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INTRODUCTION TO
Containers
at port in
Manila, PI
Created by Pamela S. Evers, Assoc. Prof., UNCW, for Educational Purposes © 2007
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• ALL BUSINESS IS INTERNATIONAL
•Economic Interdependence
•Globalization
children with
American
Su erhero
backpacks
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Alexandria 2002
Hong Kong at Night
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Rio de Janiero,
Chinese goods on
way to US
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for US tourists on a cruise
ship
Jeweler, Egypt
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Japanese robot
(ASIMO at 2007 Consumer
Cloned Pig, Taiwan
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German Navy Ship
Lutgens saluting US
Nav shi after 9/11
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Globalization
• ec s us ness orma on, con rac s annegotiations, logistics, etc.
•
Shanghai ⇒
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International LawInternational Law
Public International Law
,treaties, and organizations
governs relations among nations
Private International Law
national laws (laws of a particular
nation) related to internationalissues that affect private citizens
Afghani Women in
Front of UN Sign
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Sources of International LawSources of International Law
The sources of international law are:
Treaties and International Agreements
, , ,Mercosur)
International Organizations and Conferences
National Laws
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Basic Principles and
’ Basic Principles and
’ Important principles
and doctrines appliedin the interest ofmaintainingharmonious relationsamong nationsinclude: Doctrine of Sovereign
Immunity Kenyan Boys
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Act of State DoctrineAct of State Doctrine
Judicial branch of one country will not examinevalidity of public acts committed by recognizedforei n overnment within its own territor
Thus nations may:
Expropriate: occurs when host government interferesw ore gn nves or s un amen a owners p r g s
Confiscate
. . e nz orce o se oma o
processing plant under threat of
Venezuelan expropriation
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Doctrine of Sovereign ImmunityDoctrine of Sovereign Immunity
Exempts foreign nations from jurisdiction inU.S. courts
Foreign Sovereign Immunities Act expanded
jurisdiction of U.S. courts for creditors offoreign governments
Note: sovereign immunity also prevents a
citizen from suing a government! Theoretically…see Peterson v Iran
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Principle of ComityPrinciple of Comity
One nation defers and gives effect to laws and judicial decrees of another nation, as long as
with the law and public policy of
accommodatin nation
Lisbon
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International Law & BusinessInternational Law & Business
International lawapplies to business to
business organization
and development, ways of doing business
in foreign states, and
domestically withforeign trading partners
Textile plant in Sri Lanka;
contractor for major US lingerie
rms
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Impact of Treaties on Business
because state’ s obligation becomes a citizen’ sobli ation E.g., Convention on Global Warming
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GATT
primary treaty affecting U.S. business
Goal: reduce & eliminate trade barriers
US signed in 1994, with 124 other nations GATT created World Trade Organization
(WTO) to resolve trade disputes
Currently (8/07): 151 members
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WTO
s ec s on recor causes concern a ouimpact of trade on environment & human
WTO working on General Agreement on
Protestin Trade Issues –
Washington, DC
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CISG
. . onven on on e n erna ona a e oGoods (1980)
transactions of businesses within signatory
Similar to the U.S. Uniform CommercialCode UCC but: writing not required, mirror image acceptance,
additional remedies for breach of contract
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Forms of International Business
•
• Foreign Direct Investment• Technolo Transfer & Licensin
Walmart in
Shenzhen,
China
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TR DE
• mpor ng: rocess o uy ng goo s rom
foreign supplier and entering them into
cus oms err ory o eren na on
“ ”
jewelry for US market
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TR DE
• xpor ng: pmen o goo s or ren er ng
of services to a foreign buyer located in a
ore gn coun ry
German Monopoly board
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Trade
• e a ve y uncomp ca e process a can g vecomparative advantage
• Advantage exists if
costs of production &price received for
goods allow goods to
e so a g er pr cein foreign country than
Truck en route to market,
Central Africa
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Trade Trends
• US trade stats•US merchandise imports accounts for 1/5 of worldra e
•World's 2nd largest exporter (Germany is 1st, 7%
above US)• Imports, primarily from Canada & China, exceedexports, primarily to Canada & Mexico
• • about 20% of global trade and 60% of global output
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U.S. Department of Commerce, 8/14/2007
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FOREIGN DIRECT INVESTMENT
• e ers o owners p an ac ve con ro oongoing business concerns
, , ,operations, and other forms of production
• Provides reatest involvement & risk•expropriation or obstacles to repatriation of funds, forexample
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Foreign Direct Investment
• Forms of Multinational Enter rises MNEs :
•Wholly owned foreign subsidiary•Joint venture• Acquisition
Port in
Bremerhaven,Germany
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TECHNOLOGY TR NSFER
• e n on: exc ange o ec no ogy an
manufacturing knowledge between firms indiffering nations through licensing agreements orfranchising
Sprite On Fire
advertisement
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Technology Transfer
• Technology transfer is an "easy" method ofentr into international market
• Technology transfer agreements incorporate• Trademark, patent, or copyright
• Most nations closely regulate technologytransfers
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Intellectual Property Transfer
• greement or contract y w c o er ointellectual property grants certain rights in
specified conditions for a specified time
e.g., right to manufacture
product pursuant to
,
mark or image, right to
distribute artwork or
book
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Licensing
• Licensing: applied in manufacturing contextLicensor grants licensee right to: (a) manufacture
,apply a trade name, trade image, or trademark to
products, or (c) publish, print, or otherwise produce art orterary wor s un er a copyr g t
Nike plant inViet Nam
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Franchising
Franchisor grants franchisee right to use a trade name,trade image, trademark, copyrights, and patents (in sum,business know-how) in exchange for royalty payments tofranchisor
BangkokMcDonald’s
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Intellectual Property Piracy
• Intellectual Property contributed more than US $1trillion to global commerce in 1998 (The Economist)
legitimately, $1 worth was obtained illegally
(Business Software Alliance, Piracy Study, 7/04)• World software piracy losses of $29 billion in 2004
(CNN, 7/04)
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Intellectual Property Piracy
Counterfeits in China
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Intellectual Property Piracy
• ,
of movies are downloadeddaily (Motion Picture Assoc., 8/04)
• Counterfeits make up 10% of
global market in medicinesor ea rgan za on
• Pirates staged 445 attacks in
,people (The Independent, 3/04,UK)
market circuit boards
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LETTER OF CREDITLETTER OF CREDIT
Primary financial device used in int’
l businesstransactions to reduce risk
Involves buyer ’ s and seller ’ s banks and
supporting associated banking institutions
German
Bank
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REGULATION OF ACTIVITIESREGULATION OF ACTIVITIES
facilitate international business
Marketing and Sales
Production Export and Import Controls: Quotas, Tariffs and Anti-
Dumping Rules
Influenced by International Organizations and Agreements: World Trade Org., European Union,
. .,
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U.S. Trade ControlsU.S. Trade Controls
U.S. has substantial export controls, e.g.,
Export Administration Act of 1985
○ Permits federal govt to restrict exports if theyendanger national security, harm foreign policy
oals or drain scare materials○ Controlled Commodities List limits what may be
exported; license required and may be denied
Arms Export Control Act○ President may create 2nd list of controlled goods
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U.S. Trade ControlsU.S. Trade Controls
. .
Tariffs or Duties
○ Customs officials “classify” the goods, then impose
duty based on classification○ Example: Marubeni America v. U.S. (Pathfinder)
Websites for trade regs: http://ia.ita.doc.gov/
and http://www.trade.gov/td/tic/
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Non-Tariff BarriersNon-Tariff Barriers
Non-tariff trade barriers are non-monetary
methods of limiting imports uo as: m ng e amoun o a par cu ar goo
Import ban: preventing a particular good or particular
nation’ s im orts e. . Cuba Requirements for ingredients, manufacturing, etc.
○ E.g., Japan requires “kimono guards” on imported US autos
○
E.g., the “
tuna-dolphin”
dispute was centered on a USattempt to prevent importation of certain ingredients (tunacaught “on dolphin” ) in canned tuna
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Applicability of U.S. Law AbroadApplicability of U.S. Law Abroad
U.S. antitrust laws and the Foreign CorruptPractices Act apply to the activities of U.S.
acting abroad
under U.S. antitrust laws and the Alien TortClaims Act in U.S. courts
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Applicability of U.S. Law AbroadApplicability of U.S. Law Abroad
enera y, . . rms mus a e y . .
anti-discrimination law, even in foreign,
them to violate laws of the foreign country
“ ”
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DISPUTE SETTLEMENTDISPUTE SETTLEMENT
Options for resolution of internationalcontract disputes are like civil disputes inthe United States
Litigation or Alternate Dispute Resolution,nc u ng r ra on or e a on
Primary problems in international business
spu es re a e o ur s c on, scovery,enforceability, and collections
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RISKY BUSINESS
Doing business abroad can be
complicated and costly equ res r s managemen
Before doing business overseas:
er orm a r s assessmen po ca r s ,contractual and transaction risk, currency and
exchange rate risks)
Develop appropriate strategy Develop crisis management plan
’ nsure or r s
damaged in protest of
Iraq war
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Managing Risk
• n s ra eg c p ann ng:•Consider problems of distance,
,
differences, relevant laws
•(government agencies, attorneys,
brokers, bankers) when
appropriate!•Prepare for ethical issues
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Discussion
doing business? Com are: US firm im ortin textiles from China
vs. CA firm buying textiles from NC firm
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Discussion
How would selling goods in anonmarket economy differ from selling
What if a dispute arises?
Mali market
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Private International Law