2/13/2016

DealingwithInternationalTradeLawsandRegulationsNewJerseyBusinessMagazine

Exportingcanleadtoanexpandingconsumerbasebybreakingintountappedmarkets,whileimporting
canreducesupplycostsaswellasallowcompaniestosourceproductsthatmightnotbeavailableinthe
UnitedStates.(GeoffreyHobbsforHiltonHeadImages)
Takingpartininternationaltradecanbeasubstantialwayforanykindofbusinessestoimprove
performanceandrevenues.Exportingcanleadtoanexpandingconsumerbasebybreakingintountapped
markets,whileimportingcanreducesupplycostsaswellasallowcompaniestosourceproductsthat
mightnotbeavailableintheUnitedStates.However,whendealingwithforeignentities,itisessentialfor
businesses,nomatterwhatthesizeorscope,toknowlawsandregulations,andtohaveasoundbusiness
plan,inordertoavoidrunningtheriskoffacingstiffpenaltiesand/orbeingswindledoutofcashorgoods
ifdisputesarise.
AccordingtoNevenaSimidjiyska,anassociatewhodealswithinternationaltradelawatthefullservice
lawfirmFoxRothschild,oneofthebiggestissuesthefirmcomesacrossisthatmanyentitiesarenot
awarethatthetransactionstheyconductfallunderimportingandexporting,andthereforefallunder
internationaltradelaws.
Alotofthetime,weseecompaniesparticularlythesmalltomediumsizedonestakepartin
importingandexportingwithoutevenrealizingit,shesays.Itcanturnouttobeabigproblem,andits
notthattheydoitonpurpose.Businessesjustarentawareofthelawsandregulationsandassumethat
whattheyaredoingisfine.Butthisisnotthecase.
Forexample,Simidjiyskasaysthatacompanycanassumeaparticularproductitisimportingor
exportingdoesnotfallunderacategorythatisregulatedbytheUSgovernment,or,justbecausetheUS
hasfreetradeagreementswith20countriesaroundtheworld,thatitcanimportandexporttothose
countrieswithoutmeetingcertainqualificationsorpayingrequiredduties.
TheUSgovernmenthasalonglistofwhatisregulatedontheimportandexportsidethatincludes
chemicalsandmilitaryitems,aswellasalistofcountries,individualsandentitiesthatUScompaniesare
prohibiteddoingbusinesswith,shesays.Ourgoalistoprovideourclientswithacompliancemanual
sotheyknowwhattodoandarefullytrainedinthisarea.Astheirbusinessgrows,theyknowhowto
handlevariousissueswithoutviolatingthelaw.And,iftheyareexportingandimportingproducts,we
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2/13/2016

DealingwithInternationalTradeLawsandRegulationsNewJerseyBusinessMagazine

handlevariousissueswithoutviolatingthelaw.And,iftheyareexportingandimportingproducts,we
makethedeterminationwhetheralicenseisrequiredandobtainoneforthem.
Inregardstoexporting,Simidjiyskasaysthefirststepistofindoutifacompanyisactuallyexporting,as
thereisanextremelybroaddefinitionofwhatanexportcanbe.
IfyouhaveaUScompanythatneveractuallyshipsproductsoutsideofthecountry,itcanstillbe
conductingforeignbusiness,andagain,itmaynotevenrealizeitandassumeitsnot,shesays.Lets
sayacompanyhasanemployeefromIndia,andheorshecomestovisitfortrainingandisnotaUS
citizenorresident.WhenthatindividualreturnstoIndia,thecompanyhastechnicallyexportedaproduct,
orinthiscase,technicaldatatoIndia.And,ifthatproductortechnicaldataneedsanexportlicenseand
thecompanyhasnotreceivedthelicense,thenitisinviolationofexportlaws.Itcouldevenbesomething
assimpleasemailingtechnicaldataabroadtoaforeignsubsidiary.Evensavingtechnicaldatatoaserver
iftheserverisoutsideoftheUScanbeconsideredanexportaswell.

DisputeResolutionMechanismandTradeChallenges
Intermsofinitiatingbusinesswithaforeignentity,WendyKennedyVenoit,apartneratMcElroy,
Deutsch,Mulvaney&Carpenter(MDMC),LLP,suggeststhatabusinessshouldincludecertaindispute
resolutionmechanismswhendrawingupacontracttoprotectitselfifaproblemarises.
Venoit,whodealswithdisputeresolutionforclientsintheconstructionindustry,says,Whencreatinga
contract,purchaseorderorwhateveritmaybe,abusinessisprobablygoingtowanttomakesureit
includesadisputeresolutionprovisionthatcallsforinternationalarbitration,becausethatbasicallyallows
partiesinvolvedininternationaltradetoresolvedisputeswithouttheformalitiesoftheirrespective
countryslegalsystem.Abusinesswantstobeverycarefulwhennegotiatingcontractsanditshouldwant
tohaveaneutralvenueinsettlingdisputes.EndingupinthecourtsinChinaunderitslawsisnotideal
andotherproblemscouldstemfromit,likenotbeingabletocollectmoneythatisowed,forexample.
MaryVasilescu,partner,taxservicesataccountingfirmWissandCompany,saysthenumberof
challengesacompanycanfacewhenconductingbusinesswithaforeignentitycanbestaggeringand
thereisnoonebeallandendallanswer.
Conductingbusinesswithforeigncompaniescanbeverytricky,shesays.Therearecommunication
barriersandculturaldifferences.TherearetaxeswhichwedonthaveintheUS,likewithholdingtaxes,
valueaddedtaxes(VATs)andsometimesothertypesoflocaltaxes.Thereisalwaysalackofinformation
aboutcertainbusinesspartners.Therearedifferentchallengesthatfacemanufacturers,than,say,a
distributor.Acompanyalsohastothinkaboutcurrencyfluctuation.Therearecountrieswherethe
businessmaybegood,butitmaybedifficulttogetcashoutofthecountry,etc.Thelistgoeson,and
thereisalotofplanninginvolvedonceacompanygoesoutsideofitscomfortzoneandoutsideofthe
US.

AGrowingPhenomenon
MDMCsVenoitsaysthenumberofcompaniesintheUSinvolvedininternationaltradeissubstantial
andthatitwillonlyincreaseastimeprogresses.
SomuchworkisbeingdonethatcrossesUSbordersitishardtoimagineacompanythatdoesnthave
someelementofinternationaltradeinitsbusiness,especiallyhereinNewJersey,becausewearesoclose
totheseaports,majorairportsandNewYorkCity,shesays.Thismakesiteasiertoimportforeign
goodsandservices.And,forthecompaniesthatdontworkwithforeignpartners,Iseethatchangingvery
soon,inordertoobtainandmaintainacompetitiveadvantage.
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2/13/2016

DealingwithInternationalTradeLawsandRegulationsNewJerseyBusinessMagazine

FoxRothchildsSimidjiyskapointsoutthatitisessentialforacompanytoperformitsduediligenceif
itisunsure,orhastheslightestnotionitmaybeconductingbusinessoutsideoftheUS.
Theseareonlysomeoftheissuesacompanycanface,butifitfeelsithasanysortofinternationalaspect
toitsbusinessanyinternationalemployeesorisasubsidiaryofaforeigncompanyorviceversait
shouldreachoutfortheproperassistancetodetermineifwhatitisdoingfallsunderinternationaltrade
laws,sheconcludes.Itisbettertobesafethansorry.Thetradelawsaroundtheworldvarysomuchand
arealwayschanging,particularlyhereintheUS.Additionally,thepenaltiesareveryseriousandtendto
beincreasingeveryyear.So,companieshavetomakesuretotakethenecessarystepsinordertobecome
andremaincompliantandtogainthatcompetitiveedgeintheinternationallandscape.

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