International Business Transactions
How is UCC Article 5 applied to LOCs
(1) UCC says that the Advising Bank has no obligation other than to tell the truth. (2) UCC says that the Confirming Bank is "directly obligated as if it were the issuer." (this is stronger than a guarantee) (3) 3 days to examine documents and notify parties (new UCC mirrors UCP)
1970 Patent Cooperation Treaty
(a) 40 members (b) designed to achieve greater uniformity and less cost in the international patent filing process and in the examination of prior art. (c) Instead of filing patent applications in each nation, filings under the PCT are done in selected countries.
International Trade Administration (ITA)
(a) administrative agency is part of Commerce Dept. (b) Goal is to foster, promote, and develop world trade (c) gives out export / import info. (d) Decides whether there are subsidies in CVD cases or if AD occurs
International Trade Commission (ITC)
(a) independent bipartisan agency (b) prepares reports pertaining to international economics and foreign trade for all (c) conducts investigations about the commercial and international trade policies of the US (d) determines if there is domestic industry injury in CVD and AD cases
Court of International Trade (CIT)
(a) is part of judicial branch (b) has judx over CVD cases (c) Appeals made to Ct of Appeals for the federal Circuit (d) Appeals from here go to US SUP CT
1883 Convention of the Union of Paris (patents)
(a) over 85 members (b) remains the basic international agreement dealing with treatment of foreigners under national patent laws
Council of Ministers
(chief function is to legislate and administer the result) a) Can adopt, reject or amend legislation by unanimous vote b) Trend is to act as the arm of the single EU
Actors in FCTPA
1) "issuers of securities" and 2) "Domestic Concerns" (US citizens) 3) their representatives
UCP as applied to LOCs
1) Article 13 of UCP(1993 revision) notes that banks "must examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit." If documents on their face appear to be inconsistent with one another they will be considered as not appearing to be in accordance with the terms and conditions of the LOC. 2) Banks have reasonable time not to exceed 7 days to examine documents and notify the parties of acceptance or rejection of documents. 3) The description of the goods in the commercial invoice must correspond with the description in the LOC. 4) Banks have no liability or responsibility for errors arising in the transmission of any telecommunication.
Exon-Florio Process
1) CFIUS is notified by complaining party 2) Has 30 days to decide if it will investigate 3) Has 45 to investigate and make recommendation to President 4) Pres has 15 days to suspend / prohibit or seek divestiture 5) Can get US attorney general to enforce his decision
Defenses to FCTPA
1) It is lawful under written law or regulations of foreign nation 2) It is a reasonable and bona fide business expenditure (wine and dine)
Section 301
1) Permanent statute of general scope (no particular time frame) 2) Can be triggered privately or by ITC 3) US trade rep. investigates countries, tries to negotiate and if not then recommends to Pres. to retaliate (broad powers to retaliate) President can veto the retaliation. 4) Retaliation includes suspension or withdrawal of benefits under trade agreements, or impose duties or other import restrictions
Direct Foreign Subsidiary
1) US corp fills all the requirements 2) Not unusual (outside the oil industry most want this character) 3) You only get dividends and not profits so consider the tax consequences therefrom.
Indirect Foreign Subsidiary
1) US corp forms a US subsidiary and then the subsidiary forms a foreign subsidiary 2) Insulates parent corporation better from foreign liability
Indirect Foreign Branch
1) US corporation sets up a US subsidiary and have the subsidiary set up the foreign branch. 2) A lot of oil companies do this to protect the parent company from the foreign liabilities.
Court of Justice
1) adjudicates EU law, prosecutes member states for violations of Rome Treaty 2) 15 judges, one from each country 3) gives preliminary rulings (advisory opinions) 4) can act as arbitration tribunal if asked 5) Court of First Instance = provides forum for private suits 6) Court of Auditors
Special 301
1) created in 1988 Trade Act 2) permanent and specific 3) intended to focus on IP subjects 4) includes annual list like in Super 301 (priority list of nations who deny protection of US IP) (1st list came out in 1988 = China on of them)
European Parliament
1) directly elected by the populations of the member states, but only has modest legislative powers 2) can amend or reject the budget 3) can participate in legislation process (cooperation procedure) 4) can kick commissioner out 5) can sue in Court of Justice 6) may veto selective legislative proposals
Special License
1) for unique situations 2) allows for streamlining usual validated license process in certain circumstances.
Actees in FCTPA
1) foreign government official 2) foreign party, officials, candidates, 3) any 3rd person (knowing) that the money will be given to the above people
European Commission
1) heads a full bureaucracy 2) proposes legislation 3) 20 commissioners (big countries = 2, little = 1) 4) supposed to act independently of home nation 5) proposes and administers legislation 6) can sue in Ct of Justice 7) trend = power diminishing
Process For CVD and AD cases
1) interested party petitions for review 2) ITA determines petition is adequate 3) ITC make preliminary injury determination 4) ITA makes preliminary subsidy or AD determination (triggers security) (reasonable basis) 5) ITA makes final subsidy or AD determination 6) ITC makes final injury determination 7) Secretary of Commerce issues CVD or AD order 8) Appeal to CIT (NAFTA nations have option of substituting arbitration here) 9) Appeal to CT APPS 10) Appeal to US SUP CT
WTO's Agreement on Trade-Related Investment Measures (TRIMS)
1) multilateral agreement on transnational investment 2) obligates members to little but reporting and eliminating domestic investment rules that deny national treatment of goods imported from, or impose quantitative limits to trade with, other members.
General License
1) no requirement of formal application for review 2) available if a validated license is not required
Problems with Grey Market Goods
1) potentially harmful because not necessarily identical to authorized imports and may not meet US technical requirements or safety standards 2) no manufacturer warranty 3) consumer dissatisfaction with the goods may harm the reputation of the manufacturer and not the importer.
Direct foreign Branch
1) simple to do 2) bad because it exposes the US parent corporation to all the liabilities of operating in a foreign country. 3) All the money the branch makes is taxed to the home corporation.
Convention Establishing the Multilateral Investment Guarantee Agency of 1985. (MIGA)
1) started by World Bank 2) issues guarantees against development risks in developing countries 3) 127 countries
Convention on the Settlement of Investment Disputes (ICSID)
1) started by the World Bank 2) host government must arbitrate at the demand of a foreign investor 3) 126 countries signed it 4) if non-signing members consent to it then arbitration is allowed
Super 301
1) temporary statute that is also general in scope 2) investigation and retaliation power is now in the hands of the Trade Rep and not the President 3) 1 year annual review by Trade Rep. to Congress identifying countries doing bad things to us 4) "Priority Watch" list 5) did not focus on IP specifically, but broad enough to cover it
Section 201 (US Trade Act Amendment)
1) to determine serious injury, the ITC is required to take into account all economic factors which it considers relevant 2) the ITC must find the cause to be an important one, and that imports be more important than or have equal importance to any other cause 3) says that the President shall take all appropriate and feasible action within his power which the President determines will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs. 4) procedure = investigation by ITC, recommendation for action, discretionary enforcement power to the President, President reports to Congress the same day it decides to do something. If the President acts outside the scope of the ITC's recommendations, then Congress can take action in both Houses to overrule the Pres.
Benefits of Grey Market Goods
1) trademark owners profit from parallel importers buying their goods 2) good to US economy because competition increases market efficiency and promotes US government interest in free trade
Steps in an international sale of goods
1. Buyer sends seller a letter requesting price information for each alternative. 2. Seller sends a Proforma Invoice telling the buyer the price for each and the form of payment. 3. Buyer send seller a Purchase Order repeating the price and other terms. 4. Buyer gets Letter of Credit 5. Seller prepares to ship goods and does so. 6. Seller fills out the draft(negotiable instrument used to provide payment in most LOC transactions) to get paid.
IP rights in the EU
1. open license agreements are those which do not involve 3rd parties. 2. Closed license agreements do involve 3rd parties. 3. IP rights are exhausted if you bring goods into 1 member nation 4. EU has achieved a single European trademark, but not patent
Exon-Florio Act
1. passed as part of the Omnibus Trade and Competitiveness Act of 1988 2. Committee on Foreign Investment in the US (CFIUS) is an interagency, interdepartmental group that investigates inward foreign investment and recommends policy. (Is President's designee) 3. Authorizes the President or his designee to investigate the national security impact of "mergers, acquisitions, and takeovers" by or with foreign persons that could result in control by foreign persons. 4. Grants the President the authority, free of review, to investigate and suspend or prohibit transactions leading to control of American firms by foreign persons based on national security reasons.
Most Favored Nation Treatment
Adopted by GATT; idea that trade barrier reductions should apply to all signing members not just a limited partnership; best trade policy available to foreign nations
Authorization for delivery
Allows you to bring your widget into the US
Uniform Customs and Practice for Documentary Credits(UCP)
Alternative set of rules that can be elected in a contract
Parallel Imports
An independent importer purchases a foreign manufacturer's products and diverts them to the US in competition with the US firm who bought the trademarks rights from the foreign manufacturer.
Parties to LOC
Applicant /Account Party = buyer Issuing Bank = buyer's bank Beneficiary = seller Advising or Confirming Bank = seller's bank
Section 337 (person to nation)
As amended became a huge vehicle to combat IP infringement when infringing goods are imported into the US. Can be brought against imports that are unlawful: a) imports that involve an infringed US property right/patent b) non IP import that injures an established US industry Remedies: a) exclusion orders, cease and desist orders, monetary penalties b) can bring action in rem and go after the goods themselves.
AD Remedy
By US law, WTO, and GATT, the US may impose anti-dumping duties to equalize the price of what is being exported to the US at lower than FMV. Party may impose on any dumped product an anti-dumping duty not greater than the margin of dumping in respect to such product.
Economic Community
Common market with an attempt to harmonize economic policy
Common Market
Customs union with the free movement of factors of production like capital, labor, technology, enterprise.
Free on Board (FOB)
Delivery term. 3 types: Classic: Buyer nominates the ship, and seller places the goods on this ship. Seller receives bill of lading which normally shows him as cosignor and is to his order, and he transfers it to buyer. Insurance is arranged by the buyer With Additional Services: Same but shipping and insurance are procured by the seller on the buyer's behalf. Buyer Contracting with Carrier: Buyer deals with carrier directly, and receives the bill of lading directly.
Independent Sales Representative
Does not take title to the goods and is paid in the form of salary or commission. He obtains order for sales abroad and send those order to the US seller, thus there is no need for the sales rep. to store the goods in his nation. The risk that the buyer will not pay still lies with the US supplier and not the sales rep. It is more troublesome legally than using a foreign distributor.
Basic Elements of an Anti-Dumping Case
Dumping, injury, procedure to follow
Anti-Dumping
Duties imposed on goods that are exported at a value less than the FMV in the exporting country.
European Council
EU heads of state meet 2 times per year
Direct Effect Doctrine
EU law creates rights and obligations among its members
Primacy
EU law rules over national law where conflicts arise.
Strategic Alliance
Each investor acquires a small interest in the each others corporations. Then they enter into agreements to help each other maximize profits (like licensing agreements, exchange of personnel, etc.)
European Union Branches
European Parliament Council of Ministers European Council European Commission Court of Justice
Dumping
Exporting a product at less than its fair value in the domestic market of the exporting country
WTO's General Agreement on Trade in Services (GATS)
First serious attempt to regulate investment agreements. Attempts to get countries to give MFN treatment to all members, allow market access to all member countries, give national treatment to service sector and service suppliers.
Customs Union
Free Trade Area that also sets uniform tariffs for countries outside the group
Free Trade Area
Group of Nations agree to receive each others goods without customs duties (as if they were domestic)
Independence Principle
Idea that banks deal in documents and not goods. The issuing bank is required to pay when the correct documents are presented, whether or not the transaction actually transpired. The documents must match the terms of the LOC, and all terms will be strictly construed.
Trademarks
In the US trademarks are protected at common law and by state and federal registrations. Injunctions, damages, and seizure of goods by customs officials may follow infringement in the US. Can be renewed continuously.
Yellow Light Subsidies (adverse effects)
Injury to Domestic Industry Nullification or impairment of benefits accruing to member countries under GATT 1994 Serious Prejudice to the interests of another member country
Administrations involved in Countervailing Duty and Anti-Dumping Cases
International Trade Administration (ITA), International Trade Commission (ITC), and The Court of International Trade (CIT)
Entry Deferred Duty Basis
Keep and store it in the US, but not use it there.
Regulations
Like US administrative regulations
Commerce Control List (CCL)
List of certain restricted commodities.
Convention on the International Sale of Goods (CISG)
Multilateral agreement that covers all international sales of goods between signing nations. Supersedes article 2 of the UCC where applicable. Deals with the obligations of the seller and buyer when forming a contract, not the validity of the K terms.
WTO 1994 Agreement on Subsidies and Countervailing Measures (requirements)
Must show: (1) financial contribution from a government entity or income or price support (2) the subsidy must confer a benefit and (3) subsidy must be specific.
Export Administration Act
No longer in Effect. Meant to protect the US economy from shortages of necessary production materials, and regulate the export of military technologies. Also used to express the displeasure with the actions of foreign governments.
International Recognition of Trademarks
Paris Convention 1957 Arrangement of Nice Concerning the International Classification of Goods and Services 1973 trademark registration treaty
US patents
Patent office grants it for 20 years. Patent infringement can result in injunctive relief and damages in US courts Exclusion orders are also available against foreign-made patent infringing goods.
Countervailing Duties
Places extra costs on importing goods into the US that have an artificially lowered sales price, usually due to subsidies given by foreign governments
Foreign Corrupt Trade Practices Act of 1977
Prohibits payments defined in the act that amount to bribery and corruption. Cannot pay, offer, promise, or authorize anything of value to influence official act or to induce unlawful act corruptly and for business purpose. No private right of action (criminal only)
Trademark Counterfeiting Act of 1984
Provides criminal penalties for trademark infringement.
SCM's Traffic Light Subsidy Categories
Red Light: Actionable regardless of injury Yellow Light: Permissible, but actionable if they cause adverse effects to the interests of another country. Green Light: Non-Actionable
Types of Patent systems
Registration: Don't look to the patentability of the invention. Examination: must be novel, useful and nonobvious
Green Light Subsidies
Research and Development Subsidies Regional Subsidies Environmental Subsidies
AD process
Same as Countervailing Duties: ITA determines if there has been a sale at less than fair value and ITC determines whether such sales have caused or threaten to cause material injury to a domestic industry. (NAFTA nations can skip appeals and go to arbitration)
Cosignee Agreement
Seller ships goods to cosignee. Title does not pass to cosignee. If bankruptcy, goods withdrawn from cosignee.
Directive
Similar to US laws. Establishes Union policy that all members must follow.
Anti-Boycott Act
Target Boycotts: by foreign country and against "friendly country" or US persons Jurisdiction Activities of US persons in US interstate commerce or foreign commerce Prohibitions compliance with the boycott secondary boycott Permitted: compliance primary Enforcement: You have to Report that you have been asked to violate the anti-boycott law. Penalties: Penalizes taxpayers who essentially agree not to trade with Israel (under the Internal Revenue Code 1976 Amendment) Monetary civil penalties by Secretary of Commerce May also suspend or revoke the rights of any US person to export goods or technology No private cause of action
Appraisement
Tells you the value of your good
Subsidiarity
The EU can act in areas where it does not exclusively have power only if the member states can't sufficiently achieve the objectives. A kind of State's right amendment intended to limit the growth of regional government in Europe
Confirmed Letter of Credit
The buyer and seller both contract with their prospective banks. The seller presents the documents to his bank, who then is paid by the buyers bank in return.
Letter of Credit
The buyer contracts with his bank, where by the bank agrees to pay the seller if the seller produces the documents required by the contract, which evidence that the seller has shipped the goods required by the contract.
Stand By Letter of Credit
The contractor (account party) contracts to have an issuing bank issue an irrevocable LOC in favor of the 3rd world government (beneficiary); that payment will be made upon presentation of certain documents, or upon simple demand by the beneficiary. These are contingency payments that are meant to provide financial assurance to the government that the foreign firm will complete the project in their country fully and in accordance with the K terms. (US banks are not allowed to issue these)
TRIPS agreement (WTO)
The holder of a patent, copyright, or trademark in one country first acquires the legally protected right to the same in another country. Requires each nation to standardize its IP laws, and requires members to enforce, at their borders, procedures to prevent the importation of counterfeit goods and DSU process available.
Licensing
The owner of a trademark or patent is allowed to grant a foreign firm the ability to manufacture, develop, assemble, sell and deliver the trademarked goods. Licensee will pay a royalty for the use of the trademark.
US Trade Act of 1974
The standard for use of the escape clause mechanism requires that the imports be a "substantial cause of serious injury, or the threat thereof" to an existing domestic industry. Allows 2 types of relief: 1) Presidential relief designed to protect the domestic producers of like or directly competitive goods 2) Adjustment assistance to workers, firms and communities displaced economically by the increased import competition.
LOC fraud exception
UCC 5-109 Says that if the payee is an innocent 3rd party then the issuing bank must pay. If it is not innocent, then the issuing bank does not have to pay but the court may enjoin. There must be forged or fraudulent documents or fraud in the transaction for the issuing bank to rightfully refuse payment.
51/49 Joint Venture
US investor is allowed to buy only 49% of ownership in target company and local investors own the other 51%.
Consensus Rule
Under GATT to impose a penalty from arbitration you needed to have consensus from all nations, so the losing party could effectively block its own penalty from being enforced
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)
Under WTO the award is enforceable unless there is consensus *against* the award, and the punishment for refusal to obey is withdrawal of benefits (self-help)
Types of Licenses (Old way)
Validated Licenses General Licenses Special Licenses
Foreign Distributor
Will buy the US sellers products and then resells them through the foreign distributor's network. Title to the goods pass to the distributor, thus he bears the risk of nonpayment by the US seller or of not being able to resell them. Must find storage before final sale and distribution. The seller of the product has no control over where the goods are sent.
Cost, Freight, Insurance (CIF)
a K for the sale of goods to be performed by the delivery of documents (insurance policy, bill of lading and invoice)
Tax Haven Subsidiary
a corporation formed under the law of a judx. that does not tax. You are paying 0 tax on your operating income in that country.
Grey Market Goods
a foreign-manufactured good bearing a valid US trademark that is imported without the consent of the trademark owner
Counterfeit Trademark
a mark which is identical or substantially identical to the registered trademark and used w/o permission of the owner.
Sellers Duties under CIF
a) Deliver goods on board b) K for the carriage and pay carrier c) Provide export clearance d) contract and pay for insurance (minimal coverage only) e) pay loading costs f) pay loading costs if included in the freight g) furnish buyer with the invoice, a clean transport document(bill of lading) and a cargo insurance policy certificate. h) Documents (commercial invoice, bill of lading, export license, insurance policy)
Buyers duties under FOB
a) obtain import license b) pay price c) nominate carrier and K for the carriage and pay carrier d) pay loading costs if included in the freight e) pay unloading costs f) bear risk of loss or damage after goods are aboard
Structure of the WTO
a) overseeing Ministerial Conference meets every 2 years b) Managerial General Council: functions as a Dispute Settlement Body and a Trade Policy Review Body guides 3 Special Councils (general guidance) Trade in Goods Trade-related Aspects of IP Rights Trade in Services c) multilateral and plurilateral agreements
Buyers Duties under CIF
a) pay the price b) import license c) receive the goods the port of destination d) pay unloading costs if not included in the freight
Sellers Duties under FOB
a) provide the goods and the commercial invoice in conformity with the K of sale b) clear the goods for export at own expense such as obtain export license c) deliver the goods on board the named vessel at the named port of shipment on the specified date. (seller bears risk of loss or damage to goods prior to delivery) d) give notice to buyer that goods have been delivered on board e) provide a clean on board receipt f) pay loading costs according to the custom of the port if not included in the freight g) Documents needed: (commercial invoice, customary clean receipt, export license)
Section 301 of the Trade Act of 1974
authorizes and in some cases mandates unilateral US retaliation if another nation is in "breach of a trade agreement , engaging in unjustifiable, unreasonable or discriminatory conduct and burdens or restricts US commerce." Mandatory if in breach or unjustifiable
Negotiable bill of lading
carrier promises to deliver the goods to only to the person who is in possession of the properly endorsed bill of lading (usually required in LOC transaction)
non-negotiable bill of lading
carrier promises to deliver the goods to the person named as consignee in the bill of lading, or to a person named by a consignee.
Economic Union
complete economic policy harmonization
Free Internal Movement
goods, persons, services all freely travel internally, but can restrict to protect public policy, morality, health and lives, national treasures, and industrial and commercial property
Exceptions to FCTPA
if to "facilitate or expedite payment" "for routine governmental action" a) grease payment = customary to leave a tip.
Inversion
many oil companies change the structure of their headquarters.
FOB (Intercoms)
means that the seller fulfills his obligation to deliver when goods have passed over the ship's rails at the named port of shipment. This means that buyer has to bear all costs and risks of loss of or damage to the goods from that point.
CIF (Intercoms)
means that the seller has the same obligations as in FOB, but he also has to procure marine insurance against the buyer's risk of loss or damage to the goods during the carriage.
ITC Injury standard for CVD
must determine that imports benefiting from the subsidy injure, threaten to injure, or retard the establishment of a domestic industry.
Single Judgment
no dissenting opinions
Privatization
non-market economies sell state owned industries to the private sector, including foreign investors
Entry for consumption
part of US flow of goods
Broker
puts potential buyer in touch with the seller. Receives fees for his services. Not an employee, so no power to bind
Byrd Amendment
requires the president or his designee to investigate if the purchasing foreigner is "controlled by or acting on behalf of a foreign government."
Red Light Subsidies
subsidies contingent upon export performance and subsidies contingent upon the use of domestic goods over imported goods.
Classification
tells you how your widget is legally defined under the US tariffs schedule
Validated License
the basic license 1) requires individual application for each CCL export 2) full disclosure of the type of commodity 3) country of destination 4) consignees 5) extremely time consuming 6) Act as deterrent for US exporters of control commodities
Transnational
the movement of property, money and ideas across national borders; law is international but application is transnational
Counterfeit Goods
unlicensed manufactured goods.
Phantom Stock
very carefully enforceable K. It says we want you to run the plant, but we want to keep all the stock. It gives a person the economic value of being a shareholder without using shares.
Direct Franchising
whereby the franchisor franchises individual outlets from the home country to the target country. a) operates better in proximate countries with similar societies and legal systems
Master or Area Franchising
whereby the franchisor gives the franchisee a specific area (usually a particular country or a significant part of it) to exploit with the right usually to sub-franchise.
Export Administrative Regulations
will replace the old system with a comprehensive license and CCL will be revised to allow an exporter to determine licensing requirements by a country-product matrix. Have tighter time limits and is more user friendly.
Liquidation
with respect to your widget, customs agrees with your classification and appraisement.