A U.K. Business Person’s Guide to American Law

An Expert's View about Law and Compliance in the United States

Posted on: 15 Jun 2010

There are relatively few prohibitions and/or restrictions on doing business in the U.S.A., including for U.K. enterprises and business people.

A UK BUSINESS PERSON'S GUIDE TO AMERICAN LAW - BUSINESS PRACTICES - TAXATION Aaron N. Wise, Esq. Member of the New York Bar AARON N. WISE, ESQ., PARTNER * Gallet Dreyer & Berkey, LLP Aaron N. Wise © 2004 Attorneys at Law All rights reserved th 845 Third Avenue, 8 Floor New York, New York 10022-6601, USA Telephone: (212) 935-3131 Telefax: (212) 935-4514 Email: anw@gdblaw.com Internet: www.gdblaw.com About the Author Aaron N. Wise is a partner of the New York City law firm, Gallet Dreyer & Berkey, LLP. Mr. Wise's areas of expertise include corporate, commercial and contract law, taxation and industrial {W:\09999\019\ukbuspgd\00128455.DOC;1} ? i ? property law, and the other areas dealt with in this Guide. Mr. Wise holds law degrees from Boston College Law School, New York University Law School and the University of Paris (France). He is a frequent lecturer inside and outside the U.S.A. and is listed in Who's Who in American Law. Mr. Wise is proficient in German, French, Italian, Spanish, Portuguese, Russian and Japanese, and has a good working knowledge of several other languages. Mr. Wise also practices in the sports law field, both domestically and internationally; and is the author of the recently published multivolume work, International Sports Law and Business (Kluwer Law International, The Hague and Cambridge, Mass., 1998). He has a many years of experience in representing foreign, including UK companies and individuals, with regard to their American legal and tax matters; and American companies and individuals with respect to their international (including UK) legal and tax matters. Services of Gallet Dreyer & Berkey, LLP Gallet Dreyer & Berkey, LLP ("GDB") has its offices in the heart of Manhattan, New York City, and correspondent counsel relationships throughout the U.S.A. and in many other countries. GDB offers a full array of legal and tax services, covering essentially all topics discussed in this Guide and many others. The firm is capable of serving clients with legal problems or matters anywhere in the U.S.A. and in connection with international legal and tax matters (for example, relating to Canada, the Caribbean, Mexico and Latin America). Examples of GDB?s fields of expertise include: ! direct investments in the U.S.A. of all kinds, such as acquisitions, joint ventures, setting up of companies and manufacturing facilities; ! contracts of all kinds; ! commercial law; ! law and contracts regarding construction and engineering projects; ! securities law and transactions; ! real estate; ! technology transfer and licensing; franchising; ! intellectual property; ! computer law and contracts; internet law and contracts; ! banking law and transactions ! visas and immigration; ! tax law and tax planning; ! litigation, arbitration, and mediation; ! TABLE OF CONTENTS Chapter I: Doing Business in the U.S.A.: Basic Points {W:\09999\019\ukbuspgd\00128455.DOC;1} ? ii ? Chapter II: Contracts with Americans For the U.S. Market: Basic Points Chapter III: Exporting to the U.S.A.: Legal Factors to Remember Chapter IV: Product Liability in the U.S.A. Chapter V: Contracts With American Distributors and Sales Agents Chapter VI: Obtaining Security for Payment Chapter VII: Setting Up a U.S. Sales Company; Manufacturing in the U.S.A. Chapter VIII: Joint Ventures in the U.S.A. Chapter IX: Licensing, Technology Transfer and Intellectual Property in the U.S.A. Chapter X: Business-Related Visas for Foreign Nationals Chapter XI: Acquisition of an Existing U.S. Company: Suggested Reading Chapter XII: Taxation Of U.S. Transactions: Suggested Reading Chapter XIII: Litigation and Arbitration in the U.S.A. Chapter XIV: Errors Frequently Made by Foreigners Chapter XV: The Reverse: Contracting With Americans for Your "Home Market" Chapter XVI: International Sports and Entertainment Marketing (Europe to USA, USA to Europe) {W:\09999\019\ukbuspgd\00128455.DOC;1} ? iii ? CHAPTER I BASIC POINTS ABOUT DOING BUSINESS IN THE U.S.A. Many foreign enterprises and business people see the U.S.A. as an interesting market for selling their products and services. This Chapter offers the reader some basic points about doing business in the USA. Some are of a commercial nature, others are legal points, many involve both. And while certain of the statements below are incontrovertible facts, others represent my views based on a number of years of knowledge and experience. Here are twelve fundamental principles about the U.S.A. which I believe should be borne in mind: 1. In general, doing business in the U.S.A. involves a great deal of freedom of maneuver and considerable freedom to stipulate what you wish in contracts, and relatively little problems with the government (as compared to many other countries). The risks of private party claims or law suits are very often greater than the risks of problems with U.S. governmental authorities. However, 2. By using competent U.S. experts (lawyer, accountant, etc.) the risks and pitfalls of lawsuits can usually be controlled, if not substantially re-duced. Such experts should be engaged in advance, and be part of the planning process. 3. There are relatively few prohibitions and/or restrictions on doing business in the U.S.A., including for U.K. enterprises and business people. 4. One of the ingredients for success in the U.S. market is being "professional". By way of example only, you should (a) have good products or services adapted to the U.S. market which Americans will want to purchase, and promote their sale properly; {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 1 ? (b) your documentation (brochures, advertising materials, business cards, etc.) must be "professional" looking, in good American English, well presented, etc.; and (c) the representatives you send to the States and the Americans you hire must also be "professional" in all respects. 5. Check out carefully the U.S. party with which you propose to deal. Many Americans, for one reason or another, do not pay their bills. There are many bankruptcies in the U.S.A. Do not be reluctant to ask your proposed U.S. partner for financial statements. Your U.S. lawyer can obtain for you other valuable information proving the legal existence of the U.S. party, of a company; and documents showing any mortgages or "security interests" on your prospective U.S. contract partner's present and future assets. 6. In general (and like any generality, subject to exceptions) American manners and customs are different than yours, even in business. At the risk of over-generalizing, on the average Americans (a). are less formal, often more open and friendly, and are less inclined to observe strict protocols and ceremony than are most Europeans; (b) are punctual for meetings and events, and will expect you to be; (c) are direct and even aggressive, in business and business negotiations; and (d) do not like waiting very long for anything: replies or decisions from business partners, for a table in a restaurant, etc. 7. U.S. business people are legalistic. They use lawyers (and other experts) all the time. In the planning and negotiation of business transactions, the drafting of contracts, etc. etc. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 2 ? 8. Americans are more inclined to start lawsuits, or to threaten to do so, than most people in other countries, including the UK. Many times, a lawsuit is started or is threatened by an American to obtain a favorable out-of- court settlement of some dispute or situation. That probably applies to foreigners who have lived in the States for some time--they learn. The great majority of civil and commercial lawsuits brought in the U.S.A. are never decided by a court, but are settled by the parties involved after some "legal skirmishing". Foreign parties are particularly good targets because they are often naive and capable of being frightened into a quick settlement. 9. Damage awards pronounced by a U.S. court or sometimes even arbitrators in the U.S.A. will often be considerably higher than those issued in other countries. 10. Any serious commitment to the U.S. market (sales subsidiary, joint venture, etc.) will probably involve more costs than you are budgeting for. In my experience many foreign clients underestimate and underbudget the costs. 11. There is no substitute for first-class, American style contract documents when dealing with the U.S.A. Carefully prepared, U.S. style contract documents will serve at least two important purposes: (1) they will increase the chances of the foreign (non-U.S.) party getting what it wants without having to start a lawsuit; and (ii) they will prevent, or make it difficult, for the U.S. side to attack the foreign side. Foreign parties typically run into legal trouble in the U.S.A. when they do not have first-class American style contract documents. There is really no such thing as a "standard" or "model" contract used in the U.S.A., such as a standard distribution, sales, sales agency, license or joint venture agreement. Each U.S. style contract is specifically tailored to the particu- lar situation. 12. Rehashing Some Point Already Made: America is unique! Many foreign business people, compared to Americans, are, generally speaking, not so legalistic, willing to make deals on a handshake or with a very short (and by U.S. standards, unacceptable) written agreement; and, they are less inclined to start or threaten to start lawsuits. I call this the "Most of the Rest of the World Pattern. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 3 ? That is not to say that some Americans do not fall in the Most of the Rest of the World Pattern. However, the great majority of good, solid American companies of all sizes will not be willing to conclude any significant sort of deal without first-class, U.S.-style contracts. You, the reader, should be suspicious of a U.S. company or business person that is willing to work in any other way. America offers a great deal of opportunity for UK companies and individuals that understand how things work in the U.S.A. and apply themselves properly to the task. . The plain and simple truth is that when dealing with Americans or the U.S.A., foreign parties need competent U.S. counsel's assistance (and those of other experts). Not just when a legal or other problem arises. But especially, in the planning, negotiating and drafting processes, before the problem arises. Too many foreign parties have fouled up by not proceeding in that manner. You need only ask others who have been successful or unsuccessful in dealing with Americans and the States! {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 4 ? CHAPTER II CONTRACTS WITH AMERICANS FOR THE U.S. MARKET: BASIC POINTS The process of contracting with Americans has its own distinct features and dynamics. For optimum results, foreign parties should clearly understand them. There are essentially two situations: (i) the contract involves some activity to be carried on in the United States ("outgoing transaction"), such as: a sales contract; a distribution contract; a sales agency contract; a manufacturing license agreement; or a joint venture agreement. Again, the direction is outward -- to and/or within the U.S.A.; and (ii) an inward- bound transaction. Examples of (from your standpoint) "inward-bound" transactions are a sales contract, distribution contract, manufacturing license agreement, or joint venture agreement where the foreign party buys products or acquires distribution or license rights or concludes a JV, for and with respect to the UK and other European markets (possibly other countries as well), but not the U.S.A.) as the contract territory. I deal with "inward-bound" deals of this type in Chapter XV, the second to last one. Here are some basic principles regarding outgoing transactions to the U.S.A. (though many apply to "inward" ones too): 1. Where you (the UK side) will be the seller, supplier, licensor or will contribute the products or technology to a U.S. JV, the first contract draft should be prepared by you, and to the extent possible, you should maintain the "drafting initiative". The first draft should be a U.S.-style contract draft, carefully drafted by a U.S. lawyer. To the extent possible, the foreign party should thereafter retain the drafting initiative. These principles are followed by good U.S. companies when they are the supplier, licensor etc. (even they even try to apply them where they are not) so they will understand when you, the foreign party, tell them you will be preparing the first contract draft and later on, that you will prepare any necessary redrafts. The first contract draft sets down the basic guidelines... the playing field. If you let the U.S. side prepare it, you will find it difficult and often, more costly, to change the playing field by preparing a counterdraft. It is frequently more expensive in terms of a U.S. law firm's legal fees, to prepare a counterdraft then to prepare the first contract draft. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 5 ? Very often, I prefer to start serious negotiations by preparing, rather than a contract draft, a detailed "non-binding Summary of Terms" ("SOT") and to negotiate from that; and once the SOT is signed, to prepare the first contract draft based on that document. When I speak above about the "drafting initiative", I mean also the initiative in preparing/submitting the first draft (and subsequent ones) of an SOT. More about SOTs in point 5. 2. U.S.-style contracts will be longer and more detailed than those normally prepared in most other countries of the world. Each properly prepared U.S. contract tells its own story. Not only that, the lawyer preparing it will try, via the contract, to secure important strategic and tactical advantages for his client to optimize the chances of the client obtaining what it wants from the other side without a lawsuit. The overriding strategy will usually be: (i) secure as many advantages as possible on both the business and legal points; and (ii) making it relatively easy for the client to attack; and reducing the client's risks and making it difficult, or at least not too convenient, for the other side to defend. 3. In the U.S.A., there are many lawsuits and threatened lawsuits against foreign parties who operate under poorly drafted, incomplete, or otherwise unsatisfactory contracts. I could recite virtually an unlimited number of experiences, particularly involving foreign companies, where lawsuits, threatened lawsuits and claims by the U.S. side occurred due to the preceding sentence. Conversely, I can hardly think of too many situations where a lawsuit or a threatened lawsuit against the client arose where a U.S.-style agreement, properly protecting of the client's interests, was prepared and signed. Bear in mind that oral agreements, agreements made by telephone or letter, and even de facto arrangements can constitute legally binding contracts and obligations under U.S. law. It costs money to have a U.S. lawyer prepare a good U.S.-style agreement. However, given the propensity of Americans to make claims and to start or threaten to start lawsuits, a first-class, U.S.-style agreement is indispensable. Some of you might think: "But I have been dealing with certain U.S. parties without a first- class, U.S.-style agreement and I have had no legal problems". I would reply: "You have been lucky up to now. But remember, considering the costs of litigation in the U.S.A., the high damage awards, the inclination of Americans to sue or to threaten to do so (and this often provokes an out-of-court monetary settlement favorable to the U.S. side), one such instance could be disastrous for you". That is not to say the foregoing could not occur even with a first-class, U.S.-style contract which attempts to protect the foreign (e.g. UK) party's interests. The world is not perfect. But with such an agreement, many liability risks will normally be substantially reduced. I would go so far as to say: if you do not have the funds or the desire to use a U.S. lawyer to prepare agreements and for other assistance connected with your U.S. business activities, you should not attempt to do business with the U.S.A. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 6 ? 4. Be prepared for extensive negotiations on both the "business" terms and the "legal" provisions of the agreement. Sometimes, negotiations will not be extensive or involve many contract drafts. This, I would say, is more the exception than the rule... you should expect extensive and prolonged negotiations. For example, an exclusive distributorship agreement with a U.S. party (as distributor) can easily take several months to conclude, from beginning to end. U.S. business lawyers are experienced in negotiating agreements and should usually participate in the negotiations where both sides have their lawyers present. If both lawyers are competent, the negotiations will move along faster and the legal costs may even be less than if they did not participate (fewer contract drafts, less meetings/correspondence between the lawyer and his own client, etc.). 5. It is often advantageous not to begin with a contract draft, but rather, a "non- binding summary of main contract terms" ("Summary of Terms" or "SOT") prepared by U.S. counsel. I've already expressed my liking for beginning with an SOT. Here are some reasons why: (i) an SOT enables the client and his U.S. counsel to focus on all of the important and difficult issues, to understand and set forth on paper in concise but somewhat abbreviated form how (from the client's side) they should be dealt with; whereas, with a considerably longer, more intricate and legalistic contract draft, those goals are harder to achieve; (ii) it serves as a document which is easier to negotiate from than a very detailed U.S.-style contract draft, from both parties' standpoint; (iii) once a Summary of Terms is signed (which is not legally binding), it makes it easier for the lawyer to prepare the contract draft and will often shorten the time span to the time the final, legal-binding agreement is signed; and (iv) if no SOT is signed, that will normally indicate that the parties will not sign a legally binding contract -- thus, the SOT serves as a type of probing device. 6. You should not only help your U.S. lawyer with ideas/information to prepare SOTs and contract drafts: you should also read very carefully several times every word of them, ask questions, respond in detail to the lawyer's questions, offer comments etc. In my experience, many foreign business persons just don't like studying extremely carefully detailed, legal documents (including SOTs), and doing what the preceding sentence states. To obtain the best possible results, however, the active and attentive participation by the foreign client is absolutely necessary. Many foreigners do not understand the important of well written contracts when dealing with the U.S. and with Americans generally. They are typically not accustomed to that when dealing in their own country or other foreign markets. But the U.S. is not like other countries. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 7 ? 7. Before you (the UK party, terminate, amend, or take any other important action affecting the terms of an existing contract with a U.S. party or for the U.S. market, consult competent U.S. counsel. Once you make your move, it may too late to retract it. For that reason, check out carefully in advance your options and the implications of implementing them. 8. American business lawyers will want to know a lot about your business operations, those of the U.S. side, the economics and other aspects of the prospective business deal; and will often guide you as to the type of contract or deal you should make. In other words, American business lawyers are not simply persons who write down on paper, in contract form, what you tell them, but also "business advisors. Many lawyers in numerous other countries aren't trained, accustomed to, or otherwise inclined to play that broader role American business lawyers are used to performing. And often, foreign businesses don't expect that of them. But here again, America is America, and you should take advantage of that broader perspective of the American business lawyer. CHAPTER III EXPORTING TO THE USA: LEGAL FACTORS TO REMEMBER A foreign enterprise desires to export its products to American customers. That is the focal point of this Chapter. This Chapter does not focus in detail on product liability in the U.S.A., on concluding contracts with U.S. distributors and agents, or on how to obtain security for payment from U.S. customers. Subsequent Chapters will deal specifically with these themes. Nine Points To Remember Regarding Your U.S. Exports {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 8 ? 1. The foreign exporter should be sure that its products and goods can be exported to the U.S.A., that it meets all legal requirements of U.S. customs and import laws, and that its export documentation is complete and complies with U.S. law. One specific point will be mentioned: the "country of origin" must be plainly, conspicuously and indelibly marked on all articles entering the U.S.A., or in certain cases, on their packaging or containers. Where an article is produced in more than one country, there are special source of origin marking rules. 2. Exporters should be careful not to violate U.S. antidumping and countervailing duty laws. Selling goods in the U.S. below the price at which the same or substantially similar goods of the exporter are sold in the exporter's home market can result in violation of U.S. antidumping laws. U.S. countervailing duty laws may be violated when foreign (non-U.S.) goods have benefit from a government subsidy relative to their production or exportation (the term subsidy is broadly defined). 3. Exporters intending to sell goods to the U.S.A. under a particular trademark, brand name, promotional slogan, etc. should, before exporting (i) have their U.S. lawyer check whether the use of such mark, name, slogan, etc. might infringe any existing U.S. trademark, and (ii) apply for a U.S. trademark covering that mark, name, slogan etc. It normally makes little sense to try to build up a market for a branded product without doing that. You do not want to find, after you have been selling under a particular mark or name, that you are attacked by a third party for alleged trademark infringement or that you cannot stop a third party from using your mark or brand name or one substantially similar thereto. It is not an expensive procedure to verify whether any third party holds a U.S. trademark registration identical or similar to the mark you wish to use, or to apply for a U.S. mark. Also, if you intend to export to Canada, Mexico, Central or South America or the Caribbean (in other words, anywhere in the Western Hemisphere), you should consider following basically the same procedure as set forth above regarding the U.S.A. A U.S. law firm of international scope (like our own) can assist you with your trademark matters throughout the Western hemisphere. Essentially, the same applies with respect to patents, copyrights and designs. 4. Some special rules contained in U.S. sales law. The Uniform Commercial Code ("UCC") is in force in all U.S. states except the State of Louisiana. Article 2 of the UCC deals with the law of sales of goods. Here are four rules contained therein of which the reader should be aware: A. the pre-UCC rule was that an acceptance of an offer had to be directed to the terms of the offer, as made; and if the acceptance contained terms {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 9 ? different from or additional to, or modifying the offer, there was no acceptance of the offer (thus, no binding sales contract). The purported acceptance was merely a counteroffer which the other party could accept or reject. The UCC rule, which now applies, changed the pre-UCC rule to be as follows: (i) an expression of acceptance or a written confirmation sent within a reasonable time after receipt of the offer is, legally, an acceptance of the offer even if it contains terms additional to or different from those offered unless the acceptance states that it is conditional on the other party (the offeror) agreeing to the additional or different terms. (ii) Where acceptance is not made "conditional", the additional or different terms become part of the sales contract unless (a) the offer expressly limits acceptance to the offer's terms; or (b) they "materially" alter the offer's terms'; or (c) objection to the additional or different terms is made within a reasonable time. B. If the parties intend to make a contract for the sale of goods but fail to agree on the price therefor, a contract is nevertheless concluded and the price is a "reasonable price" at the time of delivery as determined by a court or arbitrator(s) (if there is a valid arbitration agreement between the parties). C. A contract for the sale of goods valued at $500 or more is not enforceable unless in writing and signed by the party against which enforcement is sought. If the price is $500 or more and there is no such signed writing, it does not void the agreement or make it illegal -- the parties can voluntarily perform the agreement. However, if one side refuses to perform, the other party cannot legally enforce the agreement. D. Assume an oral contract for the sale of goods. If one party sends the other a written confirmation of the oral sales contract within a reasonable time after the oral contract is made and the recipient does not object to the written confirmation within 10 days of its receipt, the oral contract will be enforceable under U.S. law if both parties are merchants. A merchant, in this context, means someone normally dealing in goods of the type involved or who, by his occupation, has knowledge of the goods involved. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 10 ? 5. General Terms of Sale ("GTS") adapted to U.S. law and practices will be very beneficial for many, if not most, exporters. Readers will be generally familiar with GTS since many foreign (including UK) companies use them. Here are some of the advantages to having your U.S. lawyer prepare GTS adapted to U.S. law/practices. Properly prepared GTS tailored to the U.S. market normally should contain the following provisions among others: - a clause providing for interest on late payments at a specified current interest rate. Without such a clause only interest at the legal rate can be recovered in all or nearly all courts of the U.S.A. - a clause allowing the seller to recover its costs of collection, including reasonable attorney fees. In most U.S. state and federal courts, costs and particularly attorneys' fees cannot be recovered, unless there is an agreement so stating. Even if disputes will be resolved by arbitration, such a clause is quite useful. - Clauses limiting or excluding the seller's product warranties (including implied ones), or which go even further in reducing the seller's product liability risk. - Clauses which give to the seller a "security interest" in specified collateral of the U.S. buyer, where goods are sold on credit terms or open account. The collateral might be, for example, the goods sold, the buyer's proceeds from the resale thereof, or the buyer's accounts receivable arising from the resale of the seller's goods. To perfect such a security interest, the seller would file certain forms in a registry - not an expensive process. This mechanism will normally give the seller a priority in that collateral over nearly all other creditors of the buyer, provided no other creditor has an earlier registered "security interest" covering the same collateral. - An arbitration clause stating that all disputes will be resolved by arbitration in a designated city under the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). Arbitration is usually cheaper and faster than a suit in the courts. Assuming sales to U.S. customers in different areas of the U.S.A., in the absence of such a clause, suits would normally have to be brought (e.g., to recover payment for goods sold) in several different States, etc. Arbitration in the U.S. has {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 11 ? certain other advantages for the foreign seller. If, for example, arbitration will be in New York City (headquarters of the AAA), New York law can be stated as the applicable law, even if both parties have no connection with New York State. Frequently, foreign companies fail to adapt their GTS to the U.S. market; rather, they use none at all. Or, they use their customary form, which often contains a clause stating that the courts (or a specified court) in the seller's country will have exclusive jurisdiction over all disputes between the seller and the buyer. Unless it can be said that the buyer has truly "accepted" this clause, a judgment obtained against the American buyer in the manufacturer's country may not be enforceable in the U.S.A.; and the clause may well be an obstacle to suing the buyer in the U.S.A. Plus, it may not be easy or inexpensive to enforce a foreign country judgment or arbitral award in the U.S.A. It is advisable to obtain the buyer's specific written agreement that it is bound by the seller's GTS. Without it, certain important GTS provisions may not be enforceable. 6. The law of a particular U.S. state should apply to sales contracts; and (my preference) the applicability of the UN Sales Convention should be waived. If the sales contract or the exporter's GTS provides for arbitration in the U.S.A. of disputes and claims (as it should, particularly when selling on credit terms), the law of a particular U.S. state should be specified as the applicable law. That might be the law of the U.S. state where arbitration will be held pursuant to the arbitration clause. It makes no sense to specify the laws of England or Scotland as applicable where arbitration will be in the U.S.A. or where, absent an arbitration clause, the UK exporter might sue in a U.S. court. Most U.S. buyers will not agree to arbitrate disputes in foreign countries, or to the jurisdiction of a non-U.S. court. Nor are such provisions desirable from the UK exporter's side, since it will face the prospect enforcing a foreign (non-U.S.) arbitral award or court decision in the U.S.A. The UN Convention on Contracts for the International Sale of Goods is in effect in the U.S.A. and in certain other countries. At this writing, it is not in force in the United Kingdom. The Convention, if it were applicable, would apply, rather than the counterpart U.S. or UK domestic sales law, to sales by UK exporters to U.S. buyers unless the parties agree in writing that it will not apply. Because the UK may ultimately adopt the Convention and for other reasons, I mention it here. One such reason is that even though the UK has not yet adopted it, a UK and a U.S. party may, in their contract, provide for its applicability if they so choose, and that will cause the Convention's rules to apply to the contract. I normally prefer not to have the UN Convention apply and to state in the GTS or sales contract that the laws of a particular U.S. state will apply. Arbitrators in the U.S.A. and U.S. courts do not have experience with the UN Convention nor is {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 12 ? there much U.S. case law interpreting it. If, however, my foreign client prefers its applicability, I will not normally try too hard to dissuade it. 7. The exporter should be aware of the existence of "foreign trade zones" ("FTZs") throughout the U.S.A. and the advantages of using them. FTZs are secured areas legally outside of U.S. customs territory. Their purpose is to attract and promote international trade. They are operated as public utilities by states, political subdivisions or corporations chartered for such purposes. Any foreign or domestic merchandise not prohibited by law, whether or not subject to U.S. customs duty, can be placed in a FTZ. In general, merchandise in a FTZ can be stored there, sold, exhibited, broken up, repacked, assembled, graded, cleaned, mixed with foreign or domestic merchandise, otherwise manipulated, or destroyed. No retail trade can be conducted there. Some of a FTZ's advantages are: (i) customs duties or, if applicable, federal excise tax, are paid only when merchandise is transferred from a FTZ to U.S. customs territory for consumption or use; (ii) goods can be exported out of the U.S.A. from a FTZ free of U.S. customs duty and tax; (iii) procedural requirements for using a FTZ are minimal; (iv) goods can remain indefinitely in a FTZ. There are other advantages as well. 8. The exporter should structure its U.S. exports sales so that no U.S. federal or U.S. state income taxes will be imposed on the profits from such sales. If an exporter should be deemed to have a "permanent establishment" in the U.S.A. for tax purposes or to be doing business in the U.S.A. or in a particular U.S. state or states by virtue of its exports to the States, it may become subject to U.S. federal income tax and/or U.S. state income tax on its U.S. export income. The exporter should review with its U.S. lawyer how to structure its U.S. export sales to avoid the imposition of U.S. income tax. 9. When exporting to your U.S. subsidiary or affiliate, be very careful about the price you charge it: Overpricing and underpricing can lead to tax and customs problems. Your price should be an "arms length" one--approximately what you would charge an unrelated party. Expert advice implemented early on should reduce the risk of these sort of problems. CHAPTER IV PRODUCT LIABILITY IN THE U.S.A. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 13 ? The theme of this particular Chapter is "product liability in the U.S.A.", particularly from the standpoint of the manufacturer or exporter. Meaning of Product Liability: In simple terms, "product liability" means the liability which a manufacturer, seller or licensor of technology can incur because the product, article, component or part it manufactures, sells, distributes or licenses causes injury to someone's person or property. Under U.S. law, there are three basic legal theories an injured party can use to formulate a product liability claim: (1) strict liability; (2) breach of express or implied contract or warranty; (3) negligence. Very often, plaintiff's will allege all three theories. One important feature of the "strict liability" theory is the manufacturer or seller can be liable even if the defect could not have been discovered or prevented by human skill, knowledge or foresight. Product liability can result from one or more of the following three types of "defects": E. "mechanical or manufacturing defects" (examples: faulty component parts, loose screws, etc.); F. "design defects" (examples: instability, toxicity, flammability, tendency to shatter, etc.); and G. "failure to adequately warn" of possible hazards in using or applying the article (including inaccurate or incomplete directions for use). Even if a subassembly, component, or part manufactured, sold or supplied by you becomes incorporated in a finished product manufactured or completed by someone else, you still may be exposed to U.S. product liability claims. You may, however, be able to claim indemnification or contribution from the final manufacturer or finisher, depending on the circumstances. Situation in U.S.A.: The following summary roughly describes the situation in the U.S.A. today: - there are both U.S. federal laws and state laws relevant to product liability. Examples of federal laws are the Hazardous Substance Labeling Act (as amended by the Child Protection Act of 1966); the Child {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 14 ? Protection and Toy Safety Act of 1969; the Flammable Fabrics Act; and the Consumer Product Safety Act. Most of the U.S. law on product liability is nevertheless contained in extensive decisions of the U.S. state and federal courts. - There are many product liability suits filed in the U.S.A. - Damage awards in product liability cases can sometimes be quite high. Not always, but sometimes. - Most product liability lawsuits are not decided by a court; rather, after some legal skirmishing, the great majority of them are settled out of court, involving some payment to the plaintiff. - In a great many instances foreign (e.g. UK) manufacturers, exporters and licensors will be able to escape the jurisdiction of the American courts where their products or components cause injury to someone in the U.S.A. Or at least they may have a good legal argument to that effect. In some instances, foreign firms will be subject to U.S. courts' reach and won't have any good argument to the contrary. This is a very important subject. (See later in this chapter "Will U.S. Court have Personal Jurisdiction Over the Foreign Manufacturer, Exporter or Licensor?"). All things being equal, product liability insurance coverage of sufficient scope should be purchased by essentially every company exposed to the risk. However, it may be unavailable for certain types of products; and for some types of products, it may be quite expensive. The "deductible" (the portion of the damages the insured will have to bear) will often be a sizeable amount. Many smaller companies will simply not be able to afford product liability insurance for the U.S.A. to the extent it is available. Nevertheless, companies should give very serious consideration to purchasing product liability insurance covering its product, components and parts in the U.S. market. Reducing Product Liability Risks - Trends: Although there is no practical way to eliminate, 100%, all risks of product liability claims in the U.S.A., there are certain things that enterprises can do to reduce them. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 15 ? Several of these are mentioned below, with no significance being attached to the order in which they are presented. - assure that your product is as safe as possible, taking into account the state of the art, U.S. law, U.S. industry standards and norms, what the competition is doing, and other relevant factors; - assure that your products contain proper indications for use and adequate warnings of potential hazards consistent with U.S. law and that your promotional material, labeling, etc., is complete and accurate and does not contain unnecessary statements which can be used against you; - check whether product liability insurance is available for the U.S.A., the cost thereof, what it covers and what it does not, and, where feasible, purchase it; - consider having your U.S. distributor or licensee obtain product liability insurance covering your risks (adding you to its policy, and you'd reimburse the distributor or licensee for the additional premiums); - consider setting up a new, low capitalized company in your home country or some third country which would either have the products contract manufactured for its account by your home country (or other) company owning the factory, or would lease from the that manufacturing company the factory or a part thereof, and thus be the "manufacturer" for purposes of U.S. export sales; - consider setting up a new, low capitalized U.S. subsidiary to purchase from the home country "manufacturer"/seller and resell to U.S. customers; - consider self-insurance; - sell under terms by which title and risk of loss to your products pass to the buyer outside of the U.S.A., and do not negotiate the agreement in the U.S.A.; {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 16 ? - insert some special clauses in your U.S. contracts which might help to convince a U.S. court that it did not have jurisdiction over you, the Israeli exporter. - in some countries U.S. court decisions (as distinguished from U.S. arbitral awards) are not enforceable - or at least not easily enforceable. Where this is the case, it can be factored into the product liability risk reduction equation; - where selling through U.S. distributors and agents, or where licensing the manufacture of products to a U.S. licensee, make a real attempt to pass over as much as possible of the product liability risk to the U.S. distributor, agent or licensee. Many non-U.S. companies are attempting this, with varying success. There are many different ways to accomplish this, some of which are mentioned below. Passing Product Liability Risk to U.S. Intermediary: It is possible to pass, by contract, a material part of a manufacturer's, supplier's or licensor's product liability exposure on to its U.S. distributor, agent or licensee. Most U.S. distributors, agents or licensees will resist such an attempt, but it is often worth a try. Surprisingly, I have found in practice that sometimes the U.S. side will accept a material part of that risk. Let's take the following situation: A foreign (non-U.S.) company sells a product or article to a U.S. distributor who in turn resells the product in the U.S. market. The non-U.S. company has no fixed place of business nor any assets in the U.S.A. An individual is injured or killed allegedly from having used, operated, consumed, etc., the product or article. That individual (or his or her estate) files suit against the U.S. distributor but not against the foreign supplier. If the contract between the foreign (non-U.S.) supplier and the U.S. distributor has restricted the distributor's rights to claim over against the supplier, the supplier's product liability risk will have been reduced. Some ways of reducing one's product liability risk by contract are: - to not agree by contract to hold harmless and indemnify the distributor for product liability damages; - to have the distributor agree to hold the supplier harmless and indemnify the supplier for product liability damages (this is usually impossible to achieve, but may be a starting point for supplier in negotiations); {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 17 ? - to water down, with many exclusions, clauses by which the supplier assumes responsibility for defective products (there are many ways of accomplishing this); - to require that the U.S. distributor bring any product liability claims for which it seeks the supplier's indemnification, in arbitration outside of the U.S.A., preferably in a jurisdiction which is not disposed to grant enormous damage awards or the law of which is relatively favorable to the supplier, and to state in the agreement that the distributor will not raise any claim over against the supplier in, or try to cause the supplier to become a party to, the U.S. litigation initiated by the injured party. - to fix a maximum limit of product liability damages sustained by the distributor which the supplier will bear. Remember that any agreement between you and your U.S. buyer, distributor, sales agent or licensee which excludes or limits your product liability exposure will not be binding on a third party who sustains injury allegedly due to your article, product, component or part. WILL A U.S. COURT HAVE PERSONAL JURISDICTION OVER THE FOREIGN MANUFACTURER, EXPORTER OR LICENSOR? By that, I mean, will a U.S. court have the authority to hear and decide a case, and render a damage award in a product liability situation, against the manufacturer, exporter or licensor? Or will that party at least have cogent legal arguments to challenge the U.S. court's exercise of personal jurisdiction? The answer is that in many instances the court located in a U.S. state in which the allegedly injured party sues will not have personal jurisdiction over a person or firm not resident in that state. Or, at least the "non-resident" will have a good legal argument to that effect in many situations. That is a major point, of critical importance to American and non-U.S. companies and individuals alike. Many companies and even lawyers are not fully aware of the relatively recent legal developments in that direction. Of course, it depends on the particular facts and circumstances. In some cases the "non-resident" of the U.S. state where suit is brought may have sound, legal arguments to challenge the U.S. court's jurisdiction and may succeed in such challenge. In other cases, it will have only relatively weak arguments and its challenge to the U.S. court's jurisdiction will {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 18 ? probably fail. The main issue will tend to revolve around whether the "non-resident" has "sufficient contacts" with the U.S. state in which the law suit is brought to justify the exercise by a court of that U.S. state of personal jurisdiction over it. By "non-resident" I don't mean only companies having their opera- tions solely outside of the U.S.A.--"foreign" companies and individuals such as UK and other firms and persons operating in their home country. I also mean American companies and individuals that are not residents of the particular U.S. state in which the product liability lawsuit has been or may be brought. I have been involved in several of product liability cases where the defendant (or one of them) was (or arguably was) a "non-resident". I was quite tempted to include in this Guide a legal memorandum which I wrote that set forth pretty clearly the, call it "new" law on "personal jurisdiction" over non-residents in product liability cases. However, it is not appropriate for this Guide, and is too long. I'll just try to summarize. The "Old" Rule: "Stream of Commerce" Theory Until fairly recently, the legal rule seemed to be, stated very generally and without nuances: if a "non-resident" of the U.S. state concerned, particularly a non-U.S. company operating from outside the U.S.A., puts its products, parts or components into the "stream of commerce" with the "expectation" some would be purchased or used by people in the U.S. state where the law suit is brought, the courts of that U.S. state will have personal jurisdiction over the non-U.S. party, even if that party has no other contacts with the U.S. state concerned. Under the "stream of commerce" theory the "expectation" that the article might well be purchased or used by people in the particular U.S. state is usually interpreted rather broadly against the non-U.S. party. We will hereafter refer to this theory as the "Stream of Commerce Theory". The "New" Rule: One or More Acts of the Non-Resident Purposefully Directed at the U.S. State Concerned Relatively recent U.S. Supreme Court, and even more recent federal and state court decisions around the USA tend to require more than a mere "expectation" or "awareness" that the product, component or part might enter the U.S. forum state through the "stream of commerce". This line of court decisions--now the generally accepted one-- looks for action of the non-U.S. party purposefully directed toward the U.S. state in which the law suit is brought (the U.S. forum state). Examples might be: (i) designing the product for the U.S. forum state's market; (ii) advertising in the U.S. forum state; (iii) establishing channels for {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 19 ? providing information, advice or servicing to customers in the U.S. forum state; (iv) marketing the products through a distributor or sales agent which has the U.S. forum state as a part of its contractual territory (in other words, creating, controlling or employing the distribution system that brought the product to the U.S. forum state); having an office, employees, agents or property in the U.S. forum state. We will hereafter refer to this theory as the "Purposeful Connection With the State Theory". I am purposely oversimplying. Technically, there are two yardsticks (standards) which the court will normally apply: (i) is the non-resident defendant's contact with the state quite substantial (for example, it has an office in the state, it is registered to do business in that state, it has one or more employees stationed in that state)--that is the "general jurisdiction standard". If that is not met then the court applies the "purposefully connected" test. If neither is met, then the non-resident is dismissed from the case. As mentioned, I have worked on several cases of this sort, most involving companies located outside of the U.S.A. One involved a foreign (non-U.S.) manufacturer/seller (my client), where the law suit was brought in the State of Colorado. That case is discussed below. Please, in reading the case study, bear in mind the "Stream of Commerce Theory" and the "Purposeful Connection With the State Theory". A Product Liability Case Study If you think you want to read more "legal" detail about the points made above, then you might digest this case study. A foreign (non-U.S.) manufacturer of metal benches for public seating in parks, shopping malls etc. (hereafter "FM") had been selling its benches for over 20 years only to one U.S. company located in Massachusetts, U.S.A. (hereafter "MassCo"), which in turn resold them to its, MassCo's, customers in different parts of the U.S.A. There was never a written contract between FM and MassCo by which FM appointed MassCo its exclusive or non-exclusive distributor for the U.S.A. or any part thereof, or which otherwise defined their relationship. MassCo resold a certain number of FM's benches to a company located in the State of Colorado (hereafter "ColoCo"), and ColoCo installed them in a Colorado shopping mall. Mr. Jones, the plaintiff (hereafter "Jones") claimed to sustain severe bodily injury and other economic damage when, allegedly, Jones sat on one of the benches and it collapsed. Jones sued three parties for damages in a Colorado State court: MassCo, ColoCo; and FM, the foreign (non-U.S.) manufacturer which sold the bench in question to MassCo. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 20 ? Although FM had a certain level of product liability insurance covering U.S. claims, FM and its insurer decided to challenge the jurisdiction of the Colorado court over FM. FM and its insurer engaged the writer's firm. The main problem posed for our firm was to convince the Colorado court not to apply the "Stream of Commerce Theory" explained above. That theory had been proclaimed and applied by the U.S. Supreme Court in several decisions until about 1984. Many lower courts applied that theory in product liability cases. In particular, the Colorado Supreme Court adopted the Stream of Commerce Theory in the rather well-known Michelin case. It was rather clear that by application of the Stream of Commerce Theory, the Colorado court in our case would decide that it had jurisdiction over FM to render a decision vis-a-vis FM on Jones' product liability claims. Our main task was to persuade the Colorado court 1. to not apply the "Stream of Commerce Theory" but rather, to apply the "Purposeful Connection With the State Theory"; and 2. to prove that FM did not have the necessary connections with the State of Colorado to justify the Colorado court's exercise of personal jurisdiction over FM. This problem was complicated by the fact that in one of the Supreme Court decisions favorable to FM, our client (the Asahi case), the portion of the majority opinion which articulated the "Purposeful Connection With the State Theory" was not adopted by the majority of the U.S. Supreme court justices. Thus, there was (and there still is) a doubt whether that legal theory rather than the "Stream of Commerce Theory" represents the law of the land which lower U.S. federal and state courts are bound to apply. We nevertheless argued before the Colorado court that the Purposeful Connection With the State Theory applies, and that by its application, the court did not have personal jurisdiction over FM to render a decision regarding FM's liability to Jones. We stressed: 1. FM did not even have and does not presently have an office, employees, agents, bank accounts or other connection with the State of Colorado; 2. FM never had and does not presently have any channels for providing regular advice or service to customers in Colorado; 3. FM never designed or adapted its metal benches (or any other product) specially for the State of Colorado market; 4. FM never advertised any of its products, including its benches, in Colorado; {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 21 ? 5. at the time the metal bench in question was manufactured or sold to MassCo, at the time of Jones' "accident", and at the time Jones sued FM, FM did not have an exclusive or non-exclusive distributor or agent which had, as its territory, the USA or the State of Colorado itself. Specifically, that there never was nor is there, at the relevant times, any contract between FM and MassCo. We argued that MassCo was always only an occasional purchaser from FM of the benches, which MassCo resold to whomever and wherever MassCo desired; that MassCo did its own advertising and promotion of the benches in the USA; and that MassCo had its own customers and channels of distribution in the USA. We also emphasized that FM had always delivered its benches directly to MassCo in Massachusetts. And that FM never had knowledge of MassCo's customers or its distribution and sales network. From the foregoing, we concluded that FM did not create, control or employ a system of distribution which introduced the particular bench into the State of Colorado which allegedly caused Jones' damages. Jones' lawyers replied forcefully in its well researched and formulated reply papers and in oral argument 1. the "Stream of Commerce Theory" applies; 2. by its application, the Colorado court has jurisdiction over FM. Jones' lawyers cited a great many of the U.S. federal and state decisions, and of course, certain U.S. Supreme Court decisions, in favor of the "Stream of Commerce Theory". They argued that the Colorado Supreme Court's Michelin decision controls, and that the portion of the U.S. Supreme Court's Asahi decision which sets forth the "Purposeful Connection With the State Theory" does not have the force of law. Their argument, in a nutshell, was, that when FM sold and delivered the bench in question to MassCo, it was foreseeable that MassCo would resell it to someone who or which might cause it to be installed in Colorado, considering that MassCo sold and delivered FM's benches into many areas of the USA. Accordingly, concluded Jones' counsel, the Colorado court can and should exercise personal jurisdiction over FM. The Colorado court decided that it did not have personal jurisdiction over FM. In other words, FM won the case on the question of personal jurisdiction . . . the Colorado court would not decide the issue of FM's liability to Jones. The court based its decision mainly on the "Purposeful Connection With the State Theory" (without specifically mentioning the Theory), concluding that FM did not have the requisite "purposeful connection with the State of Colorado". But Jones did not give up. Jones' counsel thereafter filed with the same court two successive motions for reconsideration of the decision based on alleged new evidence. The {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 22 ? Colorado court rejected both motions. Thus, FM escaped the clutches of the Colorado court. Jones did not attempt to appeal to a higher court. It is theoretically possible that if MassCo or ColoCo is held liable to Jones for damages, one or the other might try to sue FM either in Massachusetts or in FM's home country. For certain reasons which we will not discuss here, we doubt that will occur. The reader should not conclude from this case study that every American court will arrive at the same conclusion under similar facts and circumstances. The non-resident's chances of successfully invoking the "Purposeful Connection With the State Theory" are, I believe, might better before a federal court than a state court; and if sued in a state court, it the issue of whether to try to transfer the case to a federal court should typically be considered. . But the main point is that at least potentially, certain manufacturers and sellers have at their disposal a legal theory (the "Purposeful Connection With the State Theory") with which they may be able to challenge the jurisdiction of U.S. courts. Most American lawyers representing plaintiffs in product liability and similar cases work on a contingency fee basis -- they receive their fees based on the amount recovered by way of judgment or settlement. Those lawyers normally do not want a difficult and time-consuming, preliminary legal battle about whether the court has jurisdiction over a foreign (non-U.S.) or even, sometimes, out-of-state, American defendant, unless their client's damage claim is quite large. Especially when there are other American defendants easily reachable (like MassCo and ColoCo in the above case study) which have "deep pockets" and/or sufficient product liability insurance to cover the damages. We were surprised that Jones' lawyers were willing to spend so much time and effort in their attempt to sue FM. Even if a foreign company has a U.S. subsidiary or affiliate, it might be able to take advantage of the Purposeful Connection With the State Theory. If your subsidiary or affiliate is located totally outside of the state where the lawsuit is or will be brought, it is a non-resident of that state, and, depending on factors mentioned above, it may be that neither the foreign company nor its subsidiary or affiliate will be subject to the legal grasp of that state in a product liability case. There is some, albeit limited, case law to that effect. Challenging the jurisdiction of a U.S. court, as above, requires considerable legal and factual input, and is normally not inexpensive in terms of legal fees. If you lose at the lower {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 23 ? court level on the jurisdictional issue, you may wish to appeal. You may win on appeal; or, when the plaintiff sees you have appealed, a reasonable settlement of the case may result. Often, a foreign company can optimize its chances of escaping the jurisdiction of most U.S. courts by properly structuring its operations, and by how its formulates its contracts with U.S. parties (e.g., distributors, sales agents, licensees, even U.S. subsidiaries and affiliates). A company cannot and should not distort in a totally impractical way its operations, contracts etc. to try to avoid being sued, but there may well be things it can do to reduce the risk within the realm of the reasonable. Some of them are outlined in this Chapter. There is certainly much more that I could say about this subject matter. However, I'll close this Chapter will a final point and a short story. A company located outside of the U.S.A. might be threatened with a U.S. product liability lawsuit by the injured party's lawyer. That lawyer may write and phone the company. He or she might send them papers to sign. As soon as you are contacted, get your U.S. lawyer involved; and don't tell the other lawyer anything--listen, take notes, read what he or she sends you and forward those notes and documents to your U.S. lawyer. And especially, don't sign or agree to anything without your U.S. lawyer's prior approval. Here's a recent short story. A European company client of mine (a manufacturer) received phone calls, and thereafter correspondence from a U.S. lawyer. That lawyer claimed to represent a police officer who was allegedly serious injured from the use of my client's product. Unfortunately, my client did discuss the case by phone with that lawyer and did reply to letters sent by that lawyer, without contacting me first. Happily, those "no-nose" did not harm my client---but they could have. Among the documents sent to my client by the injured party's lawyer was one that, if signed by my client, would have subjected it to the jurisdiction of the U.S. court located in the state concerned. Another was a copy of a summons and complaint. My client had no known contacts with that state other than allegedly, one or more of its products had entered that state. My client, at the time the alleged "accident" occurred, did have a U.S. subsidiary located in another U.S. state, but that subsidiary did not sell the product allegedly causing the injury, it was sold directly by my European client, from Europe, into U.S. channels of commerce. Nor did my European client have any distributor or agent in the U.S. state concerned. Moreover, my client had dissolved and liquidated its U.S. subsidiary by the time the injured party's U.S. lawyer contacted it (and not for that reason). Once in the picture, I, of course, directed my client not to sign any document submitted to it by the other lawyer; to say nothing further to that lawyer; and to send me all relevant documents and keep me apprised of any further contacts and developments. I did not contact the other lawyer. No lawsuit was ever filed--I kept checking with the court concerned. The state statute of limitations is about to expire as I write. While there is still a little {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 24 ? time for the plaintiff to formally serve the litigation documents on my client (by complicated procedures pursuant to a certain international convention), that is, in my view, quite unlikely to occur. The other lawyer realized that my client wouldn't voluntarily accept the jurisdiction of the U.S. court concerned (by signing his document), that he would be in for a jurisdictional struggle that he might not win and that would be costly in terms of his time input (he quite probably was working on a "contingency fee" basis), and that my client was not going to settle the case. {W:\09999\019\ukbuspgd\00128455.DOC;1} ? 25 ? CHAPTER V CONTRACTS WITH AMERICAN DISTRIBUTORS AND SALES AGENTS This Chapter concerns the distribution or sales agency contract that you, the foreign enterprise, will conclude with your U.S. distributor or sales agent to sell and/or promote the sale of your products. Bear in mind that a distributor or dealer is a company or individual which purchases goods and resells them within a specified territory (e.g., all or a part of the U.S.A.), in its own name and for its own account, on a regular and ongoing basis. The distributor normally receives no commission from the supplier. A sales agent is a company or individual which, in the name of and/or for the account of the supplier, attempts to obtain orders for the supplier's goods within a specified territory (e.g., all or part of the U.S.A.), receiving an agreed commission on the sale. The sales agent does not buy or sell the goods: the actual sale is between the supplier and the U.S. customer. Here are some important points
Posted: 15 June 2010

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