LOG305; International Trade LAW PDF

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STUDY UNIT 1Role of Law in International Trade TransactionsDomestic TransactionsParties location —​ ​Easier to verify credit worthiness and quality of goods. Less cultural differences and communication issues. Flow of Goods​ ​—​ Easier to track location of goods and manage an efficient supply chain....

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STUDY UNIT 1 Role of Law in International Trade Transactions Domestic Transactions Parties location — Easier to verify credit worthiness and quality of goods. Less cultural differences and communication issues. Flow of Goods — Easier to track location of goods and manage an efficient supply chain. Lower transportation risks. Payment — Lower payment risks, with familiar banks. Less exposure to different currencies’ fluctuations. Laws — Higher familiarity with own rights and obligations. Easier to seek remedies and enforcement within the same country. International Transactions Parties Location

Parties are located in different countries (this is what makes the transaction “international”) Challenges: ● more complex to verify credit worthiness of the other party and to assess the quality of goods and monitor work-in-progress ● difficult to manage cultural differences, resulting in communication issues

Flow of Goods

The flow of goods take place across borders, which means that a greater number of third parties (including those based overseas) are likely to be involved. Challenges: ● difficult to track location of goods and manage an efficient supply chain ● given the geographic distance & presence of customs-related matters, there is likely to be higher costs such as: ○ custom duties, ○ insurance, ○ greater transportation risks including risk of pilferage, damage & loss ● involvement of more 3rd parties such as third-party logistics providers (3PLs) and related carriers, operators and couriers as well as different modes of transport can also obscure accountability, making it difficult to pinpoint the party responsible for adverse events such as damaged goods

Payment

Payments take place across borders, which means that different currencies, payment systems and overseas financial intermediaries are likely to be involved Challenges: ● exposure to fluctuations in currencies ○ esp if payments are not made or received in the home currency ● lack of familiarity with differing payment systems & foreign financial intermediaries may also increase the risk

Laws

Law which applies to the contracts for the international sale of goods, transportation and payments may be the laws of the other party’s country, or even that of a third country. Challenges: ● differences in national laws of different countries can cause uncertainty over the rights and obligations of each party ● available dispute resolutions and remedies and the effectiveness of enforcement proceedings may also vary from country to country ● national laws of countries may also conflict with each other, resulting in an even more ambiguous legal framework that governs an international transaction ● unfamiliarity with the national laws of other countries also increases the risk of international trade

int transaction creates a web complexity and uncertainty in terms of risks & legal matters to be considered, and may dissuade parties from engaging in int trade. reduction in int trade: ● has been view as detrimental to a country’s economic growth ○ especially if it is not able to generate wealth through the export of goods, nor import goods which are needed by businesses, population and government of that country; and ○ ultimately, affects the standard of living for their respective populations through job creation and increased purchasing power Obstacles To Adoption International Law On A Global Basis ● International laws which are drafted by international non-governmental organisations and committees do not have the force of law – until and unless countries voluntarily ratify such laws ● Legal remedies and enforcement proceedings still tend to be landlocked. Importance or Benefits of International Trade Law there is a need for int trade law to address the risks and uncertainties and reduce obstacles affecting int flow of goods ● Legal framework ○ given its neutrality, can offer a fair, stable and predictable legal framework for rights, obligations and remedies ● Neutral option ○ it can operate as neutral option for parties who are uncomfortable with laws of another country Incoterms ● The tasks involved in shipping such as arranging for transport and loading/unloading; ● The documentation (such as bills of lading, insurance policies, licences) required to be provided; ● Who bears the risk ● This is important as the passing of risks can take place at different times from the passing of property (legal title) and the passing of possession, depending on what parties have agreed in their contract; ● The delivery destinations and obligations of sellers and buyers; ● Which party arranges for the insurances and up to which point of the journey; ● The payment of any export and import duties; ● Responsibility for obtaining export and import clearances. EXW & DDP ● Seller: delivers the goods at the disposal of the buyer at a named place (like a factory or warehouse) ○ That named place may or may not be the seller's premises ● Imposes the least set of obligations on the seller ● Buyer arranges import/export, arrange for carriage, insurance and licenses ● Risk transfers after the seller delivered the goods ● The opposite of EXW is DDP (Seller arranges everything) CIF & CFR ● Seller: Cost, Insurance, Freight, Export, Insurance ● Buyer: Import ● Seller can charge higher ● Seller has greater control ● Risk transfers when the goods are on board ● CFR is similar except Seller is not responsible for insurance FOB ● ● ● ●

Seller: deliver, load the goods on board. Clear export. Buyer has more control on the freight and freight cost Buyer: ensure shipping space, send notice to seller, arrange insurance, clear import Risk transfers: goods loaded on the vessel

FAS ● ● ● ● ●

Seller: deliver the goods to the vessel, no need to load. Clear export In general, not used for containerised goods > use FCA (free carrier) For bulk or break bulk cargo Buyer: load the goods, arrange transport and insurance. Clear import. Risk transfer: goods placed alongside the vessel

UN Convention on the International Sale of Goods ● developed by UNCITRAL (United Nations Commission on International Trade Law) ● UNCISG, also known as Vienna Convention ● provides common set of rights & obligations ● seeks to be neutral ● compromise that is acceptable amongst countries ● UNCISG offers the flexibility by providing countries with the option of excluding certain of its specified articles ○ the flexibility was instrumental in convincing states to adopt the Vienna Convention as part of their int law The Vienna Convention provides a common set of rights and obligations (harmonisation) that can be applied to international trade between buyers and sellers around the world. It seeks to be neutral and avoids promoting or adopting principles found in any one legal system in preference to another. Instead, it attempts to find a compromise that is acceptable amongst countries, regardless of their legal or economic background.

Table 1.2 Some Key Provisions of UNCISG Articles

Key Changes ‘Application’

Article 1

UNCISG applies to contract for sale of goods (not barter or exchange of goods or services nor distribution agreements) It is relevant when: ● the parties’ places of business are in different countries; and ● both of these countries are contracting states to the Vienna Convention; and ● both parties know that they have places of businesses in different countries by the time they enter into the contract “Autonomy of Buyer and Seller to Exclude UNCISG”

Article 6

UNCISG is not mandatory for buyers and sellers Even when the countries have adopted the Vienna Convention into their national laws, the buyer and seller with places of business in those countries can still opt to explicitly vary or exclude the Vienna Convention (partial or entirely) from their sales contract. “Seller’s Obligations and Rights”

Article 30

Sets out Seller’s obligations to deliver goods, hand over documents and transfer property in the goods.

Article 37

Seller has the right to replace (or remedy defects in) non-conforming goods, so long as it does so by the delivery date and it does not cause the buyer unreasonable inconvenience or unreasonable expense.

Article 64

Seller may declare the contract as void if Buyer commits a “fundamental breach” of the contract. Article 25: “Fundamental breach” is defined to mean a breach that “results in such detriment to the other party as substantially deprives him what he is entitled to expect under the contract.” An example of a fundamental breach could be when Buyer omits to issue a Letter of Credit, as per the agreed payment mode under the contract. “Buyer’s Obligation and Rights”

Article 46

In some circumstances, Buyer has the right to ask Seller to substitute or repair non-confirming goods

Article 53

Buyer is obliged to take delivery of the goods, subject to some factors.

Article 60

To aid delivery of the goods, the Buyer must do all acts reasonably expected of him to enable the seller to make delivery, and to take delivery of the goods. “Remedy-Damages”

Article 74

Innocent party can claim damages for the other party’s breach of contract Damages “consist of a sum equal to the loss”, including the loss of profit, suffered by the innocent party

Article 75

If Buyer has bought replacement goods due to Seller’s breach of contract, Buyer may recover the difference between contract price and the price of the replacement goods as well as any other losses recoverable under Article 74.

UNICITRAL UNCISG EBOOK DOWNLOAD: https://www.uncitral.org/pdf/english/texts/sales/cisg/V1056997-CISG-e-book.pdf STUDY UNIT 2 Electronic Transactions and Digital Innovations Model Law vs Convention Model Law — a suggested pattern of a law for governments to consider adopting as part of their domestic legislation. Convention — binding if a country chooses to become a party to it (ie , ratifies it). ● in general, a country can depart from a Convention only if the Convention permits reservations to be taken to its provisions. Model Law on Electronic Commerce (EC model) EC Model Law seeks to provide equal treatment to paper-based & electronic information by: ● establish rules and norms which validate and recognise contracts that are formed through electronic means; ● set rules for forming and performing electronic contracts; ● define the characteristics of valid electronic writing and of an original document; ● provide for the acceptability of electronic signatures for legal and commercial purposes; and ● support the admission of computer evidence in courts and arbitration proceedings. The EC Model Law is not a comprehensive, prescriptive set of rules for electronic transactions, and does not seek to govern every aspect of forming a contract through electronic means. Instead, as a model law, it seeks to enable and facilitate electronic commerce by providing national legislators with a set of neutral, internationally acceptable rules that they can adopt or adapt as part of their national laws, so as to increase legal certainty and validity for electronic commerce. EC Model Law Key Provisions Application Article 1

EC Model Law applies to any kind of information in the form of a data message used in the context of commercial activities activities includes: ● Factoring, agency, distribution, leases, industrial co-operation; ●

Transport of goods by air, seal or road;

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and sales contracts.

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Countries can decide whether, when adapting the EC Model Law for inclusion into their own national laws, the EC Model Law provisions apply to domestic and/or international commercial transactions conducted via electronic means.

Nature of Data Transmission Article 5

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EC Model Law gives legal recognition to data messages, without discrimination against how such data messages were transmitted. There is no requirement for any specific mode of transmission.

Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message. Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is not contained in the data message purporting to give rise to such legal effect, but is merely referred to in that data message. Article 6 (1)

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Does not require contracts to be “in writing” (a feature of paper contracts). Instead, it just focuses on information which is “capable of being reproduced and read” (as per electronic contracts).

Where the law requires information to be in writing, that requirement is met by a data message if the information contained therein is accessible so as to be usable for subsequent reference. Signatures Article 7

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Provides an equivalent to signatures on paper contracts. An electronic signature is considered authentic if the method for authentication meets certain criteria.

(1) where the law requires a signature of a person, that requirement is met in relation to a data message if: (a) method is used to identify that person and to indicate that person’s approval of the information contained in the data message and (b) that method is as reliable as was appropriate for the purpose for which the data message was generated or communicated, in the light of all the circumstances, including any relevant agreement Formation and Validity of Contracts Article 11

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Recognises the validity of contracts formed via electronic means. A contract cannot be denied validity or enforceability simply because it was concluded by electronic means.

(1) In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose. Time and Place of Dispatch/Receipt of Data Transmissions Article 15

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Identifies when and where data messages are considered to have been dispatched or received.

15 (1)

Unless otherwise agreed between the originator and the addressee, the dispatch of a data message occurs when it enters an information system outside the control of the originator or of the person who sent the data message on behalf of the originator.

15 (2)

Unless otherwise agreed between the originator and the addressee, the time of receipt of a data message is determined as follows: (a) if the addressee has designated an information system for the purpose of receiving data messages, receipt occurs: i. at the time when the data message enters the designated information system; or ii. if the data message is sent to an information system of the addressee that is not the designated information system, at the time when the data message is retrieved by the addressee;

(b) if the addressee has not designated an information system, receipt occurs when the data message enters an information system of the addressee. 15 (3)

Paragraph (2) applies notwithstanding that the place where the information system is located may be different from the place where the data message is deemed to be received under paragraph (4).

15 (4)

Unless otherwise agreed between the originator and the addressee, a data message is deemed to be dispatched at the place where the originator has its place of business, and is deemed to be received at the place where the addressee has its place of business. For the purposes of this paragraph: (a) if the originator or the addressee has more than one place of business, the place of business is that which has the closest relationship to the underlying transaction or, where there is no underlying transaction, the principal place of business; (b) if the originator or the addressee does not have a place of business, reference is to be made to its habitual residence. Carriage of Goods

Articles 16 Article 17

Actions related to contracts of carriage of goods Allows for the use of electronic transport documentation (such as an electronic bill of lading). It applies to transport of goods by sea, road, rail, air and multimodal transport.

Model Law on Electronic Signatures (ES Model) Integrity, reliability and authenticity of electronic messages are crucial, given that electronic signatures are subject to: ● external threats such as hacking, viruses and worms; ● the use of computers for committing fraud and blackmail; and ● the manipulation of computer-held material. Hence, the use of electronic signatures that meet certain conditions can help to authenticate electronic messages and their respective senders. ES Model Law seeks to enable & facilitate the use of electronic signatures by: ● Establish criteria for technical reliability, for the equivalence between electronic and hand-written signatures; ● Provide basic rules of conduct that may serve as guidelines for assessing duties and liabilities for the signatory, the relying party and trusted third parties intervening in the signature process; ● Provide recognition of foreign certificates and foreign electronic signatures (regardless of the place of origin of the foreign certificate and/or signature). ES Model Law Key Provisions Application Article 1

This Law applies where electronic signatures are used in the context of commercial activities. It does not override any rule of law intended for the protection of consumers. The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: ● any trade transaction for the supply or exchange of goods or services ● distribution agreement ● commercial representation or agency ● factoring, leasing, construction of works, consulting ● engineering, licensing, investment, financing, banking, insurance

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exploitation agreement or concession joint venture and other forms of industrial or business cooperation carriage of goods or passengers by air, sea, rail or road

ES Model Law appears applicable to consumer transactions, so long as it does not supersede existing consumer protection laws in each country. Nature and Reliability Article 2(a)

“Electronic Signature” means data in electronic form in, affixed to or logically associated with, a data message, which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message. Defines electronic signatures via the requirements for:

Article 2(c)

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Identification of signatory (data in an electronic form used to identify the signatory); and

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Intention to sign (indication of signatory’s approval of information contained in the data message).

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Open-ended definition which is technology neutral.

“Data Message” means information generated, sent, received or stored by electronic, optical or similar means including, but not limited to, electronic data interchange (electronic mail, telegram, telex or telecopy) ●

Open-ended definition which is technology neutral. Responsibilities of Parties

Articles 8, 9 and 11

Sets out the Responsibilities of each Article. Art 8: Conduct of the signatory Art 9: Conduct of the certification service provider ● service provider of security certificates which confirm the link between the Signatory and the signature creation data Art 11: Conduct of the relying party ● the party...