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The Legal Environment of Business 9th ed. Notes

by: Tiffany Notetaker

The Legal Environment of Business 9th ed. Notes MGMT 246 - 03

Marketplace > California State University - Fullerton > Business, management > MGMT 246 - 03 > The Legal Environment of Business 9th ed Notes
Tiffany Notetaker
Cal State Fullerton
GPA 3.62
Business and Its Legal Environment
Charles Smith

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Chapter 5, 7, 9 Textbook Notes.
Business and Its Legal Environment
Charles Smith
business management
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This 16 page Bundle was uploaded by Tiffany Notetaker on Monday September 28, 2015. The Bundle belongs to MGMT 246 - 03 at California State University - Fullerton taught by Charles Smith in Summer 2015. Since its upload, it has received 29 views. For similar materials see Business and Its Legal Environment in Business, management at California State University - Fullerton.

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Date Created: 09/28/15
Chapter 5 Business and the Constitution 1 The Constitutional Powers of Government A The states adopted the Articles of Confederation postRevolutionary War which created a confederate form of government where states had authority to govern themselves and the national government could exercise only limited powers The Articles proved ineffective in times of economic crisis and then came the US Constitution which became the basis for an entirely new form of government B A federal form of government emerged where the national government and the states share sovereign power as a result of compromise a The Constitution sets forth specific powers that can be exercised by the national government including the implied power to undertake actions necessary to carry out its enumerated powers All other powers are reserved for the states b State government has the authority to regulate affairs within their borders State regulatory powers are also known as police powers Local governments also exercise police powers C US Constitution includes provisions concerning relations among states such as the privileges and immunities clause and the full faith and credit clause a The privileges and immunities clause prevents a state from imposing unreasonable burdens on citizens of a different state particularly with regard to means of livelihood or doing business b The full faith and credit clause ensures that rights established under deeds wills contracts and similar instruments in one state will be honored in other states It also ensures any judicial decision will be honored and enforced in all states in regards to property rights It protects their legal rights as they move from state to state D The Constitution provided for 3 branches of government the legislative branch that makes the laws the executive branch that enforces the laws and the judicial branch that interprets the laws A system of checks and balances allows each branch to limit the actions of the other two branches in order to prevent any branch from becoming too powerful E The Constitution expressly delegated the power to regulate interstate commerce to the national government This clause is called the commerce clause The USSC later decided that the national government could regulate intrastate commerce as well in the case of Gibbons V Ogden a The commerce clause provided for expansion of the national government s regulatory powers as new kinds of problems came about Activities that seemed local could be regulated by the national government if it was deemed to substantially affect interstate commerce b The power over commerce allows the national government to regulate almost every commercial enterprise in the US It permits national government to legislate in areas that Congress has not explicitly been given power Chapter 5 Business and the Constitution c The USSC held that Congress has authority to prohibit intrastate possession and noncommercial cultivation of marijuana as part of a larger regulatory scheme Controlled Substances Act State medical marijuana laws do not protect an individual from federal prosecution d The dormant commerce clause is the negative aspect of the commerce clause states do not have the authority to regulate interstate commerce It comes into play when regulations affect interstate commerce F The supremacy clause provides that the Constitution laws and treaties of the US are the supreme Law of the Land which means that a state law is rendered invalid when there is a direct con ict between a federal and state law Preemption is when Congress chooses to act legislate exclusively in an area in which the federal government and state have concurrent powers a Sometimes a federal statute will include a preemption provision to make it clear that Congress intends the legislation to preempt any state laws on the matter b In situations where it is not clear whether Congress intended to preempt an entire subject area against state regulation the courts determine whether Congress intended to exercise exclusive power over a given area G Congress may not tax some states while exempting others The commerce clause almost always provides a basis for sustaining a federal tax Congress can spend revenues to carry out expressed powers and to promote any objective it deems worthwhile as long as it does not violate the Bill of Rights 2 Business and the Bill of Rights A The Bill of Rights embodies a series of protections for the individual against various types of interference by the federal government Some of these constitutional protections apply to business entities as well such as corporations existing as separate legal entities legal persons and are granted the same rights and privileges as natural persons do B The Bill of Rights limited only powers of the national government but later incorporated most of these rights into the protections against state actions 14th Amendment a The 14th Amendment provides that neither the federal nor state governments can deprive persons of life liberty or property without due process of law b The rights secured by the Bill of Rights are not absolute and it is ultimately the USSC that is the final interpreter of the Constitution and gives meaning to these general rights and determines their boundaries C Freedom of speech particularly political speech is a prized right and courts have protected this right to the fullest extent possible Symbolic speech gestures movements articles of clothing and other forms of expressive conduct is protected by the courts Chapter 5 Business and the Constitution a Expression oral written or symbolized by conduct is subject to reasonable restrictions i To be content neutral restrictions must be aimed at combatting some societal problem such as crime or drug abuse and not be aimed at suppressing the expressive conduct or its message ii If a law regulates the content of the expression it must serve a compelling state interest and be narrowly written to achieve that interest For a statute to be valid there must be a compelling government interest that can be furthered only by the law in question b Political speech by corporations falls within the protection of the First Amendment A law forbidding a corporation from including inserts with its bills to express its views on controversial issues violates the First Amendment c Commercial speech consists of communications primarily advertising and marketing made by business firms that involve only their commercial interests States may restrict certain kinds of advertising in the interest of preventing consumers from being misled A restriction on commercial speech will be considered valid as long as it meets 3 criteria i It must seek to implement a substantial government interest ii It must directly advance that interest iii It must go no further than necessary to accomplish its objective d Speech that violates criminal laws are not constitutionally protected such as fighting words defamatory speech and speech that violates criminal laws are not protected under the First Amendment i The First Amendment does not protect obscene speech Material is considered obscene if 1 The average person finds it violates contemporary community standards 2 The word taken as a whole appeals to a prurient arousing or obsessive interest in sex 3 The work shows patently offensive sexual conduct 4 The work lacks serious redeeming literary artistic political or scientific merit ii Congress s first two attempts at protecting minors from pornographic materials on the Internet failed In 2000 Congress enacted the Children s Internet Protection Act CIPA which required public schools and libraries to install filtering software on computers to keep children from accessing adult content Chapter 5 Business and the Constitution iii The Prosecutorial Remedies and Other Tools makes it a crime to intentionally distribute virtual child pornography without indicating that it is computer generated D The establishment clause of the First Amendment states that the government may neither establish any religion and the free exercise clause states that the government cannot prohibit the free exercise of religious practices This applies to both federal and state governments a The establishment clause also prohibits the government from passing laws that promote aid or endorse religion or show preference for one religion over another i Laws that do not promote or place a significant burden on religion are constitutional even if they have an impact In order for it to be constitutional it must not have a primary effect of promoting or inhibiting religion ii Religious displays on public property have often been challenged as violating the establishment clause and the USSC generally focus on the proximity of the religious display to nonreligious symbols b The free exercise clause guarantees that a person can hold any religious belief that she or he wants or a person can have no religious belief This clause only restricts the actions of the government i The government must have a compelling state interest for restricting the free exercise of religion and the restriction must be the only way to further that interest ii The government can react when religious practices work against public policy and the public welfare When public safety is an issue an individual s religious beliefs often have to give way to the government s interest in protecting the public E The Fourth Amendment protects citizens against unreasonable search and seizure usually requiring law enforcement officers to obtain a search warrant an order from a judge of other public official authorizing the search or seizure a To obtain a search warrant law enforcement officers must convince a judge that they have reasonable grounds or probable cause to believe a search will reveal evidence of a specific legality The Fourth Amendment also prohibits general warrants it must be specific b Warrants are not required for searches of business in such highly regulated industries such as liquor guns and strip mining F The Fifth Amendment guarantees that an accused person cannot be forced to give testimony that might subject him or her to any criminal prosecution It only applies to natural persons 3 Due Process and Equal Protection Chapter 5 Business and the Constitution A The Fifth and Fourteenth Amendments provide that no person shall be deprived of life liberty or property without due process of law The due process clause has two aspects procedural and substantive a Procedural due process requires that any government decision to take life liberty or property must be made equitably The government must give a person proper notice and an opportunity to be heard Fair procedure requires that the person have an opportunity to object to a proposed action before an impartial neutral decision maker Substantive due process focuses on the content of legislation rather than fairness of procedures It limits what the government may do in its legislative and executive capacity If a law or other governmental action limits a fundamental right the state must have a legitimate and compelling interest to justify its action B The equal protection clause applies to the federal government as well The equal protection clause states that the government cannot enact laws that treat similarly situated individuals differently Courts apply different levels of scrutiny tests to cases where a law or action distinguishes between or among individuals and the basis for distinction is being examined a If a law or action prohibits or inhibits some persons from exercising a fundamental right the law or action will be subject to strict scrutiny by the courts Under the strict scrutiny test the classification must be necessary to promote a compelling state interest Intermediate scrutiny is applied in cases involving discrimination based on gender or discrimination against illegitimate children Laws using these classifications must be substantially related to important government objectives The rational basis test is applied in matters of economic or social welfare where a classification can be considered valid if there is any conceivable rational basis on which the classification might relate to a legitimate government interest 4 Privacy Rights A The US Constitution does not explicitly mention a general right to privacy In the landmark case Griswold v Connecticut the USSC held that a constitutional right to privacy was implied by multiple amendments B Congress passed the Freedom of Information Act which allows any person to request copies of any information on themselves contain in federal government files The Privacy Act also did this Many other laws have been passed to protect individual s privacy rights a A pretext is a false motive put forth to hide the real motive Pretexting is obtaining information by false means The GrammLeachBliley Act makes pretexting to obtain financial information illegal but does not mention lying to obtain nonfinancial information Chapter 5 Business and the Constitution b Congress passed the Health Insurance Portability and Accountability Act which defines and limits the circumstances in Which an individual s protected health information may be used or disclosed c The USA Patriot Act gives government officials increased authority to monitor Internet activities and to gain access to personal financial information and student information To gain access to these communications the government must certify that the information likely to be obtained by such monitoring is relevant to an ongoing criminal investigation C Privacy rights are protected to some extent under tort law Internet law and employment law The Federal Trade Commission has played an active role in protecting the privacy rights of online consumers Chapter 7 Criminal Law and Cyber Crime 1 Civil Law and Criminal Law A Civil law pertains to duties that exist between persons or between persons and their governments Criminal law has to do with crime a wrong against society set forth in a statute and punishable by a fine andor imprisonment sometimes death B There are numerous procedural safeguards to protect the rights of defendants in criminal cases such as having the higher burden of proof and harsher sanctions a In a civil case the plaintiff must prove their case by a preponderance of the evidence the plaintiff must convince the court that based on the evidence presented it is more likely than not that the plaintiff s allegations are true Only of the jury need to be in agreement for a verdict In a criminal case the state must prove its case beyond a reasonable doubt The government prosecutor must prove beyond a reasonable doubt that the defendant has committed every essential element of the offense with which they are charged The jury s verdict must be unanimous b Sanctions imposed on criminal wrongdoers are harsher than those applied in civil cases and are designed to punish those who commit crimes and to deter others from committing similar acts in the future They can include fines andor loss of one s liberty by incarceration in a jail or prison C Some torts such as assault and battery provide a basis for a criminal prosecution as well as a civil action in tort D Crimes are classified as felonies or misdemeanors Felonies are serious crimes punishable by death or imprisonment for more than 1 year Misdemeanors are less serious crimes punishable by a fine or confinement for up to 1 year Petty offenses are minor Violations that are considered a subset of misdemeanors 2 Criminal Liability A In order for a person to be convicted of a crime the performance of a prohibited act must happen with a specific state of mind intent on the part of the actor B A prohibited act is referred to as the actus reus guilty act For a crime to exist the guilty act must cause some hard to a person or to property or attempt to The person must have specifically intended to commit the crime to be convicted of an attempt C A wrongful mental state mens rea is typically required to establish criminal liability a A defendant is criminally reckless if he or she consciously disregards a substantial and unjustifiable risk b Criminal negligence involves the mental state in which the defendant takes an unjustified substantial and foreseeable risk that results in harm Homicide can be classified as involuntary manslaughter when it results from an act of criminal negligence and there is no intent to kill Chapter 7 Criminal Law and Cyber Crime C Strict liability crimes are offenses that do not require a wrongful mental state to establish criminal liability i Many of the criminal offenses listed in the federal criminal code do not require a specific mental state Strict liability crimes are particularly common in environmental laws laws aimed at combatting illegal drugs and other laws affecting public health safety and welfare ii Many states have laws that punish behavior as criminal without the need to show criminal intent iii Overcriminalization is the use of criminal law as the main tool to solve social problems When the requirement of intent is removed the idea that crimes are wrong against a society is undermined D A corporation is a legal entity created under the laws of a state Corporations cannot be imprisoned but they can be fined or denied certain legal privileges a Corporations are normally liable for the crimes committed by their agents and employees within the course and scope of their employment Corporate directors and officers are personally liable for the crimes they commit regardless of whether the crimes were committed for their private benefit or on the corporation s behalf Under the responsible corporate officer doctrine a court may impose criminal liability on a corporate officer who participated in directed or merely knew about a given criminal violation 3 Types of Crimes A Criminal acts can generally be grouped into five broad categories violent crime property crime public order crime whitecollar crime and organized crime B Violent crimes are crimes against persons because they cause others to suffer harm or death Robbery taking of money personal property or any other article of value from a person by means of force or fear is also a violent crime C The most common type of criminal activity is property crime where the goal of the offender is some form of economic gain or the damaging of property a Burglary was defined as breaking and entering the dwelling of another at night with the intent to commit a felony Today the time of day and element of breaking are irrelevant and the building does not have to be a dwelling Larceny involved unlawful taking and carrying away of someone else s personal property with intent to permanently deprive the owner of possession stealing or theft It does not involve force or fear Obtaining goods by means of false pretenses is a form of theft that involves trickery or fraud Petty theft is theft of a small quantity of Chapter 7 Criminal Law and Cyber Crime cash or lowvalue goods Grand theft is the theft of a larger amount of cash or highervalue property It is a crime to receive goods that a person knows or should have known was stolen or illegally obtained which implies intent to deprive the true owner of those goods Arson is the willful and malicious burning of a building sometimes vehicles and other items of personal property Forgery is the fraudulent making or altering of any writing in a way that changes the legal rights and liabilities of another D Victimless crimes are crimes that normally harm only the offender but are detrimental to society as a whole because they may create an environment that gives rise to property and violent crimes E Whitecollar crimes are crimes that occur in the business context They usually involve an illegal act or series of acts committed by an individual or business entity using some nonviolent means to obtain a personal or business advantage a b Embezzlement is when a person who is entrusted with another person s property fraudulently appropriates it Mail and wire fraud are federal crimes where it is illegal to devise any scheme that uses US mail commercial carriers or wire with the intent to defraud the public Bribery involves offering to gives something of value to a person in an attempt to in uence that person who is usually but not always a public official to act in a way that serves a private interest Federal bankruptcy laws allows individuals and businesses to be relieved of oppressive debt through bankruptcy proceedings where numerous whitecollar crimes may be committed throughout the phases Insider trading happens when an individual obtains inside information about the plans of a publicly listed corporation makes stocktrading profits by purchasing or selling corporate securities based on the information The Economic Espionage Act makes the theft of trade secrets a form of intellectual property that can be extremely valuable a federal cr1me F Organized crime operates illegitimately by providing illegal goods and services a b Money laundering is engaging in financial transactions to conceal the identity source or destination of illegally gained funds The Racketeer In uenced and Corrupt Organizations Act RICO makes it a federal crime to use income obtained from racketeering activity to purchase any interest in an enterprise acquire or maintain an interest in an enterprise through racketeering activity conduct or participate in the affairs of an enterprise through racketeering activity Chapter 7 Criminal Law and Cyber Crime 4 and conspire to do any of the preceding activities in order to curb the entry of organized crime i The broad language of RICO has allowed it to be applied in cases that have little or nothing to do with organized crime If a person commits two of these offenses they are guilty of racketeering activity ii In the case of a RICO violation the government can seek civil penalties The statute allows private individuals to sue violators and potentially recover treble damages Defenses to Criminal Liability A Persons charged with crimes may be relieved of criminal liability if they can show that their criminal actions were justified under the circumstances Procedural violations may also operate as defenses B Selfdefense is the bestknown defense to criminal liability The defense of one s dwelling defense of other property and prevention of a crime also justify the use of force C Criminal defendants can sometimes be relieved of liability by showing necessity that a criminal act was necessary to prevent an even greater harm Insanity may be a defense to a criminal charge if the person suffers from a mental illness and may be incapable of the state of mind required to commit a crime a Federal courts and some states use the substantialcapacity test set forth in the Model Penal Code b It is very difficult to prove insanity and is therefore rarely used and is usually not successful E A mistake of fact can excuse criminal responsibility if it negates the mental state necessary to commit a crime F Duress exists when the wrongful threat of one person induces another person to perform an act that they would not otherwise have performed Entrapment is a defense designed to prevent police officers or other government agents from enticing persons to commit crimes in order to later prosecute them for those crimes Statute of limitations states that the state must initiate criminal prosecution within a certain number of years I The state can grant immunity from prosecution when it wishes to obtain information from a person accused of a crime Criminal Procedures A Criminal procedures are designed to protect the constitutional rights of individuals and to prevent the arbitrary use of power on the part of the government B The Fourth Amendment protects the people against unreasonable search and seizure Law enforcement officers normally must obtain a search warrant an order from a judge or other public official authorizing the search of seizure before searching or seizing private property Chapter 7 Criminal Law and Cyber Crime a Law enforcement officers need reasonable grounds probable cause to obtain a search warrant b General warrants are prohibited A particular description of what is to be searched or seized is required C The exclusionary rule states that any evidence obtained in violation of the constitutional rights spelled out in the Fourth Fifth and Sixth Amendments generally is not admissible at trial The USSC issued a landmark decision in Miranda V Arizona though the procedural rights required by the Court in this case are familiar to almost every American E The Supreme Court has made a number of exceptions to the Miranda rule F There are three phases to the criminal process arrest indictment or information and trial a Before a warrant can be issued there must be probable cause to believe that the individual in question has committed a crime Arrests can be made without a warrant if there is not time to get one but the action of the arresting officer is still judged by the standard of probable cause b Individuals must be formally charged with having committed specific crimes before they can be brought to trial If issued by a grand jury the charge is called an indictment A grand jury s function is to determine whether a reasonable basis exists for believing that a crime has been committed and that a trial ought to be held c A criminal trial where the entire burden of proof is on the prosecutor takes place G The US Sentencing Commission performs the task of standardizing sentences for federal crimes a The USSC changed the federal sentencing guidelines from mandatory to advisory because certain provisions were unconstitutional b Penalties can be enhanced for whitecollar crimes violations of the SarbanesOxley Act and violations of security laws Cyber Crime A Computer crime is any violation of criminal law that involves knowledge of computer technology for its perpetration investigation or prosecution Cyber crime is any criminal activity occurring via a computer in the virtual community of the Internet B Cyber fraud is fraud any misrepresentation knowingly made with the intention of deceiving another and on which a reasonable person would and does rely to their detriment committed over the Internet a Online auction fraud is when a person puts up an expensive item for auction and then refuses to send the product after receiving payment or sends an item worth less than the one offered in the auction b Online retail fraud is when consumers pay directly for items that are never delivered Chapter 7 Criminal Law and Cyber Crime C Cyber theft is when a thief steals data stored in a networked computer with Internet access from anywhere on the globe a d Identity theft is when the wrongdoer steals a form of identification name date of birth SSN and uses the information to access the Victim s financial resources Phishing is when the perpetrator fishes for financial data and passwords from consumers by posing as a legitimate business Employment fraud is when a criminal poses as an employer and asks those looking for employment to reveal enough information to allow for identity theft Companies take risks storing their online customers creditcard numbers which are targets for cyber thieves D A hacker is someone who uses one computer to break into another Botnets are networks of computers that have been appropriated by hackers without the knowledge of their owners a Botnets are a form of malware any program that is harmful to a computer or computer user Another form of malware is a virus which can be programmed to perform a number of functions A wouldbe thief can rent online services of cyber criminals to do the work for a small price Cyberterrorists may target businesses with the goal of a wholesale theft of data such as merchant s customer files or the monitoring of a computer to discover a business firm s plans and transactions E Determining the location of a cyber crime and identifying a criminal in cyber space present significant challenges for law enforcement a b Geographic boundaries do not apply in cyberspace Laws written to protect physical property are often difficult to apply in cyberspace The Computer Fraud and Abuse Act provides that a person who accesses a computer online without authority to obtain classified restricted or protected data is subject to criminal prosecution This theft is a felony Chapter 8 International Law in a Global Economy 1 International Law A The major difference between international law and national law is that government authorities can enforce national law No government can enforce international law Sovereign nations voluntarily agree to be governed in certain respects by international law usually with the purpose of facilitating international trade and commerce B There are three sources of international law international customs treaties and agreements and international organizations and conferences a Treaties and other explicit agreements between or among foreign nations provide another important source of international law A treaty must be authorized an ratified by the supreme power of each nation b In international organization refers to an organization composed mainly of officials of member nations and usually established by treaty i The General Assembly of the United Nations has adopted numerous nonbinding resolutions and declarations that embody principles of international law ii The 1980 Convention on Contracts for the International Sale of Goods is designed to settle disputes between parties to sales contracts It spells out duties of international buyers and sellers that will apply if the parties have not agreed otherwise in their contracts C Companies operating in foreign nations are subject to the laws of those nations International disputes are often resolved through the court systems of foreign nations a In a common law system the courts independently develop the rules of governing certain areas of law The common law rules apply to all areas not covered by statutory law b Civil law systems refer to a codified law an ordered grouping of legal principles enacted into law by a legislature or other governing body The primary source of law is a statutory code c The legal system common in Islamic countries has laws in uenced by sharia the religious law of Islam Sharia is a comprehensive code of principles that governs public and private lives of persons of Islamic faith D A number of legal principles and doctrines have evolved and are employed by the courts of various nations to resolve or reduce con icts that involve a foreign element The important legal documents are based primarily on courtesy and respect and are applied in interests of maintaining harmonious relations among nations a The principle of comity refers to legal reciprocity where one nation will defer and give effect to the government acts of another country as long as the acts are consistent with the law and public policy of the accommodating nation Chapter 8 International Law in a Global Economy b The act of state doctrine provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within the latter s own territory i Expropriation occurs when a government seizes a privately owned business or privately owned goods for a proper public purpose and awards just compensation Confiscation is when the government seizes property for an illegal purpose and without just compensation ii The act of state doctrine and the doctrine of sovereign immunity tend to shield foreign nations from the jurisdiction of US courts 0 The doctrine of sovereign immunity exempts foreign nations from the jurisdiction of the US courts when certain conditions are satisfied i A foreign state is not immune from the jurisdiction of US courts when the foreign state 1 Waived its immunity either explicitly or by implication 2 Engaged in commercial activity within the US or in commercial activity outside the US that has a direct effect in the US 3 Has committed a tort in the US or has violated certain international laws ii A foreign state includes a political subdivision of a foreign state and an instrumentality department or agency of any branch of a government of a foreign state Commercial activity is defined as a regular course of commercial conduct transaction or act that is carried out by a foreign state within the US 2 Doing Business Internationally A A US domestic firm can engage in international business transactions B In direct exporting a US company signs a sales contract with a foreign purchaser that provides for the conditions of shipment and payment for the goods Indirect exporting is if a sufficient business develops in a foreign country a US company may establish a specialized marketing organization there by appointing a foreign agent or distributor a A distribution agreement is contract that sets out the terms and conditions of the distributorship price currency guarantee of supply available method of payment etc b The National Export Initiative was created in an effort to increase US exports Some say it was to reduce outsourcing having manufacturing or other activities performed in lowerwage countries such as China and India i The Export Promotion Cabinet consists of officials from 16 government agencies and departments who must submit detailed plans steps they will take to increase US exports Chapter 8 International Law in a Global Economy ii The ExportImport Bank of the US increased financing that it makes available to small and mediumsized businesses C Foreign manufacturing facilities are an alternative to direct or indirect exporting US firms typically establish manufacturing plants abroad when they believe that by doing so they will reduce costs a A US firm may license a foreign manufacturing company to use its copyrighted patented or trademarked intellectual property or trade secrets It allows the foreign firm to use an established brand name for a fee Franchising is when the owner of a trademark trade name or copyright licenses another to use the mark name or copyright under certain conditions or limitations in the selling of goods or services Another way to expand into a foreign market is to establish a wholly owned subsidiary firm in a foreign country The parent company in the US maintains complete ownership of all facilities in the foreign country and has total authority and control over all phases of the operation In a joint venture the US company owns only a part of the operation while someone else owns the rest 3 Regulation of Speci c Business Activity A B Nations impose laws to restrict or facilitate international business Controls may also be imposed by international agreements Firms that invest in foreign nations face the risk that the foreign government may expropriate the investment property This does not violate international law but confiscation does Congress cannot impose any export taxes but they can restrict or encourage them with export quotas restrictions on technology exports and incentives and subsidies All nations have restrictions on imports including strict prohibitions quotas and tariffs a b The Trading with the Enemy Act prohibits goods from being imported form nations that have been designated enemies of the US Quotas are a limit on the amounts of goods that can be imported Tariffs are taxes on imports it s usually a percentage of the value of the import but can be a at rate per unit Countries sometimes impose tariffs on goods from a particular nation in retaliation for political acts The US has laws specifically directed at what it sees as unfair international trade practices Dumping is the sale of imported goods at less than fair value The International Trade Commission and the International Trade Administration are instrumental in imposing antidumping duties E Restrictions on imports are trade barriers The elimination of trade barriers is sometimes seen as essential to the world s economic wellbeing Each member of the World Trade Organization is required to grant normal trade relations Chapter 8 International Law in a Global Economy status to other member countries This means that each member is obligated to treat other members at least as well as it treats the others a The European Union created the Common Market It is a single integrated trading unit made up of 28 European nations b The North American Free Trade Agreement created a regional trading unit consisting of Canada Mexico and the US Its goal was to eliminate tariffs on goods imported from countries outside the NAFTA trading unit 0 The Central AmericaDominican RepublicUnited States Free Trade Agreement s purpose was to reduce trade tariffs and improve market access among all of the signatory nations d The Republic of KoreaUnited States Free Trade Agreement s provisions eliminated 95 of each nation s tariffs on industrial and consumer exports within five years 4 International Dispute Resolution A International contacts agree in advance to be bound by the decision of a B specified third party in the event of a dispute Under the New York Convention a court will compel the parties to arbitrate their dispute if all of the following are true there is a written recorded agreement to arbitrate the matter the agreement provides for arbitration in a convention signatory nation the agreement arises out of commercial legal relationship and one party to the agreement is not a US citizen both parties cannot be US citizens If a sales contract does not include an arbitration clause litigation may occur The lawsuit will be heard by a court in the specified forum and decided according to that forum s law If it does not specify a forum and choice of law proceedings will be more complex and legally uncertain 5 US Laws in a Global Context A The globalization of business raises questions about the extraterritorial B application of a nation s laws US antitrust laws may subject firms in foreign nations to their provisions as well as protect foreign consumers and competitors from violations committed by US citizens The international application of tort liability is growing in significance and controversy as an increasing number of US plaintiffs are suing foreign entities for torts that these entities have allegedly committed overseas Federal laws in the US prohibit discrimination on the basis of race color national origin religion gender age and disability These laws generally apply extraterritorially


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