C H A P T E R 2 4
International Law and Transactions
TRUE-FALSE QUESTIONS
1. The principle of equity is unique to civil law legal systems.
2. Civil law systems are based on British law.
3. The traditional Islamic rules and laws that regulate Muslim life are called Sharia.
4. Customary practice arises from legislative action.
5. Civil law systems are found in areas besides Europe.
6. Under Islamic law, “Zakat” is the allocation of certain taxes to deprived and poor people as a welfare
contribution.
7. U.S. trade laws are enacted by the Congress pursuant to the treaty power of the U.S. Constitution.
8. Most western European countries use the “American rule” whereby each party, win or lose,
generally pays its own attorney fees.
9. A preference given by a country to domestic products in government procurement is a type of
nontariff barrier to trade.
10. Countries are prohibited by international law from regulating the percentage of foreign ownership of
businesses that are incorporated within their borders.
11. Codification is a process by which existing common law positions are restated and laid down in a
statute.
12. The Department of State administers embargoes imposed on U.S. trade with countries such as Iraq,
Cuba, and North Korea.
13. Tariffs are a means by which imports may be limited.
14. The antidumping law is the most frequently used U.S. import-relief law.
15. Section 301 of the Trade Act of 1974 is the principal U.S. statute addressing unfair foreign practices
affecting U.S. exports of goods or services.
16. The transfer of technical data to a foreign citizen while present in the U.S. is generally not
considered to be an export.
17. A political union represents the agreement of countries regarding constitutional systems.
18. In India, Hindu law is applied to most commercial transactions.
19. Some countries require employers to fund employee benefits that are not expected in the U.S.
20. Choice-of-law provisions in a contract seek to avoid later disputes over which law applies.
MULTIPLE-CHOICE QUESTIONS
1. ________ law legal systems primarily rely on case law and precedents.
A. Common
B. Civil
C. Statutory
D. Codified
2. All member states of the European Union apply a single set of tariffs, called the _______ tariff, on
goods imported from outside the European Union
A. accepted use
B. mandated application
C. common customs
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D. European exaction
3. If a country exerts nationalization over a company’s assets and does not provide compensation,
_______ has occurred.
A. expropriation
B. privatization
C. extraterritoriality
D. confiscation
4. Through the process of ________, a nation that was not an original party to a treaty can elect to
participate in a treaty at a later time.
A. ratification
B. accession
C. signing
D. approval
5. The process by which property ownership is transferred from a nation to a private entity is called
________.
A. privatization
B. nationalization
C. appropriation
D. a transfer
6. ________ is the process by which a country asserts a right to regulate activities that occur beyond its
borders.
A. Internationalization
B. Nationalization
C. Extraterritoriality
D. Appropriation
7. The ________ collects U.S. tariffs in this country.
384 MANAGERS AND THE LEGAL ENVIRONMENT
A. U.S. Customs and Border Protection
B. Department of Commerce
C. International Trade Commission
D. U.S. Trade Representative
8. ________ tariffs require the importer to pay a percentage of the value of the imported merchandise.
A. Ad valorem
B. Ad hoc
C. Harmonized
D. Customs valuation
9. In the United States, the value of an article for customs purposes is normally the ________ value,
which is the price indicated on the sales invoice.
A. customs
B. transaction
C. domestic
D. international
10. The ________ is a program developed by the industrialized countries to assist developing nations by
improving their ability to export
A. World Trade Organization
B. Developing Nations Schedule
C. Harmonized Tariff Schedule
D. Generalized System of Preferences
11. Exports are controlled by means of export
A. duties
B. licenses
C. subsidies
D. customs valuations
12. A product is ________ when it is sold abroad below the current selling price in the exporter’s home
market or below the exporter’s cost of production.
A. subsidized
B. dumped
C. underpriced
D. undervalued
13. The ________ was created to provide financing for the purchase of U.S. exports.
A. World Bank
B. U.S. Bank
C. Export-Import Bank of the U.S.
D. U.S. Trade Association
14. ________ is the principal U.S. statute addressing unfair foreign practices affecting U.S. exports of
goods or services.
A. Section 301 of the Trade Act of 1974
B. Section 502 of the Trade Act of 1990
C. The Unfair Export Limits Act
D. The International Control Act
15. In a series of laws, known collectively as the ________ laws, Congress has authorized the President
to raise U.S. tariffs on specified products and to provide other forms of import protection to U.S.
businesses.
A. export-relief
B. domestic-relief
C. import-relief
D. international-relief
16. The ________ provides for temporary relief to domestic industries seriously injured by increasing
imports, regardless of whether unfair practices are involved.
A. fair trade law
B. import-relief law
C. duty free zone
D. foreign trade zone
17. Under GATT’s principle of _______ tariffs, each time tariffs are reduced, they may not be raised
again without compensation to other World Trade Organization members.
A. absolute
B. based
C. bound
D. nationalized
18. The North American Free Trade Agreement provides for elimination of barriers to trade between
what countries?
A. The United States, Canada, and Mexico.
B. The United States, Canada, Mexico, and Brazil.
C. The United States and all South American countries.
D. The United States and Mexico only.
19. The European Commission is the ________ of the European Union.
A. executive branch
B. legislative branch
C. administrative agency
D. police arm
20. A ________ is created when a group of states reduce or eliminate tariffs between themselves but
maintain their own individual tariffs as to other states.
A. free trade area
B. Caribbean basin initiative
C. customs union
D. most favored nation
21. The Council of Ministers is the legislative body of
A. NAFTA.
B. GATT.
C. the Treaty of Rome.
D. the European Union.
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22. The members of the European Parliament are elected by the ________ of the member states.
A. legislative branch
B. executive branch
C. citizens
D. Council of Ministers
23. The process in which existing common law positions are restated and laid down in a statute is
referred to as _______.
A. conciliation
B. codification
C. directive encoding
D. sectioning
24. A(n) _______ has features of a customs union but goes a step further by eliminating barriers that
restrict the movement of labor, capital, and technology among member nations.
A. valuation market
B. common market
C. import relief consortium
D. nontarrif consortium
25. When internationally accepted arbitration rules are used in conjunction with the parties’ own
methods of selecting an arbitration panel, it is known as a(n) ________ arbitration.
A. multinational
B. neutral
C. ad hoc
D. private
26. If a country exerts nationalization over a company’s assets provides compensation, _______ has
occurred.
A. expropriation
B. privatization
C. extraterritoriality
388 MANAGERS AND THE LEGAL ENVIRONMENT
D. confiscation
27. Which of the following is a legal principle of international law under which nations submit their
decision-making authority to a common organization or institution?
A. Private international law
B. Supranational law
C. The international naturalized agreement
D. The foreign resolution principle
28. One simple way of addressing foreign tax risks is a(n) ________, whereby the local licensee is
obligated to pay all taxes other than those specifically allocated to the foreign partner.
A. gross-up clause
B. tax shift clause
C. local commitment clause
D. overseas investment clause
29. The principle that each World Trade Organization member must accord to all other member
countries tariff treatment no less favorable than it provides to any other country is known as the
_______ principle.
A. most favored nation
B. preference
C. bound nation protection
D. product enhancement
30. ________ is a process used mainly in the area of public international law whereby a third party,
often a disinterested government, brings the parties together by establishing communication and
providing a site where the parties can meet, often in secret.
A. Public involvement
B. Good offices
C. International involvement
D. Best transactions
31. Amanda was just hired to work for a federal agency in the procurement department. Amanda shops
for the best buys possible and thinks she has found a great deal. She returns to her office and tells
her supervisor about her discovery. Her boss tells her to be sure that the Buy American Act is
satisfied. Amanda decides to research the law. What will she find?
A. That under all circumstances federal agencies must purchase products that are 100% made in the
U.S.A.
B. That under all circumstances federal agencies must purchase products with at least 75% of the
components made in the U.S.A.
C. That unless the price is a certain percentage higher than the price of the equivalent foreign
product, federal agencies must buy products with at least 50% of the components made in the U.S.A.
D. That federal agencies may buy foreign made products so long as it can be established that a
representative did comparison shopping and established that the foreign made good is a better deal
than the made in the U.S.A. product.
32. Senator Smith is tired of all the imports of televisions coming into this country. He proposes a bill
by which all foreign-made televisions will be taxed an additional $100 before being allowed into the
country. He receives a great deal of support for his bill, but one senator questions whether such an
arrangement is illegal since it will discriminate against imported goods. Which of the following is
correct?
A. There is no problem with the additional tax because the U.S. is a sovereign nation.
B. There is no problem with the tax so long as it can be shown that American jobs are being lost due
to the number of televisions being imported.
C. Under the principle of national treatment, the U.S., as a member of the World Trade
Organization, may not discriminate against imported goods and may not apply the tax unless it is
also applied equally to domestic products.
D. The tax may not be imposed under the Uniform Trade Initiative.
33. Allison, a dress designer, believes that she has a great deal with a company in Ireland, called
Fashion, which has agreed to purchase a number of her dresses. The manager of Fashion, however,
insists on delivery of the dresses before payment will be provided. Which of the following would be
a good idea for Allison?
A. Allison should insist on a documentary letter of credit provided by an issuing bank promising
payment upon proof of delivery of the dresses.
B. Allison should insist on a letter of credit issued by the buyer promising payment upon delivery of
the dresses.
C. Allison should personally deliver the dresses so that she can demand payment while there.
D. Allison should turn down the deal because it is too risky.
34. Jackson owns a business in a foreign country that is considered “friendly” with the U.S. but which
has significant political unrest. Jackson is uneasy about the situation in the country. He is
concerned that his business could be the subject of a taking by the foreign country or losses due to
civil unrest. What advice would you give him?
A. He should seek insurance through the Foreign Insurance Services Company, a privately run
insurance company specializing in foreign risk.
B. He should do nothing at the present, but seek reimbursement through the U.S. government should
losses be incurred.
C. He should seek insurance through the Overseas Private Investment Corporation, a U.S.
government agency specializing in providing insurance for foreign risk.
D. He should sell the company and leave the country because insurance is not available
35. Connie owns a retail establishment that sells electronics. She does a lot of business with Company
ABC in Japan. Connie does not want to learn Japanese law or travel to Japan in the event of a
dispute with the company. She seeks advice regarding how to protect herself from such risks in the
event of a dispute. Which of the following would be a good idea for Connie?
A. A choice–of-law provision.
B. A choice-of-forum provision.
C. A conflict–of-laws provision.
D. Both a choice-of-law provision and a choice-of-forum provision.
ESSAY QUESTIONS
1. Set forth the differences between the current British common law system and the U.S. common law
systems. Describe the difference between a solicitor and a barrister in the British system.
2. What is the principle of comity? What conditions must usually exist for the principle to be applied?
3. What is the act–of-state doctrine, and how is it generally applied by U.S. courts?
4. Set forth the private and public factors the U.S. Supreme Court set forth in Gilbert Oil Corp. v.
Gilbert that a court should consider in deciding whether to dismiss a case based on forum non
conveniens?
5. What is the commercial activity exception to the Foreign Sovereign Immunities Act?
6. Set forth the seven principle European Institutions primarily responsible for governing the European
Union.
