Introduction

We first begin by discussing the plain meaning of “Global Transactions”:

The phrase “Global Transaction” or “Cross-Border Transaction,” also known as “International Transaction,” is the transaction between two entities from different countries or territories. It is essentially all transactions that are conducted across one or more national borders. These are among the most complex types of transactions since they necessarily involve multiple jurisdictions, bodies of law, and diverse counterparties. These deals can include both inbound and outbound transfers of stock, property, services, financial and commercial obligations, or combined research between independent dealers or related entities. They can be bilateral or multilateral. Technology, communications, and interconnected markets are bringing more international companies into contact with one another. As a result, international transactions are becoming more commonplace. These interactions present enormous opportunities for well-prepared management teams, entrepreneurs, and deal-makers.

It is a fact that we live in an increasingly globalized society. The United States in particular “is the world’s largest trading nation, with over $5.6 trillion in exports and imports of goods and services in 2019” (USTR n.d.). We have trade relations with more than 200 countries, territories, and regional associations around the globe, and shipped $1.431 trillion worth of goods around the globe in 2020 (USTR n.d.; Workman 2022). Just the 2020 United States import of foods, feeds, and beverages reached $154.4 billion, the highest on record (United States Census Bureau 2022; United States Census Bureau 1992). Beyond the trade engaged in by corporations, everyday consumers are increasingly accustomed to purchasing directly from international sources. Around 54% of United States digital shoppers reported making online purchases from foreign sites in the past (Saleh 2021).

The estimated global cross-border business-to-consumer (“B2C”) Market, in billions, is:

Year	Cross-Border B2C Market (in USD Billion)	Cross-Border Shoppers (in Millions)
2015	304	361
2016	400	451
2017	530	576
2018	676	715
2019	826	848
2020	994	943

The global B2C e-commerce market is anticipated to reach $4,820 billion by the year 2026 (Marketers Media 2020).

Global Transactions provide lucrative opportunities for internationally-minded entrepreneurs and companies. Given their complexity, however, such transactions come with a host of issues that need to be understood in advance of the transaction. Foreign counterparties present a broad range of complex issues that must be dealt with clarity and expertise in order to successfully negotiate any type of deal. Experienced players in the cross-border transactions arena understand that most successful transactions are based on careful advance preparation, well thought-out strategies, and deal structures that anticipate likely issues and concerns.

Many of these current political, cultural, diplomatic, corporate, and legal issues must be identified early in the process and appropriately addressed—sometimes even overcome—in one fashion or another for any inbound or outbound transaction to be successful today. While there are many issues to examine when engaged in global transactions, for the purposes of this book, we will explore 10 of the top issues for corporate and legal actors within multinational enterprises to consider, each of which is explored in a chapter in this book. These are:

General Understanding of Corporate Form and Transactions

This chapter will serve as a basic review for most of the readers of the textbook, as it outlines the essential and basic differences between various corporate forms. It reviews the primary components of a corporate structure, then examines the differences, as well as the advantages and disadvantages, of the most frequent types of corporate forms: partnerships, corporations, and hybrids of those two forms.

Multinational Enterprises and Global Trade

This chapter explores the basic components of multinational enterprises and the variety of methods by which businesses can enter foreign markets as well as the advantages and disadvantages of each method. It also explores more generally the advantages and disadvantages of operating as a multinational enterprise, and the issues involved in holding such enterprises accountable for human rights abuses.

Macro-Global Economic Environment

Any lawyer or businessperson interested in learning about global transactions must understand the basic components of the macro-global economic environment, including the role and functionality of the World Trade Organization, the International Monetary Fund, the World Bank, the Asian Infrastructure Investment Bank, and the New Development Bank. This chapter explores these various institutions, briefly describes their role and their interactions with multinational enterprises, and sets forth the international trade dispute resolution mechanisms offered by the World Trade Organization. This chapter explores the basic principles of international trade, why most countries restrict trade, various types of trade restrictions, as well as trade blocs and their functionality. Free trade is typically defined as trade with the absence of tariffs, quotas, or other restriction mechanisms. Many economists argue that lifting such restrictions allows countries to specialize in the goods they produce, increase the efficiency with which those goods are manufactured, and increase their incomes. Other economists, however, argue that free trade only benefits the wealthiest of countries because those are the countries setting international prices and standards. It is generally accepted that removing trade barriers on a particular product can hurt the shareholders and employees of the domestic industry that produces that particular good. In addition to other economic issues, cultural differences between countries, even those differences that may seem small, carry substantial weight in the global transactions space and should be considered as well.

Political and Cultural Considerations, International Diplomacy, and How to Succeed Cross-Culturally

Cultural differences between countries, even those differences that may seem small, carry substantial weight in the global transactions space. They can literally be the difference between a successful venture and an utter failure. Political, social, legal, linguistic, religious, and diplomatic considerations are a significant component of successful international transactions and deserve substantial research and evaluation. This chapter explores those issues and offers concrete advice and solutions to overcoming cultural barriers to cross-border deals.

International Financing and Currency/Cyber-Currency Issues

Finance-related challenges in global transactions are plentiful. This chapter explores two such issues: financing, and currency concerns. Many deals, including acquisitions, occur with the assistance of financing. There are three basic methods for corporations to obtain financing: equity, debt, or some hybrid of the two. Equity and debt financing methods have many advantages and disadvantages, which we will explore in this chapter. This chapter will also explore general currency-related issues, including a discussion on the functionality and rise of cryptocurrencies.

Employment and Labor Issues

Labor and employment issues in cross-border transactions can be quite complex because of the differences in local jurisdiction requirements or customs and practices. The depth of challenges in this area can become compounded by the scale and geographic scope of the deal. Overlooking these concerns can result in a flawed transaction structure, unforeseen liabilities, or unsuccessful business integration after the transaction is concluded. Most labor and employment issues are best addressed by early identification and well-thought-out strategies. For instance, many countries severely restrict the ability to fire employees, and local labor laws may also impact or regulate employee work hours and benefits including overtime, vacation, and severance. France, for example, does not recognize “at will” employment and, as such, the employer must provide each employee with a written contract and may only terminate the employee for cause. In Japan, long-held traditional local customs and practices based on the expectation of “lifetime employment” for employees were recently codified into statute. Chinese law stipulates the amount of severance to be paid to an employee terminated without cause. Labor unions play a large role in Germany and union collective bargaining agreements typically define employee wages, work conditions, and termination conditions. Therefore, when considering a cross-border deal that involves more than one – and sometimes multiple – international jurisdictions, understanding labor and employment issues in those jurisdictions becomes necessary.

Tax and Accounting Considerations

Tax concerns are typically critical to structuring a cross-border transaction. Issues this chapter will examine include contemplating a dividend stream and structuring the transaction to deal with withholding tax requirements, the possibility of utilizing a subsidiary located in a country with favorable tax attributes, the proportion of debt and equity as they impact overall tax obligations, and the awareness of different countries’ accounting standards. Even a cursory understanding of tax concerns can minimize the taxes imposed on dividends as they cross borders. For example, the proportion of debt and equity will be important from a tax perspective, as will obtaining United States interest deductions on indebtedness. For cross-border stock-for-stock mergers or acquisitions that are intended to be tax-free, special rules applicable to these kinds of transactions may be relevant. Different countries also have different accounting rules. Being aware of any significant difference between these accounting standards will minimize confusion about the financial terms of a deal.

In addition to these issues, this chapter also explores the more specific issue of transfer pricing and the mechanisms multinational enterprises can and typically employ to lower their global costs while increasing their global profits.

Intellectual Property

Intellectual property issues, such as those relating to trademarks, copyrights, and patents, are frequently a key component of cross-border deals. The protection of intellectual property is of utmost importance to nearly any entity, but particularly those who have built secondary meaning around their brands and those with patent rights. There is, however, no comprehensive international intellectual property rights enforcement system. Intellectual property rights that exist in the United States essentially end at American borders. To enforce intellectual property rights internationally, in a foreign country’s jurisdiction, intellectual property owners must avail themselves of the procedures and laws of each foreign nation. This chapter explores the key intellectual property concerns with which international transaction leaders should concern themselves.

Bribery, Fraud, Extortion Considerations

Whether the deal is a merger, an acquisition, a distribution agreement, a strategic alliance, or otherwise, an understanding of bribery, fraud, and extortion laws and related red flags are key. These issues exist in domestic deals as well, but international transactions introduce further complications because they require compliance by non-US-based actors, including entities that are sometimes not directly under the control of the multinational enterprise directly involved in the transaction. This chapter will explore key issues of concern during both the deal-making process and the post-closing integration phase.

Leadership and Ethics

Leadership skills are invaluable for all business leaders, including those of small and mid-size businesses. Understanding and evaluating various leadership styles, including new models of leadership, is an essential component of professional success. Emphasizing and advancing leadership skills strengthens character, provides leaders with greater control over their destiny, advances their capability to cultivate an organizational vision, enhances formulation and communication of new strategic directions, motivates and advances employee productivity and loyalty, and promotes the recruitment, development, and maintenance of talent. This chapter will set out the advantages and disadvantages of various leadership styles as well as propose new models of leadership that incorporate diversity, equity, and inclusion.

These considerations are not exhaustive of all possible issues, and no two deals are ever identical. Similarly, the order in which these chapters and issues appear is not meant to establish any particular priority between them, because every deal has its priorities and dynamics. There are many other potential concerns for those involved in cross-border transactions. Identifying and addressing the issues in this book, however, provides the framework necessary to succeed in those transactions.

Bibliography

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USTR n.d.
Countries and Regions. Office of the United States Trade Representative. https://ustr.gov/countries-regions

Marketers Media 2020
Marketers Media. 2020. Global Trends in Cross-Border B2C E-Commerce Market to Exceed USD 4,820 Billion by 2026 — Facts & Factors. AP News. https://apnews.com/press-release/marketers-media/lifestyle-technology-business-e-commerce-fashion-20c0e999da913c13e69f06b581a9b3ab

Saleh 2021
Saleh, Khalid. 2021. Cross Border Shopping – Statistics and Trends. invesp. https://www.invespcro.com/blog/cross-border-shopping/

United States Census Bureau 2022
U.S. International Trade Data, Foreign Trade. 2022. United States Census Bureau. https://www.census.gov/foreign-trade/data/index.html

United States Census Bureau 1992
U.S. International Trade in Goods and Services, 1992 – Present. United States Census Bureau. https://www.census.gov/foreign-trade/statistics/historical/exhibit_history.pdf

Workman 2022
Workman, Daniel. 2022. United States Top 10 Exports. World’s Top Exports. https://www.worldstopexports.com/united-states-top-10-exports/