Deck 7: The Legal Environment of International Trade

Question 1

The WTO provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war.

Answer 1

True

Question 2

Under GATT, the principle of trade without discrimination is embodied in the most favored nation clause.

Answer 2

True

Question 3

Since 1947 and the end of the World War II era, the goal of the GATT has been to restrict world trade.

Answer 3

False

Question 4

A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur.

Question 5

The U.S. dollar is considered the international currency.

Question 6

Licensing involves the transfer of title of goods to a distributor who bears the financial and commercial risks for the subsequent sale of the goods.

Question 7

Parties to international ventures often agree to arbitrate their disputes in neutral countries.

Question 8

When an international sale is made, the parties often set forth in their contract which country's law will govern a dispute.

Question 9

As a result of pressure from the United Nations Conference on Trade and Development (UNCTAD), the General Agreement on Tariffs and Trade (GATT) allowed the grant of special preferences to developing countries as an exception to the GATT's basic rule of trade without discrimination.

Question 10

Law is the result of the desire of the lawmaker to achieve certain goals.

Question 11

A societé anonyme is the European counterpart of a U.S. corporation.

Question 12

A direct sale to customers abroad by an American firm, with terms of payment commonly based on an irrevocable letter of credit, is an import sale.

Question 13

The International Monetary Fund (IMF) was formed to shorten the duration and lessen the disequilibrium in the international balance of payments of its members.

Question 14

Franchising is a form of licensing that now is very common in international business.

Question 15

The International Bank for Reconstruction and Development, also known as the World Bank, facilitates the lending of money by capital surplus countries to countries needing economic help and wanting foreign investments.

Question 16

The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's country.

Question 17

The interests of the less-developed nations of the world are represented by the UNCTAD.

Question 18

A country can borrow money from other IMF members or from the IMF by means of specific distribution rights (SDRs) sufficient to permit that country to maintain the stability of its currency's relationship to other world currencies.

Question 19

The goal of the North American Free Trade Agreement (NAFTA) is to eliminate all tariffs between Mexico, Canada, and the United States.

Question 20

Contracts for the International Sale of Goods (CISG) sets forth uniform rules to govern international sales contracts.

Question 21

NAFTA seeks to eliminate tariffs among which countries?

A) all members of the United Nations
B) United States, Canada, and Mexico
C) United States and Japan
D) members of the common market

Question 22

The provisions of the United Nations Convention on Contracts for the International Sale of Goods have been strongly influenced by:

A) the GATT's most-favored nation clause.
B) the European Economic Community's Treaty of Rome.
C) the Uniform Commercial Code.
D) the success of the Organization of Petroleum Exporting Companies.

Question 23

The GATT:

A) is a multilateral treaty
B) is subscribed to by the United States
C) has as its goal the liberalization of world trade
D) all of the above

Question 24

Which of the following statements is true regarding the World Trade Organization (WTO)?

A) The WTO has been in place since 1947.
B) The WTO coordinates its activities with GATT.
C) It provides a dispute settlement body to promote the resolution of trade disputes.
D) It has the ability to impose criminal penalties.

Question 25

The term dumping refers to the sale of damaged goods in a foreign market to cut the losses that would otherwise be caused by their damage.

Question 26

The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials.

Question 27

The jurisdictional rule of reason addresses the problems that arise when a foreign country has a significant interest in regulating conduct taking place within the United States.

Question 28

Blocking laws prohibit the disclosure, copying, inspection, or removal of documents located in the territory of the enacting country in compliance with orders from foreign authorities.

Question 29

United States antitrust laws can protect United States exports.

Question 30

Which of the following does not describe the European Union (EU)?

A) It was formerly known as the European Economic Community.
B) It had three members sign on as recently as 1995.
C) It eliminated internal barriers to the free movement of goods, persons, services, and capital between member countries.
D) It is administered solely by the heads of state of the member countries.

Question 31

The main purpose of the International Monetary Fund is to:

A) provide easy access to money for multinational corporations.
B) facilitate the expansion and balanced growth of international trade.
C) create a model simplified lending system.
D) facilitate currency exchanges.

Question 32

Under the act of state doctrine, the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory.

Question 33

The use of import quotas represents the most common form of tariff barrier.

Question 34

A common barrier to the free movement of goods across borders is the tariff barrier.

Question 35

Which country is NOT a part of The North American Free Trade Agreement (NAFTA)?

A) Mexico.
B) United States
C) Canada.
D) Greenland

Question 36

The Overseas Private Investment Corporation (OPIC) offers asset protection insurance against risk of loss to plant and equipment, as well as loss of deposits in overseas bank accounts, to companies that qualify on the basis of the involvement of a "substantial U.S. interest."

Question 37

The Securities and Exchange Commission (SEC) is not limited to litigation when a securities law enforcement investigation runs into secrecy or blocking laws.

Question 38

A direct sale to customers in a foreign country is a(n):

A) foreign distributorship.
B) agency arrangement.
C) licensed sale.
D) export sale.

Question 39

Which is a correct statement about arbitration of contractual disputes regarding international trade?

A) It is done in court.
B) There is extensive judicial review of the decision.
C) Parties frequently arbitrate in neutral countries.
D) It is not available in disputes of more than $1 million.

Question 40

Which of the following is true regarding export regulations?

A) Valid reasons for controlling the export of goods include national security, foreign policy, or short supply.
B) The U.S. has recently implemented a system of granting export licenses that is designed to differ from that used by the EU.
C) Only civil, not criminal, sanctions apply to those who violate export control regulations.
D) Only governments, not individuals, are held liable when goods are exported that might be used for improper defense purposes.

Question 41

Companies with concerns over the possibility of expropriation could lessen the harm or the likelihood of this occurring by:

A) fully investigating a host government's stability.
B) establishing treaty commitments.
C) obtaining insurance.
D) all of the above.

Question 42

When a U.S. trademark holder licenses a foreign business use of its trademark overseas and a third party imports these goods into the United States to compete against the U.S. manufacturer's goods, the foreign-made goods are called __________ goods.

A) "gray market"
B) counterfeit.
C) specially-licensed.
D) dumped goods.

Question 43

Which of the following actions is not prohibited by The Foreign Corrupt Practices Act?

A) offers of payments to government officials to influence a decision on behalf of the firm making the payment
B) payments to government officials to influence a decision on behalf of the firm making the payment
C) payments to low-level officials for expediting the performance of routine government services
D) all of the above actions are prohibited by The Foreign Corrupt Practices Act

Question 44

Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it engages in illegal commercial conduct?

A) act-of-state
B) sovereign compliance
C) Timberlane
D) sovereign immunity

Question 45

The transfer of technology rights in a product to allow another firm in a foreign country to produce a product in return for royalties or other specified payments is called:

A) exporting.
B) licensing.
C) agency representation.
D) subsidiary sales.

Question 46

Which of the following is not a nontariff barrier?

A) government subsidies
B) import quotas
C) complex custom procedures
D) an import or export duty or tax placed on goods as they move in or out of a country

Question 47

U.S. courts will assume jurisdiction and apply antitrust laws to conduct business outside the United States if the activities of the business firms outside the United States have a direct, substantial, and foreseeable impact on U.S. commerce. This is based on what principal?

A) the "jurisdictional rule of reason"
B) the "act-of-state doctrine
C) the "effects" doctrine
D) comity

Question 48

Oswaldo Enterprises began to do business in a small East African nation. The representatives of Oswaldo bid on government contracts. Although Oswaldo was by far the lowest bidder and offered a superior product, the company was not awarded a contract. Oswaldo officials learned after inquiring that the company would have to give substantial sums of money to high-level government officials in order to receive a contract. Oswaldo officials are considering this as a necessary cost of doing business, but they are concerned about violating U.S. law. Discuss the implications of this under the Foreign Corrupt Practices Act.

Question 49

You plan to enter the export market with a new product that you have just developed. You feel that the product has great promise, but you are confused over whether you are required to obtain an export license. Further, your brother-in-law says that he knows someone in the Japanese government who could greatly assist you in your endeavors for a very modest fee. Discuss this situation.

Question 50

The SEC has accused the Acme Company of fraud in connection with the sale of its securities to American citizens. Although the firm is American-owned, it is located in Switzerland. All of the accounts and business records of the firm are in several Swiss banks. The SEC has been actively pursuing the case, although it has not been able to provide a great deal of hope for those victimized by the fraud. What factors are probably hindering the SEC, and how might this be handled?

Question 51

What is the maximum fine that can be imposed against a company for violation of The Foreign Corrupt Practices Act?

A) $100,000
B) $500,000
C) $1,000,000
D) Only individuals, not companies, can be fined for violating The Foreign Corrupt Practices Act.

Question 52

Three defenses are commonly raised to the extraterritorial application of U.S. antitrust laws. They are:

A) act-of-state, sovereign compliance, and sovereign immunity doctrines.
B) jurisdictional rule of reason, effects doctrine, and comity.
C) foreign legislation, sovereign compliance, and comity.
D) foreign antitrust laws, sovereign immunity doctrine, and International Monetary Fund applications.

Question 53

Legal restrictions of U.S. firms doing business abroad in regard to payments made to foreign officials for obtaining business are set forth in the:

A) International Corruption Prohibition Act.
B) Global Anti-bribery Control Act.
C) Foreign Corrupt Practices Act.
D) International Graft Prohibition Act.

Question 54

Which of the following allows a domestic firm to maintain the greatest control over its foreign operations?

A) wholly-owned subsidiaries
B) licensing
C) foreign distributorships
D) agency arrangements

Question 55

When a foreign government takes over an American business that is being conducted in the foreign country, this is called:

A) expropriation.
B) dollar credits.
C) suspension agreement.
D) antidumping.

Question 56

In antidumping cases:

A) The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV).
B) The International Trade Commission determines if there is an injury to a U.S. industry as a result of such sales.
C) Remedial action will be taken only if findings of both LTFV sales and injury are present.
D) All of the above

Question 57

The Alexo Corporation has been charged in a United States court with violation of American antitrust laws in its foreign dealings. The firm has raised the defense that its actions were compelled by the government of its host country. Alexo based its defense on the__________ doctrine.

A) act-of-state
B) sovereign compliance
C) sovereign immunity
D) Timberlane