2/13/2016 DealingwithInternationalTradeLawsandRegulationsNewJerseyBusinessMagazine

http://njbmagazine.com/monthly_articles/dealinginternationaltradelawsregulations/ 2/8

Exportingcanleadtoanexpandingconsumerbasebybreakingintountappedmarkets,whileimportingcanreducesupplycostsaswellasallowcompaniestosourceproductsthatmightnotbeavailableintheUnitedStates.(GeoffreyHobbsforHiltonHeadImages)

Takingpartininternationaltradecanbeasubstantialwayforanykindofbusinessestoimproveperformanceandrevenues.Exportingcanleadtoanexpandingconsumerbasebybreakingintountappedmarkets,whileimportingcanreducesupplycostsaswellasallowcompaniestosourceproductsthatmightnotbeavailableintheUnitedStates.However,whendealingwithforeignentities,itisessentialforbusinesses,nomatterwhatthesizeorscope,toknowlawsandregulations,andtohaveasoundbusinessplan,inordertoavoidrunningtheriskoffacingstiffpenaltiesand/orbeingswindledoutofcashorgoodsifdisputesarise.

AccordingtoNevenaSimidjiyska,anassociatewhodealswithinternationaltradelawatthefullservicelawfirmFoxRothschild,oneofthebiggestissuesthefirmcomesacrossisthatmanyentitiesarenotawarethatthetransactionstheyconductfallunderimportingandexporting,andthereforefallunderinternationaltradelaws.

Alotofthetime,weseecompaniesparticularlythesmalltomediumsizedonestakepartinimportingandexportingwithoutevenrealizingit,shesays.Itcanturnouttobeabigproblem,anditsnotthattheydoitonpurpose.Businessesjustarentawareofthelawsandregulationsandassumethatwhattheyaredoingisfine.Butthisisnotthecase.

Forexample,SimidjiyskasaysthatacompanycanassumeaparticularproductitisimportingorexportingdoesnotfallunderacategorythatisregulatedbytheUSgovernment,or,justbecausetheUShasfreetradeagreementswith20countriesaroundtheworld,thatitcanimportandexporttothosecountrieswithoutmeetingcertainqualificationsorpayingrequiredduties.

TheUSgovernmenthasalonglistofwhatisregulatedontheimportandexportsidethatincludeschemicalsandmilitaryitems,aswellasalistofcountries,individualsandentitiesthatUScompaniesareprohibiteddoingbusinesswith,shesays.Ourgoalistoprovideourclientswithacompliancemanualsotheyknowwhattodoandarefullytrainedinthisarea.Astheirbusinessgrows,theyknowhowtohandlevariousissueswithoutviolatingthelaw.And,iftheyareexportingandimportingproducts,we

2/13/2016 DealingwithInternationalTradeLawsandRegulationsNewJerseyBusinessMagazine

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handlevariousissueswithoutviolatingthelaw.And,iftheyareexportingandimportingproducts,wemakethedeterminationwhetheralicenseisrequiredandobtainoneforthem.

Inregardstoexporting,Simidjiyskasaysthefirststepistofindoutifacompanyisactuallyexporting,asthereisanextremelybroaddefinitionofwhatanexportcanbe.

IfyouhaveaUScompanythatneveractuallyshipsproductsoutsideofthecountry,itcanstillbeconductingforeignbusiness,andagain,itmaynotevenrealizeitandassumeitsnot,shesays.LetssayacompanyhasanemployeefromIndia,andheorshecomestovisitfortrainingandisnotaUScitizenorresident.WhenthatindividualreturnstoIndia,thecompanyhastechnicallyexportedaproduct,orinthiscase,technicaldatatoIndia.And,ifthatproductortechnicaldataneedsanexportlicenseandthecompanyhasnotreceivedthelicense,thenitisinviolationofexportlaws.Itcouldevenbesomethingassimpleasemailingtechnicaldataabroadtoaforeignsubsidiary.EvensavingtechnicaldatatoaserveriftheserverisoutsideoftheUScanbeconsideredanexportaswell.

DisputeResolutionMechanismandTradeChallenges

Intermsofinitiatingbusinesswithaforeignentity,WendyKennedyVenoit,apartneratMcElroy,Deutsch,Mulvaney&Carpenter(MDMC),LLP,suggeststhatabusinessshouldincludecertaindisputeresolutionmechanismswhendrawingupacontracttoprotectitselfifaproblemarises.

Venoit,whodealswithdisputeresolutionforclientsintheconstructionindustry,says,Whencreatingacontract,purchaseorderorwhateveritmaybe,abusinessisprobablygoingtowanttomakesureitincludesadisputeresolutionprovisionthatcallsforinternationalarbitration,becausethatbasicallyallowspartiesinvolvedininternationaltradetoresolvedisputeswithouttheformalitiesoftheirrespectivecountryslegalsystem.Abusinesswantstobeverycarefulwhennegotiatingcontractsanditshouldwanttohaveaneutralvenueinsettlingdisputes.EndingupinthecourtsinChinaunderitslawsisnotidealandotherproblemscouldstemfromit,likenotbeingabletocollectmoneythatisowed,forexample.

MaryVasilescu,partner,taxservicesataccountingfirmWissandCompany,saysthenumberofchallengesacompanycanfacewhenconductingbusinesswithaforeignentitycanbestaggeringandthereisnoonebeallandendallanswer.

Conductingbusinesswithforeigncompaniescanbeverytricky,shesays.Therearecommunicationbarriersandculturaldifferences.TherearetaxeswhichwedonthaveintheUS,likewithholdingtaxes,valueaddedtaxes(VATs)andsometimesothertypesoflocaltaxes.Thereisalwaysalackofinformationaboutcertainbusinesspartners.Therearedifferentchallengesthatfacemanufacturers,than,say,adistributor.Acompanyalsohastothinkaboutcurrencyfluctuation.Therearecountrieswherethebusinessmaybegood,butitmaybedifficulttogetcashoutofthecountry,etc.Thelistgoeson,andthereisalotofplanninginvolvedonceacompanygoesoutsideofitscomfortzoneandoutsideoftheUS.

AGrowingPhenomenon

MDMCsVenoitsaysthenumberofcompaniesintheUSinvolvedininternationaltradeissubstantialandthatitwillonlyincreaseastimeprogresses.

SomuchworkisbeingdonethatcrossesUSbordersitishardtoimagineacompanythatdoesnthavesomeelementofinternationaltradeinitsbusiness,especiallyhereinNewJersey,becausewearesoclosetotheseaports,majorairportsandNewYorkCity,shesays.Thismakesiteasiertoimportforeigngoodsandservices.And,forthecompaniesthatdontworkwithforeignpartners,Iseethatchangingverysoon,inordertoobtainandmaintainacompetitiveadvantage.

2/13/2016 DealingwithInternationalTradeLawsandRegulationsNewJerseyBusinessMagazine

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FoxRothchildsSimidjiyskapointsoutthatitisessentialforacompanytoperformitsduediligenceifitisunsure,orhastheslightestnotionitmaybeconductingbusinessoutsideoftheUS.

Theseareonlysomeoftheissuesacompanycanface,butifitfeelsithasanysortofinternationalaspecttoitsbusinessanyinternationalemployeesorisasubsidiaryofaforeigncompanyorviceversaitshouldreachoutfortheproperassistancetodetermineifwhatitisdoingfallsunderinternationaltradelaws,sheconcludes.Itisbettertobesafethansorry.Thetradelawsaroundtheworldvarysomuchandarealwayschanging,particularlyhereintheUS.Additionally,thepenaltiesareveryseriousandtendtobeincreasingeveryyear.So,companieshavetomakesuretotakethenecessarystepsinordertobecomeandremaincompliantandtogainthatcompetitiveedgeintheinternationallandscape.

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