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Chapter 33

BU231 Chapter 33

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Wilfrid Laurier University
Keith Masterman

1 READING NOTES CHAPTER 33: International Business Transactions Law and International Business • Initially firms establish themselves locally, then become international as when they engage in business with customers in foreign countries • As the foreign market grows a business may appoint an agent or representative office • Eventually, operations may develop into full scale manufacturing and a branch or subsidiary (discussed later) may be established • Questions of private law and public now arise, now in the realm of public international law (relations between states) Foreign Trade • Export Contracts o Contract of Sale  Much of our earlier material regarding contracts still applies  However, international contracts with an international element present special problems due to longer times requiring transportation, insurance o Proper Law of Contract  The proper law of contract is the law of the country or jurisdiction that the parties intend to govern  Clearest method of establishing the proper law is for the parties themselves to make express provision  Where proper law is not expressly stated the court will attempt to determine the intentions from circumstances o Contractual Terms (Terminology)  A standard set of terms known as Incoterms have come to be widely used  Also the publication and widespread adoption of standard form contracts published by global trade associations (UNECE) in order to harmonize international laws o Shipment and Insurance (Good for multiple choice)  Ex Works Seller’s responsibility is only to make goods available to the buyer at the sellers own warehouse… no responsibility  FOB Buyer arranges shipment and seller is responsible to deliver the goods to the carrier… responsibility ends there  CIF Seller assumes responsibility for shipping the goods to the country of destination… responsible for delivery and insurance  DDP One step further as seller does all of the above and pays the 2 import duties o Payment  The currency used to denominate the price and to make payment is important  Generally, seller does not mind in which currency the price is paid, so long as the currency is freely convertible meaning no restrictions such as in protectionist third world countries like Cuba o Countertrade  Countertrade is a form of barter where a seller agrees to accept payment in the form of goods produced or acquired by the buyer • An example is for a corporation selling machinery to a firm in a developing country in return for a part of that firm’s production as a price o Licensing  You should only license someone in a foreign country if that country’s government and courts have the integrity to protect your trademark • Government Regulation of Trade o Export Promotion  Canadian embassy staff collect commercial information and disseminate it to Canadian businesses  Export Development Corporation is a crown corporation that facilitates and develops Canada’s exports • ‘Rock stars’ of Canadian business who tour / party with other countries in order to open doors for everyone  International aid is essentially disguised bribery, but helps in dire situations o Import Duties / Tariffs  Setting of tariffs is no longer determined independently by governments, but is largely regulated by GATT, NAFTA, WTO  Various preferences are granted depending on who your friends with  Determining origins of goods becomes very important now since goods may be manufactured in one country from raw materials in another, and pass through a third party country before arriving o Import Restrictions / Quotas  Known as non-tariff barriers  Generally, Canada has a relatively liberal policy towards imports from other countries and adheres to GATT… primarily put quotas on agriculture and textiles 3  Canada is especially good at quietly discriminating against foreign goods by use of French / English labelling requirements o Dumping and Subsidies  Dumping occurs where a firm sells goods abroad at prices lower than those at which similar goods sell in a domestic market • The firm uses profits on domestic sales to subsidize its exports and undercut competitiors  Subsidies occur where the government provides special benefits to its exporters in order to assist them in exporting • Eg. Recent WTO conflict between Brazil and Canada over Bombardier vs. a Brazillian aerospace firm • International Law of Trade o Intl. law of trade is based upon a great deal of reciprocity, where one country scratches another’s back or vice versa o GATT and WTO  GATT was originally created after WWII, and is now superseded by the WTO in 1995  In addition to providing a forum for negotiations
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