Advising the Client Buying From or Selling to a Party in a Foreign Country
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Transcript of Advising the Client Buying From or Selling to a Party in a Foreign Country
Advising the Client Buying From or Selling to a Party in a Foreign Country
Greg E. MitchellAttorney at Law
Frost Brown Todd LLC250 West Main Street
2800 Lexington Financial CenterLexington, KY 40507
(859) [email protected]
Preliminary Practical Concerns in International Transactions
Assembling the Team Doing Your Homework Protecting Intellectual Property Rights Knowing Your Partner Long-term Relationship Appreciate Cultural Differences Implementation of Export Compliance Program
Types of International Sales Transactions
Direct Sales Agency Arrangements Distributor Arrangements Franchise Arrangements Joint Ventures
Direct Sales
What Contractual Terms Control? Are Standard Terms & Conditions
Adequate? When Does Risk of Loss Pass? How & When Do You Get Paid? What Law Governs the Transaction? What Language Governs the Contract? How are Disputes Resolved & Judgments Enforced? Who is the Ultimate Purchaser? Is an Export License Required? Is an Import License Required & Who must Obtain It?
International Commercial Terms: INCOTERMS 2000
Standard trade definitions published by International Chamber of Commerce
Establishes rights & obligations of parties to contract of sale for delivery of tangible goods
13 different terms that address different sales conditions
www.iccwbo.org/incoterms
INCOTERMS 2000
Ex Works (EXW) Free Carrier (FCA) Free On Board (FOB) Cost and Freight (CFR) Carriage and Insurance Paid (CIP) Delivered Duty Paid (DDP)
Methods of Payment
Open Account Letters of Credit Documentary Collections Consignment Sales
Dispute Resolution
Choice of Law Forum Selection Clause Judicial Forum vs. Arbitration Forum
International Chamber of Commerce London Court of International Arbitration American Arbitration Association
UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Mediation Clause
Direct Sales: Other Contractual Issues
Hierarchy of Documents Warranties & Waivers Security Interests Currency Selection Clause Governing Language Clause
Agency Arrangements
Description of Products Description of Territory Exclusivity & Competing Products Marketing Obligations Payment for Services Intellectual Property Rights Licensing & Registration Requirements Compliance with Foreign Corrupt Practices Act Term & Termination Rights
Distributor Arrangements
Price & Sales Terms Exclusivity & Direct Sales Distributor Obligations
Marketing Obligations Inventory Requirements Servicing Obligations Training Obligations
Intellectual Property Rights Buy-out Clause
Alternative Structures:
Franchise Arrangement Joint Venture
Trade & Customs Laws
World Trade Organization & General Agreement on Tariffs and Trade (GATT)
Tariffs & Customs Duties Free Trade Agreements & Preferential Duty
Programs
Tariffs & Customs Duties
Tax imposed at the border on imported goods Types of Tariffs & Duties:
Ad valorem tariff - % of imported good’s value Specific tariff – flat per unit charge Mixed tariff – blend of ad valorem & specific tariff Tariff quotas – variable tax based on amount of imported goods
Determination of Tariff: What is the classification of the imported good under Harmonized
Tariff Schedule - Harmonized Commodity Description and Code System administered by World Customs Organization
What is the value of the imported good – WTO Valuation Code What is the country of origin of the imported good
Country of Origin Markings
Free Trade Agreements & Preferential Duty Programs
Free Trade Agreements Agreements between member countries to reduce or
eliminate duties on goods Customs laws & rules of origin vary by
Free Trade Area NAFTA
Preferential Duty Programs Import of specifically designated goods
from designated countries with duty-free treatment
Caribbean Basin Initiative Andean Trade Preference Act African Growth and Opportunity Act
Headlines You Don’t Want to Read about Your Client
“Export Privileges Denied to Virginia Entities for Violations of Export Administration Regulations”
“Telecom Company Fined $2.5 Million for FCPA Violations”
Individual Sentenced to 60 Months in Jail for Export Control Violations”
Subsidiary of US Company fined for Antiboycott Violations”
Major Defense Contractor Fined $100 Million for Illegal Export of Defense Articles”
Department of Commerce, Bureau of Industry & Security Department of State, Directorate of Defense Trade Controls Department of Treasury, Office of Foreign Asset Control Food & Drug Administration Drug Enforcement Administration Environmental Protection Agency Patent & Trademark Office Nuclear Regulatory Commission
US Export Controls
OFAC Export Controls Department of Treasury, Office of Foreign Asset Control Scope:
Comprehensive trade sanction programs: Cuba, Iran, Syria, Sudan & Myanmar
Non-comprehensive trade sanction programs: Belarus, Democratic Republic of Congo, Iraq, Lebanon, Liberia, North Korea, Sierra Leone & Zimbabwe
Trade & investment embargos against entities and individuals designated for terrorism & narcotics trafficking
Separate set of regulations for each sanctioned country Export Licenses:
General license – particular export transaction for class of persons without a license
Specific license – authorization by OFAC to particular person for a particular export transaction
BIS Export Controls
Department of Commerce, Bureau of Industry & Security
Export Administration Regulations – regulate export, transfer & re-export of most commercial items
Regulates products with both commercial and military applications as well as commercial products with no obvious military applications
Three Categories under Export Administration Regs. No License Required License Exceptions License Required
ITAR Export Controls
Department of State, Directorate of Defense Trade Controls
Regulates export of US-origin defense articles, information and services covered by International Traffic in Arms Regulations
Register any export of components or technical data described on US Munitions List (22 CFR 121)
Export License required if no exception under 22 CFR 123.
Foreign Corrupt Practices Act
Federal criminal offense for any US person or entity or foreign person while in the US to make a corrupt payment to any foreign government official to obtain or retain business
Anti-bribery Provisions Accounting Provisions
Elements of FCPA Anti-Bribery Violation
An issuer, domestic concern or any foreign person in the United States who
Corruptly Pays or offers to pay anything of value To a foreign official, or to any person while knowing
that all or part of such payment will be offered or paid to a foreign official
For the purpose of influencing the official or to secure any improper advantage
In order to obtain or retain business.
Scope of Anti-bribery Provisions
Issuer – any company that list shares on a U.S. Exchange Domestic Concern – any business that has its principal place
of business in the U.S. or is organized under the laws of the U.S, its states, territories or possessions and any individuals who are citizens, nationals or residents of the U.S.
Officers, directors, employees, agents and stockholders of Issuers & Domestic Concerns
Foreign Persons – including officers, employees, agents and stockholders of foreign persons if they violated FCPA while in the U.S.
Affirmative Defenses under Foreign Corrupt Practices Act
Payment or gift was lawful under written laws and regulations of foreign official’s country
Bona Fide Expenditures – reasonable and bona fide expenditures (travel & lodging expenses) incurred by foreign official that are directly related to: Promotion, demonstration or explanation of
products or services Execution or performance of a contract
with a foreign government or agency Burden of proof is on Defendant
Penalties under Foreign Corrupt Practices Act
Entities subject to fines of up to $2,000,000 Officer, directors, employees, agents and
stockholders subject to fines of up to $100,000 and imprisonment of up to five years
Questions?
Greg E. MitchellAttorney at Law
(859) 244-7548 • Email: [email protected]
Frost Brown Todd LLC • 250 West Main Street • 2800 Lexington Financial Center • Lexington, KY 40507