Chapter 8

1. Chapter 8 International Law

2. Quotes of the Day What affects men sharply about a foreign nation is not so much finding or not finding familiar things; it is rather not finding them in the familiar place.” G.K Chesterton, British Author “The greatest meliorator of the world is selfish, huckstering trade.” Ralph Waldo Emerson, American Philosopher and Poet

3. Trade Regulation: The Big Picture • Exporting: Shipping goods or services out of a country • Importing: Shipping goods or services into a country

4. Export Controls • Export Administration Act of 1985 • Balances the need for free trade with important requirements of national security • Permits the federal government to restrict exports if they: • Endanger national security • Harm foreign policy goals • Drain scarce materials • Controlled Commodities List • Made by the Secretary of Commerce • Lists restricted items which may not be exported without a license

5. Export Controls • Arms Export Control Act • Permits the president to make a second list of controlled items, all related to military weaponry

6. Import Controls • Tariff: A tax imposed on goods when they enter a country • Classification - A customs official inspects the merchandise as it arrives and classifies it, in other words, decides precisely what the goods are • Valuation • Ad valorem: Customs officials impose duties “according to the value of the goods”

7. Import Controls • Duties for dumping and subsidizing • Dumping: Selling merchandise at one price in the domestic market and at a cheaper, unfair price in an international market • US Department of Commerce will impose a dumping duty when they suspect that the low prices are intended to harm American companies • Countervailing duties: A tariff on subsidized goods

8. Treaties • General Agreement on Tariffs and Trade (GATT) • Created the WTO to stimulate international commerce and resolve trade disputes • World Trade Organization (WTO): Organization created by GATT to stimulate international commerce and resolve trade disputes

9. Treaties • Regional agreements • North American Free Trade Agreement (NAFTA): A treaty eliminating almost all trade barriers, tariff and nontariff, between the United States, Canada, and Mexico • European Union (EU): Twenty-seven countries belong to the EU, including Great Britain, Germany, France, Italy, and Spain, as well as Latvia and Slovakia

10. International Sales Agreement • The sales contract • What law governs? • Texas law • French law • An international treaty • United Nations Convention on Contracts for the International Sale of Goods (CISG): Applies automatically to any contract for the sale of goods between two parties from different countries if each operates in a country that is a signatory • Signatory: A nation that signs a treaty

11. Choice of Forum • The parties must decide: • What law governs • Where disagreements will be resolved

12. Choice of Language and Currency • Parties must select: • A language for the contract - Vital because legal terms seldom translate literally • A currency for payment - Vital because the exchange rate may alter between the signing and payment

13. Letter of Credit • A commercial device used to guarantee payment in international trade Negotiable Bill of Lading • A document which describes exactly the goods received—their quantity, color, quality, and anything else important Draft • A formal order, based on the letter of credit

14. International Trade Issues • Repatriation of profits: Occurs when an investing company pulls its earnings out of a foreign country and takes them back home • Expropriation: Government’s seizure of property owned by foreign investors • Nationalize: Action in which a government assumes ownership of property • Confiscation: Government takes property without fair payment

15. International Trade Issues • Sovereign immunity: Holds that the courts of one nation lack the jurisdiction (power) to hear suits against foreign governments • Foreign Sovereign Immunities Act (FSIA): A statute which states that American courts generally cannot entertain suits against foreign governments

16. International Trade Issues • Three possible exceptions when seeking compensation for foreign expropriation: • Waiver • Commercial activity • Violation of international law • Overseas Private Investment Corporation (OPIC): Insures U.S. investors against overseas losses due to political violence and expropriation

17. International Trade Issues • Foreign Corrupt Practices Act (FCPA): Makes it illegal for an American businessperson to give “anything of value” to any foreign official in order to influence an official decision • Has two principal requirements: • Bribe • Recordkeeping • Not all payments violate the FCPA • A grease or facilitating payment is legal • A payment does not violate the FCPA if: • It was legal under the written laws of the country in which it was made

18. International Trade Issues • Extraterritoriality: The power of one nation to impose its laws in other countries • International subsidiaries: That many American companies do business through • Foreign companies controlled by these American companies

19. “Overseas investment, like sales abroad, offers potentially great rewards but significant pitfalls. A working knowledge of international law is essential to any entrepreneur or executive seriously considering foreign commerce.”