1. Chapter 7 THE LEGAL ENVIRONMENT OF INTERNATIONAL TRADE

2. 2 General Principles Legal Background: Parties may choose the parameters of their agreement. Legal Background: Parties may choose the parameters of their agreement.  Which country’s laws will govern the transaction?  Where and how will disputes be resolved?  What currency or monetary system will be used for the transaction? A large number of international trade organizations exist to help facilitate multinational transactions in goods, services and investments. A large number of international trade organizations exist to help facilitate multinational transactions in goods, services and investments. Arbitration is the norm for international disputes. Arbitration is the norm for international disputes.

3. 3 The General Agreement on Tariffs and Trade (GATT), subscribed to by the United States and most of the industrialized countries of the world, is based on the principle of trade without discrimination. The General Agreement on Tariffs and Trade (GATT), subscribed to by the United States and most of the industrialized countries of the world, is based on the principle of trade without discrimination. The World Trade Organization (WTO) took over policing GATT in 1995. WTO provides international dispute resolution. The World Trade Organization (WTO) took over policing GATT in 1995. WTO provides international dispute resolution. International Trade Organizations, Conferences & Treaties

4. 4 CISG provides uniform rules for international sales contracts between parties in contracting nations. CISG provides uniform rules for international sales contracts between parties in contracting nations. UNCTAD represents lesser developed countries. UNCTAD represents lesser developed countries. EU: European Council, European Commission, European Parliament, European Court of Justice. EU: European Council, European Commission, European Parliament, European Court of Justice. NAFTA. NAFTA. OPEC. OPEC. International Trade Organizations, Conferences & Treaties

5. 5 GATT/WTO promote world trade United Nations Convention on Contracts for the International Sale of Goods (CISG) establish uniform rules for international sales contracts United Nations Conference on Trade and Development (UNCTAD) redistribute income inter- nationally through trade European Economic Community (EU) remove trade barriers and unify economic policies International Trade Organizations, Conferences & Treaties

6. 6 United States - Canada Free Trade Agreement (FTA) increase trade between these countries North American Free Trade Agreement (NAFTA) eliminate tariffs between Mexico, Canada, and U.S. International Monetary Fund (IMF) facilitate expansion and balanced growth of international trade Organization of Petroleum Exporting Countries (OPEC) control oil production and exploration International Trade Organizations, Conferences & Treaties

7. 7 Export Sales Domestic business works with foreign business to sell or produce product. Foreign DistributorshipLicensing and Franchising Wholly Owned SubsidiaryJoint Venture Agency Direct sales from business to international customer – no “middleman.” Domestic business sets up a business in a foreign country & maintains control. Forms of Business Organizations

8. 8 Governmental Regulation Export Regulations. Export Regulations.  Determine if License is Needed. Export Control Classifications Numbers.Export Control Classifications Numbers.  Criminal Sanctions. Export licenses needed for high-technology.Export licenses needed for high-technology.

9. 9 Intellectual Property Protections. Intellectual Property Protections.  Counterfeit Goods.  Gray Market Goods. Antitrust. Antitrust.  Jurisdiction: The Effects Doctrine: if foreign conduct has substantial effect on U.S. commerce.The Effects Doctrine: if foreign conduct has substantial effect on U.S. commerce. Jurisdictional Rule of Reason: foreign state may have jurisdiction over conduct.Jurisdictional Rule of Reason: foreign state may have jurisdiction over conduct. Governmental Regulation

10. 10 Governmental Regulation Antitrust (cont’d). Antitrust (cont’d).  Defenses. Act of State Doctrine.Act of State Doctrine. Sovereign Compliance Doctrine.Sovereign Compliance Doctrine.  Foreign Trade Antitrust Improvements Act.  Foreign Antitrust Laws. EU: Treaty of Rome.EU: Treaty of Rome.

11. 11 Securities Regulation Illegal securities transactions affect U.S. economy. Illegal securities transactions affect U.S. economy. Jurisdiction: federal courts have jurisdiction over securities fraud cases that impact Americans--here or abroad. Jurisdiction: federal courts have jurisdiction over securities fraud cases that impact Americans--here or abroad. Foreign Secrecy Laws. Foreign Secrecy Laws.

12. 12 Barriers to Trade Tariffs are the most common barrier to trade. Tariffs are the most common barrier to trade. Tariff Barriers. Tariff is a tax on goods as they move in/out of a country. Tariff Barriers. Tariff is a tax on goods as they move in/out of a country. Non-tariff barriers- e.g., import quotas. Non-tariff barriers- e.g., import quotas. Export Controls as Instruments of Foreign Policy. Export Controls as Instruments of Foreign Policy.

13. 13 Relief Mechanisms Antidumping Laws and Export Subsidies. Antidumping Laws and Export Subsidies.  Selling goods in a foreign country below the fair value.  Uruguay Round Agreement Act of 1994. Retaliation and Relief Against Foreign Unfair Trade Restrictions. Retaliation and Relief Against Foreign Unfair Trade Restrictions.  U.S. Trade Representative can retaliate under the Ominibus Trade and Competitiveness Act.

14. 14Expropriation U.S. business have legitimate concern about foreign government seizing assets. U.S. business have legitimate concern about foreign government seizing assets.  Businesses in defense, natural resources, banking and communications are susceptible. Insurance of businesses will minimize loss. Insurance of businesses will minimize loss. Overseas Private Investment Corporation is under policy control of U.S. Secretary of State. Overseas Private Investment Corporation is under policy control of U.S. Secretary of State.

15. 15 Government Assistance Export Trading Company Act of 1982. Export Trading Company Act of 1982.  Promotes formation of U.S.-based export companies. Foreign Sales Corporation Act of 1984. Foreign Sales Corporation Act of 1984.  Tax incentives for qualified businesses. U.S. Export-Import Bank. U.S. Export-Import Bank. Foreign Corrupt Practices Act. Foreign Corrupt Practices Act.