Compliance with foreign law

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 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 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 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 valueadded 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
Federico Ramirez Rodríguez, identificado con la C.C.: 9.876.765

de Bogotá D.C., es el presidente de la Junta Directiva de la

empresa Compumundohipermegared S.A., NIT. 891.468.732-1,

cuyo domicilio se encuentra en la ciudad de Neiva (H) y es

representada por Barney Gomez, identificado con la C.C.:

12.345.678 de Medellín (Antioquia), presentaron hoy un

reemplazo de la Factura Proforma No. RRC1009 al Banco

Davivienda, NIT. 813.010.555-1, por la No. RRC1087, de la

solicitud 0012321 presentada en el Banco de Bogotá, NIT.

901.146.555-0, el día 15 de octubre de 2019, por unos gastos de

exportación de bienes de una de exportación definitiva, cuya

solicitud es 0001234, reintegrara 800 dólares cuya negociación

se presenta en $3.504,25. Se aclara, que se incluirán costos de

aduana por valor de 600 dólares por Reintegro por

exportaciones de Café, de referencia JJR0106. Calcule el valor

de la transacción.