Business Law Final CH.24

Export 459

A U.S. domestic firm can engage in international busi- ness transactions in a number of ways. The simplest way is for U.S. firms to export their goods and ser- vices to foreign markets. Alternatively, a U.S. firm can establish foreign production facilities to be closer to the foreign market or markets in which its products are sold.

The government of Bolivia passes a law stating that no U.S. dollars are allowed to enter the country. Americans traveling to Bolivia therefore may not bring dollars with them, nor may anyone else bring dollars into the country. All dollars have to be exchanged for the Bolivian domestic currency at any border crossing, airport, or train station. Laura, a U.S. citizen, files a lawsuit against Bolivia in a U.S. court challenging the legality of this law. Laura will most likely a. prevail because the law clearly violates the U.S. Constitution. b. prevail because of the doctrine of comity. c. not prevail because of the act of state doctrine. d. not prevail because Laura has sovereign immunity.

c. not prevail because of the act of state doctrine.

Treaty 454

A treaty is an agreement or con- tract between two or more nations that must be autho- rized and ratified by the supreme power of each nation. Under Article II, Section 2, of the U.S. Constitution, the president has the power "by and with the Advice and Consent of the Senate, to make Treaties, provided two- thirds of the Senators present concur."

Dumping 462

Dumping, for example, is the sale of imported goods at "less than fair value." Fair value is usually determined by the price of the goods in the exporting country. Foreign firms that engage in dumping in the United States hope to undersell U.S. businesses and obtain a larger share of the U.S. market. To prevent this, an extra tariff—known as an antidumping duty—may be assessed on the imports.

Normal trade relations (NTR) status 462

Each member country of the WTO is required to grant normal trade relations (ntr) status (for- merly known as most-favored-nation status) to other member countries. This means that each member is obligated to treat other members at least as well as it treats the country that receives its most favorable treatment with regard to imports or exports. Various regional trade agreements and associations also help to minimize trade barriers between nations.

Civil law system 456

In a civil law system, the primary source of law is a statutory code. Courts interpret the code and apply the rules to individual cases, but courts may not depart from the code and develop their own laws. Judicial precedents are not binding, as they are in a common law system.

International law 453

International law can be defined as a body of law—formed as a result of international customs, treaties, and organizations—that governs relations among or between nations.

Quota 461

Limits on the amounts of goods that can be imported are known as quotas. At one time, the United States had legal quotas on the number of automobiles that could be imported from Japan.

Act of state doctrine 458

The act of state doctrine provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within the latter's own territory.

Comity 456

The principle of comity basically refers to legal reciprocity. One nation will defer and give effect to the executive, legislative, and judicial acts of another country, as long as the acts are consistent with the law and public policy of the accommodating nation.

International organization 454

The term inter- national organization generally refers to an orga- nization composed mainly of officials of member nations and usually established by treaty. The United States is a member of more than one hundred multi- lateral and bilateral organizations, including at least twenty through the United Nations.

Distribution agreement 459

This is a contract setting out the terms and conditions of the distributorship, such as price, currency of payment, guarantee of supply availabil- ity, and method of payment.

Confiscation 458

When a government seizes private property for an illegal purpose and without just compensa- tion, the taking is referred to as a confiscation. The line between these two forms of taking is sometimes blurred because of differing interpretations of what is illegal and what constitutes just compensation.

Sovereign immunity 458

When cer- tain conditions are satisfied, the doctrine of sovereign immunity exempts foreign nations from the jurisdic- tion of the U.S. courts. In 1976, Congress codified this rule in the Foreign Sovereign Immunities Act (FSIA).3

Dunkin Donuts, an American company, licenses Olivia to use its trademark, trade name, and recipes to produce and sell doughnuts in Romania. Payment will include a rather large set-up fee plus a small royalty on all revenues generated by the Romanian company. The type of business arrangement Olivia and Dunkin Donuts have is most likely a. a franchise. b. an export license. c. a manufacturing plant. d. an international partnership.

a. a franchise.

Landers, Inc., an American company, agrees to sell copper electric cables to a state-owned company in Ecuador. Landers was given specific manufacturing requirements and had to invest in new machinery to meet them. Once the order was processed, the Ecuadorian electric company repudiated the contract, claiming immunity under the Foreign Sovereign Immunities Act (FSIA). Nonetheless, Landers might prevail in court because: a. of the exception to the FSIA concerning national governments engaging in strictly commercial activities. b. the government of Ecuador cannot defend itself without having a subsidiary of its electric company based in the United States. c. the contract included a comity provision.

a. of the exception to the FSIA concerning national governments engaging in strictly commercial activities.

A major difference between international law and national law is: a. that government authorities enforce national law. b. a time difference. c. the decreased use of bills of lading. d. the dissimilarity in types of currency used

a. that government authorities enforce national law.

The main reason that U.S. firms establish manufacturing plants abroad is that: a. in so doing they increase their shipping costs. b. in so doing they reduce costs. c. in so doing they better manage their marketing campaigns.

b. in so doing they reduce costs.

The U.S. government decides to charge $1.50 on every DVD player that is imported into the country. This policy a. could lead to the imposition of quotas on Taiwanese products. b. is a legally permitted tariff. c. is barred by Article I, Section 9, of the Constitution. d. is an incentive for American manufacturers to export more electronic equipment.

b. is a legally permitted tariff.

One of the basic difference between a common law and a civil law legal system is that: a. judges in civil systems do not allow witnesses to speak during trials. b. judges in civil systems often actively question witnesses. c. judges in civil systems are elected by the people.

b. judges in civil systems often actively question witnesses.

Wai-tung, a Chinese firm, manufactures automobiles. In order to get a foothold in the American market, Wai-tung sells its cars for several thousand dollars below what it charges in China. Wai-tung a. may continue to sell its cars at the discounted price for six months, after which a tariff may be imposed. b. may have antidumping duties imposed on its imported goods. c. is subject to the quotas imposed by the United State on goods sold below market value. d. is subject to American antitrust laws.

b. may have antidumping duties imposed on its imported goods.

Electronic Imports, a U.S. company enters into a contract with E Manufacturing, a company based in China. Both companies have a sign agreement with an arbitration provision, that in the event of any disputes, the matter will be arbitrated in the United States. An issue arises that causes E Manufacturing to breach its agreement with Electronic Imports, and E Manufacturing files suit in a court in China. Electronic Imports would rely on which of the following to enforce its arbitration provision in the agreement? a. The North American Free Trade Agreement. b. Section 1 of the Sherman Act. c. The New York Convention. d. The Alien Tort Claims Act

c. The New York Convention.

Habib is an Arab prisoner being held in a U.S. prison. Another prisoner, Aham, attacks and seriously injures Habib. Habib's family in Saudi Arabia wants to file a lawsuit in a U.S. court against the American company that operates the prison for negligently allowing Habib to be injured. If Habib's family wishes to file a lawsuit alleging a violation of a U.S. treaty they may a. be able to bring a lawsuit under the laws of sharia b. not be able to bring a lawsuit because foreign citizens are exempt from the jurisdiction of U.S. courts c. be able to bring a lawsuit under the Alien Tort Claims Act d. not be able to bring a lawsuit because Saudi Arabia does not have a common law legal system

c. be able to bring a lawsuit under the Alien Tort Claims Act

Geo Sox, an American company, agreed to sell copper electric cables to a state-owned company in Nigeria. Geo Sox was given very specific manufacturing requirements and had to invest in new machinery to meet the requirements. Once the order was processed, the Nigerian electric company repudiated the contract, claiming immunity under the Foreign Sovereign Immunities Act (FSIA). However, Geo Sox might prevail in court because a. the contract included a comity provision. b. the government of Nigeria cannot defend itself without having a subsidiary of its electrical company based in the United States. c. of the exception to the FSIA concerning national governments engaging in strictly commercial activities. d. NAFTA prohibits application of the FSIA to African nations.

c. of the exception to the FSIA concerning national governments engaging in strictly commercial activities.

Micrylex Corp. (a U.S. corporation) signs a sales contract with Freiers, S.A. (a French company) in which Micrylex agrees to sell Freiers $15,000 worth of Micrylex products. This is an example of a. technology licensing. b. manufacturing abroad. c. franchising. d. direct exporting.

d. direct exporting.

Expropriation 458

expropriation occurs when a government seizes a privately owned business or privately owned goods for a proper public purpose and awards just compen- sation.

Tariff 462

tariffs are taxes on imports. A tariff is usually a percentage of the value of the import, but it can be a flat rate per unit (such as per barrel of oil). Tariffs raise the prices of imported goods, causing some con- sumers to purchase domestically manufactured goods instead of imports.