Chapter 23

What does Article I, Section 9 of the US Constitution state regarding exports?

"no tax or duty shall be laid on Articles exported from any state" (Congress cannot impose taxes on exports)

Why might a country want to restrict exports?

- protect national security -further foreign policy objectives -conserve resources (or raise their prices)

Since 1980, what four countries have been involving in an increasing number of civil lawsuits against private companies?

-Colombia -Egypt -Nigeria -Saudi Arabia

What are three things are classified as import restrictions?

-Strict Prohibitions -Quotas -Tariffs

In what ways can a firm regulate their international business activities?

1. Investment Protections 2. Export Controls 3. Import Controls 4. Minimizing Trade Barriers

Under what circumstances will a court compel the parties to arbitrate their dispute?

1. there is a written agreement to arbitrate the matter 2. the agreement provides for arbitration in a convention signatory nation 3. the agreement arises out of a commercial legal relationship 4. one party to the agreement is not a US citizen (both parties cannot be US citizens)

What antitrust law provides for these extraterritorial effects?

Section 1 of the Sherman Act

Choice-of-Law Clause

a clause in a contract designating the law (such as the law of a particular state or nation) that will govern the contract

Distributor Agreement

a contract between a seller and a distributor of the seller's products setting out the terms and conditions of the distributorship

Act of State Doctrine

a doctrine providing that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory

Sovereign Immunity

a doctrine that immunizes foreign nations from the jurisdiction of US courts when certain conditions are satisfied

Confiscation

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

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention)

assists in the enforcement of arbitration clauses, as do provision in specific treaties among nations

International Custom

evidence of a general practice accepted as law

What is one of the most common tort violations involving foreign affairs?

human rights violations by foreign governments

When is the act of state doctrine frequently used?

in situations involving expropriation or confiscation

Export

the sale of goods and services by domestic firms to buyers located in other countries

What are some examples of coercive actions a nation may take on to punish another nation for violating international law?

- economic sanctions -severance of diplomatic relations -boycotts -war (last resort)

What are some benefits of NAFTA?

- gives the countries an advantage by retaining tariffs on goods imported from countries outside of NAFTA - eliminates barriers that traditionally have prevented cross-border movement of services -eliminates citizenship requirements for the licensing of accountants, attorneys, physicians, and other professionals

What is the major law regulating employment discrimination and does it apply extraterritorially?

-Title VII of the Civil Rights Act -yes, for US employees working abroad

What are some protections for foreign investments?

-countries may guarantee that foreign investors will be compensated if their property is take (done through statutory laws or provisions in treaties) -countries may provide insurance for their citizens' investments abroad

What are the remedies of confiscation?

-few exists -generally a lump-sum settlement occurs after negotiation between the US and the taking nation

What are the three sources of international law?

-international customs -treaties and international agreements -international organizations

What are the advantages of manufacturing abroad?

-lower costs -fewer government regulations -lower taxes and trade barriers

1980 Convention on Contracts for International Sale of Goods (CISG)

-one of the United Nations Commission's most significant creations -designed to settle disputes between parties to sales contracts if the parties have not agreed otherwise in their contracts -governs only sales contracts between trading partners in nations that have ratified the CISG

How are firms generally paid for a license?

-payment of royalties -ex. so many cents per unit produced or a certain percentage of profits from units sold

What aspects are included in a distributor agreement?

-price -currency of payment -guarantee of supply availability -method of payment

What might a US firm license to a foreign manufacturing company?

-right to use its copyrighted, patented, or trademarked intellectual property or trade secrets

What is the tradeoff for companies involved in a licensing agreement?

-the firm that receives the license can take advantage of an established reputation for quality -the firm that grants the license receives income from the foreign sales and establishes a global reputation

Joint Venture

-when a US company makes a deal with another to work together -each firm owns only part of the operation thus they share responsibilities, profits, and liabilities

What are the two ways a US domestic firm can engage in international business transactions?

1. Export (simplest way) 2. Establish foreign production facilities

What ways can Congress restrict or encourage exports?

1. Export Quotas 2. Restriction on Technology Exports 3. Incentives and Subsidies

What two US agencies impose antidumping duties?

1. International Trade Commission (ITC) 2. International Trade Administration (ITA) (part of the Department of Commerce)

What are the two aspects of international space law?

1. International Treaties (primarily negotiated by the UN) 2. UN Resolutions

What are three ways a domestic firm may engage in manufacturing abroad?

1. Licensing 2. Subsidiaries 3. Joint Ventures

When is a foreign state not immune from jurisdiction of US courts?

1. when the foreign state has waived its immunity either explicitly or by implication 2. when the foreign state has engaged in commercial activity within the US or in commercial activity outside of the US that has a direct effect in the US 3. when the foreign state has committed a tort in the US or has violated certain international laws 4. when a foreign state that has been designated a "state sponsor of terrorism" is sued under the FSIA for "personal injury or death that was caused by an act of torture" or a related act of terrorism

Expropriation violated the principles of international law whereas confiscation does not. T/F

False, confiscation does violate international law whereas expropriation generally does not

What is the largest free trade agreement the US has entered into since NAFTA?

KORUS

Treaty

a formal international agreement negotiated between two nations or among several nations

Common Market

a free trade zone comprising the nations of Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany

Expropriation

a government's seizure of a privately owned business or personal property for a proper public purpose and with just compensation

Normal Trade Relations (NTR) Status

a legal trade status granted to member countries of the World Trade Organization (WTO); meant to minimize trade barriers among countries

What government can enforce international law?

a nation is a sovereign entity meaning that there is no higher authority to which that nation must submit; thus, if a nation violates international law, other countries/international organizations can only take coercive actions

Forum-Selection Clause

a provision in a contract designating the court, jurisdiction or tribunal that will decide any disputes arising under a contract

Commercial Activity

a regular course of commercial conduct, transaction, or act that is carried out by a foreign state with the US

Quotas

a set limit on the amount of goods that can be imported

Tariff

a tax on imported goods

UN Committee on the Peaceful Uses of Outer Space (COPUS)

administers space law treaties and advises the international community on space policy matters

The Republic of Korea-United States Free Trade Agreement (KORUS FTA)

aimed at eliminating 95 percent of each nation's tariffs on industrial and consumer exports

Alien Tort Statute (ATS)

allows even foreign citizens to bring civil suits in US courts for injuries caused by violations of international law or a treaty of the US

Multilateral Agreement

an agreement formed by several nations

Bilateral Agreement

an agreement formed by two nations to govern their commercial exchanges or other relations with one another

Antidumping Duty

an extra tariff set on goods that were order to prevent dumping; the duty may be retroactive to cover past dumping

International Organization

an organization composed mainly of member nations and usually established by treaty (i.e. United Nations); more broadly it also includes nongovernmental organizations (i.e. Red Cross)

Fair Value

based on the price of those goods in the exporting country

What are international principles and doctrines primarily based on?

courtesy and respect, and are applied in the interests of maintaining harmonious relations among nations

North American Free Trade Agreement (NAFTA)

created a regional trading unit consisting of Canada, Mexico, and the US

What does the ITA do in regards to antidumping duties?

decides whether imports were sold at less than fair value; their determination established the amount of antidumping duties (= price charged in US - price charged in exporting country)

Foreign Sovereign Immunities Act (FISA)

exclusively governs the circumstances in which an action may be brought in the US against a foreign nation

Why do sovereign nations voluntarily agree to govern under international law?

for the purpose of facilitating international trade and commerce as well as civilizes discourse

Who can be sued under the Sherman Act for extraterritorial purposes?

foreign governments and businesses, even if the violation occurs outside of the US

Are tariffs generally a flat rate or a percentage of the value of the import?

generally is a percentage of the value but can be a flat rate per unit such as per barrel of oil

Instrumentality of a Foreign State

includes any department or agency of any branch of a gov't

Foreign State

includes both a political subdivision of a foreign state and an instrumentality of a foreign state

What does the ITC do in regards to antidumping duties?

it asses the effects of dumping on domestic businesses and makes recommendations to the president concerning temporary import restriction

How much authority does the International Court of Justice have over nations?

it normally only has authority to settle legal disputes when nations voluntarily submit to its jurisdiction

What was KORUS expected to do for the US?

it was expected to boost US exports and benefit US automakers, farmers, ranchers, and manufacturers but exports have not increased as much as predicted and the agreement is likely to be renegotiated

International Law

law based on international customs, organizations, and treaties that governs relations among nations

Space Law

law consisting of the international and national laws that govern activities in outer space

National Law

law that pertains to a particular nation

What is stated in Article IV of the Outer Space Treaty?

no weapons of mass destruction are permitted in our space

What is stated in Article I and II of the Outer Space Treaty?

outer space is declared to be free for exploration and use by all nations

What is the purpose of dumping?

purpose is to undersell US businesses to obtain a larger share of the US market

Trade Barriers

restrictions on imports

European Union (EU)

single integrated trading unit made up of 28 European nations

Trading with the Enemy Act

states that no goods may be imported from nations that have been designated as enemies of the US

Which acts protect US employees working abroad?

the Age Discrimination in Employment Act and the Americans with Disabilities Act (for citizens working abroad for US firms)

What is considered the foundation of international space law and established the framework for later international agreements and UN resolutions?

the UN Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space (Outer Space Treaty)

What did the USSC rule in 2018 that limits the application of the ATS?

the court ruled that foreign corporations could no longer be defendants in suits brought under the ATS

Who decides whether an activity is governmental or commercial in nature?

the courts because section 1603 (which defines commercial activity) does not describe the particulars of what constitutes a commercial activity

In cases alleging that a foreign government has wrongfully taken a plaintiff's property, who have the burden of proving expropriation, not confiscation?

the defendant government

How does an agency relationship work?

the foreign firm acts as the US firm's agent and can enter into contracts in the foreign location on behalf of the US company -limits the involvement of the US firm in the international market

What happens when disputes arise regarding resolutions or declarations made by international organizations?

the issue may be brought before the International Court of Justice

How do subsidiaries work?

the parent company, which remain in the US, retains complete ownership of all facilities in the foreign country and retains complete authority and control over all phases of the operation

Who has the burden of proving that a defendant is not entitled to sovereign immunity?

the plaintiff

In the US, who has power to make a treaty?

the president/executive branch but it must be voted on by the Senate with a two thirds vote

Comity

the principle by which one nation defers to and gives effect to the laws and judicial decrees of another nation; based primarily on respects; ex. marriage between a man and woman is recognized in nearly all nations

What is the purpose of tariffs?

the raise the prices of imported goods leading some consumers to purchase more domestically manufactured goods

Dumping

the sale of goods in a foreign country at a price below the price charge for the same goods in the domestic market (sale of imported goods at "less than fair value")

What extraterritorial effects does US antitrust laws have in the global market?

they may subject firms in foreign nations to their provisions as well as protect foreign consumers and competitors from violations committed by US citizens

What risk do firms take on when investing in foreign nations?

they risk the foreign nation taking possession of the investment property (expropriation and confiscation)

What was the goal of NAFTA?

to eliminate tariffs among the nations on substantially all goods by reducing the tariffs incrementally over a period of time

The Central American-Dominican Republic-United States Free Trade Agreement (CAFTA-DR)

trade agreement between Costa Rica, the DR, El Salvador, Guatemala, Honduras, Nicaragua, and the US with the purpose of reducing tariffs and improving market access among the nations

Any conspiracy that has a substantial effect on US commerce is within the reach of the Sherman Act. T/F

true

Both the act of state doctrine and the doctrine of sovereign immunity tends to shield foreign nations from the jurisdiction of US courts. T/F

true, thus firms or individuals who own property overseas generally have little legal protection against gov't actions in the countries in which they operate

Direct Exporting

when US companies sign a sales contract with a foreign purchaser that provides for the conditions of shipment and payment for the goods

Indirect Exporting

when a US company sets up a specialized marketing organization in a country; done through the use of an agency relationship of distributorship

When might a US firm decide to partake in a distributorship?

when a foreign country represents a substantial market for the firm

When do US employees not need to abide by US discrimination laws?

when abiding by the law would violate the laws of the country in which the workplace is located; this helps prevent conflicting laws

Why is space law facing many new challenges in today's world?

when it first started, it was only national governments working on space exploration so laws were only directed towards the governments; now, private companies have joined the mix