Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 7 The Legal Environment of International Trade Twomey Jennings Anderson’s Business Law and the Legal Environment, Comprehensive 20e Anderson’s Business Law and the Legal Environment, Standard 20e Business Law: Principles for Today’s Commercial Environment 2e

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 2 General Principles 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?

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 3 General Principles 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.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 4 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. International Trade Organizations, Conferences & Treaties

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 5 The World Trade Organization (WTO) took over policing GATT in WTO provides international dispute resolution. International Trade Organizations, Conferences & Treaties

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 6 CISG provides uniform rules for international sales contracts between parties in contracting nations. UNCTAD represents lesser developed countries. International Trade Organizations, Conferences & Treaties

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 7 EU: European Council, European Commission, European Parliament, European Court of Justice. NAFTA. OPEC. International Trade Organizations, Conferences & Treaties

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 8 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

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 9 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

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 10 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. International Trade Organizations, Conferences & Treaties

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 11 Governmental Regulation Export Regulations. –Determine if License is Needed. Export Control Classifications Numbers. –Criminal Sanctions. Export licenses needed for high- technology.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 12 Counterfeit Goods. Gray Market Goods. Protection of Intellectual Property Rights

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 13 Antitrust Jurisdiction. –The “Effects Doctrine”: U.S. courts assume jurisdiction if foreign conduct has substantial effect on U.S. commerce. –Jurisdictional Rule of Reason: foreign state may have jurisdiction over conduct if it has a significant interest.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 14 Antitrust Defenses. –Act of State Doctrine. –Sovereign Compliance Doctrine. Foreign Trade Antitrust Improvements Act. Foreign Antitrust Laws. –EU: Treaty of Rome.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 15 Securities Regulation Illegal securities transactions affect U.S. economy. Jurisdiction: federal courts have jurisdiction over securities fraud cases that impact Americans--here or abroad. Foreign Secrecy Laws.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 16 Barriers 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. Non-tariff barriers- e.g., import quotas. Export Controls as Instruments of Foreign Policy.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 17 Relief Mechanisms Antidumping Laws and Export Subsidies. –Selling goods in a foreign country below the fair value. –Uruguay Round Agreement Act of Retaliation and Relief Against Foreign Unfair Trade Restrictions. –U.S. Trade Representative can retaliate under the Ominibus Trade and Competitiveness Act.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 18 Expropriation 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. Overseas Private Investment Corporation is under policy control of U.S. Secretary of State.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 19 Government Assistance Export Trading Company Act of –Promotes formation of U.S.-based export companies. Foreign Sales Corporation Act of –Tax incentives for qualified businesses. U.S. Export-Import Bank. Foreign Corrupt Practices Act.

Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 20 FCPA The Foreign Corrupt Practices Act: –Places restrictions on U.S. firms doing business abroad. –May not make payments to foreign officials for getting business from foreign government.