LEGL 4900 EXAM #1 - CH. 1

Transatlantic Financing Corp. v. United States

"suez cannal" Impracticability, TFC was contracted to transport wheat from TX to Iran, parties never agreed which route to take, war conflict caused blockading of Suex canal so the ship had to go around cape of good hope extending the voyage several thousand miles adding 14% to TFC's costs, TFC sued for added expense, court ruled in favor of the US, court said it did not make the contract commercially impracticable

what are the three forms of investment under foreign direct investment

1) startup of a new foreign subsidiary company 2) formation of a joint venture w/ existing foreign company 3) merger with a foreign company 4) acquisition of a foreign company by stock purchase

what are the three main categories of international business

1) trade 2) protection/licensing of intellectual property 3) foreign direct investment

Dayan v. McDonald's Corp.

Dayan received an exclusive franchise to operate mcdonalds restaurants in Paris. agreement required that franchisee meet all requirements of quality, service, and cleanliness. Dayan failed to do this so mcdonalds sued to remove the franchise agreement, court found grounds to terminate agreement, dayan appealed

who regulates franchising in the US

Federal Trade Commission (FTC)

those defined by UN on the basis of low per capita income, poor health, high adult literacy, unstable agricultural production, weak export economy, and large populations displaced by natural disasters

LDCs - least developed countries. ex. include Somalia, Rwanda, Haiti, Afghanistan, Bangladesh, Cambodia

FDI provides the greatest opportunity for market penetration, the most involvement, and the greatest risk

TRUE

Forms of Intellectual Property

Trademarks Patents Copyrights Trade Secrets

In re Union Carbide Corporation Gas Plant Disaster in Bhopal

UCC's subsidiary in India, UCIL, was incorporated under the laws of India. 51% of stock was owned by UCC, 24% by government of India, and balance by Indian citizens. UCC gave a plan for a new project, but India insisted they use their new technology to design it, was supervised by Indian engineers, then explosion happened and Indian govt tried to sue UCC but it wasn't their fault so the case was upheld in India because it should be heard in the country in which the greatest amount of public interest is invested

most important IP organization in the world, offers arbitration for IP disputes between countries

World Intellectual Property Organization, a specialized agency of the UN and the World Trade Organization (WTO) - helps member countries assure a more uniform application and enforcement of IP laws

how does it help to produce home country's product in a foreign country instead of exporting

a firm can become more competitive in the host market, it can avoid quotas and tariffs on imported goods, avoid currency fluctuations on traded goods, provide better service and spare parts, and more quickly adapt products to local tastes and market trends. manufacturing overseas can mean taking advantage of local natural resources, labor, and manufacturing economies of scale

FDIs are ___ investments, as opposed to stocks for dividends or appreciation which are ___ investments

active investments, passive investments

___ is a document prepared by an exporter or shipper that certifies and attests to the country of origin of the goods being shipped, it is also required by the receiving (importing) country

certificate of origin (CO)

disadvantages of a joint venture

company may have to share its technology, expertise, and profits with another company, or give up control of local operations

___ is expropriation without compensation or payment

confiscation

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

conflict between two licenses of exclusive distribution rights to Russian films in the US, Krupny plan could distribute only in russian language, Ruscico could distribute in muliple languages with subtitles, none of the parties considered that you could just turn off the subtitles, none of the agreements specifically stated that you could not turn off subtitles. Close Up brought this suit up to Ruscico, and the defendants won (ruscico)

refers to those countries that are transitioning from centrally planned economies to free markets

countries in transition

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

currency controls

Bernina Distributors v. Bernina Sewing Machine Co.

defendant purchased sewing machines from a Swiss manufacturer, they were imported to the US for sale to distributors, contract allowed that importer could pass on cost increases to the distributor, importer imposed a charge to protect itself, eventually the value of the swiss franc doubled the importer's costs, distributor did not feel as though this was what the contract meant, importer argued that the exchange rate risk had rendered performance of the contract commercially impracticable, court ruled in favor of the distributor, and importer appealed

___ refers to the type of exporting in which the exporter (manufacturer) assumes responsibility for most of the export functions, including marketing, export licensing, shipping, and collecting payment

direct exporting

risks of international business

distance and logistics, culture, language, currency controls, government control, political risk, cross border trade controls, export controls/sanctions, tariff/non-tariff barriers, exchange rate risk, supplier risk, property or marine risk (transporting goods), exposure to foreign laws

describes countries that have potential for rapid economic growth

emerging market economy

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

export controls

independent firms that assume a range of export-related responsibilities for manufacturers, producers, or other exporters are called ___. they render advice on training/how to export, or they might assume full responsibility for entire export sales process

export management companies (EMCs)

export trading companies (ETCs) can apply for and receive ___ from the US department of commerce that waives the application of US antitrust laws to their specified export activities

export trade certificate of review

___ gives American exporters the same competitive advantage as the Japanese when it came to fixing prices and marketing jointly

export trading company act

___ is the shipment of goods out of a country or rendering of services to a buyer located in a foreign country

exporting

___ is the taking of privately owned assets, such as real estate, factories, farms, mines, or oil refineries, by a government with the payment of some compensation

expropriation

IP law is ___ law, not ___ law

federal, not state law

business presence by investor in the host country, part of the home country

foreign branch

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 of another country

foreign direct investment (FDIs)

independent firms, usually located in a region or country that a firm is exporting to, that purchase and take delivery of goods to resale to their customers, usually used if the products are seasonal/perishable, or if the products require service on arrival

foreign distributors

___ are independent sales agents who solicit orders on behalf of their principals and receive commission, have the advantage of knowing the foreign market, having est. customer loyalty

foreign sales representatives

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

foreign subsidiary

business arrangement that uses agreements to license, control, and protect use of patents, trademarks, copyrights, or business know-how, combined with a proven plan of business operation in return for royalties/fees/commissions

franchising

___ and ___ act as the agent for the exporter or the importer in arranging transportation and insurance for goods, preparing import/export documents, and moving goods through customs

freight forwarders and customs brokers

one significant trend in the in business during the 20th century

globalization of multinational corporations

Gaskin v. Stumm Handel GMBH

he entered into an employment contract, didn't know German in his contract, not an excuse

refers to the country that under whose laws the investing corporation was created/is headquartered

home country (ex. ford, coca-cola, exxon) but operate in host countries all over the world

what challenges do firms face when in business with developing countries

host of adverse government policies, including high tariffs, taxes, import licensing requirements, financial regulation, controls on technology transfer, and trade and investment barriers that protect local industries from competition, rules lack transparency, government rules normally not readily available to foreign firms, compliance almost impossible, long delays

___ is the entering of goods into the customs territory of the country or the receipt of services from a foreign provider

importing

___ refers to a firm's use of specialized intermediaries outside of their own organization to handle specific functions, foreign marketing/sales/finance/etc. intermediaries usually include international/export trading companies and export management companies

indirect exporting

companies that do not have the capital or resources to tackle a foreign market alone use ___

indirect exporting

violation of IP rights of another, often referred to as counterfeiting or priacy

infringement

legal rights which result from intellectual activity in the industrial, scientific, literary, and artistic fields

intellectual property

DIP SpA v Commune di Bassano del Grappa

italian law prohibits opening of local retail stores without notification to and obtaining a license from the local authorities. action to get approved was brought on by 3 applicants whose licenses had been denied. one of the applicants, a subsidiary of a german company, argued that italian licensing law discriminated against non-italian companies and imported goods, leading to higher consumer prices. court found the licensing laws under italian government are not invalid under the laws of the EU so they were fine to do that

cooperative business arrangement between two or more companies for a profit, can take the form of a partnership or a corporation

joint venture

grant of rights in that property

license

contracts by which the holder of IP will grant certain rights in that property to another party under specified conditions for a specified amount of time in return for loyalties or some other form of larger business arrangement

licensing agreements

why is franchising a good vehicle for entering a foreign market?

local franchisee provides capital investment, entrepreneurial commitment, and on-site mgmt to deal with local issues such as labor and employment

___ means that a share of the business is owned by nationals of the host country

local participation

___ are firms that have significant foreign direct investment assets or that derive a significant portion of their revenues from more than one country

multinational corporations

transfer of private-sector firms to government ownership and control

nationalization

developing countries that have made rapid progress in becoming industrialized or technology based economies

newly industrialized countries, located all over the world

the risk that a buyer will fail or refuse to pay

payment or credit risk

risk to firm's interests as a result from political instability, civil unrest, political change, war, terrorism, etc.

political risk

quantitative restriction on imports that limits the quantity of an item that may enter a country annually

quota

___ are broader and more comprehensive restrictions on trade and financial transactions w/ countries, who sponsor international terrorism, engage in the proliferation of WMDs, threaten international peace, or violate major aspects of international law

sanctions

___ is an import duty to pay taxes on goods entering the custom's country territory

tariff

___ is the import or export of goods and services across national borders, usually as part of an exchange

trade

___ refers to the providing of services to a customer or the operation of service companies in a foreign country

trade in services

sharing of scientific info, technology, and manufacturing between firms is known as

transfer of technology

examples of trade in services

transportation, banking, insurance, package delivery, software development, etc.

T/F - the only way export trade certificates of review are approved is if it is shown that the advantage will not lessen competition within the US

true

licenses can be either exclusive or nonexclusive, and frequently limit distribution to a certain geographical area, to certain uses, or to a certain period of time

true

Tarbert Trading Ltd. v. Cometals, inc

two trading companies (not US ETCs) were overly anxious to make the sale and a fraudulent certificate of origin (CO), complaint and the counterclaim were both dismissed. agreements that violate the law are void

IP owner has the right to

use, reproduce, distribute, and profit from its property, and to protect it from unauthorized infringement