International Business Law: Exam 1

3 Types of Legal Relationships - 1) Nation to Nation 2) Nation to Individual 3) Person/Entity to Foreign Person/Entity 7 Risks of Conducting International Business - 1) Transaction Risks: Seller's Payment Risk; Buyer's Delivery Risk *Reducing Transaction Risks: Documentary Transaction; Letters of Credit 2) Language Risk: Misuderstanding as to the contract terms *Reducing Language Risk: Standard forms and provisions; Translations 3) Cultural Risks: Lack of knowledge of local laws/customs; bribery *Reducing cultural risk: knowledge of local laws/customs; local representation 4) Currency Risks: Rate fluctuations-devaluation; inconvertability of local currency into "hard currency"; transfer restrictions * Reducing Currency Risks: Payment in stable currency; "Countertrade" 5) Legal Risks: Cost of foreign litigation; substantive differences in laws of foreign countries; changes in laws subsequent to entering contract (especially long term)- local participation and content requirement, increase in tariff rates, import/export restrictions, increased taxation; Intellectual property transfer restrictions; Procedural differences; non-enforcement of existing laws *Reducing Legal Risks: Knowledge of local laws; local representation; contract provisions- choice of forum, choice of laws, arbitration/mediation 6) Political Risks: Expropriation; increased regulation; increased taxation; unfavorable change in laws *Reducing Political Risks: local advisors/consultants; local legal counsel; insurance 7) Transportation Risks: Theft, Damage, destruction, *Reducing transportation risks: Knowledge of "risk of loss" principles; insurance 8 Sources of Law - 1) International Conventions: Multilateral agreements 2) Treaties: when ratified are binding on federal and state governments 3) Laws of Country where doing business 4) Generally Accepted Business Practices: International chamber of commerce 5) Generally Accepted Legal Principles 6) Judicial Decisions: US and Foreign 7) Scholarly Writings 8) The Contract/Agreement Itself Boycott - Refusal to trade or do business with certain firms Embargo - A total or near-total van on trade with a foreign country or countries EMC (export management companies) - Independent firms that can do tasks as little as rendering advice and training on how to export, or they might assume full responsibility