Although the great majority of international business transactions do not pose antitrust problems, antitrust issues may be raised in various types of transactions, among which are:
o overseas distribution arrangements;
o overseas joint ventures for research, manufacturing, construction, and distribution;
o patent, trademark, copyright, and know-how licenses;
o mergers and acquisitions involving foreign firms; and
o raw material procurement agreements and concessions.
The potential U.S. and foreign antitrust problems posed by such transactions are discussed in greater detail in Chapter 16. Where potential U.S. or foreign antitrust issues are raised, it is advisable to obtain the advice and assistance of qualified antitrust counsel.
For particular transactions that pose difficult antitrust issues, and for which an export trade certificate of review is not desired, the Antitrust Division of the Department of Justice can be asked to state its enforcement views in a business review letter. The business review procedure is initiated by writing a letter to the Antitrust Division describing the particular business transaction that is contemplated and requesting the department’s views on the antitrust legality of the transaction.
Certain aspects of the federal antitrust enforcement policies regarding international transactions are explored in the Department of Justice’s Antitrust Enforcement Guidelines for International Operations (1995).
Foreign Corrupt Practices Act
It is unlawful for a U.S. firm (as well as any officer, directors employee, agent, or agent of a firm or any stockholder acting on behalf of the firm) to offer, pay, or promise to pay (or to authorize any such payment or promise) money or anything of value to any foreign official (or foreign political party or candidate for foreign political office) for the purpose of obtaining or retaining business. It is also unlawful to make a payment to any person while knowing that all or a portion of the payment will be offered, given, or promised, directly or indirectly, to any foreign official (or foreign political party or candidate for foreign political office) for the purposes of assisting the firm in obtaining or retaining business. “Knowing” includes the concepts of “conscious disregard” and “willful blindness.”
There is an exception to the antibribery provisions for “facilitating payments for routine governmental action.” The statute lists a number of examples. Actions similar to those listed are also covered by this exception.
A person charged with a violation of the antibribery provisions of the Federal Corrupt Practices Act (FCPA) may assert as a defense that the payment was lawful under the written laws and regulations of the foreign country or that the payment was associated with demonstrating a product or performing a contractual obligation.
Firms are subject to a fine of up to $2 million; officers, directors, employees, agents, and stockholders are subject to a fine of up to $100,000 and imprisonment for up to five years. The Attorney General can bring a civil action against a domestic concern (and the Securities and Exchange Commission [SEC] against an issuer) for a fine of up to $10,000 as well as against any officer, director, employee, or agent of an issuer, or stockholder acting on behalf of the firm, who willfully violates the antibribery provisions. Under federal criminal laws other than the FCPA, individuals may be fined up to $250,000 or up to twice the amount of the gross gain or gross loss if the defendant derives pecuniary gain from the offense or causes a pecuniary loss to another person.
The Attorney General may also bring a civil action to enjoin any act or practice of a domestic concern (and the SEC with respect to an issuer) whenever it appears that the domestic concern or issuer (or an officer, director, employee, agent, or stockholder acting on behalf of the domestic concern or issuer) is in violation (or about to be) of the antibribery provisions.
A person or firm found in violation of the FCPA may be barred from doing business with the federal government. Indictment alone can lead to suspension of the right to do business with the U.S. Government.
The Department of Justice has established an Foreign Corrupt Practices Act Opinion Procedure, the details of which are found at 28 CFR Part 77. Under the Opinion Procedure, any party may request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. Conduct for which the Department of Justice has issued an opinion stating that the conduct conforms with current enforcement policy will be entitled to a presumption of conformity with the FCPA.
For further information from the Department of Justice about the FCPA and the Foreign Corrupt Practices Act Opinion Procedure, contact the Deputy Chief, Fraud Section, Criminal Division, U.S. Department of Justice, Room 2424, Bond Building, 1400 New York Avenue, NW, Washington, D.C.20530, 202-514-0651 (FTS) 202-368-0651.
The Department of Commerce supplies general information to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA and international bribery. For further information from the Department of Commerce about the FCPA, contact the Chief Counsel for International Commerce or the Senior Counsel for International Finance and Trade, Office of the Chief Counsel for International Commerce, U.S. Department of Commerce, Room 5882, 14th Street and Constitution Avenue, NW, Washington, D.C. 20230, 202-482-0937.
Food and Drug Administration
and Environmental Protection Agency Restrictions
In addition to the various export regulations that have been discussed, rules and regulations enforced by the Food and Drug Administration (FDA) and the Environmental Protection Agency(EPA) also affect a limited number of exporters.
Food and Drug Administration
FDA enforces U.S. laws intended to assure the consumer that foods are pure and wholesome, that drugs and devices are safe and effective, and that cosmetics are safe. FDA has promulgated a wide range of regulations to enforce these goals. Exporters of products covered by FDA’s regulations are affected as follows:
If the item is intended for export only, meets the specifications of the foreign purchaser, is not in conflict with the laws of the country to which it is to be shipped, and is properly labeled, it is exempt from the adulteration and misbranding provisions of the Federal Food, Drug, and Cosmetic Act (see 801(e)). This exemption does not apply to “new drugs” that have not been approved as safe and effective, or to certain devices and biologics. Additional requirements apply to these products. Banned new animal drugs may not be exported.
If the exporter thinks the export product may be covered by FDA, it is important to contact the nearest FDA field office or the Food and Drug Administration. Companies can make inquiries by writing to the FDA at 5600 Fishers Lane, Rockville, MD 20857, calling 1-800-532-4440, or visiting the FDA Web site at: http://www.fda.gov.
Environmental Protection Agency
EPA regulates the export of hazardous waste, pesticides, toxic chemicals, and ozone deplete substances. Although EPA generally does not prohibit the export of these substances(there are some exceptions). There are various statutory notification systems design to inform receiving foreign governments that materials of possible human health or environmental concern will be entering their countries, and in some cases, allows for the foreign governments to object to such shipments.
Under the Resource Conservation and Recovery Act (RCRA), there are two different sets of export regulations – one for exports of hazardous wastes moving for recycling within the Organization for Economic Cooperation and Development (OECD) (40 CFR 262 subpart H), and the other for non-OECD hazardous waste exports, as well as for hazardous wastes exported for treatment and disposal, both within and outside the OECD (40 CFR 262 subpart E). In both cases, exports are prohibited absent the consent of the importing government. Exporters are required to notify EPA’s Office of Compliance (EPA/OC) in writing. EPA/OC then forwards the notification to the importing government (and to transit countries, if applicable). In some cases, the written consent of the importing government is required before the shipment may commence; in other cases, consent is considered “tacit” if there is no response from the importing government after 30 days. Exporters should be aware of the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal This treaty bans trade in hazardous wastes between parties and nonparties unless there is a Basel-consistent bilateral agreement in place. Approximately 110 countries have ratified the Basel Convention; however, the U.S. has not. Therefore, exporters should be aware of potential trade restrictions. Exporters of hazardous waste should contact either EPA’s Office of Compliance, Import/Export Program at 202-564-2290 or the RCRA/Superfund Hotline at 800-424-9346 or 703-412-9810.
As for pesticides and other toxic chemicals, neither the federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) nor the Toxic Substances Control Act (TSCA) requires exporters of banned or severely restricted chemicals to obtain written consent before shipping. However, exporters of unregistered pesticides or other chemicals subject to regulatory control actions must comply with certain notification requirements. Under TSCA importing countries are notified of the export or the intended export of many industrial chemicals or mixtures (40 CFR 707 subpart D). These chemicals or mixtures are subject to certain regulator actions taken under the act. Exporters send to EPA, for each affected chemical or mixture, a notice for each country to which the chemical or mixture is exported. The notice is sent annually or only once, depending on the regulatory action controlling the chemical or mixture. The agency then informs the importing country of the regulatory action taken. These notices are also used to satisfy the information exchange provisions of the Prior Informed Consent (PIC) procedures, which are under the United Nations Environment Programme. For chemicals banned or severely restricted in the U.S. and subject to the PIC procedures, EPA forwards to the designated national authority of the importing country information on the chemical’s regulatory controls. In addition, TSCA also prohibits the export of polychlorinated biphenyls (PCBs) and PCB-containing items in concentrations greater than or equal to 50 ppm, unless an exemption was granted. The TSCA hotline, 202-554-1404, can provide general information on these export requirements.
A person may not export class I ozone-depleting substances, including chlorofluorcarbons (CFCs), to any country that is not a signatory to the international treaty entitled the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol). The United States is a signatory to the Montreal Protocol.Under authority of the Clean Air Act Amendations of 1990, the EPA published regulations prohibiting the export of bulk shipments of CFCs, halons, methyl chloroform, carbon tetrachloride, and hydrobromoflurocarbons (HBFCs) to any country not a party to the protocol (40 CFR Part 82 subpart A). Currently, there are 162 nations that are signatories to the Montreal Protocol. The U.S. Customs Service and EPA coordinate to monitor and enforce import and export restrictions on ozone-depleting substances. To obtain an up-to-date list of signatories to Montreal Protocol to export class I ozone-depleting substances contact EPA’s Stratospheric Protection Division at 202-233-9410.
Import Regulations of Foreign Governments
Import documentation requirements and other regulations imposed by foreign governments vary from country to country. It is vital that exporters be aware of the regulations that apply to their own operations and transactions. Many governments, for instance, require consular invoices, certificates of inspection, health certification, and various other documents. For sources of information about foreign government import regulations, see Chapter 2.
Customs Benefits for Exporters
Drawback of Customs Duties
Historically, the word “drawback” has denoted a situation in which the duty or tax, lawfully collected, is refunded or remitted, wholly, or partially, because of a particular use made of the commodity on which the duty or tax was collected.
Drawback was initially authorized by the first tariff act of the United States in 1789. Since then, it has been part of the law, although from time to time the conditions under which it is payable have changed.
The rationale for drawback has always been to encourage American commerce or manufacturers to compete in foreign markets without the handicap of including costs, and consequently in his sales price, the duty paid on imported merchandise.
Types of Drawback
Several types of drawback are authorized under section 1313, Title 19, United States Code:
11. If articles are exported or destroyed, which were manufactured in the United States with the use of imported merchandise, then the duties paid on the imported merchandise used may be refunded as drawback, (less 1 percent which is retained by the U.S. Customs Service (Customs) to defray costs (section 1313(a) drawback).
12. If both imported merchandise and any other merchandise of the same kind and quality are used to manufacture articles, some of which are exported or destroyed before use, then drawback not exceeding 99 percent of the duty which was paid on the imported merchandise is payable on the exports. It is immaterial whether the actual imported merchandise or the domestic merchandise of the same kind and quality was used in the exported articles. This provision in the code makes it possible for firms to obtain drawback without the expense of maintaining separate inventories for imported and domestic merchandise (section 1313(b) drawback – the substitution provision).
13. If merchandise is exported or destroyed because it does not conform with sample or specifications, or was shipped without the consent of the consignee, then 99 percent of the duties which were paid on the merchandise may be recovered as drawback.
14. When certain products manufactured with the use of domestic alcohol are exported or shipped to various island possessions, a drawback of the internal revenue taxes paid on the domestic alcohol may be refunded (section 1313(e) drawback).
15. If imported salt is used to cure fish, the duties on the salt may be remitted (section 1313(e) drawback).
16. If imported salt is used to cure meat which is exported, a drawback, in amounts not less than $100, of duties paid on the salt may be obtained (section 1313(f) drawback).
17. If imported materials are used to construct and equip vessels and aircraft built for foreign account and ownership, 99 percent of the duties paid on the materials may be recovered as drawback, even though the vessels and aircraft are not, in the strict meaning of the word, exported (section 1313(g) drawback).
18. If imported merchandise is used in the United States to repair jet aircraft engines originally manufactured abroad, the duties paid on the imported merchandise may be recovered as drawback, in the amounts not less than $100, when the engines are exported (section 1313(h) drawback).
19. If imported merchandise is exported without being used, or destroyed under Customs supervision, 99 percent of the duties paid on the merchandise may be recovered as drawback (section 1313(j) drawback).
If merchandise that is commercially interchangeable with imported merchandise is exported or destroyed under Customs supervision and at the time of exportation or destruction has not been used, 99 percent of the duties on the merchandise may be recovered as drawback (section 1313(j) drawback).
Packaging material used to package merchandise exported or destroyed under section 1313(a), (b), (c), or (j), may receive 99 percent of the duties paid on the packaging materials as drawback (section 1313(q) drawback).
How to Obtain Drawback
As most manufacturers are interested in sections 1313(a) and (b), only the procedures for obtaining drawback under these provisions are discussed.
The purpose of drawback is to enable a manufacturer to compete in foreign markets. To do so, however, the manufacturer must know, prior to making contractual commitments, that he will be entitled to drawback on his exports. The drawback procedure has been designed to give the manufacturer this assurance and protection.
Drawback Proposal
To obtain drawback, first prepare a drawback proposal (statement) and file it with a Regional Commissioner of Customs for section 1313(a) drawback and with the Entry Rulings Branch, Customs headquarters, for other types of drawback, including combination 1313(a) and (b) drawback.
There are currently several general drawback contracts available (orange juice, steel, sugar, component parts, and greige goods) which eliminate the need for submission of a proposal. These have been published in the Customs Bulletin and Decisions with instructions as to the procedure for adhering to them.
A simple drawback proposal to serve as a model may be obtained from regional commissioners for section 1313(a) drawback. For other types of drawback, including combination 1313(a) and (b), write to: U.S. Customs Service, Entry Rulings Branch, 1301 Constitution Ave., NW, Franklin Court, Washington, D.C., 20229, or call 202-482-7040. The U.S. Customs Service also maintains an Internet site at http://www.customs. ustreas.gov.