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What US laws apply to limit specific business practices in all foreign countries?
Numerous US laws limit specific types of conduct or business activity in foreign countries. Major limitations under US law include:
• Antiterrorism and Effective Death Penalty Act of 1996 – This act prohibits doing business with companies that have been linked to terrorism.
• USA Patriot Act of 2001 (Patriot Act) – The Patriot Act prohibits individuals or companies from providing material support to any foreign individual, organization, or company engaging in terrorist activity. “Material support” may include providing money, assets, information, etc.
⁃ Note: The State Department designates certain organizations as providing material support for terrorist activity.
• Foreign Corrupt Practices Act (FCPA) – The FCPA was passed to prevent businesses using bribes to gain an unfair business advantage. The FCPA prohibits a business, its employees, or agents from offering or giving anything of value to a foreign official for the purpose of gaining an unfair business advantage. A foreign official includes government officials, candidates for office, political parties, any person who knows the money will be offered, given, or promised to a foreign official for purposes of securing improper advantage. An improper advantage includes securing additional business, permits, special taxation, or favor in judicial or legislative proceedings. This prohibition applies to all businesses. The FCPA also places accounting disclosure requirements on any company subject to SEC regulations. Companies must keep detailed records that reflect transactions and disposition of assets that are sufficient to provide reasonable assurance that transactions are carried out within management’s authorizations. The exception to this rule is that companies may pay officials to perform their routine government tasks. The prohibitive line is that payment cannot go to influence a positive decision for the company from an official empowered to make such decision. Companies may also pay statutory fees to officials or undertake marketing and promotion efforts.
US laws applicable to business operations may apply to the business’s foreign operations as well. The concept of applying US laws to businesses or operations outside of the United States is known as “extraterritoriality”. Example of US laws limiting foreign activity include:
• Employment laws – Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act of 1967 apply to US companies carrying on business abroad, as well as companies controlled by a US employer.
• Environmental Laws – Environmental laws concerning the handling and disposal of hazardous material may apply to operations abroad.
• Tax Laws – US tax laws are extensive and complicated. There is a great deal of interplay between US taxation and foreign business activity.
• Antitrust Laws – US antitrust law applies to company activity outside of the United States if such activity has an intended or actual, substantial or foreseeable effect within the United States.
• Foreign Bank Account Reporting – The transfer of funds in excess of $10,000 in or out of the United States must be reported to the US Customs and Board Protection or US Treasury.
The above list of foreign laws limiting specific activities in foreign countries is just a sample of the many laws or regulations that could apply to a company’s foreign operations.
• Discussion: Do you agree that government efforts to thwart terrorist activity should trump a company’s intentions to do business in a foreign country or with a foreign firm? Do you think the US prohibitions against discriminatory practices should also apply in countries that allow such conduct? Why do you think the US government seeks to prohibit bribes and other kickbacks to individuals outside of the US?
• Practice Question: ABC Corp imports goods from Country A, that has numerous laws that directly discriminate against individuals. Might ABC run into trouble in doing business with Country A?