Four Questions in International Business Law

Introduction

This paper seeks to answer four given questions in relation to international business law. Questions range from changes in UCP, reasons for change, application of changes, made, advantages and disadvantages of exports under present state of laws and the direction on what multilateral trade will take in the future.

Questions and Answers:

Answer to Question 1 (Approximate length: 150 words)

Some of the major changes between UCP 500 and UCP 600 are the following: (1) There were articles from UCP 500 that were removed UCP 600 and they include: Article 5: Instructions to Issue/Amend Credits, Article 6: Revocable vs. Irrevocable Credits, Article 8: Revocation of a Credit, Article 12: Incomplete or Unclear Instructions, Article 30: Freight Forwarder Transport Documents and Article 38: Other Documents; (2) The phrase “reasonable time” and “without delay” have been deleted and Banks are now simply allowed five days to examine documents and assert any discrepancies under New Articles 14(b) and 16(d). It may be recalled that under the UCP 500, a reasonable time of not to exceed 7 days was allowed but UCP 600 allows either the processing or rejecting payment to made within 5 days only from the presentation of documents (Beverly Weiss Manne, 2007).
As to why it was considered necessary to have this revision of the rules may be explained by the need for new rules due several reasons. One reason is that the UCP500 which became effective in 1994, needs to be amended to adjust with the requirements of the times, hence the need for the incorporation of global logistics and new technologies need to be incorporated in the letters of credit. Another reason is that under the UCP 500 there were issues with high discrepancy rates, that generated frequent interpretive inquires to the ICC and many lawsuits, hence the need for updates of the rules.

Answer to Question 1b (Approximate length: 550 words)

The Bank of Suva is advised not to pay the Bank of Brisbane due to the non compliance of the requirements upon which each letter of credit is to be made credit is to be made payable. These requirements are as follows: (1) a duly signed commercial invoice in three copies; (2) a full set of on board bills of lading evidencing shipment from Brisbane to Suva of 200 computers by 1 March, 2007 1 May, 2007 and 1 July 2007 at the latest; (3) a stamped certificate of insurance covering carriage from port warehouse to port warehouse; and (4) a certificate confirming that the computers were made in Australia and are less than 6 months old. (i.e. 2006/2007 stock). From the four requirements not a single requirement was completely complied with since what were sent to it as its bases of payment to Bank of Brisbane are as follows: (1) the commercial invoice has been signed but only 1 copy has been provided and the computers are; (2) the bill of lading dated 20 February which is for 150 computers; (3) the bill of lading dated 20 February which is for 150 computers; (4) the certificate of insurance has not been stamped; and (5) the confirmation certificate which does not state that the computers were made in Australia and refers to them as “recent stock” and not 2006/2007 stock. It is very clear that requirement number 1 which requires “a duly signed commercial invoice in three copies” is not fully complied and that one commercial invoice has been signed out.

The second requirement which stated as “a full set of on board bills of lading evidencing shipment from Brisbane to Suva of 200 computers by 1 March, 2007 1 May, 2007 and 1 July 2007 at the latest” is not also complied with since what was sent appeared to be two bills lading dated February 20 for 150 computers each. It may be observed that the earliest bill of lading should be dated March 1, 2007. Moreover since the total number of computers to be shipped is 600 the uncertainty of what is the exact quantity of computers was sent in addition to the earlier date than expected could be a valid ground Bank of Suva to refuse any payment to Bank of Brisbane. Although it was indicate how many units of computer would be applicable to each letter of credit, there may be basis to estimate that it could be 200 units each since there are three letters of credit opened for 600 units, the documents used as bases of claim from the Bank of Suva would simply not be considered valid.

The third requirement which states “a stamped certificate of insurance covering carriage from port warehouse to port warehouse” was not the complied with since what was submitted was a certificate of insurance has not been stamped. It may be argued that the requirement of stamping may not be taken lightly since accepting the document that has no stamping my mean assuming more responsibilities than was necessary and this could place the resources of the bank in a disadvantageous situation as it could amount to waiving any claim that it may have against the insurance company should something untoward happen to the goods shipped if there were any.
The fourth requirement which states “a certificate confirming that the computers were made in Australia and are less than 6 months old. (i.e. 2006/2007 stock) cannot be considered complied with the documentation which indicates “the confirmation certificate which does not state that the computers were made in Australia and refers to them as “recent stock” and not 2006/2007 stock.” The two are simply not the same.

Answer to Question 2 – (Approximate length: 400 words)

Expansion in general connotes more business. Options for more revenues are necessarily expanded. If such expansion is done through exports, there are therefore obvious advantages. The specific advantages of exporting include the enhancement domestic competitiveness and while increasing sales and profits. Selling to other countries is a sign although may not be conclusive of a well performing domestic performance. More sales outside the country could of course increase revenues and profits if the sales are made above actual costs.

This effort of the company to go to other countries’ markets may give the company the chance to gain global market share as the company now reduces dependence on existing markets. To have explored foreign market may be the start of more business, hence more profits.

Export could also exploit corporate technology and know-how so as to even extend the sales potential of existing products. Some in the domestic market may become more successful abroad; thus this could help the company in stabilizing seasonal market fluctuations in its domestic market. With growing revenues, the potential for corporate expansion is closer to reality. Sometime, companies with excess production capacity could only serve the interest more if it goes to exports.

Since export could be equated to a new swimmer diving into the sea of opportunities could be a way for a company to gain information about foreign competition that will lead to more markets abroad. This could be true in many exporting countries like Japan and China (Zhao and Shaoming Zou ,2002). While they may have started with small products, eventually they realize that they have more market for their other products.

Answer to Question 3 – (Approximate length: 150-200 words for each part)

Each of following governmental rules is explained whether each conforms or not with GATT/WTO obligations:

1. Where a country charges a higher tariff on the importation of motor vehicles if they do not have airbags for safety purposes while the country does not require domestic manufacturers to fit cars with airbags, this said act will violate the GATT/TWTO obligations as this is an act to restrict free trade while not covered by exemptions.
2. When a domestic law prohibits the importation of cheese that costs less than $5 per kilo, and arguing that low price cheese could be a health hazard may violate the GATT/WTO obligation in the absence of clear evidence that such imported cheese is indeed a health hazard product.
3. (Where a country decides to no longer treat a designated developing country as such and hence it loses its tariff preferences would violate the GATT/TWTO obligations since to do so would nullify the essence of the said obligations since the intention is to bind all members as a general rule in effecting rules of the agreement. In order not to violate the rule, the said country must treat all developing countries similarly.
4. Where country decides to reduce its tariff rates by 5% in relation to any country that does not apply illegal trade barriers to its own exports, it is submitted that there could be no violation since the objective would not be to restrict international trade but would further liberalize the same in addition to the fact that it treats other countries similarly situated. The rule on national treatment which means that imported and locally-produced goods should be treated equally could be applied in this case.

Answer to Question 4 – On Multilateral trading system – (Approximate length: 350 words)

There is basis to the statement that the multilateral trading system is at cross-roads because of the possibilities of different routes that it could take. That one road leads to the death of multilateralism is a possible reality because it would appear from the latest report on the success of the multilateral trading system has not really helped economically some members of the WTO particular the developing countries. What could cause this to happen may be attributed to the actions of the developed nations. Khor (2001) explained the developed countries have not lived up to their liberalization commitments, while they proclaim indisputable benefit for developing countries to liberalize their imports and investments as fast as possible.

The other road that leads to the emergence of a network of bilateral and regional trade deal is also the more probable alternative if the death will not. The possible explanation for this is that there are regions in the world that have yet fully developed and if these regions could just have to grow first economically before the multilateral trading could successfully sets in an attractive proposition to many. On the issue of whether countries will cooperate or not and therefore when the issue is to determine whether countries should be working together, this paper believes that there is a greater force that would continue to organize them selves via trading activities.

The other road which will lead to a resurgence of the multilateral trade system and to fulfillment of the original ambitions of the 1947 General Agreement on Tariffs and Trade is still a viable option also since if the more developed nations would be finally be convinced to give more concession to least developed nations then this could really help the poorer countries to benefit more from these agreements. What could make this possible are the plans of different countries to open up each other economies in addition to the fact that globalization is unstoppable. Another factor is the result of the sixth WTO Conference Ministerial in December where there concessions made to developing countries which included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries. This paper believes that this will give more chances to developing nations to be part of multilateral trade (Global Policy Forum, n.d.).

Conclusion

Changes happen in many aspects of business. Both local and international laws must be updated to conform to the demand of the times. Technology has brought changes and it continues to influences the same and to be influenced by them. The need to update laws is also inevitable as this could leave the courts to apply not the law but their expanded interpretation. If no updates are made, business will also be affected since good business lies in good and clear rules to govern in case of conflicts.