Law Exam 2
tariff engineering
An importer is free to engineer his product in order to take advantage of the tariff laws (Tariff engineering) See Heartland By-Products Inc. v. U.S. (2001)
ad valorem rate
based on % of value of imported articles
applicant
buyer
prohibited subsidies
export subsidies or import substation subsidy
protection of public health, safety, or welfare 2
product testing, inspections, certifications Example: U.S. Flammable Fabrics Act Places restricts on sale of all bed mattresses, baby clothing, etc.
red clauses in credits
promise in L/C (underlined in red ink) -finance tool for smaller sellers Who need capital to produce products shipped under an L/C Promise by Issuing Bank To reimburse Seller's bank for loans made to Seller
multi lateral trade negotiations:
reduce tariffs and non tariff barriers (NTB) -kennedy round: more tariff cuts -uruguay round: gatt to wto
GATT permits tariffs to
regulate important BUT NOT quotas or other quantitative restrictions
reasons for regulating imports
revenue -protection of domestic industry -retaliation against foreign trade barriers -protection of resources
beneficiary
seller
commercial invoice
separate invoice for commercial shipment entering in US
specific tariff rate
specified amount per unit
tariffs
tax levied on goods by country of importation
Swift system
the bolero project- to replace paper-based transfer or trade documents with electronic transmissions globally -routing # on your checks
WTO Agreement on Rules of Origin
under development since 1995 Marketing and Labeling of Exports Customs marking rules Must indicate name of country of origin to ultimate purchaser Items not requiring marks
documentary draft
used to expedite payment in a documentary sale
time limits on liquidation
within one year of entry. Running currently at 10 ½ months
ad valorem tariffs
% value levied
letter of credit
-Obligation of a bank -Usually irrevocable (default is irrevocable) -Issued by the issuing bank on behalf of their customer -Promising to pay a sum of money -To a beneficiary upon occurrence of a certain event(s)
documentary letter of credit defined
1. The definite undertaking of the issuing bank, 2. Issued in accordance with the instructions of their customer (applicant) 3. In favor to the beneficiary - through the advising bank 4. Issuing bank then promises to pay a certain sum of money in the stated currency 5. Within the prescribed time limits 6. Upon the complying presentation 7. if the required and conforming documents
protesting liquidations
: within 90 days
liquidation
Final computation and payment of duty
customs unions
Free trade area with a common external tariff Example: European Union Is common market & monetary union Functions at a high level of economic, legal and political integration Examples: Andean Community of Nations, Asian Free Trade Initiative, Middle East Economic Integration
Maurice O'Meara Co. v. National Park Bank of New York outcome
HELD: Banks obligation to pay is separate and distinct from contract between buyer and seller Bank could not without payment on drafts Even if it believed paper was not quality ordered by Sun Herald Bank also had no right to demand testing or inspection of paper prior to payment
Courtaulds North America v. North Carolina National Bank outcome
HELD: Description of goods in the invoice didn't match description of goods in the L/C Defect was not cured by a correct description on the packing list
global quotas
Imposed by an importing nation on a product regardless of country of origin
GATT
Negotiating session called "rounds" From 1947 to Present Newest Round: Doha Development Agenda Ongoing since 2001 By 2013, negotiations had not been completed Purpose: Reduce agriculture subsides by developed countries Goal: Trade Liberalization Free Market Principle
protection of public health, safety, or welfare
Product Testing, Inspections, and Certifications for Compliance with Product Safety, Quality, and Technical Standards and Regulations Sale Examples: automotive safety, vehicle emissions, safe foods/pharmaceuticals, CFC's that harm ozone Protects consumers also from fraud/deceptions Many are not always be transparent
import competition
Protects industries at home Limits the attempts of foreign governments to protect their industries By denying access to their markets
government procurement
Purchase of goods & services by gov't agencies at all levels GATT allows exception to national treatment allowing government to favor domestic supplier WTO Agreement on Government Procurement applies only to those countries that signed Applies to goods and services worth ~ $200,000 US Total 2013: $7.7 Million US - BIG BUSINESS
quota
Quantitative restriction on imports
GATS example
The WTO Agreement on Trade in Financial Services WTO Agreement on Basic Telecommunications Opened telecommunication markets to foreign competitors
free trade areas
Two or more countries party to a free trade agreement Example: North American Free Trade Agreement [NAFTA] (U.S., Canada & Mexico)
actionable (adverse effect) subsidiaries
Upstream Subsidies: Granted for raw materials WTO Subsidy Dispute Settlement
advising bank
Usu. of seller
WTO agreement on subsidiaries and countervailing measures
WTO rules apply to specific subsidies
reciprocal trade agreements act of 1934
introduced most favored nation status (now known as normal trade relations)
direct non tariff barriers
limit imports of goods/services or deny access of foreign firms to local markets (embargoes, quotas, complex and discriminatory import licensing schemes) -example: can't import absinthe - US, EU countries, eg. France Belgoum
GATS analysis (thornberg and edwards)
"The results of . . . statistical analysis . . . [conclude that GATS] is an initial step in creating [agreement on trade in services]". [I]t appears the GATS negotiation was a failure both in form and in function In its effort to begin the systemic opening of international trade in services. Creators were "either unwilling or unable to create uniform schemes." Conclusion: Tie the GATS to the GATT for better commitments among members
documentary draft and bank collection process
-Documentary collections is similar to a C.O.D. transaction -Drafts can be accepted by buyer creating a trade acceptance -Buyer agrees to pay unconditionally at the time stated on the draft i.e. 30 days from date -Banker's acceptance= Bank agrees to pay -Time draft drawn on and accepted by a bank -This is in agreement with bank's client -Bank stamps its name, date and signature on draft -Thus creating an "acceptance" and bank now obligated -To pay amount stated to the holder of instrument on specified date. -Holder (who has the instrument) can convert to cash (usually discounted) or hold it until it matures = A negotiable instrument
credit risks in factoring accounts receivable: rights of assignee
-Seller (assignor) assigns rights to collect to assignee -This process is called "factoring" and creates a "factor" (who is the actual assignee -Does Assignee have the same rights as a holder in due course? NO -Seller (assignor) assigns its rights to collect he account to the financial institution (assignee) -Assginee "steps into the shoes of the assignor" -Only has the same rights as the assignor -If assignor has no rights? Ugh!
requirements of a bill of exchange
-Unconditional order in writing -From one person to another -Signed by the person giving it -To pay on demand or at a certain time -Fixed sum of money -To the ORDER or BEARER
holder in due course
-has a negotiable instrument -takes for value -in good faith -without notice of dishonor or overdue -without notice of alteration or unauthorized signature
negotiation and transfer of negotiable instruments
-negotiation is the transfer of an instrument from one party to another (the holder) -holder takes legal rights in the instrument -endorsement -delivery
smoot-hawley tariff act of 1930
-raised tariffs too high -there was international retaliation -some say it exacerbated the great depression
bill of exchange draft
-signed order of drawer -given to drawee -to pay sum of money to third party -on demand or definite time
the bill of exchange negotiable instrument
-signed writing -unconditional promise to pay a fixed sum of money -to order, or bearer -on demand at a definite time
bill of exchange
-specialized type of international draft -used to expedite foreign money payments -much like a draft: *unconditional order in writing *addressed by one person to another *signed by the person giving it *requires that the person to whom addressed pay on demand or fixed time *sum certain of money *to the order of or to bearer
law applicable to letters of credit
-the default letter of credit is irrevocable -the LOC is independent of the sales contract between the buyer and seller
Maurice O'Meara Co. v. National Park Bank of New York
1925. bank was in error for not paying, based on the demand for weights; bank's obligation is to pay when presented with the documents called for in the letter of credit. -national park bank issued letter of credit -addressed to ronconi and millar, beneficiary -account party: sun herald -"covering the shipment of 1,322 tons of news print paper in 72.5 and 36 inch made in december, 1920 and january 1921. -bank refused payment because it had no opportunity to test the tensile strength of paper -the market price of paper had fallen sharply in time period between contract sale and presentation of documents -amounted of over $20,000 -ronconi and miller transferred rights to collection to maurice o'meara co. (financial institution) -maurice o' meara claims issuing bank had no right to test/inspect paper -Contract between buyer and seller in no way concerned the bank Bank had no right to test paper tensile strength Bank stated, "There has arisen a reasonable doubt regarding quality of newsprint paper. . . ." Said it wanted paper to be tested by "an impartial and unprejudiced expert" Until then would "defer payment.
history of GATT (general agreement on tariffs and trade)
1944 Bretton Woods Conference in New Hampshire Important international, economic and political institutions Including International Monetary Fund International Bank for Reconstruction and Develop (World Bank) Creates multilateral trade negotiations on participating countries
large scale stores in japan
1974 Japanese Large-Scale Retail Stores law Japan traditionally has small neighborhood stores/shops Law limited #, location, operations of large scale stores/supermarkets in Japan w/ 500 meters of floor space If gov't found proposed store risk of harming nearby shops Could require store to reduce floor space Limit days/house of operations This is a non-tariff barrier that appears completely neutral. Due to rounds of negotiations in 1980s & 199;0s Law was eventually repealed Replaced with laws focused on environment and city/planning policies In came U.S. and European volume discounters Entered Japanese market Almost immediately began to transform retailing in Japan
non-preferential rules of origin
: Imports from developed countries that receive normal tariff treatment. Example: Trade between U.S. and Europe
trade in agriculture
A country has Sanitary and Phytosanitary Measures: Food, Animal, and Plant Safety The right to protect human, animal &plant life But cannot be used to justify otherwise discriminatory conduct Codex Alimentarius: International standards for the protection of plants animals and foodstuffs
technical barriers to trade
A technical regulation is a MANDATORY law/regulation affecting a product's characteristics Examples: Performance, design, construction, chemical composition, materials, packaging or labeling Standards must be met before importation or sales in a country Standard is a VOLUNTARY guideline established by a private or administrative body
following an LOC transaction
Advising the LOC to the Beneficiary Seller's Compliance with the LOC Seller must read the terms and conditions of the LOC very carefully before shipment or manufacturing of product Is the LOC accurate? Reflect the terms and conditions of the sales contract?
Most favored nation (MFN) trade
Agreement to treat products (or services) from that country with lowest tariff rates AND it gives those tariff rates to similar products that are - Imported from its other MFN trading partners In U.S., MFN granted by Congress According to WTO, all member nations are entitled to MFN status
Equal Dignity Rule
An act of Congress can override an inconsistent prior treaty A treaty will override an inconsistent prior act of Congress -Statutes and treaties are of equal dignity Example of Treaties under U.S. Law: FCN Treaties (Friendship, Commerce and Navigation)Congressional-Executive Agreements - International agreements between president, rep. of U.S. and foreign country Voted into law by simple majority vote of both Senate and H. of Reps.
preferential rules of origin
Applied to goods traded within a free trade area or customs union. Receive preferential tariff treatment under agreements, such as NAFTA
procedures for dishonor
Bank must follow procedure or face "issuer preclusion" Issuer Preclusion: Bank precluded from claiming the docs were properly presented Can ask purchaser if wants to waive discrepancies? Bank must give notice of refusal No later 7 banking days after receipt of the documents
Better Homes Plastics Corp. v. United States (1996)
Better Home Plastics imported shower curtain sets Consisted of outer textile curtain, an inner plastic lining and plastic hooks Curtain was decorative and semi-transparent, permitting color of plastic line to show through. Classified under Heading 6303"Curtains and interior blinds; curtain or bed valances Subheading 6303.92 as "Other . . . synthetic fibers" 12.8 % duty Better Home argued: Classification of set should be based on set's inner plastic liner under Heading 3924. "Tableware, kitchenware, other household articles and toilet articles, of plastics AND Item 3924.90.10 for "Curtains and drapes" at a duty of 3.36 ad valorem: HELD: Essential character, not relative specificity applies, and goods are classified by shower liner not curtain
WTO Antidumping agreement
Calculating the Dumping Margin Dumping is selling at less than normal value, or less than "fair value" Calculating the Export Price Price at which a product is sold to an unaffiliated buyer in the importing country Calculating the Normal Value of Like Products in the Exporting or Producing Country What Is a "Like Product"? See the Pesquera Mares Australes Ltda. v. United States, p. 299 (2001) case
standby letters of credit
Can be used in lieu of conventional Letter of credit In sale of goods Is a security for almost any type of payment Can ensure compliance with almost any obligation EXAMPLE: Exxon Valdez oil spill (Alaska 1989) Court required Exon to provide $6 billion Standby Letter of credit To ensure Exxon would complete environmental clean-up Works like a "performance bond" - back up device for performance of payment Flexible and tailored for specific uses
partly made in the USA
Can't label "Made in U.S.A. May still bear qualified claims in some cases Ex: Product invented in U.S. and made in India CANNOT claim "Created in U.S.A Would be deceptive "Assembled in U.S.A.": May be used only where product has undergone substantial transformation Ex: Component parts for computers made in Singapore & assembled in Texas with ONLY a screwdriver & screws MAY NOT be labeled "Assembled in the U.S.A."
cigarette additives
Chemical compounds have been approved as additives to food in U.S. They were not tested by burning. Burning changes the properties of chemicals. More than 4,000 chemical compounds are created by burning a cigarette 69 of which are carcinogenic
Pesquera Mares Australes Ltda. v. United States, p. 299 (2001) case
Chilean salmon exporter accused: Dumping salmon in U.S. (Sold salmon in Japan at a higher price) Price was less than fair market value U.S. Dept. of Commerce International Trade Administration (ITA) Based normal value on price of salmon sold in Japan HOWEVER U.S. salmon was "premium" grade Japanese salmon was both "premium" and "super-premium" grades ITA said Japan and U.S. salmon "identical physical characteristics"
tobacco info
Clove cigarettes, also called kreteks (kree-teks) originated in Indonesia and other Southeast Asian countries. They contain 60% to 70% tobacco and 30% to 40% ground cloves, clove oil, and other additives. The chemicals in cloves have been linked to asthma and other lung diseases. Users often have the mistaken notion that smoking clove cigarettes is safer than smoking regular cigarettes. EARTH TO SMOKER! IT'S A TABACCO PRODUCT clove cigarettes have been shown to deliver more nicotine, carbon monoxide, and tar than regular cigarettes. FDA has now banned the sale of candy-, fruit- and clove-flavored cigarettes. The move was authorized by the Family Smoking Prevention and Tobacco Control Act. Cigarette manufacturers make sweet-flavored cigarettes to attract teens to smoking STUDY: Cigarette makers manipulated menthol to hook teens ANALYSES: Heart attack rates fall 17% after smoking bans enacted
tariff shift rule
Country of origin is the last country in which all "inputs" into finished product underwent a "DEFINED CHANGE" Inputs: Such as raw materials, component parts, etc. Example: Raw materials or component parts from Europe are combined, altered or subjected to a process in Canada Happens a lot in auto industry That process results in certain change in tariff classification.
administration of customs and tariff laws
Customs (Customs and Border Protection, CBP) divided the U.S. into seven regions, then further divided into districts Customs offices are located at ports of entry to U.S., (e.g., major seaports, airports, and border crossings) Within each district are field import specialists who can seek advice from national import specialists
Thailand - Restrictions on Importation of Cigarettes outcome
DECISION: Argument of Thailand that competition between imports & domestic ciggies would lead to increase in total sales - FLAWED reasoning Licensing system by Thailand must be brought into conformity under duties in the GATT
United States—Measures Affecting the Production and Sale of Clove Cigarettes (2012) case outcome
DECISION: U.S. regulation not justified. Clove and menthol cigs are "like products" Due to comparative relationship in the market
Pesquera Mares Australes Ltda. v. United States, p. 299 (2001) case outcome
Decision: Chilean salmon exporter violated U.S. antidumping laws Sold salmon in the U.S. at less than fair value Super premium salmon sold by this exporter in Japan was similar enough to premium grade sold in U.S. Considered a "foreign like product" U.S. can add antidumping duties Special import tariffs assessed along with normal tariffs
India—Quantitative Restrictions on Imports of Agricultural, Textile, & Industrial Products outcome
Decision: Quantitative restrictions and licensing violated Art. XI Were discriminatory and not "rules based" Were no longer justified to preserve its balance of payment
Courtaulds North America v. North Carolina National Bank
Defendant bank issued irrevocable letter of credit On behalf of customer, Adastra Knitting Mills 60-day time drafts of Courtaulds for up to $135,000 covering shipments of 100% Acrylic Yarn Bank refused to accept draft due to discrepancy Between letter of credit and commercial invoice Buyer had gone into bankruptcy Court appointed trustee would not waive the discrepancy Commercial invoice stated: "covers 100% acrylic yard" BUT Accompanying invoice stated that goods were "Imported Acrylic Yarn" Bank is concerned only with the documents. Here documents don't precisely comply Courtaulds said invoices actually met specifications In that packing lists attached to invoices contained words "cartons marked: 100% acrylic Lower court stated: "only treat a document as an invoice which clearly is marked on its fact 'invoice.'" Bank would be responsible for any loss Cannot be condemned for sticking to the letter of the letter of credit Courtaulds sent substituted invoice after refusal of the draft Retroactive amendment does not extend letter of credit had expired
WTO Agreement on Subsidies and Countervailing Measures (1994)
Definition of a Subsidy: Government confers a benefit on a domestic firm Provides income, price support or financial contribution Examples: not collecting a tax, providing grant or loan at favorable rate Purpose: In order to achieve a social or economic objective
rules of origin
Definitions and Purposes of Rules of Origin: Administered by U.S. Customs and Border Protection The General Rule in the United States: if an item is wholly grown, produced, or manufactured in one country, then that country is the country of origin
Actionable (Adverse Effect) Subsidies
Domestic subsidies which give unfair competitive advantage to domestic firms Actionable at WTO if: Cause injury to domestic industry, OR Cause nullification and impairment of rights, OR cause "serious prejudice." (Presumed if subsidy exceeds 5% of value.)
separation of powers
Drafters of U.S. Constitution placed power to regulate international commerce in hands of federal government The Executive-Legislative Debate Legislative Power
EC Measures Concerning Meat and Meat Products (Hormones) (1997)
EC's ban on sale of beef containing residual growth hormones This violated Agreement on Sanitary and Phytosanitary Measures EC regulation for Zero residue is a violation. International standard permits residue of growth hormone. (Bleh!!!)
following an LOC transaction continued
Examination of Documents and Discrepancies UCU Art. 14 (b): The bank allows up to 5 banking days to inspect the documents Commercial Invoice: Required by buyers, banks, and customs authorities Ocean Bill of Lading: Must be labeled "On Board Bill of Lading" Certificates of Analysis or Inspection If required Insurance Policy
marketing and labeling of exports
FTC- if label states "Made in USA" it means, "All or virtually all of the materials, processing or component parts are made in the U.S." AND that their final assembly or processing took place there". Only negligible foreign content- "All or virtually all" is a very high standard
Carl Zeiss, Inc v. United States outcome
HELD: Government wins. Classification under Heading 9011 is correct. ZMS 319 meets the common dictionary meaning of compound microscope. Can also be classified under Heading 9018 as a "medical appliance". HOWEVER: Heading 9011 for compound microscopes is better Narrower and more specific Describes article with more accuracy & certainty.
Sztejn v. J. Henry Shroder Banking Corp outcome
HELD: In favor of plaintiff and enjoined bank's payment Court can enjoin an issuing bank from honoring a draft IF bank learned customer will suffer irreparable harm as result of fraudulent transaction
Heartland By-Products Inc. V. US
Importer added molasses to sugar syrup in Canada THEN removed it after syrup was imported in to the U.S. Syrup with molasses entered free from U.S. tariff-rate quotas on sugar syrup imports. Custom: No other purpose for adding molasses except to avoid the quota; that molasses as a foreign substance," and adding it was not genuine step in the manufacturing process. Molasses was later returned to Canada to be reused for same purpose (SNEAKY) Because of the return of molasses to Canada, Customs deemed the process was done for "disguise or artifice" to circumvent customs laws. HELD: Customs reclassification as syrup stands!!!!!
India—Quantitative Restrictions on Imports of Agricultural, Textile, & Industrial Products (1999) case
India placed complex restrictions on import of agricultural, industrial and consumer goods from other countries. Goods placed on "negative list" Could only be imported by special license License only granted to "actual user" Restrictions often arbitrarily applied Case-by-Case basis Impossible to know at any given time what might be allowed in the country U.S. brought complaint at WTO against India Requested restrictions on thousands of products be removed. India claimed: Without restrictions, its foreign exchange would leave the country Upsetting its balance of payments Inhibiting its economic development
national treatment provisions in GATT
Intended to ensure that imported products will not be subject to discriminatory treatment - under the laws of the importing nation See the Japan--Taxes on Alcoholic Beverages (1996 WTO)
Japan Taxes on Alcoholic Beverages
Japan Liquor Tax Law (Shuzeiho) 10 categories of beverage Sake Sake (compound) Shochu Mirin Beer Wine Whiskey Brandy Spirits Liqueurs Miscellaneous ` Shochu is distilled from potatoes, buckwheat or other grains Shochu and vodka share many characteristics However vodka and other import liquors fall in categories Where tax rate is 7-8 times higher than category for shochu Japan Liquor Tax Law Violates national treatment provisions of GATT Article III Shochu is a "like product" and "directly competitive and substitutable" with other imported spirits. Imported spirits were taxed higher than shochu Japan requested to bring its tax law into compliance with GATT
Japanese Rice: A trade dilemma
Japanese Treatment of rice import Rice staple food of Japan/Symbolic of the culture Japanese laws placing strict limitation on rice imports Imposed gov't controls on rice pricing distribution Today, permits imports - BUT Subject to tariff & non-tariff barriers Japanese are self sufficient in rice production (Also Western [Yuck?] diet - demand for rice reduced
Independence principle
LOC is independent of the sales transaction
enforcement and penalties
Making Materially False Statements to Customs Negligent Violations See the U.S. v. Golden Ship Trading (2001)
tariff classification
Method of categorizing different types/kinds of goods Based on universal terminology According to tariff name, use of physical characteristics
5 principles of GATT
Multilateral trade negotiations Transparency/predictability of trade opportunities Reciprocal tariff reductions and bound commitments Nondiscrimination and unconditional MFN National treatment Elimination of quotas and other non-tariff barriers Dispute resolution
non governmental organization
National standard institutes of 163 countries Developed over 19,5000 standards for goods services, manufacturing and technology in industries Voluntary - not legally binding International standardization makes design and building products cheaper and trade easier ISO 9000—Certification ensuring product quality through - Product Design Manufacturing Process Certification makes selling in Europe much easier ISO 14000- Environmental standards
tariff schedule
Nations official tariff schedule together with tariff rate for each item According to country from which it originated. Classification by Use Description on the tariff schedule by use Example: Detergent additive for gasoline is described as a "preparation used to the carburetor . . . clean."
tariff rate quotas
Not really a quota Tariff rate that increases according to quantity of goods imported E.g. US limits raw cane sugar, tuna, dairy products, peanuts, brooms, olives & some cotton and wool products (textiles) E.g. Spain/Portugal limits leather shoe products
marketing and labeling of exports exemptions
Objects that are incapable of being marked Due to their size of special characteristics. Examples: Works of art, unstrung beads, nuts, bolts, cigarettes, eggs, feathers, livestock & veggies.
Confirmed Letters of Credit - Back-up Bank if 1st Bank can't pay
Often U.S. Banks are used by U.S. Sellers Seller is uncertain of a bank in a buyer's country Seller wants an additional layer of security Seller has a secondary bank (often in Seller's country like the U.S.) To guarantee the 1st bank's money will be received by seller Through second bank guarantee money to seller More expensive than a regular L/C
substantial transformation test
Original article looses its identity Because it is transformed into new and different article Has "a new name, character or use" See Ferrostall Metals Corp. v. United States (1987)
Thailand - Restrictions on Importation of Cigarettes (1990)
Royal Thai Government Thai Tobacco Act of 1966: Prohibits import of tobacco Except by license of the Director-General of Excise Dept. Licenses have only been granted to government-owned Thai Tobacco Monopoly Monopoly imported cigarettes 3 times since 1966 10 years prior to case - ZERO imports U.S. said licensing requirements more restrictive than necessary to protect human health. Thailand argued imports were prohibited due to chemicals and additives in U.S. ciggies WHO: Initial demand for ciggies by youth influenced by advertising Bans on advertising could curb youth demand Other countries had introduced labeling and ingredient disclosure regs.
revolving and evergreen credits
Seller needs several letters of credit Buys from a given Buyer several times Maximum amount of $ during a certain period Draws against the credit Evergreen clause proves for automatic renewals of L/C UNTIL Bank gives "clear & unequivocal notice" of intent not to renew
ethical issues in LOC
Sellers and Bankers must Beware If Buyer is looking for reason to reject docs. (e.g. if ship sinks or market price falls) Discrepancy will give savvy (or unscrupulous:?) Buyer a way out If Buyer is looking a ways to chisel a better price Discrepancy give him/her leverage.
presidential or executive power
Separation of powers and checks and balances leaves the President having to work with Congress -power to negotiate treaties -power to appoint ambassadors
trade regulation
Sometimes use United Nations or other International Trade Organizations Purpose: Create cooperation among nations UN sometimes punishes countries through trade embargoes
zero quota
Sometimes used when referring to a complete ban On the import of a product Permits ZERO (0) quantities imported
back to back letter of credit financing
Special financing arrangement Proceeds of 1 credit serve a security to obtain a 2nd credit Used where manufacturer or exporter has a contract to sell finished goods to buyer BUT Needs financing to purchase needed parts or raw materials Is really 2 credits 1 issued in favor of exporter Serves as security for 2nd issued in favor of exporter's supplier of parts or materials - make sure he gets paid!!!
countervailing duty actions
Special tariff levied in addition to normal tariff Imposed on subsidized good imported Purpose: Offset the subsidy
absolute quotas
Strictly prohibit imports of an item above pre-determined limit
Ferrostall Metals Corp. V. United States
Substantial Transformation Test See the Ferrostall Metals Corp. v. United States (1987) case; Japanese steel that was galvanized in New Zealand Was substantially transformed to a New Zealand product Not subject to voluntary restraints between U.S. and Japan (Steel hot topic between them!) (Pun, Pun!)
Sztejn v. J. Henry Shroder Banking Corp
Sztejn contract to purchase hog bristles from Transea Traders in India Bank issued an irrevocable letter of credit to Transea Covering shipment of hog bristles and Payable upon presentation of proper documents Transea filled fifty cases with cow hair & worthless rubbish Bill of lading from steamship co. showed shipment: 50 cases of hog bristles Sztejn brought action against issuing bank Restrain it from paying on L/C Here: seller intentionally defrauded buyer Seller's fraud was called to bank's attention No hardship will be caused by permitting the bank to refuse payment where fraud is claimed Bank is vitally interested in assuring itself that goods are represented by the documents
Harmonization, Equivalence, and Mutual Recognition
TBT applies to all products, agricultural, industrial, and consumer goods See the United States—Measures Affecting the Production and Sale of Clove Cigarettes (2012) case
dutiable status of goods
Tariffs, restraints on imports, and other import controls Are applied to goods according to the item's dutiable status Classification of Goods Harmonized Commodity Description and Coding System
rules of strict compliance
Terms of documents presented to issuing bank must strictly conform to requirements of the LOC and the UCP 600 COurtaulds North America, Inc. v. North Carolina National Bank
country of origin
The country from which an imported article is said to have originated; determines
dumping
The unfair trade practice of selling products in a foreign country For less than the price charged for the same or comparable goods in the producer's home market Reasons for Price Cutting Price discrimination Purpose to drive out competition Usual remedy is antidumping duty
allocated quota
Total limit is "allocated" among several specific countries
WTO General Agreement on Trade in Services (GATS)
Trade in services includes professional services E.g., law, accounting, architecture, engineering, etc., Also health care, insurance, travel, and many others According to WTO, exports of commercial services exceeded $4 trillion (2012)
trade related investment measures
Trade-Related Aspects of Intellectual Property Rights (TRIPS) WTO countries agree to abide by intellectual property conventions Domestic and foreign IPR (intellectual property rights) treated the same, and enforcement strengthened Members are bringing their laws into compliance with TRIPS
domestic law effect of us treaties
Treaties are self-executing, non-self-executing, or executory
United States—Measures Affecting the Production and Sale of Clove Cigarettes (2012) case
U.S. wants to reduce smoking by children 2009: Family Smoking Prevention and Tobacco Control Act Prohibits import or sale of ciggies with flavor, herb or spice, including fruit, chocolate, cinnamon, and CLOVE Menthol cigs are produced primarily in U.S. Clove cigs are primarily from Indonesia Indonesia complained on ban on clove-flavored ciggies. Said discriminated against flavored tobaccos made in other countries. U.S. said it EXCLUDED menthol because Worried about black market in menthol cigs.
Enjoining Banks from Purchasing Documents in Cases of Fraud
UCP is silent when court may enjoin a letter of credit for fraud Sztejn v. J. Henry Shroder Banking Corp
section 301 trade act 1974
United States—Sections 301-310 of the Trade Act of 1974 Basic Section 301 US Trace Act valid U.S. may impose retaliatory trade sanctions against another country ONLY IF Strictly follows WTO dispute settlement rules by Dispute Settlement Body
transferable credits
Used by traders selling quickly internationally Example: Swiss Bank issues L/C for account of African country In favor of the trader's part of the credit that is transferred to trader's supplier in the Philippines For cost of goods Philippine trade is supplying to African country. LOC can be split among many suppliers Each present documents for payment Trader takes profit out of balance of credit
GATS Examples
WTO Trade in Agriculture Some Agricultural Trade Issues in the EU and Japan EU Common Agricultural Policy
WTO replaced gatt in 1995
WTO is an umbrella organization that sets rules of international trade and dispute resolution
general principle of least restrictive trade
WTO mandates a balancing test: Weigh protecting public vs. restrictions on trade See the Thailand: Restrictions on Importation of Cigarettes
US v. Golden Ship Trading
Wu entered 3 shipments of T-shirts purchased from Hui Hui claimed he had factory in Dominican Republic Wu declared country of origin as Dominican Republic Customs discovered produced body of T-shirts in China Shipped them to Dominican Republic, where sleeves were attached Labeled them "Made in the Dominican Republic" (SNEAKY) Wu relied on assurances from the broker that were not true. Can still make the importer liable Customs assessed penalty of $44,000 - UPHELD.
Carl Zeiss, Inc v. United States
Zeiss imported ZMS 319 microscopes, stands and accessories, including a camera All specially tailored for neurosurgical use. Customs classified the ZMS 319 as a "stereoscopic compound microscope with means for photographing the image." Under heading 9011 "compound microscope) Zeiss argued: Article should be classified under heading 9018 "Instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electro-medical apparatus and sight-testing instruments.
the formal entry
administrative process required for the importation of goods into the customs territory of a country Goods have officially "entered" when: Arrived at U.S. port of entry Goods are permitted Delivery is authorized by Customs after inspection and release Estimated duties have been paid or customs bond posted Required Documentation: Documents must be filed within 15 days: (1) An entry manifest or merchandise release form (2) U.S. Customs Entry Summary Form (3) Proof of the right to make entry (a bill of lading, air waybill, or carrier's certificate) (4) The commercial invoice obtained from the seller (5) Packing slips to identify the contents of cartons 6. Other documents required by special regulations (e.g., certificate of origin, quota visa, textile declaration)
trade barrier
any impediment to trade in services or goods -import trade barrier is any impediment, direct or indirect, to the entrance or sale of imported goods or services
quantitative restrictions
balance of payments exception and developing countries India—Quantitative Restrictions on Imports of Agricultural, Textile, & Industrial Products (1999) case
bills of exchange and documentary drafts
both negotiable -act as substitute for money -act as a financing or credit device: specialized type of international draft used to expedite foreign payments
issuing bank
buyer's bank
compound tariff rate
combo of ad valor and specific tariff rates
trade expansion act of 1962
created office of the us trade representative
complying presentation
delivery of seller's documents -draft to the nominated bank or to the advising bank -contains: all required documents within the time frame allowed and prior to expiry of the credit with no discrepancies and complies with all terms of the LOC
documentary drafts used in trade finance
ex. get a loan from a bank while you are manufacturing a product -get draft usually for a certain time -draft shows you will be paid on a certain date -bank will finance you while products manfactured
rules of strict compliance continued
functional standard of compliance -the UCP 600 rule -changes to UCP in 2007 indicate move to modified strict compliance rule -functional standard of compliance (used by courts in US and some european countries_
trade reform act of 1974
gave more power to the president
unconditional MFN
if a member extends privilege to another member then that privilege automatically is extended to all members Exceptions to MFN Trading Status New Terminology: MFN is now Normal Trade Relations or NTR
global tariffs
imposted on particular class of goods without regard to country of origin
indirect non-tariff barriers
law- johnny depp brought dogs to australia without registration and quarantine -regulations -rules of administrative agencies -difficult or costly to import foreign made goods/services -purpose: to protect humans or animals, public safety, or environment -sometimes against foreign made products
specific or flat tariffs
on basis of physical units
WTO agreement on technical barriers to trade (TBT)
one of uruguay round agreements 1994 -harmonization -equivalence and mutual recognition Nations encouraged to enter into mutual recognition agreements Recognize certifications (called Conformity of Assessments ) Of inspection firms/labs approved in country of manufacture