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Chapter 22

UTA has made arrangements for its faculty to send all student exams

to India where graders there will grade all exams and return the exams to UTA faculty for the assignment of final grades. This is an example of_______________.

  1. A tariff if fees for all graded tests are not the same.
  2. Offshoring. 
  3. A manufacturing license since UTA is "licensing" the graders in India.
  4. Franchising. 

ABC has a written agreement with a Mexican company called MEX which allows MEX the use of ABC's patented technology to make widgets. That company (MEX) agrees to pay ABC $250,000 as an up-front fee and an on-going 10% royalty on all sales revenue from selling the widgets. MEX over a year of sales efforts sells $1,000,000 in widgets and collects $800,000 all of that amount. What is the TOTAL amount of money that MEX will pay to ABC from the beginning of this arrangement to year- end? 

  1. $350,000.
  2. $1,250,000.  
  3. $ 330,000.  
  4. $1,050,000.  

The Foreign Corrupt Practices Act (FCPA) prohibits___________________. 

  1. The acceptance of bribes by foreign government officials. 
  2. The offering of bribes by US companies or their agents to foreign government officials intended to retain or get business with a company or country.
  3. Bribes to US government officials by foreign companies trying to get or retain business with US government.
  4. Corruption in government operations (i.e. government employees accepting bribes) in any country outside the US.

Under _________, a host country seizes title to assets in that country owned by ________. The blanks are:  

  1. alien investor.
  2. A tender alien investor.
  3. Nationalization...a domestic investor.
  4. Eminent alien investor.

See Question #14 above. Under this written arrangement, ABC is a ______ and MEX is a ______________.

  1. Franchisor...franchisee.
  2. Franchisee...franchisor.
  3. Licensee...licensor. 
  4. Licensor...licensee.

A foreign distributor of ABC products typically ______________________. 

  1. Exports those products.
  2. Imports those products. 
  3. Purchases ABC products with the intent to resell them locally.
  4. B and C.          

Under the Corruption Perceptions Index shown in your book, the two countries generally viewed as LEAST corrupt by numerical ranking are  _______.

  1. Denmark and United States.
  2. China and Norway.
  3. New Zealand and Denmark. 
  4. New Zealand and the United States. 

ABC Company agrees to sell shoes to Burania, an African country. The sales price of each pair of shoes as of the date of contract will be fixed at 13.00 Baruns (Buranian currency) which as of the date of signing is exactly worth $10.00 USD i .e.  $10.00 USD = 13.00 Baruns. One year later, $10.00 USD = 15.2 Baruns. Whose economic interests have been most negatively affected by this fluctuation in currency value?

  1. Neither party is affected at all as the price of a pair of shoes is still the same.
  2. Burania.
  3. ABC Company. 
  4. Both parties are affected equally by this fluctuation.

ABC owns and manufactures appliances from its plant in Arlington. It decides to open an operation in Chile and selects William to be its local partner in Chile who invests $10,000,000 of his own money for total startup costs for the Chilean entity of $50,000,000. ABC's Chilean operation may be described correctly as a ________________.

a.     Wholly-owned subsidiary of ABC.

b.     Franchise.

c.     Joint venture.

d.     A and C.

ABC licenses the manufacture of kitchen appliances to DEF Company in Ecuador, using ABC's patented technology. DEF can the make sales of those appliances in Ecuador. The total cash consideration paid under this license to ABC by DEF in the first year was $75,000. If the upfront fee paid by DEF was $25,000 of that amount and ABC had an on-going royalty interest of 10% on sales made by DEF, then DEF sold _______ worth of kitchen appliances.    

a.     $750,000.

b.     $500,000.

c.     $5,000,000.

d.     $250,000.

The FCPA contains a requirement for ______________ by covered companies and well as the more-publicized anti-bribery provisions. 

  1. Filing of quarterly financial statements with SEC.                  
  2. Truth-in Advertising 
  3. Accurate recordkeeping.            
  4. Annual tax payments of 1.0% of revenue to subsidize US government compliance        

ABC has a written agreement with MEX Ltd. in Mexico City, Mexico which allows MEX the use of ABC's patented technology to make widgets. That company (MEX) agrees to pay ABC the amount of 5% of all of all revenue received from sales of widgets made under this agreement. This % payment is called a _____. 

a.     Royalty.

b.     Paid-up front fee.   

c.      Commission.    

d.     Facilitating payment. 


ABC allows a company in Ecuador ("ECC") to manufacture washing machines there using ABC's patent-protected technology and sell them throughout a three-country area. For every washing machine sold by ECC under this arrangement, ABC is to receive compensation equal to 10% of the sales price. What clause (or clauses) below should ABC put into this agreement to help ensure it will receive all of the money it is owed under the ECC agreement? 

a.     a "right to audit" clause.

b.     a clause prohibiting nationalization of ECC by Ecuador.

c.      a clause whereby ECC waives its right to assert sovereign immunity in local Ecuadorean courts if there is a fee dispute. 

d.     a mediation clause.

ABC has a contract with Juno, Inc located in Rome, Italy. Juno buys shoes from ABC and re-sells them directly to shoe buyers in Juno's department stores  located in Rome. The contract between ABC Company and Juno is referred to as ________________________.  

a.     a foreign sales agent agreement.     

b.     a foreign distributorship agreement.

c.      a joint venture agreement. 

d.     a manufacturing license agreement.  

Which strategy below best implements ABC Company's goal of reducing risks  in its  foreign sales efforts in Chile?  

a.     Investing in Chilean real estate and building a plant there for manufacturing. 

b.     Selling its items on the Internet from company website in US and exporting/shipping directly to Chilean customers.

c.      Identifying a Chilean investor to be a partner in ABC's Chilean subsidiary.

d.     Agreeing to accept payment in Chilean currency.  

ABC makes toasters at its plant in Dallas. It agrees to sell 1,000 toasters to SamKig in Korea. for delivery to buyer on June 21, ,2015. There is a penalty provisions for delayed receipt of goods by buyer equal to $1,000 per day late. Also, there is a standard force majeure clause in the contract. A huge storm at sea delays all traffic in the area where the delivery ship is located for 5 days. The goods are transported to SamKig and arrive on June 28th. SamKig. ABC will owe SamKig _____ under these events based on these facts.   

a.     $7,000 for late delivery. 

b.     $ 5,000  for late delivery 

c.      $ 2,000 for late delay

d.     Zero if the delivery term was DDP.

ABC Company (ABC) in Dallas sells heavy industrial equipment (e.g. cranes) to buyers. All equipment is made in Dallas. It contracts in writing with a private Peruvian citizen (Manuel) who lives in Lima to sell its products in Peru to local customers there. Manuel sells $100,000 worth of ABC Company equipment to local businesses and as a _____ will receive ­­­­­­­ _______.

a.     Employee...a salary from ABC.

b.     Distributor...a commission of approximately $10,000. 

c.      Foreign sales agent...a salary.

d.     Foreign sales agent ...a commission of approximately $10,000 

The two most corrupt countries in the world per the Transparency International "Corruption Perception Index" are _______________. 

a.     Sudan and China

b.     South Sudan and Nigeria

c.      Afghanistan and Russia

d.     Russia and Chad

ABC enters into a foreign sales agent agreement with Bill in France. Under the agreement, Bill receives a 10% commission on all sales in France he arranges for ABC products. .He sells $1,000,000 in ABC products . ABC receives payment in the total amount of $800,000 for the products. ABC owes Bill _______ under their agreement.  

a.     $1,000,000

b.     $100,000

c.      $1,100,000

d.     $80,000

John has a contract with the Indian Air Force to install seats in its jets. The Air Force does not pay him all money he claims he is owed. He sues the Government of India Air force in US federal court in Dallas to collect his money. The court will likely: _____

a.      Dismiss the case because of the doctrine of foreign sovereign immunity.

b.     Dismiss the case because of the doctrine of sovereign immunity as applying in State of Texas courts.

c.      Allow the case to proceed and hold for John on the merits of the facts if it is convinced by a  preponderance of the evidence 

d.     Dismiss the case if it involved deceptive advertising by John to get this contract.      

In ________, a host country seizes title to assets in that country owned by ________. The blanks are in order __________________.  

a. alien investor 

b.     A tender alien investor

c.      Nationalization...a domestic investor

d.     Eminent alien investor.


Under the Corruption Perceptions Index shown in your book, the two countries generally viewed as LEAST corrupt by numerical ranking are _______.

a.     Denmark and Russia

b.     China and Norway

c.      New Zealand and Denmark 

d.     New Zealand and the United States 

Company ("ABC") located in Arlington, Texas   makes TV sets. It agrees to sell 1,000 TV sets to Sanborn Ltd. Located in Mexico City but asks Sanborn to post a letter of credit at Mexico Capital Bank ("Bank") in Mexico City to pay for the TV sets. ABC is the _________ under the letter of credit and will be paid under a standard letter of credit _______. The correct answers in order for the blanks are_________.

a.     Beneficiary ...when the TV sets cross the border into Mexico. 

b.     Seller...when any warranty problems with the TV are discovered by Sanborn customers and fixed by ABC.  

c.      Beneficiary...when ABC delivers to the Bank the bill of lading and other documents specified in the letter of credit.  

d.     Options holder... after the TV sets are accepted by Sanborn in Mexico.    

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