Part 6 – Special Legal Rights and Relationships Chapter 33 – International Business Law Prepared...
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Transcript of Part 6 – Special Legal Rights and Relationships Chapter 33 – International Business Law Prepared...
Part 6 – Special Legal Rights and Relationships
Chapter 33 – International Business Law
Prepared by Michael Bozzo, Mohawk College
© 2015 McGraw-Hill Ryerson Limited 33-1
Introduction Imports Exports International Trade Regulation
World Trade OrganizationBilateral AgreementsNAFTAExtraterritorialityGovernment Trade Assistance
© 2015 McGraw-Hill Ryerson Limited 33-2
Overview
International Trading RelationshipsForeign-Distribution AgreementsForeign Branch Plants or Sales officesInternational Joint VenturesLicense Agreements
International Contract of Sales Arbitration
© 2015 McGraw-Hill Ryerson Limited 33-3
Overview
EnvironmentDifferent than for domestic tradeApplication of different laws
Canadian law Foreign law International law
© 2015 McGraw-Hill Ryerson Limited 33-4
Introduction
Trade is important – in 2013 Canada exported $443 billion ( 24% of our GDP) worth of goods and imported $475 billion (25% of our GDP)
The U.S. is our biggest trading partner, they purchased $335 billion worth of our exports and sold us $247 billion worth of our imports
© 2015 McGraw-Hill Ryerson Limited 33-5
Canadian Economy
TariffThe duty (payment) charged by the Federal government
on goods imported into CanadaCustoms Act ○ Sets out powers and duties of customs, procedures for
importation of goods, appeal proceduresCustoms Tariff Act○ Sets out various duty rates applicable to imported goods○ Lists allowed and prohibited goods○ Based on World Customs Organization’s “Harmonized
System”World Customs Organization○ Provides internationally recognized identification numbers
for goods traded internationally
© 2015 McGraw-Hill Ryerson Limited 33-6
Imports
DumpingThe selling abroad of goods at prices lower than
the prices of the goods sold domestically in the country of origin
Goods “dumped’ into Canada have a anti-dumping duty applied to them
Must establish dumping before imposing the dutyGoverned by Special Import Measures Act
© 2015 McGraw-Hill Ryerson Limited 33-7
Dumping
Direct or indirect government assistance to producers
Subsidized imported goods into Canada are subject to countervailing duties if: Sales would cause injury to Canadian producers;
or Subsidized goods would prevent or retard the
development of such goods in CanadaGoverned by Special Import Measures Act
© 2015 McGraw-Hill Ryerson Limited 33-8
Subsidies
Purpose Protect Canada from countries with extremely low
production and labour costs Controls the flow of goods into Canada from such
countries Limits quantities of certain goods Requires importers to get import permits for certain goods Requires exporters to get permits to export controlled
goods Complexity of import and export requires use of a
customs broker
Export and Import Permits Act
© 2015 McGraw-Hill Ryerson Limited 33-9
General ruleLess restrictive than importsSeveral trade barriers may be faced by
exportersInternational agreements aim to reduce
such trade barriers
© 2015 McGraw-Hill Ryerson Limited 33-10
Exports
Countries have signed agreements to limit their controls and duties on goods
World Trade Organization A multi-nation organization that provides a forum for the negotiation
of trade rules, and provides a mechanism for the resolution of international trade disputes
Most Favored Nation (MFN) The obligation of a member of the WTO to impose the same lowest
rate of duty granted on goods from one member state to the same goods from all other member states
National Treatment (NT) The prohibition on imposing special taxes or duties on goods after
import that exceed those of domestic production
International Trade Regulation
© 2015 McGraw-Hill Ryerson Limited 33-11
Rapid globalization has produced a range of bilateral trade agreements Often deal with specific types of goods
NAFTA (North American Free Trade Agreement) Free-trade area
Two or more member territories for which tariffs on trade between them are abolished
In force since 1994 (Canada, USA, Mexico) Phased reduction and elimination of tariffs Commission to resolve trade disputes Provisions on intellectual property, investments, market access,
and standards Preferential treatment between such countries
Rules-of-origin requirements
Bilateral Agreements
© 2015 McGraw-Hill Ryerson Limited 33-12
Customs Union (E.U.)A free trade area whose members apply a uniform
schedule of tariffs on imports from non-member territories
In addition to common internal tariffs, also have common external tariff
Common Market ○ A customs union that further allows barrier movement
of services, workers and finance among member territories.
Monetary Union○ An area, most successfully a common market, issuing its
own currency for use among its member territories
Bilateral Agreements
© 2015 McGraw-Hill Ryerson Limited 33-13
Extraterritoriality The attempt by nations to enforce their laws beyond their
own territory Most commonly done by the USA, a right allegedly asserted by the
U.S. congress E.g. Helms Burton law
Countries (Canada included), in the absence of a treaty to the contrary, will refuse to recognize foreign judgments
In 2013, Canada and the European Union negotiated a free trade agreement, which is yet to pass into law
Canada not party to Organization of Petroleum Exporting Countries, an oil-trading cartel
Bi-lateral Agreements
© 2015 McGraw-Hill Ryerson Limited 33-14
PurposeSet up to assist Canadian firms in exportingTypes of assistance
Financial assistance Provide security for payment of goods sold under
export transactions Provide loan guarantees
Department of Foreign Affairs, Trade and Development, Program for Export Market Development, Export Development Corporation
Government Trade Assistance
© 2015 McGraw-Hill Ryerson Limited 33-15
Risks Broad spectrum of risk from low to high depending on the
activity undertaken and the country dealt with Foreign exchange risk Joint venture partners Expropriation
Foreign Distribution Agreements Foreign branch plant, sales office, joint venture, license
agreements Contractual in nature Care must be taken to protect interests through clauses in
the contract itself
International Trading Relationships
© 2015 McGraw-Hill Ryerson Limited 33-16
Foreign Branch Plants of Sales OfficesAlternative to foreign distribution agreementRequires more money and knowledge of laws of
other countrySubject to laws of the host country not home
countryMust be aware of ability to flow both capital and
technology
International Trading Relationships
© 2015 McGraw-Hill Ryerson Limited 33-17
Joint VentureForms○ Unincorporated (contractual)○ Incorporated (formation of new corporation)
License AgreementsContractualused when protection of intellectual property is importantLicense allows termination of license if a breach whereas a
sale is finalSeveral important terms required in the license agreement
© 2015 McGraw-Hill Ryerson Limited 33-18
International Trading Relationships
Four Documents Each serves a distinct purpose
1. Contract of Sale2. Bill of Lading3. Contract of Insurance4. Commercial Invoice
International Contracts of Sale
© 2015 McGraw-Hill Ryerson Limited 33-19
Needs to address certain elements of the international aspect Trade terms and terminology Governing law Specifics as to goods: quantity, quality, per unit price, delivery
dates, modes of shipping, packaging Force majeure Payment: currency, time, place Arbitration
Pre-contractual matters Acceptance of an offer is effective on receipt (thereby
excluding the “mailbox rule”) Contracts need not be in writing to be enforceable
© 2015 McGraw-Hill Ryerson Limited 33-20
Contract of Sale
Bill of LadingA contract entered into between a bailor and a common
carrier of goods (bailee) that sets out the terms of the bailment and represents a title document to the goods carried○ Sets out carrier’s responsibilities○ Sets out name of seller (shipper/consignor) and consignee
(buyer or buyer’s agent)○ Permits and licenses
Purposes○ Contract between carrier and shipper○ Document of title○ Receipt for the goods
Usually coupled with a sight draft
© 2015 McGraw-Hill Ryerson Limited 33-21
Bill of Landing
PurposeProtect against risk of shipping goodsVarious forms of insurance exist○ Specific shipment or open basis
One party will have the obligation to insure the goods○ Contingency insurance – other party takes out in case
other party forgets or is negligentPolitical risk insurance○ Goods shipped to buyers on consignment or deferred
payment basis○ When country is politically or economically unstable
© 2015 McGraw-Hill Ryerson Limited 33-22
Insurance
CharacteristicsOften required by buyer’s customs officeAn invoice for the goods soldCustoms document set out details of goods
Commercial Invoice
© 2015 McGraw-Hill Ryerson Limited 33-23
Each party usually wants their own law to governParties free to choose any law, not necessarily one of their
ownGoverning law different from governing jurisdictionUsually the same, but they can be different○ Governing law – law that governs the interpretation and
enforcement of the contract○ Governing jurisdiction – place where the dispute is heard,
which court or tribunal has jurisdiction to hear and resolve the matter
Courts generally respect the choice of the partiesIf not explicit choice○ Use various tests to determine the governing law
© 2015 McGraw-Hill Ryerson Limited 33-24
Choice of Law
Arbitration Often need for a different forum than courts Commercial arbitration is often incorporated as the choice
of dispute resolution One or more third parties impartially deciding the matter
Arbitration Process Needs to be a clause of the contract
Must set out which rules to follow Composition of arbitration board Place of arbitration
Arbitration
© 2015 McGraw-Hill Ryerson Limited 33-25
EnforcementMost countries deal with it by statuteCanada a party to various conventions
United Nations Commercial Arbitration Code United Nations Foreign Arbitral Awards Convention Act
Enforcement by application to the local courts Issue is whether local courts will enforce an
arbitration award Depends upon recognition of such arbitration
organization
Arbitration
© 2015 McGraw-Hill Ryerson Limited 33-26
International TradeA major part of Canada’s economyImport and Export Acts○ Customs tariff regulation○ Permits for importing and exporting
International Contract○ Various documents usually required
Bill of lading, insurance, commercial invoice
○ Arbitration clause as alternative form to resolve disputes
© 2015 McGraw-Hill Ryerson Limited 33-27
SUMMARY
International Trade RelationshipsVarious forms exist for Canadian firms by which they
can conduct international businessForm depends on goals, and the country one is
dealing with○ Distribution agreements○ Branch plants○ Sales Offices○ Joint Ventures○ License Agreements
© 2015 McGraw-Hill Ryerson Limited 33-28
SUMMARY