1) MegNet is a U.S. company based in Utah. It is negotiating to sell $4 million worth of computer goods to a French company, Legran. MagNet's attorney suggests that payment be by a letter of credit. What is a letter of credit and why dose MagNet's attorney recommend payment by letter of credit? What are some of the other documents involved and what is their role. Are their other issues that you should put into the agreement?
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The letter of credit is a document which is used in business transaction, normally used in international business transactions. Letter of Credit enables a supplier in one country, secure terms of payment to customer on the other country by involving a bank. This document drafted by assuring that, buyers' payment to seller will be made on time and with the correct amount. According to Mugasha (2003) "A fundamental principle in letter of credit law is the autonomy of the bank's obligation from the underlying transaction and other related contracts" (p. 136). It was wise for MagNet's attorney to recommend payment by letter of credit because the transaction is an international one. There are various documents involved in Letter of Credit payment, they include; Commercial invoice, Insurance document, certificate of origin, Bill of lading or airway bill, and inspection documents among others. Bank makes payment upon scrutinizing those documents, thus they are very crucial for the transaction. Other issues which need to be agreed in the letter of credit to avoid its failures are; timelines giving sufficient time to meet all tasks specified and presentation of required documents. Complying with the rules and policies is also important.
2) Yount, Inc. is interested in expanding its business to include exporting its produce to several other countries. What are some issues that should be considered before making the decision to export? How would you recommend that they organize themselves to do such business?
There are several issues, which should be considered before making the decision to export. It is important to have a business plan pointing how the product readiness for export. According to Porter (1982), the formulation of the export policy involves consideration of agricultural policy, foreign policy, macroeconomic policy, and maritime policy interest (p. 187).In order for the Yount to succeed in export plans, I recommend draft a business plan to assess the potential of the product in the market, facilitate application for financing. Yount should also put into consideration the intellectual property issues while developing the business plan. This will help the company not be caught infringing on the Intellectual properties of other and prevent competitors from free-riding on your idea.
3) Identify the term for and discuss the legality of a government's taking of property owned by foreign investors. Discuss what action a company might take if I want to do business abroad but is concerned about losing its property to a foreign government. How might the company try to limit its risks and protect itself?
Many countries nationalize property, implying that they take owner of the property. "When a government takes property owned by foreign investors, it is called expropriation" (Beatty & Samuelson, 2007, p. 201). Expropriation has been witnessed in many nations around the globe, which many questioning its legality. However, as Beatty and Samuelson (2007), explains this practice is common and legal, provided there is adequate compensation to the owner of the property (p. 201). Investing to a foreign country helps in expanding market, however, it is very risky and an intelligent and accurate plan is needed. It is advisable to know the tax regulations of the country you intent to invest. To minimize risk and protect it, any company intending to invest in a foreign country should research on requirements from the foreign country, come up with a compliance plan, which will guide it in meeting the rule and regulations.
4) Explain some mechanisms and types of international dispute resolution. Which would you use if you had a choice and why would you use that type.
Dispute resolution refers to the process of resolve any conflict arising between parties. According to American society of International Law and Nederlandse Vereniging Voor Internationaal Recht (1994), "the basis of international dispute resolution, except for transnational litigation, is the consent of the parties to the jurisdiction of a particular mechanism" (p. 166). Mechanism which can be employed in resolving dispute includes; lawsuit, arbitration, mediation, conciliation, facilitation, and collaborative law. As American society of International Law and Nederlandse Vereniging Voor Internationaal Recht (1994) continue to explain, parties choose, and are drawn presumably to the mechanism that best fit their needs or which they feel most comfortable with (p. 166). I would prefer resolving any dispute through mediation, because this mechanism leaves each party satisfied. Mediation allows both parties to reach a mutual agreement.