Exporting FAQs

What products require an export license?

Certain products, because of both their civilian and military purposes, may require an export license. For information you may contact Trade Export - Office of Bureau of Export Administration: (408) 748-7450. Sophisticated and high technology products, short supply items, technical information, and products that have defense, strategic, weapons development, proliferation, or law enforcement applications can be subject to export licenses. It is up to the exporter to determine whether the product requires a license. Exporters should consult the Commerce Department's BXA and find out if the items or services they are planning to export are classified on the Commerce Control List (CCL). If a product appears on this list, it may require a license. In general, this list contains items controlled by the Export Administration Regulations (EAR) because they are considered to be dual use items.

Which national law will cover cross-border electronic transactions between a seller and a buyer?

The question of applicable law arises each time there is a cross-border transaction. Applicable law is the law that the parties to a contract can choose to govern the contract or the law that is applied when the parties have not made a choice of law. In general, a distinction is made between transactions concerning businesses only (business-to-business) and those concerning consumers. Where an agreement is entered into between a professional and a consumer (business-to-consumer), the parties involved, in choosing an applicable law, cannot depart from the public policy laws of the consumer's country (e.g., with regard to time of retraction, abusive clauses, etc.), which are meant to protect the consumer. The general principle is of the autonomy of the parties to a contract, which means that parties have the freedom to choose which law will govern their contract. This principle is recognized in most countries (with some notable exceptions, see for example Brazil's law introducing the civil code of Brazil of 1942, concerning conflicts of laws), as well as the Rome Convention of 19 June 1980, on the law applicable to contractual obligations. As a consequence, for purposes of legal certainty, parties to a contract are advised to specify which law will govern their transaction(s). If the parties have not specified which law will apply to a contract, then the jurisdiction (e.g., state court or arbitral tribunal) responsible for the case will have to decide which law is applicable. Each country has its own guiding rules with regard to choice of law, but, in general, two solutions are most commonly applied: the first is where the applicable law will be the law of the country of the seller (the party who provides the performance which is characteristic of the contract); the second is where the applicable law is that of the place of the signing of the contract. Moreover, you should be aware that certain conventions or international rules lay down specific rules in relation to international transactions, such as: the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April 1980) and the UNIDROIT (International Institute for the Unification of Private Law) Principles of International Commercial Contracts, 1994. These and other such international texts can be chosen by parties to govern their contracts and therefore the disputes that could arise in the context of their contractual relations.

In case of a dispute, which court will have jurisdiction over a cross-border contract agreed upon electronically?

Jurisdiction raises the question of which national court or arbitral tribunal will hear the dispute. In the absence of a term in your contract conferring jurisdiction on a specific court or arbitration panel, (note: the validity of such a clause depends on national law; for example, in France such a clause is not valid between non-business parties unless the contract has an international dimension) a national court will decide if it has jurisdiction over the case in accordance with its own national rules of law. Therefore it is strongly recommended, for the sake of security and foreseeability, that you and the other party stipulate in your contract which court or arbitration panel will have jurisdiction over a dispute arising from your contract. The same recommendation is made regarding the applicable law for your contract; business parties are advised to stipulate clearly which law will apply to their contract in case of a dispute. In international business dealings, arbitration clauses are the usual practice, since they avoid submitting disputes to a state court or national rules of procedure that at least one of the two parties will not be acquainted with. Furthermore, arbitral awards can be recognized internationally: the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ratified by some 120 States, facilitates the recognition of arbitral awards as if they were national court decisions. Arbitration may not always be necessary where countries are linked by treaties that define which courts have jurisdiction and facilitate the recognition of state court decisions. For example, in Europe, the Brussels Convention of 27 September 1968 and the Lugano Convention of 16 September 1988 provide that, in principle, the court which has jurisdiction is the court of the defendant's residence, the court of the country where the contract is performed, or the court of the country where the harmful event which is the subject of the dispute occurred; the Conventions also facilitate the recognition, in European Union countries, of court decisions. In most countries, however, such rules do not exist. Moreover, most countries still accord privileges to their own nationals to submit disputes to their national courts (in the absence of a clause in a contract referring to a state court or to arbitration). It should be noted that draft Convention on Jurisdiction and Foreign Judgments in civil and commercial matters is being studied by the Hague Conference of International Private Law (October 1999), and a European draft Regulation of 14 July 1999 concerning jurisdiction is being submitted to the European Council.

How can I ensure that an agreement made electronically is legally binding?

When parties enter into an electronic commercial contract, the contract is formed by one party making an offer and the other party accepting this offer. The exchange of consents will give legal effect to the contract without either party having to respect requirements of form, except in such situations where the law specifically requires that a contract be written in a specific form (e.g., for the sale of property, settlements, etc.), or where the national law requires a written document (e.g., for the sale of a business, maritime bills of lading, etc.). Nevertheless, for day-to-day transactions, the main legal problem concerns the question of evidence. The existence of a contract can be disputed if you do not have evidence of its formation. Thus, a simple electronic message which is not signed can be called into question. Consequently, a message representing an offer or the acceptance of an offer runs the risk of being considered as simply a beginning to written evidence and not complete documentary evidence. A vast legislative change is taking place on a global level, recognizing that writing in the electronic medium is the functional equivalent of traditional writing on paper. The legal effect of electronic records is recognized in Articles 6, 7, and 8 of UNCITRAL's Model Law on Electronic Commerce, which is the standard reference for countries wishing to adapt existing laws or create new laws to deal with electronic transactions. In practice, if you use an electronic medium (such as e-mail) during the process of contracting, it is wise to forestall potential problems of evidence by incorporating a reliable, recognized electronic signature into your electronic correspondence. This makes it possible to identify the parties as signatories of the contract so that they cannot later repudiate the contract on the basis that the agreement was not signed; then the integrity of the contract can be guaranteed. In case of doubt, it may also be wise to confirm the acceptance of an offer by sending a confirmation document by mail, such as an acknowledgment of receipt.

If a buyer accepts, online, my online offer for the sale of goods, are we then legally bound by a contract?

In countries with a common law system (e.g., the United Kingdom, Nigeria, India, New Zealand, etc.) when a seller offers products for sale, he is, as a rule, entitled to revoke his offer at any time before it is accepted by a buyer. This applies to online and offline offers for sale. In countries with a civil law system (e.g., Germany, France, Brazil, Indonesia, etc.), when a seller offers products for sale, he is bound to maintain his offer open (i.e., he cannot revoke his offer, so long as he has sufficient stocks of his products to meet any orders). This principle applies to online as well as offline offers for a sale. In view of the above, a potential buyer may wish to provide evidence of his/her order. The best means for him/her to do this are: to electronically sign the order, to print a copy of the acceptance of his/her offer, or perhaps even store the exchanges electronically (e.g., by saving them in a folder or database). A crucial text for business-to-business transactions is Article 14 of the Vienna Convention on the International Sale of Goods of 1980, which defines the terms "offer" and "invitation to make offers," and specifies that an offer must be made to the persons concerned and "1)... constitutes an offer if it is sufficiently definite and indicates the intention of the offerer to be bound in the case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. 2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal. " On the basis of Article 14, a fundamental question arises as to whether an offer should be considered as binding where a seller makes a general offer (i.e., not to a specific person or group of persons) on his web site and a foreign buyer accepts the offer. With regard to this issue, the United Nations Center for the Facilitation of Procedures and Practices for Administration, Commerce, and Transport (UN/ CEFACT), in Article 3.2.1 of its "Electronic Commerce Agreement" (see Appendix VI), which was approved in March 2000, provides an answer which can be incorporated into contracts: "A message constitutes an offer if it includes a proposal for concluding a contract addressed to one or more specific persons which is sufficiently definite and indicates the intention of the sender of the offer to be bound in case of acceptance. A message made available electronically at large shall, unless otherwise stated therein, not constitute an offer."

How do I sign a contract electronically? Is an electronic signature as binding as a written signature?

The majority of countries recognize that it is perfectly valid to sign a contract electronically, especially when this occurs in a closed electronic system, such as an Electronic Data Interchange (EDI) system. Today, in practice, the digital signature (a process based on public key cryptology) is the most frequently used technology for electronic signatures. This technology, as well as being the most widespread, is also the most secure. It allows signatories to be identified by recipients through the intervention of a trusted third party, known as the Certification Authority (C.A.). The technology involves the signatory generating a pair of asymmetrical digital keys: a private key which is kept secret between the signatory and the C.A. and a public key, which, as the name indicates, allows a recipient to verify through the C.A. that the signature has actually come from the person identified with the private key. The C.A. creates a digital identification certificate which establishes a link between the person of the signatory and his pair of keys so that the signatory cannot later disclaim the signature. This certificate is signed by the Certification Authority. The signature consists of an encrypted message of the kind normally used in real signatures, which is attached or logically joined to the main message. The intervention of a third party is indispensable in establishing confidence and security in electronic exchanges, since the contracting parties are never physically present to sign. The development of eCommerce relies, to a large extent, on the trust and security that users feel in electronic communications. Applications related to or requiring electronic signatures are numerous, for example: payments of contracts, administrative declarations, procurement operations, etc. Since 1981, the Council of Europe, and, as of 1985, the United Nations Commission on International Trade Law (UNCITRAL), have been recommending countries to take all necessary measures to eliminate legal requirements imposing paper-based documents and handwritten signatures to the detriment of their data-processing or electronic equivalents. Article 7 of UNCITRAL's Model Law on Electronic Commerce of 1996 specifies that: "Where the law requires a signature of a person, that requirement is met in relation to a data message if a method is used to identify that person and to indicate that person's approval of the information contained in the data message; and that method is as reliable as was appropriate for the purpose for which the data message was generated or communicated, in the light of all the circumstances including any relevant agreement." The above applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the absence of signature.

How can I guarantee that the terms I agree upon electronically are those I actually see on my computer (i.e., those that the other party has issued on his or her side)?

To our knowledge, there is no absolute guarantee, from a technical point of view, allowing for certainty that what one party sees on its computer screen is identical to what was issued by the other party on its site. Each web browser has its own way of reading pages written in HTML language on any given web site that is visited. Moreover, as the sources of word processing software (market standards) are not freely accessible, macrocommands could be implemented in a file, marking the contract which one intends to sign: hence the signed text may not be the one which has been examined on the screen. The only method which would appear to give some guarantees in this respect consists of the labeling of the site by a third, independent organization (e.g., an auditor, a Chamber of Commerce, etc.). If the web site does not have a label, it is advisable to carry out, before each transaction, a capture of the page on the screen (generally, any purchase orders to be filled in by the buyer are in standard form) and to print out the form in order to have evidence in the event of litigation.

How can I protect my business, my brand name, my domain name, or published material from being copied on the Web?

You should be aware that some matters are not protected by patent or copyright laws. These are know-how, commercial secrets, and ideas (i.e. ideas are for free development). The above are difficult to protect, except by means of a confidentiality agreement. It is necessary to have such a contract to prevent any collaborators, partners, subcontractors, customers, etc., from exploiting ideas that a company wishes to protect. In practice, protection is ensured by undertakings of confidentiality and non-competition clauses in contracts, and penalty clauses in the event of any violation of the agreement. In addition, several countries provide certain facilities; for example, the possibility to deposit a sealed, date-stamped envelope containing details of a trade secret at the national industrial property institute, or to deposit such secrets with a third party using a logibox (for example, the source code of software and its digital support), which, although conferring no right (except that of a possible anteriority), will allow the bad faith of a plagiarist to be shown. The laws of most countries protect brand names (trademarks) when they are distinctive and nonfraudulent. Protection for trademarks is usually obtained through registration in a government office. The minimum period of protection for trademarks under the World Trade Organization's Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement is seven years from the date of initial registration. Registration is renewable indefinitely. A brand name can also be deposited for registration at the international level with the World Intellectual Property Organization (WIPO). Protection of the brand will then last 20 years in the member states of the Madrid Agreement. In Europe, the business community can file to register a European trademark under the European Council's EC Regulation n° 40-94 of 20 December 1993. The protected trademark can cover one or more classes of products, and its holder has the right of ownership. It should be noted that a design can be protected by both copyright and trademark laws at the same time. Manifestly known brand names, even if they are not the subject of an application for registration, are protected. The illegal copying of a trademark can be the subject of an infringement proceeding. The illegal registration of a brand name counterfeiting an existing trademark can be the subject of an action in cancellation or of an action in claim to determine the rightful owner of the trademark.

How do I protect my domain name?

The awarding and registration of a domain name for your web site is carried out by organizations that have been delegated this responsibility by the Internet Corporation for Assigned Names and Numbers (ICANN). They include: InterNIC (Internet National Information Center, for the United States and all countries not managed by RIPE - NCC or APNIC), NSI (Network Solutions Incorporated) for allotment of generic directories (.com, .gov, .net) through InterNIC's authority, RIPE-NCC (European IP network - Network Coordination Center, for Europe), AFNIC (for France under the authority of RIPE-NCC and managed by INRIA, National Institute for the Data processing and Automated Research), and APNIC (for Asia Pacific zone). As domain names are granted on a first come first served basis, conflicts often arise between existing brands or trade names and domain names. The best protection is a simultaneous registration of your brand name (trademark or company name, see above) together with registration of your domain name of the type ending in .com, .fr, .net, etc., with the national organization that manages patent and trademark rights in your country. It is possible to register your site's domain name as a trademark (if your brand name is already registered with your national Intellectual Property institute or with WIPO) by justifying your ownership of the trademark. It is thus possible to obtain and register a domain name such as HILTON.tm.fr if you are the holder of HILTON T or ®. These precautions will ensure effective protection against a possible third party's fraudulent application to register a similar brand name, and later allotment of a domain name. For example, the holder of the mark HILTON.fr T or ® will be able to oppose the use by, or attribution to, others of HILTTON.fr as a brand or domain name. However, ownership of the HILTON mark alone may not be sufficient (except by invoking some clear offense of unfair competition, parasitic dealing, or abuse of the right of reservation of the domain name just added) to ensure withdrawal of a domain name such as HILTTON.fr. According to the Bern Convention signed in 1886 and last revised in 1996, any original intellectual creation is subject to ownership, confers on the owner a monopoly over exploitation, and provides the following exclusive rights: representation, reproduction, translation, broadcasting, adaptation, recording, public reciting, right of continuity, and moral rights. The protection lasts for the lifetime of the author and 7O years after his or her death. According to the World Trade Organization's TRIPS Agreement, computer programs should be considered as literary works and protected under national copyright laws. The legal precedent in several European countries and North America has considered that digitalization of an intellectual creation without the right to do so constitutes an illegal reproduction. The Internet is by nature a multimedia form. This, in conjunction with its international nature, makes traditional distinctions between works of the mind, designs, or models less and less relevant. Since the content of the Internet is multimedia by nature (images, sounds, designs, models, text) it is not possible here to go into the details of the various rights which are concerned. In addition to the symbols © for copyright and ® for registered trademark, which inform the user that a work is protected, one of the most common protections currently in use is electronic tattooing (watermarking) and citing of a third party, agent, and identifier of work. The work protected by copyright law can freely circulate on digital networks insofar as watermarking reinforces the right of ownership of its author, as the author is identified. It also makes it possible to know the methods used to manage any royalties and thus to whom rights must be paid.

How can I protect confidential information which I share with other business partners online?

Only a partial answer can be given to this difficult question of confidentiality. The exchange of files by e-mail, ftp, or other means without any specific protection does not offer any guarantee of confidentiality. The exchanged data can easily be intercepted, read, and even modified. One should also take into account the fact that the majority of worldwide electronic exchanges (telephone, fax, e-mail, etc.) with other countries can be intercepted and read by new supercomputers. This means that all significant data from an industrial or commercial point of view can be intercepted and redistributed as soon as it is of interest to rival companies. For instance, a fax or an e-mail originating from an aeronautical manufacturer relating to a commercial bid for an airline could, in theory, become known to a competitor who could then rapidly realign his prices on the first offer and win the bid. Confidentiality of electronic exchanges is therefore crucial, not only for the security of electronic trade, but also for the commercial survival of companies and the privacy of their personnel. At the international level, there are: guidelines within the OECD relating to the policy of cryptography adopted by the Council on 27 March, 1997, the Wassenaar Agreement of 11-12 July 1996, enforced in September 1996, (comprising 33 countries), the European Union's Regulation (EC) n°3381/94 of 19 December 1994 instituting a community agreement for control of exportation of goods with a potential double use, and the Council Decision 94/942/PESC of 19 December 1994 relating to common action adopted by the Council concerning the control of the exportation of goods with double use. Nevertheless, the cryptography system is a very significant domain insofar as it affects the internal and external security of countries. Each sovereign state applies its own policies to serve its strategic interests.

What are some key issues regarding taxing Internet transactions?

A working group was formed within the Organization for Economic Cooperation and Development (OECD) to examine the means of taxing goods and circulating information via the Internet. In order to determine whether acquisitions coming from a third country should be subjected to value-added tax (VAT), a distinction can be drawn between the sale of goods and the sale of services. Until 31 December 1999, a tolerance had been granted to electronic trade via the Internet, which benefited from exemption from VAT. It is the goal of the OECD to work with foreign governments to achieve agreements that will ensure the following: no new taxes are imposed that discriminate against Internet commerce, existing taxes should be applied in ways that avoid inconsistent national tax jurisdictions and double taxation, and tax systems treat transactions equally, regardless of whether such transactions occur through electronic means or through more conventional means of commerce. With the goal of achieving a global consensus regarding the taxation of electronic commerce, DECD countries agree that neutrality, efficiency, certainty, simplicity, effectiveness, fairness ,and flexibility underlie any taxation of the Internet or electronic commerce. In the United States, the Advisory Commission on Electronic Trade has just recommended that Congress extend the moratorium on taxes for Internet transactions until 2006. In the European Union, according to the Sixth Directive n°77-388 of 17 May 1977 JOCE L195/1, it is necessary to determine first whether the sale is of goods or of services (definitions may vary from one country to another), if an acquisition is coming from a Member State, is subject to VAT. There is no customs duty on the import of services within the European Union; the export of services is not subject to VAT.

What are some of the arguments for and against taxation of Internet transactions?

While offering a US perspective, the following article may prove useful for decision-makers in developing countries as they grapple with the issue of whether to tax eCommerce transactions. A congressional advisory panel adopted a package of tax recommendations that would save money for Internet users and benefit such companies as America Online Inc. and AT&T Corp. Yet the Advisory Commission on Electronic Commerce failed to reach consensus on whether or when online purchases should be taxed; it also failed to secure the necessary two-thirds majority support from its 19 members to make its report to Congress a formal recommendation. The panel endorsed a plan to extend the current moratorium on new Internet taxes until 2006, create a process for state and local governments to simplify sales taxes, and repeal a 3 percent federal telecommunications excise tax. The telecommunications tax cut is worth $52 billion over 10 years and is designed to lower consumers' cost of getting on the Internet, its supporters said. "That is a major tax cut for the people of America," said Virginia Governor James Gilmore, the commission's chairman. Even without an agreement on the central question - whether sales taxes should apply to Internet purchases - the commission's report is likely to serve as a roadmap for Congress. The House Commerce Committee plans hearings on the tax issues Thursday [23 March 2000], and the Senate Finance Committee expects hearings later this year. Congress created the commission in 1998 when it placed a three-year ban on Internet access taxes and other taxes that target the Internet. The panel, which has spent 10 months trying to decide whether or how to tax online purchases made by consumers, must report to Congress by April 21[2000]. The commission's meeting came to a dramatic conclusion as pro- and anti-tax forces met privately Monday night and again this morning to try to find the two-thirds majority necessary to make their report to Congress a formal recommendation. Gilmore, AT&T Chairman Michael Armstrong, and Charles Schwab Corp. President David Pottruck led the anti-tax camp and negotiated with pro-tax forces led by Utah Governor Michael Leavitt, Washington Governor Gary Locke, and Dallas Mayor Ron Kirk. "We were so very, very close, but other than a couple of details, we weren't able to reach agreement," Lode said. "And time has run out."