Professional Documents
Culture Documents
TRUE/FALSE
2. As of 2007, the top 2 countries which traded goods with the United States were China and Japan.
4. Generally, consumers are not adversely affected by tariffs since tariffs affect wholesale prices, not
retail prices.
5. Ad valorem duty is based on the price actually paid for the good when sold for export to the United
States.
6. Although the United States government officially signed the GATT treaty, the United States Congress
has refused to ratify the agreement.
7. The European Union is the world’s most powerful regional association with 27 member nations as of
2010.
8. A contract involving the sale of goods from a Texas seller to a French wholesaler is necessarily
governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG).
9. If the United States sets a limit on the number of cars that can be imported, this action is a form of
tariff.
10. It is a violation of United States law for a domestic company to pay money to a foreign governmental
official in order to obtain favorable influence of the foreign government.
12. Trein, Inc., a U.S. company entered into an exclusive distributorship agreement with Posty, Inc., a
Zambian company. This means that Trein will only use Posty to distribute products in Zambia.
13. Under European Union law, any agreement, contract, or discussion that distorts competition within
European Union countries is illegal.
14. International comity holds that the courts of one nation lack the jurisdiction to hear suits against
foreign governments.
15. The two principal requirements of the Foreign Corrupt Practices Act involve bribes and record
keeping.
MULTIPLE CHOICE
2. Benton Corporation imports European made goods from Fouchard SA into the United States. Who is
required to pay the duty on the imported goods?
a. The importer, Benton Corporation.
b. The exporter of the goods, Fouchard SA.
c. Each party pays one-half of the duty.
d. No one as the US and the EU signed a free trade agreement.
ANS: A PTS: 1 MSC: AACSB Analytic
3. The United States and Argentina have signed the Convention on Contracts for the International Sale of
Goods (CISG). Oxtron, Inc., a U.S. company, and Leer, an Argentinean company, have entered into a
contract under which Oxtron is to ship medical devices to Leer. The contract does not include a choice
of law provision. The contract will be governed by:
a. the CISG.
b. the UCC.
c. the domestic contract law of Argentina.
d. the domestic contract law of the United States.
ANS: A PTS: 1 MSC: AACSB Reflective Thinking
4. The United States and Singapore have signed the Convention on Contracts for the International Sale of
Goods (CISG). Notren, Inc., a U.S. company, and SWT, a Singapore company, have entered into a
contract under which SWT is to ship party supplies to Notren. One of the terms of the contract states,
"The validity and performance of this contract will be governed by the Uniform Commercial Code
(UCC) of the state of New York, not the Convention of the International Sale of Goods (CISG)." The
contract will be governed by the:
a. CISG.
b. Uniform Commercial Code of New York.
c. common law.
d. World Trade Law.
ANS: B PTS: 1 MSC: AACSB Reflective Thinking
5. Oxtron, Inc., a U.S. company, and Leer, an Argentinean company, orally agreed to a contract under
which Oxtron is to ship medical devices to Leer. The contract is governed by the CISG. Which
statement is correct?
a. The contract is not enforceable because it is oral.
b. Whether the contract is enforceable without a written agreement depends on the value of
the medical devices.
c. Whether the contract is enforceable without a written agreement depends on whether the
medical devices are a necessity.
d. The contract is enforceable without a written agreement.
ANS: D PTS: 1 MSC: AACSB Reflective Thinking
6. In Avenues In Leather, Inc. v. United States, the federal appellate court ruled that the Calcu-Folio was,
for tariff classification purposes, a binder and not a briefcase. The classification of goods is significant
because:
a. the fair value will vary depending on the classification.
b. the tariffs will vary depending on the classification.
c. the subsidy will vary depending on the classification.
d. the dumping duty will vary depending on the classification.
ANS: B PTS: 1 MSC: AACSB Reflective Thinking
8. Lindell, Inc., a U.S. company, and Halden, AG, a German company, entered into a contract under
which Halden is to ship party supplies to Lindell. One of the terms of the contract states, "Any disputes
that arise under this contract will be resolved in the courts of Germany." This contract term is:
a. a forum selection clause.
b. a choice of law clause.
c. an arbitration clause.
d. not enforceable.
ANS: A PTS: 1 MSC: AACSB Reflective Thinking
11. Zebra Toy Company, located in Chicago, sells $500,000 worth of toys to a London, England,
wholesaler. This contract could be governed by:
a. Illinois's Uniform Commercial Code.
b. English law.
c. the CISG.
d. All the above are correct.
ANS: D PTS: 1 MSC: AACSB Reflective Thinking
13. The primary goal of the North American Free Trade Agreement (NAFTA) is to:
a. allow Canada, the United States, and Mexico to compete as a common economic entity
against other countries in the world.
b. allow for the free and unrestricted movement of people from one country to another to
improve the labor market of all three counties.
c. eliminate almost all trade barriers between the three nations.
d. All the above are correct.
ANS: C PTS: 1 MSC: AACSB Analytic
14. What is a major difference between a United States lawsuit versus a French lawsuit?
a. In a French civil lawsuit, there is no right to a jury trial.
b. Unlike the US, the French legal system engages in extensive discovery procedures.
c. In a French lawsuit, the rules of evidence are less flexible.
d. All of the above are correct.
ANS: A PTS: 1 MSC: AACSB Analytic
16. Hardhat Machine Company sold goods to Irish Eyes Company of Northern Ireland. Big Bank issued a
letter of credit on behalf of Irish Eyes and the letter was given to Hardhat. The "account party" is:
a. Irish Eyes.
b. Hardhat Machine Company.
c. Big Bank.
d. None of the above.
ANS: A PTS: 1 MSC: AACSB Reflective Thinking
17. Hardhat Machine Company sold goods to Irish Eyes Company of Northern Ireland. Big Bank issued a
letter of credit on behalf of Irish Eyes and the letter was given to Hardhat. The documents required by
the letter of credit are presented to the bank for payment while the goods are still in transit. Is Hardhat
entitled to be paid?
a. No, payment is not due until the goods are delivered.
b. No, payment is not due until 30 days after delivery.
c. No, payment is not due until the buyer has had a reasonable time to inspect the goods.
d. Yes, the letter of credit is a promise by the bank to pay when certain documents are
presented.
ANS: D PTS: 1 MSC: AACSB Reflective Thinking
18. As of 2007 figures, the country trading the most goods with the United States was:
a. Canada.
b. China.
c. Japan.
d. Mexico.
ANS: A PTS: 1 MSC: AACSB Analytic
19. Larson Cashmere Company invests a large sum of money in retail stores located in a foreign country.
Larson intends to bring its foreign earnings back home to the United States. This practice is known as:
a. repatriation of profits.
b. inflow profit streaming.
c. expropriation.
d. return of earnings.
ANS: A PTS: 1 MSC: AACSB Reflective Thinking
20. The Austrian government has opened a tourist information center in New York City. If a dispute arises
over the lease of the storefront, may the landlord sue the Austrian government in the United States
courts?
a. Yes, because the Austrian government was engaged in a commercial activity.
b. No, because of the Foreign Sovereign Immunities Act which forbids U.S. courts from
hearing any cases involving foreign governments.
c. Yes, if the Austrian government signed a written waiver giving up its immunity.
d. Yes, as the Austrian government is a signatory on the CISG.
ANS: A PTS: 1 MSC: AACSB Reflective Thinking
21. Jones Oil, a small United States oil company, started doing business in a foreign country. The foreign
country later decided to take over the oil industry, including Jones Oil's operation. The foreign country
paid Jones adequate compensation in United States dollars. The foreign country’s action is called:
a. confiscation.
b. repatriation.
c. expropriation.
d. retribution.
ANS: C PTS: 1 MSC: AACSB Reflective Thinking
22. Kjell is the vice president of international sales for Oxtren, Inc, a U.S. company. To secure a
multimillion dollar contract for his company, Kjell paid a Mongolian governmental officer $10,000.
Kjell:
a. has violated the Foreign Corrupt Practices Act.
b. has not violated the Foreign Corrupt Practice Act because the payment was a grease
payment.
c. has not violated the Foreign Corrupt Practices Act because the government official was
from Mongolia, not the United States.
d. has not done anything illegal because Congress has not ratified the Convention of
Combatting Bribery of Foreign Public Officials in International Transactions.
ANS: A PTS: 1 MSC: AACSB Reflective Thinking | AACSB Ethics
23. The Marcel Company is opening an office in Mexico. The cost to obtain electrical service is $500, but
the clerk suggests that service could be started faster if an additional $50 is paid, which the clerk will
keep. If the Marcel official pays the additional $50:
a. he will have violated the Foreign Corrupt Practices Act.
b. he will not have violated the Foreign Corrupt Practices Act because this would be
considered a “grease” or facilitating payment, which is legal.
c. he will be guilty of violating the Foreign Corrupt Practices Act only if the payment was
illegal under the written law of Mexico.
d. he will be guilty of violating both the Foreign Corrupt Practices Act and the Convention of
Combatting Bribery of Foreign Public Officials in International Business Transactions.
ANS: B PTS: 1 MSC: AACSB Reflective Thinking | AACSB Ethics
24. Archer Co. has decided it wants to expand into international business, but it is concerned about
expropriation of its property or losses caused by political unrest. Archer is considering purchasing
insurance through the Overseas Private Investment Corporation (OPIC). OPIC:
a. provides insurance, but the cost is relatively high.
b. provides insurance, but the list of countries in which it is willing to provide such
protection is fairly short.
c. has had remarkable success at no cost to the U.S. government.
d. insures against expropriation, but not against losses stemming from political violence.
ANS: C PTS: 1 MSC: AACSB Reflective Thinking
ESSAY
1. Explain what the General Agreement on Tariffs and Trade (GATT) is and give pro and con arguments
concerning this agreement.
ANS:
GATT refers to the General Agreement on Tariffs and Trade. The United States and 125 other
countries formally signed GATT in 1994. The general purpose of GATT is to eliminate trade barriers
between signatory countries and to bolster commerce.
Proponents of GATT claim that the United States will be a primary beneficiary since this country has
traditionally assessed lower tariffs than other countries. Accordingly, the U.S. will be able to compete
on a more level footing with foreign competitors. The result will be a great increase in world trade and
greater income for this country.
Opponents of GATT argue that this country will lose millions of jobs since labor-intensive goods will
be made via exploited labor in foreign countries. Given the low cost of production, American
companies will not be able to compete. Additionally, opponents claim that domestic job losses will be
in low-end employment, so those put out of work are the ones least able to find alternative
employment.
ANS:
The WTO was established by GATT. It has the authority to resolve trade disputes between signatory
countries. The WTO addresses primarily tariff violations or nontariff barriers. This international
"court" may order compliance from any nation violating GATT and may penalize countries by
imposing trade sanctions.
3. Laney, Inc. is interested in expanding its business overseas by licensing its intellectual property rights
to a German company. Discuss the precautions to take and risks to be aware of before making the
decision to enter into a licensing agreement.
ANS:
Laney should do this only if it is convinced the manufacturer will maintain sufficiently high standards.
Even so, there are two major issues. First, Laney must ensure that all of its patents and trademarks are
protected. Germany will honor both forms of American intellectual property rights, but not all
countries will. No company should establish a licensing arrangement without investigating. The WTO
should increase respect worldwide for the intellectual property rights created by all nations. Second, if
Laney grants an exclusive license to any foreign manufacturer, it could encounter antitrust problems. It
must analyze both EU and American antitrust law before taking the risk.
ANS:
The CISG applies to any contract for the sale of goods between two parties, from different countries,
each of which is a signatory. France and the US are both signatories. Under the UCC, a contract for the
sale of goods valued at over $500 must be evidenced in writing; under the CISG, an oral agreement is
enforceable despite the dollar amount involved. The UCC states an offer is irrevocable if it is in
writing and states the offer will be held open for a fixed period of time (this is called a UCC firm
offer); the CISG makes some types of offers irrevocable even if executed orally. The UCC does not
follow the mirror image rule relative to the acceptance of offers; the CISG recognizes the mirror image
rule. The UCC generally only permits money damages for a successful plaintiff; the CISG allows for
specific performance under a variety of situations.
5. MicroWare is a U.S. company based in Utah. It is negotiating to sell $4 million worth of computer
goods to a French company, Baranger. MicroWare’s attorney suggests that payment be by a letter of
credit. What is a letter of credit and why does MicroWare’s attorney recommend payment by letter of
credit?
ANS:
A letter of credit is a commercial device used to grant greater assurance of payment in international
transactions. The purpose for obtaining a letter of credit is to assure payment for the goods. Baranger is
the "account party" and MicroWare is the "beneficiary" of the letter. Baranger will instruct its bank to
issue a letter of credit to MicroWare. The letter of credit is a promise by Baranger’s bank to pay
MicroWare upon receipt of certain documents. If Baranger’s bank forwards the letter of credit to
MicroWare’s bank, the latter can confirm the letter of credit, thus providing MicroWare with even
greater assurance of payment.
6. Identify the term for and discuss the legality of a government’s taking of property owned by foreign
investors. Discuss what action a company might take if it wants to do business abroad but is concerned
about losing its property to a foreign government.
ANS:
A government’s taking of property owned by foreign investors is called “expropriation.” This practice
is common and is legal if there is adequate compensation. The U.S. government acknowledges that
expropriation of American interests is legal if the host government pays the owners promptly and fully
in dollars. If the compensation is long delayed, inadequate, or made in a local currency that is hard to
exchange, the taking is considered to be confiscation. The courts of almost all nations agree that
confiscation is illegal. A company wanting to do business abroad but concerned about expropriation
can purchase insurance. The Overseas Private Investment Corporation (OPIC) insures U.S. investors
against overseas losses resulting from political violence or expropriation. The OPIC insurance is
available to investors at relatively low rates and covers investments in almost any country.