Blaw Test 2

What procedures must the bank follow if they want to dishonor?

- bank must follow procedure or face "issuer preclusion" and will be prevented from asserting the documents are discrepant -ask purchaser if wants to waive discrepancies -bank must give notice no later than 7 banking days after receipt of the documents

During times of emergency, are the president's powers related to trade and foreign affairs extended or pulled back? What areas may be included?

-President can handle broad matters related to international trade and foreign affairs and emergency powers especially that affect national security -Includes: agricultral trade problems, monetary policies, IP protection/technology acces. -Can provide "trade remedies" such as temporary tariffs to allow US businesses to adjust to free trade (decreased tariffs on imports so more competition)

According to article 17 of the Montreal Convention what are the 3 elements of liability?

1. death or bodily injury 2. resulting from an (unexpected, unusual, external) accident (ex: ear injury from descent - no; vien thrombosis from sitting too long - no; asthma attack from smoke, passenger asked to move - yes, see Olympic Airways v Husain). 3. on board the aircraft or while embarking or disembarking (ie, under control of airline employees; proximity to security or boarding gate)

What are the brief requirements for a Bill of Exchange or A Documentary Draft?

1. unconditional order in writing 2. from one person to another 3. signed by the person giving it 4. to pay on demand or at a certain time 5. a fixed sum of money 6. to the ORDER or BEARER

How many days within shipment must the LOC be presented?

21

How many days are allowed by the buyer's bank to inspect the documents?

5 banking days

What are the two purposes that Bills of Exchange and Documentary Drafts serve?

Act as a substitute for money and act as a financing or credit device. They are specialized type of international drafts used to expedite foreign money payments

How many SDRs is the carrier responsible for when it comes to cargo? How can that standard be raised?

Air carrier is liable for "damages sustained" to cargo under its control, up to 19 SDRs per kilo, unless the shipper has declared a higher value on the waybill. Not liable if due to defect in cargo, defective packaging etc

What makes up the 2-tiered liability system when looking at the liability of airlines?

Airline is strictly liable for up to 113,100 SDRs. Airline is presumed negligent for das over 113,100 SDRs, unless it can prove it was not negligent, did not act willfully, or wrongfully.

What law applies to LOC transactions (a) in the US and (b) internationally?

Article 5 UCC - US Uniform Customs & Practice (UCP) incorporated into LOC -international NY law states UCP not UCC is applicable Presumed irrevocable The LOC is independent of the sales contract between the seller and buyer

How many SDRs is the carrier responsible for when baggage is lost? How can that standard be raised?

Baggage losses: limited to 1,131 SDRs per passenger, unless higher value declared/paid (like buying extra insurance)

Explain the per-package limitations under COGSA. Can the shipper obtain higher values? How? Archigetis case "fair opportunity"

Based on domestic law. In US is $500 per pkg limitation unless shipper declared and paid for higher value. Archigetis case - court held each yacht was "package" and limited carrier's liability to $500 per yacht

Is COGSA a treaty or a US law?

COGSA = cargo losses and the carriage of goods by Sea. It's a US law.

If you are not suing the airline carrier, but a third party (plane manufacturer) does the Montreal convention still apply? What laws would apply?

Cannot sue under Montreal Convention, but under tort of state with jurisdiction or where heard (defective design or built plane, vendors)

What does CAD mean?

Cash against documents - seller sends all the docs along w/ a sight draft to his bank who then sends them to buyer's bank w/ collection letter/instructions. Once funds taken from buyer's acct. the buyer gets the documents so can get goods

What is a Confirmed Letter of Credit? Standby Letter of Credit?

Confirmed Letters of Credit - bank in seller's country "confirms" and agrees to purchase docs/honor drafts on LOC on same terms as issuing bank. Much more expensive, but gives S funds much quicker. If bank won't do, then S might need to reconsider underlying transaction Standby Letters of Credit - issuer is obligated to pay beneficiary upon presentation of documents indicating a default by the account party in payment of debt or performance of the obligation

Who has the power to set tariffs?

Congress can set tariffs which can affect international trade. Congress has given president power to modify tariffs with their approval

Who establishes the overall policies when it comes to economic trade and policy?

Congress has this power, they delegate it to the president to carry out policy

If the Rule of Strict Compliance is in effect, what can happen if there is a discrepancy between the documents? What provision must match up exactly in which two docs?

Description of goods must match up exactly. If there isn't perfection in documents buyer's bank can refuse to pay.

Customs

Enforces IP laws, import export laws and collect import duties (+ others)

What clause was previously extensively used to help carriers avoid liability?

Exculpatory clauses to avoid responsibility for losses and claims, even if their own fault. Not much bargaining power for small shippers.

What are executive orders? Proclamations? Sole executive agreements? Who makes them? Are they binding? Do they need to be ratified? If Congress disapproves, is there anything they can do?

Executive orders - set policy and direct government operation. Proclamations- like laws with a narrow scope, ie emancipation proclamation Executive orders and proclamations can be overridden with legislation/funding Sole executive agreements - international agreements between the president and a foreign country, made without resorting to treaty process. Carry out existing laws or make agreements that do not create broad new national policies. Binding and have the effect of law. Do not have to be ratified but cannot overly extend constitutional powers either.

What are they key provisions of the Reciprocal Trade Agreements Act of 1934?

FDR wanted to lower tariffs so introduced this. -Introduced most favored national status (now known as Normal Trade Realtions) -unconditional MFN - if US lowers tariff on an imported item, then lowered tariff automatically applies to ALL MFN partners

According to the Supremacy Clause, are states restricted in regulating foreign trade or tax imports? If a federal law or treaty regulates commerce, can a state do so also? See AZ v US to see which law (federal or state) prevails

Federal laws >>>> state laws AZ shows this with immigration Federal gov cant tax exports and states cant tax imports or exports, state ad valorem tax on inventory ok Commerce clause - congress has power to regulate foreign commerce, states do not

What are the inherent powers of the president?

Foreign affairs, appoint & receive ambassadors, act as commander-in-chief. Arise per constitution or court interpretation. Must take care that laws are faithfully executed.

US department of commerce

Fosters trade and promotes exports, resolves complaints by US firms that foreign governments unfairly blocking market access, import administration, export licenses for some products Includes: International Trade Administration (ITA), Bureau of Industry and Security, US department of Homeland Security

Who is a good resource (maybe your best friend) to use when arranging transportation of goods?)

Freight forwarders

What were the effects of the Trade Reform Act of 1974?

Gave more power to the President so could negotiate trade agreements based on Congressional objectives. Referred to as "trade promotion authority" of President (renewed 2015) Also, could use "fast-track" process President must consult w/ congress, notify of changes to US trade law, give congress chance to comment on negotiation and president chance to modify if needed. Then both houses vote on bill from president with simple majority vote & no amendments Minimize risk that congress would balk after president negotiated deal

What are some specific situations in which the carrier would not be held liable? Howaldt case

Generally, carrier is not liable for errors in navigation or management, fire unless the fault is the shippers (like a cigarette), perils of the sea, act of God, act of war, act of public enemies, legal seizure, quarantine, labor strikes or lockouts, riots, saving life or property at sea, insufficient packing, inherent defect in goods, inadequate marking of goods, latent (hidden) defects in ship. In Howaldt case goods hat water damage, argued ship wasn't seaworthy but lost because it was a hurricane so it was "perils of the sea"

What was the issue in Dole v Carter? What does it say about the difference between executive agreements and treaties?

Hungarian coronation regalia. Executive agreements don't need to be ratified like treaties

What are the sources of power of the president? The president must also take care that the laws of the US are ________ _________.

Inherent Powers, Treaty Power, and Power delegated by congress. Must take care that the laws are faithfully executed.

Who are the parties involved when using a letter of credit?

Issuing bank (buyer's bank), account party (buyer), beneficiary (seller)

How does the independence principle interact with the Letter of Credit? (O'Meara case)

LOC is independent of the sales transaction In case bank was in error for not paying bc they didn't have time to test paper, they didn't have requirement to test paper they deal in docs only

Why would you want to use a LOC instead of a documentary sale with a banker's acceptance?

LOC provides additional assurance

What are the time limits involved when filing damages for luggage or cargo? Is there a difference between when you can file the lawsuit and when the airline must be notified? (verbally or writing)

Lawsuit can be filed within 2 years usually. But notify airlines promptly - within 7 days of receipt of damaged luggage, 14 days for damaged cargo. File claim in writing with no more than 21 days from when delivered.

What does Federal Preemption of Trade Policy mean? How does trade policy influence foreign policy?

Massachusetts law that prohibited goods or services from Burma. Was already federal statute taking actions (although different) to compel Burma to quit violent suppression of democracy so state law was undermining federal one, must speak w/ one voice

Can mental anguish damages be awarded? El Al Israel Airlines, Ltd v Tseng

Mental anguish can only be awarded if it's caused by an injury. In this case, she wasn't physically harmed so she could not claim emotional damages.

What replaced the Warsaw Convention? What does this new convention cover?

Montreal Convention of 1999. People, baggage, and cargo covered.

What is MFN?

Most favored nation status (now known as normal trade relations), if US lowers tariff on imported item, then lowered tariff automatically applies to ALL MFN partners

What is the responsibility of the Carrier before beginning of a trip? Must use ___________ ___________ to show vessel is _________. What does this make the Carrier liable for? What burden does the shipper hold? What document can the shipper use to provide evidence?

Must use due diligence at the beginning of the voyage and vessel must be seaworthy. Carrier is liable for damage to the cargo from failure to use due diligence to make the ship seaworthy at its departure. Shipper has the burden of proving that the goods were loaded in good condition and delivered in damaged condition. The shipper can use bill of lading to provide evidence. Written notice of the damage must be given to the carrier before or at the time of taking the goods. If the damage is not visible then within three days of delivery is okay. A claim must be filed within one year. Failure to give notice creates a rebuttle presumption that the goods were in good condition. Carrier must dis-prove.

What does "speak with one voice" refer to?

Nation wants to appear united so congress tries to be consistent with what president says and vice versa in international negotiation

What are the characteristics of Admiralty Law Jurisdiction in the US? (Jury? State/federal court? where did loss occur? vessel?)

No jury - judge is trier of fact also. Different SOL. Usually heard in federal court (c/b state under concurrent juris) Cases occurring in navigable water - can be used for commercial activity -vessel -very broadly defined, no self propulsion required so could be oil drilling rig Maritime torts in admiralty court - on navigable water; or caused by vessel on navigable water, substantial re: to traditional maritime activity, could disrupt maritime commerce (ex plane went down in lake Erie, not admiralty case even tho navigable water since not a traditional maritime activity)

Does COGSA apply for goods carried from US port to US port? If not, what rule applies?

No, COGSA only applies to every bill of lading by sea to or from ports in US to foreign ports. If US Port to US port, Harter Act applies

Does the injured party have to show that the airline was at fault? explain

No, airline is presumed negligent for das over 113,100 SDRs, UNLESS it can prove it was not negligent, did not act willfully, or was wrongfully. Also should be able to get at least 113,100 strictly.

If you are on an international flight, can you choose a different legal remedy?

No, convention is exclusive remedy if international flight

What is a Congressional-Executive Agreement? What are the requirements to enact one? Was this in the constitution?

Not provided for in the constitution, but a compromise. Same purposes as treaties but easier to enact. International agreements negotiated by president but just need a statue or joint resolution w/ simple majority of both senate and house to pass (not 2/3 vote like treaty)

What is the definition of a package under COGSA? What good shipping practices can be applied when determining packages?

Package - containers, pallets, other interpretations. "one container" is not one package unless BOL states quantity as one package. If number of packages is not shown on BOL, then COGSA requires carrier become insurer of the cargo. Good shipping practices -- base on smallest unit of packaging.

What is an Airway Bill? Is it negotiable?

People get tickets, cargo gets Air WayBills. Is receipt for goodes, contract for transport and charges but non-negotiable, not the document of title

According to the constitution, who has the power to regulate international commerce? What does congress do? President?

Power to regulate international commerce is in hands of federal government Congress regulates commerce, president negotiates

What are some characteristics of the Montreal Convention? What flights would it apply to?

Provides for electronic ticketing/documents, raises $ of recovery, provides $ for flight/baggage delays. Applies to passengers ticketed for international travel, if approved by all countries involved in the 'legs' of the journey. Departure & destination countries must be parties to convention. If depart round-trip from US, to non-treaty country and back to US, would be covered.Domestic legs included only if in continuous international travel (ex could include flight from Waco to Dallas if final destination is international)

What was the effect of the Smoot-Hawley Tariff Act of 1930

Raised tariffs so high, there was international retaliation. Worsened the great depression

What are Special Drawing Rights?

SDRs are way damage is measured under Montreal Convention, a mix of different currencies developed by Int'l Monetary Fund (IMF)

Who are the 3 parties on a draft? Explain

Signed order of drawer (buyer of goods) orders drawee (bank) to pay the payee (seller

What restrictions on imports and exports do states have? What is the reason behind these restrictions

States cannot impose burdens on interstate commerce, cant impose restrictions that have effect on imports either. Try to support free market/one voice etc

What does the Rule of Strict Compliance mean? (Courtaulds case)

Terms of documents presented to issuing bank must strictly conform to requirements of the LOC and the UCP. Prevailing standard. If discrepancy between BOL, invoice, insurance, etc then buyer's bank can refuse to pay. More specifically, desription of goods in commercial invoice must correspond exactly to that in LOC. Courtaulds example - bank did not pay because imported acrylic yarn vs 100% acrylic yarn, was correct because documents did not exactly match letter of credit

Which 1924 convention increased the liability that carriers assumed?

The Hague Rules increased liability of carriers

How does the Functional standard of Compliance differ from the Rule of Strict Compliance?

The functional standard is in US and some European countries, they relax strict compliance rules so banks don't have to reject docs due to obviously minor typos

What are trade agreements? What are free trade agreements? Can they only address tariffs?

Trade agreements - international agreement between nations on matters related to trade and tariffs; bilateral or multilateral. Can cover barriers to trade that are not tariffs (quotas, special licenses for importing, red tape in customs laws, endangered wildlife, antiquities, IP, workers, disputes, etc) Free Trade agreements - create "free trade areas" with no (or special) tariffs and a few restrictions (ie NAFTA). usually created w/ congressional-executive process

Know related terms: trade promotion authority. Fast-track process. What must president and congress do under this authority? How is vote done?

Trade promotion authority of president - from trade reform act of 1974, gave more power to pres. Fast-track process: pres consults with congress, notifies of changes to US trade law, gives congress chance to comment on negotiation and president chance to modify if needed. Then both houses vote on bill with simple majority vote and no ammendments

Under what circumstances can a bank be dismissed from paying on a letter of credit? Sztejn case. Why would the bank want to be sued by the buyer?

UCP is silent when court may enjoin a letter of credit for fraud. Banks don't want their reputations harmed if refuse to pay on LOC. Where there is credible evidence of active fraud on the seller's part before the bank has paid on the LOC, court may enjoin the payment - ex was obvious fraud

What is a negotiable instrument?

Usually checks or promissory notes, is a signed writing with unconditional promise to pay a fixed sum of money to order or bearer, on demand or at a definite time

What power does the commerce clause give congress? What is the reason behind the commerce clause?

Very broad power of congress to regulate foreign commerce to the exclusion of states. Want to avoid taxing same service or product multiple times by different govts

How is a vessel defined in the context of maritime law?

Very broadly defined, no propulsion required so could be oil drilling rig

What did the General Agreement of Tariffs and Trade (1994) establish?

WTO -world trade organization

Are there limits to the inherent powers of the president? How is Youngstown Sheet & tube v Sawyer a good example of an overreach of presidential powers? (When president acts with support of Congress, in absence of support, against will of congress - what effect?)

Yes limits. Pres did not have power to take over steel industry. w/ support = max authority, his own + congress no support = twilight zone, own authority against = lowest ebb, his power minus congress

Do developing countries get trade preferences?

Yes, even lower than MFN rates

Are airlines responsible for compensation due to delays? Explain

Yes, if delay in transporting people, baggage, or cargo airlines may be liable for delays up to 4,694 per passenger

Layout the steps to a Letter of Credit transaction

a. Buyer's advising bank sends the LOC to the Beneficiary (seller) via a bank in seller's country (correspondent bank) b. Seller's compliance with the LOC - seller must read the terms and conditions of the LOC very carefully before manufacture or ship goods. Is the LOC accurate? Reflect the terms and conditions of the sales contract? Can he comply with those terms? c. Complying presentation of the LOC - sellers documents and draft are delivered to the nominated bank (seller's) or directly to (buyer's) issuing bank. Per UCP must present all docs within 21 days of shipment. Must contain ALL the required documents within the time frame allowed and prior to expiry of the credit with no discrepancies and which complies with all terms of the LOC. d. Examination of documents and discrepancies - After buyer's bank (issuing bank) gets documents, the UCP allows up to five banking days for the bank to inspect paperwork. Documents usually include: draft, commmercial invoice is required by buyers banks and customs authorities, ocean bill of lading (must be on board and clean), certificates of analysis/inspection, insurance policy, certificate of origin, possibly others if contract between buyer and seller requires

What are the requirements/characteristics of a Holder in Due Course when a Documentary Draft is used? Why would you want to be a HDC?

a. Has a negotiable instrument b. takes for value c. in good faith d. without notice of dishonor or overdue, and e. without notice of alteration or unauthorized signature. maybe you paid 95k for 100k later, can make money off it, short term investment sort of

What is the UCP 600 rule?

changes to UCP in 2007 indicate move to modified strict compliance rule. Data doesn't have to be identical, but it can't conflict. Description of goods in commercial invoice MUST correspond with LOC.

What documents are usually required by the buyer and included in the transaction

commercial invoice usually required by buyer other common: draft, ocean bill of lading (on board and clean), certificates of analysis/inspection, insurance policy, certificate of origin, possibly others if contract requires

When looking at compensable damages, what does the Montreal convention specify can be collected?

convention does not specify what damages can be collected by plaintiff, may depend on state law although still no punitive damages. Only mental anguish if actually CAUSED by bodily injury (ie saying plane is going to crash cant do any, but if plane actually crashes and ur hurt and the injury causes bodily injury it can work)

International Trade Commision

created in 1916, independent agency - members appointed by pres, senate confirms, investigates/reports on international economics and trade

Who/what is the united states trade representative?

exec office. Congress gave power to president, who uses USTR to carry out all bilateral and multilateral trade negotiations on behalf of US -has annual report to congress -trade expansion act of 1962 created this position -someone appointed by president

What is the Import-Export Clause?

federal government cannot tax exports and states cant tax imports or exports. State ad valorem tax on inventory is okay

Treasury Department

has money

What is the effect of a country having unconditional MFN status?

if US lowers tariff on imported item, then lowered tariff automatically applies to all MFN partners. Starkist case - congressional delegation of tariff authority to President was constitutional and guided decisions based on purpose of the act

What is required of a negotiable order instrument for it to be negotiated or transferred?

it must be endorsed and delivered if payable to ORDER of person. if just payable to bearer then delivery alone is sufficient.

What is the purpose of COGSA?

like Hague Rules, invalidates clauses (ususally in bill of lading) that try to limit liability for carrier and sub-contractors (downstream/Himalaya clause). COGSA does allow a foreign selection clause.

A negotiable instrument moves ______ and a negotiable document moves ___________.

negotiable documents move goods, negotiable instruments move money

What is a letter of credit?

obligation of a bank usually irrevocable (useless if not), issued on behalf of their customer, promising to pay a sum of money to a beneficiary upon occurrence of a certain event(s)

Department of Homeland Security

reorganized for terrorism, part of US department of commerce

What is the SWIFT system?

society for worldwide interbank financial transfer, faciliates funds transfers between 9000+ banks. Working cooperatively with transport & logistics industry, have created the Bolero Project which moves most documents electronically.

How is a Bill of Exchange different from a regular draft?

specialized type of international draft used to expedite foreign money payments

Under what circumstances does warsaw convention still apply?

still applies in 50 countries, and has lower $$$

US court of international trade

trade or tariff law, exclusive jurisdiction over all civil actions against US involving revenue from imports, tariffs, embargoes, or quantitative restriction (except for health and safety) and enforcement of customs laws. 9 judges, located in NYC

How is a Documentary Draft used?

used to expedite payment in a documentary sale

What is the significance of liability of material deviation?

Carrier cannot claim protection of $500 per package

What are the characteristics of US treaties?

Treaties are negotiated by executive branch with advice and consent of senate (2/3) -treaties are either self-executing or non-self-executing -equal dignity rule - treaties have same legal effect as statutes -an act of congress can override an inconsistent prior treaty - consider which is more recent -a treaty will override an inconsistent prior act of congress

How are Documentary Drafts used in Trade Finances? How are they helpful to Financial Institutions?

a. Use of time drafts and acceptances - if per contract buyer agrees to pay seller at a future date, maybe 60 days after shipment, the buyer or his bank can obtain the documents to get the goods immediately by "accepting" the documents. The bank will be bounded by this "trade acceptance" and will be obligated to pay the funds at the future date. b. upon banker's acceptance by stamping its name, date and signature on the face of the draft, the bank's credit is subbed for the buyer's. Whoever holds the trade acceptance draft at maturity gets paid the amount (short term, 6 months max) c. buyer is charged a fee (basically like a loan) by the bank d. major financial institutions facilitate international trade by doing this

Describe the documentary draft and bank collection process. What is a 'trade acceptance' or 'banker's acceptance' and why is that significant?

a. drafts can be accepted by buyer creating a "trade acceptance" b. buyer agrees to pay unconditionally at the time stated on the draft c. banker's acceptance =bank agrees to pay = negotiable instrument d. documentary collection is similar to a COD transaction e. Called "Cash Against Documents" or CAD. How it works: Seller sends all the docs (BOL, insurance, inspections, etc) along with a sight draft (or demand) draft to his bank who sends them to buyer's bank (like in ch 6) with collection letter/instructions. once funds taken from buyer's account, the buyer gets the documents so can get goods

How is a documentary letter of credit defined?

a. the definite undertaking of a bank (not exactly a contract) b. issued in accordance w/ the instructions of their customer (the buyer) c. in favor to the beneficiary d. wherein bank promises to pay a certain sum of money in the stated currency e. within the prescribed time limits f. upon complying presentation g. of the required and conforming documents