International Business Transactions
I. Law of International Business Transactions
A. Lex Mercaoria (the law merchant)
a. This refers to the common law developed by traders over time. This law has been codified into hard law (treaties/conventions) and into soft law (codes/standards of practice).
B. United Nations Commission on Trade Law (UNCITRAL)
a. U.N. Convention on the International Sale of Goods
b. Rotterdam Rules (carriage of goods wholly or partly by sea)
c. Convention on Independent Guarantees and Standby Letters of Credit
d. UNCITRAL Arbitration Rules (revised 2010).
i. These are “stand alone” rules and not subject to other rules under other countries, etc.
ii. Does all their work in Vienna and New York.
C. International Institute for the Unification of Private Law (UNIDROIT)
i. Principles of Int’l commercial law – Model Laws
ii. Model laws on leasing, Franchise Disclosure Conventions
i. Conventions on International Leasing, Factoring, Interests in Mobile Manufacturing, Stolen or Illegally Exported Cultural Objects.
D. International Chamber of Commerce (ICC)
a. Standards for sales and financing
i. International Commercial Terms (INCOTERMS)(2010)
ii. Uniform Customs and Practices for Documentary Credits (UCP)(2007)
b. Model Contracts
i. Distribution Agreements, Franchising
i. Rules of Arbitration (2012)
ii. ADR Rules
iii. Arbitration Act (FAA)
1. FAA requires courts to enforce agreements to arbitrate as well as arbitral awards. A federal court does this by staying, upon motion, any litigation brought by a party that has signed an agreement to arbitrate.
E. Why Government Trade Policies?
a. 1) Regulate for Safety, 2) Protect against unfair trade practice, 3) To protect businesses within your country, 4) Raise money—economic stimulus
b. Tools Used to Protect
i. 1) Tariffs, 2) Subsidies, 3) Quota(s), 4) Standards
F. U.S. Trade Policy
a. Responsibility shared between President and Congress
b. Within Executive Branch – the United states Trade Rep negotiates all treaties: FTAs, WTO Agreements, etc.
c. Int’l Trade Adm. of the Commerce Dept. oversees major portion of trade action (Antidumping and Countervailing Duty Cases)
d. Int’l Trade Comm. oversees a portion of trade action (all injury determinations), does §337 cases, and reports on economic impact of trade policies/agreements.
G. U.S. & the World Trade Organization (WTO)
a. Became contracting party to General Agreement on Tariffs & Trade (GATT) in 1947 – Pres. Truman signed
b. World Bank & Int’l Monetary Fund – established in 1947
c. WTO was created in 1995
i. Primary Function: [to] facilitate the implementation, administration, and operation, and further the objectives, of this Agreement and of the Multilateral Trade Agreements, AND SHALL also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements.
d. Rule Making
i. Art. XI(1): “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947(1). Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting.”
1. Consensus: “The body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision.”
e. Negotiating Rounds – Art. III (2) of WTO:
i. “The WTO may also provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference.”
ii. The purpose of the GATT is to “constrain governments from imposing or continuing a variety of measures that restrain or distort int’l trade.”
f. Dispute Settlement
i. Method: Arbitral Panels – Art. III (3)
ii. Jurisdiction: The scope of GATT panels were given (Art. XXIII)
1. Violation claims
2. Non-violation nullification and impairment claims
g. Differences between the WTO & GATT
i. WTO = Membership organization; GATT had contracting parties
h. Legal Rules of the WTO & WTO Agreements
i. GATT (1947/1994)
ii. General Agreements on Trade in Services (GATS)
iii. Trade-Related Intellectual Property rights agreement (TRIPs)
vi. Trade-Related Investment Measures Agreement (TRIMs)
viii. Subsidies & Countervailing Measures
ix. Anti-Dumping Agreement
x. Sanitary & Phyto- Sanitary Agreement (SPS)
xi. Technical Barriers to Trade Agreement
xii. Customs Valuation
xiii. Pre-Shipment Inspection
i. GATT Norms: Two Main Goals of the GATT
i. Liberalization & Non-Discrimination
ii. Major GATT rules are subject to exceptions
1. General Exceptions, National Security, Regional Arrangements, Trade Actions, Trade Agreements, Special & Differential Treatment.
H. Tariff Binding
a. Current round of negotiations is Doha Round
b. Negotiations strive to lower tariffs on goods.
i. Once agreed upon, all Member-States must make the new rate available to all WTO members.
ii. Tariffs then cannot be raised unless you pay or prove you can escape from the GATT obligations
1. Also, Tariffs can be raised if you are responding to unfair trade practices, i.e., dumping or subsidization by another country.
I. Most Favored Nation (MFN)
a. To give a favor or privilege to any one member, you must give it to all.
b. MFN – Spreads trade/tariff protection & helps to eliminate discrimination.
i. Case Examples
1. MFN violations do not have to be spelled out on the face of the measure or by its words– effects will be examined
2. Benefits or special treatment for products must be related to the product itself and cannot be channeled through a private entity
ii. Exception to MFN – Regional Trading Arrangements:
1. WTO Member States can offer duty free movement of goods to only some countries
2. Must be involved in a Custom Union or Free Trade Agreement (Area)
J. National Treatment
a. Concept: Do not discriminate against importation & domestic products
i. “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase transportat
ks arising from diseases carried by animals/plants/products/pests
d. To prevent or limit damage from entry/establishment/spread of pests
2. Member States are obligated to ensure that SPS measures do not arbitrarily or unjustifiably discriminate between WTO Members where identical or similar conditions prevail and are not applied in a manner that would constitute a disguised restriction on international trade.
a. Can base SPS standards on International Standards, or
b. Introduce stricter standards as long as they are scientifically justified – based on risk assessment.
d. Standards, above tariffs and quotas, is the one thing that is the strongest barrier to keeping your products from going in to a certain country.
a. This is a Major Exception to the Most Favored Nation Rule
b. Art. XXIV allows the creation and maintenance of preferential trading arrangements as long as they are done according to the requirements set out in the provision.
i. 90% of all preferential trading arrangements currently notified to the WTO are FTAs.
ii. However, preferential programs are being replaced by Regional Trade Agreements (RTA)
1. North countries = developed countries
2. South countries = undeveloped countries
c. Free Trade Area
i. Defined: a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.
ii. Duties and other regulations of commerce…. shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area.
1. To eliminate duties and other restrictive regulations on substantially all trade between constituent territories originating in those territories (requires establishing rules of origin)
2. Not to raise duties or other restrictive regulations against non-members upon the formation of the free trade area
3. To achieve these objectives within a reasonable period of time
a. According to the WTO this means that Art. XXIV intended to allow regional arrangements “as long as they satisfied three requirements; transparency, commitment to deep intra-regional liberalization, and neutrality vis-a-vis third parties.”
i. Neutrality to third parties means you cannot do anything that raises or lowers standards, tariffs, etc to outside nations not involved with the RTA.
d. GATS & Regionalism (pg. 16)
i. This Agreement shall not prevent any of its Members from being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement, provided that such an agreement:
1. (a) has substantial sectoral coverage, and
2. (b) provides for the absence or elimination of substantially all discrimination, in the sense of Article XVII, between or among the parties, in the sectors covered under subparagraph (a), through: