In This Chapter
The Export Administration Regulations (EAR) govern the export and reexport of items for reasons of national security, non-proliferation, foreign policy, and short supply. A relatively small percentage of exports and reexports require the submission of a license application to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). Licensing is dependent on an item’s technical characteristics, destination, end use, and end user (see Box 10.1). Once a classification has been determined, exporters may use a single chart, set forth in the EAR, to decide if a license is needed to export to a particular country. The regulations include answers to frequently asked questions, detailed step-by-step instructions for finding out if a transaction is subject to the regulations, instructions for requesting a commodity classification or advisory opinion, and directions for applying for a license. If you have questions about whether your products require a license, call your local Export Assistance Center or (800) USA-TRADE (800-872-8723).
To help ensure that U.S. exports go only to legally authorized destinations, the U.S. government requires a destination control statement on shipping documents. The commercial invoice and bill of lading (or air waybill) for nearly all commercial shipments leaving the United States must display a statement notifying the carrier and all foreign parties (the ultimate and intermediate consignees and purchaser) that the U.S. material has been approved for export only to certain destinations and may not be diverted. The minimum antidiversion statement for goods exported under U.S. Department of Commerce authority says, “These commodities, technology, or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.”
Exceptions to the use of the destination control statement are listed in Part 758.6 of the EAR. Advice on the appropriate statement to use can be provided by the U.S. Department of Commerce, an attorney, or the freight forwarder.
The United States has an established policy of opposing restrictive trade practices or boycotts fostered or imposed by foreign countries against other countries friendly to the United States. This policy is implemented through the antiboycott provisions of the Export Administration Act (enforced by the U.S. Department of Commerce) and through a 1977 amendment to the Tax Reform Act of 1976 (enforced by the U.S. Department of the Treasury). In general, these laws prohibit U.S. persons from participating in foreign boycotts or taking actions that further or support such boycotts. The antiboycott regulations carry out this general purpose by:
Under the Foreign Corrupt Practices Act (FCPA), it is unlawful for a U.S. person or firm (as well as any officer, director, employee, or agent of a firm or any stockholder acting on behalf of the firm) to offer, pay, or promise to pay (or to authorize any such payment or promise) money or anything of value to any foreign official (or foreign political party or candidate for foreign political office) for the purpose of obtaining or retaining business. It is also unlawful to make a payment to any person while knowing that all or a portion of the payment will be offered, given, or promised—directly or indirectly—to any foreign official (or foreign political party or candidate for foreign political office) for the purposes of assisting the firm in obtaining or retaining business. “Knowing” includes the concepts of “conscious disregard” and “willful blindness.” The FCPA also covers foreign persons or firms that commit acts in furtherance of such bribery in the territory of the United States. U.S. persons or firms, or covered foreign persons or firms, should consult an attorney when confronted with FCPA issues.
For further information from the U.S. Department of Justice about the FCPA and the FCPA Opinion Procedure, contact the Deputy Chief, Fraud Section, Criminal Division, U.S. Department of Justice, 10th and Constitution Ave., NW, Bond Building, 4th Floor, Washington, DC 20530, or call (202) 514-1721. Specific questions should be faxed to the Foreign Corrupt Practices Act coordinator, Department of Justice, Criminal Division, Fraud Section at (202) 514-7021. You may obtain more information on the act online at www.usdoj.gov/criminal/fraud/fcpa.
Although the U.S. Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the law and about international developments concerning it. For further information, contact the Office of Chief Counsel for International Commerce at (202) 482-0937 or view the Web site at www.osec.doc.gov/ogc/occic/tabi.html.
Import documentation requirements and other regulations imposed by foreign governments vary from country to country. As an exporter, you must be aware of the regulations that apply to your own operations and transactions. For instance, many governments require consular invoices, certificates of inspection, health certification, and various other documents. For sources of information about foreign government import regulations, see Chapter 4.
The North American Free Trade Agreement (NAFTA) was negotiated among the United States, Mexico, and Canada and came into effect on January 1, 1994. It provides for the elimination of tariffs on most goods originating in the three countries over a maximum transition period of 15 years. An excellent source of information on all aspects of NAFTA is the U.S. Commercial Service’s Trade Information Center at (800) USA-TRADE (800-872-8723).
Tariffs will be eliminated only on goods that originate in one of the four ways defined in article 401 of the NAFTA:
Article 502 of the NAFTA requires that importers base their claims of the country of origin on the exporters’ written certificate of origin, which may be the U.S.-approved certificate of origin (CF 434), the Canadian certificate of origin (Form B-232), or the Mexican certificate of origin (Certificado de Origen). The certificate may cover a single shipment, or it may be used as a blanket declaration for a period of 12 months. In either case, the certificate must be in the importer’s possession when the importer is making the claim.
As an exporter, your company should also consider the customs privileges of U.S. foreign trade zones (FTZs). These zones are domestic U.S. sites that are considered outside U.S. customs territory and are available for activities that might otherwise be carried on overseas for customs reasons. For export operations, the zones provide accelerated export status for purposes of excise tax rebates. There is no issue of drawback because duties are not collected when the goods are in the FTZ. For import and reexport activities, no customs duties, federal excise taxes, or state or local ad valorem taxes are charged on foreign goods moved into FTZs unless and until the goods or products made from them are moved into U.S. customs territory. Thus, FTZs can be profitable for operations involving foreign dutiable materials and components being assembled or produced here for reexport. Also, no quota restrictions ordinarily apply to export activity.
As of January 2006, there were 268 approved FTZs in communities throughout the United States. Associated with these FTZs are more than 400 subzones. These facilities are available for operations involving storage, repacking, inspection, exhibition, assembly, manufacturing, and other processing. The value of merchandise handled by FTZs exceeds $170 billion.
Information about the zones is available from the zone manager, from local Export Assistance Centers, or from the Executive Secretary, Foreign-Trade Zones Board, International Trade Administration, United States Department of Commerce, 1401 Constitution Ave., NW, Suite 4100W, Washington, DC 20230. You may also access information at www.ia.ita.doc.gov/ftzpage/.
To encourage and facilitate international trade, countries all over the world have established many types of export processing zones (EPZs), which include free trade zones, special economic zones, bonded warehouses, free ports, and customs zones. EPZs have evolved from initial assembly and simple processing activities to include high-tech and science parks, finance zones, logistics centers, and even tourist resorts. They now include not only general type zones but also single-industry zones and single-commodity zones. Both the number of EPZs and the number of countries hosting them have expanded rapidly. There are now more than 600 EPZs in more than 100 countries. Many U.S. manufacturers and their distributors use these zones for receiving shipments of goods that are reshipped in smaller lots to customers throughout the surrounding areas. For further information, contact your local Export Assistance Center or the Trade Information Center at (800) USA-TRADE (800-872-8723).
A customs-bonded warehouse is a building or other secured area in which dutiable goods may be stored, may be manipulated, or may undergo manufacturing operations without payment of duty. Authority for establishing bonded-storage warehouses is set forth in Title 19, United States Code (U.S.C.), section 1555. Bonded manufacturing and smelting and refining warehouses are established under Title 19, U.S.C., sections 1311 and 1312.
When goods enter a bonded warehouse, the importer and warehouse proprietor incur financial and legal liability under a bond. The liability is canceled when the goods are:
Your company could enjoy several advantages by using a bonded warehouse. No duty is collected until merchandise is withdrawn for consumption. An importer has control over use of money until the duty is paid on withdrawal of merchandise from the bonded warehouse. If no domestic buyer is found for the imported articles, the importing company can sell merchandise for exportation, thereby canceling the importer’s obligation to pay duty.
Many items subject to quota or other restrictions may be stored in a bonded warehouse.
Check with the nearest U.S. Customs office, however, before placing such merchandise in a bonded warehouse.
Duties owed on articles that have been manipulated are determined at the time of withdrawal from the bonded warehouse.
Intellectual property refers to a broad collection of rights relating to works of authorship, which are protected under copyright law; inventions, which are protected under patent law; marks, which are protected by trademark law; and designs and trade secrets. No international treaty completely defines these types of intellectual property, and countries’ laws differ in significant respects. National intellectual property laws create, confirm, or regulate a property right without which others could use or copy a trade secret, an expression, a design, or a product or its mark and packaging.
The rights granted by a U.S. patent, trademark registration, copyright, or mask work (design of a semiconductor chip) registration extend only throughout the United States and its territories and possessions. They confer no protection on your company’s product in a foreign country. There is no such thing as an international patent, trademark, or copyright. To secure patent or mask rights in any country, you must apply for the patent or register the mask work in that country. While most countries require registration of trademarks in order to secure protection, others grant rights that are based on priority of use in that country. Copyright protection depends on national laws, but registration is typically not required. There is no real shortcut to worldwide protection of intellectual property. However, some advantages and minimum standards for the protection and enforcement of intellectual property exist under treaties or other international agreements (see Box 10.2).
The oldest treaty relating to patents, trademarks, and unfair competition is the Paris Convention for the Protection of Industrial Property. The United States and more than 160 other countries are parties to this treaty. The Paris Convention sets minimum standards of protection and provides two important benefits: the right of national treatment and the right of priority.
In a general sense, national treatment means that a Paris Convention country will not discriminate against nationals of another Paris Convention country in granting patent or trademark protection. The rights provided by a foreign country may be greater or less than those provided under U.S. law, but the rights given will be the same as that country provides to its own citizens.
Before the existence of the Paris Convention, it was difficult to obtain protection for industrial property rights in the various countries of the world because of the diversity of their laws. Furthermore, patent applications had to be made roughly at the same time in all countries in order to avoid publication in one country destroying the novelty of the invention in the other countries. In addition, a delay in filing a patent or trademark application left open the possibility that those rights would be lost because of intervening acts such as sale of the invention or registration of the trademark by another person. The Paris Convention’s right of priority provides a solution to that problem by establishing an alternative to filing applications in many countries simultaneously. It allows the applicant one year from the date of the first application filed in a Paris Convention country (six months for a design or trademark) in which to file in other countries. Publication or sale of an invention, or use of a mark, after first filing will therefore not jeopardize patentability in countries that grant a right of priority to U.S. applicants as long as they submit an application before the end of the priority period.
Not all countries adhere to the Paris Convention, but similar benefits may be available under another treaty or bilateral agreement. These substantive obligations have been incorporated into the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) and must be adhered to by WTO members.
The United States is also a party to the Patent Cooperation Treaty (PCT), which provides procedures for filing patent applications in its member countries. The PCT allows you to file one international application that designates member countries in which a patent is sought. Filing the international application extends the period in which you have to fulfill the national requirements for each country by 18 months. This additional time can be very useful for evaluating the chances of obtaining patents and of exploiting your invention commercially in various designated countries. It is also useful for assessing both the technical value of your invention and the continued need for protection in those countries. Only after you have decided whether, and with respect to which countries, you wish to proceed further with your application must you fulfill the various national requirements for entry into the national phase. These requirements include paying national fees and, in some cases, filing translations of the application was filed or as amended.
The international copyright regulations that the United States abides by are governed principally by the Berne Convention for the Protection of Literary and Artistic Works, to which about 160 other nations adhere. The United States is also a member of the Universal Copyright Convention (UCC) and has special bilateral relations with a number of foreign countries. Under the Berne Convention, works created by a national of a Berne Union country or works first or simultaneously published in a Berne country are automatically eligible for protection in every other country of the Berne Union, without registration or compliance with any other formality of law.
These rules hold true of works first published in the United States on or after March 1, 1989, the date on which the United States acceded to the Berne Convention. Works first published before March 1989 were protected in many countries under the UCC—if the works were published with the formalities specified in that convention. Older works may also be protected as a consequence of simultaneous publication in a Berne country or by virtue of bilateral obligations. In any event, the requirements and protection vary from country to country; you should investigate them before seeking publication anywhere.
Both NAFTA and TRIPs establish minimum standards for the protection of intellectual property and the enforcement of those standards. Neither agreement bestows rights on U.S. intellectual property owners. Rather, both agreements ensure that a member state that is party to one or both of the agreements provides a certain level of protection to those individuals or companies protected under that member state’s laws.
U.S. patent law differs from the patent laws of most other countries in several important aspects. U.S. patent law grants a patent to the first inventor, even if another person independently makes the invention and files an application first. Most other countries award the patent to the inventor who first files a patent application. The United States also provides a one-year grace period that does not preclude an inventor from obtaining protection after an act such as publishing, offering for sale, or using the invention that would make the invention public. Many countries, including most European countries, lack a grace period that allows an inventor to so disclose an invention before filing a patent application. In countries with an absolute novelty rule, the inventor must file a patent application before making the invention public anywhere. Hence, even the publication of an invention in a U.S. patent grant is a disclosure that can defeat the right to obtain foreign patents unless the applicant is entitled to claim the right of priority under the Paris Convention, as described.
Unlike the United States, many countries require that an invention be worked locally to retain the benefit of the patent. Working a patent may require commercial-scale manufacture within the country, or it may be met by importation of goods covered by the patent, depending on the law of a particular country. The Paris Convention permits penalties for abuses of patent rights, such as not working a patent—for example, the right to a compulsory license at a reasonable royalty followed by possible forfeiture of the patent when the grant of a compulsory license was not sufficient to prevent abuses.
For an invention made in the United States, U.S. law prohibits filing abroad without a foreign filing license from the Patent and Trademark Office unless six months have elapsed since a U.S. application was filed. This prohibition protects against transfers of information that might damage the national security. The penalties for filing abroad without following these requirements range from loss of U.S. patent rights to possible imprisonment if classified information is released. In addition, other export control laws require you to obtain a license before exporting certain technologies, even if no patent application is filed—or they may bar the exporting of certain technologies altogether.
A trademark is a word, symbol, name, slogan, or combination thereof that identifies and distinguishes the source of sponsorship of goods and may serve as an index of quality. Service marks perform the same function for businesses dealing in services rather than goods. For example, an airplane manufacturer might register its service mark. In the United States, rights to trademarks, service marks, and other marks (such as collective marks) are acquired through use in commerce within the United States. (A company may register its mark in the United States based on such use.) Additionally, the United States provides for protection of a mark, registered or not, if that mark has become well known through domestic or international use. However, in most countries, trademark rights are acquired only through registration, and many countries require local use of the registered mark to maintain the registration. Whether a given mark can be registered in a particular country will depend on the law of that country. For example, some countries do not protect service marks. The United States is not a member of any agreement under which a single filing will provide international protection, although the right of priority under the Paris Convention confers a substantial benefit.
If your business is expanding, you may face a period of time in which your mark may be known and perhaps registered in the United States, but you are not quite ready to do business abroad. It is prudent to decide early where you will need trademark protection and to protect your rights by filing in those countries. Where to file is a business decision, balancing the expense of registration against its benefit. At a minimum, you will want to file in countries in which you will do business. You may also find it desirable to file in countries that are known sources of counterfeit goods, although some require local use to maintain a registration. Although trademark laws impose no deadlines for registering a mark, a business should, as a practical matter, register promptly to avoid having its mark registered by someone else.
Although you are not legally required to do so, you may find it helpful to investigate the connotation of a trademark, trade name, number, or trade dress before making a major investment in another country. A different language or culture may have unfavorable, silly, or even rude meanings for words or symbols with neutral or favorable connotations in the United States. Even packaging colors may connote different meanings in different countries. For example, white may imply purity in the United States, but it is the color of mourning in most of the Far East.
Trade names are also protected on a country-by-country basis. Although the Paris Convention requires protection of trade names; they are not necessarily registered as they are in the United States. Each country protects trade names in accordance with its own business practices.
A copyright protects original works of authorship. In the United States, this protection gives the owner the exclusive right to reproduce the work, to prepare derivative works, to distribute copies, or to perform or display the work publicly.
In the United States, original works of authorship include literary, dramatic, musical, artistic, and certain other intellectual works. A computer program, for example, is considered a literary work protected by copyright in the United States and in a large and increasing number of foreign countries.
In most countries, the place of first publication determines if copyright protection is available. Some countries require certain formalities to maintain copyright protection. Many other countries, particularly member countries of the Berne Union, offer copyright protection without these formalities. Still others offer little or no protection for the works of foreign nationals. Before publishing a work anywhere, you should investigate the scope of protection available, as well as the specific legal requirements for copyright protection in countries where you desire copyright protection.
F or more information on intellectual property rights and the Strategy Targeting Organized Piracy (STOP!) initiative, visit www.stopfakes.gov.
FACT: Failure to understand and fully comply with laws and regulations related to restricted or prohibited exports may result in substantial penalties.
INSIGHT: You must be diligent in your efforts to comply. Contact the U.S. Commercial Service’s Trade Information Center to learn more about restricted or prohibited exports by calling (800) USA-TRADE (800-872-8723).
FACT: Trademark laws impose no deadline for registering a mark.
INSIGHT: A business should, as a practical matter, register promptly to avoid having its mark registered by someone else.