam 3

value added tax (VAT)

a tax on the value added at every stage of the production process

gray market goods

- aka parallel goods - products imported back into the US

consolidated screening list

- searchable online database - list of certain individuals, groups, or entities identified by the government who it is unlawful to transfer any controlled item to

notification-registration

- system more open to technological transfer - harder to enforce by less regulated countries

geographical indications

where a product, particularly wine or liquor, is marketed by reference to a geographic region

Export Control Classification Number

give the reasons for control for each (control list and country chart) and tell whether a license is required for export to specific countries

comity

good relations

active investment

the investor having an ownership interest in a foreign business either as a foreign branch or as a subsidiary

foreign direct investment (FDI)

the investor owns and actively controls the productive assets of ongoing business concerns in a foreign country

buy-back agreement

the provider of the equipment or technology used in manufacturing will receive, as its payment, a portion of the goods manufactured by the supplier's equipment of the factory in which the equipment is installed

deemed export

the release or transfer of any item subject to control, including technology or software, to a foreign person in the united states

political risk

the risk that profits will be affected by changes in the host country's political structure in instability

inconvertibility risk

the risk that the government of a country with "soft currency" will hinder the US entrepreneur from trading the foreign currency back to US dollars

language politics

the situation, found in regions of a few countries, where laws require that companies conduct business in a certain language

nationalization

the taking of an entire industry or natural resource as part of a plan to restructure the nation's economic system.

diversion

the unlawful transfer, transshipment, rerouting, or reexporting of controlled goods or technology from one destination to which the goods or technology were legally shipped to another destination or foreign person who has not been licensed to receive the items

foreign policy controls

these controls are used to promote the foreign policy goals of the US

typical key motivation for FDI

to take advantage of host country's natural; or human resources

license exception

an authorization to export without a license

political risk insurance

inconvertibility insurance is a type of this - insuring for the risk that the FDI may have based on the political wellbeing of the country - the anticipated increased marginal returns must be higher than the premium on the insurance in order for the FDI to be justifiable

electronic export information

an electronic filing required for each export shipment leaving the US

reinsurance treaty

agreement among insurance companies that spreads the risk among its members

validated end user program

allows qualified exporters to preapprove shipments to foreign trusted customers, business partners, and subsidiaries of American companies of certain high technology or dual use items without the need for individual export licenses

soft blockages

delays in processing conversion requests by the local authorities

Prior approval

intrusive regulatory scheme of IPR transfer, government decides what is allowed

Traditional theory

prohibits all takings of foreign property

trade creditors

the entities that sell supplies or services to the venture

export

"actual shipment or transmission" out of the united states in any manner, or transferring of technology or software to a foreign person in the US

Geographical Limitations

- When the licensor agrees to provide services to facilitate the anticipated activities, such as assistance in setting up an assembly line or other training and technical support - this is one way it can restrict the licensee's use of the transferred IPR. e.g. within a specific nation

counterpurchase agreement

- a common type of countertrade - involves the sale of goods to a buyer, often a foreign government, which requires as a condition of the sale that the seller buy other goods produced in that country

political risk analysis

- a form of proactive management - the enterprise retains a firm or its own personnel to analyze a host country's risk of nationalization/expropriation as it would study any other business problem

net book value

- a measure of compensation - this value reflects the tax related depreciated cost of assets without regard to whether there has been true depreciation in value

gray market

- aka parallel trade - importation of merchandise produced and sold abroad and then imported back into the US for sale in competition with the US trademark owner - legal to sell, but intended for a different geographical region - ex: international versions of textbooks

profit margin preservation provisions

- aka unitary index adjustment factors - the price or payment to the foreign investor will be adjusted periodically to maintain the same profit margin

countertrade

- another popular way of dealing with the inability to convert currency is a reciprocal arrangement between buyer and seller for the sale of goods or services intended to minimize the outflow of foreign exchange from the buyer's country -Local currency purchases local products, which are exported to a hard currency country and proceeds areconverted to dollars and returned to the foreign investor.

Franchising

- arrangement in which the licensor permits the licensee to sell certain goods under the licensors trademark or service mark under the terms of a franchising agreement

Trade-Related Aspects of Intellectual Property Rights (TRIPS)

- became effective in most nations on 1/1/2000 - requires its signatory nations to enact minimum substantive standards of protection and create a viable enforcement mechanism - requires every member of the WTO to abide by the Paris and Berne conventions

passive investment

- can involve either a passive debt investment ( making a loan to a foreign business) or a passive equity investment (purchasing an equity interest in the foreign business as a portfolio as a portfolio investment that does not allow for control of the business) - least regulated type of foreign investment because they don't raise the specter of "outsider" Influence

utility patents

- common type of restriction on the licensee's use of transferred IPR - ex: Licensor limits sale of something using IPR by licensee within a specific nation

copyrights

- for artistic and creative works - Berne Convention deals with granting these among signatory nations - no filing required. all an author needs to do is put the copyright symbol and the year of authorship to provide copyright protection throughout the world

repatriated

- foreign money paid out to the US person, typically in the form of a dividend - the deferral principle

priority claim

- given to applications by Patent Cooperation Treaty when one of the applicants is a national or resident to a PCT nation - allows applicant business to have up to 30 months after filing to begin the administrative process (prosecution) of the application in the countries in which it wishes to obtain protection

right of priority

- given to the patent holder of any signatory country of the Paris Convention - says the original date of the patent application is the same as the international patent application - prevents a "race tot he patent office"

currency exchange rights

- help solve the inconvertibility problem for the foreign investor - if an investor proposes bringing a desired industry to the soft currency nation, it can negotiate with the government in advance for preferential access to hard currency

import substitution rights

- if preferential currency exchange rights aren't available, the US investor can seek these from the government

counterfeit goods

- imitation goods sold illegally - piracy - US businesses lose over $250 billion dollars per year

parallel exchange

- in some soft currency nations, foreign investors form consortia to trade local soft currency - the investors spread the risk over a larger group with the hoping of reducing the vagaries of local bureaucracy

bad faith

- intentional wrongful behavior - can sometimes include negligence without a finding of intent

creeping exporpriation

- is the effect of laws and regulations that subject the investor to discriminatory taxes, legislative controls over management of the firm, price controls, forced employment of nationals, license cancellation, and restrictions on currency convertibility - very ambiguous which makes it difficult for a foreign investor

forms of FDI

- opening a branch that operates in a host country but is still part of the investing business organized in the investor's home country - owning a subsidiary organized in and focused on the host country -acquiring a foreign firm - operating through a joint venture with a business entity based in the host country

privatization

- opposite of nationalization - the national sovereign transfers a government owned asset to private parties

export credit agencies

- other nations versions of OPIC -Provide export financing or credit insurance by promoting investment from their own countries.

intellectual property rights

- patents, trademarks, trade secrets, copyrights - increasingly becoming an extremely important asset of any large corporation - critical to a company's ability to compete effectively and they are often a key reason behind a company's dominance in the workplace

fluctuation risk

- possibility that currency of the foreign country will devalue against the US dollar

national security controls

- the export of an item may be controlled to particular countries for reasons of national security if the item would make a significant contribution to the military potential of any other country(s) that would prove detrimental to the national security of the US - coordinated with the US allies on the basis of the Wessenaar arrangement

cybersquatting

- the registering of a domain name with the intent to profit from the goodwill of a trademark belonging to another - brought on by "the first to file" rule

currency risk

- the risk that profits in the foreign host country's currency will not translate into equivalent profits in the investor's home country - two forms: fluctuation and inconvertibility

Doha Declaration

- there was a problem with the limited supply of generic drugs - developing and least developed countries were having public health issues involving HIV/Aids Malaria, TB, and other epidemics - The Doha Declaration declared that TRIPS needed to be a wider national and international action to address these problems - promote access to medicines for all (existing medicines and formulating new medicines)

output or customer restrictions

-limiting the number or amount of a product the licensee can produce using the IPR -limiting who the licensee can sell the IPR products to

fair, reasonable, and nondiscriminatory (FRAND)

-reason Samsung was required to give a license to Apple before seeking injunctive relief -can reduce risk of patent "hold-up" and perceived advantages of litigation -only applies in limited circumstances and has not curbed litigation in a meaningful way

transfer pricing

-shifting income from a high-tax jurisdiction to a low-tax jurisdiction - This is problematic because a very large proportion of international trade occurs between related parties that are free to fix prices to one another because market forces do not discipline the prices. - example would be a parent and subsidiary

Base Erosion and Profit Shifting (BEPS)

Base erosion: trying to get the lowest tax rate in your home country profit sharing: moving your profits around the globe so you can put them in jurisdictions that will tax you the least

the Berne convention is for

Copyrights

eminent domain, or condemnation

the government's power to take private property for public purposes

OPIC

United States' Overseas Private Investment Corporation

currency swaps

a broad assortment of financial contracts may be purchased from financial intermediaries to hedge against fluctuation risk

tax haven

a country where the effective tax rate on a relevant item of income is very low or zero

royalty

a license fee

license

a limited permission to use the US firm's trademarks, copyrights, or know-how in making products for sale in the vicinity of the foreign company's country

extraterritorial jurisdiction

a nation extending the powers of its export control laws over its goods and technology once they have left its territory

expropriation

a taking of an isolated item of property

automated commercial environment

an inline system of US customs and border protection, in collaboration with the US census bureau

boycott

an organized refusal of one or more nations, often backed by economic sanctions, to trade with one or more other nations

Tied purchase clauses

caluses that require the franchisee to buy certain goods from the franchiser

franchise tax

can impose taxes based on the franchiser's worldwide operations even if its local operations fizzle

dual-use items

commercial items that may also have military, terrorist, or "proliferation" uses

biopiracy

extracting plants and animals indigenous to the emerging nation for research, alter the plant or animal, and then obtain patents related to this research without providing the host country without compensation or affordable access to the inventions

foreign availability

generally means that the controlled item, or one of comparable quality, is available from non US sources in sufficient quantities so that nay attempt to control for national security purposes would be ineffective

currency inconvertibility

inability to convert currency

private political risk insurance

insurance not provided by the government but by a private insurer

inconvertibility or nontransfer insurance policy

investors can purchase to ensure against hard blockages (and for a higher fee soft blockages)

export controls

laws and regulations that govern the control and licensing of certain goods and technology exported from the US or released or transferred to anyone who is not a US citizen, whether that person is within or outside the US

short supply controls

laws to protect the US economy from excessive foreign demand for scarce materials - ex: during wartime limiting exports of steel

antiboycott laws

legal responses by governments that make it unlawful for their citizens or companies to participate in a boycott

commerce country chart

list of countries that need a license in order to export to that country

commerce control list

list of items that need a license for export

technology

means the information necessary for the development, production, use, or operation of items, and in almost any form, such as blueprints, drawings, photographs, formulae, and engineering designs, whether written, verbal, or electronic

hard blockages

occur when the foreign government passes a law that prevents conversion or transfer

export management and compliance program

one of the best ways for to ensure compliance us for a company to establish a .... - these are virtually mandatory today in large exporting firms

soft currency

one that is not freely exchangeable for currencies of other nations

foreign person

one who is neither a US citizen nor a permanent US resident

nonobvious patent

patent requirement involving an inventive step

useful patent

patent requirement stating that new invention must be capable of industrial application

design patents

patents protecting the ornamental features of an article of manufacture

countertrade

payments to the franchiser with goods instead of hard currency

modern traditional theory

permits takings but imposes certain requirements on the nation exercising its takings power conditions: must be for a public purpose nondiscriminatory, and accompanied by a prompt, adequate, and effective compensation

insurance syndicates

pools of money provided by investors to insure specific projects

red flag indicator

possible indicators that an unlawful diversion might be planned

reexport

refers to the shipment or transfer of American-controlled items or technology from one foreign country to another foreign country or foreign person

sanction

regulation that restricts or prohibits certain relationships with specified (or targeted) foreign countries, entities, or individuals because of their support for international terrorism, the proliferation of WMDs, for international drug and narcotics trafficking, or other threats to national security

deemed reexport

release or transfer of an item from someone who was licensed to receive it to a different foreign person

fundamental research

research in science, engineering, or mathematics, the results of which ordinarily are published and shared broadly within the researched community, and for which researchers have not accepted restrictions for proprietary or national security reasons

field of use limitations

restrict the applications for which the licensee may employ the IPR

multilateral sanctions

sanctions usually resulting from a resolution of the United Nations Security Council, are usually more effective than sanctions that don't have universal support

barter

the direct exchange of goods for goods (or services)

conscious avoidance

the exporter purposely avoided learning the truth about an end user or destination - information that may have had a bearing on his or her license application

the Psris convention is for

trademarks and patents

grant back

when a licensor seeks ownership in or at least the right to use (often without compensation) new technology improved upon from the original technology int he license

exclusive rights

when the licensee wants complete control of the IPR within some geographic area in order to enhance its chances of earning an adequate return on its investment

double taxation

where the same item of income is taxed by two different tax authorities