National American University

BUSINESS L 3100

Chapter 7-THE LEGAL ENVIRONMENT OF INTERNATIONAL TRADE

TRUE/FALSE

1)When an international sale is made, the parties often set forth in their contract which country's law will govern a dispute.

 

                                           

 

2. Parties to international ventures often agree to arbitrate their disputes in neutral countries.

 

                                           

 

3. Law is the result of the desire of the lawmaker to achieve certain goals.

 

                                           

 

4. A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur.

 

                                           

 

5. The U.S. dollar is considered the international currency.

 

                                           

 

6. Since 1947 and the end of the World War II era, the goal of the General Agreement on Tariffs and Trade (GATT) has been to restrict world trade.

 

                                           

 

7. Under the General Agreement on Tariffs and Trade (GATT), the principle of trade without discrimina- tion is embodied in the most favored nation clause.

 

                                           

 

8. The World Trade Organization (WTO) provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war.

 

                                           

 

9. The United Nations Conventions on Contracts for the International Sale of Goods (CISG) sets forth uniform rules to govern international sales contracts.

 

                                           

 

10. The interests of the less-developed nations of the world are represented by the United Nations Confer- ence on Trade and Development (UNCTAD).

 

                                           

11. The goal of the North American Free Trade Agreement (NAFTA) is to eliminate all tariffs between the United States and Europe.

 

                                           

 

12. A country can borrow money from other International Monetary Fund (IMF) members or from the IMF by means of special drawing rights (SDRs) sufficient to permit that country to maintain the stabil- ity of its currency’s relationship to other world currencies.

 

                                           

 

13. The International Monetary Fund (IMF) was formed to shorten the duration and lessen the disequilib- rium in the international balance of payments of its members.

 

                                           

 

14. The Export-Import Bank (EX-IM Bank) is an international agency.

 

                                           

 

 

15. One of the main goals of the Organization of Petroleum Exporting Countries (OPEC) was to reduce taxes from crude oil production.

 

                                           

 

16. A direct sale by an American firm to a customer abroad, with terms of payment commonly based on an irrevocable letter of credit, is an import sale.

 

                                           

 

17. The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's coun- try.

 

                                           

 

18. Franchising is a form of licensing that now is very common in international business.

 

                                           

 

19. Licensing involves the transfer of title of goods to a distributor who bears the financial and commercial risks for the subsequent sale of the goods.

 

                                           

 

20. A societé anonyme is the European counterpart of a U.S. corporation.

 

                                           

 

21. United States antitrust laws can protect United States exports.

 

                                           

22. The jurisdictional rule of reason addresses the problems that arise when a foreign country has a signifi- cant interest in regulating conduct taking place within the United States.

 

                                           

 

23. Under the act-of-state doctrine, the courts of one country will not sit in judgment of the acts of the gov- ernment of another country conducted within its own territory.

 

                                           

 

24. Blocking laws prohibit the disclosure, copying, inspection, or removal of documents located in the en- acting country in compliance with orders from foreign authorities.

 

                                           

 

25. The Securities and Exchange Commission (SEC) is not limited to litigation when a securities law en- forcement investigation runs into secrecy or blocking laws.

 

                                           

 

26. A common barrier to the free movement of goods across borders is the tariff barrier.

 

                                           

 

27. The use of import quotas represents the most common form of tariff barrier.

 

                                           

 

28. The term dumping refers to the sale of damaged goods in a foreign market to cut the losses that would otherwise be caused by the damage.

 

                                           

 

29. The Overseas Private Investment Corporation (OPIC) offers asset protection insurance against risk of loss to plant and equipment, as well as loss of deposits in overseas bank accounts, to companies that qualify on the basis of the involvement of a “substantial U.S. interest.”

 

                                           

 

30. The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials.

 

                                           

 

MULTIPLE CHOICE

 

1. Which is a correct statement about arbitration of contractual disputes regarding international trade?
   1. It is done in court.
   2. There is extensive judicial review of the decision.
   3. Parties frequently arbitrate in neutral countries.
   4. It is not available in disputes of more than $1 million.  

2. The General Agreement on Tariffs and Trade (GATT):
   1. is a multilateral treaty
   2. is subscribed to by the United States
   3. has as its goal the liberalization of world trade
   4. all of the above

                                           

 

3. Which of the following statements is true regarding the World Trade Organization (WTO)?
   1. The WTO has been in place since 1947.
   2. The WTO coordinates its activities with GATT.
   3. It provides a dispute settlement body to promote the resolution of trade disputes.
   4. It has the ability to impose criminal penalties.
4. The provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG) have been strongly influenced by:
   1. the GATT's most-favored nation clause.
   2. the European Economic Community's Treaty of Rome.
   3. the Uniform Commercial Code.
   4. the success of the Organization of Petroleum Exporting Companies.   
5. The United Nations Conference on Trade and Development (UNCTAD):
   1. represents the interests of less developed countries.
   2. arbitrates trade disputes between countries.
   3. furnishes letters of credit to expedite trade.
   4. all of the above.

                                           

 

6. Which of the following does not describe the European Union (EU)?
   1. It was formerly known as the European Economic Community.
   2. It had ten members sign on in 2004.
   3. It eliminated internal barriers to the free movement of goods, persons, services, and capital between member countries.
   4. It is administered solely by the heads of state of the member countries.          
7. NAFTA seeks to eliminate tariffs among which countries?
   1. all members of the United Nations
   2. United States, Canada, and Mexico
   3. United States and Japan
   4. members of the common market ANS:        B    
8. The main purpose of the International Monetary Fund (IMF) is to:
   1. provide easy access to money for multinational corporations.
   2. facilitate the expansion and balanced growth of international trade.
   3. create a model simplified lending system.
   4. facilitate currency exchanges.

                                           

 

9. The Ex-IM Bank:
   1. helps U.S. manufacturers export goods by provides loan guarantees.
   2. receives funding from the U.S. Treasury to help sustain its operations.
   3. has a financing cap of $100 billion.
   4. all of the above.

                                           

 

10. A direct sale to customers in a foreign country is a(n):
    1. foreign distributorship.
    2. agency arrangement.
    3. licensed sale.
    4. export sale.

                                           

 

11. One reason the U.S. controls the export of goods and technology is:
    1. for national security reason.
    2. foreign policy.
    3. short supply of domestic goods.
    4. All of the above are reasons the U.S. controls the export of goods and techonolgy.     
12. The transfer of technology rights in a product to allow another firm in a foreign country to produce a product in return for royalties or other specified payments is called:
    1. exporting.
    2. licensing.
    3. agency representation.
    4. subsidiary sales.

                                           

 

13. Which of the following allows a domestic firm to maintain the greatest control over its foreign opera- tions?
    1. wholly-owned subsidiaries
    2. licensing
    3. foreign distributorships
    4. agency arrangements

                                           

 

14. When a U.S. trademark holder licenses a foreign business use of its trademark overseas and a third party imports these goods into the United States to compete against the U.S. manufacturer's goods, the foreign-made goods are called                                         goods.
    1. “gray market”
    2. counterfeit.
    3. specially-licensed.
    4. dumped goods.

                                           

15. U.S. courts will assume jurisdiction and apply antitrust laws to conduct business outside the United States if the activities of the business firms outside the United States have a direct, substantial, and foreseeable impact on U.S. commerce. This is based on what principal?
    1. the “jurisdictional rule of reason”
    2. the “act–of–state doctrine
    3. the “effects” doctrine
    4. comity

                                           

 

16. Three defenses are commonly raised to the extraterritorial application of U.S. antitrust laws. They are:
    1. act–of-state, sovereign compliance, and sovereign immunity doctrines.
    2. jurisdictional rule of reason, effects doctrine, and comity.
    3. foreign legislation, sovereign compliance, and comity.
    4. foreign antitrust laws, sovereign immunity doctrine, and International Monetary Fund ap- plications.

                                           

 

17. The Alexo Corporation has been charged in a United States court with violation of American antitrust laws in its foreign dealings. The firm has raised the defense that its actions were compelled by the gov- ernment of its host country. Alexo based its defense on the                                           doctrine.
    1. act-of-state
    2. sovereign compliance
    3. sovereign immunity
    4. Treaty of Rome

                                           

 

18. Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it en- gages in illegal commercial conduct?
    1. act-of-state
    2. sovereign compliance
    3. Timberlane
    4. sovereign immunity

                                           

 

19. Which of the following is NOT a nontariff barrier?
    1. government subsidies
    2. import quotas
    3. complex custom procedures
    4. an import or export duty or tax placed on goods as they move in or out of a country   
20. In antidumping cases:
    1. The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV).
    2. The International Trade Commission determines if there is an injury to a U.S. industry as a result of such sales.
    3. Remedial action will be taken only if findings of both LTFV sales and injury are present.
    4. All of the above

                                           

21. Companies with concerns over the possibility of expropriation could lessen the harm or the likelihood of this occurring by:
    1. fully investigating a host government's stability.
    2. establishing treaty commitments.
    3. obtaining insurance.
    4. all of the above.

                                           

 

22. When a foreign government takes over an American business that is being conducted in the foreign country, this is called:
    1. expropriation.
    2. dollar credits.
    3. suspension agreement.
    4. antidumping.

                                           

 

23. Legal restrictions of U.S. firms doing business abroad in regard to payments made to foreign officials for obtaining business are set forth in the:
    1. International Corruption Prohibition Act.
    2. Global Anti-bribery Control Act.
    3. Foreign Corrupt Practices Act.
    4. International Graft Prohibition Act.

                                           

 

24. Which of the following actions is not prohibited by The Foreign Corrupt Practices Act?
    1. offers of payments to government officials to influence a decision on behalf of the firm making the payment
    2. payments to government officials to influence a decision on behalf of the firm making the payment
    3. payments to low-level officials for expediting the performance of routine government ser- vices
    4. all of the above actions are prohibited by The Foreign Corrupt Practices Act     

 

 

CASE

 

1. You plan to enter the export market with a new product that you have just developed. You feel that the product has great promise, but you are confused over whether you are required to obtain an export li- cense. Further, your brother-in-law says that he knows someone in the Japanese government who could greatly assist you in your endeavors for a very modest fee. Discuss this situation.