CH 1 International business law and its environment

Most important constraints to FDI in developing countries

* macroeconomic instability * political risk *access to qualified staff * access to financing * corruption *infrastructure capacity *limited market opporunities * increased gob regulations in the aftermath of global financial crisis

export plan

*readiness for export * long term commitment to exporting * identifying foreign market * identify risks * evaluating legal aspects * determining product readiness * Identify export team * identify possibile financing arrangements * Establishing distribution channels * Re-evaluating export performance

foreign sales rep

-independent sale agents who solicit orders on behalf of their principals and receive compensation on a commission basis. Ex) They represent several different manufacturers of u.s sporting goods in Japan (balls, bats, hats)

International/Exporting Trading Companies & Export Management Companies

2 types of intermediaries for indirect exporting

Customs Broker

A person who manages the paperwork required for international shipping and tracks and moves the shipments through the proper channels.

WIPO (World Intellectual Property Organization)

A specialized agency of the United Nations * headquartered in Geneva * 185 member countries * administers an arbitration center to resolve IP disputes between private parties

1983 Export Trading Company Act

Allowed US exporters the same competitive advantage as the Japanese trading companies

freight forwarder

An organization that puts many small shipments together to create a single large shipment that can be transported cost-effectively to the final destination.

differences in Developed, developING and Least developed countries

Developed: high per capita income, high standards of living, later stages of industrialization, advanced tech, modern production & management methods, diversified economies. * Some developing don't have this but are entering post industrial economy with growing service sector Developing countries: greater state control, high foreign debt, low education levels, disparity between social and economic classes * lack transparency in business dealings *bribery and corruption make it difficult to deal with local official * least developed: LDC defined by United Nations with many criteria. most often sub saharan Africa, Cambodia in Asia Afghanistan in Central Asia. Most of the population is under the age 25. need investment to deal with many basic problems

license

IP can be transferred by the owner or holder to licensee through grant of rights in that property

infringement issues

IP infringement is often referred to as piracy or counterfeiting * IP rights are rewards for innovation *without protection arts, science and industry would be destroyed *Ecommerce and mobile tech have magnified the problem in many areas. due to lack of enforcement of IP laws in China India Indonesia Russia, Ukraine and Venezuela

Difference between export trading and export management companies

International trading companies specialize in all aspects of import/export. Handle particular types of goods, come from both developed and developing countries and extensive sale contacts and experience in international finance, air and ocean shipping , prep legal doc... Export trading companies (ETC)can apply for export trade certificate to jointly export marketing, make arrangements, allocate territories etc.- must show that it does not lessen competition Export Management companies: EMC assume responsibilities for manufacturers , producers, or exporters. specialize in specific industries/product or foreign market. Does the research, prep doc, handle language translation.

Japanese Trading Companies

Sogo Shosha

lesson of Dayan v McDonalds Corp

The difficulties in supervising the operations of a franchise in a foreign country * mcdondalds won because plaintiff did not comply to QSC standards- continued business by without mcdonalds trademark (cleaning issue) -doesn't take a language to keep up with quality and safety protocol

Three categories of international business

Trade Protection & Licensing of intellectual property Foreign direct investment

Franchising

a business arrangement that uses an agreement to license, control and protect the use of the franchisor's patents, trademarks, copyrights or business know-how in return for royalties, fees, or commissions

Certificate of origin (CO)

a document , prepared or provided by an exporter or shipper that certifies and attests to the county of origin of the goods being shipped -some countries requires certification and others just requires it to be on a exporting company letterhead

Expropriation

a government's seizure of a domestic or foreign company's assets with 'just' payment

confiscation

a government's taking of a privately owned business or personal property without a proper public purpose or an award of just compensation

local participation

a share of the business is owned by nationals of the host country -developing countries have a history of having this

Main lesson in Tarbert Trading vs Cometals Inc.

agreements that violate the law are void. An agreement calling for the delivery of a fraudulent certificate of origin is illegal and contrary to public policy

Multinational Corporations

are firms that have significant FDI assets or that derive a significant portion of their revenues from more than one country -comprised of a parent company in the home country and foreign affiliates located in the host countries

Sanctions

broader and more comprehensive restrictions on trade and financial transactions w countries who sponsor international terrorism,

foreign branch

business presence by the investor in the host country -part of the home country entity, with operations in the host country

Export trading companies (ETC)

can apply for export trade certificates of review from the DOJ that waives the application of U.S anti-trust laws. -They can jointly establish export prices, allocate territories, and do business in ways that would be illegal if done with the U.S market -other benefits are to allow them to bid on large foreign projects, joint marketing efforts for complementary products

Transatlantic Financing Corp. v. United States

case that involved a contract with the US and a chipping company -they had a contract to ship goods from point A to point B -usually would take the Suez Canal, but it was blocked off, so they took the long way -shipping company sued for extra expenses for the longer trip -US won as the contract stated they pay $$$ for goods to go from one point to another; not how it got there

Bernina Distributors v. Bernina Sewing Machine Co.

case that involved currency fluctuation (goods and services) -US companies (distributors) bought sewing machines from a Swiss company (importers) -Contract stated that the importer will transfer the risk to the distributors if costs increase -Exchange rate for the Franc increases (currency risk) -Currency fluctuation is not an increase cost (whereas shipping, manufacturing are) -Importer must pay

DIP SpA v Commune di Bassano del Grappa

case that stated that Italian law prohibits the opening of new stores without a license from the local authorities (mayor + committee) -may be denied if it believed that the good/service in that market is already being satisfied -German sued stating that the licensing law discriminated against non-Italian companies and imported goods -Argued the Italian law was invalid under the laws of the EU and the Treaty of Rome Decision: The law is not invalid

Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.

case where a Russian film company want to distribute into the US -2 company's had 2 exclusive rights; one had the original Russian language; and the other was dubbed and subbed -The company with the original language sued the other company for infringement (turning off subtitles) -That company lost as no one thinks to turn off the subtitles -Could have been solved by extra contract language and technology smarts

In re Union Carbide Corporation Gas Plant Disaster at Bhopal

case where a gas leak in India led to people dying in India -was taken to court to be tried in New York, but was denied via the doctrine of forum non conveniens (case should be heard in the country with the greatest interest in the outcome and most convenient)

indirect exporting

companies that do not have the experience, personnel, or capital to tackle a foreign market alone frequently use this -refers to a firms use of specialized intermediaries outside of their own org. to handle specific functions ex) foreign marketing, sales finance, and shipping. Two types of intermediaries include (INTERNATIONAL/EXPORT TRADING COMPANIES & EXPORT MANAGEMENT COMPANIES)

licensing agreements

contracts by which the holder of IP will grant certain rights (aka the license) in that property to another party under specified conditions and for a specified time, in exchange of a fee or royalty can be exclusive or non-exclusive

repatriating profits

earned by their subsidiary companies within the country. Some countries prohibit import of luxury or consumer goods the government deems non essential to preserve foreign currency.

International trading companies

firms that specialize in all aspects of import/export transactions either by buying goods on their own accounts for resale or by acting as middlemen -usually handles particular types of goods (energy, minerals, metals) -comes from both developed and developing countries ability to bring together many competing producers and take advantage of economies of scale

foreign subsidiary

foreign company organized under the laws of a foreign host country, but owned and controlled by the parent corporation in the home country

property or marine risk

goods can be damaged by salt water, air, ships wreck, planes crash, refrigeration breaks down, food spoils, infestations, etc.

risk of franchising

heavily regulated in u.s by Federal Trade Commission at federal level. * extensive disclosure statements * restrictions on amount of money or products that can be transferred *

supplier risk

importers and purchasing managers learn to manage_____________ -most will visit the supplier to inspect and make sure it compels with contract

payment or credit risk

in an import/export transaction, the risk that the buyer will fail or refuse to pay

Export management companies (EMC)

independent firms that assumes a range of export-related responsibilities for manufacturers, producers, or other exporters. -little or all of responsibilities for the entire export sales process -Provides research of foreign markets, foreign channels of distribution, trade shows, working with sales agents, prep documents and shipping arrangements

Foreign distributors

independent firms, usually located in the country or region to which a firm is exporting, that purchase and take delivery of goods for resale to their customers -usually when products require service or local supply of spare parts or if they are perishable or seasonal. -Assume risk of buying and warehousing goods and provides additional support services -also bares responsibility for local advertising and promotion

Joint venture

is a cooperative business arrangement between 2 or more companies for profit -can take the form of a partnership or corporation -often used where the laws of the host country require some local ownership or require that the investing foreign firm has a local partner

export controls

is a restriction on exports of goods, services, or technology to a country or group of countries imposed for reasons f national security foreign policy

Intellectual Property (IP) / Intellectual Property Rights (IPR)

legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields ex) patents, trademarks, copyrights, trade secrets

lesson of Gaskin vs Stumm

must understand foreign language of contract or get lawyer to explain it -case involved language and cultural differences -contract was written entirely in German, and the plaintiff (US guy) signed it without being able to read or speak German -however the terms were explained to him in English, one term being that any disputes would be handled in German courts -US guy wanted US court, but failed as they ruled he failed to reach out to find a translator (shouldn't have signed it)

Direct exporting

often a manufacturer, assumes responsibility for most of the export functions: marketing, export licensing, shipping and collecting payment. -They should take primary responsibility for dealing with foreign buyers, attend foreign trade shows, comply with gov export/import regulations, shipping and handling the movement of goods and money in the transaction. -They use services of foreign sales reps or foreign distributors

Transnational Corporation

often used in the United Nations system, reflecting that the corporations operations and interests transcend national boundaires

FDI (Foreign Direct Investment)

refers to the ownership and operation or effective control of the productive assets of an ongoing business by an individual or corporate investor who is a resident or national of another country. *active investments (long term) *greatest oppertunity for market penetration, but greater risk

infringement

refers to the violation of the IP rights of another, and often occurs in the unauthorized use, distribution, or appropriation of those rights *also referred as piracy or counterfeiting

currency control

restrictions on foreign currency transactions used by some developing countries that do not have large reserves of foreign currency

Exchange Rate Risk

results from the fluctuations in the relative value of two currencies when one is exchanged for the other

affiliates

several subsidiaries owned by ONE parent are called this

Transfer of technology

sharing of scientific information, technology, and manufacturing know how between firms, universities, or other institutions *important for building business alliances and is accomplished through licensing agreements

nationalization

transfer of private sector firms to gov ownership and control usually with payment to share holders and pursuant to a larger plan to restructure a national economy