Law Chapter 10: The Legal Environment of International Trade

When a U.S. trademark holder licenses a foreign business use of its trademark overseas and a third party imports these goods into the United States to compete against the U.S. manufacturer's goods, the foreign-made goods are called _____ goods:

"Gray market"

A direct sale to customers in a foreign country is a(n):

Export sale

When a foreign government takes over an American business that is being conducted in the foreign country, this is called:

Expropriation

The main purpose of the International Monetary Fund is to:

Facilitate the expansion and balanced growth of international trade.

A country can borrow money from other IMF members or from the IMF by means of specific distribution rights (SDRs) sufficient to permit that country to maintain the stability of its currency's relationship to other world currencies.

False

A direct sale to customers abroad by an American firm, with terms of payment commonly based on an irrevocable letter of credit, is an import sale.

False

A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur.

False

Licensing involves the transfer of title of goods to a distributor who bears the financial and commercial risks for the subsequent sale of the goods.

False

Since 1947 and the end of the World War II era, the goal of the GATT has been to restrict world trade.

False

The U.S. dollar is considered the international currency.

False

The jurisdictional rule of reason addresses the problems that arise when a foreign country has a significant interest in regulating conduct taking place within the United States.

False

The term dumping refers to the sale of damaged goods in a foreign market to cut the losses that would otherwise be caused by their damage.

False

The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's country.

False

The use of import quotas represents the most common form of tariff barrier.

False

Which of the following does not describe the European Union (EU)?:

It is administered solely by the heads of state of the member countries.

Which of the following statements is true regarding the World Trade Organization (WTO)?:

It provides a dispute settlement body to promote the resolution of trade disputes.

The transfer of technology rights in a product to allow another firm in a foreign country to produce a product in return for royalties or other specified payments is called:

Licensing

Which of the following allows a domestic firm to maintain the greatest control over its foreign operations?:

Wholly-owned subsidiaries

What is the maximum fine that can be imposed against a company for violation of The Foreign Corrupt Practices Act?:

$1,000,000

Companies with concerns over the possibility of expropriation could lessen the harm or the likelihood of this occurring by:

- Fully investigating a host government's stability - Establishing treaty commitments. - Obtaining insurance.

The GATT:

- Is a multilateral treaty - Is subscribed to by the United States - Has as its goal the liberalization of world trade

In antidumping cases:

- The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV). - The International Trade Commission determines if there is an injury to a U.S. industry as a result of such sales. - Remedial action will be taken only if findings of both LTFV sales and injury are present.

Three defenses are commonly raised to the extraterritorial application of U.S. antitrust laws. They are:

Act-of-state, sovereign compliance, and sovereign immunity doctrines.

Which of the following is not a nontariff barrier?:

An import or export duty or tax placed on goods as they move in or out of a country.

Legal restrictions of U.S. firms doing business abroad in regard to payments made to foreign officials for obtaining business are set forth in the:

Foreign Corrupt Practices act

Which country is NOT a part of the North American Free Trade Agreement (NAFTA)?:

Greenland

The International Monetary Fund (IMF) was formed to shorten the duration and lessen the disequilibrium in the international balance of payments of its members.

True

Which is a correct statement about arbitration of contractual disputes regarding international trade?:

Parties frequently arbitrate in neutral countries.

Which of the following actions is not prohibited by The Foreign Corrupt Practices Act?:

Payments to low-level officials for expediting the performance of routine government services.

The provisions of the United Nations Convention on Contracts for the International Sale of Goods have been strongly influenced by:

The Uniform Commercial Code

The Alexo Corporation has been charged in a United States court with violation of American antitrust laws in its foreign dealings. The firm has raised the defense that its actions were compelled by the government of its host country. Alexo based its defense on the__________ doctrine:

Sovereign compliance

Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it engages in illegal commercial conduct?:

Sovereign immunity.

U.S. courts will assume jurisdiction and apply antitrust laws to conduct business outside the United States if the activities of the business firms outside the United States have a direct, substantial, and foreseeable impact on U.S. commerce. This is based on what principle?:

The "effects" doctrine

A common barrier to the free movement of goods across borders is the tariff barrier.

True

A societé anonyme is the European counterpart of a U.S. corporation.

True

As a result of pressure from the United Nations Conference on Trade and Development (UNCTAD), the General Agreement on Tariffs and Trade (GATT) allowed the grant of special preferences to developing countries as an exception to the GATT's basic rule of trade without discrimination.

True

Blocking laws prohibit the disclosure, copying, inspection, or removal of documents located in the territory of the enacting country in compliance with orders from foreign authorities.

True

Contracts for the International Sale of Goods (CISG) sets forth uniform rules to govern international sales contracts.

True

Franchising is a form of licensing that now is very common in international business.

True

Law is the result of the desire of the lawmaker to achieve certain goals.

True

Parties to international ventures often agree to arbitrate their disputes in neutral countries.

True

The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials.

True

The International Bank for Reconstruction and Development, also known as the World Bank, facilitates the lending of money by capital surplus countries to countries needing economic help and wanting foreign investments.

True

The Overseas Private Investment Corporation (OPIC) offers asset protection insurance against risk of loss to plant and equipment, as well as loss of deposits in overseas bank accounts, to companies that qualify on the basis of the involvement of a "substantial U.S. interest."

True

The Securities and Exchange Commission (SEC) is not limited to litigation when a securities law enforcement investigation runs into secrecy or blocking laws.

True

The WTO provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war.

True

The goal of the North American Free Trade Agreement (NAFTA) is to eliminate all tariffs between Mexico, Canada, and the United States.

True

The interests of the less-developed nations of the world are represented by the UNCTAD

True

Under GATT, the principle of trade without discrimination is embodied in the most favored nation clause.

True

Under the act of state doctrine, the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory.

True

United States antitrust laws can protect United States exports.

True

When an international sale is made, the parties often set forth in their contract which country's laws will govern a dispute.

True

NAFTA seeks to eliminate tariffs among which countries?:

United States, Canada, and Mexico

Which of the following is true regarding export regulations?:

Valid reasons for controlling the export of goods include national security, foreign policy, or short supply.