• International Business Law
  • Home Country Laws
    • Export Controls
    • Import Controls
      • Agricultural Products
        • Dairy
        • Agricultural Commodities
        • Insects
        • Livestock
        • Meat
        • Plants
        • Poultry
        • Seeds
      • Arms, Ammunition, and Radioactive Materials
      • Consumer Products
        • Appliances
        • Flammable Fabrics
        • Radiation-Producing Products
        • Radio Frequency Emitting Devices
      • Food, Drugs, Cosmetics, and Medical Products
        • Food and Cosmetics
        • Biological Drugs
        • Drug Paraphernalia
      • Gold, Silver, Currency, and Stamps
      • Motor Vehicles
      • Pesticides and Toxic and Hazardous Substances
      • Textiles, Wool, and Fur
    • Voluntary Restraint Agreements
    • Foreign Corrupt Practices Act
  • Host Country Laws
  • International Law and Treaties
  • International Contract Considerations
  • International Letters of Credit
  • Resources

The days when international transactions and business deals were only the realm of huge multinational corporations are over. Today even sole proprietorships are licensed to buy or sell products and services across national boundaries. There is no simple way to sum up all of the regulations a company might encounter doing business abroad. At a minimum, a United States company involved in an international business transaction will be bound by regulations of the United States (the home country), regulations of the country in which the business is conducted (the host country), and international regulations, which are derived from a variety of sources.

The United States has many laws governing international transactions in goods and services. Among these laws are export controls, import controls, and the Foreign Corrupt Practices Act.

Export Controls

Generally speaking, federal regulations make it much easier for businesses to export than to import. Exports commonly are thought to be beneficial for the domestic economy, so the government does not want to impede them. Most government involvement in exports aims at encouraging a greater volume of exports to existing trade partners, tearing down barriers to United States exports, and helping businesses find new markets for their products. Nonetheless, sometimes controls are placed on exports to protect national security, advance foreign policy, or protect the domestic economy from the drain of materials in short supply. Export controls include requirements that people acquire licenses to export certain items that are sensitive, highly technological, or that might be used for military or other strategic purposes.

Most export controls are overseen by the Bureau of Export Administration, an arm of the United States Department of Commerce. Department of Commerce officials are an excellent source of information on compliance with general export regulations and licensing procedures.

Certain classes of exports administered by other federal agencies include:

• Endangered fish, wildlife, and birds such as bald eagles and golden eagles (Department of the Interior)

• Tobacco seed or any live tobacco product (Department of Agriculture)

• Arms, ammunition, and instruments of war (Department of State, Office of Defense Trade Controls)

• Narcotics and dangerous drugs (Department of Justice, Drug Enforcement Administration)

Import Controls

As mentioned above, the federal government offers substantially more help to exporters than it offers to importers. A bewildering variety of government agencies are involved in one or more aspects of United States import policies and it may be confusing to know which agency or agencies need to approve an import.

The United States Customs Service assesses and collects duties, taxes, and fees on most imported goods; enforces customs and related laws; and administers certain navigation laws and treaties. The Customs Service publishes several general guides, available from regional offices to help importers understand United States import regulations.

A number of imports are subject to special treatment by other federal agencies before they may be brought into this country.

Agricultural Products

Dairy

Most dairy products including cheese and milk must have special import licenses, and are subject to quotas administered by the Department of Agriculture's Foreign Agricultural Service. Milk and cream imports also must meet the requirements of the Food, Drug, and Cosmetic Act and the Import Milk Act. Milk and cream importers need permits from the Department of Health and Human Services, Food and Drug Administration, and the Department of Agriculture.

Agricultural Commodities

Many agricultural commodities--such as fruits, vegetables, and nuts--must meet detailed import requirements relating to size, grade, quality, and maturity. Commodities must pass inspection before they are allowed into the United States. Inspection certificates are issued by the Food Safety and Inspection Service of the Department of Agriculture. The Agriculture Marketing Service of the Department of Agriculture answers general inquiries about importing fruits, vegetables, and nuts.

Insects

All insects that could be harmful to domestic crops or trees are forbidden entry into the United States unless they are for scientific research. Other insects may be imported only with special approval from the Animal and Plant Health Inspection Service of the Department of Agriculture.

Livestock

The Animal and Plant Health Inspection Service imposes a variety of inspection and quarantine requirements on most livestock and animal by-products. Permits for import into the United States must be obtained before the item is shipped from its country of origin. Only certain ports of entry into the United States are set up to handle animal inspection and quarantine, so arrangements for import must be made well in advance to ensure that officials at the desired point of entry can perform the appropriate inspection and quarantine. Exceptions to most of these inspection and quarantine requirements are available for imports from Canadian provinces and certain northern Mexican states.

Meat

Commercial shipments of meat and meat products are regulated by the Department of Agriculture and must be inspected by its Animal and Plant Health Inspection Service as well as its Food Safety and Inspection Service before they are permitted into the United States. Noncommercial shipments of meat are regulated by the Federal Food, Drug, and Cosmetic Act, which is enforced by the Food and Drug Administration of the Department of Health and Human Services.

Plants

The Department of Agriculture regulates import of plants and plant products. Certain endangered species may require special inspection and approval or may be denied entry altogether.

Poultry

The importing of poultry and poultry products, including eggs, is controlled by the Animal and Plant Health Inspection Service and the Food Safety and Inspection Service of the Department of Agriculture. Permits, special markings, labeling, and, in some cases, foreign inspection certificates are required.

Seeds

Importation of seeds is governed by the Federal Seed Act of 1939 and regulations of the Agricultural Marketing Service of the Department of Agriculture.

Arms, Ammunition, and Radioactive Materials

Importing of arms, ammunition, explosives, and instruments of war is severely limited. These items may be brought into the United States only with the express permission of and a license from the Bureau of Alcohol, Tobacco and Firearms of the Department of the Treasury. Even temporary importation or transit across the territory of the United States is prohibited without a license from the Office of Munitions Control, Department of State.

Most radioactive materials are subject to regulation by the Nuclear Regulatory Commission. Licenses to import these items into the United States are granted by the Nuclear Regulatory Commission.

Consumer Products

Appliances

Household appliances must meet energy efficiency standards set by the Department of Energy, Consumer Products Efficiency Branch, before they may be brought into the country. In addition, the Federal Trade Commission, Division for Energy and Product Information, sets standards for labeling household appliances. Importers intending to bring any common household appliance into the United States should contact both of these agencies for the requirements in effect at the desired date of import.

Flammable Fabrics

Fabrics intended for wearing apparel or interior decoration must meet strict standards for non-flammability set by the United States Consumer Products Safety Commission. Some products that do not meet these standards may be brought into the country with special permission, provided they will be finished or processed yp meet federal non-flammability standards.

Radiation-Producing Products

Many radiation-producing products such as television sets, microwave ovens, sunlamps, and ultrasound equipment are subject to radiation performance standards set by the Radiation Control for Health and Safety Act of 1968. Any product with a performance standard set by the Act may be imported into the United States only with the permission of the Food and Drug Administration, National Center for Devices and Radiological Health.

Radio Frequency Emitting Devices

Radios, televisions, tape recorders, and other radio frequency emitting devices may be imported only with documentation from the Federal Communications Commission that they are in conformity with, will soon be in conformity with, or are exempt from, the agency's requirements.

Food, Drugs, Cosmetics, and Medical Products

Food and Cosmetics

The import of most food, beverages, and cosmetics is controlled by the Food and Drug Administration of the Department of Health and Human Services. Products regulated by the Food and Drug Administration are subject to inspection, and possible detention, at the border. Products that are defective, unsafe, filthy, produced under unsanitary conditions, or branded in such a way that they are false, misleading, or improperly labeled are prohibited. Seafood is subject to additional standards set by the National Marine Fisheries Service of the Department of Commerce.

Biological Drugs

Import of biological products for human use is regulated by the Public Health Service Act. Foreign producers intending to send their products to the United States must obtain licenses from the Food and Drug Administration, Department of Health and Human Services both for facilities and for individual shipments. Biological drugs for animal use are regulated by the Virus Serum Toxin Act, which is enforced by the Department of Agriculture. The Virus Serum Toxin Act requires special permits and labels before biological drugs for animal use may be imported into the United States.

Drug Paraphernalia

Importing of drug paraphernalia is prohibited under the United States Code. Penalties for the illegal import of drug paraphernalia include both jail time and fines. Prohibited items include water pipes, roach clips, miniature spoons, bongs, and cocaine freebase kits.

Gold, Silver, Currency, and Stamps

The importation of gold and silver is subject to detailed quality and marking regulations established by the National Stamping Act and enforced by the Department of Justice. Anyone importing into the United States or receiving from overseas more than $10,000 in monetary instruments, including currency, travelers checks, money orders, and negotiable instruments or investment securities, must file a report of the transaction with the Customs Service at the point of entry. It is illegal to import facsimiles of United States postage stamps, unless they are intended for philatelic, educational, historical, or newsworthy purposes. The Department of the Treasury regulates this area.

Motor Vehicles

Every motor vehicle or piece of motor vehicle equipment imported into the United States must comply with federal motor vehicle safety standards set forth in the National Traffic and Motor Vehicle Safety Act of 1966. To clear customs, each vehicle must be accompanied by a declaration that states (1) the vehicle is in conformity with the Act, (2) the vehicle was manufactured prior to 1968, when the standards were not yet in effect, or (3) although the vehicle was not manufactured in conformity with the Act, it will be brought into conformity within 120 days of entry. Other declarations may be made in unique circumstances. Permission to import motor vehicles in exception to the standards set forth in the Act is granted by the National Highway Traffic Safety Administration (NHTSA), which also administers other aspects of importation under the Act.

Motor vehicles and engines also must comply with Environmental Protection Agency (EPA) requirements under the Clean Air Act. These emission requirements apply to all motor vehicles, which must bear a label stating conformity with EPA emission requirements, unless exempted. Some vehicles may enter, for example, pending conformity. Separately imported engines for heavy-duty vehicles are covered and must comply with the same labeling requirement. Engines for light-duty vehicles that are imported separately from the vehicles, are not covered by these regulations.

Pesticides and Toxic and Hazardous Substances

Pesticides, fungicides, herbicides, and rodenticides are governed by the Insecticide, Fungicide, and Rodenticide Act of 1947 and the Federal Environment Pesticide Control Act of 1972. Import of these substances must be registered with the Environmental Protection Agency's Office of Pesticides and Toxic Substances. Registration may be completed in advance of shipment. If the shipment is approved by the Agency, the Office of Pesticides and Toxic Substances provides the importer with a Notice of Arrival that must be presented to Customs Service officials in order for the items to be released from custody.

Several federal regulations govern importing hazardous substances packaged for household use. Marking, labeling, and packaging regulations are enforced by the Department of Transportation, Office of Hazardous Materials Transportation. The Toxic Substances Control Act regulates imports of chemical substances that pose an unreasonable risk of injury to health or the environment. Customs officers are required to impound all imported toxic substances until the importer shows proof of compliance with or exemption from the requirements of the Toxic Substances Control Act.

Textiles, Wool, and Fur

Textile fiber products imported into the United States are subject to identification and marking requirements set forth in the Textile Fiber Products Identification Act. Wool products are regulated by the Wool Products Labeling Act of 1939. The Act requires most wool imports to be clearly labeled to show the total wool weight and content of the product. Most fur imports are subject to regulation under the Fur Products Labeling Act. Information on these Acts and the regulations promulgated under them is available from the Federal Trade Commission.

Voluntary Restraint Agreements

Voluntary restraint agreements limit exports to the United States of certain products from certain countries. Voluntary restraint agreements are reached through trade negotiations between the United States government and representatives of foreign countries. An example of such an agreement is the limit on steel and machine tools manufactured in Japan and South Korea.

The Department of Commerce administers programs created under such agreements. An export certificate or license from the country of origin is required before any item subject to such an agreement is permitted entry into the United States.

Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) is a federal law that forbids any citizen or resident of the United States from giving or offering to give gifts, bribes, or anything of value to a foreign official or political figure in an attempt to influence a decision. Although the text and intent of the FCPA are quite simple, the FCPA has been criticized by many United States business leaders as an unnecessary handicap to business efforts abroad. They argue that the FCPA is an awkward, even elitist, attempt to impose United States values onto foreign transactions, despite cultural differences. The law itself recognizes the difficulty of imposing ethical standards in other countries, as evidenced by an exception for payments made to foreign government officials if the money or goods are "facilitative payments for routine government action." What constitutes "facilitative payments" or "routine government actions" is unclear. Business leaders concerned with how a transaction might be viewed under the FCPA should consult legal counsel experienced in this area.

Because there are so many countries, each with unique import and export laws, corporate structures, and cultural norms, this chapter can offer only a brief sketch of where and how international businesses most likely will encounter the legal systems of other countries.

Each host country has its own laws that United States companies must obey when doing business there. These laws may create tax consequences, restrict the movement of capital, govern mergers, or require financial disclosure. Some host country laws have serious potential consequences. For instance, in some countries a company's capital and property can be nationalized with few, if any, due process protections. Businesspersons from the United States trying to establish businesses in Russia have experienced firsthand how difficult it can be to try to conduct business in a country where laws and monetary exchange rates sometimes change dramatically from day to day.

The United States Department of Commerce operates a National Trade Data Bank, which collects information on trade with specific countries. It also operates a Trade Information Center, which provides information on doing business overseas and has numerous country desk officers who specialize in advising businesses and individuals on a particular country's economy, trade policies, political situation, and United States government policies toward that country.

A variety of international codes, laws, and treaties regulate international sales, such as the Convention on International Sale of Goods, the General Agreement on Tariffs and Trade (GATT), and the North American Free Trade Agreement (NAFTA). These laws may have a substantial effect on how companies do business internationally. Treaties such as NAFTA, for example, provide for duty-free treatment of certain goods, create certificate-of-origin procedures for exporters, and regulate trade in North America in specific industries such as energy, intellectual property, and telecommunications. NAFTA and GATT also establish a framework for settlement of disputes arising out of the treaties. In addition, there are codes of conduct for international businesses that, although not enforced by any one legal body, generally are adhered to by parties actively engaged in international business. Federal resources for particular areas of trade usually have information about international laws also. International trade attorneys are experts in helping businesses comply with international laws and treaties that may be applicable to their industry.

As in domestic business transactions, contracts are the basis on which international trade is conducted. Many of the contracts entered into are similar to those used in every domestic business, such as employment contracts, distributorship contracts, and purchasing contracts. However, there are some issues that are of particular concern in the international arena. For example, international contracts usually specify which language will be used to conduct business and specify a set rate of exchange between currencies. In addition, because international business dealings involve governmental regulation at several levels, it is common to include a government approval clause in contracts. Such a clause states which partner in the contract is responsible for obtaining any governmental permission needed for the transaction.

Contracts also customarily provide for the handling of any disputes that may arise between the parties. A contract may specify that parties will attempt arbitration before a lawsuit is filed. Contracts also include provisions, for example, governing choice of forum (the country with jurisdiction in case of a dispute) and choice of law (which jurisdiction's laws will be followed to settle a grievance).

Unlike domestic transactions in which the buyer and seller typically know each other or have access to reliable financial data about one another, in many international transactions the buyer and seller may not know each other and may have a difficult time learning more about each other. The seller may not know how creditworthy a buyer is or how shifts in exchange rates could alter the terms of the agreement. A buyer may not know the seller's reputation for quality and timeliness or whether the seller will be able to handle customs formalities sufficiently well to ship the product to the buyer.

In some international negotiations, a letter of credit may help facilitate the transaction. The term "letter of credit" actually is a shorthand way of referring to a complex set of agreements and documents in which a bank assumes responsibility for paying the seller and for assuring that goods are shipped properly. In a typical letter of credit transaction the buyer contracts with its bank to issue a letter of credit to the seller. The letter of credit is a promise from the bank to pay the specified amount to the seller if, and only if, the seller produces adequate documentation (such as invoices, bills of lading, and inspection certificates) proving that goods were shipped properly and will be received as agreed upon. The buyer and its bank make a separate arrangement between them so the bank is reimbursed. In some transactions the seller's bank also will be involved in guaranteeing payment.

A number of publications exist that can help a businessperson become more familiar with international trade issues. These include:

Barry Appleton, Navigating NAFTA: A Concise User's Guide to the North American Free Trade Agreement (Lawyer's Cooperative Publishing, Rochester, NY 1994).

International Trade for the Nonspecialist (Paul H. Vishny ed., American Law Institute-American Bar Association Committee for Continuing Professional Education, Philadelphia, PA 1993).

Eric Sletten, How to Succeed in Exporting and Doing Business Internationally (Wiley, New York, NY 1994).

Start Your Own Import/Export Business (JoAnn Padgett ed., Pfeiffer & Company, San Diego, CA 1994).

Kenneth D. Weiss, Building an Import/Export Business (Wiley, New York, NY 1991).

Many agencies and departments of the U.S. government regulate international trade. A businessperson is most likely to use the services of these offices:

For information on or to obtain Importing Into the United States, the official guide to importing into the United stated published by Prima Publishing, Rocklin, CA (1992), contact the United States Customs Service, Dallas/Fort Worth Director, P.O. Box 619050, Dallas Fort Worth, TX 75261, (214) 574-2170; Houston Director, 1717 Loop East, #406, Houston, TX 77029, (713) 671-1000; Laredo Director, P.O. Box 3130, Laredo, TX 78044-3130, (210) 726-2267; Port Arthur Director, 4550 Jimmy Johnson Boulevard, Port Arthur, TX 77642, (409) 724-0087.

United States Department of Agriculture, 14th and Independence Avenues S.W., Washington, DC 20250, (202) 720-2791, touch "4" (Animal and Plant Health Inspection Service); (202) 720-2791, touch "8" (Food Safety and Inspection Service).

United States Department of Justice, Drug Enforcement Administration, 700 Army-Navy Drive, Arlington, VA 22202, (202) 307-8000.

United States Department of Health and Human Services, Food and Drug Administration, Center for Food Safety and Applied Nutrition, 200 C Street S.W., Washington, DC 20204, (202) 205-4850.

United States International Trade Administration, 14th and Constitution Avenues N.W., #3418, Washington, DC 20230, (202) 482-3809 (Public Affairs); (202) 482-1780 (Import Administration).

United States Department of Commerce, 14th Street and Constitution Avenue N.W., Washington, DC 20230, (800) 872-8723 (National Trade Data Bank); (202) 482-1455 (Bureau of Export Administration).