International Business Law Exam 2
Expropriation and Nationalization
--Expropriation: occurs when a government takes privately-owned property, such as when Fidel Castro took control of Cuba and then seized ships and the cargo within them that were in Havana harbor. --Nationalization is similar except that the government takes over operation of an enterprise that was one private, such as when Libya under Col. Khadafi nationalized the operation of oil wells that had been owned and operated by U.S. company Texaco. - the government does indeed have the power to take private property. -the government must afford due process in the form of notice of the taking and an opportunity to challenge that taking before a neutral factfinder, typically a court; the property must be taken for a public purpose and not merely transferred to another private party; finally, the government must fairly compensate the owner for the value of that taking. -fear of expropriation and nationalization causes US companies to fear investing internationally
Assume that Texas State University hires two professors, one from Canada and the other from Mexico. Describe the steps that each professional must take before coming to the U.S. to work.
--MEXICO: First the professor must fit into one of the 4 categories of business persons eligible, prove they have an approved profession and the minimum degree for it, must have an offer to be hired at a US company to prove they intend to work, if there is a quota set they may be liable to prior approval procedures, petitions, or labor certification tests. Then take themselves and their family to apply for TN and TD visas. Then they and their family must present visas AND passports at a US port of entry. --CANADA: simply make application at US port of entry, present evidence that they have a valid profession and has a job offer from a US employer, pay $50 dollars and show proof of Canadian citizenship(don't even need passport!!) and can renew TN status each year easily and indefinitely
A wooden bench is manufactured in Canada from Canadian wood, but the bench is held together with Chinese-made metal nuts and bolts equivalent to 2 percent of the value of the bench. Does NAFTA require a complex formula to determine the origin of this product?
-De Minimus Rule: (if non-member goods make up 7% of less or the good it can still be counted as originating in the member countries) -Nuts & Bolts are only 2% of the value of the bench, so it doesn't matter and can still be considered a Canadian product
Why in 2000 was the U.S. no longer in compliance and thus subject to the retaliatory tariffs?
-Phase-Out: Cross-Boarder Services (c) -"A person of Mexico will be permitted to obtain operating authority to provide: six years after the date of entry into force of this Agreement, Cross Border truck services." -basically, NAFTA came into force in 1994, and the US had to give Mexican trucks equal treatment and phase out the unequal treatment after six years(in 2000) but didn't do this
State Courts - Court of Appeals - Intermediate Appeal Jurisdiction
-This level of the Texas Appellate Court System is referred to as an intermediate level and handles all appeals that proceed from lower-level trial courts within a respective district. -Neither testimony or evidence is presented here and decisions are reached based on the record from the trial court; however, oral arguments may be presented for the specific issue that is being appealed. -This system was planned to prevent most civil litigation from having to be heard by the Supreme Court as well as making available to a citizen and their criminal attorney a less expensive way to appeal a lower court's decision.
State Courts - District - General and Special Jurisdiction
-This level of the judicial process is considered to be the primary trial court setting in Texas and covers a broad area of general jurisdiction over a designated geographical area. -At such a level, all causes of action can be heard here unless governing statues specifically direct such cases to an appellate, original, or exclusive jurisdiction elsewhere. -District courts have the power to enter all orders involving all types of state civil lawsuits including, breach of contract, real estate litigation, personal injury litigation, injunctions, and business litigation. -Appeals that originate from this judicial area are generally sent to the Court of Appeals except for criminal death sentence appeals that go directly to the Court of Criminal Appeals.
NAFTA Professional Visas
-U.S. policymakers have seen to it that NAFTA's immigration provisions allow for discriminatory treatment of Mexican nationals as compared to Canadian nationals. -the obligation of each Party to NAFTA is to apply its immigration measures "so as to avoid unduly impairing or delaying trade in goods or services or conduct of investment activities under this Agreement." - each Party to NAFTA shall grant temporary entry to business persons seeking to engage in a profession(must present evidence of a degree to prove they are a professional) -must be a professional, have an offer of employment from a US employer for this profession -however, the US can discriminate against persons of Mexico seeks temporary entry in a number of ways -can require a visa - can establish an annual numerical limit to how many professionals will be excepted -by imposing a quota, can altogether ignore the Section D prohibitions against prior approval procedures, petitions, or labor certification tests when inconsistent with that Party's pre-existing requirements for the temporary entry of professionals. -TN professionals get approved for only one year at a time, but can theoretically reapply every year and potentially get approved every year indefinitely -H-1B Specialty Workers get approved from three years, but can only stay for a maximum of six years (continued on next card)
Creation of NAFTA
-US and Canada already had a trade agreement (CUSFTA) -Mexico approached the two nations about forming a trilateral pact -Mexico had LOTS of opportunity! (tons of potential customers, huge labor force, tons of resources(petroleum and agriculture)) -So US and Canada were eager to tap this market and remove trade restrictions! -But none of the countries wanted to have a common market because >Mexico didn't want to; they'd long had laws in place that made trade and investment difficult to protect their own national interest(throwback to India) >US and Mexico didn't want to bc the Mexican Peso was weak and fluctuating, illegal immigration, and crime -NAFTA has been renegotiated and re-named the US Mecico Canada Agreement(USMCA) >changed the Auto industry >signed by all three nations but hasn't been ratified yet, so it isn't binding law yet
NAFTA Investor Provisions
-US companies pre-NAFTA hesitated to invest in Mexico ----Mexico had super restrictive laws:---- -provisions requiring that a minimum proportion of equitable stake (ownership) of a company be by Mexican nationals -that a certain percentage of products produced be sold only in Mexico—or only outside of it; that components be sourced only from local suppliers -that a percentage of the workforce, management, and board of directors be Mexican nationals - that foreign companies not take profits out of the country in the form of dollars - and that foreign companies reveal intellectual property like trade secrets and know-how as part of operating ----NAFTA has specific provisions to target these kind of practices-- -includes MFN and NT, as well as Preformance requirements: NOT allowed to: -(b) to achieve a given level or percentage of domestic content; -(c) to purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from persons in its territory; -(e) to restrict sales of goods or services in its territory that such investment produces or provides by relating such sales in any way to the volume or value of its exports or foreign exchange earnings; -(f) to transfer technology, a production process or other proprietary knowledge to a person in its territory, except when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority to remedy an alleged violation of competition laws or to act in a manner not inconsistent with other provisions of this Agreement; -basically, this created rules to stop a bunch of the crazy stuff Mexico was doing -HOWEVER: remember that it actually IS allowed for a party to require that the board of directors be primarily the nationality of that party -and you can of course enforce regulations for protecting human, animal, or plant life or protection of natural resources(environmental stuff)
Hypothetical: The Infiniti QX50 VC Turbo
-general rule: if a car is made with parts sourced from anywhere in the US, Mexico, or Canada, it's a North American Car. -ex. if Nissan builds a car in Mexico for exportation to the US, there's no tariffs(NAFTA, duh) -but what about if a part or parts of the car come from other non-NAFTA countries? -the agreement requires the regional value content for these products be calculated using the Net Cost Method (total cost of components & labor - marketing and transportation) -62.5% of the value of the vehicle must be traced back to North America for it to be considered a North American product and therefore not be subject to a tariff in the US -The USMCA will make two changes: regional value content rises from 62.5 to 75% and 40-45% of automobile content must be made by workers earning a minimum of $16/hr -this encourages more cars to be made in the US -$16/hr means no more cheap labor, probably less labor from Mexico -also means potential harm to US(and Mex and Canada) due to the 75% because it will raise the cost to make a vehicle -basically: even though there are no tariffs, making a car will be more expensive and it will be cheaper to build a car in places like China or India
Harmonized Tariff Schedule
-goods are sorted with a ten-digit number -first two numbers are the broad category(ex. Beverages, Spirits, and Vinegar are #22) -is it water, beer, wine, etc? in this case soda would make the number 2202 -then Flavoring makes it 2202.10.00 -sweetened artificially or naturally? 2202.10.00.40 -once the product has been sorted, the right column will show its tariff rate for WTO and non-WTO countries. -the middle column shows which products can enter the US trade free due to a free-trade agreement with the US -country of origin is key: soda made in Mexico w Mexican water and sugar will have no tariff. But if it's made in Japan w Japanese ingredients it would have a tariff. -Japan couldn't sell it's soda to a Mexican company to be sold in the US and expect that it won't have a tariff. Non-tariff only applies to goods MADE in and with ingredients from a member country. -But what about complicated goods like automobiles that require many parts to function? *See next card*
State Level Court Jurisdiction- COUNTY courts
1) Constitutional - The work handled in this type of court includes: appeals from lower courts; cases involving juveniles; any misdemeanor cases involving fines over $500 and/or jail sentences; certain probate issues; and civil actions from $200 to $10,000. 2)Statutory - This involves an expansive range including all criminal, civil, appellate, and original actions as prescribed for constitutional county courts by law. In Cameron County, the County Courts at law has a maximum jurisdictional limit of $1,000,000
Three Main Types of Regional Trade
1. Free Trade Area: a group of two or more countries that eliminate tariffs and non-tariff barriers to trade(NTB) for goods within each member's country(ex. NAFTA and CAFTA-DR). The countries in agreement are not subject to tariffs and there are provisions to make shipping and crossing the boarder easier 2. Customs Union: Same as a free trade area(no tariffs for members, eased NTBs) PLUS the group establishes common tariffs for all goods from non-member countries. (ex. Mercosur which includes South American countries like Argentina, Brazil, Paraguay, and Uruguay) Mercosur countries negotiate tariff rates as a block (they all have the same tariff for non member countries like the US) The combination of four countries allows greater leverage in negotiating 3. Common Market: Same as customs union(zero tariffs for member nations, common tariff for non-member countries) PLUS the group has a common currency and allows free flow of labor and capital across boarders. (ex. The European Union(EU)) The EU has made all the countries within have the same currency(the euro) so exchange rates and fluctuation aren't a concern for these countries. Laborers from the countries need only a passport (NO visa) to cross boarders and find work.
NAFTA is a free trade area among Canada, the U.S., and Mexico, while the European Union is a common market of many countries. Which of the following is an advantage that NAFTA has over the EU? A) More discretion to exclude workers from other member countries from entering B) Greater ease moving currency across member countries' borders C) Both (a) and (b) D) Neither (a) nor (b)
A) More discretion to exclude workers from other member countries from entering
GE opens a manufacturing facility in Mexico. The Mexican government imposes several regulations on the facility. Which of the following requirements is likely to be allowed under NAFTA Chapter 11? A)Half of all managers be Mexican B) Half of the board of directors be Mexican C)Twenty percent of all component parts must be sourced in Mexico D)GE must disclose the "know-how" related to the manufacturing process
B) Half of the board of directors be Mexican
Nat'l Instruments of Texas entered into a contract to purchase gold for computer components from Oro S.A. of Nicaragua. This contract is the only business Oro has ever done in the U.S. Nat'l Instruments desires to sue Oro for breach of contract. Oro is subject to personal jurisdiction A) In any U.S. court B) In a Texas court, but only for a lawsuit related to the contract C) In a Texas court, but only if Oro consents D) In a Texas court, but only if Oro is registered with the Texas Secretary of State E) None of the above
B) In a Texas court, but only for a lawsuit related to the contract
Which of the following can be imported to the U.S. without the importer paying a tariff? A) Soda made in Japan from Japanese carbonated water and sweeteners and sold directly to a U.S. importer B) Soda made in Mexico from Mexican water and sugar and sold directly to a U.S. importer C) Soda made in Jamaica from Jamaican water and sugar, which is first sold to a Mexican wholesaler who then sells the soda to a U.S. importer D) Both (b) and (c)
B) Soda made in Mexico from Mexican water and sugar and sold directly to a U.S. importer -Good must ORIGINATE in one of the NAFTA countries
One purpose of NAFTA was to make the provision of cross-border services easier among the three member parties. The treaty A)Gave equal rights for services originating in all three member countries because the spirit of NAFTA is for three co-equal sovereigns B)Gave Mexico lesser rights for services, but those provisions were eventually phased out C)Same as (b), but only some of the discriminatory provisions were phased out D)Same as (b), but none of the discriminatory provisions were phased out
C)Same as (b), but only some of the discriminatory provisions were phased out
State Courts - Justice and Municipal - Limited Jurisdiction
In Texas, the courts with the smallest jurisdictions are those at the local level - the Municipal and Justice Trial Courts. [Justice Courts hear civil cases of $10,000 or less and criminal cases where the penalty is a fine only. Municipal courts hear some small claims as well as fine-only criminal cases.]
Rules of Origin- Basic Principles
Article 401 states that goods can be deemed to have origin in 4 ways: 1. goods wholly obtained or produced in the NAFTA region 2. goods produced in the NAFTA region wholly from originating materials 3. goods meeting the Annex 401 origin rules 4. unassembled goods and goods classified with their parts which do not meet Annex 401 rules of origin but that contain 60% regional value content using the transaction method, or 50% regional value content using the net cost method. -ex. Sausages produced in mexico from pork meat from Hungary and spices from Jamaica would still be considered a "good of Mexico" because each of the ingredients for pork sausage are classified in chapters other than Chapter 16, the resulting pork sausage meets the requirements of the tariff shift rule - If one or more of the non-originating raw materials or components used to manufacture a good does not meet the tariff shift rule (i.e., the product is classified in one of the disallowed HTS chapters, headings, or subheadings), the good is considered not originating and generally does not qualify for NAFTA treatment (unless the de minimis rule applies). - The de minimis rule provides for goods that contain small amounts of non-originating materials that fail to undergo the applicable change in tariff classification. Under the de minimis rule, if the value of the raw material or component is 7 percent or less of the transaction value of the good.
J. McIntrye Machinery, Ltd. v. Nicastro
FACTS OF THE CASE -Robert Nicastro, a New Jersey resident, tried to sue J. MacIntyre Machinery, an ENGLISH company for an injury he sustained in New Jersey courts -England is where J MacIntyre is incorporated and operates -the company never marketed goods to new jersey or shipped them there, rather, an independent company sold his machines in the US, there is no allegation that the distributor was under MacIntyre's control -advertised in multiple states, but never New Jersey -no more than 4 machines were ever even in NJ SO DO NEW JERSEY COURTS HAVE JURISDICTION OVER J MacIntyre?? -As a general rule, the sovereign's exercise of power requires some act by which the defendant "purposefully avails itself of the privilege of conducting activities within the forum State -basically, no, NJ courts don't have juridiction over him because he didn't purposefully make an effort to do business in New Jersey But in what cases would a NJ court have jurisdiction? -if physically present in NJ -Purposeful Availment: if there's evidence there's been contact and specific activity directed in New Jersey -Specific Jurisdiction: jurisdiction over a defendant that is derived from the defendant's activities in a state
Metalclad Corp. v. Mexico
FACTS OF THE CASE: -Metalclad Corp is a US company that bought and started a Mexican hazardous waste facility in Guadalcazar -Metalclad got all the necessary permits to build and operate the landfill -BUT a municipality of Guadalcazar denied a municipal construction permit, and the governor of San Luis Potosi subsequently declared an area encompassing the landfill to be an ecological reserve. - (NAFTA) found that the lack of transparency in Mexico's regulatory requirements constituted a denial of fair and equitable treatment and that Mexico's actions to prevent Metalclad from operating the landfill constituted an expropriation - injunction was issued barring Metalclad from operating the landfill. - the governor issued an Ecological Decree declaring an area encompassing the landfill to be a Natural Area for the protection of rare cactus. -the Tribunal found that Guadalcazar should've been more transparant and upfront about any "ecological" issues -because the landfill never got to open, there were no real estimates of how much money it would've made -Instead, the Tribunal awarded damages based on "Metalclad's actual investment" in the project, plus 6 percent interest from the date that Guadalcazar denied the municipal construction permit, for a total award of $16,685,000 -Mexico put forth an application for the money to be set aside and not payed -supreme court judge of that province ordered Mexico to pay Metalclad 75 percent of its costs in the proceeding. -eventually settled the case for o settle the case for $15,626,260.
Important texts regarding FEDERAL court jurisdiction
FEDERAL DISTRICT COURT JURISDICTION (a)The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between— (1) citizens of different States; (2) citizens of a State and citizens or subjects of a foreign state, except that the district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State; (3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and (4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States. ------------ (c) For the purposes of this section and section 1441 of this title— (1) a corporation shall be deemed to be a CITIZEN of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business.
How can Metalclad have had its property expropriated if it was not physically seized (in other words, Metalclad still has full ownership of the facility)?
Mexico blocked the comapny (Metalclad's) ability to do business there by last minute issuing an Ecological Decree protecting the land. Land doesn't have to be physically "seized" to be expropriated.
When NAFTA came into force in 1994, the U.S. was in compliance by restricting Mexican trucks to the border zone. Why?
NAFTA ANNEX I #3: "Under the moratorium, persons of Mexico without operating authority may operate only within ICC Border Commercial Zones, for which ICC operating authority is not required. Persons of Mexico providing truck services, including for hire, private, and exempt services, without operating authority are required to obtain a certificate of registration from the ICC to enter the United States and operate to or from the ICC Border Commercial Zones." -restricts Mexican trucks to the boarder zone ARTICLE 1206: Reservations " 1. Articles 1202(national treatment), 1203(most favored nation) and 1205 do NOT apply to: (a) any existing non-conforming measure that is maintained by (i) a Party at the federal level, as set out in its Schedule to Annex I" -basically, the US was able to avoid abiding by MFN and NT (but not forever, see next card)
A processing facility in Mexico makes sausage from component parts that come from other nations: pork from Hungary, spices from Jamaica. Is that sausage a Mexican product, or will the U.S. importer pay a tariff?
NO, The US Importer won't pay a tariff because each of the ingredients for pork sausage are classified in chapters other than Chapter 16, the resulting pork sausage meets the requirements of the tariff shift rule, still counts as originating in Mexico
The Mexican Trucking Dispute
Prior to NAFTA: -Canadian Trucks: could enter the US easily and go to and from Canada and the US, deliver goods to any destination -Mexican Trucks: However, there was a moratorium forbidding any Mexican trucks or their drivers from entering the United States in order to transport goods to various points within the country. one exception: Mexican trucks were allowed to cross the border into 20- to 25-mile commercial zones. was cumbersome, expensive, and fraught with delays. cost more than $1 million per day!!! Post NAFTA: -NAFTA made this system way more free and unrestricted/efficient -but the US quickly realized that many Mexican drivers and trucks were unsafe ( 56% of trucks and 28% of drivers were placed out of service after inspections) -there were lots of differences in US and Mexican standards(US limits hours a truck driver can drive each day, requires front brakes, weight restrictions, exhaust regulations, while Mexico didn't. As a result, many Mexican trucks were denied entry into the US. -Mexican government filed a request for arbitration under NAFTA's provisions to challenge these measures -NAFTA Dispute Settlement panel ruled the U.S. was not in compliance with the crossborder trucking provisions of the agreement. -To force the U.S. to come into compliance, a NAFTA Arbitration Panel imposed more than $2 billion in annual tariffs on exports of U.S. agriculture, personal care products and manufacturing goods.
So if a "common market" is the best at increasing trade, investment, and employment, why haven't the NAFTA countries(USA, Mexico, & Canada) shifted to this?
Sovereignty Continuum: -(the more intertwined and connected you become with the other countries(Common Market), the less independent and sovereign the countries become. Their economies get more and more intertwined, not always a good thing. -An example of how this can go wrong is Brexit(UK decided to leave the EU) -UK wanted to be more independent (didn't want to loose jobs to other countries, don't want to bail out weaker countries, don't want to join currency with a country w a weak currency) -therefore, you can understand why the NAFTA countries wouldn't want to loose their sovereignty and prefer to stick to free trade rather than common market
Service by Central Authority
Provided for under the Hague Convention, service of an American summons is accomplished by appropriate foreign government personnel, often the police. All courts (again, assuming the nation is a signatory country) regard service of process done in this fashion as lawful and sufficient process to accomplish service -can take just 60 days!! So much more efficient than Letters Rogatory
Hypothetical: National Instruments(if u don't remember this hypothetical, it's on the first page of topic 4) Which court or courts in Texas have subject matter jurisdiction over this contract lawsuit?
The Federal District courts would have jurisdiction bc corporations shall be considered citizens of wherever it has been incorporated(Nicaragua) so it's a "person" of a foreign state, and the sum of the damage is 500,000 which is well above the minimum of 75,000 to go to federal court.
NAFTA
The North American Free Trade Agreement -US, Canada, and Mexico -This agreement allows an exception to break the rules of MFN, these countries can tax each other less(or often, not all), compared to other countries not in the agreement that get taxed higher. -rationale for this exception is that any attempts to make trade freer is good (increase overall trade) -But the countries have to do so with the intent to encourage freer trade with the countries in the agreement, not to raise barriers or restrict trade with other nations
Obtaining Evidence Abroad
The U.S. is a party to the Hague Convention, this treaty allows for requests for evidence to be sent to a central authority in a foreign country, and that authority then obtains the evidence. Although the IASCAP contains evidence-gathering provisions, the U.S. made a reservation to them, so this treaty does not provide a means of obtaining evidence. If the evidence is sought from a resident of a country that is not party to the Hague Evidence Convention, then the options include letters rogatory or attempting to secure the voluntary assistance of foreign persons
State Level Court Jurisdiction- Court of Criminal Appeals and Supreme Courts
There are two courts that serve as the ultimate level of appeal within the state of Texas: 1) Supreme Court - The Texas Supreme Court has final authority over most juvenile and civil actions. A great deal of its time is spent determining if it will hear an appeal from a lower court as all requests for appeal must be examined and reviewed that are filed for action. 2) Court of Criminal Appeals - For criminal case appeals, the Court of Criminal Appeals was established to relieve the case load of the Supreme Court of Texas. This is the highest level of appeals for a criminal attorney who is seeking relief for their clients from a prior judicial decision.
International registered or certified mail
This is provided for under the Hague Convention, but not all signatories to the Convention permit its use within their territory. Under the Hague Convention, parties may opt out of one or more forms of service.
Does a Texas court have personal jurisdiction over Oro?
YES because there was purposeful availment: Oro deliberately did business with a Texas company
Letters Rogatory
slow, tried and true method of serving process, but very, very slow and complex. However, it does work. -can take 6 months to a year - -Hague Conventions or IACLRAP is way faster and more efficient, but you must be a party to one of these treaties, or else you can't use this method.
Service of Process
the plaintiff initiates a lawsuit with service of process, arranging for a copy of the filed complaint along with a summons from the court. The court can only assert power over the defendant if that defendant is served in a way the law recognizes as valid