CHAPTER 1
INTRODUCTION TO INTERNATIONAL BUSINESS
CASES IN THIS CHAPTER
Tarbert Trading Ltd. V. Cometals, Inc.
Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.
Dayan v. McDonald’s Corp.
In re Union Carbide Corporation Gas Plant Disaster at Bhopal
Transatlantic Financing Corp. v. United States
Gaskin v. Stumm Handel GMBH
Bernina Distributors v. Bernina Sewing Machine Co.
DIP SpA v. Commune di Bassano del Grappa
TEACHING SUMMARY
,The three basic forms of international business—trade, licensing of technology and
intellectual property and foreign direct investment—are methods of entering foreign
markets, but they are not mutually exclusive. They are not mutually exclusive and are often
combined. The savvy manager of an international business will seek to create joint ventures
and business opportunities to invest, or manufacture, trade via export and imports for
goods and services and license its products where appropriate and protectable. However,
international business opportunities are fraught with risk, selecting the appropriate
methods of entering a foreign market or country must be consider the culture, politics, and
economics of the host country. Through the study of international law, one can better
identify and manage potential legal risks.
CASE QUESTIONS AND ANSWERS
Tarbert Trading Ltd. V. Cometals, Inc.
1. Import/export transactions usually require much more documentation than
domestic transactions. These include detailed invoices, packing lists, shipping and
insurance documents, and specialized certificates. Here, a “certificate of origin”
was required by the government of Columbia before the goods could be imported.
Does it refer to the country from which the goods were shipped or where they were
grown or made? Why do you think Columbia required a “CO”? What is its
purpose?
Answer: The CO refers to the country where the goods were grown or made, not
from where it was shipped. It identifies for the buyer where the goods come from
so if goods from country A have a better reputation than those from country B, the
buyer will know which goods it is receiving.
2. Suppose that the beans had arrived in Columbia and were then stopped by
Columbian customs authorities because of a fraudulent certificate. What do you
think might have happened to the beans? What would the risk have been to
Cometals and Tarbert? What if the Columbian buyer had already paid for the
beans?
Answer: They would have been impounded; not allowed to enter the country.
Cometals and Tarbert likely would face fines and perhaps criminal punishment. If
the buyer had already paid for the beans, the buyer could sue in Columbian court
to recover damages as the buyer did not get what he bargained and paid for.
3. Evaluate and discuss the conduct of Cometals and Tarbert. Fraudulent
documentation is not uncommon in international trade, especially when parties do
, not have a history of business together. What are the lessons to be learned by all
parties?
Answer: Their conduct was illegal and unethical. You need to know the party you
are dealing with. If that is difficult or impossible, the risk is greater and may lead to
not doing business with them. Agreements protecting yourself are very important in
international business.
Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.
1. What are the “limited exclusive” rights granted to the licensees in this case?
Answer: Each has the right to copy and distribute DVDs of the film. Krupny could
distribute the films in the Russian language and Ruscico could distribute dubbed
or subtitled films in various other languages.
2. What is the difference between the rights granted to the plaintiff and those granted to
the defendants?
Answer: The language to be used in the films they distribute. Krupny can use only the
Russian language and Ruscico can use any non-Russian language.
3. Do you agree or disagree with the court’s interpretation of the license agreements?
Answer: The court interprets what the licenses provide; it cannot add other
language to the agreement.
4. What does this case tell you about negotiating and drafting a licensing agreement?
Answer: You must think how the language used in the licensing agreement will
apply in practice. Be sure you have covered every possible scenario—especially
true where the medium nay change—theatre films, streaming videos, use on
tablets, phones, computers, etc.
Dayan v. McDonald's Corp.
1. What social or cultural factors affected McDonald's marketing in Paris?
Answer: Parisian customs will inevitably affect the franchise agreement, which
required the Paris franchisee meet the quality, service and cleanliness standards
set by McDonald's USA. A successful franchise requires the franchisee to have
the ability or desire to meet those U.S. standards. This case also illustrates the
problems of franchising (licensing) over long distances and beyond the day-to-
day control of the franchisor. The problems here could have arisen as easily in
the case of a manufacturing business and the licensing of technology.
, 2. How could McDonald's have exercised greater control over its franchisee?
Answer: Better training in the U.S., more frequent inspection visits, and closer
supervision of the Parisian franchises.
3. What types of products and/or services are most suitable for foreign licensing?
Answer: Licensing generally is done as an alternative to foreign investment in
plant and equipment where the licensor is unwilling to take the risks of further
market penetration. Collecting royalties can be far safer than risking production
overseas. Collecting royalties based on sales can be far safer than risking
production overseas.
U.S. franchisors are getting a firm jump on the European market and have been
particularly successful worldwide in franchising fast food restaurants as well as a
host of service-related industries. An ability to adapt to local markets has proven
to be a crucial factor in the success or failure of U.S. franchisors abroad. As the
“Johannesburgers and Fries” article demonstrates, breaking into a foreign market
requires franchisors to examine carefully the might of homegrown brands and
local tastes.
Gas Plant Disaster In re Union Carbide Corporation at Bhopal
1. India gained independence from Great Britain in 1947. Like many developing
countries with agrarian economies, independent India embarked on a long period
of socialist and protectionist policies. What types of controls do you think
developing countries placed on foreign investors? How do you think this defined
the relationship between UCC and the Indian government prior to 1984?
Answer: This question calls for further student research and opinions. Students
may be directed to review restrictions upon foreign investment presently existing
in the developing world and contrast it to restrictions existing in 1984.
INTRODUCTION TO INTERNATIONAL BUSINESS
CASES IN THIS CHAPTER
Tarbert Trading Ltd. V. Cometals, Inc.
Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.
Dayan v. McDonald’s Corp.
In re Union Carbide Corporation Gas Plant Disaster at Bhopal
Transatlantic Financing Corp. v. United States
Gaskin v. Stumm Handel GMBH
Bernina Distributors v. Bernina Sewing Machine Co.
DIP SpA v. Commune di Bassano del Grappa
TEACHING SUMMARY
,The three basic forms of international business—trade, licensing of technology and
intellectual property and foreign direct investment—are methods of entering foreign
markets, but they are not mutually exclusive. They are not mutually exclusive and are often
combined. The savvy manager of an international business will seek to create joint ventures
and business opportunities to invest, or manufacture, trade via export and imports for
goods and services and license its products where appropriate and protectable. However,
international business opportunities are fraught with risk, selecting the appropriate
methods of entering a foreign market or country must be consider the culture, politics, and
economics of the host country. Through the study of international law, one can better
identify and manage potential legal risks.
CASE QUESTIONS AND ANSWERS
Tarbert Trading Ltd. V. Cometals, Inc.
1. Import/export transactions usually require much more documentation than
domestic transactions. These include detailed invoices, packing lists, shipping and
insurance documents, and specialized certificates. Here, a “certificate of origin”
was required by the government of Columbia before the goods could be imported.
Does it refer to the country from which the goods were shipped or where they were
grown or made? Why do you think Columbia required a “CO”? What is its
purpose?
Answer: The CO refers to the country where the goods were grown or made, not
from where it was shipped. It identifies for the buyer where the goods come from
so if goods from country A have a better reputation than those from country B, the
buyer will know which goods it is receiving.
2. Suppose that the beans had arrived in Columbia and were then stopped by
Columbian customs authorities because of a fraudulent certificate. What do you
think might have happened to the beans? What would the risk have been to
Cometals and Tarbert? What if the Columbian buyer had already paid for the
beans?
Answer: They would have been impounded; not allowed to enter the country.
Cometals and Tarbert likely would face fines and perhaps criminal punishment. If
the buyer had already paid for the beans, the buyer could sue in Columbian court
to recover damages as the buyer did not get what he bargained and paid for.
3. Evaluate and discuss the conduct of Cometals and Tarbert. Fraudulent
documentation is not uncommon in international trade, especially when parties do
, not have a history of business together. What are the lessons to be learned by all
parties?
Answer: Their conduct was illegal and unethical. You need to know the party you
are dealing with. If that is difficult or impossible, the risk is greater and may lead to
not doing business with them. Agreements protecting yourself are very important in
international business.
Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.
1. What are the “limited exclusive” rights granted to the licensees in this case?
Answer: Each has the right to copy and distribute DVDs of the film. Krupny could
distribute the films in the Russian language and Ruscico could distribute dubbed
or subtitled films in various other languages.
2. What is the difference between the rights granted to the plaintiff and those granted to
the defendants?
Answer: The language to be used in the films they distribute. Krupny can use only the
Russian language and Ruscico can use any non-Russian language.
3. Do you agree or disagree with the court’s interpretation of the license agreements?
Answer: The court interprets what the licenses provide; it cannot add other
language to the agreement.
4. What does this case tell you about negotiating and drafting a licensing agreement?
Answer: You must think how the language used in the licensing agreement will
apply in practice. Be sure you have covered every possible scenario—especially
true where the medium nay change—theatre films, streaming videos, use on
tablets, phones, computers, etc.
Dayan v. McDonald's Corp.
1. What social or cultural factors affected McDonald's marketing in Paris?
Answer: Parisian customs will inevitably affect the franchise agreement, which
required the Paris franchisee meet the quality, service and cleanliness standards
set by McDonald's USA. A successful franchise requires the franchisee to have
the ability or desire to meet those U.S. standards. This case also illustrates the
problems of franchising (licensing) over long distances and beyond the day-to-
day control of the franchisor. The problems here could have arisen as easily in
the case of a manufacturing business and the licensing of technology.
, 2. How could McDonald's have exercised greater control over its franchisee?
Answer: Better training in the U.S., more frequent inspection visits, and closer
supervision of the Parisian franchises.
3. What types of products and/or services are most suitable for foreign licensing?
Answer: Licensing generally is done as an alternative to foreign investment in
plant and equipment where the licensor is unwilling to take the risks of further
market penetration. Collecting royalties can be far safer than risking production
overseas. Collecting royalties based on sales can be far safer than risking
production overseas.
U.S. franchisors are getting a firm jump on the European market and have been
particularly successful worldwide in franchising fast food restaurants as well as a
host of service-related industries. An ability to adapt to local markets has proven
to be a crucial factor in the success or failure of U.S. franchisors abroad. As the
“Johannesburgers and Fries” article demonstrates, breaking into a foreign market
requires franchisors to examine carefully the might of homegrown brands and
local tastes.
Gas Plant Disaster In re Union Carbide Corporation at Bhopal
1. India gained independence from Great Britain in 1947. Like many developing
countries with agrarian economies, independent India embarked on a long period
of socialist and protectionist policies. What types of controls do you think
developing countries placed on foreign investors? How do you think this defined
the relationship between UCC and the Indian government prior to 1984?
Answer: This question calls for further student research and opinions. Students
may be directed to review restrictions upon foreign investment presently existing
in the developing world and contrast it to restrictions existing in 1984.
