Preview Extract
CHAPTER 8-INTERNATIONAL LAW
TRUE/FALSE
1. Multinational enterprises are companies doing business in several countries
simultaneously.
Answer: True
2. The United States is the world’s largest exporter of agricultural products.
Answer: True
3. Tariffs are generally higher in developing countries than in developed countries.
Answer: True
4. Generally, consumers are not adversely affected by tariffs since tariffs affect wholesale
prices, not retail prices.
Answer: False
5. Ad valorem duty is based on the fair market value of the imported good as of the date it
reaches the United States, not the price actually paid for the good when sold for export to the
United States.
Answer: False
6. Although the United States government officially signed the GATT treaty, the United
States Congress has refused to ratify the agreement.
Answer: False
7. The European Union is one of the world’s most powerful regional associations with 42
member nations as of 2011.
Answer: False
8. A contract involving the sale of goods from a Texas seller to a French wholesaler must
always use the United Nations Convention on Contracts for the International Sale of Goods
(CISG).
Answer: False
9. If the United States sets a limit on the number of cars that can be imported, this action is a
form of tariff.
Answer: False
10. It is not a violation of United States law for a domestic company to pay money to a
foreign governmental official in order to obtain a contract with the foreign government if this
type of “commission” is commonly paid in that foreign country.
Answer: False
11. The Presidents of Oxtron, Inc., a U.S. company, and Dunka, Inc. a German company, met
in Munich, Germany. Oxtron and Dunka are direct competitors in over-the-counter
medicines. The presidents agree to fix prices on their major products. This agreement may
violate U.S. antitrust law even though the agreement was made in Germany.
Answer: True
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.
Answer: True
13. Under European Union law, any agreement, contract, or discussion that distorts
competition within European Union countries is illegal.
Answer: True
14. International comity holds that the courts of one nation lack the jurisdiction to hear suits
against foreign governments.
Answer: False
15. The two principal requirements of the Foreign Corrupt Practices Act involve bribes and
grease payments.
Answer: False
MULTIPLE CHOICE
1. For manufactured goods, the United States and European Union impose an average tariff
of ________ percent, and major trading partners around the world impose tariffs of ________
percent for identical items.
a. 10; 5
b. less than 4; 10 to 30
c. 25; 39 to 70
d. 10 to 30; less than 4
Answer: B
2. Axle Corporation imports goods into the United States. Who is required to pay the duty on
the imported goods?
a. The importer, Axle Corporation.
b. The World Trade Organization.
c. Each party pays one-half the duty.
d. The exporter of the goods.
Answer: A
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.
Answer: A
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.
Answer: B
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.
Answer: D
6. In Marubeni America Corp. v. United States, the federal appellate court ruled that the
Nissan Pathfinder was, for tariff classification purposes a motor vehicle for the transport of
passengers. The classification of goods is significant because:
a. the tariffs will vary depending on the classification.
b. the fair value 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.
Answer: A
7. If a foreign company "dumps" goods on the United States market:
a. the goods will be considered illegal goods and not be allowed to be sold in the United
States.
b. the United States will issue trade sanctions against the country that allowed the dumping.
c. a "dumping duty" will be imposed on the dumped goods if the Commerce Department
determines the goods are being sold at less than fair value and that this harms an American
industry.
d. All the above are correct.
Answer: C
8. Notren, Inc., a U.S. company, and SWT, a Singapore company, entered into a contract
under which SWT is to ship party supplies to Notren. One of the terms of the contract states,
"Any disputes that arise under this contract will be resolved in the courts of Singapore." This
contract term is a:
a. letter of credit.
b. choice of language clause.
c. choice of forum clause.
d. draft clause.
Answer: C
9. What is a major argument against the GATT Treaty?
a. The United States will have to compete against countries with unlimited pools of exploited
labor.
b. The United States will lose millions of jobs involving low-end employment and these types
of workers are least capable of finding other employment.
c. Both a and b above are major arguments against GATT.
d. Neither a nor b above is a major argument against GATT.
Answer: C
10. The European Union has adopted a currency known as the:
a. Yuri.
b. Common Union.
c. Yen.
d. Euro.
Answer: D
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.
Answer: D
12. With respect to United States patents and copyrights, GATT:
a. expressly excludes controversies involving patent and copyright violations.
b. will allow the United States to assess tariffs against a country that refuses to honor U.S.
copyrights or patents.
c. imposes sanctions against any country refusing to honor another signatory country's patents
or copyrights.
d. requires retribution to be paid to the United States by any country ignoring U.S. patents or
copyrights.
Answer: B
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.
Answer: C
14. What is a major difference between a United States lawsuit versus a French lawsuit?
a. In a French civil lawsuit, there is usually no right to a jury trial.
b. The French legal system does not engage in extensive discovery procedures commonly
used in the United States.
c. In a French lawsuit, the rules of evidence are more flexible.
d. All of the above are correct.
Answer: D
15. The primary antitrust law in the United States is the:
a. Wagner Act.
b. Sherman Act.
c. SEC Act of 1933.
d. Robinson-Patman Act.
Answer: B
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.
Answer: A
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.
Answer: D
18. When considering both imports and exports, the country trading the most goods with the
United States is:
a. Canada.
b. China.
c. Japan.
d. Mexico.
Answer: A
19. Zebra Toy Company invests a large sum of money in retail stores located in a foreign
country. Zebra 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. comity.
Answer: A
20. The Australian government has opened a for-profit tourist information center in New York
City. If a dispute arises over the lease of the storefront, may the landlord sue the Australian
government in the United States courts?
a. Yes, because the Australian 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. It depends. The Australian government can only be sued if it signed a written waiver giving
up its immunity.
d. It depends. The Australian government can only be sued if it is a signatory on the CISG.
Answer: A
21. MagNet, a small United States computer company, started doing business in a foreign
country. The foreign country later decided to take over all computer industry, including
MagNet's operation. The foreign country paid MagNet adequate compensation in United
States dollars. The foreign country’s action is called:
a. comity.
b. repatriation.
c. expropriation.
d. inflow profit streaming.
Answer: C
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.
Answer: A
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.
Answer: B
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.
Answer: C
25. The United States has agreed to which of the following?
a. GATT.
b. NAFTA.
c. CISG.
d. All of the above.
Answer: D
ESSAY
1. Explain what the General Agreement on Tariffs and Trade (GATT) is and give pro and con
arguments concerning this agreement.
Answer: 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.
2. Explain the origin and purpose of the World Trade Organization.
Answer: 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. Yount, Inc. is interested in expanding its business to include exporting its products to
several other countries. Discuss two federal statutes that should be considered before making
the decision to export.
Answer: All nations limit what may be exported. In the United States, the Export
Administration Act of 1985 attempts to balance the need for free trade with requirements of
national security. This statute permits the federal government to restrict exports if they
endanger national security, harm foreign policy goals, or drain scarce resources. The
Secretary of Commerce makes a Controlled Commodities List, and no one may export a
commodity on the list without a license. A second statute that limits exports is the Arms
Export Control Act. This statute permits the president to create a second list of controlled
goods, all related to military weaponry. Again, no one may export any listed item without a
license.
4. MagNet is a U.S. company based in Utah. It is negotiating to sell $4 million worth of
computer goods to a French company, L'la. L'la is insisting that the contract be governed by
the CISG. What are some of the primary differences between the UCC and the CISG?
Answer: 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. MagNet is a U.S. company based in Utah. It is negotiating to sell $4 million worth of
computer goods to a French company, Legran. MagNet's attorney suggests that payment be
by a letter of credit. What is a letter of credit and why does MagNet's attorney recommend
payment by letter of credit?
Answer: 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. Legran is the "account party" and MagNet is the "beneficiary" of the letter.
Legran will instruct its bank to issue a letter of credit to MagNet. The letter of credit is a
promise by the Legran's bank to pay MagNet upon receipt of certain documents. If Legran's
bank forwards the letter of credit to MagNet's bank, MagNet's bank can confirm the letter of
credit, thus providing MagNet 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.
Answer: 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.
Test Bank For Introduction to Business Law
Jeffrey F. Beatty, Susan S. Samuelson
9781133188155
