International trade 2 exam

Excuses for Nonperformance of a contract? (3)

1) impossibility, (2) frustration of purpose (3) commercial impracticability

Electronic data interchange (EDI)- Adv/Dis

Used instead of paper documents Adv: Quicker, permits tracking, eliminates multiple paper copies Dis: security, not available in all counties, no standardization

Letter of credit is an obligation of? substitutes the bank's credit for?

a bank issued on behalf of a bank customer promising to pay a sum of money to a beneficiary upon event; that of the customer

tariff schedule

a listing of specific items, coded numerically and described by name or use. Then applied to the nation's tariff rates based on country of origin classification per each good

Generally speaking a subsidy is a "specific subsidy" unless

eligibility is automatic upon meeting certain neutral, objective criteria.

Overall theme of CISG

endeavors to keep the parties in their bargain

Importing is the?

entering of goods into country

"rule of strict compliance"

every document must match the letter of credit; even a small discrepancy is reason for rejection of the documents although some typographical errors may be overlooked (excused)

Trade Adjustment Assistance Program

federal assistance program for workers who lose their jobs as a result of increased imports of foreign goods

Freight forwarder's bill of lading

federally licensed individuals acting as agent for seller; can either be "straight" or "order"

Subsidies and Countervailing Measure (SCM) Agreement defines a "subsidy" as a

financial contribution of any form that gives a benefit to an enterprise or industry

EAR export controls should not be imposed for foreign policy or national security purposes if there is _______________? Meaning?

foreign availability" of the goods or technology -available without restriction from sources outside the U.S

Convention for the International Sale of Goods ("CISG") deals with(2)

formation of contract rights and obligations of seller and buyer, but not validity of contract)

specific subsidies are?

given to a select company/industry or number of companies/industries. Or select firms of a geographic region

Unilateral controls are?

those that only the United States(single nation) imposes

Banker's acceptance is. Replacing ____ with _____

time draft drawn on and accepted by a commercial bank (replacing the buyer's credit with its own); accepting bank becomes obligated to pay the amount stated to the holder when due

Disputes over antidumping duties may be taken to who? and By Who?

to WTO but only by nations, not private parties

If WTO finds the antidumping order imposed by importing country violates the WTO Antidumping Agreement then what happens?

they may recommend measures to be taken against importing country by Dispute Settlement Body

Bill of Exchange- Negotiation

transfer of instrument(check/money order,etc) in a fashion that the transferee - holder - takes rights Most international transactions involve order instruments

Substantial transformation test

transformed into a new and different article having a "new name, character or use"

Documentary sale is a type of ?

type of contract for sale of goods in which possession and ownership of goods are transferred from seller to buyer through the "negotiation" and "delivery" of a "negotiable" document of title issued by an ocean carrier;

"antiboycott laws make it

unlawful for citizens or companies to participate in a boycott

diversion makes it_______ to....

unlawful transfer/re-exporting of controlled goods/technology from one (legal) destination to another (unlawful) destination;

actionable subsidy, also known as? what is it? (3)

"adverse effects subsidies" not automatically prohibited, but can be if (1) causes material injury to producers of like product (2) violates a trade agreement or (3) causes "serious prejudice" to the interests of complaining country. Actionable subsidies must be the cause of significant price undercutting, price suppression or lost sales.

EAR "controlled items" can include ?(2)

"commercial items" and "dual-use items"

the president sets the list of? reference to controlled goods

"controlled" countries- lists largely exempt from public comment procedures or judicial review

Force Majeure states/means

"superior force" clauses excuses (or suspend) the party from performance upon occurrence of certain events

customs law is a broader term which encompasses

"tariff law" and also aspects of goods and people crossing international borders

Authority for U.S. Sanctions - two main bases for president's authority to act

(1) Trading with the Enemy Act (1917) (2) International Emergency Economic Powers Act- primary power of the president to impose sanctions during peacetime emergency

Export Administration Regulations (EAR) applies to ?(4)

(1) U.S. origin goods and technology (wherever located - even if in a foreign country); (2) foreign-made goods having a certain percentage(25) of U.S.- origin controlled content (3) certain items made in foreign country using U.S. -origin controlled technology (4) items made at a plant outside the U.S. if the plant was designed and built with U.S. technology

The Escape clause is able to be used when (4)

(1) as a result of unforeseen developments; and (2) due to a tariff concession (or obligation under a trade agreement); (3) increased quantities of an imported product; (4) are causing (or threatening to cause) serious injury to domestic producers

Remedies for Breach (6)

(1) avoidance (cancellation) of contract (2) remedy or cure (3) additional time for performance (extension), CISG gives extra grace period for seller to perform (4) price reduction (if seller ships defective or non-conforming goods (5) damages (money damages); breaching party (buyer or seller) liable for damages in amount sufficient to make the injured party whole (6) specific performance (under CISG Court may grant specific performance without regard to whether or not money damages would be inadequate as a remedy

CISG applies if?(3)

(1) contract is for commercial sale of goods (2) between parties with places of business in different countries (3) places of business(countries) accept the CISC

Major (broad) reasons for controlling exports under EAR

(1) protect national security; (2) promote U.S. foreign policy; (3) prevent short supply of essential domestic materials

drawbacks are?

(refunds) of duties already paid on imported goods when the goods are re-exported or destroyed

Under CISG - a communication is an "offer" when it a?(2)

1. Proposal for forming a contract; and 2. Is sufficiently definite (goods,quantity,price) and indicates an intent to be bound

US "safeguards" law Section 201- How does it differ from GATT/WTO? (2)

1. U.S. law does not limit safeguards to situations where injury or risk of injury to domestic industry comes from "unforeseen developments"; 2. a "serious injury" differs under U.S. law than under GATT/WTO

Steps in Letter of Credit Transaction(4)

1. buyer finalizes contract with seller, then applies for letter of credit with the bank. 2.issuing bank sends letter of credit to seller, via foreign bank(advisory bank). Foreign banks informs the seller the letter of credit ready 3.Seller should compare letter of credit against the contract to make sure they match 4.Seller makes a "complying presentation" of documents to the nominated/advisory bank to honor the documents-UCC 21 days

Transaction risk (2)

1. delivery risk (risk to buyer that seller will not deliver as required by contract) 2.payment risk/credit risk (risk to seller that buyer will not pay as required by contract)

differences between UCC and CISG

CISG-doesn't require written contract, does not address validity of contract, competences of parties, doesn't mention consideration. Gives time for grace period (German Nachfrist, period after) UCC- need one over 500$, uses Parol Evidence rule "mailbox rule"

US Harmonized Tariff Schedule has 2 columns: what are they?

Column 1 - has 2 tariff rates Column 2 - original Smoot-Hawley Tariff Act of 1930. Now applicable to countries to which U.S. has not granted "normal trade relations" status (for example, North Korea)

goods or technology to be controlled are selected by ?

Department of Commerce & with other multilateral organizations of which US is a member

dumping margin

Difference of price sold in home market than in foreign market

Documentary sale - cons

Documentary sale does not guarantee the buyer will actually purchase the goods. Bad for high value goods, or first time customer

Weapons, munitions and defense systems are not considered? Regulated by who?

Dual use goods, US Department of state

EAR stands for?

Export Administration Regulations

Multilateral controls are? By who?

Export Administration regulations(EAR) published to implement agreements of the multilateral export control by the BIS(Bureau of Industry and Security ), part of the department of commerce

Historically Subsidies and Nonmarket Economy Countries, special case? why?

Historically, US countervailing duty laws did not apply to NME's countries (under the theory that really everything about those economies was really subsidized);

two types of prohibited Subsidies?

Import substitution subsidies & Export subsidies

clean bill of lading

No visible damage to the goods

Mutual Assent is?

Offer and acceptance

bailOr

Owner

baileE

Person Entrusted with the goods

Final decision under US law for countervailing duties cases and dumping cases are reviewable in?

U.S. Court of International Trade

Documentary sale - pros

certificates of inspection or analysis Better for: low to moderate value repeat customer Goods can be cost-effectively returned or resold Goods (commodity) that need to be traded in transit

Specific Performance is more accepted as a remedy under

civil law and CISG than under common law and UCC

dutiable status" depends on (3)

classification/coding-what it is customs value-what it is worth country of origin - where it came from

Types of Ocean Bills of Lading

clean on-board received-for-shipment straight

Multimodal transport documents

combined transport document" or "through bills of lading") i.e container goes from train to ship

what are dual-use items?

commercial items which also have military uses (nuclear, chemical or biological weapons)

deemed export" rules try to control the ?

communication of technology by foreign subsidiaries of U.S. companies to foreign employees in foreign countries

deemed exports are? Examples?

communication or transfer by a U.S. citizen of controlled technology to a foreign national(Non-citizen, non-resident) Ex. technology, data, software, encryption technology or other

deemed re-export are? examples?

communication or transfer of controlled technology from a licensed recipient to a third person technology, data, software, encryption technology or other

re-export provisions seek to ?

control goods and technology long after they have left the U.S

Remedies for dumping may include

imposing of "anti-dumping duties" (in addition to normal tariffs This levels the playing field by offsetting the low price of the dumped goods

what are commercial items?

intended primarily for civilian use

received-for-shipment bill of lading

issued by carrier upon receiving goods for transport; no guarantee that the goods will be loaded on board ship soon

Export controls are?

laws and regulations that govern the licensing of certain goods exported from the country

dutiable" status of goods, refers to the _______ of the....

legal status of the imported goods at the time of entry for purposes of tariff and customs laws

foreign trade zones

legally defined site within a country subject to special customs regulations

Independence principle -states? except If?

letter of credit is independent of sales contract between seller and buyer the documents presented by the seller are fraudulent or forged. Then buyer can get an injunction from the court

Harmonized Tariff Schedule of the United States

maintained by the International Trade Commission ("ITC") other countries/jurisdictions have their own

Air waybills are used for? Meaning what?

most air transport is handled through nonnegotiable air waybills (meaning that the carrier will deliver the goods only to the named consignee

boycott is the?

organized refusal of one or more nations to trade with one or more other nations

bailment separates

ownership from possession

Right to export and travel is a __________________ which is recognized by law, but can be revoked

privilege

what is "privatization" ?

process by which a government sells or otherwise transfers government-owned industries or other assets to the private sector

"Sanctions are regulations that.. reasons why?

prohibit domestic companies or citizens from doing business with certain foreign governments, organizations or individuals. for example, due to support of terrorism, spread of nuclear weapons, drug trafficking

two types of Subsidies?

prohibited subsidies & export subsidies

Safeguarding is the

protecting domestic industries from foreign competition; - buying time for domestic industries to adjust

Fundamental Breach

results in such detriment to the other party, as to deprive him/her of what they are entitled to expect under the contract

WTO Agreement on Safeguards says?

safeguard" may be imposed by a country only after an investigation has happened and determined that legal requirements for imposing "safeguard" have been met. Also that the increase in imports are the actual cause of the domestic industry's decline; tariffs are the preferred form of safeguard-should be as least restrictive as possible,

Destination Contract (Arrival Contract) risk of loss passes to buyer when

seller to deliver goods at a particular destination when seller delivers goods to buyer at port of destination

Performance of Contracts States buyer and sellers? what are they?

seller's obligations-including to deliver conforming goods in manner specified within the time specified) buyer's obligations-including to pay and take delivery

Bill of Exchange-two types of drafts (2)

sight draft (payable on sight) time draft (payable at a certain subsequent time)

Usually impediment does not entirely excuse performance, but merely

suspends it until the impediment ends

when holder receives "negotiable" document of title, what does this represent? "holder by due negotiation" is also know as

takes title to the document and to the goods it represents. Title represents ownership a good faith purchaser

How does the Battle of Forms operates? Under CISG

terms that DO NOT materially alter the deal become part of the contract unless offeree objects; Acceptance with new terms that DO materially alter the deal are considered a rejection and counter-offer

Subsidy disputes can be resolved through?

the WTO, Dispute Settlement Body (nation to nation) May authorize complaining country to take countermeasures to offset the improper subsidies or alternatively be resolved through administrative action ("countervailing duty actions") both routes can be taken, only one remedy tho

Standby letters of credit state the?

issuer is obligated to pay beneficiary upon presentation of required documents (often the documents include an independent third party's written confirmation of the default)

rules of origin" are used to determine and fall into what two categories

the country of origin non-preferential rules of origin" applicable to countries that receive normal tariff treatment and "preferential rules of origin" applicable to free trade area, customs union, some developing countries

Non-preferential rules of origin-general rule states(2)

(1) from what country are the goods "wholly obtained" (2) if not "wholly obtained in one country, then the country of origin is the country where the goods last underwent a substantial transformation

country of origin are used to determine (6)

(1) tariff rate for goods (2) If goods are subject to countervailing/antidumping duties (3) whether the goods are subject to an embargo or quota (4) government procurement rules (5) health or safety issues (6) country of origin (may be different test) for marking or labeling requirements, etc.

Preferential Rules of Origin -NAFTA, General Rule

(1) the goods must be "wholly produced or obtained" in Canada, Mexico or the United States (2) the goods may contain non-NAFTA inputs (raw materials or components) but must meet: the regional value content requirements

export licenses are determined based on?

(1) whether the item is controlled, (2) the country of destination, and (3) the identity of end-user

Under CISG exemption (excuse) for "Impediments Beyond Control" party is not liable for failure to perform obligations due to?(4)

(1.) impediments beyond control (2.) issues not reasonably foreseeable at time of contract (3.) unavoidable and could not be overcome, (4.) notice was given to the other side of the impediment and its effect on the contract

Negotiation of order instrument requires (2)

(a) necessary endorsement and (b) delivery

bill of lading (3)

1. receipt for the goods 2.contract of carriage (i.e., a transport document); 3. document of title to the goods

Limits on Safeguards (2)

1. temporary (lifted when conditions permit) 2. "global" in nature, cant discriminate 3.developing countries are exempted from application of the "safeguard" measure unless IM amount to 3% of IM on that product

Steps in importation(4)

1.formal entry- step at which estimated duties paid or a customs bond posted 2. liquidation-final assessment of the applicable duties; if additional duties are owed a "notice of adjustment" is issued 3.protest- importer may protest (additional duties). Initially with U.S. Bureau of Customs and Border Protection, Customs headquarters in Washington and, ultimately to Court of International Trade (4) enforcement procedures- (include civil violations and criminal penalties depending on the situation)- results from making false claims.

trade compensation is when

A Country lowers tariff duties on certain products coming from another Country to offset the increased duties coming from the safeguard measure imposed on different products If they don't reach an agreement, Country B may suspend equivalent trade

unfair governmental subsidies governed by?

GATT/WTO and WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement")

2012 Subsidies and NMEs. Countervailing duty law extended to subsidized imports from NME countries if ?

ITA is able to identify and measure government subsidies (if not the government and firms are really a single entity. antidumping laws are the only remedy

International Trade Commission ("ITC") - an independent agency, Relating to Section 201 If yes, actions taken may include(5)

ITC gives public notice, holds hearings makes a determination (yes/no) as to injury. If yes, ITC may recommend a limited-duration remedy (which could include (1) tariff increases (2) tariff-rate quotas (3) absolute quotas (4) auctioned quotas (5) financial assistance to workers or to domestic industry)

Incoterms stands for?

International Rules for the Interpretation of Trade

Commerce Control List is?

List of controlled items (goods and tech)

prohibited subsidy's are? No need to do what?

Prohibited in all cases. Harmful effects are presumed; no need to prove effects. these are subsidies which clearly distort international competition;

What is in column 2 of the US Harmonized Tariff Schedule

Rates now applicable to countries to which U.S. has not granted "normal trade relations" status (for example, North Korea) Ex. tariffs can be "ad valorem" (percentage of the value of the article imported); "specific" (specified amount per unit of weight or measure) or "compound" (a combination of both ad valorem and specific tariff rates).

How do Documentary Collection Work?

Seller entrusts goods to carrier/ gets negotiable bill of lading. Seller's bank forwards package of documents to collecting bank in buyer's country with instructions to release the documents to the buyer only on payment of the draft

What is a? Bill of Exchange-Draft

Signed order of drawer Given to drawee (bank who posses $ of drawer) To pay sum of money to payee,to order or to bearer On demand or at definite time For example, a check is a draft

What is a Bill of Exchange-Negotiable instrument

Signed writing, Containing unconditional promise to pay a fixed sum.On demand or at a definite time For example, promissory note (2 party)

Confirmed letters of credit is when? How does this effect the letter of credit

a second bank (usually in the seller's country) agrees to buy the documents on the same terms as the issuing bank; increases the costs of the transaction, but makes transaction safer for the seller in case the issuing bank for some reason cannot honor the "purchase"

Harmonized Commodity Description and Coding System

developed by the "World Customs Organization" uses standard rules and tariff language to describe and classify(codes) goods used by virtually all countries trading internationally; the idea is that a good should fall into the same classification (and receive the same code) in all countries

Escape clause

allows a country to take temporary corrective action ("emergency action") to in order to "safeguard" its domestic industry.

Parol Evidence Rule

allows a court to consider all relevant circumstances in considering the intent of the parties

tariff classification is

assigning types of goods to categories based on the name, use or physical characteristic

a negotiable ocean bill of lading is a?

document of title issued by an ocean carrier to a shipper upon receipt of goods for transport

Documentary collection is the process where ?

banks act as intermediaries between the buyer and the seller to handle the exchange of bill of lading for payment

trade acceptance creates the

buyer's unconditional obligation to pay on due date

Trade Financing-How can exporter provide credit for the buyer?

by issuing a time draft which the buyer then "accepts". Providing 60 days for payment

Export subsidies are made to....

domestic firms upon the export of their product

A negotiable bill of lading is important to international trade because of its ?

negotiability; the goods can be bought and sold while still in transit (title is transferred through negotiation of the document, for example, the ocean bill of lading)

Shipment Contract (Departure Contract) risk of loss passes to buyer

contract requires seller to ship goods, but does not require seller to deliver the goods to a named place when seller delivers goods to the first carrier (for example, truck line) this is the most common approach

clearing customs includes?

customs officials check if there are any prohibitions or restrictions on the imported goods. whether any tariff (duty) is due; each country will have own processes; similar from country to country due to "harmonization" process;

. International Trade Administration ("ITA") does what in reference to dumping?

determines whether dumping occurred and the extent of the dumping

Rule of strict compliance is the prevailing view in most countries, but some courts in U.S. (and some European countries) a "functional standard" of compliance is used . Meaning??

dont need to be necessarily a "mirror image" of the letter of credit language. Other documents reviewed by the honoring bank and apply common sense

Electronic Data Interchange and the eUCP What is Bolero?

extends UCP to electronic documents the technical infrastructure for exchanging documents in a common electronic format;

What is in column 1 of the US Harmonized Tariff Schedule

general rate - imports from countries with "normal trade relations" (formerly known as "most favored nations") special rate - special tariff treatment on IM/EX from a developing country,(Generalized System of Preferences) or from a free trade area in which US participates;

Most international lawyers reject concept that one country (unless there is a treaty) can control goods and technology within the borders of another country , Why?

goods and technology do not have citizenship as do people; thus, the U.S. position is controversial

straight bill of lading(nonnegotiable)

goods are intended by seller/shipper to go only to the consignee (the named recipient

Import substitution subsidies

government subsidy based on using or purchasing domestically made goods rather than imported goods

Trade financing using letters of credit are letters of commitment from, these insure?

government to issuing bank (to insure payments made to US sellers under letters of credit confirmed by bank)

holder in due course of negotiable instrument can take

greater rights than those of transferor; Thus, holder in due course of negotiable instruments can take free of most disputes (such as breach of contract)

Letter of credit - Are not necessarily contracts meaning latin term, means?

it does not have to come about through offer and acceptance, mutual assent and consideration); it is not a negotiable instrument it is sui generis -something of its own - it is a "definite undertaking"

tariff law are the?

laws and regulations that determine the "dutiable" status of goods and the rate of the duty (tariff);

End User Controls are? Who has burden?

make it unlawful to release any controlled item to certain persons or entities. Exporter has burden to comply with export control regulations

U.S. Customs rules require articles of foreign manufacture imported into U.S. be ?

marked to indicate the country of origin

Petitions for "trade adjustment assistance"(3)

may be filed by group of workers (3 or more) (1) significant number of workers have/threatened to lose their jobs; (2) firm's sales or production had decreased absolutely (3)increased imports of like or directly competitive products importantly contributed;

General WTO rule about safeguarding

member nations may not raise tariff rates on imported goods just to protect domestic industry or domestic jobs, but under limited circumstances a government may impose temporary safeguards to protect its domestic industry from injury from increased imports

tariff engineering

modifying or engineering a product prior to importation in order to obtain a favorable duty Good is classified according to its condition at time of importation

Automated Export System is a? from who?

online system of U.S. Census Bureau collects Electronic Export Information ("EEI") from the exporter and is required to be filed for each transaction for which an export license has been issued

Dumping is the ?

selling of goods in a foreign country for less than the price charged in the exporter/producer's home market an "unfair trade practice"

U.S. export controls- Re-Exports (2)

shipping or transferring U.S.- controlled goods/technology from one foreign country to another foreign country

U.S. export controls- Exports includes the (2)

shipping/transfer of controlled items out of U.S. to a foreign national,inside or outside the U.S

on-board bill of lading

signed by ship's agent of carrier stating the goods have been loaded on-board

International Draft or Bill of Exchange

similar to a check, but is not drawn against funds on deposit with a bank; Instead its an order from seller to buyer(bank) to pay seller upon delivery of goods the seller is both drawer and payee; buyer (or buyer's bank) is drawee.

The SCM Agreement applies only to

specific subsidies

Under UCC holder in due course of a negotiable instrument takes, takes instrument for________,in ____________ ______________? Without what (2)

value, in good faith w/o notice of instrument is overdue or has been dishonored or contains unauthorized signature or has been altered

U.S. International Trade Commission ("ITC") determines what in reference to dumping?

whether dumping caused (or threatens) "material injury" to a domestic industry producing "like products

if Secretary of Labor determines that the group is affirmative, then group of workers is certified as eligible for trade adjustment assistance; Meaning what?

workers can apply individually for benefits with state jobs office (benefits can be cash, tax credits, vouchers for job search expenses, training, relocation, health care insurance; in some circumstances for older workers benefits can be wage subsidies)