4. Able Ltd is a leading Queensland importer and distributor of mining equipment wishes to import a US$1,000,000 drill. They communicate with a US company, based in Tennessee, who, subsequently supplies the drill. Able seeks your advice as an adviser on the following key legal aspects of its proposed purchase. Assume that the US company has a standard form contract based on US law,with no arbitration clause, but is amenable to negotiation on key legal issues in exchange for Able making payment in full, prior to shipment:
(a) Choice of law issues, Australia or US, what US law would by default govern the sales contract if the standard form US contract was relied upon, and is it possible under US law to select CISG for the law of the contract?
One of Able Ltd biggest factors to consider is that Australia ratifies the CISG whereas US does not ratify the CISG. The choice of law is dependent on the acceptance between 2 parties. It can be Australian Law, US Law or CISG. CISG is not a must for this case and thus it can be opt out if by default govern the sales contract US’s standard form contract was relied upon (Jacobs et al. 2005).
Australia has a very strong import and export law system with the rest of the world. Australia has a very effective location which allows the country to build strong trading relations with the Oceanic region of the world. Australia has developed many trading policies and procedures which assistance business and companies to trade internationally, as safely as possible. According to Menaker (2005),one of Australia’s biggest advantages if the Free Trade Agreements that Australia has with a lot of other countries. Additionally Drahos et al.(2004) state that free trade agreements allow imports and exports to be more free and liberalized, as long as the importing and exporting comply with the terms of the agreements. Although these free trade agreements help liberalise the trading, for importing and exporting, tariffs and duties must be considered.
Australia has implemented these tariffs and duties which are commitments to satisfy the World Trade Organisation. These tariffs and duties assist with the classification of goods that are imported to Australia from another country. Able Ltd must ensure that the Australian tariffs and duties are considered when determining the viability of importing the $1,000,000 drill.
America also has numerous trade barriers which needs to be considered. Although US is a more liberated market in terms of importing and exporting, there are still customs which must be legally accepted. Other American laws such as the Arms Export Control Act and Export Administration Act must also be reviewed in order to make sure that the importing of the large drill can comply with both Australian and US trade laws (Hanson & Xiang 2011).