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Evidencia 3: Compliance with foreign law

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Compliance with foreign law

Incorrect information about foreign law may result in

Prior to exporting to a foreign country or even agreeing to sell to a customer in a

foreign country, a U.S. company should be aware of any foreign laws that might affect
the sale. Information about foreign law often can be obtained from the customer or
distributor to which the U.S. company intends to sell. However, if the customer or
distributor is incorrect in the information that it gives to the exporter, the exporter may
pay dearly for having relied solely upon the advice of the customer.

Incorrect information about foreign law may result in the prohibition of importation of
the exporter’s product, or it may mean that the customer cannot resell the product as
profitably as expected. Unfortunately, customers often overlook those things that may
be of the greatest concern to the exporter. As a result, it may be necessary for the
U.S. exporter to confirm its customer’s advice with third parties, including attorneys,
banks, or government agencies, to feel confident that it properly understands the
foreign law requirements. Some specific examples are as follows:

1. Industry standards

Foreign manufacturers and trade associations often promulgate industry

standards that are enacted into law or that require compliance in order to sell
successfully there. It may be necessary to identify such standards even prior
to manufacture of the product that the company intends to sell for export or to
modify the product prior to shipment. Or, it may be necessary to arrange for
the importing customer to make such modifications. Sometimes compliance
with such standards is evidenced by certain marks on the product, such as
‘‘JIS’’ (Japan), ‘‘CSA’’ (Canada), and ‘‘UL’’ (Underwriters Laboratories - U.S.).

One type of foreign safety standard that is becoming important is the ‘‘CE’’
mark required for the importation of certain products into the European
Community. The European Community has issued directives relating to safety
standards for the following important products: toys, simple pressure vessels
and telecommunications terminal equipment, machinery, gas appliances,
electromagnetic compatibility, low voltage products, and medical devices (see
www.newapproach.org.). Products not conforming to these directives are
subject to seizure and the assessment of fines. The manufacturer may
conduct its own conformity assessment and self-declare compliance in most
cases. For some products, however, the manufacturer is required (and in all
cases may elect) to hire an authorized independent certifying service company
to conduct the conformity assessment. The manufacturer must maintain a
technical construction file to support the declaration and must have an
authorized representative located within the European Community to respond
to enforcement actions
.

The ISO 9000 quality standards are becoming increasingly important for
European sales. One helpful source of information in the United States is the
National Center for Standards and Certification Information, a part of the
Department of Commerce National Institute of Standards and Technology,
www.nist.gov, which maintains collections of foreign government standards by
product. The National Technical Information Service, www.ntis.gov, the
Foreign Agricultural Service of the Department of Agriculture,
www.fas.usda.gov, and the American National Standards Institute,
www.ansi.org, which maintains over 100,000 worldwide product standards on
its NSSN network, also collect such information. Canada has the 20 exporting:
 Procedures and Documentation Standards Council, www.scc.ca, and
Germany has the Deutsches Institut für Normung (DIN), http://www.din.de/de/

2. Foreign customs laws

The countries of export destination may have absolute quotas on the quantity of products that
can be imported. Importation of products in excess of the quota will be

The countries of export destination may have absolute quotas on the quantity
of products that can be imported. Importation of products in excess of the
quota will be prohibited. Similarly, it is important to identify the amount of
customs duties that will be assessed on the product, which will involve
determining the correct tariff classification for the product under foreign law in
order to determine whether the tariff rate will be so high that it is unlikely that
sales of the product will be successful in that country, and to evaluate whether
a distributor will be able to make a reasonable profit if it resells at the current
market price in that country. It is especially important to confirm that there are
no antidumping, countervailing, or other special customs duties imposed on
the products. These duties are often much higher than regular ad valorem
duties, and may be applied to products imported to the country even if the
seller was not subject to the original antidumping investigation.

Some countries, such as Ethiopia, Belarus, Cambodia, Yugoslavia,

Kazakhstan, Lebanon, Liberia, Saudi Arabia, and Ukraine, do not fully adhere
to the GATT Valuation Code and may assess duties on fair market value
rather than invoice price. Another problem is ‘‘assists.’’ If the buyer will be
furnishing items used in the production of merchandise, such as tools, dies,
molds, raw materials, or engineering or development services, to the seller,
the importer of record (whether that is the buyer or the seller through an
agent) may be required to pay customs duties on such items, and the seller
may be required to identify such items in its commercial invoices.
 Many countries have severe penalties for import violations; for example,
France assesses a penalty of two times the value of the merchandise, India
assesses a penalty of five times the value of the merchandise, and China
confiscates the merchandise. See appendix K listing web sites for foreign
customs agencies and tariff information. In any case, where there is doubt as
to the correct classification or valuation of the merchandise, duty rate, or
existence of assists, the importer (whether buyer or seller) may wish to seek
an administrative ruling from the foreign customs agency. This will usually take
some period of time, and the seller and buyer may have to adjust their
production and delivery plans accordingly. (A more thorough understanding of
the types of considerations that the buyer may have to take into account under
its customs laws can be gained by reviewing the similar considerations for a
U.S. importer discussed in chapter 6, section F).

3. Government contracting

Sales to foreign governments, government agencies, or partially government

owned private businesses often involve specialized procedures and
documentation. Public competitive bidding and compliance with invitations to
bid and acquisition regulations, and providing bid bonds, performance bonds,
guarantees, standby letters of credit, and numerous certifications may be
required. Commissions may be prohibited, or the disclosure of commissions
paid may be required. Government purchases may qualify for customs duty,
quota, or import license exemptions. Barter or countertrade may be
necessary.

4. Buy American equivalent

Laws Foreign government agencies often promulgate regulations that are

designed to give preferential treatment to products supplied by manufacturers
 in their own country. This may consist of an absolute preference, or it may be
a certain price differential preference. Determining whether such laws or
agency regulations exist for your company’s products is mandatory if
government sales are expected to be important.

5. Exchange controls and import licenses

Unlike the United States, many nations of the world have exchange control systems designed
to limit the amount of their currency that can be used to buy foreign products. These nations
require

Unlike the United States, many nations of the world have exchange control
systems designed to limit the amount of their currency that can be used to buy
foreign products. These nations require that an import license from a central
bank or the government be obtained in order for customers in that country to
pay for imported products. For a U.S. exporter who wishes to get paid, it is
extremely important to determine (1) whether an exchange control system
exists and an import license is necessary in the foreign country, (2) what time
periods are necessary to obtain such licenses, and (3) the conditions that
must be fulfilled and documentation that must be provided in order for the
importer to obtain such licenses.

6. Value-added taxes
Many countries impose a value-added tax on

Many countries impose a value-added tax on the stages of production and

distribution. Such taxes usually apply to imported goods, so that the importer,
in addition to paying customs duties, must pay a value-added tax based,
usually, on the customs value plus duties. When the importer marks up and
resells the goods, it will collect the tax from the purchaser, which it must remit
to the tax authorities after taking a credit for the taxes due on importation.
(Exporters are often exempt from the value added tax) the amount of value-
added tax can be significant, as it is usually higher than traditional sales taxes,
and, therefore, whether the product can be priced competitively in the foreign
market is a matter of analysis.
 7. Specialized laws

Foreign countries often enact specialized laws prohibiting the importation of

certain products except in compliance with such laws. In the United States,
there are many special laws regulating the domestic sale and importation of a
wide variety of products (see chapter 6, section A). Some U.S. laws regulate
all products manufactured in the United States; others do not apply to
products being manufactured for export. In any case, like the United States,
foreign countries often have special laws affecting certain products or classes
of products, and the existence of such regulation should be ascertained prior
to manufacture, prior to entering into an agreement to sell, and even prior to
quoting prices or delivery dates to a customer. (Johnson y Bade, 2010) 1

Responda las siguientes preguntas, en el encabezado de la pregunta encuentra el

párrafo en donde está la respuesta.

1. Introduction
Incorrect information about foreign law may result in the prohibition of importation of the exporter’s
product, or it may mean that the customer cannot resell the product as profitably as expected. Unfortunately, customers often
overlook those things that may be of the greatest concern to the exporter. As a result, it may be necessary for the
U.S. exporter to confirm its customer’s advice with third parties, including attorneys, banks, or government agencies, to feel
confident that it properly understands the foreign law requirements. Some specific examples are as follows:

2. Industry standards
The European Community has issued directives relating to safety
standards for the following important products: toys, simple pressure vessels and

telecommunications terminal equipment, machinery, gas appliances, electromagnetic compatibility, low

voltage products, and medical devices (see www.newapproach.org.). Products not conforming to these
directives are subject to seizure and the assessment of fines. The manufacturer may conduct its
own conformity assessment and self-declare compliance in most cases. For some products, however,
the manufacturer is required (and in all cases may elect) to hire an authorized independent certifying service
company to conduct the conformity assessment. The manufacturer must maintain a technical
construction file to support the declaration and must have an authorized representative located within
the European Community to respond to enforcement actions.
3. Foreign customs laws
The countries of export destination may have absolute quotas on the quantity of products that
can be imported. Importation of products in excess of the quota will be prohibited. Similarly, it is
important to identify the amount of customs duties that will be assessed on the product, which will involve determining the
correct tariff classification for the product under foreign law in order to determine whether the tariff rate will be so high that it is unlikely
that sales of the product will be successful in that country, and to evaluate whether a distributor will be able to make a reasonable profit
if it resells at the current market price in that country. It is especially important to confirm that there are no antidumping, countervailing,
or other special customs duties imposed on the products. These duties are often much higher than regular ad valorem duties, and
may be applied to products imported to the country even if the seller was not subject to the original antidumping investigation.

4. Exchange controls and import licenses

Unlike the United States, many nations of the world have exchange control systems
designed to limit the amount of their currency that can be used to buy foreign products.
These nations require that an import license from a central bank or the government be obtained in order for
customers in that country to pay for imported products.

1 Johnson, T. y Bade, D. (2010). Export/import procedures and documentation. Estados Unidos:

American Management Association.
5. Value-added taxes
Many countries impose a a value-added tax on the stages of production and distribution.

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