《A LAWTER'S GUIDE TO INTERNATIONAL BUSINESS TRANSACTIONS》

Section Ⅰ UNITED STATES LAW GOVERNING INTERNATIONAL TRADE1

Preface2

THE TRADE AGREEMENTS PROGRAM3

Introduction3

Background of the Trade Agreements Program4

The Trade Expansion Act of 19627

Tariff-Cutting Authority7

Import Restrictions to Offset Unreasonable,Unjustifiable or Discriminatory Acts of Foreign Countries11

Safeguards Against Injury14

Adjustment Assistance22

Orderly Marketing Agreements36

National Security Amendment37

Section 22 of the Agricultural Adjustment Act38

Administration of the Program39

LAWS AND REGULATIONS AFFECTING UNITED STATES TRADE43

Introduction43

General Agreement on Tariffs and Trade(GATT)43

Tariff Schedules44

General Provisions Governing Import and Export Trade46

Organization49

Constitutionality of United States Participation in GATT51

Antidumping Legislation52

Procedure Before the Treasury Department and Tariff Commission52

Regulations53

Appellate Procedures53

Countervailing Duties54

Procedure Before the Treasury Department54

Judicial Review55

The Buy American Act55

Administrative Procedures56

Export Controls56

Summary of Current Law and Program57

The Regulatory System Under the Export Control Act60

Summary of Related Statutes in the Export Control Field63

Detailed Scope and Procedures Under Export Control Act65

Procedure for Making a General License Exportation70

The System for Individual and Other Validated Export Licenses70

Control of Technical Data79

Enforcement:Sanctions Which May Be Imposed When Export Control Violations Occur81

Trading with the Enemy Act85

Regulations Issued Under Section 5(b)86

Transactions Covered87

Bibliography93

Appendix101

Section Ⅱ INDUSTRIAL FOREIGN LICENSING ARRANGEMENTS105

Preface106

INDUSTRIAL FOREIGN LICENSING AGREEMENTS107

Introduction107

Advantages and Disadvantages of Licensing107

Types of Licenses108

Categories of Licensees110

Categories of Licensors111

Types of Statutory Industrial Property Rights111

Patents Overseas113

The International Convention114

Classification of Foreign Patents115

"Working" of Patents116

Trademarks Overseas117

"Registered-User" Countries118

Remedies in Case of Infringement121

Types of Non-Statutory Industrial Property Rights122

Licenses and Assignments122

Protection of Non-Statutory Rights123

Licenses by Implication124

Difference Between Know-How and Trade Secrets124

Trade Secrets Under Case Law125

Broader Concepts of Know-How127

Know-How in Antitrust Cases127

Possible Limited Use of Term "Trade Secrets"130

Basic Provisions in License Contracts130

Preambles and Whereas Clauses130

Provisions Describing "Fields" and the Like131

Products-Improvements and New Developments133

Know-How and Technical Data134

Grant of Rights135

Quality Supervision136

Technical Aid and Assistance136

Weights and Measures137

Supply of Parts and Equipment138

Royalties and Fees138

Variable Rates143

Other Payment Protection Provisions144

Miscellaneous Provisions146

Additional Problems in Foreign Licensing147

Antitrust Considerations147

Registration and Recordation of Contracts149

U.S. Tax Considerations150

"Base Companies" Under 1962 Revenue Act150

Bibliography153

Appendix161

Section Ⅲ FOREIGN LAW ASPECTS OF DIRECT INVESTMENT ABROAD181

Preface182

FOREIGN LAW ASPECTS OF DIRECT INVESTMENT ABROAD183

Introduction183

Role of the American Lawyer185

Incentives and Restrictions187

Forms of Business Organization(Foreign Company Law)188

Foreign Branch of Domestic Parent189

Foreign Branch of U.S.Subsidiary190

Foreign Branch of a Foreign "Base Company"190

Foreign Subsidiary190

Corporation(SociétéAnonyme,Sociedad Anonima,Aktien-gesellschaft)191

Private Company and Public Company194

Limited Liability Company(Société à Responsabilité Limitée,Sociedad de Responsabilidad Limitada,or Gesellschaft mit Beschrankter Haftung)194

The Partnership(Société en Nora Collectif,Sociedad Colectiva,Offeva Handelsgesellschaft)195

Joint Ventures196

Participation by Local Government196

Voluntary Participation With Local Capital198

Exchange Controls200

Rates of Exchange201

Convertibility203

Relaxation of Exchange Controls to Encourage Foreign Investment204

Convertibility Guaranties204

Exchange Controls and the International Monetary Fund205

Relationship of Import Restrictions to Exchange Controls205

Relaxation of Import Restrictions205

Foreign Tax Laws206

Range of Rates206

Types of Taxes208

Tax Incentives210

Tax Treaties211

Regulation of Business211

Foreign Labor Laws212

Wage Scales213

Labor Benefits213

Profit Sharing213

Vested Rights in a Job214

Measures to Insure Use of Local Labor214

Bibliography215

Appendix267

Section ⅣLEGAL PROTECTION OF INTERNATIONAL BUSINESS TRANSACTIONS299

Preface300

LEGAL PROTECTION OF INTERNATIONAL TRANSACTIONS AGAINST NON-COMMERCIAL RISKS301

Introduction301

Legal Protection Under Local Law304

Assurances Applicable to Direct Investments of Foreign Capital306

Assurances Applicable to Know-How Agreements and U.S. Exports308

Enforcement of Rights Under Local Law310

Legal Protection Under International Law311

Customary International Law311

Responsibility for Taking of an Alien's Property314

Responsibility for Breach of Undertaking to Alien316

Protection Under Customary International Law for Know-How Agreements and U.S. Exports321

Bilateral Treaties of Friendship and Commerce322

Problems of Enforcement of Rights Under International Law331

Proposals for Multilateral Measures for the Protection of Foreign Investment332

Legal Protection of International Transactions Under United States Law336

Investment Guaranty Program336

Export Credit Insurance346

Other Aspects of United States Law354

Conclusion357

Bibliography359

Appendix369

Section Ⅳ FINANCING OF INTERNATIONAL BUSINESS TRANS-ACTIONS387

Preface390

EXPORT-IMPORT BANK391

Introduction391

Statutory Authority and Functions391

Financial Resources393

Types of Assistance Available393

Direct Financing-Project Credits394

Loans for Relending396

Emergency Foreign Trade Credits397

Agricultural Commodity Credits397

Exporter Credits-General Medium-Term Requirements397

Participation with Commercial Banks in Medium-Term Financing398

Guarantees and Insurance399

Commercial Bank Guarantees400

Comprehensive Exporter Guarantees400

Export Credit Insurance-The Foreign Credit Insurance Association401

Other Guarantees and Insurance401

AGENCY FOR INTERNATIONAL DEVELOPMENT403

Introduction403

Organization of AID405

Development Loans406

Eligibility of Borrowers408

Terms and Conditions408

Pre-Application Steps409

Special Development Loan Considerations411

Development Grants and Technical Cooperation Assistance412

Cooley Loans413

Eligibility of Borrowers414

Terms and Conditions415

Special Considerations416

Surveys of Investment Opportunities417

Eligibility of Surveyors418

Criteria for Financing Surveys419

Scope of Surveys419

Terms of Participation419

Investment Guarantees420

Additional Categories of Assistance421

Supporting Assistance421

Contingency Fund422

Alliance for Progress Fund422

Special Restrictions on the Use of Foreign Assistance Funds423

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION427

Introduction427

Nature and Purposes428

Membership429

Capital Structure429

Major Loan Policies430

Eligible Projects430

Government Guarantees430

Assessment of Repayment Prospects430

Competition with Other Sources of Finance430

Types of Expenditures Financed430

Methods of Procurement Under Bank Loans431

Promotion of Local Private Enterprise432

Loan Charges and Maturities433

Currencies Used in Loans433

Lending Activities434

Raising Funds by the Bank436

Bond Sales436

Poltfolio Sales436

Miscellaneous Operations437

Technical Assistance437

Assistance in Development Programming437

Economic Development Institute437

Executing Agent for United Nations Special Fund437

Development Advisory Service438

Arbitration and Conciliation438

Legal Status,Privileges and Immunities439

Legal Status439

Judicial Process439

Privileges and Immunities439

Administration and Organization440

International Development Association440

Membership and Resources441

Credit Terms441

Operations442

INTERNATIONAL FINANCE CORPORATION443

Introduction443

Background and Purposes444

Scale of Activities445

Investment Operations445

Development of Capital Markets and Underwriting Operations448

Development Banks448

Participations and Portfolio Sales452

Organization and Staff452

THE INTERNATIONAL MONETARY FUND457

Introduction457

Content of Articles457

Structure of Organization457

Legal Status458

Purposes of Fund-Code of Conduct459

Exchange Rates459

Restrictions460

Other Exchange Practices462

Gold Transactions462

Relations with GATT462

Use of Fund Resources462

Drawings463

Stand-by Arrangements465

Replenishment466

Ineligibility467

Private Transactions467

Interpretation of the Articles469

THE INTER-AMERICAN DEVELOPMENT BANK471

Introduction471

Resources472

Ordinary Operations473

Fund for Special Operations473

Social Progress Trust Fund474

Technical Assistance474

Administration475

Legal Status,Privileges and Immunities475

Legal Status476

Judicial Process476

Privilege and Immunities476

Taxation476

Criteria Employed in Making Loans477

Applications for Loans478

Criteria Employed in Making Loans from the Social Progress Trust Fund480

SOURCES OF PRIVATE FINANCING483

Introduction483

Financing of International Trade484

American "International" Banks484

Services485

Organizational Structure487

Other Export-Import Financing Companies498

Financing of Direct Investments Abroad499

Edge Act Financing Corporations502

Other Sources of Investment Financing509

Development Banks510

Investment Banks512

Investment Development Companies513

Investment Companies and Mutual Funds515

Insurance Companies and Pension Funds516

Conclusion517

INVESTMENT OF PRIVATE CAPITAL IN FOREIGN SECURITIES519

Introduction519

Significance of Foreign and Domestic Law522

Validity of the Security Under Foreign Law523

Securities of Governmental Issuers524

Securities of Private Issuers525

Protection of Security Holders Under Foreign Law527

Debt Securities528

Equity Securities531

Enforcement534

Special Risks Confronting the Holder of Foreign Securities534

Exchange Controls535

Currency Valuation Problems539

Tax Considerations542

Expropriation of Corporate Assets546

Compliance with Federal Regulation547

The Pattern of Federal Securities Regulation547

Primary and Secondary Distributions of Foreign Securities556

Trading in Outstanding Securities572

American Depositary Receipts:An Alternative Trading Device579

Dealers' Problems584

Investment Company Act Problems588

Enforcement of the Federal Securities Law Against Non-Residents591

Compliance with State Blue Sky Laws596

Registration of New Foreign Issues598

Registration of Outstanding Foreign Issues599

Bibliography601

Appendix615

Section ⅥUNITED STATES AND FOREIGN ANTITRUST LAWS GOVERNING INTERNATIONAL BUSINESS TRANSACTIONS617

Preface618

PART Ⅰ BASIC UNITED STATES ANTITRUST LAWS619

Introduction619

Restraint of Trade:Section 1 of the Sherman Act and Section 73 of the Wilson Tariff Act620

Monopolization:Section 2 of the Sherman Act620

The Clayton(Robinson-Patman)Act Provisions620

Applicable Sanctions621

Jurisdiction Over the Person622

Jurisdiction Over the Subject Matter622

Acts Prohibited or Required by Foreign Law624

Practices Covered by the Sherman Act624

Agreements to Divide Territories and Markets,and to Fix Prices625

Patent and Trademark Licenses626

Some Practical Considerations627

Importance of General Industry Context628

Corporate Subsidiaries629

Joint Ventures630

Distributorships631

Applicable Substantive Law632

The "Rule of Reason"632

Definition of the Relevant Market633

Broad Scope of the "Conspiracy" Concept634

Special Caveat to Section 2(Monopolization)Cases634

Antitrust Exemptions635

Shipping,Aviation and Marine Insurance635

Webb-Pomerene Associations635

Conflicting National Policies636

PART Ⅱ FOREIGN AND SUPRANATIONAL ANTITRUST LAWS639

Introduction639

Importance of United States Policy640

Emergence of Supranational Legislation641

Germany:The Restraints of Competition Law of 1957641

Vertical Cartel Agreements643

The Netherlands:The Economic Competition Act of 1958644

Requirements for Registering Agreements644

Activities Conflicting With the Public Interest645

France:The Price Ordinance Decrees646

Enforcement of Article 37647

Application of Article 59647

Belgium:The Law of May 27,1960648

United Kingdom:The Restrictive Trade Practices Act of 1956649

Scope of the 1956 Act650

The Seven "Gateway" Tests651

Sweden:The 1953 Law of Restraints of Competition652

Enforcement of the 1953 Law653

Importance of Negotiation Procedures653

European Common Market:Article 85 and 86 of the Rome Treaty654

Scope of Articles 85 and 86655

Prohibitions Under Article 85(1)656

Exemptions Under Article 85(3)656

Prohibitions Under Article 86657

Administrative Procedures:Regulation 17657

Registering Agreements:Regulation 27659

Regulations of December 24,1962659

European Coal and Steel Community:The Treaty of Paris661

Freedom of Competition v. Institutional Controls661

Exemptions Granted by the High Authority662

"Concentrations" Under Article 66663

Corrective Measures Under Article 66(7)665

European Free Trade Association:The Stockhohn Convention665

Article 15 of the Convention665

Administrative Procedures666

Canada:The Combines Investigation Act of 1952666

Exemptions Under the Act667

Enforcement Procedures668

Other Antitrust Legislation669

Conclusion671

Bibliography673

Appendix693

Section ⅦUNITED STATES TAXATION OF INTERNATIONAL BUSINESS TRANSACTIONS717

Preface718

Introduction719

PART Ⅰ BASIC JURISDICTIONAL RULES721

Corporations721

Domestic Corporations721

Foreign Corporations721

Individuals724

United States Citizens724

Aliens Resident in the United States725

Aliens Not Resident in the United States726

Source of Income Rules727

Interest728

Dividends729

Personal Services729

Rents and Royalties729

Purchase and Sale of Personal Property730

Manufacture and Sale of Personal Property731

Other Source Rules732

PART Ⅱ LIMITATIONS ON UNITED STATES JURISDICTION733

Foreign Tax Credit734

Background and Purpose734

Direct Credit735

Derivative Credit736

Limitations on Credit738

Major Technical Problems741

Treatment of Foreign Corporations743

Basic Pattern of Deferral743

Limitation on Deferral744

Foreign Pelsonal Holding Companies and Foreign Investment Companies746

Controlled Foreign Corporations748

Disposition of Stock of Foreign Corporations758

Special Deductions and Exemptions for Domestic Corporations761

Western Hemisphere Trade Corporations761

Corporations Operating in Possessions763

China Trade Act Corporations764

Tax Treaties765

PART Ⅲ SAFEGUARDS FOR UNITED STATES TAXING JURISDICTION769

Reporting and Record-Keeping Requirements for Foreign Corporations769

Section 6038-Annual Information From Controlling(Over 50 Per Cent)Shareholders770

Section 6046-Information by Officers,Directors and Five Per Cent Shareholders on Certain Events770

Section 964(c)-Records to Be Maintained by United States Shareholders(Ten Per Cent Owners)of Controlled Foreign Corporations771

Section 482-Power to Reallocate Income773

Transfers of Property to,Among,or from Foreign Corporations776

Section 367-Nonrecognition of Gain in Corporate Formations,Liquidations and Reorganizations777

Section 1249-Transfers of Patents780

Section 1491-Excise Tax on Appreciated Securities781

General Tax Avoidance Provisions782

Principle of "Substance over Form"782

Section 269-Corporations Acquired to Avoid Tax783

Section 341-Collapsible Corporations783

Personal Holding Companies and Accumulated Earnings Tax784

PART Ⅳ ORGANIZATION OF FOREIGN OPERATIONS787

General Considerations from a United States Tax Standpoint in Selecting a Form of Operation787

Nature of Business787

Sales and Licensing Direct from United States788

Branch Operations788

Domestic Subsidiary789

Foreign Subsidiary790

Foreign Taxes,Accounting and General Operating Considerations791

Exporting Operations796

Importing Operations800

Leasing and Licensing Operations800

Servicing Operations802

Manufacturing Operations804

Multiple-Function Operations804

Special Aspects of Less Developed Country Operations806

Acquisition and Ownership of Stock in Foreign Corporations808

Use and Withdrawal of Earnings812

Bibliography817

Appendix825

Section Ⅷ EUROPEAN ECONOMIC COOPERATIVE ORGANIZATIONS841

Preface842

EUROPEAN ECONOMIC COOPERATIVE ORGANIZATIONS843

Introduction843

Organization for Economic Cooperation and Development844

European Payments Union845

European Monetary Agreement845

Liberalization of European Trade845

Split Producing ECC and EFTA846

Creation of OECD846

The European Communities847

Institutions of the European Communities849

The Assembly849

The Commissions850

Councils of Ministers850

The Court of Justice851

The European Investment Bank853

Overseas Countries and Territories854

The European Economic Community854

Provisions of the EEC Treaty855

Freeing Internal Trade855

Page Common External Tariff856

Agriculture857

Labor and Welfare Policies857

Movement of Capital859

The Right of Establishment859

Rules Governing Competition861

Governmental Barriers to Trade864

Taxation865

Euratom867

The European Free Trade Association868

Future of EFTA870

Comparison of EFTA With the EEC870

Tariff Rates871

Institutions871

Coordination of Policies and Harmonization of Laws871

Social Fund Investment Banks and Overseas Territories872

Conclusion872

Bibliography873

Appendix889

Section Ⅸ THE LATIN AMERICAN ECONOMIC COOPERATIVE ORGANIZATIONS895

Preface896

THE LATIN AMERICAN FREE TRADE ASSOCIATION897

Introduction897

Membership and Accession899

Legal Status900

Juridical Structure901

"Resolutions"902

Organs of the Association902

The Permanent Executive Committee902

The Mechanics of Tariff Reduction904

Rules of Origin905

Annual Negotiation of the National Lists906

Triennial Negotiation of the "Common List"909

Negotiation of Complimentarity Agreements910

Saving Clauses and Other Exceptions to the Trade Liberalization Program912

Dumping and Other Unfair Commercial Procedures917

Related Aspects of Economic Integration919

THE CENTRAL AMERICAN PROGRAM OF ECONOMIC INTEGRATION923

Introduction923

Objectives of the Central American Treaties923

The Common External Tariff927

The Common Market928

Exceptions under Annex A928

Equalizing Trade Barriers929

The Industrial Development Program and "Integration Industries"931

The "Integration Industries" Regime931

Advantages of Integration Industries933

Significance of Integration Industries935

Industrial Development Apart from the "Integration Industries" Regime936

Guatemala936

El Salvador938

Honduras939

Nicaragua941

Costa Rica943

"Harmonization" of Incentives to Industry945

The Agreement on Fiscal Incentives946

Administration of the Agreement949

Bibliography951

Appendix959

Section ⅩINTERNATIONAL LITIGATION AND ARBITRATION961

Preface962

INTERNATIONAL LITIGATION AND ARBITRATION963

Introduction963

The Decision to Litigate963

The Decision to Arbitrate964

Litigation Abroad-The Civil Code Lawsuit964

Jurisdiction967

Service in the United States of the Process of a Foreign Court968

Obtaining Evidence in the United States for Use Abroad969

Documentary Evidence971

Litigation in the United States972

Service of Process Abroad972

Obtaining Evidence Abroad for Use in the United States974

Documentary Evidence977

Proof of Law-Here and Abroad979

Processes in International Arbitration980

Various National Arbitral Practices980

The Arbitration Agreement981

The Role of International Arbitration Agencies982

The Role of National Arbitration Laws983

Enforcement of Judgments and Arbitral Awards985

Enforcement of Foreign Judgments985

Enforcement of Foreign Arbitral Awards986

Arbitration Awards and Multi-lateral Treaties987

Problems of Sovereign Immunity989

Conclusion992

Bibliography993

Appendix1011

Biographies of Editors and Contributors1029

Table of Cases1035

Opinions of Attorney General1041

Table of Statutes and Regulations1042

Table of Abbreviations1055

Index1056