International Trade and Finance Law - Assignment Example

?International Trade and Finance Law Table of Contents Introduction 3 Brief of Legal Risks in International Trade and Finance 4 Identification of Legal Risks in South East Asia 6 Brief Assessment of Legal Risks in South East Asia 8 Conclusion 9 References 11 Bibliography 13 Introduction Being highly influenced by the rapid growth of globalisation, organisations in the present day context often seek to expand their business operations beyond the national boundaries. In this regard, a continuous growth and rapid transformation of the business strategies practiced by the modern business organisations can be observed apparently with respect to their global trade operations. Contextually, the rapid development of modern trade operations among the various global industries has also inspired the organisations to be significantly focused on acquiring a continuously increasing market share and thereby attaining greater competitive advantages (OECD, 2008). However, besides the vivid opportunities, the global exposure practices have also been observed to impose certain threats and constraints upon the organisations. For instance, organisations intending to expand in the global context may face various types of legal risks owing to the differences pertaining to the regulatory framework of the home country and the host nation. It is in this context that international trade laws, in terms of industry specific concessions and Foreign Direct Investments, often tend to constrict the expansion programs of organisations (Johnsrud, 2011). Based on these aspects, the discussion intends to briefly discuss the international trade laws and the related risk factors that are quite likely to be faced by Cowan Davies (CD) PLC when expanding its business operations in South East Asia. Moreover, the discussion also focuses on identifying major risks of trade and finance that are probable to be faced by CD in its planned expansion to South East Asia. Brief Description of Legal Risks in International Trade and Finance Legal risks are often perceived to be a few of the fundamental issues faced by organisations when conducting processes related to international trade and finance. It is in this context that over the past decades, laws related to trade affairs and business operations have developed apparently, which has also imposed a significant influence on the organisational operations. For instance, in early decades of the 18th century, businesses were largely focused on national contexts rather than on foreign environments apart from the export and import functions. With the gradual increase in the globalisation effects, organisations became more concentrated on expanding their businesses in foreign countries in order to attain the virtues of added resource availability and increased market demand. However, owing to the distinctive cultural backgrounds and business procedures, various regions developed dissimilar trade policies which later cropped up as a fundamental reason for international trade related conflicts (Schmitthoff & Cheng, 1937). For instance, the legal framework followed by the South East Asian economies to facilitate international trade has been observed as quite different from that practiced by the western countries. Where the organisations operating in America, England and other allied western countries need to abide by the norms specified by North American Free Trade Agreement (NAFTA), the companies operating in the South East Asian region needs to follow the rules and regulations specified by the Association of Southeast Asia Nations (ASEAN). Supposedly, the policies followed by the two international trade related treaties are distinct in terms of their characteristics which might give rise to conflicts and legal issues in case of global exposure (Johnsrud, 2011). With this concern, there are various trade and finance risks identifiable, which could affect the export activities of CD for its expansion in the South East Asian region. It is worth mentioning in this context that the organisation has been considerably involved in manufacturing activities throughout England. However, when practicing export operations in the South East Asian region, the organisation might have to face some uncertainties including governmental or political risks, strategic risks, operational risks, financial risks, technological risks and various social and environmental risks concerning the prevailing international law related regimes in the economies (OECD, 2008). From an in-depth perspective, CD might also face various other legal issues in expanding to the South East Asian region, such as transactional risks, time of payment risks as well as alternative payment modes practiced by the importers or exporters (Hernandez, 2012). To be illustrated from a comprehensive perspective, the legal aspects that are likely to pose a significant threat to the business operations of CD in South East Asia can be grouped into various categories. For instance, the organisation should be involved in an objective-oriented process with regard to their offerings. The products and/or services that are rendered to the customers in the host country should be considered in accordance with the legal aspects enforced in the national environment of the economy. Moreover, the organisation should also need to consider the standard of the products or services when dealing with the consumers in other countries, taking into account the potential customers’ preferences and values to avoid any legal conflict between the customers and the marketer (Mistelis, 2001). However, it is also important for the foreign entrepreneurs to practice an effective and transparent process of the supply chain management system abiding by the various social norms of the host country in terms of trading. In addition, the governmental regulations regarding the location of the trading area and payment issues of exchanging currency as well as non-payment risks should also be taken into consideration by CD when conducting trade operations in a foreign nation. Furthermore, protection of the organisation’s intellectual property is also an important factor for foreign entrepreneurs in order to secure its business process in the overseas countries (Crown, 2012). Identification of Legal Risks in South East Asia According to the South East Asian region’s current business scenario, it can be observed that the industries operating in the allied economies have been significantly increasing their investment amount in business infrastructure improvements allowing a greater number of foreign entrepreneurs in the industry segments. Moreover, it has also been observed that some of the South East Asian countries have developed their legal guidelines in order to prioritise in higher investment and land acquisition processes. Hence, owing to its rapid collaborations with the international economies and increasingly flexible international law regimes, the South East Asian markets have emerged as the major focusing areas for the global organisations in terms of its successful expansion in the business processes (International Bar Association, 2012). In relation to the business expansion plan of CD, the organisation might have to face various legal issues when commencing its export centric business process in the foreign market of South East Asia. With this concern, some of the fundamental legal issued that should be addressed by CD in this context can be identified as follows. The organisation needs to maintain a contractual relationship with the local government of the host country that regulates the duration as well as the termination of the corporate relationship of CD with the economy. Therefore, the foreign organisation must need to adhere to the local laws and various trade regulations of the host country by practicing transparent trade operations (Kentuckiana Business Forum, 2012) The local governmental regulations also tend to influence the employment policies of the organisation in the host country under its labour regulations law including wages and benefits as well as various other issues relating to the authority of the company to terminate the workers (Kentuckiana Business Forum, 2012) Effective evaluation of the country’s trade regulations regarding the intellectual property and trademark protection law must also be considered by CD prior to its ultimate settlement in the economy (WIPO Intellectual Property Handbook, n.d.) Product liability regulations of the local industry can also expose the organisation towards increased risks in the foreign market forcing it to redesign the product and thereby incur additional costs in the long run. This, in turn, is likely to hamper the financial viability of the organisation in the host country, which must be considered as a vital aspect (OECD Global Relations Secretariat, 2011) The effective guidelines of antitrust or local market competition can also be considered as the major restriction for the organisation in its global expansion initiatives (Kentuckiana Business Forum, 2012) Moreover, the organisation must consider domestic laws and regulations related to consumer protection, funding practices and various other aspects of the business practice including export control as well as market competition regulations (Kentuckiana Business Forum, 2012). Brief Assessment of Legal Risks in South East Asia When concerning the legal risk assessment of the global countries, it can further be mentioned that alterations in the country’s governmental regulations can lead CD to bear financial losses, thereby hindering its financial viability and consequently minimising its sustainability. Changing legislation policies or overseas exchange control guidelines can be thus regarded as some of the major uncertainties faced by the modern day organisations in relation to their foreign trade operations. The sales contract of the foreign organisation can also be discouraged because of the changes in the laws and trade guidelines of the overseas countries regarding international trade practices (United Overseas Bank Limited Co., 2010). In the context of assessing legal risk factors in the South East Asian market, CD should be focused on recognising its trade products as well as the allied uncertainties that could affect the organisation in its overseas trade operations. The process of understanding the company’s trade and finance product will enable to mitigate sudden risks in the foreign market related with the export restrictions and customer preferences. The organisation further needs to practice effective guidelines for controlling its financial requirements and smoothly execute its various business processes in the overseas countries. The process shall also prove highly favourable in assisting the organisations in minimising certain undeniable risks in the foreign market (Foreign Affairs and International Trade Canada, 2011). In addition, an effective model of payment mechanism in the organisation’s insurance coverage with respect to the legal guidelines, terms and conditions along with other activities can also support the organisation in recognising and reducing the legal problems prevailing for similar foreign entrepreneurs within the overseas nation. With respect to the development trends of the foreign trade regulations, CD should further develop the major import/export financing options and recognize risk encountering strategies to facilitate the organisation’s overseas transactions in order to perform its foreign trade activities smoothly. Therefore, it can be stated that effective identification of risks as well as early control measures in the organisation’s trade financing practices shall prove to be quite beneficial in mitigating the legal problems of its foreign trade operations (Narotama University, n.d.). Additionally, another important factor to be considered in this regard can be identified as the effective management of an interdependent relationship with the government and local political representatives of the overseas countries, which can facilitate better communication and likewise reduce the probability of conflicts arising due to misinterpretation of national laws and distorted communication process. Therefore, the management of CD should also focus on developing a mutual relationship with the government of South East Asian countries in order to conduct its trade and finance activities effectively in a sustainable way (Narotama University, n.d.). Conclusion The expansion of companies in foreign regions involves various risks and uncertainties among which a few shall be identifiable, while others can only be anticipated based on certain assumptions. Legal risks can be identified in the category of identifiable and controllable risks. Thus, taking the virtues of its identifiability, CD must concentrate on undertaking a rigorous survey of the legal environment of South East Asian countries. In this regard, the company shall also consider case reviews through which it might generate a considerable awareness regarding other organisations’ policies when expanding in the similar region. Consequently, the management of CD must develop effective strategies in accordance with the foreign market opportunities as well as associated risk factors and effective evaluation process in order to avail the intended trade opportunities. According to the present day context, it can be observed that the trading opportunities pertaining to the foreign market provides an effective and competitive advantage for the organisation in its long-run profitability. However, largely depending upon the alliances with overseas collaborators may also raise certain possibilities for the organisation causing a huge amount of financial loss due to the changing legal guidelines of the host country. With reference to the above stated legal risks and constraints, it can be stated that the organisation must practice an effective corporate guideline during its overseas trade expansion. Proper identification and development of adequate measures to mitigate the probable risks can be, thus, considered as the most effective strategies for CD to preserve its sustainability in the South East Asian nations. References Foreign Affairs and International Trade Canada, 2011. Foreign Affairs and International Trade Canada. Report on plans and priorities 2010-2011. [Online] Available at: http://www.tbs-sct.gc.ca/rpp/2010-2011/inst/ext/ext-eng.pdf [Accessed October 19, 2012]. Hernandez, P. M., 2012. Legal risks in international trade finance. CLACE 2012. [Online] Available at: http://www.felaban.com/archivos_actividades_congresos/JUNE%205%20-%20CONFERENCE%2015%20-%201530%20PM%20-%20Patricia%20Hernandez.pdf [Accessed October 19, 2012]. International Bar Association, 2012. Southeast Asia and the global economy – legal developments. 3rd Asia Pacific Regional Forum Conference. [Online] Available at: http://www.int-bar.org/conferences/conf440/binary/APF%20prog,%20Kuala%20lumpur%202012.pdf [Accessed October 19, 2012]. Johnsrud, K., 2011. International trade law guide. Arthur W. Diamond law library research guides. Mistelis, L., 2001. Is harmonisation a necessary evil? - The future of harmonisation and new sources of international trade law. Pace Institute of International Commercial Law. [Online] Available at: http://www.jus.uio.no/pace/is_harmonisation_a_necessary_evil.loukas_mistelis/landscape.pdf [Accessed October 19, 2012]. Narotama University, n.d. Political and legal environment. International law and local legal environment. [Online] Available at: http://ebooks.narotama.ac.id/files/Global%20Marketing%20Management%20(5th%20Edition)/Chapter%205%20Political%20and%20LegalEnvironment.pdf [Accessed October 19, 2012]. OECD Global Relations Secretariat, 2011. Active with Southeast Asia, special focus on Indonesia. Regional approaches. [Online] Available at: http://www.oecd.org/globalrelations/regionalapproaches/42916438.pdf [Accessed October 19, 2012]. OECD, 2008. OECD guidelines for multinational enterprises. Investment. [Online] Available at: http://www.oecd.org/investment/guidelinesformultinationalenterprises/1922428.pdf [Accessed October 19, 2012]. Schmitthoff, C. M. and Cheng, C. J., 1937. Clive M. Schmitthoff's select essays on international trade law. BRILL. UK Trade & Investment, 2012. Selling services overseas: international trade regulations. Import and export procedures. [Online] Available at: https://www.gov.uk/international-trade-in-services-import-and-export-regulations [Accessed October 19, 2012]. United Overseas Bank Limited Co., 2010. Risks in international trade & mitigating measures. What are the different types of risks in international trade? [Online] Available at: http://www.uob.com.sg/assets/pdfs/corporate/corporate/TradeTutorials_RisksinInternationalTrade.pdf [Accessed October 19, 2012]. WIPO Intellectual Property Handbook, n.d. International treaties and conventions on intellectual property. Chapter 5. [Online] Available at: http://www.wipo.int/about-ip/en/iprm/pdf/ch5.pdf [Accessed October 19, 2012]. Bibliography Muchlinski, P. et al., 2008. The Oxford handbook of international investment law. Oxford University Press. Schaffer, R. et al., 2008. International business law and its environment. Cengage Learning Read More