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Chapter 31

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Valerie Irie

BU231 Chapter 31 – International Business Transactions Law and International Business -Foreign trade – the buying and selling of goods and services between parties from different countries -Foreign presence – placing representatives of a business in foreign markets -Foreign investment – conducting operations in a foreign market -Private law – the law that governs transactions between private parties, such as a seller and a buyer of goods -Public law – law governing the relationship between private individuals and the state -Public international law – law involving relations between states -Non-governmental organizations – voluntary, non-profit associations of private entities working to influence policy, raise awareness, and affect change, such as the International Chamber of Commerce -Super-governmental organizations – non-profit associations of governments from around the world working to find common solutions to international issues Foreign Trade Export/Import Contracts -The contract between a supplier and customer constitutes the essence of the transaction The Contract of Sale -In addition to the basic agreement for the sale of the goods, the parties normally arrange for the transportation of the goods, for their insurance during shipment, and, frequently, or the financing of the transactions -Expert houses/freight forwarders – specialist firms that make the arrangements for shipment, insurance, and financing in export saes The Proper Law of the Contract -Several contracts make up the entire transaction and each one might be governed by a different law -Proper law of the contract – the law of the country or jurisdiction by which the provisions of a contract are to be interpreted and its effect determined -Conflict of laws/private international law – the principles of law that apply to resolve questions concerned with private relationships that are affected by the laws of two or more countries -Where the parties do not expressly state the proper law, the court will attempt to determine the intention of the parties first by considering the contract as whole in light of the surrounding circumstances Contractual Terms -Incoterms – a set of standard contractual terms adopted by the International Chamber of Commerce -UNIDROIT – the International Institute for the Unification of Private Law, harmonizes laws and has 61 member states, including Canada -UNCITRAL – United Nations Commission on International Trade Law furthers harmonization and unification in international trade through conventions, model laws, and guidelines -OECD – The Organisation for Economic Co-operation and Development has 30 member countries including Canada, and promotes world trade and sustainable economic growth by setting standards for best practice BU231 Chapter 31 – International Business Transactions The Documentation -The export sale normally requires at least four documents: -the contract of sale -the bill of lading -the insurance policy or certificate -the invoice Shipment and Insurance -Transportation arrangements are an essential element of an export sale -Usually the goods will be insured against loss or damage during transit, and either the buyer or the seller assumes responsibility for arranging insurance -The contract price reflects whether it is the seller or the buyer who arranges and pays for shipment and insurance, and up to which stage of the journey -Common types of arrangements for shipping: -EXW = ex works -FOB = free on board -CIF = cost, insurance, and freight -DDP = delivery duty paid -In EXW, the seller’s responsibility is only to make the goods available to the buyer at the seller’s own works or warehouse -Under a FOB, the buyer arranges shipment, and the seller’s obligation is to deliver the goods to the carrier named by the buyer -In a CIF, the seller assumes responsibility for shipping the goods to the country of destination -In a DDP, the seller bears the risks and costs of transporting the goods to an agreed destination and sometimes even paying the import duties Payment -The currency the price is stated in and paid in must be the same -Exchange controls – restrictions on the conversion or export of currency -Foreign exchange risk management – methods of reducing the risk involved in currency fluctuations Financing -Collection arrangement – an arrangement whereby the seller employs the services of its bank to collect payment by depositing the documents with the bank and receiving credit for the price -Letter of credit – a document that the buyer of goods obtains from the bank and uses to pay the seller Countertrade -Countertrade – a form of barter, under which a seller agrees to accept payment in goods produced or procured by the buyer Export of Services -Date, legal or financial advice, or technological expertise may be supplied to customers in other countries Intellectual Property -Protection must be sought in the target country BU231 Chapter 31 – International Business Transactions -Naturally, a business will want to convert its name, logo, or brand to a Chinese version that has meaning to the targeted consumer -For added protection, import and export contracts should confirm the ownership of existing intellectual property, designate ownership of any new products, designs, etc., that are generated under the contract, and call for the return of any confidential information, including product specifications, designs, or moulds at the end of the contract Government Regulation of International Trade Export Promotion -An important function of Canadian embassy staff abroad is to collect commercial information and disseminate it to Canadian business Export Controls -Restrictions upon exports remain common Import Duties -The setting of tariffs is no longer determined unilaterally by governments, but is largely regulated by international agreements, such as the GATT and the NAFTA Import Restrictions -Non-tariff barriers – national rules, other than import duties, that restrict or prevent the importation of goods -Quotas – restrictions on the quantities of goods that may be imported Dumping and Subsidies -Dumping – selling products abroad at prices below those charged on domestic sales -Export subsidy – the granting by governments of financial assistance to promote exports -Anti-dumping duties/Countervailing duties – special duties imposed on imported products to counter the advantage obtained from dumping or export subsidies The International Law of Trade -The international law of trade is based to a large extent upon the principle of reciprocity, an approach generally followed in negotiating agreements between states, sometimes bilaterally and sometimes on a multilateral basis The GATT and the World Trade Organization (WTO) -The GATT is the principal instrument that lays down agreed rules for international trade -Trade-related investment measures – national mea
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