Export Regulations, Customs Benefits, and Tax Incentives

This chapter covers a wide range of regulations, procedures, and practices that fall into three categories: (1) regulations that exporters must follow to comply with U.S. law; (2) procedures that exporters should follow to ensure a successful export transaction; and (3) programs and certain tax procedures that open new markets or provide financial benefits to exporters.

Export Regulations

Most export controls are administered by the Bureau of Export Administration (BXA) in the U.S. Department of Commerce. Exporters should remember that violations of the Export Administration Regulations (EAR) carry both civil and criminal penalties. Whenever there is any doubt about how to comply with export regulations, Department of Commerce officials or qualified professional consultants should be contacted for assistance.

An annual subscription to the EAR provides the basic manual and supplemental updates for about a year. The EAR were restructured in 1996 to clarify the regulatory language, simplify their use, and to generally make the export control regulations more user-friendly. The National Technical Information Service (NTIS) will provide the EAR in electronic or paper formats with three update bulletins (to the those subscribing to the paper version) per cycle. The annual subscription fee is $89.00 for the paper format; $252.00 for the electronic version; and $100 for cd rom. For additional information on the EAR and their availability, contact

National Technical Information Service (NTIS)
5285 Port Royal Road
Springfield, VA 22161
Tel: (703) 605-6060; Fax: (703) 605-6900
Email: info@ntis.fedworld.gov; Web site: www.fedworld.gov

Some export controls are administered by other U.S. government departments and agencies for national security or foreign policy purposes. These offices include the Department of State, the Office of Foreign Assets Control, the Nuclear Regulatory Commission, and the Patent and Trademark Office.

Export Administration Regulations

Recent Overhaul of the EAR

On September 30, 1993, the Secretary of Commerce submitted to the Congress a report of the Trade Promotion Coordinating Committee (TPCC), which included among its goals to undertake a comprehensive review of the Export Administration Regulations to simplify, clarify, and make the regulations more user-friendly.

In November 1993, BXA organized a Task Group, drawn from several of its offices, to carry out the TPCC recommendation. The interim rule was published in the Federal Register on March 25, 1996 (Volume 61, Number 58, pages 12713-12763. It became effective April 24, 1996, although final compliance with this interim rule was not compelled until November 1, 1996. The repeal of the importer statement requirement for General License GCT was effective immediately, as was the Special Comprehensive License provisions in part 752 are effective immediately. Until March 25, 1997, holders of issued and outstanding special licenses may continue to use those special licenses according to their terms and conditions and according to the special license provisions of the earlier EAR.

Items Subject to the EAR

The following items are subject to the EAR (according to EAR Sec. 734.3(a):

1. All items in the United States, including in a U.S. Foreign Trade Zone or moving in transit through the United States from one foreign country to another;

2. All U.S. origin items wherever located;

3. U.S. origin parts, components, materials or other commodities incorporated abroad into foreign-made products, U.S. origin software commingled with foreign software, and U.S. origin technology commingled with foreign technology, in quantities exceeding de minimis levels as described in EAR Sec. 734.4 and Supplement No. 2 of Sec. 734;

4. Certain foreign-made direct products of U.S. origin technology or software, as described in Sec. 736.2(b)(3) of the EAR. The term "direct product" means the immediate product (including processes and services) produced directly by the use of technology or software; and

5. Certain commodities produced by any plant or major component of a plant located outside the United States that is a direct product of U.S.-origin technology or software, as described in Sec. 736.2(b)(3) of the EAR.

Items Not Subject to the EAR

The following items are not subject to the EAR (according to EAR Sec. 734.3(b):

1. Items that are exclusively controlled for export or reexport by the following departments and agencies of the U.S. Government which regulate exports or reexports for national security or foreign policy purposes:

Department of State. The International Traffic in Arms Regulations (22 CFR part 121) administered by the Office of Defense Trade Controls relate to defense articles and defense services on the U.S. Munitions List. Section 38 of the Arms Export Control Act (22 USC 2778).
Treasury Department, Office of Foreign Assets Control (OFAC). Regulations administered by OFAC implement broad controls and embargo transactions with certain foreign countries. These regulations include controls on exports and reexports to certain countries (31 CFR chapter V). Trading with the Enemy Act (50 USC app. section 1 et seq.), and International Emergency Economic Powers Act (50 USC 1701, et seq.)
U.S. Nuclear Regulatory Commission (NRC). Regulations administered by NRC control the export and reexport of commodities related to nuclear reactor vessels (10 CFR part 110). Atomic Energy Act of 1954, as amended (42 USC part 2011 et seq.).
Department of Energy (DOE). Regulations administered by DOE control the export and reexport of technology related to the production of special nuclear materials (10 CFR part 810). Atomic Energy Act of 1954, as amended (42 USC section 2011 et seq.).
Patent and Trademark Office (PTO). Regulations administered by PTO provide for the export to a foreign country of unclassified technology in the form of a patent application or an amendment, modification, or supplement thereto or division thereof (37 CFR part 5). BXA has delegated authority under the Export Administration Act to the PTO to approve exports and reexports of such technology which is subject to the EAR. Exports and reexports of such technology not approved under PTO regulations must comply with the EAR.

2. Prerecorded phonograph records reproducing in whole or in part, the content of printed books, pamphlets, and miscellaneous publications, including newspapers and periodicals; printed books, pamphlets, and miscellaneous publications including bound newspapers and periodicals; children's picture and painting books; newspaper and periodicals, unbound, excluding waste; music books; sheet music; calendars and calendar blocks, paper; maps, hydrographical charts, atlases, gazetteers, globe covers, and globes (terrestrial and celestial); exposed and developed microfilm reproducing, in whole or in part, the content of any of the above; exposed and developed motion picture film and soundtrack; and advertising printed matter exclusively related thereto.

3. Publicly available technology and software that:

Are already published or will be published as described in EAR Sec. 734.7;
Arise during, or result from, fundamental research, as described in EAR Sec. 734.8;
Are educational, as described in EAR Sec. 734.9; or
Are included in certain patent applications, as described in EAR Sec. 734.10.

4. Foreign made items that have de minimis U.S. content based on the principles described in EAR Sec. 734.4.

Licensing Requirements

Under the simplified EAR, no license or other authorization is required for any transaction under BXA jurisdiction unless the regulations affirmatively state the requirement. Previous regulations stated that all exports were prohibited without either a general license or a validated from BXA. In addition, the terms "general license" and "validated license" have been dropped. "License" is now used only to refer to authorization issued by BXA upon application. The many general licenses which previously existed have been converted into a smaller number of exceptions to require the exporter to seek a license when the Commerce Control List indicates that the particular item going to the stated country generally requires a license.

The Ten General Prohibitions

The affirmative statements of the need to obtain a license have been consolidated into ten general prohibitions, found in EAR Sec. 736. They consist, very briefly, of the following:

1. Exports and reexports. Export and reexport of controlled items to listed countries.

2. Parts and components reexports. Reexport and export from abroad of foreign-made items incorporating more than a de minimis amount of controlled U.S. content.

3. Foreign-produced direct product reexports. Reexport and export from abroad of the foreign-produced direct product of U.S. technology and software.

4. Denial orders. Engaging in actions prohibited by a denial order.

5. End-use end-user. Export or reexport to prohibited end-user or end-users.

6. Embargo. Export or reexport to embargoed destinations.

7. U.S. person proliferation activity. Support of proliferation activities.

8. In-Transit. In-transit shipments and items to be unladen from vessels and aircraft.

9. Orders, Terms and Conditions. Violation of any orders, terms, or conditions.

10. Knowledge Violation to Occur. Proceeding with transactions with knowledge that a violation has occurred or is about to occur.

Determining Need for a BXA License

Of those exports and reexports subject to the Export Administration Regulations (EAR), a relatively small percentage require a license from BXA. License requirements are dependent upon an item's technical characteristics, the destination, the end-use, and the end-user, and other activities of the end-user. You will need the following five facts to determine your obligations under the EAR:

1. What is it?

What an item is, for export control purposes, depends on its classification, which is its place on the Commerce Control List (see part 774 of the EAR).

2. Where is it going?

The country of ultimate destination for an export or reexport also determines licensing requirements (see parts 738 and 774 of the EAR concerning the Country Chart and the Commerce Control List).

3. Who will receive it?

The ultimate end-user of your item cannot be a bad end-user. See General Prohibition Four (Denial Orders) in Sec. 736.2(b)(4) and parts 744 and 764 of the EAR for a reference to the list of persons you may not deal with.

4. What will they do with it?

The ultimate end-use of your item cannot be a bad end-use. See General Prohibition Five (End-Use End-User) in Sec. 736.2(b)(5) and part 744 of the EAR for general end-use and end-user restrictions.

5. What else do they do?

Conduct such as contracting, financing, and freight forwarding in support of a proliferation project (as described in Sec. 744.6 of the EAR) may prevent you from dealing with someone.

The Department of Commerce, Bureau of Export Administration (BXA) is the primary licensing agency for dual use exports (commercial items which could have military applications). Other departments and agencies have regulatory jurisdiction over certain types of exports and reexports. For example, the State Department licenses the export defense articles and services, while certain nuclear materials and equipment are licensed by the Nuclear Regulatory Commission.

For assistance in determining which U.S. Government agency has licensing jurisdiction over your export see .

Commodity Classification

To determine licensing requirements, you must first classify your item against the Commerce Control List (CCL). All commodities, technology or software subject to the licensing authority of BXA are included in the CCL which is found in Supplement 1 to Part 774 of the EAR. On the CCL, individual items are identified by an Export Control Classification Number (ECCN).

To classify your product, you should begin with a review of the general characteristics of your item. This will usually guide you to the appropriate category on the CCL. Once the appropriate category is identified, you should match the particular characteristics and functions of your item to a specific ECCN.

You can also request an official commodity classification from BXA. A commodity classification request requires the submission of an application and technical specifications of your commodity, software or technology to BXA. To submit a classification request use Multipurpose Application Form BXA-748P or its electronic equivalent (ERIC).

Dual Use Licensing

The term "dual use" is sometimes used to distinguish the types of items covered by the EAR from those that are covered by the regulations of certain other export licensing agencies. In general, the term dual use serves to distinguish EAR-controlled items that can be used both in sensitive (e.g., military or nuclear) and other, non- sensitive applications from those that are (a) weapons or military-related in use or design and subject to the controls of the Department of State or (b) subject to the nuclear-related controls of the Department of Energy or the Nuclear Regulatory Commission. Note, however, that although the short-hand term dual use may be employed to refer to the entire scope of the EAR, the EAR also apply to some items that have solely civil uses.

U.S. national interests are safeguarded through BXA's effective administration of export control laws relating to dual-use technologies. Controls are maintained on exports from the United States, and reexports of U.S.-origin items from foreign destinations, on strategic commodities and technical data worldwide to prevent the diversion of such strategic items to end-users or end-uses of concern.

The effectiveness of these controls is enhanced by their being maintained as part of multilateral control arrangements. The Wassenaar Arrangement, the Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control Regime are the four multilateral export control regimes in which the United States participates. BXA implements U.S. foreign policy controls such as crime control, antiterrorism and regional stability and is responsible for export controls on terrorist countries. BXA also administers export controls to protect the United States from the adverse impact of the unrestricted export of commodities in short supply (e.g. some crude oil, other petroleum products, and unprocessed western red cedar).

Commodity Jurisdiction

A commodity jurisdiction (CJ) request is used to determine whether an item or service is subject to the export licensing authority of the Department of Commerce or the Department of State, Office of Defense Trade Controls (DTC). BXA is the primary licensing agency for dual use exports (commercial items which could have military applications), while the State Department licenses defense articles and services. If you are not completely sure of the export licensing jurisdiction of an item, you should request a CJ determination. You can also submit a CJ request if you feel that jurisdiction of an item is incorrectly assigned and should be transferred to another agency.

To submit a CJ request, send a letter to DTC, along with technical specifications, brochures, etc. describing the items for consideration. If you believe that the current jurisdiction of the item is incorrectly assigned, provide an explanation outlining the reasons. A CJ determination will only identify the proper licensing authority for an item; it is not a license or approval to export. Once the jurisdiction of an item is established, you should contact the proper licensing agency (Commerce or State) to determine the licensing requirement of the item. For specific instructions you may contact DTC by telephone at (703) 875-6644, or via fax at (703) 875-6647, attention: PM/DTC/CJ.

License Exceptions

If you decide by reviewing the CCL in combination with the Country Chart that a license is required for your destination, you should determine whether a License Exception will except you from that requirement. License Exceptions are generally not available to overcome General Prohibitions Four through Ten. However, selected License Exceptions for embargoed destinations are specified in part 746 of the EAR and License Exceptions for short supply controls are specified in part 754 of the EAR.

Unauthorized Parties

Various requirements of the EAR are dependent upon a person's knowledge of the end-use, end-user, ultimate destination, or other facts relating to a transaction or activity. These provisions include the nonproliferation-related "catch-all" sections and the prohibition against proceeding with a transaction with knowledge that a violation of the EAR has occurred or is about to occur.

If you are being asked to participate in an export transaction that you believe may be illegal, or if you have information that such an illegal transaction may be about to occur, you are encouraged to contact BXA's Office of Export Enforcement immediately at (800) 424-2980 or the Office of Exporter Services at (202) 482-4532.

You may also wish to check the parties to your transaction against the "List of Specially Designated Nationals" maintained by the Department of the Treasury's Office of Foreign Assets Control.

If you think you may be dealing with an "unauthorized party," there are several steps you should take:

Read and understand the "Know Your Customer Guidance" provided in the EAR (and reprinted below). It will help you recognize and avoid prohibited transactions.
Be familiar with the "Red Flag Indicators" (listed on ) that can help you recognize illegal, or potentially illegal, transactions.
Always check the parties to your transaction (including freight forwarders, intermediate consignees, and the ultimate consignee) against the most recent "Denied Persons List."

"Know Your Customer" Guidance

BXA provides the following guidance on how individuals and firms should act under this knowledge standard. This guidance does not change or interpret the EAR.

1. Decide whether there are "red flags".

Take into account any abnormal circumstances in a transaction that indicate that the export may be destined for an inappropriate end-use, end-user, or destination. Such circumstances are referred to as "red flags". Included among examples of red flags are orders for items that are inconsistent with the needs of the purchaser, a customer declining installation and testing when included in the sales price or when normally requested, or requests for equipment configurations that are incompatible with the stated destination (e.g., 120 volts in a country with 220 volts). Commerce has developed lists of such red flags that are not all-inclusive but are intended to illustrate the types of circumstances that should cause reasonable suspicion that a transaction will violate the EAR.

2. If there are "red flags", inquire.

If there are no "red flags"' in the information that comes to your firm, you should be able to proceed with a transaction in reliance on information you have received. That is, absent "red flags"' (or an express requirement in the EAR), there is no affirmative duty upon exporters to inquire, verify, or otherwise "go behind" the customer's representations. However, when "red flags" are raised in information that comes to your firm, you have a duty to check out the suspicious circumstances and inquire about the end-use, end- user, or ultimate country of destination. The duty to check out "red flags" is not confined to the use of License Exceptions affected by the "know" or "reason to know" language in the EAR. Applicants for licenses are required by part 748 of the EAR to obtain documentary evidence concerning the transaction, and misrepresentation or concealment of material facts is prohibited, both in the licensing process and in all export control documents. You can rely upon representations from your customer and repeat them in the documents you file unless red flags oblige you to take verification steps.

3. Do not self-blind.

Do not cut off the flow of information that comes to your firm in the normal course of business. For example, do not instruct the sales force to tell potential customers to refrain from discussing the actual end-use, end-user, and ultimate country of destination for the product your firm is seeking to sell. Do not put on blinders that prevent the learning of relevant information. An affirmative policy of steps to avoid "bad" information would not insulate a company from liability, and it would usually be considered an aggravating factor in an enforcement proceeding.

4. Employees need to know how to handle "red flags".

Knowledge possessed by an employee of a company can be imputed to a firm so as to make it liable for a violation. This makes it important for firms to establish clear policies and effective compliance procedures to ensure that such knowledge about transactions can be evaluated by responsible senior officials. Failure to do so could be regarded as a form of self-blinding.

5. Reevaluate all the information after the inquiry.

The purpose of this inquiry and reevaluation is to determine whether the "red flags" can be explained or justified. If they can, you may proceed with the transaction. If the "red flags" cannot be explained or justified and you proceed, you run the risk of having had "knowledge" that would make your action a violation of the EAR.

6. Refrain from the transaction or advise BXA and wait.

If you continue to have reasons for concern after your inquiry, then you should either refrain from the transaction or submit all the relevant information to BXA in the form of an application for a validated license or in such other form as BXA may specify.

Industry has an important role to play in preventing exports and reexports contrary to the national security and foreign policy interests of the United States. BXA will continue to work in partnership with industry to make this front line of defense effective, while minimizing the regulatory burden on exporters. If you have any question about whether you have encountered a "red flag", you may contact the Office of Export Enforcement at (800) 424-2980 or the Office of Exporter Services at (202) 482-4532.

Red Flag Indicators

Possible indicators that an unlawful diversion might be planned by your customer include the following:

1. The customer or purchasing agent is reluctant to offer information about the end-use of a product.

2. The product's capabilities do not fit the buyer's line of business; for example, a small bakery places an order for several sophisticated lasers.

3. The product ordered is incompatible with the technical level of the country to which the product is being shipped. For example, semiconductor manufacturing equipment would be of little use in a country without an electronics industry.

4. The customer has little or no business background.

5. The customer is willing to pay cash for a very expensive item when the terms of the sale call for financing.

6. The customer is unfamiliar with the product's performance characteristics but still wants the product.

7. Routine installation, training or maintenance services are declined by the customer.

8. Delivery dates are vague, or deliveries are planned for out- of-the-way destinations.

9. A freight forwarding firm is listed as the product's final destination.

10. The shipping route is abnormal for the product and destination.

11. Packaging is inconsistent with the stated method of shipment or destination.

12. When questioned, the buyer is evasive or unclear about whether the purchased product is for domestic use, export or reexport.

BXA Export Enforcement Programs

The primary roles of BXA's Export Enforcement (EE) program are to:

prevent the illegal export of dual-use items before they occur;
Investigate and assist in the prosecution of violators of the Export Administration Regulations (EAR) and the Fastener Quality Act (FQA); and
Inform and educate exporters, freight forwarders, and manufacturers of their enforcement responsibilities under the EAR and FQA.

Pre-License Checks and Post-Shipment Verification. All export license applications are screened electronically by EE to ensure items are not illegally exported. In addition EE reviews specific individual license applications to assess diversion risks, identify potential violations, and determine the reliability of those receiving controlled U.S.-origin commodities or technical data. In some instances EE, or another Federal agency, requests that a pre-license check be conducted to determine the bona fides of the transaction and suitability of the end-user. The result of this check is factored into the licensing recommendation EE makes to BXA's licensing offices. In addition, EE carries out post-shipment verifications to ensure that a controlled U.S.-origin item has actually been delivered to the authorized ultimate consignee or end-user and that it is being used as claimed on the export license application.

Safeguards Verification Program. EE conducts numerous on-site safeguard verification trips around the world annually. During these trips, pre-license checks and post-shipment verifications are conducted on controlled U.S. goods, especially those of proliferation concern. In cases where EE's Safeguards Verification Teams discover items are being used inappropriately or in a manner that is inconsistent with an export license they work closely with host government officials to correct the situation. The EE verification teams also assess the suitability of foreign firms to receive U.S.-origin goods and technologies that require U.S. validated licenses.

SED Review Program. EE conducts on-site reviews of selected Shipper's Export Declarations (SED) at U.S. ports before goods are exported and again after shipments are made. These on-site reviews are conducted to uncover attempts to export items illegally which require a validated export license from the Department of Commerce. Items for export to destinations of concern and exports of proliferation concern are targeted specifically.

In addition to the preventive enforcement efforts under the SED Review Program, EE's Office of Enforcement Support identifies past shipments that may have violated the Export Administration Regulations and refers them to the Office of Export Enforcement (OEE) for further investigation. Over 450 investigations of suspected export control violations occur annually, based on the routine review of SEDs.

Visa Application Review Program. This program was initiated in 1990 to help prevent the unauthorized access to controlled U.S. technology or technical data by aliens visiting the United States. Under this program, information on visa applications is reviewed to detect and prevent possible violations of the Export Administration Regulations. Each year this program results in a number of recommendations against issuing visas being forwarded to the U.S. Department of State.

BXA Forms

Many BXA forms used in the export licensing process changed during the course of 1996. When ordering forms, check the list below to be certain you are ordering currently accepted forms. Limited quantities are available from BXA's Western Regional Office in California, and most local offices of the Department of Commerce. These forms are only available through the mail; they can not be faxed or sent by email. All forms are available free of charge. If you need more than ten copies of any one form you may submit a request by fax through BXA's Washington D.C. office at Fax: (202) 219-7179, or call the Exporter Counseling Division at Tel: (202) 482-4811.

The following forms remain unchanged:

BXA 645P: International Import Certificate

BXA 647P: Delivery Verification Certificate.

The following new forms are required as of June, 1996:

BXA 748P: Multipurpose Application
(Replaces BXA 622P & BXA685P & BXA699P)

BXA 748P-A: Item Appendix
(Replaces BXA 622P-A)

BXA 748P-B: End User Appendix
(Replaces BXA622P-B)

BXA 752P: Statement by Consignee in support of Special Comprehensive License
(Replaces BXA 6052P)

BXA 711: Statement by Ultimate Consignee and Purchaser
(Replaces BXA 629P)

The following forms have been discontinued:

BXA 648P: Notification of Delivery Verification Requirement

BXA 686P: Statement by Foreign Importer of Aircraft or Vessel Repair Parts

BXA 6026P: Service Supply Statement by U.S. Exporter

For More Information on Export Regulations

BXA Contacts

Web site: www.bxa.doc.gov/

Office of Exporter Services
Tel: (202) 482-0436; Fax: (202) 482-3322

Chemical & Biological Controls and Treaty Compliance
Tel: (202) 482-3825; Fax: (202) 482-0751

Strategic Industries and Economic Security
Tel: (202) 482-4506; Fax: (202) 482-5650

Office of Nuclear and Missile Technology Controls
Tel: (202) 482-4188; Fax: (202) 482-4145

Office of Strategic Trade and Foreign Policy Controls
Tel: (202) 482-0092; Fax: (202) 482-4094

Office of Export Enforcement
Tel: (202) 482-2252; Fax: (202) 482-5889

Office of Export Enforcement, Intelligence and Field Support Division
Tel: (202) 482-1208; Fax: (202) 482-0964

Export License Compliance Division
Tel: (202) 482-5914

Western Regional Office, Orange County, CA
Tel: (949) 660-0144; Fax: (949) 660-9347
Web site: www.primnet.com/~bxawest

Northern Calif. Branch Office, Santa Clara County, CA
Tel: (408) 998-7402; Fax: (408) 998-7470

Publications Related to the EAR

The Table of Denial Orders. Lists entities, domestic and international with whom certain export and export related transactions are prohibited or restricted. The Table of Denial Orders is constantly changing, and exporters are responsible for being up to date with the most current version. The Western Regional Office can mail out a recent, "not current" paper copy of the Table of Denial Orders. An electronic version can be accessed through BXA's Western Regional Office web site at www.primenet.com/~bxawest.

The Specially Designated Nationals List. Lists entities, both domestic and international with whom certain export and export related transactions are prohibited or restricted. The Specially Designated Nationals List is constantly changing, and exporters are responsible for being up to date with the most current version. This list is maintained by the Department of the Treasury Office of Foreign Assets Control and consists primarily of known front runner entities for trade with embargoed entities. An electronic version can be accessed through BXA's Western Regional Office web site at www.primenet.com/~bxawest.

Executive Orders and Federal Register Notices. Changes to the EAR are usually made public in one of two medium. Most often changes to the Export Administration Regulations are made public through publication in the Federal Register. Changes are occasionally made public through executive orders issued from the White House. When these orders do not contain an effective date the exporter should check with the local office of the BXA to determine their effective date.

Other Government Agencies Regulating Exports

The list below is organized by commodity. If your commodity is on this list your should check the indicated text Code of Federal Regulations (CFR) and/or contact the agency listed.

Carriers and Goods Destined for North Korea
Department of Transportation, Office of International Law, General Counsel (See 44 CFR part 403)
Tel: (202) 366-2972; Fax: (202) 366-9188.
Defense Services and Defense Articles
Department of State, Office of Defense Trade Controls (See 22 CFR parts 120 through 130)
Tel: (703) 875-6644; Fax: (703) 875-6647
Drugs, Chemicals and Precursors
Drug Enforcement Administration, International Chemical Control Unit (See 21 CFR parts 1311 through 1313)
Tel: (202) 307-7202; Fax: (202) 307-8570
Web site: www.usdoj.gov/dea/deahome.htm
Controlled Substances
Drug Enforcement Administration, International Drug Unit (See 21 CFR 1311 through 1313)
Tel: (202) 307-2414; Fax: (202) 307-8570
Web site: www.usdoj.gov/dea/deahome.htm
Defense-Related Technology
Department of Defense, Defense Threat Reduction Agency
Tel: (703) 604-5196; Fax: (703) 602-5840
Drugs and Biologics
Food and Drug Administration, Import/ Export (See 21 USC 301 et seq.)
Tel: (301) 594-3150; Fax: (301) 594-0165
Fish and Wildlife; Endangered Species
Department of the Interior, Chief Office of Management Authority
Tel: (703) 358-2093; Fax: (703) 358-2281
Web site: www.fws.govl
Foreign Assets and Transactions Controls
Department of Treasury, Office of Foreign Assets Control, Licensing (See 31 CFR parts 500 through 590)
Tel: (202) 622-2480; Fax: (202) 622-1657
Web site: www.treas.gov/ofac (Provides direct access to the list of Specially Designated Nationals)
Investigational Drugs
Food and Drug Administration, International Affairs (See 21 CFR 312.1106)
Tel: (301) 827-4480; Fax: (301) 443-0235
Web site: www.fda.gov
Medical Devices
Food and Drug Administration, Office of Compliance (See 21 USC 301 et seq.)
Tel: (301) 594-4699; Fax: (301) 594-4715
Web site: www.fda.gov
Natural Gas and Electric Power
Department of Energy, Office of Fossil Energy (See 10 CFR 205.300 through 205.379 and part 590)
Tel: (202) 586-6503; Fax: (202) 586-5146
Web site: www.fe.doe.gov
Nuclear Materials and Equipment
Nuclear Regulatory Commission, Office of International Programs (See 10 CFR part 110)
Tel: (301) 415-2344; Fax: (301) 415-2395
Web site: www.nrc.gov/NRC/nucmat.html
Nuclear Technology, Technical Data for Nuclear Weapons/Special Nuclear Materials
Department of Energy, Office of Arms Control and Non Proliferation, Export Control Division (See 10 CFR part 810)
Tel: (202) 586-2331; Fax: (202) 586-1348
Web site: http://nn43web.nn.gov/
Ocean Freight Forwarders
Federal Maritime Commission, Office of Freight Forwarders (See 46 CFR part 510)
Tel: (202) 523-5843; Fax: (202) 523-5830
Web site: www.fmc.gov
Patent Filing Data Sent Abroad
Department of Commerce, Patent and Trademark Office, Licensing and Review (See 37 CFR part 5)
Tel: (703) 306-4187; Fax: (703) 306-4196
Web site: www.uspto.gov/
Toxic Waste Exports
Environmental Protection Agency, Office of Solid Waste, International and Special Projects Branch
Tel: (703) 308-8751; Fax: (703) 308-0522
Web site: www.epa.gov/epaoswer/
U.S. Flagged or U.S. Manufactured Vessels Over 1,000 Gross Tons
U.S. Maritime Administration, Division of Vessel Transfer and Disposal (See 46 CFR part 221)
Tel: (202) 366-5821; Fax: (202) 493-2180
Web site: www.marad.dot.gov

Antidiversion, Antiboycott, and Antitrust Requirements

Antidiversion Clause

To help ensure that U.S. exports go only to legally authorized destinations, the U.S. government requires a destination control statement on shipping documents. Under this requirement, the commercial invoice and bill of lading (or air waybill) for nearly all commercial shipments leaving the United States must display a statement notifying the carrier and all foreign parties (the ultimate and intermediate consignees and purchaser) that the U.S. material has been licensed for export only to certain destinations and may not be diverted contrary to U.S. law. Exceptions to the use of the destination control statement are (1) shipments to Canada and intended for consumption in Canada and (2) shipments being made under certain general licenses. Advice on the appropriate statement to be used can be provided by the Department of Commerce, the Commerce district office, an attorney, or the freight forwarder.

Antiboycott Regulations

During the mid-1970's the United States adopted two laws that seek to counteract the participation of U.S. citizens in other nation's economic boycotts or embargoes. These "antiboycott" laws are the 1977 amendments to the Export Administration Act (EAA) and the Ribicoff Amendment to the 1976 Tax Reform Act (TRA). The antiboycott laws were adopted to require U.S. firms to refuse to participate in foreign boycotts that the United States does not sanction. They have the effect of preventing U.S. firms from being used to implement foreign policies of other nations which run counter to U.S. policy.

The antiboycott provisions of the Export Administration Regulations (EAR) apply to all "U.S. persons," defined to include individuals and companies located in the United States and their foreign affiliates. These persons are subject to the law when their activities relate to the sale, purchase, or transfer of goods or services between the United States and a foreign country. This covers U.S. exports and imports, financing, forwarding and shipping, and certain other transactions that may take place wholly offshore.

Generally, the Tax Reform Act applies to all U.S. taxpayers (and their related companies). The TRA's reporting requirements apply to taxpayers' "operations" in, with, or related to boycotting countries or their nationals. Its penalties apply to those taxpayers with Domestic International Sales Corporation, Foreign Sales Corporation, foreign subsidiary deferral, and/or foreign tax credit benefits.

Conduct that may be penalized under the TRA and/or prohibited under the EAR includes:

Agreements to refuse or actual refusals to do business with or in Israel or with blacklisted companies.
Agreements to discriminate or actual discrimination against other persons based on race, religion, sex, national origin or nationality.
Agreements to furnish or actually furnishing information about business relationships with or in Israel or with blacklisted companies.
Agreements to furnish or the actual furnishing of information about the race, religion, sex, or national origin of another person.
Furnishing information about business relationships with Israel or with blacklisted persons.
Implementing letters of credit containing prohibited boycott terms or conditions.

TRA does not "prohibit" conduct, but denies tax benefits for certain types of boycott- related agreements.

The EAR requires U.S. persons to report quarterly any requests they have received to take any action to comply with, further, or support an unsanctioned foreign boycott. EAR reports are filed quarterly on form BXA 621-P, available from the Commerce Department's ITA and BXA field offices or from the Office of Antiboycott Compliance in Washington, D.C.

The TRA requires taxpayers to report "operations" in, with, or related to a boycotting country or its nationals and requests received to participate in or cooperate with an international boycott. The Treasury Department publishes a quarterly list of "boycotting countries." TRA reports are filed with tax returns on IRS Form 5713, available from local IRS offices.

Violations of the antiboycott provisions of the EAR carry the same penalties as those for export control violations. For individuals, this can include fines of up to $250,000, imprisonment for up to ten years, or both. For firms the penalties for each violation can be $1 million or up to five times the value of the exports involved. In addition, for each violation of the EAR any or all of the following may be imposed: revocation of validated export licenses; the general denial of export privileges; the exclusion from practice; and/or the imposition of fines of up to $10,000 per violation, or $100,000. Violations of the TRA involve the denial of all or part of the foreign tax benefits discussed above.

The Department of Commerce's Office of Antiboycott Compliance (OAC) administers the program through ongoing investigations of corporate activities. OAC operates an automated boycott-reporting system providing statistical and enforcement data to Congress and to the public, issuing interpretations of the regulations for the affected public, and offering nonbinding informal guidance to the private sector on specific compliance concerns. U.S. firms with questions about complying with antiboycott regulations should contact OAC's Enforcement Division at Tel: (202) 482-2381 or Fax: (202) 482-0913 or write to

Office of Antiboycott Compliance
Bureau of Export Administration
Room 6098, U.S. Department of Commerce
Washington, DC 20230

Antitrust Laws

The U.S. antitrust laws reflect this nation's commitment to an economy based on competition. They are intended to foster the efficient allocation of resources by providing consumers with goods and services at the lowest price that efficient business operations can profitably offer. Various foreign countries--including the EC, Canada, the United Kingdom, Germany, Japan, and Australia--also have their own antitrust laws that U.S. firms must comply with when exporting to such nations.

Formal written bilateral arrangements exist between the United States and the Federal Republic of Germany, Australia, and Canada. International antitrust cooperation can also occur through mutual legal assistance treaties (MLATs). MLATs currently are in force with over a dozen countries, however, only the MLAT with Canada has been used to date to obtain assistance in antitrust investigations. The Department of Justice and the Federal Trade Commission (FTC) also hold regular consultations with the antitrust officials of Canada, the European Commission, and Japan, and have close, informal ties with the antitrust authorities of many other countries. Since 1990, the U.S. has cooperated closely with countries in the process of establishing competition agencies, assisted by funding provided by the Agency for International Development. On November 2, 1994, President Clinton signed into law the International Antitrust Enforcement Assistance Act of 1994, which authorizes the U.S. to enter into antitrust mutual assistance agreements in accordance with the legislation.

The U.S. antitrust statutes do not provide a checklist of specific requirements. Instead they set forth broad principles that are applied to the specific facts and circumstances of a business transaction. Under the U.S. antitrust laws, some types of trade restraints, known as per se violations, are regarded as conclusively illegal. Per se violations include price-fixing agreements and conspiracies, divisions of markets by competitors, and certain group boycotts and tying arrangements.

Most restraints of trade in the United States are judged under a second legal standard known as the rule of reason. The rule of reason requires a showing that (1) certain acts occurred and (2) such acts had an anticompetitive effect. Under the rule of reason, various factors are considered, including business justification, impact on prices and output in the market, barriers to entry, and market shares of the parties.

In the case of exports by U.S. firms, there are special limitations on the application of the per se and rule of reason tests by U.S. courts. Under Title IV of the Export Trading Company Act (also known as the Foreign Trade Antitrust Improvements Act), there must be a "direct, substantial and reasonably foreseeable" effect on the domestic or import commerce of the United States or on the export commerce of a U.S. person before an activity may be challenged under the Sherman Antitrust Act or the Federal Trade Commission Act (two of the primary federal antitrust statutes). This provision clarifies the particular circumstances under which the overseas activities of U.S. exporters may be challenged under these two antitrust statutes. Under Title III of the Export Trading Company Act the Department of Commerce, with the concurrence of the U.S. Department of Justice, can issue an export trade certificate of review that provides certain limited immunity from the federal and state antitrust laws. Refer to Chapter 4, , for more information.)

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

overseas distribution arrangements;
overseas joint ventures for research, manufacturing, construction, and distribution;
patent, trademark, copyright, and know-how licenses;
mergers and acquisitions involving foreign firms; and
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 laws and the Antitrust Division's enforcement policies regarding international transactions are explored in the Department of Justice's Antitrust Enforcement Guidelines for International Operations , which were revised in 1995. For more information, contact

Antitrust Division
U.S. Department of Justice
Main Justice Bldg.
Washington, DC 20530
Tel: (202) 514-2401; Fax: (202) 616-2645
Web site: www.usdoj.gov

Foreign Corrupt Practices Act (FCPA)

The FCPA makes it unlawful for any person or firm (as well as persons 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, candidate, or official) for the purposes of assisting the person or firm in obtaining or retaining business. Knowing includes the concepts of conscious disregard and willful blindness. The FCPA also contains provisions applicable to publicly held companies concerning financial recordkeeping and internal accounting controls.

The Department of Justice enforces the criminal provisions of the FCPA and the civil provisions against "domestic concerns." The Securities and Exchange Commission (SEC) is responsible for civil enforcement against "issuers." The Department of Commerce supplies general information to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA.

There is an exception to the antibribery provisions for "facilitating payments for routine governmental action." Actions "similar" to the examples listed in the statute are also covered by this exception. A person charged with violating the FCPA's antibribery provisions 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 $250,000 and imprisonment for up to five years. The U.S. attorney general can bring a civil action against a domestic concern (and the SEC against an issuer) for a fine of up to $10,000 as well as against any officer, director, employee, or agent of a firm or stockholder acting on behalf of the firm, who willfully violates the antibribery provisions. Under federal criminal law 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 (and the SEC, where appropriate) may also bring a civil action to enjoin any act or practice whenever it appears that the person or firm (or a person acting on behalf of a firm) is in violation or about to be in violation 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 a suspension of the right to do business with the government.

Conduct that constitutes a violation of the FCPA may give rise to a private cause of action under the Racketeer-Influenced and Corrupt Organizations Act.

The Department of Justice established a new FCPA opinion procedure in the early 1990s; the details of the opinion procedure are provided in 28 CFR Part 80. Under the opinion procedure, any party may request a statement of the Department of Justice's present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct.

FDA and EPA 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

The 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" or "new animal drugs" that have not been approved as safe and effective or to certain devices.
If the exporter thinks the export product may be covered by FDA, it is important to contact the nearest FDA field office or the Public Health Service, Food and Drug Administration, 5600 Fishers Lane, Rockville, MD 20857.

Environmental Protection Agency

EPA's involvement in exports is limited to hazardous waste, pesticides, and toxic chemicals. Although EPA has no authority to prohibit the export of these substances, it has an established notification system designed to inform receiving foreign governments that materials of possible human health or environmental concern will be entering their country.

Under the Resource Conservation and Recovery Act (RCRA), generators of waste who wish to export waste considered hazardous are required to notify EPA before shipping a given hazardous waste to a given foreign consignee. EPA then notifies the government of the foreign consignee. Export cannot occur until written approval is received from the foreign government.

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, the EPA is mandated by FIFRA Section 17 to inform other governments about unregistered pesticides exported from the U.S. and about pesticide regulatory actions taken in the U.S. that may have significance for other countries. The notification program involves both notices of export sent to importing countries, and notices of U.S. regulatory actions sent to all governments world-wide. The revised export policy of 1992 greatly expanded EPA's pesticide export tracking and notification system responsibilities.

An exporter of hazardous waste, unregistered pesticides, or toxic chemicals should contact one or more of the following offices:

RCRA Hotline
(For information on compliance with the Resource Conservation and Recovery Act)
Tel: (703) 412-9810
Web site: www.epa.gov/
TSCA Hotline
(For information on compliance with the Toxic Substances Control Act)
Tel: (202) 554-1404
EPA Office of Pesticide Programs
Tel: (703) 305-7090; Fax: (703) 308-4776
Dept. of Transportation Hazardous Materials Information Center
(For information on transporting hazardous materials)
Tel: (800) 467-4922

U.S. Department of Agriculture

Federal Grain Inspection Service (FGIS)

The FGIS inspects and weighs all exported grain, oilseeds, and related products for domestic and export trade. For more information, contact

FGIS Compliance Division, Regulatory Branch
Tel: (202) 720-8536; Fax: (202) 690-2755
Web site: www.usda.gov/gipsa

Food Safety and Inspection Service (FSIS)

Under the Federal Meat Inspection Act and the Poultry Products Inspection Act, FSIS inspects all meat and poultry sold in interstate and foreign commerce, including imported products. Approximately 7,400 Federal inspectors carry out inspection laws in some 6,200 plants. For further information contact

Food Safety Education
Food Safety and Inspection Service
14th and Independence Ave. SW, Room 2932
Washington, DC 20250
Tel: (202) 720-7943; Fax: (202) 720-1843
Web site: www.fsis.usda.gov

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 referrals on foreign import regulations related to hazardous substances, contact the United Nations Environmental Programs Office, Tel: (202) 260-5917. For sources of information about foreign government import regulations, refer to Chapter 12, .

Customs Benefits for Exporters

Drawback of Customs Duties

Drawback is a form of tax relief in which a lawfully collected customs duty is refunded or remitted wholly or in part because of the particular use made of the commodity on which the duty was collected. U.S. firms that import materials or components that they process or assemble for reexport may obtain drawback refunds of all duties paid on the imported merchandise, less 1 percent to cover customs costs. This practice encourages U.S. exporters by permitting them to compete in foreign markets without the handicap of including in their sales prices the duties paid on imported components. 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.

Several types of drawback are authorized under section 1313, Title 19, United States Code. The Trade and Tariff Act of 1984 revised and expanded drawbacks. Regulations implementing the act have been promulgated in 19 CFR Part 191. Under existing regulations several types of drawback have been authorized, but only two are of interest to most manufacturers:

1. 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 one percent, which is retained by Customs to defray costs. (This is Section 1313(a) drawback.)

2. 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 makes it possible for firms to obtain drawback without the expense of maintain separate inventories for imported and domestic merchandise. (This is Section 13131(b) drawback--the substitution provision.)

To obtain drawback, the U.S. firm must file a proposal with a regional commissioner of customs (for section 1313(a) drawback) or with the Entry and Carrier Rulings Branch, U.S. Customs Headquarters, at the address at the end of this section (for other types of drawback, including combination 1313 (a) and (b) drawback). There are currently several general drawback contracts available which eliminate the need for submission of a proposal. These have been published in the Customs Bulletin with instructions as to the procedure for adhering to them. A sample 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), contact the Entry and Carrier Rulings Branch of the Customs Service.

The approval of a section 1313(a) proposal takes the form of a letter from a Regional Commissioner of Customs to the applicant. The approval of a section 1313(b) drawback proposal takes the form of a letter from Headquarters, U.S. Customs Service to the Regional Commissioner of Customs where the applicant will file claims. The applicant receives a copy of this letter. Synopses of all contracts are published in the "Customs Bulletin and Decisions." The proposal and approval together are called a drawback contract or drawback rate. If the manufacturer wants to have his rate changed in any way, he should file a new proposal and the procedure is the same as above.

Claims must be filed within three years after exportation of the articles. To prevent tolling by the statute of limitations, a claim may be filed before drawback rate is effective, although no payments will be made until the contract is approved.

Drawback claimants must establish that the articles on which drawback is being claimed were exported within five years after the merchandise in question was imported. Once the request for drawback is approved, the proposal and approval together constitute the manufacturer's drawback rate.

When a claim has been completed by the filing of all required documents, the entry will be liquidated by the Regional Commissioner of Customs to determine the amount of drawback due. Drawback is payable to the exporter unless the manufacturer reserves to himself the right to claim the drawback.

Entry and Carrier Rulings Branch
U.S. Customs Service Headquarters
1301 Constitution Avenue NW
Washington, DC 20229
Tel: (202) 927-2320
Web site: www.customs.ustreas.gov

Effect of NAFTA

The NAFTA provisions on drawback apply to goods imported into the United States and subsequently exported to Canada on or after January 1, 1996. The NAFTA provisions on drawback will apply to goods imported into the United States and subsequently exported to Mexico, on or after January 1, 2001.

Under the NAFTA, the amount of Customs duties that will be refunded, reduced or waived is the lesser of the total amount of Customs duties paid or owed on the goods or materials when imported into the United States and the total amount of Customs duties paid or owed on the finished good in the NAFTA country to which it is exported, for purposes of sections 1313(a), (b), (f), (h), and (g).

No NAFTA country, on condition of export, will refund, reduce or waive the following: antidumping or countervailing duties, premiums offered or collected pursuant to any tendering system with respect to the administration of quantitative import restrictions, tariff rate quotas or trade preference levels, or a fee pursuant to section 22 of the U.S. Agricultural Adjustment Act. Moreover, same condition substitution drawback was eliminated as of January 1, 1994.

U.S. Foreign-Trade Zones

Exporters should also consider the customs privileges of U.S. foreign-trade zones. These zones are domestic U.S. sites that are considered outside U.S. customs territory and are available for activities that might otherwise be carried on overseas for customs reasons. For export operations, the zones provide accelerated export status for purposes of excise tax rebates and customs drawback. For import and reexport activities, no customs duties, federal excise taxes, or state or local ad valorem taxes are charged on foreign goods moved into zones unless and until the goods, or products made from them, are moved into customs territory. This means that the use of zones can be profitable for operations involving foreign dutiable materials and components being assembled or produced here for reexport. Also, no quota restrictions ordinarily apply.

There are now more than 200 approved foreign-trade zones in port communities in 48 states. Associated with these projects are some 200 subzones. These facilities are available for operations involving storage, repacking, inspection, exhibition, assembly, manufacturing, and other processing.

Several thousand business firms use foreign-trade zones every year. The value of merchandise moved to and from the zones in 1995 exceeded $110 billion. Export shipments are a small but quickly growing sector of the trade handled by U.S. FTZs and subzones; in 1995 the value of export shipments was more than $17 billion.

Information about the zones is available from the zone manager, from local Commerce district offices, or from the Executive Secretary, Foreign-Trade Zones Board, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; Tel: (202) 482-2862; Fax: (202) 482-0002.

Foreign Free Trade Zones and Bonded Warehouses

To encourage and facilitate international trade, there are free ports, free trade zones, and similar customs-privileged facilities are now in operation in some foreign countries worldwide, usually in or near seaports or airports. Many U.S. manufacturers and their distributors use free ports or free trade zones for receiving shipments of goods that are reshipped in smaller lots to customers throughout the surrounding areas.

Bonded warehouses can also be found in many locations. Here, goods can be warehoused without duties being assessed. Once goods are released, they are subject to duties.

Foreign Sales Corporations

One of the most important steps a U.S. exporter can take to reduce federal income tax on export-related income is to set up a foreign sales corporation (FSC). This tax incentive for U.S. exporters replaced the domestic international sales corporation (DISC), except the interest charge DISC. While the interest charge DISC allows exporters to defer paying taxes on export sales, the tax incentive provided by the FSC legislation is in the form of a permanent exemption from federal income tax for a portion of the export income attributable to the offshore activities of FSCs (26 USC, sections 921-927). The tax exemption can be as great as 15 percent on gross income from exporting, and the expenses can be kept low through the use of intermediaries who are familiar with and able to carry out the formal requirements. A firm that is exporting or thinking of exporting can optimize available tax benefits with proper planning, evaluation, and assistance from an accountant or lawyer.

An FSC is a corporation set up in certain foreign countries or in U.S. possessions (other than Puerto Rico) to obtain a corporate tax exemption on a portion of its earnings generated by the sale or lease of export property and the performance of some services. A corporation initially qualifies as an FSC by meeting certain basic formation tests. An FSC (unless it is a small FSC) must also meet several foreign management tests throughout the year. If it complies with those requirements, the FSC is entitled to an exemption on qualified export transactions in which it performs the required foreign economic processes.

FSCs can be formed by manufacturers, nonmanufacturers, or groups of exporters, such as export trading companies. An FSC can function as a principal, buying and selling for its own account, or as a commission agent. It can be related to a manufacturing parent or it can be an independent merchant or broker.

An FSC must be incorporated and have its main office (a shared office is acceptable) in the U.S. Virgin Islands, American Samoa, Guam, the Northern Mariana Islands, or a qualified foreign country. In general, a firm must file for incorporation by following the normal procedures of the host nation or U.S. possession. Taxes paid by an FSC to a foreign country do not qualify for the foreign U.S. tax credit. Some nations, however, offer tax incentives to attract FSCs; to qualify, a company must identify itself as an FSC to the host government. Consult the government tax authorities in the country or U.S. possession of interest for specific information.

A country qualifies as an FSC host if it has an exchange of information agreement with the United States approved by the U.S. Department of the Treasury. Since the Internal Revenue Service (IRS) does not allow foreign tax credits for foreign taxes imposed on the FSC's qualified income, it is generally advantageous to locate an FSC only in a country where local income taxes and withholding taxes are minimized. The vast majority of FSCs are incorporated in the U.S. Virgin Islands or Guam.

The FSC must have at least one director who is not a U.S. resident, must keep one set of its books of account (including copies or summaries of invoices) at its main offshore office, cannot have more than 25 shareholders, cannot have any preferred stock, and must file an election to become an FSC with the IRS. Also, a group may not own both an FSC and an interest charge DISC.

The portion of the FSC gross income from exporting that is exempt from U.S. corporate taxation is 32 percent for a corporate-held FSC if it buys from independent suppliers or contracts with related suppliers at an "arm's-length" price--a price equivalent to that which would have been paid by an unrelated purchaser to an unrelated seller. An FSC supplied by a related entity can also use the special administrative pricing rules to compute its tax exemption. Although an FSC does not have to use the two special administrative pricing rules, these rules may provide additional tax savings for certain FSCs.

Small FSCs and interest charge DISCs are designed to give export incentives to smaller businesses. The tax benefits of a small FSC or an interest charge DISC are limited by ceilings on the amount of gross income that is eligible for the benefits.

The small FSC is generally the same as an FSC, except that a small FSC must file an election with the IRS designating itself as a small FSC--which means it does not have to meet foreign management or foreign economic process requirements. A small FSC tax exemption is limited to the income generated by $5 million or less in gross export revenues.

An exporter can still set up a DISC in the form of an interest charge DISC to defer the imposition of taxes for up to $10 million in export sales. A corporate shareholder of an interest charge DISC may defer the imposition of taxes on approximately 94 percent of its income up to the $10 million ceiling if the income is reinvested by the DISC in qualified export assets. An individual who is the sole shareholder of an interest charge DISC can defer 100 percent of the DISC income up to the $10 million ceiling. An interest charge DISC must meet the following requirements: the taxpayer must make a new election; the tax year of the new DISC must match the tax year of its majority stockholder; and the DISC shareholders must pay interest annually at U.S. Treasury bill rates on their proportionate share of the accumulated taxes deferred.

A shared FSC is an FSC that is shared by 25 or fewer unrelated exporter-shareholders to reduce the costs while obtaining the full tax benefit of an FSC. Each exporter-shareholder owns a separate class of stock and each runs its own business as usual. Typically, exporters pay a commission on export sales to the FSC, which distributes the commission back to the exporter.

States, regional authorities, trade associations, or private businesses can sponsor a shared FSC for their state's companies, their association's members, or their business clients or customers, or for U.S. companies in general. A shared FSC is a means of sharing the cost of the FSC. However, the benefits and proprietary information are not shared. The sponsor and the other exporter-shareholders do not participate in the exporter's profits, do not participate in the exporter's tax benefits, and are not a risk for another exporter's debts.

For more information about FSCs, U.S. companies may contact

Office of Service Industries
U.S. Department of Commerce
Tel: (202) 482-3575; Fax: (202) 482-2669
Web site: www.ita.doc.gov/sif/

The Uruguay Round Trade Agreements

The Uruguay Round Trade Agreements, completed in 1994 under General Agreement on Tariff and Trade (GATT) auspices, produced significant tariff reductions and resulted in some important advances in multilateral trade relations.

The World Trade Organization (WTO) was established in January 1995 as the legal and institutional foundation of the multilateral trading system. The WTO is the embodiment of the results of the Uruguay Round trade negotiations and the successor to the General Agreement on Tariffs and Trade (GATT). WTO members must grant the products of other members no less favorable treatment than that accorded to the products of any other country.

While quotas are generally outlawed, tariffs or customs duties are legal in the WTO. However, significant reductions were made by over 120 countries in the Uruguay Round. These reductions are being phased in over five years and will result in a 40 percent cut in industrial countries' tariffs in industrial products from an average of 6.3 percent to 3.8 percent. The Round also increased the percentage of bound product lines to nearly 100 percent for developed nations and countries in transition and to 73 percent for developing countries. Members have also undertaken an initial set of commitments covering national regulations affecting various services activities. These commitments are, like those for tariffs, contained in binding national schedules.

The WTO extends and clarifies previous GATT rules that laid down the basis on which governments could impose compensating duties on two forms of "unfair" competition: dumping and subsidies. The WTO Agreement on agriculture is designed to provide increased fairness in farm trade. That on intellectual property will improve conditions of competition where ideas and inventions are involved, and another will do the same thing for trade in services.

Some of the benefits of to United States exporters include:

The total elimination of foreign tariffs imposed on U.S. goods by some major markets for pharmaceuticals; medical, construction, and agricultural equipment; steel; beer; distilled spirits; furniture; paper, pulp, and printed matter; and toys.
Deep cuts, averaging one-third, in many other foreign tariffs affecting U.S. exports.
A reduction in paperwork costs due to the simplification and harmonization of customs procedures and licensing.
Better access to some growing markets such as South Korea, Malaysia, Thailand, Argentina, Brazil, and others.
Stronger intellectual property protection for U.S. patents, copyrights, trademarks, industrial designs and trade secrets.
Improved enforcement of GATT rules.
Strong antidumping and countervailing duty rules.
More open markets for U.S. service exporters in fields such as accounting, advertising, commuter services, tourism, engineering, and construction.
Expanded opportunities to compete for foreign government procurement contracts.
Reduced standards barriers to U.S. exports

For more information on the WTO and GATT, contact

World Trade Organization
154 rue de Lausanne
CH-1211 Geneva 21, Switzerland
Tel: [41] (22) 739-5111; Fax: [41] (22) 739-5458
Web site: www.wto.org.

Office of Multilateral Affairs
U.S. Department of Commerce/ITA
Washington, DC 20230
Tel: (202) 482-0603

There are also a number of documents available on the fax retrieval system operated by the Trade Information Center. Call (800) USA-TRADE and ask for a directory of available documents on the Uruguay Round and WTO.

Intellectual Property Rights Considerations

The United States provides a wide range of protection for intellectual property (i.e., patents, trademarks, service marks, copyrights, trade secrets, and semiconductor mask works). Many businesses--particularly high-technology firms, the publishing industry, chemical and pharmaceutical firms, the recording industry, and computer software companies--depend heavily on the protection afforded their creative products and processes.

In the United States, there are five major forms of intellectual property protection. A U.S. patent confers on its owner the exclusive right for 17 years (14 years for design patents) from the date the patent is granted to manufacture, use, and sell the patented product or process within the United States. The United States and the Philippines are the only two countries that award patents on a first-to-invent basis; all other countries award patents to the first to file a patent application. As of November 16, 1989, a trademark or service mark registered with the U.S. Patent and Trademark Office remains in force for 10 years from the date of registration and may be renewed for successive periods of 10 years, provided the mark continues to be used in interstate commerce and has not been previously canceled or surrendered.

A work created (fixed in tangible form for the first time) in the United States on or after January 1, 1978, is automatically protected by a U.S. copyright from the moment of its creation. Such a copyright, as a general rule, has a term that endures for the author's life plus an additional 50 years after the author's death. In the case of works made for hire and for anonymous and pseudonymous works (unless the author's identity is revealed in records of the U.S. Copyright Office of the Library of Congress), the duration of the copyright is 75 years from publication or 100 years from creation, whichever is shorter. Other, more detailed provisions of the Copyright Act of 1976 govern the term of works created before January 1, 1978.

Trade secrets are protected by state unfair competition and contract law. Unlike a U.S. patent, a trade secret does not entitle its owner to a government-sanctioned monopoly of the discovered technology for a particular length of time. Nevertheless, trade secrets can be a valuable and marketable form of technology. Trade secrets are typically protected by confidentiality agreements between a firm and its employees and by trade secret licensing agreement provisions that prohibit disclosures of the trade secret by the licensee or its employees.

Semiconductor mask work registrations protect the mask works embodied in semiconductor chip products. In many other countries, mask works are referred to as integrated circuit layout designs. The Semiconductor Chip Protection Act of 1984 provides the owner of a mask work with the exclusive right to reproduce, import, and distribute such mask works for a period of 10 years from the earlier of two dates: the date on which the mask work is registered with the U.S. Copyright Office or the date on which the mask work is first commercially exploited anywhere in the world.

Intellectual Property Rights Protections Outside the U.S.

The rights granted under U.S. patent, trademark, or copyright law can be enforced only in the United States, its territories, and its possessions; they confer no protection in a foreign country. The protection available in each country depends on that country's national laws, administrative practices, and treaty obligations. The relevant international treaties set certain minimum standards for protection, but individual country laws and practices can and do differ significantly.

To secure patent and trademark right outside the United States a company must apply for a patent or register a trademark on a country-by-country basis. The laws of many countries differ in various respects from the patent law of the United States. In most foreign countries, publication of the invention before the date of the application will bar the right to a patent. In most foreign countries maintenance fees are required. Most foreign countries require that the patented invention must be manufactured in that country after a certain period, usually three years. If there is no manufacture within this period, the patent may be void in some countries, although in most countries the patent may be subject to the grant of compulsory licenses to any person who may apply for a license.

The Paris Convention for the Protection of Industrial Property, relating to patents, is adhered to by 100 countries, including the United States. It provides that each country guarantees to the citizens of the other countries the same rights in patent and trademark matters that it gives to its own citizens. The treaty also provides for the right of priority in the case of patents, trademarks and industrial designs (design patents). This right means that, on the basis of a regular first application filed in one of the member countries, the applicant may, within a certain period of time, apply for protection in all the other member countries. These later applications will then be regarded as if they had been filed on the same day as the first application. Thus, these later applicants will have priority over applications for the same invention which may have been filed during the same period of time by other persons. Moreover, these later applications, being based on the first application, will not be invalidated by any acts accomplished in the interval, such as, for example, publication or exploitation of the invention, the sale of copies of the design, or use of the trademark. The period of time mentioned above, within which the subsequent applications may be filed in the other countries, is 12 months in the case of first applications for patent and six months in the case of industrial designs and trademarks.

Another treaty, known as the Patent Cooperation Treaty, was negotiated at a diplomatic conference in Washington, D.C., in June of 1970. The treaty came into force on January 24, 1978, and is presently adhered to by 44 countries, including the United States. The treaty facilitates the filing of applications for patent on the same invention in member countries by providing, among other things, for centralized filing procedures and a standardized application format.

The timely filing of an international application affords applicants an international filing date in each country which is designated in the international application and provides both a search of the invention and a later time period within which the national applications for patent must be filed.

A number of patent attorneys specialize in obtaining patents in foreign countries. In general, an inventor should be satisfied that he could make some profit from foreign patents or that there is some particular reason for obtaining them, before he attempts to apply for foreign patents.

Under United States law it is necessary, in the case of inventions made in the United States, to obtain a license from the Commissioner of Patents and Trademarks before applying for a patent in a foreign country. Such a license is required if the foreign application is to be filed before an application is filed in the United States or before the expiration of six months from the filing of an application in the United States. The filing of an application for patent constitutes the request for a license and the granting or denial of such request is indicated in the filing receipt mailed to each applicant. After six months from the United States filing, a license is not required unless the invention has been ordered to be kept secret. If the invention has been ordered to be kept secret, the consent to the filing abroad must be obtained from the Commissioner of Patents and Trademarks during the period the order of secrecy is in effect.

The level and scope of copyright protection available within a country also depends on that country's domestic laws and treaty obligations. In most countries, the place of first publication is an important criterion for determining whether foreign works are eligible for copyright protection. Works first published in the United States on or after March 1, 1989--the date on which U.S. adherence to the Berne Convention for the Protection of Literary and Artistic Works became effective--are, with few exceptions, automatically protected in the more than 110 countries that comprise the Berne Union. Exporters of goods embodying works protected by copyright in the United States should find out how individual Berne Union countries deal with older U.S. works, including those first published (but not first or simultaneously published in a Berne Union country) before March 1, 1989.

The United States maintains copyright relations with a number of countries under a second international agreement called the Universal Copyright Convention (UCC). UCC countries that do not also adhere to Berne often require compliance with certain formalities to maintain copyright protection. Those formalities can be either or both of the following: (1) registration and (2) the requirement that published copies of a work bear copyright notice, the name of the author, and the date of first publication. The United States has bilateral copyright agreements with more than 40 countries, and the laws of these countries may or may not be consistent with either of the copyright conventions. Before first publication of a work anywhere, it is advisable to investigate the scope of and requirements for maintaining copyright protection for those countries in which copyright protection is desired.

Intellectual property rights owners should be aware that after valuable intellectual property rights have been secured in foreign markets, enforcement must be accomplished through local law. As a general matter, intellectual property rights are private rights to be enforced by the rights owner. Ease of enforcement varies from country to country and depends on such factors as the attitude of local officials, substantive requirements of the law, and court procedures. U.S. law affords a civil remedy for infringement (with money damages to a successful plaintiff) and criminal penalties (including fines and jail terms) for more serious offenses. The availability of criminal penalties for infringement, either as the exclusive remedy or in addition to private suits, also varies among countries.

A number of countries are parties to only some, or even none, of the treaties that have been discussed here. Therefore, would-be U.S. exporters should carefully evaluate the intellectual property laws of their potential foreign markets, as well as applicable multilateral and bilateral treaties and agreements (including bilateral trade agreements), before making a decision to do business there. The intellectual property considerations that arise can be quite complex and, if possible, should be explored in detail with an attorney.

In summary, U.S. exporters with intellectual property concerns should consider taking the following steps:

1. Obtaining protection under all applicable U.S. laws for their inventions, trademarks, service marks, copyrights, and semiconductor mask works.

2. Researching the intellectual property laws of countries where they may conduct business. The US&FCS has information about intellectual property laws and practices of particular countries, although it does not provide legal advice.

3. Securing the services of competent local counsel to file appropriate patent, trademark, or copyright applications within priority periods.

4. Adequately protecting their trade secrets through appropriate confidentiality provisions in employment, licensing, marketing, distribution, and joint venture agreements.

For more information on intellectual property rights issues, contact

U.S. Patent and Trademark Office
U.S. Department of Commerce
101 Independence Ave. SE
Washington, DC 20231
Tel: (703) 308-4357; Fax: (703) 308-5258
Web site: www.uspto.gov

U.S. Copyright Office
LM 455, Library of Congress
Washington, D.C. 20559
Tel: (202) 707-3000
Web site: www.loc.gov/copyright

Uruguay Round TRIPs Agreement

The Uruguay Round Agreement on Trade Related Aspects of Intellectual Property Rights (also known as the TRIPs Agreement) recognizes that widely varying standards in the protection and enforcement of intellectual property rights and the lack of a multilateral framework of principles, rules and disciplines dealing with international trade in counterfeit goods have been a growing source of tension in international economic relations. To that end, the agreement addresses the applicability of basic GATT principles and those of relevant international intellectual property agreements; the provision of adequate intellectual property rights; the provision of effective enforcement measures for those rights; multilateral dispute settlement; and transitional arrangements.

The implementation periods varies. Developed countries, such as the United States, were given only one year to bring their legislation and practices into conformity. Developing and least-developed countries have been assigned transition periods ranging from 5 to 11 years. On December 8, 1994, President Clinton signed the Uruguay Round Agreements Act (URAA). The URAA implements the Uruguay Round GATT, which includes an agreement on TRIPs.

Some of the notable intellectual and industrial rights protections offered by the TRIPs agreement cover the following:

National-treatment commitment. The nationals of other parties must be given treatment no less favorable than that accorded to a party's own nationals with regard to the protection of intellectual property. In addition, any advantage a party gives to the nationals of another country must be extended immediately and unconditionally to the nationals of all other parties.
Patents. There is a general obligation to comply with the main provisions of the Paris Convention. In addition, the agreement requires that 20-year patent protection be available for all inventions, whether of products or processes, in almost all fields of technology. Detailed conditions are laid down for compulsory licensing or governmental use of patents without the authorization of the patent owner.
Copyrights. Parties must comply with most major provisions of the Paris version of the Berne Convention. Important additions to existing international rules in the area of copyright and related rights are the provisions on rental rights; authors of computer programs and producers of sound recordings are given the right to authorize or prohibit the commercial rental of their works to the public. A similar exclusive right applies to films where commercial rental has led to widespread copying. The draft also requires performers to be given protection from unauthorized recording and broadcast of live performances, commonly known as bootlegging.
Trademarks and service marks. The agreement defines what types of signs must be eligible for protection as a trademark or service mark and what the minimum rights conferred on their owners must be. Marks that have become well-known in a particular country enjoy additional protection. In addition, the agreement lays down a number of obligations with regard to the use of trademarks and service marks, their term of protection, and their licensing or assignment.
Industrial designs. These are protected under the agreement for a period of 10 years. Owners of protected designs would be able to prevent the manufacture, sale or importation of articles with a design which is a copy of the protected design.
Layout designs of integrated circuits. The agreement requires parties to provide protection on the basis of the Washington Treaty on Intellectual Property in Respect of Integrated Circuits, but with a number of additions: protection must be available for a minimum period of 10 years; the rights must extend to articles incorporating infringing layout designs; innocent infringers must be allowed to use or sell stock in hand or ordered before learning of the infringement against a suitable royalty: and compulsory licensing and government use is only allowed under a number of strict conditions.

Arbitration of Disputes in International Transactions

The parties to a commercial transaction may provide in their contract that any disputes over interpretation or performance of the agreement will be resolved through arbitration. In the domestic context, arbitration may be appealing for a variety of reasons. Frequently cited advantages over conventional courtroom litigation include potential savings in time and expense, confidentiality of the proceedings, and expertise of the arbitrators.

For export transactions, in which the parties to the agreement are from different countries, additional important advantages are neutrality (international arbitration allows each party to avoid the domestic courts of the other should a dispute arise) and ease of enforcement (foreign arbitral awards can be easier to enforce than foreign court decisions).

In an agreement to arbitrate (usually just inserted as a term in the contract governing the transaction as a whole), the parties also have broad power to agree on many significant aspects of the arbitration. The arbitration clause may do the following:

Specify the location (a "neutral site") where the arbitration will be conducted, although care must be taken to select a country that has adopted the UN Convention on the Recognition and Enforcement of Foreign Awards (or another convention providing for the enforcement of arbitral awards).
Establish the rules that will govern the arbitration, usually by incorporating a set of existing arbitration rules such as the UN Commission on International Trade Law (UNCITRAL) Model Rules.
Appoint an arbitration institute to administer the arbitration. The International Chamber of Commerce based in Paris, the American Arbitration Association in New York, and the Arbitration Institute of the Stockholm Chamber of Commerce in Sweden are three such prominent institutions.
Choose the law that will govern procedural issues or the merits of the dispute, for example, the law of the State of New York.
Place certain limitations on the selection of arbitrators, for example, by agreeing to exclude nationals of the parties to the dispute or by requiring certain qualifications or expertise.
Designate the language in which the arbitral proceedings will be conducted.

For international arbitration to work effectively, the national courts in the countries of both parties to the dispute must recognize and support arbitration as a legitimate alternative means for resolving disputes. This support is particularly crucial at two stages in the arbitration process. First, should one party attempt to avoid arbitration after a dispute has arisen, the other party must be able to rely on the judicial system in either country to enforce the agreement to arbitrate by compelling arbitration. Second, the party that wins in the arbitration proceeding must be confident that the national courts will enforce the decision of the arbitrators. This will ensure that the arbitration process is not ultimately frustrated at the enforcement stage if the losing party refuses to pay or otherwise satisfy the arbitral award.

The strong policy of U.S. federal law is to approve and support resolution of disputes by arbitration. Through the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (popularly known as the New York Convention), which the United States ratified in 1970, more than 80 countries have undertaken international legal obligations to recognize and enforce arbitral awards. While several other arbitration treaties have been concluded, the New York Convention is by far the most important international agreement on commercial arbitration and may be credited for much of the explosive growth of arbitration of international disputes in recent decades.

Providing for arbitration of disputes makes good sense in many international commercial transactions. Because of the complexity of the subject, however, legal advice should be obtained for specific export transactions. For more information on arbitration, contact

American Arbitration Association
1633 Broadway
New York, NY 10019
Tel: (212) 484-4000; Fax: (212) 307-4387
Web site: www.adr.org

The United Nations Sales Convention

The UN Convention on Contracts for the International Sale of Goods (CISG) became the law of the United States on January 1, 1988. It establishes uniform legal rules to govern the formation of international sales contracts and the rights and obligations of the buyer and seller. The CISG is expected to facilitate and stimulate international trade.

The CISG applies automatically to all contracts for the sale of goods between traders from two different countries that have both ratified the CISG. This automatic application takes place unless the parties to the contract expressly exclude all or part of the CISG or expressly stipulate to law other than the CISG. Parties can also expressly choose to apply the CISG when it would not automatically apply.

As of 1996, the following countries and territories applied the CISG: Argentina, Australia, Austria, Bosnia-Herzegovina, Bulgaria, Belarus, Canada, Chile, China, Cuba, the Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Germany, Ghana, Guinea, Hungary, Iraq, Italy, Lithuania, Lesotho, Mexico, Moldova, the Netherlands, New Zealand, Norway, Poland, Romania, Russia, Singapore, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Syria, Uganda, Ukraine, United States, Venezuela, Yugoslavia (Serbia-Montenegro), and Zambia.

The United States made a reservation, the effect of which is that the CISG will apply only when the other party to the transaction also has its place of business in a country that applies the CISG.

Convention Provisions

The provisions and scope of the CISG are similar to Article 2 of the Uniform Commercial Code (effective in the United States except Louisiana). The CISG comprises four parts:

Part I, Sphere of Application and General Provisions (Articles 1-13), provides that the CISG covers the international sale of most commercial goods.
Part II, Formation of the Contract (Articles 14-24), provides rules on offer and acceptance.
Part III, Sale of Goods (Articles 25-88), covers obligations and remedies of the seller and buyer and rules governing the passing of risk and damages.
Part IV, Final Provisions (Articles 89-101), covers the right of a country to disclaim certain parts of the convention.

Applying (or Excluding) the CISG

U.S. businesses can avoid the difficulties of reaching agreement with foreign parties on choice-of-law issues because the CISG text is available as a compromise. Using the CISG may decrease the time and legal costs otherwise involved in research of different unfamiliar foreign laws. Further, the CISG may reduce the problems of proof and foreign law in domestic and foreign courts.

Application of the CISG may especially make sense for smaller firms and for American firms contracting with companies in countries where the legal systems are obscure, unfamiliar, or not suited for international sales transactions of goods. However, some larger, more experienced firms may want to continue their current practices, at least with regard to parties with whom they have been doing business regularly.

When a firm chooses to exclude the CISG, it is not sufficient to simply say "the laws of New York apply," because the CISG would be the law of the State of New York under certain circumstances. Rather, one would say "the provisions of the Uniform Commercial Code as adopted by the State of New York, and not the UN Convention on Contracts for the International Sale of Goods, apply."

After it is determined whether or not the CISG governs a particular transaction, the related documentation should be reviewed to ensure consistency with the CISG or other governing law. For agreements about to expire, companies should make sure renewals take into account the applicability (or nonapplicability) of the CISG.

The CISG can be found in the Federal Register (March 2, 1987; Vol. 52, No. 40, p. 6262) along with a notice by the U.S. Department of State, and in the pocket part to 15 USCA app. at 29. To obtain an up-to-date listing of ratifying or acceding countries and their reservations call the UN Treaty Section at Tel: (212) 963-5047; Fax: (212) 963-3693, or visit the UN's Web site (www.un.org). For further information contact the Office of the Assistant Legal Adviser for Private International Law, U.S. Department of State (Tel: (202) 776-8420; Fax: (202) 776-8482), or the Office of the Chief Counsel for International Commerce, U.S. Department of Commerce (Tel: (202) 482-0937; Fax: (202) 482-4076).

Chapter 9

Selling Overseas

Responding to Inquiries

Separating the Wheat From the Chaff

Business Practices in International Selling

Building a Working Relationship

Chapter 10

Pricing, Quotations, and Terms

Pricing Considerations

Foreign Market Objectives

Costs

Market Demand

Competition

Pricing Summary

Quotations and Pro Forma Invoices

Terms of Sale

Chapter 11

Export Regulations, Customs Benefits, and Tax Incentives