International Business Transactions
Prof. Steinitz
Fall 2012
I. Modern Forms and Patterns of IBT
a. Types of IBTs, categorized by penetration:
i. export-import transaction
ii. agent or distributor sells goods abroad
iii. licensing to a foreign entity to manufacture and distribute products abroad
iv. Joint ventures
b. Forms of Trade
i. Goods
ii. Services
iii. FDI
iv. Knowledge/Technology Transfer
c. MNE
i. DEFINITION: a number of affiliated businesses which function simultaneously in different countries, are joined together by ties of common ownership of control, and are responsible to a common management strategy. From the headquarters company (and country) flow direction and control, and from the affiliates (branches, subsidiaries and joint enterprises) products, revenues, and information.
ii. Reasons why MNEs are so important to IBTs
1. Provide capital, know-how, and access to foreign markets for host country, thereby increasing export competitiveness
2. FDI tied to MNEs
3. MNEs own lots of IP
d. Intl Forums and Institutions
i. UNCITRAL
1. UN Commission on International Trade Law
2. dedicated to formulizing modern rules on commercial transactions and to furthering the harmonization and unification of the law of international commerce.
3. CREATES TREATIES, e.g. CISG
4. CREATES MODEL LAWS, e.g. UNCITRAL Arbitration Rules
ii. UNIDROIT (International Institute for the Unification of Private Law)
iii. International Chamber of Commerce (ICC)
1. UCP—Uniform Customs and Practice for Documentary Credits
2. Court of Arbitration
3. Incoterms
II. International (Documentary) Sale of Goods
a. Bill of Lading
i. Contract of Carriage
ii. Shows to whom it will be shipped (non-negotiable, straight) or shows that the holder has title to the goods (negotiable)
b. Incoterms
i. Generally
1. Published by the Intl Chamber of Commerce
2. Parties adopt it by K, or may be implied if the UCC applies through custom and practice.
3. apply to matters concerning the duties and obligations of sellers and buyers to a K of sale relating to the delivery of tangible goods sold.
4. Note—there are 3 Ks usually: K of sale, K of carriage, and L/C. Incoterms apply only to the Sale K (not to carriage)
5. Risk of Loss on buyer until he satisfies his delivery obligation to the buyer. These say then that duty is satisfied.
6. For CIF and FOB, risk of loss passes to buyer when the goods have passed the ship’s rail.
7. Incoterms have been revised to adopt to modern practice, e.g. the term “free carrier” has been added to deal with the case where the reception point in maritime commerce is no longer the traditional passing of the ship’s rail but a point on land prior to the loading of the goods on the vessel.
ii. FOB (Free On Board) (p. 79):
1. S delivers goods past ship’s rail at named port of shipment
a. bears all costs and risk of loss until that point
2. S clear goods for export
3. applies only for sea/inland waterway transport.
iii. CIF (Cost Insurance Freight) (p. 82)
1. S delivers goods past ship’s rail at named port (like FOB)
2. S pays all costs and freight necessary to bring goods to named port of destination, BUT risk of loss or damage to the goods, and additional costs incurred after delivery are transferred to the B.
3. S has to procure marine insurance (only minimum cover required)
a. minimum coverage = K cost plus 10% (110% coverage)
4. Must have a negotiable B/L
a. in CIF, the goods are delivered past the ship’s rail, but S does not possess them until the port of destination. This is distinct from the FOB where delivery and possession occur at same time.
5. Buyer has a right to inspect before shipment (unlike FOB)
6. only for waterway transport
iv. Biddell Brothers v. E. Clemens Horst Company (Ct. Ap. King’s Bench, 1911)
1. Kennedy, Dissentàeven though the K does not require payment against documents, it is necessarily implied by the term CIF, because otherwise the S would give up the goods, while B would still be able to reject them at the port of delivery, or would have to hold the B/L until goods were accepted, in violation of the K. This view was taken upon appeal to H of Lords.
2. Reference Parker v. Schuller (1901) in which Seller sues Buyer under a CIF K for not shipping the goods. The sellers lost on appeal b/c they should have argued that the breach occurred when B failed to ship the documents, b/c the documents could not have been shipped without shipping the goods.
3. SIG:
a. CIFàduty to deliver documents to S, goods to carrier.
b. Buyer has no right to inspect at port of delivery
v. The Julia (House of Lords, 1949)
1. Rye shipped to from S in Argentina to B in Belgium. Issue delivery orders so that B doesn’t have to buy whole cargo. Delivery order issued to seller who had agents in Antwerp and who would make represerntations to ship’s master that the B had paid for cost and freight, and then the goods are released (first to S’s agent, then to B). Parties call this K a CIF, but didn’t have a negotiable B/L and B held insurance certificates
2. Goods are rerouted to Lisbon, and sold for lower price. B wants purchase price back, S offers only to give amount realized on sale in Lisbon.
3. HELD: This was not a CIF K; it was a K to deliver goods in Antwerp. This was an internal shipment from S to S’s agents.
4. SIG: under CIF transaction, B must get title
vi. B/L in the context of the K of Affreightment
1. Private Carrier
a
i. can apply to persons performing services on behalf of the carrier, e.g. stevedores, truck carriers, etc.
e. COGSA applies where:
i. All Ks for carriage of goods by sea to or from the US in foreign trade (common carriers)
ii. Private carriage under a charter party only when charter party incorporates it through a Clause Paramount (Fruit)
iii. If there is a B/L that forms the K of carriage, then COGSA applies even with private carriage.
f. COGSA does not usually apply to
i. inland transport
ii. non-carriers
1. **BUT Himalaya clause provides coverage
10. Fruit of the Loom v. Arawak Caribbean Line Ltd. (S.D.Fla, 1998)
a. Fruit sends goods from Jamaica to Kentucky using Arawak as a carrier, who will carry them by sea and then sub-K for Seaside to drive them to Kentucky. On road transport the truck is hijacked. There was a through BL so COGSA governs. The Himalaya cause means that Seaside is covered by COGSA. The B/L also placed risk of theft on shipper, so carrier not liable at all.
11. Steel Coils v. Lake Marion (5th Cir. 2003)àBoP
a. Steel coils are damages in transit from Russia to New Orleans and Houston by seawater. Coils travel by rail from Moscow to Riga, where the Lake Marion crew took them.
b. Burden:
i. Π must establish PF case by demonstrating that cargo was loaded in an undamaged condition and discharged in a damaged condition.
1. B/L serves PF case that they were undamaged when loaded
ii. Burden shifts to Δ to prove that
1. they exercised due diligence to prevent the damage, or
2. the damage was caused by one of the exceptions set forth in § 1304(2) of COGSA, including:
a. perils, dangers, and accidents of the sea or other navigable waters
b. latent defects not discoverable by due diligence
