SENA

Evidence 7: Compliance with foreign law

Presented by:
Ma. Valeria Ruiz Salgado

Bogotá D.C.
2019
Compliance with foreign law Prior to exporting to a foreign country or even agreeing to
sell to a customer in a foreign country, a U.S. company should be aware of any foreign
laws that might affect the sale. Information about foreign law often can be obtained from
the customer or distributor to which the U.S. company intends to sell. However, if the
customer or distributor is incorrect in the information that it gives to the exporter, the
exporter may pay dearly for having relied solely upon the advice of the customer.
Incorrect information about foreign law may result in the prohibition of importation of
the exporter’s product, or it may mean that the customer cannot resell the product as
profitably as expected. Unfortunately, customers often overlook those things that may
be of the greatest concern to the exporter. As a result, it may be necessary for the U.S.
exporter to confirm its customer’s advice with third parties, including attorneys, banks,
or government agencies, to feel confident that it properly understands the foreign law
requirements. Some specific examples are as follows:
1. Industry standards Foreign manufacturers and trade associations often promulgate
industry standards that are enacted into law or that require compliance in order to sell
successfully there. It may be necessary to identify such standards even prior to
manufacture of the product that the company intends to sell for export or to modify the
product prior to shipment. Or, it may be necessary to arrange for the importing customer
to make such modifications. Sometimes compliance with such standards is evidenced by
certain marks on the product, such as ‘‘JIS’’ (Japan), ‘‘CSA’’ (Canada), and ‘‘UL’’
(Underwriters Laboratories - U.S.). One type of foreign safety standard that is becoming
important is the ‘‘CE’’ mark required for the importation of certain products into the
European Community. The European Community has issued directives relating to safety
standards for the following important products: toys, simple pressure vessels and
telecommunications terminal equipment, machinery, gas appliances, electromagnetic
compatibility, low voltage products, and medical devices (see www.newapproach.org.).
Products not conforming to these directives are subject to seizure and the assessment of
fines. The manufacturer may conduct its own conformity assessment and self-declare
compliance in most cases. For some products, however, the manufacturer is required
(and in all cases may elect) to hire an authorized independent certifying service company
to conduct the conformity assessment. The manufacturer must maintain a technical
construction file to support the declaration and must have an authorized representative
located within the European Community to respond to enforcement actions.
The ISO 9000 quality standards are becoming increasingly important for European
sales. One helpful source of information in the United States is the National Center for
Standards and Certification Information, a part of the Department of Commerce
National Institute of Standards and Technology, www.nist.gov, which maintains
collections of foreign government standards by product. The National Technical
Information Service, www.ntis.gov, the Foreign Agricultural Service of the Department
of Agriculture, www.fas.usda.gov, and the American National Standards Institute,
www.ansi.org, which maintains over 100,000 worldwide product standards on its NSSN
network, also collect such information. Canada has the 20 exporting: Procedures and
Documentation Standards Council, www.scc.ca, and Germany has the Deutsches Institut
für Normung (DIN), http://www.din.de/de/

2. Foreign customs laws The countries of export destination may have absolute quotas
on the quantity of products that can be imported. Importation of products in excess of
the quota will be prohibited. Similarly, it is important to identify the amount of customs
duties that will be assessed on the product, which will involve determining the correct
tariff classification for the product under foreign law in order to determine whether the
tariff rate will be so high that it is unlikely that sales of the product will be successful in
that country, and to evaluate whether a distributor will be able to make a reasonable
profit if it resells at the current market price in that country. It is especially important to
confirm that there are no antidumping, countervailing, or other special customs duties
imposed on the products. These duties are often much higher than regular ad valorem
duties, and may be applied to products imported to the country even if the seller was not
subject to the original antidumping investigation. Some countries, such as Ethiopia,
Belarus, Cambodia, Yugoslavia, Kazakhstan, Lebanon, Liberia, Saudi Arabia, and
Ukraine, do not fully adhere to the GATT Valuation Code and may assess duties on fair
market value rather than invoice price. Another problem is ‘‘assists.’’ If the buyer will be
furnishing items used in the production of merchandise, such as tools, dies, molds, raw
materials, or engineering or development services, to the seller, the importer of record
(whether that is the buyer or the seller through an agent) may be required to pay customs
duties on such items, and the seller may be required to identify such items in its
commercial invoices.

Many countries have severe penalties for import violations; for example, France
assesses a penalty of two times the value of the merchandise, India assesses a penalty of
five times the value of the merchandise, and China confiscates the merchandise. See
appendix K listing web sites for foreign customs agencies and tariff information. In any
case, where there is doubt as to the correct classification or valuation of the merchandise,
duty rate, or existence of assists, the importer (whether buyer or seller) may wish to seek
an administrative ruling from the foreign customs agency.
This will usually take some period of time, and the seller and buyer may have to adjust
their production and delivery plans accordingly. (A more thorough understanding of the
types of considerations that the buyer may have to take into account under its customs
laws can be gained by reviewing the similar considerations for a U.S. importer discussed
in chapter 6, section F).
3. Government contracting Sales to foreign governments, government agencies, or
partially government owned private businesses often involve specialized procedures and
documentation. Public competitive bidding and compliance with invitations to bid and
acquisition regulations, and providing bid bonds, performance bonds, guarantees,
standby letters of credit, and numerous certifications may be required. Commissions
may be prohibited, or the disclosure of commissions paid may be required. Government
purchases may qualify for customs duty, quota, or import license exemptions. Barter or
countertrade may be necessary.
4. Buy American equivalent Laws Foreign government agencies often promulgate
regulations that are designed to give preferential treatment to products supplied by
manufacturers in their own country. This may consist of an absolute preference, or it
may be a certain price differential preference. Determining whether such laws or agency
regulations exist for your company’s products is mandatory if government sales are
expected to be important.

5. Exchange controls and import licenses Unlike the United States, many nations of the
world have exchange control systems designed to limit the amount of their currency that
can be used to buy foreign products. These nations require that an import license from a
central bank or the government be obtained in order for customers in that country to pay
for imported products. For a U.S. exporter who wishes to get paid, it is extremely
important to determine (1) whether an exchange control system exists and an import
license is necessary in the foreign country, (2) what time periods are necessary to obtain
such licenses, and (3) the conditions that must be fulfilled and documentation that must
be provided in order for the importer to obtain such licenses.
6. Value-added taxes Many countries impose a value-added tax on the stages of
production and distribution. Such taxes usually apply to imported goods, so that the
importer, in addition to paying customs duties, must pay a value-added tax based,
usually, on the customs value plus duties. When the importer marks up and resells the
goods, it will collect the tax from the purchaser, which it must remit to the tax authorities
after taking a credit for the taxes due on importation. (Exporters are often exempt from
the value added tax) the amount of value-added tax can be significant, as it is usually
higher than traditional sales taxes, and, therefore, whether the product can be priced
competitively in the foreign market is a matter of analysis.

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

1- VOCABULARY:
Dearly: caro
relied solely: confiado únicamente
attorneys: abogados
enacted: promulgada
assessment: evaluación
assessed: juzgado
antidumping: antidesecho
ad valorem: proporcional al valor
bidding: posturas, invitación
enact: promulgar
 2- Compliance with international law

Compliance with foreign law

To be able to export, every American company must know the laws that may
influence its export. For this reason it is the duty of the exporter not only to rely on
the information that can be obtained from the client but to know the foreign law

The wrong information obtained by an exporter may have the consequence of not
importing your product or that the resale is not profitable. For this reason it is
necessary to have clear requirements such as:

1. Industry standards: It is necessary to be able to identify the minimum standards

required in the manufacture of the product before shipment, such as the directives
that the European community has placed on some products such as toys,
machinery, medical devices, etc. . In the event that the product does not meet the
minimum requirements, it is possible that seizures or fines may be generated that
may damage the operational profits.

2. Foreign customs laws: Some countries have rules such as quantity of products
entering their country, customs duties according to the tariff classification,
antidumping confirmation

3. Government contracting: Any sale made to government agencies involves

special procedures and documents, although they may also qualify for customs
tariffs or import license exemptions.

4. Buy the American equivalent: foreign government laws promulgate regulations

that give special treatment to the products of your own country therefore it is
necessary and mandatory to verify if the products in the process of sale are in such
regulations

5. Exchange controls and import licenses: Many countries limit the amount of
money that can be used for the purchase of foreign products, it is important to
determine if a change control system exists and if necessary in the country to which
it is going export and the conditions to obtain those licenses

6. Value added tax: These taxes are applied to imported goods, therefore customs
duties plus value added must be paid. When the importer marks and resells the
goods, he will collect the buyer's tax, which he must remit to the tax authorities after
taking a credit for the taxes owed on the importation.
 7. Specialized laws: some regulations of the United States regulate all
manufactured products before entering into a sales agreement, quotation or
delivery dates to a client

 Identifique y clasifique las frases en sus diferentes tipos.

Declarative Sentence

Every American company must know the laws that can influence its export

Imperative Sentence

It is necessary to have clear requirements

It is necessary to be able to identify the minimum standards required in the

manufacture of the product before shipment

Conditional Sentence

If these rules are violated, fines may occur

 Elabore un gráfico con el cual explique los diferentes ejemplos de

cumplimiento con las leyes extranjeras, utilizando las preposiciones de lugar.

GRAFICO

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buyer
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Generate commercial Compliance with
processing personally Generate non-tariff Make payment of
and export technical standards
or hire a customs requirements export taxes
documentation required
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Security certifications

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Sanitary controls

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