Legal Aspects of Small Business in the Global Marketplace
By MBITA member Jack Ybarra, Transmetrics, Inc.
On October 4, 2013, the office of the Minority Business Development Agency of the U.S. Department of Commerce presented an award to MBITA member Transmetrics, Inc., a small civil engineering firm based in Campbell, California. The award was made to Transmetrics for its extensive international network and its active participation in the international business arena.
Many small firms, afraid of entering the international marketplace, prefer not to do business with foreign firms or venture outside the U.S. marketplace. So when presented with an opportunity to do business in Taiwan, Transmetrics management agreed with a brief email and a telephone call, to send an employee to Taiwan for a period of one year to perform engineering work. Everything went well and payments for services rendered were promptly made every month. There was never a contract or agreement outlining responsibilities, liabilities, payment or non payment provisions, or any thing else.
A similar agreement was made with a Spanish company and work was performed in Spain by the same employee. Since then, the firm has entered into several simple joint venture agreements with foreign firms for work in the United States. These joint venture agreements have required foreign firms to send employees to work with Transmetrics staff in California on various types of specialized engineering work. All these efforts were done with minimum written or verbal agreements.
Taiwan high speed rail project. Transmetrics provided consultant services on the preliminary and detailed design work as well as the construction methods of the aerial structures and stations.
AVE High Speed Rail Extension Project in Barcelona. Transmetrics provided advisory design services and tunnel design advice for the HSR extension to Barcelona.
Imagine the horror on the faces of the international legal experts attending the MBITA's Global Trade Law Taxes Conference in Silicon Valley last year when they heard the Transmetrics story. This conference was one of the best training conferences for small businesses, like Transmetrics, Inc, ever organized. It provided eye opening information on how not to engage in international business and how to avoid unnecessary difficulties in the international marketplace. As the globalization of business and the opportunities it provides for small businesses increases daily, the subject matter of this conference was crucial for small businesses if they are to succeed in the international marketplace.
As an example, an international joint venture agreement is one of the most prevalent forms of cross-border business transactions which takes advantage of synergies of the partners involved and allows them to increase profitability and revenues. Such agreements outline the responsibilities and liabilities of each party as it complies with local and state laws, cites provisions for insurance and taxes, as well as how disagreements will be handled. This joint venture agreement avoids lawsuits by spelling out rules for arbitration and outlines enforceability of provisions through recognized international arbitration entities such as the International Chamber of Commerce (ICC) or others based outside of the United States.
Fortunately only one of the many agreements Transmetrics made did not work well. All other ventures were successful and ended without problems. But these types of ventures should not be left to chance and business owners interested in taking advantage of new world trade opportunities should seek expert advice and counsel before getting started. Hopefully more of these conferences will be available for small businesses in the future.
MBITA Member Update
MBITA member BB Wong is taking the experience she's gained from almost 40 years as a real estate broker and is putting it to good use. She received the 2015 Entrepreneur of the Year
award from the Santa Cruz Women's Council of Realtors for her startup company Lifestyled Listings. It's been "getting a lot of traction," according to Judy Brose, the 2015 president of the Council. "It is definitely one of those things that is outside the box," she says.
What is Lifestyled Listings? In short, it's a complex real estate search engine that allows the buyer to seek out properties (and, consequently, agents) based on their lifestyle preferences. "There's literally nothing else like it," says co-founder Jiro Wiseman. "Consumers are confronted with more information than ever in real estate history," he explains. "There is a perfect place, home, and agent for each buyer's unique needs. Now that there is more data than ever about all three of those things, we are taking a new approach to connecting those pieces to make great connections."
Lifestyled Listings caters towards one of the most underserved portions of the real estate market; second home buyers, especially with the influx of wealthy foreigners investing into American residential real estate. Currently, there are no major portals geared towards this 1.6 billion dollar market. BB Wong and Lifestyled Listings have seen this as an opportunity and are in turn setting a new precedent for the home-buying process.
There is so much more to Lifestyled Listings than is mentioned here. Learn more at http://lifestyledlistings.com/bbwong.
Tommy G's TAGlines
|Tommy's Taglines is a new feature column for the World TradeWinds eZine. Thomas A. Gardiner was a founding member of MBITA in 1987 and one of the leading tourism professionals in California. Please enjoy these tagline headlines on the current trends and milestones in our news rich society.
1 - China NOT SLOWING DOWN alert - McKinsey & Co.'s Shanghai Office director and also the director of the McKinsey Global Institute, reflects on three decades on working and living in China. The Five myths about the Chinese economy, published by McKinsey & Company, Insights & Publications, Author: Jonathan Woetzel, published November 2015. Read More
2 - Weather alert - IBM spends $2 Billion buying the digital content of the weather channel developing artificial intelligence (AI) on selling 'predictive human behavior' data to businesses. Fortune magazine reports that IBM bought The Weather Company because weather affects nearly everything. Author, Jonathan Vanian published October 28, 2015. Read more.
3 - Movie MUST GO alert - THE BIG SHORT is an historical account of the Great Recession. The movie opens with the classic real-life axiom, 'If we do not learn from history, we are doomed to repeat it.' The last line of the movie, printed on a placard, shows the real life Michael Burry, who is the real-life market genius patterned in The Big Short movie played by actor Christian Bale, focuses all of his trading on one commodity, "Water, one bottle of wine takes over 400 bottles of water to produce, says Burry, It's the water embedded in food is what I find interesting". Michael Burry, thinks another financial crisis is looming Water is the new global currency', magazine article. Author: Jessica Pressler, published December 28, 2015. Read more.
4 - Travelers finances alert - The US $ dollar's global 'purchasing power parity' (PPP) is calculated with Burgernomics: The'Big Mac Index' (burgernomics) was invented by The Economist in 1986 which established a lighthearted guide to whether currencies are at their correct level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services, in this case a hamburger compared in any two countries. For example, the average price of a Big Mac in America in January 2016 was $4.93 compared to China at only $2.68 at market exchange rates. So the Big Mac index interprets that the Yuan was undervalued by 46% at that time. Read more.
5 - Credit card cash back alert - There is an amazing diversity of merchant participation that offer 2% to 6% cash back incentives that drive loyalty for that particular credit card. Hustler Money Blog, Author, Anthony Nguyen, published January 13, 2016. Read more.
6 - Hotel booking direct cash back alert - The Guestbook Review, a new hotel booking website that has thrown their hat into the ring, states there is a 5% cash b back on hotel stays + elite credits/benefits. The hotel booking space is one of the most saturated markets online, due to the fact that these sites are often charging fees of 15-25% to the hotels for each booking which differentiates when you are able to book directly with the hotel at a 5% cash offering. Read more.
Thomas A. Gardiner is the current California Representative for John Gardiner's Tennis Ranch Foundation
Thomas A. Gardiner has been in the Hospitality Destination Resort business all his life.
Born in Carmel, CA in 1951 and living on the Monterey Bay all his life, his parents John and Barbara Gardiner were recognized in 1957 by Time Magazine for opening the 1st Destination Tennis Resort - Summer Children's Tennis School Camp in the World: The John Gardiner's Tennis Ranch Foundation, a
501(3)c CA-Non-Profit Hospitality & Tourism Careers Development organization in Carmel Valley CA.
Growing up in a family business, doing almost every resort job, becoming the general manager and being recognized by Forbes, Gourmet, Tennis and Town & Country magazines, Mr. Gardiner resigned in 1984 to form TAGCORP Management & Marketing Services Consultant Business.
|Ayse's Corner is a feature column of the World TradeWinds eZine'. Ayse Oge is a published author and global trade marketing expert and author of Emerging Markets.
BRICS Economic Slowdown
BRIC (Brazil, Russia, India, and China) has always shown solid economic growth and definitely changed the landscape of global business over the past ten years. Just a few years ago, China was growing at an average rate of 10% a year, India averaged 8%, Russia 5%, and both Brazil and South Africa around 4% while the G-7's economies (which include Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Union) each expanded at an average rate of less than 1.4% over the same time frame.
However, since 2011, the factors that made BRIC an economic powerhouse have all reversed. Weak global trades, a steady decline in commodity prices, and tightening global financial conditions have reduced the banks' willingness to extend trade finance with BRICS. This led to two of the current BRICS countries - Brazil and Russia - into recessions and caused a huge amount of investors leaving BRICS and pulling out $500 billion over the past year alone. The IMF indicates that emerging economies around the world are going through their fifth consecutive annual slowdown as prices for their raw material exports tumbled.
The strong dollar is weighing on these economies, especially those who borrowed against the dollar while interest rates were still low and have yet to pay back their debts. As Brad McMillan, Chief Investment Officer at Commonwealth Financial Network, states: "The problem is when your currency gets cheaper and the currency you borrowed in gets more expensive, you have to come up with a lot more of your own local currency to pay back that debt. And that's what we're seeing systematically across the emerging markets."
Other Major Challenges Facing BRICS in 2016:
Brazil's economy, currently the seventh largest in the world, is impacted by a high inflation rate of almost 10 percent. In addition, corporate profitability and the consumer's purchasing-power have declined. A corruption scandal involving some of the highest government officials is preventing policymakers from putting together reforms aimed at boosting growth and restoring confidence.
Russia's ongoing conflict with Ukraine and sanctions imposed by the West, combined with falling oil prices, has resulted in a deep recession that shows no signs of easing. Moscow must roll out deep economic reforms to pull the economy out of this severe recession and generate much-needed growth.
Investors have been pleased by President Modi's efforts at economic revitalization. India is the fastest-growing BRIC, and is what Ian Bremmer, a political scientist, referred to as "the last BRIC standing." Despite the bright outlook of India, it still needs to accomplish major reforms, open up its economy, and invest in a stronger infrastructure.
The Asian giant is expected to post its worst annual growth rate of 7 percent this year after growing at an average of 10 percent a year for three decades straight. China is undergoing a challenging structural transformation from an economy based heavily on investment and manufacturing towards one focused more on consumption and services.
Johannesburg is facing a tough road ahead, having to earn back investor confidence after a series of political unrest, dealing with debt problems, and major infrastructure bottlenecks. A record drought and China's diminishing demand for the platinum and iron from South Africa's mines will cut growth by another 1/10 of a percent this year, the IMF says.
The leaders of these five countries collectively account for about 40 percent of the world's population. Substantial natural resource reserves need to focus on overhauling their economies to make them more productive and competitive. The solutions are different for each country, but they range from increasing private-sector investment, undergoing labor-market reforms, and providing stronger protection for intellectual-property rights.
Ayse Oge is President of Ultimate Trade, International Trade Consulting, Speaking and Training. Ayse Oge is International Trade Consultant, Speaker and Trainer. She has served as an instructor for SCORE (Service Corps of Retired Executives) with the same goal as her focus. Ms. Oge has authored numerous articles and several publications including books, World Smart Veterans: From War to International Trade, Go Global to Win and World Wise Children. Ms. Oge's list of certificates, honors and awards for her leadership and service includes The Business Education State Advisory Committee.
MBITA's trade finance column features articles from the experts in the field of EXPORT FINANCING.
EXIM Bank Releases its FY 2015 Annual Report
Report Shows that Over $430 Million Generated For American Taxpayers Last Year; 109,000 American Jobs Supported
Washington, DC - On January 14, 2016 the Export-Import Bank of the United States (EXIM Bank) released its Fiscal Year 2015 Annual Report highlighting its support of more than $17 billion in U.S. exports and an estimated 109,000 U.S. jobs. The Bank also announced it has transferred $431.6 million in deficit-reducing receipts to the U.S. Treasury's General Fund for fiscal year 2015.
EXIM Bank is a self-sustaining federal agency and operates at no cost to the taxpayers. Over the last two decades, EXIM Bank has generated a surplus of almost $7 billion for U.S. taxpayers.
"The Bank is proud to help level the playing field for American businesses who offer the world's highest-quality goods and services to global markets," said Fred P. Hochberg, EXIM chairman and president. "In the months ahead, we will redouble our efforts to ensure U.S. businesses - particularly small businesses - that have every tool available to be on equal footing with their foreign competitors to win sales and create more jobs."
Among the highlights from the 2015 Annual Report:
- EXIM support 109,000 American jobs.
- EXIM supported $17 billion in exports at no cost to American taxpayers.
- EXIM supported more than $3.1 billion of exports from U.S. small businesses.
- Nearly 90% of transactions directly supported U.S. small businesses.
- EXIM Bank had a default rate of 0.235 % as of Sept. 30, 2015
- Remitted $431.6 million to the U.S. Treasury for debt reduction.
ABOUT EXIM BANK:
EXIM Bank is an independent federal agency that supports and maintains U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. The Bank provides a variety of financing mechanisms, including working capital guarantees and export credit insurance, to promote the sale of U.S. goods and services abroad. Almost ninety percent of its transactions directly serve American small businesses.
In fiscal year 2015, EXIM Bank approved $12.4 billion in total authorizations. These authorizations supported an estimated $17 billion in U.S. export sales, as well as approximately 109,000 American jobs in communities across the country.
Small business exporters can learn about how Ex-Im Bank products can empower them to increase foreign sales by clicking here. For more information about EXIM, visit www.exim.gov.
This press release was published by Exim Bank on January 14, 2016.
View source press release.
Initiative (NEI) Update
Statement from U.S. Secretary of Commerce Penny Pritzker on International Trade in Goods and Services in 2015
U.S. exports of goods and services totaled $2.23 trillion in 2015, a 4.8 percent decrease from 2014. Overall, the United States increased goods exports to 58 international markets, establishing records with 20 global partners, including the United Kingdom, Saudi Arabia, Ireland, and Vietnam. Increased exports to these partners were driven by higher value products such as civilian aircrafts and pharmaceuticals.
U.S. services exports tallied another record year in 2015, increasing by $5.9 billion from 2014. Many services sectors increased exports in 2015, including other business services; telecommunications, computer and information services; financial services; and travel. Each of these services sectors reached export increases of more than $1 billion.
"Today's data show that total U.S. services exports set a record for a sixth consecutive year, and goods exports to several major trading partners also eclipsed record levels," said Secretary Pritzker. "However, we recognize that U.S. exporters faced challenges from slowing global growth. Despite these headwinds, the volume of Made-in-America exports remained relatively unchanged, showing there is a continued demand for U.S. products."
"The Commerce Department is committed to achieving President Obama's goal to expand U.S. exports and grow our national and local economies while supporting good-paying jobs in communities throughout the United States. Implementing the newly-signed Trans-Pacific Partnership (TPP) and finalizing negotiations on the Transatlantic Trade and Investment Partnership are critical to achieving this goal."
The Trans-Pacific Partnership (TPP) is a transformational 21st-century trade agreement with 11 other countries bordering the Pacific, home to some of the fastest-growing markets in the world. Combined, the current TPP members represent nearly 40 percent of the global GDP. TPP levels the playing field for American workers and American businesses, supporting more Made-in-America exports and higher paying American jobs.
The Transatlantic Trade and Investment Partnership (TTIP) will be an ambitious, comprehensive, and high-standard trade and investment agreement between the United States and the European Union (EU), that offers significant benefits for U.S. companies and workers through eliminating existing trade barriers and better enabling U.S. companies and workers to compete. TTIP will provide new opportunities for U.S. industry, as approximately one-fifth of all U.S. goods and services exports go to the EU.
This press release was published by the U.S. Department of Commerce on February 5, 2016.
Read source press release.
International Trade Administration
The International Trade Administration (ITA) is the premier resource for American companies competing in the global marketplace. ITA has 2,100 employees assisting U.S. exporters in more than 100 U.S. cities and 72 countries worldwide. For more information on ITA visit www.trade.gov
The National Export Strategy is available also at
http://trade.gov/NEI and http://export.gov.
United States Department of Commerce
Office of Public Affairs - Tel. 202-482-4883
Welcome to the World TradeWinds new legal section focusing on the challenges of trade and investment and the do's and dont's of the various laws that pertain to global trade transactions.
International Mediation of Business Disputes
By MBITA member James Rowles, Esq.
International commercial mediation is the big new thing in Alternative Dispute Resolution (ADR).
In February, 2016, two events pointed to the growing use of mediation in the resolution of international disputes. The International Chamber of Commerce (ICC) held its 11th International Commercial Mediation competition in Paris, in which 65 teams from 35 countries participated. Pepperdine University was one of two U.S. teams that made the quarter-finals.
|11th ICC International Commercial Mediation Competition - New York, February 2016
In New York, a working group of the United Nations Commission on International Trade Law (UNCITRAL) met and issued a report pointing toward possible future adoption of a convention (treaty) on the enforcement of settlement agreements reached through international mediation.
Such a convention would complement the 1958 "New York" Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
The focus of mediation is facilitating agreement between the parties, while that of arbitration (like litigation in the courts) is reaching a judgment based on the law.
The advantages of mediation by a neutral third party are significant: 1) relatively quick resolution of disputes when agreement can be reached; 2) lower legal bills due to the brevity and essentially non-legal nature of the proceedings; 3) greater party control over resolution of the dispute, which may involve more than monetary damages (clarification and apology for misunderstandings, willingness to continue doing business, etc.). California and a number of other states have adopted legislation to protect the confidentiality of what is said in the mediation itself, which makes parties more willing to explore settlement possibilities.
International mediation has all of these advantages plus the potential ability to deal more effectively with differences in language and culture, and legal systems, which may otherwise complicate communication and mutual understanding in an international case.
Today, large companies and increasingly smaller ones frequently insert a provision in their agreements stipulating that arbitration will be preceded by a mandatory mediation phase (e.g., 60 days). Specification of the place, law governing the mediation proceedings, and selection of the mediator may also be included. Arbitration or litigation remains a possibility if agreement is not reached.
James P. Rowles, a member of MBITA, is an international lawyer and mediator with experience working in a variety of countries, languages and legal systems.
James Rowles, Esq.
International Legal and Management Consulting
P.O. Box 7153
Menlo Park, CA 94026
Tel. (650) 750 5742
Must See Video on Global Trade
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Online Export Classes
This six-course series will cover all key areas of the export industry, including markets, sales representatives, pricing, agreements, shipping and payments. You can earn Continuing Education Units (CEUs) and a Certificate in Export Management. The classes are available online 24/7, so you can start immediately and learn at your own pace.