978-1285428222 Chapter 22 Lecture Note Part 1

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CHAPTER 22

THE INTERNATIONAL LEGAL ENVIRONMENT OF BUSINESS

INTERNATIONAL LAW AND BUSINESS—The percent of U.S. gross national product

involved in direct international trade has tripled in recent decades. Virtually every business,

whether oriented towards domestic or international markets, is now affected by events and

conditions originating in the international business environment.

The International Business Environment—International business may be defined to include

all business transactions that involve two or more countries. Besides involving the movement of

goods across national boundaries, international business involves the movement of services,

capital, and personnel. It also includes the transactions of all multinational enterprises, whether

of private, public, or mixed ownership. International business is much more than just business

transactions across national boundaries. It includes activities are affected by international

business conditions and world events. A distinction between domestic and inter-national

businesses lies in the special risks confronting the international business enterprise. Those risks

fall into the general categories of financial, political, and regulatory risks.

Origins of International Law—There is no comprehensive system of laws or regulations for

guiding business transactions between two countries. The legal environment consists of laws and

policies from all countries engaged in international commercial activity. Early trade customs

centered around the law of the sea and provided, among other things, for rights of shipping in

foreign ports, salvage rights, and freedom of passage. During the Middle Ages, international

principles embodied in the lex mercatoria (law merchant) governed commercial transactions

throughout Europe. Although laws governing international transactions were more extensive in

some countries than others, the customs and codes of conduct created a workable legal structure

for the protection and encouragement of international transactions. The international commerce

codes in use today in much of Europe and in the United States are derived in part from those old

codes.

Sources of International Law—The main sources of international commercial law are the laws

of individual countries, the laws embodied in trade agreements between or among countries, and

the rules enacted by a worldwide or regional organization—such as the United Nations or the

European Union. There is no international regulatory agency or system of courts universally

accepted for controlling international business behavior or resolving international conflicts

among businesses or countries. International law can be enforced to some degree through (1) the

International Court of Justice, (2) international arbitration, or (3) the courts of an individual

country. However, the decisions of those tribunals in resolving international business disputes

can be enforced only if the countries involved agree to be bound by them.

International Trade Agreements—Countries improve economic relations through trade

agreements that cover a variety of potential commercial problems. This helps the investment and

trade climates among countries. For example, virtually all industrialized countries have bilateral

tax agreements to prevent double taxation of individuals and businesses. Two important trade

agreements for the U.S. are the North American Free Trade Agreement (NAFTA) and the World

Trade Organization (WTO)

North American Free Trade Agreement—NAFTA is a treaty that was ratified by the legislatures

in Canada, Mexico, and the U.S. and went into effect in 1994. It reduces or eliminates tariffs and

trade barriers among those nations. Although some tariffs were eliminated immediately, many

are phased out through 2009. The industries most affected include ag products, automobiles,

pharmaceuticals, and textiles. NAFTA created large free trade area; 450 million people. NAFTA

includes a variety of issues not usually found in trade agreements, such as protection of

intellectual property and the environment, and the creation of special panels to resolve disputes

involving unfair trade practices, investment restrictions, and environmental issues.

World Trade Organization—For 48 years, GATT worked to reduce trade barriers imposed by

governments. GATT focused on trade restrictions (import quotas and tariffs); it published tariff

schedules to which its signers agreed. Tariff schedules were developed in multinational trade

negotiations or “rounds.” In the most recent round—the Uruguay Round—124 nations

participated. GATT was replaced by the WTO, one of the most significant developments of the

last round. Since 1995, WTO has overseen the trade agreement and has a dispute-resolution

system, using three-person arbitration panels. The panels follow strict schedules for rendering

decisions. WTO members cannot veto decisions, unlike before (unless they withdraw from the

agreement). The latest round will eventually lower world tariffs by 40 percent. The U.S., Japan,

members of the EU, and other industrialized nations agreed to eliminate all tariffs in 10

industries:

Beer

Construction equipment

Distilled spirits

Farm machinery

Furniture

Medical equipment

Paper

Pharmaceuticals

Steel

Toys

Intellectual Property–The WTO agreement provides world protection for intellectual property; 7

years of protection for trademarks, 20 years for patents and up to 50 years for copyrights

(generally moving to 75 years plus in most places). Only in the film and television industry was

the U.S. not able to gain a barrier to trade reduction in Europe. France was particularly adamant

about maintaining the barrier because of its concerns about the heavy cultural influence of such

programming (and the demise of the not very successful French film industry).

Subsidies and Countervailing Measures—WTO has authority to investigate and rule on

government subsidies that give a producer an unfair advantage in a market. It is a very slow

process, taking years, with much negotiation, but it reduces incentives for governments to use

such measures.

Add. Case: US v. Moghadam (11th Cir., 1999)–Moghadam was convicted of violating the

statute that makes it a criminal offense to bootleg musical performances. He recorded live

performances then produced and sold CDs. The statute arose from the Agreement on Trade

Related Aspects of Intellectual Property (TRIPs), a part of the World Trade Organization

agreements. He admitted to making the CDs, but claimed the law was unconstitutional and

appealed his conviction.

Decision: Affirmed. The statute is constitutional under the Commerce Clause powers of

Congress. The anti-bootlegging statute had a sufficient connection to interstate and international

Add. Info: International Organizations: To encourage international business, various

organizations has been developed to facilitate, finance, and regulate international business

transactions.

1. The United Nations—Although created principally as a peacekeeping body, the UN has some

success in economic and social efforts. The UN is most visible in the field of international trade

through its Commission on International Trade Law (UNCITRAL). The primary purposes of

UNCITRAL are to promote harmonization and unification of laws affecting international trade

and to encourage the elimination of legal obstacles encumbering international trade.

2. The World Bank—The World Bank is the functional name given to the International Bank for

Reconstruction and Development. The current purpose of the World Bank is to “promote private

foreign investment by means of guarantees or participation in loans and other investments made

by private investors.” To do this, the World Bank assists in the financial arrangements of

businesses, industries, and agricultural associations of its member states.

3. International Monetary Fund—The basic purposes of the International Monetary Fund (IMF)

are to “facilitate the expansion and balanced growth of international trade,” to aid in “the

elimination of foreign exchange restrictions which hamper the growth of international trade,”

and to “shorten the duration of and lessen disequilibrium in the international balances of

payments of its members.” These purposes are achieved through the administration of a complex

lending system.

Add. Case: El Al Israel Airlines v. Tseng (S. Ct., 1999)–Before Tseng boarded an El Al flight

from New York to Tel Aviv, El Al subjected her to an intrusive security search. She sued El Al in

state court in New York for assault and false imprisonment. Suit was moved to federal court,

which dismissed the claim on the basis that she failed to establish an injury recognized under the

Warsaw Convention. Case appealed.

Decision: The Warsaw Convention precludes a passenger from bringing an action for personal

injury damages under local law when the claim does not satisfy the conditions for liability

Add. Info: Regional Organizations: Several regional organizations exist throughout the world

to facilitate trade and economic development. For example, the European Economic Community,

now the European Union (EU), was created to eliminate restrictions on the free flow of goods,

capital, and persons; harmonize economic policies; and create a common external tariff among

its member countries. The original member countries of the EC include Belgium, Denmark,

France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United

Kingdom, and West Germany. More members are being added, as most of Europe is now in it.

U.S. IMPORT POLICY—Countries have long imposed restrictions or prohibitions on the

importation and exportation of certain products. In addition, export laws and regulations are

often enacted to encourage international business activity by domestic industries.

Taxes on Imports—Restrictions on imports may be imposed to generate revenue for the

government or to protect domestic industries from foreign competition. Import licensing

procedures, quotas, testing requirements, safety and manufacturing standards, government

procurement policies, and complicated customs procedures are all ways to regulate imports. The

most common means of regulating imports into a country is through tariffs.

Tariff Classes—A tariff is a duty or tax levied by a government on imports. Tariffs can be

classified into: specific tariffs, which impose a fixed tax or duty on each unit of the product, and

ad valorem tariffs, which impose a tax based on a percentage of the price of the product. In the

U.S. the duty or tax is published in the Tariff Schedules that apply to all products entering U.S.

ports. Customs officials classify products and determine the tariff rates when products enter the

country. Any tariff imposed must be paid before the good may enter the country. Most disputes

that occur in this area arise over the classification of products under the Tariff Schedules.

Harmonized Tariff Schedules—In 1989, the U.S. replaced its tariff schedules with the

Harmonized Tariff Schedule. The Harmonized Tariff Schedule was developed by a group of

countries for the purpose of standardizing the ways in which goods are classified by customs

officials worldwide.

CASE: U.S. v. Mead Corp. (S. Ct., 2001)—Mead imported day planner calendars. Customs

classified them under the HTSUS class the same as diaries and notebooks with a 4% tariff. Mead

appealed this classification holding that they should be classified as “other” with no tariff. The

Court of International Trade upheld Customs’ determination; Mead appealed. The Federal Circuit

reversed, holding that Customs declarations do not get the high level of deference as given by

courts to regulations under Chevron because tariffs are set without a formal notice and hearing

process. Customs appealed.

Decision: Remanded. Customs issues more than 10,000 tariff declarations a year; it cannot go

through full notice process except in certain cases. Tariffs should be treated like policy

Question: 1. What does the lower level of deference by the courts mean in practice?

A lot of litigation. There is a lot of money on the table when a tariff classification can mean 4%

or 10% off the top, so firms routinely challenge Customs classifications. Many are upheld, but it

Add. Case: Hemscheidt Co. v. U.S. (Fed. Cir., 1995)–Hemscheidt imported coal mining

machines. For 20 years they had been subject to a 2.5% ad valorem tariff under a category that

covered “excavating, boring and extracting machinery.” After the Harmonized Tariff Schedule

(HTS) went into effect, Hemscheidt continued to import machines at the same tariff rate. The

HTS number was different than the old tariff schedule number, but the name was the same. After

three years, Customs changed the classification of the machinery to a higher tariff class that

covered “machines having individual functions and not specified or included elsewhere” in the

HTS. Hemscheidt protested the reclassification. The Court of International Trade held for

Hemscheidt because tariff law required Customs to publish a notice of reclassification in the

Federal Register; since it did not, the reclassification was invalid. Customs appealed.

Decision: Affirmed. “Nothing in the [HTS] indicates that Congress instructed Customs to cease

its established and uniform classification practice regarding the subject articles.” Congress

Add. Case: BASF v. U.S. (Fed. Cir., 2007)—BASF imports Lucrotin ® 1% which contains 1%

beta-carotene and is used as a food colorant. It had a classification as a carotene colorant

subject to a tariff. BASF contended it should be duty free because beta-carotene can be such in

its classification as a vitamin. Customs applied another food preparation classification to it and

applied a tariff. BASF appealed to the Court of International Trade, which held that the food

colorant classification was correct. BASF appealed.

Decision: Affirmed. The Harmonized Tariff Schedule of the U.S. (HTSUS) is what is followed in

Add. Case: Russ Berrie & Co. v. U.S. (Fed. Cir., 2004)–Berrie imported cheap lapel pins and

earrings with Halloween and Christmas themes. He wanted them classified “festive articles”,

which are duty free, but Customs classified them as “imitation jewelry” subject to an 11 percent

duty. He appealed. The Court of International Trade held in Berrie’s favor, holding that Customs’

decision lacked valid reasoning, Customs appealed.

Decision: Reversed. Customs’ determination is reasonable; the merchandise fits nicely under the

Add. Case: Heartland By-Products v. U.S. (Fed. Cir., 2001)–Heartland applied for and

received a certain tariff it would pay to import sugar syrup from Canada. Its competitors

complained to Customs that Heartland should be paying a higher tariff because of the type of

sugar it was importing. Customs investigated and upheld the original classification. Competitors

complained again and this time Customs increased the tariff rate by changing the classification.

Heartland appealed. The Court of International Trade held that the original classification was

correct. Customs and Heartland’s competitors appealed.

Decision: Reversed. Customs was correct to change the classification and was within its

Add. Case: U.S. v. Haggar Apparel (S. Ct., 1999)–Haggar cut material for pants in the U.S.,

sent the material to Mexico for sewing, then it was shipped back to the U.S. for sale. Customs

applied a higher tariff rate to the pants because after they were sewn in Mexico, a permapress

treatment was added. Customs held that was an operation “incidental to the assembly process”

that made the pants subject to a higher tariff than if permapress had not been added. Haggar

sued for a refund of the tariff, contending that the Customs regulations were not consistent with

the tariff law. The Court of International Trade and the Court of Appeals agreed with Haggar;

Customs appealed.

Decision: Reversed. The regulations issued by Customs, under the authority the agency was

granted by Congress, is entitled to deference by the courts under the standard set by the Supreme

Issue Spotter: Starting an Import Business

To import regular products you must have an importer of record number, which is usually the

tax-id number of you or your business, and you must post a surety bond to protect the U.S.

government in case you can’t pay your duties, taxes and other fees. Surety bonds are required for

shipments of more than $2,000 and usually cost at least $30 per shipment. If you have multiple

shipments a year, you can buy what is called a continuous bond.

Imports must be properly marked from country of origin. Whether the good are considered fully

assembled may control the tariff designation, so that may play a role in what form the good are

brought in. The website www.cbp.gov is helpful. Check “Import” and “Informed Compliance.”

As the case in the text indicates, what classification a good is put under in the tariff schedule is

important, as several classifications may be possible. Customs brokers are experts in the

procedures and usually charge about $100 per shipment to help with paperwork. Big shipping

companies offer such services. Then there is the whole issue of payment form—making sure the

seller does not pocket the cash before the goods have arrived and been inspected.

Import Controls—The Department of Commerce, the International Trade Administration (ITA),

and the International Trade Commission (ITC) have certain abilities to restrict foreign imports.

The agencies are concerned with foreign companies that practice “dumping” or receive a subsidy

from their governments to lower their costs of production. The agencies may also restrict imports

in the absence of dumping or subsidies. As barriers to trade are lowered, some domestic

industries and their workers face economic hardships due to foreign competition. The ITC can

temporarily restrict imports to provide those industries with an opportunity to adjust to the new

competitive environment created by the lower trade barriers.

Bans on Certain Products—The entry of certain products may run contrary to established

governmental policies concerning national security, general economic protectionism,

environmental standards, or other policies dictated by statute. For example, certain explosives

raise national security concerns and cannot be legally imported. Illegal products, such as

narcotics, violate drug or other laws and cannot be legally imported. Products made from

endangered species are prohibited. Other items may not meet U.S. safety regulations or pollution

requirements and cannot be brought into the country.

Add. Case: U.S. v. Arch Trading (4th Cir., 1993)–In 1988 Arch Trading signed a contract with

Ag. Supplies, an Iraq government company, to install laboratory equipment in Iraq. Payment

was assured by a $2 million irrevocable letter of credit issued by an Iraqi bank and guaranteed

by Commercial Bank of Kuwait. To secure that letter, Arch deposited $200,000 with the Kuwaiti

bank. By 1990, Arch had sent five of six shipments to Iraq, but none had been installed. Then

Iraq invaded Kuwait. President Bush issued executive orders prohibiting U.S. persons from

exporting anything to Iraq or performing any contract in Iraq. Arch hired a Jordanian firm to do

the installation. One Arch employee joined the Jordanians in Iraq to help the installation, which

was finished in 1990. Arch sought to recover the money deposited with the Kuwaiti bank to

secure the letter of credit guaranteeing performance, submitting documents misrepresenting that

the contract was completed before the embargo. The Kuwaiti bank denied the request for return

of the funds “until Arch Trading obtained a license from the Office of Foreign Assets Control of

the Department of the Treasury (OFAC).” Arch wrote a letter, dated April 3, 1991, to OFAC

explaining the situation: “We have performed our contract prior to August 2d, 1990, and

stopped any contact with Iraq in conformity with the presidential executive (order).” Arch’s

dealings with Iraq came to the attention of Customs. Arch was convicted of conspiring to commit

an offense; disobeying the executive orders; and of lying to OFAC about its conduct. It was

imposed to a fine of $50,000. Arch appealed.

Decision: Affirmed. The executive orders that Arch violated did not encourage arbitrary and

Antidumping Orders—Under both the WTO and U.S. antidumping laws, dumping “is the

business practice of charging a lower price in the export market then in the home market, after

taking into consideration important differences in the sale (such as credit terms and

transportation) and the goods being sold.” This was first prohibited in 1916, when Congress

enacted the Antidumping Duty Act. If a company is dumping goods in the U.S., an antidumping

order will be issued. Goods from the company are subject to payment of an antidumping duty

(tax). The amount of the duty is determined by comparing the market price in the company’s

home market with the price charged in the U.S. The percentage difference between the home and

U.S. markets will form an ad valorem duty to be applied to the price when sold in the U.S. This

duty is paid to Customs by cash deposit at the port, normally by the importer. Duty orders

generally remain in place until the importer has demonstrated three consecutive years of “fair

market value” sales and Commerce is convinced there is a low likelihood of “less than fair

market value” sales in the future.

Add. Case: Huaiyin Foreign Trade Corp. v. U.S. (Fed. Cir., 2003)—Crawfish processors in

the U.S. filed an antidumping petition with commerce, claiming that crawfish tailmeat from

China was sold in the U.S. at less than fair market value. Commerce determined that the

complaint was correct. It imposed a dumping duty of 201.63% on crawfish from Chinese

government-controlled firms and a duty of 91.5% on crawfish from private Chinese processors.

Huaiyin was accidentally classified as a private company and assigned the lower rate. U.S.

competitors noticed and complained that it should be assigned the higher rate. Commerce then

imposed the higher rate. Huaiyin appealed. The determination was affirmed. Huaiyin appealed.

Decision: Affirmed. A Commerce determination will be upheld unless not supported by the

Add. Case: Crawfish Processors Alliance v. U.S. (Fed. Cir., 2007)–Crawfish imported from

China is subject to an Antidumping Duty Order that imposes a tariff. The product is “freshwater

crawfish tail meat, in all its forms (whether washed or with fat on, whether purged or unpurged),

grades, and sizes; whether frozen, fresh, or chilled; and regardless of how it is packed,

preserved, or prepared.” Coastal Foods, an importer, requested a scope ruling from the

Department of Commerce to determine whether crawfish etouffee was included in the order.

Etouffee is a stew composed mostly of gravy that is pre-cooked. Ingredients include assorted

vegetables, spices, oil, starches, and ground-up crawfish. The Crawfish Processors Alliance,

representing domestic interests, insisted that etouffee should be covered by the tariff. Commerce

held it was not. The Alliance opposed that finding, but it was upheld by the Court of

International trade. The Alliance appealed.

Decision: Affirmed. The language of the antidumping duty order did not clearly resolve whether

etouffee was properly considered as crawfish or if it had been transformed into a different

product such that it could no longer be considered crawfish. Commerce properly considered

Add. Case: Pesquera Mares Australes Ltd. v. U.S. (Fed. Cir., 2001)–Domestic salmon sellers

initiated an antidumping investigation, contending salmon from Chile were selling in the U.S. for

less than fair market value. Commerce investigated and determined that certain salmon were

being sold for less in Japan than in the U.S. and imposed a 2.23 percent tariff. The Court of

International Trade upheld the tariff; the Chilean salmon sellers appealed.

Decision: Affirmed. Commerce determined that salmon of similar quality, regardless of the label

Add. Disc.—The U.S. has extensive antidumping laws. Commerce brings about 200 actions a

year against companies from dozens of nations. Dumping actions cover everything: honey from

China, disposable pocket lighters from Thailand, color TVs from Taiwan, ceiling fans from

China, and roses from Columbia. Antidumping statutes are a way for U.S. companies to get

protection from imports. However, it is also a way for foreign companies to get a measure of

protection against U.S. exports. U.S. statutes have been copied by more than 40 nations that

bring more than 2000 antidumping cases a year—many against U.S. companies. Exporters must

be prepared to justify price difference on the basis of quality, differing characteristics, services,

or sales terms.

Add. Info: Antidumping Calculation: This is taken from Zenith Electronics v. U.S., 633 F. Supp.

1382. When sold in the home market, the pre-tax price (pre-tax FMV) of a hypothetical Japanese

television is $100. When sold for export to the U.S., the purchase price (USP) for the same

model is $90. The absolute dumping margin for the television is therefore $10. The ad valorem

(percentage of price) dumping margin is 11.1% ($10/$90). If the Japanese commodity tax is

15%, the tax on home market sales is $15; the after-tax home fair market value (FMV) is $115,

assuming the consumer bears the full burden of the tax. The amount of tax rebated or not

collected on the exported television is $13.50 (15% of $90). Adding this amount adjusts the USP

to $103.50 ($90 + $13.50). The tax-adjusted absolute dumping margin (FMV – adjusted USP) is

thus $11.50 ($115 – $103.50)—an amount greater than the pre-tax absolute dumping margin of

$10.

Foreign Trade Zones and Duty-Free Ports—Foreign trade zones are special territorial areas

where goods can be imported without paying usual tariffs. Duty-free ports do not assess duties

on products entering them. This encourages importation and sale of international goods in the

country. Hong Kong is well-known for this practice.

Issue Spotter: Where to Produce?

You can assemble just about any where in the world, but most likely in North America or China.

The problem with assembly in China is the extra shipping cost and time to get the final product

here, and the difficulties in having an operation in another country. Such assembly operations are

often in border plants along the Mexican border where tariffs can be avoided due to NAFTA and

also due to foreign trade zones that give special benefits. Local governments also often compete

in an effort to get production facilities. Shop around for the best combination of tariffs,

transportation, labor & laws.

Export Promotion and Restrictions—Most governments encourage exporting to stimulate

domestic employment and bring in foreign exchange. This is believed needed to help prevent a

trade deficit. At the same time, for policy reasons, it a governments may restrict exports of

certain products.

Federal Government Efforts—Commerce is the main export-promotion agency. Responsibility

for export promotion within Commerce is with the Intl. Trade Admin. ITA manages the U.S.

Foreign Commercial Service which maintains offices at most major commercial centers overseas

and export counselors in offices around the U.S. At overseas offices (Commercial Consulates),

the Commercial Service encourages activity by supplying information about U.S. products,

arranging business meetings with local firms, accompanying U.S. company representatives to

meetings, and gathering local-market information. The Export Trading Company Act allows U.S.

companies to form trading companies similar to those in Japan. The development of such

companies in the U.S. is inhibited because of antitrust laws. While the Act provides an antitrust

exemption, it is too weak to encourage many U.S. trading companies Only a few single product,

trading companies have been established.

Add. Info: State Government Efforts: Some state governments have export efforts. California,

Florida, Illinois, New York, and Washington have large export promotion programs. The

California Office of Export Development is to “strengthen the state’s activities in marketing its

agricultural, manufacturing, and service industries overseas. It shall be responsible for

conducting market research; disseminating trade leads; and sponsoring trade delegations,

missions, marts, seminars, and other appropriate promotional events.” Some states have foreign

development offices to provide information about the state’s products and services to potential

foreign buyers. A few states offer export loan assistance and guarantees to small businesses

interested in the export market.

Export Restrictions—The U.S. imposes restrictions on the sale of a good or a technology may (1)

injure domestic industry (e.g., the export of a raw material in short supply), (2) jeopardize

national security (e.g., selling military hardware to the wrong country), or (3) conflict with

national policy (e.g., selling goods to a country the government has embargoed because of

terrorist activities). Restrictions are managed by licensing according to terms of the Export

Administration Act (EAA). Commerce imposes licensing requirements under strict standards.

Add. Case: Havana Club Holding, S.A. v. Galleon, S.A. (2nd Cir., 2000) Background: A rum

maker from Cuba, HCI, which exports to Europe, Canada, and Mexico, sued a rum seller from

the U.S. for trademark infringement and false designation of origin. The Cuban firm asserted

that it has superior rights to the name “Havana Club,” so the use of that name by the American

firm was trademark and trade name infringement and constituted false designation of origin by

giving the impression that the rum was from Cuba. Trial court dismissed the suit; HCI appealed.

Decision: Affirmed. “In 1963, the United States imposed an embargo on Cuba, reflected in the

Cuban Assets Control Regulations.” Because of the embargo, HCI’s “Havana Club” rum has

never been sold in the U.S. Under the General Interamerican Convention for Trade Mark and

Controls on Exports The EAA allows Commerce to require the following export licenses,

depending on the type of good or technology being exported:

1) a validated license, authorizing a specific export;

2) a qualified general license, authorizing multiple exports;

3) a general license that applies to most U.S. goods; and

4) other licenses as may assist in the implementation of the Act.

The Commodity Control List lists products subject to licenses and the restrictions imposed.

Goods not on the List are subject to a general license—which often only requires a Shipper’s

Export Declaration filed with Commerce. A validated export license is required for the export of

certain goods on the List because of national security. Commerce may impose controls “only to

the extent necessary … to restrict the export of goods and technology which would make a

significant contribution to the military potential of any other country or combination of countries

which would prove detrimental to the national security of the United States.”

Application to Reexport U.S. Goods. Commerce’s licensing requirements apply to the reexport

of U.S. goods. That is, an export license is needed to ship U.S.-origin controlled goods from say,

India to Taiwan. This is to stop shipment of sensitive goods from the U.S. to a “safe” country and

then to a controlled country.