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International Business Transactions
Temple University School of Law
McAlinn, Gerald Paul

International Business Transactions Outline
I.        Introduction
A.      Background Considerations
B.      Growth of International Business, Modern Forms, New Developments
C.      Legal Framework for International Business
D.      International Economic Law
II.      International Sale of Goods
A.      Overview of an International Sale – p.131
i)         Int’l Sale of Goods –
(1)     Both an export from the country of the seller and an import into the country of the buyer; applicable laws concerning exports are relevant & must be observed. 
(2)     Expectation of the Parties – p. 60
(a)     Both – want the bargain to be completed
(b)     Buyer – wishes to receive payment as quickly as possible; receive the goods as bargained for in the sales K. May wish to inspect the goods to ensure that they satisfactorily conform to the K. Can inquire into info about the seller.
(c)     Seller – wishes to receive payment as expeditiously as possible and does not wish to wait too long while the buyer inspects the goods.
(3)     Int’l Context of B & S Expectations – p. 61
(a)     An int’l context, the expectations are the same, but risks increase significantly.
(b)     B will have greater difficulty ascertaining the reputation of the S
(i)       Ex. China
(c)     Ensuring Expectations are Met
(i)       Commercial Terms – Int’l trading community has created a lexicon of commercial terms that assign duties and obligations in the sale. 
(ii)     Documentary Sale – documents that deal w/ the risk of non-performance. Consists of 3 documents. Negotiable bill must be used in a documentary sale. P. 70.
1.       Sales K – usu. Requires a clean BOL; b/w the S and the B for the goods, which can consist of one writing or a series of writings. Usually formed through negotiations of leading to an offer by the B and acceptance by the S. Ex. p. 64-66.
2.       Letter of Credit – usu. Requires a clean BOL; a method in which S can obtain payment from B’s bank upon the presentation of certain documents (so S does not risk that B will not pay against the docs.) p. 67-68, and
3.       Bill of Lading – the k of affreightment or carriage b/w the S and the carrier for shipment of the goods. Determines to whom the carrier should deliver the goods. 
a.       Contents: description of the goods that has been loaded into containers, but does not say if to buyer expectations.
b.       If Non-Negotiable BOL (aka straight or white BOL) the carrier is to deliver the goods to the person named as the cosignee in the bill or to an agent or person designated by the cosignee. The consignee need not submit the orig. of the non-negotiable bill to the carrier to obtain the possession of goods.
c.        Negotiable Bill (aka yellow BOL) – carrier is to deliver the goods only to the person in possession of the original negotiable BOL properly endorsed. (sev. sets of orig. issued). 
i.         Carrier obtains surrender of the negotiable bill before delivering the goods. Negotiable bill thus represents control of the goods themselves b/c whoever has possession of a property endorsed bill has the right to pos’n of the goods. 
ii.        Allows transfer by endorsement
d.       Determine if Negotiable or Non-Negotiable by
i.         Rd. space for consignee. If to a specific person, then the bill is a non-negotiable bill
ii.        If to “the Order of Shipper” then it was a negotiable bill and to anyone to whom the bill has been endorsed by the shipper and by subsequent persons can obtain possession of the goods.
e.        Steps to Using the BOL – p. 70
i.         Carrier issues the bill to the S after the goods have been loaded on board.
ii.        S endorses the BOL to the issuing bank and submits the other required documents of payment. 
iii.      When bank pays S the bank then forwards the docs to the B for reimbursement.
iv.      Bank endorses the BOL to B who then submits the BOL to the carrier and receives custody of the goods.
v.       May be marked on Clean Bill of Lading this means that the goods have not been damaged in the process of being loaded on board the vessel. 
vi.      BE SURE TO READ THE BOL b/c the std. terms that govern the rights and obligations of the parties. 
f.        Commercial Invoice-
i.         provides detailed information about the goods as it should repeat the bulk of the buyer’s purchase order.
ii.        Gives the indication that the goods are of the quality bargained for by the B. 
g.        Allocation of Liability Upon Shipment
i.         Carrier undertakes the responsibility from the moment it takes receipt of the goods to deliver the goods to the port of discharge or a named place of delivery. 
ii.        The liability of the carrier for any damage to the goods if the carriage is to or from the U.S. is governed to the federal Carriage of Goods by Sea Act (COGSA) 46 U.S.C. s. 1300. et seq. 
iii.      This limits liability to the carrier to $500 per package unless the shipper declares otherwise in the BOL s. 1304(5). P. 72. 
h.       Sell the Goods In Route
i.         If the B, wholesaler, or distrib, uses a documentary of sale can be very useful b/c it allows the B to sell the goods while they are still in transit. 
4.       NB: In a documentary sale, no letter of credit needed b/c the seller can submit the documents directly to the buyer for payment. p. 63
ii)       Import Regulations
(1)     Tariff–
(a)     A border tax levied on imported goods; typically paid by the importer (buyer);
(i)       inhibits imports by making them more expensive for the importer who typically must pass on the cost to the consumer in addition to raising money for the importing country’s government. 
(b)     3 Kinds of Tariffs
(i)       Ad valorem – tax that is expressed as a % of the value of an imported item.
(ii)     Specific – a flat tax per imported item
(iii)    Mixed – combines aspects of both ad valorem and specific tax. A common mixed quota is a tariff quota, a tax that sets one, usually lower, charge on the first x number of unites imported and a much higher charge on units imported above x.
(c)     Applicable tariff is “bound” a ceiling amount will be fixed under Article II of the General Agreement on Tariffs and Trade (GATT). Arbitrary customs procedures are forbidden under GATT.
(d)     3 Variables in the Calculation of Tariffs               
(i)       Classification of the imported product
(ii)     Valuation of the imported product, and
(iii)     The place of origin of the product
(2)     Quota
(a)     Quantitative restrictions; a numerical limit on the number of units of a category of product that can be imported;
(b)     more effective than a tariff b/c it completely eliminates the products in excess of the number specified. Tariff produces revenue cor the importing nation, but a quota does not. 
B.      Commercial Terms – p. 75
i)         Incoterms-
(1)     int’l commercial terms that clarify who is responsible for the different parts of the trade. 
(a)     Notes which parties can adopt by contract that then determine responsibilities in the various tasks in the int’l sales transaction.
(b)     Specific and limited; only apply to matters concerning the duties and obligations of sellers and buyers to a contract of sale relating to the delivery of tangible goods sold. Only applies to pts. Of the k of sale.
C.      Interpretation of Commercial Terms
i)         Allocation of Responsibility (shipping terms) – see chart on p. 78-88
(1)     goods are delivered by the seller to a point on land where they are stored in a container in a warehouse for subsequent transport by sea or by a combined means of transport (air, sea, or land) – multimodal transport.
(2)     Reception Point – Loading point of the Vessel; FCA from prev. FOB.
(3)     CFR and CIF – may only use carriage by sea for transport b/c the seller must present a bill of lading or other maritime document to the B
(4)     CFR, CIF, CPT – S has K for carriage but w/o assuming risk of loss to the goods or add’l costs past the point of shipping.
(a)     CIF (COST INSURANCE and FREIGHT…named port of destination)
(i)       Biddel Brothers – where the ct. held where a B & S are in a CIF transaction, unless there is a k for something different, there is no right to inspection of goods before payment. / Under CIF K, B must pay against the documents. Parker v. Schuller p. 91, 93 
(5)     FCA, FAS, FOB – S must deliver the goods to a carrier named by the buyer. 
(a)     FOB – S delivers the goods “pass the ships rail” at the named port of shipment. B must bear all of the costs and risks of loss or damage to the goods from that point. Requires S to clear the goods for export. ONLY or sea or inland or waterway. 
D.      Documents of Title – p. 82
i)         CIF (Cost, Insurance, and Freight …named port of destination)
(1)     Means that the seller delivers when the goods pass the ship’s rail in the port of shipment; seller must pay the costs and freight necessary to bring the goods to the named port BUT risk of loss/damage to the goods and additional costs transfer from seller to buyer. P. 82 
(2)     ROL shifts to the B once the goods are safely loaded aboard the ship, but the buyer is protected b/c it has a doc. Of title such as a negotiable BOL and also a policy of insurance. P. 100.
(3)     S must also pay & obtain marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage. Seller pays ins. Prem.
(4)     S only required to obtain insurance on a minimum cover. Extras must be agreed upon.  
(5)     S is required to clear the goods for export; term may only be used for sea and inland waterway transport. If parties do not intend to deliver goods across the shop’s rail, the CIP should be used.
(6)     Delivery obligation is satisfied with the delivery of the documents; is breached by the non-delivery of documents, not the goods. 
(7)     Negotiable bill of lading is crucial
ii)      CIF and C&F
(1)     Unless, otherwise agreed, these terms mean that the BUYER must make payments against the tender of the documents and the SELLER may not tender nor the BUYER demand delivery of the goods in substitution for the documents. Julia & Parker v. Schuller
E.       Contract of Affreightment, Bills of Lading
i)        Contract of Affreightment
(1)     If the delivery order is not a document of title then the B is in essence, making an advance payment of the payment purchase price against the

– Only if two or more headings apply, then
a.       Select the one that is more specific of them all.
2.       If a choice b/w 4 headings and 8525 is most specific, then select that one.
(iii)    “Essential Character Test” – If both headings are specific, then look at which heading addressed the essential character and use of the good. 
1.       Illustration – Better Homes – shower curtain set w/ 3pts.:textile curtain, plastic opaque liner, rings attached to the bar. Result is a 12.8% v. 3.36% duty. Very diff. amts. 2 headings that are equally specific so you use the essential character test.
(iv)   Last Classification in Numerical Order –  
1.       If several pos. headings, none is more specific than the other, and the essential character is unclear, then just look to the last classification based on numerical number. 
(v)     Tariff Rate Quota –
1.       When 2 tariff rates apply, then apply the lower rate up to a certain amt.
2.       Then applies a higher rate up to the rest
3.       Illustration-  
a.       Marubeni – when customs add the extra tax, then the cost is passed along to the consumers. GM and competitors wanted an extra tax on Nissan to imports. Can result in factories built in the U.S.
b.       Heartland Byproducts v. U.S. –
i.         Applied TRQ only to sugar syrup w/ less than 6% impurities. Sugar Mkts didn’t want direct competition and the U.S. wanted to protect sugar industry so that the sugar industry could put a customs charge on imported sugar
ii.        Heartland put molasses in the sugar (to impurify it and avoid the TRQ), and then they took I out and injected pure sugar syrup once the good was imported and dir. Compete w/sugar mkts b/c it could sell its products at a lower price.
iii.      Ct. said that foreign substances must be excluded when analyzing syrup content, so whether the molasses was present or not would be irrelevant, b/c other substances would be judged.
(2)     Valuation (How you Determines Product Value) – p.145
(a)     Specific duty rates are assigned to ea. Tariff schedule classification
(b)     Determined based on the appraised value of the imported product must be determined.
(c)     Simple procedures & Requires customs to observe min. fairness and transparency standards and eliminating many protectionist features
(d)     5 Valuation Methods:
(i)       transaction value – eq. to the invoice price of the goods at the time of exportation from the country in which the good are produced. [Price actually paid for the goods] 1.       BEWARE! Sometimes price on the invoice is not the price actually paid b/c there is an amount that is REIMBURSED
a.       Ex. S gives B $50 to buy an item but B gives S $10 back. The price paid was not $50, but actually $40. Impose a duty on the $40.
b.       Cost Paid = cost – custom duties that will be reimbursed. 
c.        Importer must separately mark ea. Item to reduce the transaction price of the duty paid. If not, then customs will just see a reg. trans action and will be charged more. 
2.       Illustration- Century Importers v. U.S –
a.       Molsen was going to pay for the import duties and purchase price on the beer. Molsen would reimburse Century for customs duties that were paid. 
b.       Century filled out forms wrong and did not show the reimbursement that Molsen was going to make and Molsen was charged at a higher rate. Molsen threatened not reimburse in the future if the forms were not filled in correctly.
3.       CAN’T USE trans val. if exporter and importer are related parties and re: influences the price of the or where there is no sale at the time of export, ie. Consignment transaction
(ii)     transaction value of identical value merchandise
(iii)    transaction value of similar merchandise
(iv)   deductive value
1.       is determined by starting w/ the resale price of the goods to unrelated customers by the importer in the country of importation and
2.       backing out commissions or profits or general expenses, all CIF costs, and the value of further proceedings at the port of exportation. 
(v)     computed value –
determined by adding the costs of materials, fabrication, general expenses, and