Not only does this make it logistically more complicated (merchant accounts tend to freak out) – but there are major legal complexities you inherent just because you are doing business in a country different than your own.
Here’s an overview of the legal complexities you need to be aware of when you start doing business or selling products/services outside your own country – so you know the potential issues and when you need to get help.
1. When you do business in another country, you are subject to that country’s laws.
Obvious, but easy to forget –> if you do business in another country, you have to obey their rules.
Which means that you first need to *know* about their rules.
Keeping up with with the rules of each country is a freaking extravaganza. Not only because you need to research and/or hire an attorney in each country, but also because the laws of other countries may be fundamentally different than yours. Even simple things like whether a contract offer can be taken back before it is accepted is radically different in the U.S. versus much of Europe, for example.
Since we obviously can’t cover every area of law, here’s a sample of the kinds of issues you run into:
Custom Requirements. When you send your products via mail/shipping into another country, you are subject to their customs, taxes, fees, and other importation requirements. Back when I shipped products overseas, I used a fulfillment house who knew the rules, because I had no desire to keep track of the different paperwork and fees required for Canada versus South Africa versus Portugal versus India etc. If you are shipping physical products out of your country, either hire a fulfillment house or make sure you have researched or obtained advice on how to set up compliance with the various paperwork, taxes, and other requirements of each country.
Copyrights & Trademarks. Just because you have a copyright on your book and a trademark on your tag line in *your* country, doesn’t mean you have any protections against infringement in every other country.
Now don’t freak out yet.
Most countries have agreed per the Berne Convention (and other treaties) that if you have copyright protection in your country, other countries will respect that copyright as if it had been obtained per their requirements. Most countries have signed onto these treaties, but a few have not — so if you have a large presence in a particular country, you may want to check the list.
Trademarks, however, are different. First, a bit of background. As I discussed on the Facebook page recently, trademarks are not a “right” arising because you created or invented something (like copyrights and patents). Trademarks are a consumer protection law, to protect consumers from the “likelihood of confusion” – so they don’t think they are buying a Pepsi but are actually getting a counterfeit Pepsie.
Here in the U.S., you can get a trademark in two ways – a common law (mostly local-only) trademark just by using your word/logo/phrase in the connection of the sale of goods/services, or you can formally register for your trademark with the United State Patent and Trademark Office for use in particular industry areas. Getting dibs on a trademark is about who is “first to use” that trademark in commerce.
That’s different than some other countries. In some places (like the European Union), who gets the trademark is based upon the “first to file” for the trademark registration, not who uses it first. Some countries have agreed to a common international trademark registration processes, but it has not been standardized across all countries. (For more info, see these Toolkits.)
And, don’t forget – when you are in another country (such as when your website is accessible from that country), you may get cease-and-desist letters from trademark holders in that country. I once got such a letter from someone in Canada for allegedly infringing her Canadian trademark on the word “mompreneur” – I emailed back re the generic status of that mark and also that I wasn’t in Canada (at the time, I didn’t yet have clients there). After a few more emails, she went away – but she theoretically could have pursued an action to enforce her trademark.
Industry/Profession Specific Rules. As an attorney, for example, I need to make sure that my website states that I’m licensed to practice in the United States (California and the USPTO, to be exact) and which state/country’s law I’m referring to when I write a blog post. Similarly, if you’re a licensed counselor, you may not be allowed to offer your services to someone in another country without being licensed there. There are also professions and industries that may not be regulated at all in one country, but in other countries, you are required to be registered or licensed to practice or to sell those types of products. Make sure you check what rules apply to your line of work.
“Working” in Other Countries. Are you traveling to an international conference for a speaking gig? Going to meet a potential client at a Starbucks to talk a potential business deal? Getting a table at the trade show to display your wares?
You may need a business visa, a work permit, a business registration, or another formal documentation to legally do business while you’re traveling in another country.
For example, if a citizen of another country travels to the U.S. for a speaking gig, they may need a B-1 business visitor visa. And, that visa is only applicable if they don’t receive a salary or other income from the gig – and are compensated via only expense reimbursement and in some cases, an honorarium (with restrictions). At a certain point, that speaker may need a work permit. In Canada, a U.S. citizen speaker doesn’t need a work permit if they are speaking at an event that is no longer than five days.
Under the North American Free Trade Agreement (NAFTA), business visitors between U.S., Mexico, and Canada can go to the other member countries to sell goods or negotiate contracts for the sale of goods, but they are not allowed to deliver the goods or provide services on the same trip without going through additional requirements. And, of course, NAFTA does not apply outside of North America.
If you decide to do business on an ongoing basis in another country, you may need to register as a foreign business in that country/provence/state, pay taxes or other fees, and associate with a local agent (for service of legal documents or complaints). It’s difficult to know where you cross that line when you’re doing business online – but if you are going there in person, you definitely need to address these issues.
Privacy Policies, Disclaimers, and Spam. If you have a website, people from other countries can access it, give you their contact information, and potentially buy your products and services. As such, you need to comply with the rules for websites and emails by those other countries (especially if you are also doing business there).
For example, if you send mass emails to U.S. email addresses, you need to comply with the CAN-SPAM Act – including such requirements as having a real physical address in each email, requiring people to opt-in before you email them, having opt-out instructions in each email, and other advertising disclosure requirements. If your website targets children under age 13, you also need to comply with the U.S. Children’s Online Privacy Protection Act (COPPA).
Employment Law. Do you have a virtual assistant or other staff in another country – and is that person an employee (per *their* rules)? Are you complying with the local employment laws, regulations, taxes, paperwork requirements?
It is common for us to have vendors and assistants who are virtual, or even local to an in-person event (a conference, for example) – but are not at our regular place of business. In your country that person may be a contractor, but in another place, that person may be considered an employee. In some places you are not allowed to have unpaid “volunteers” or interns. You may be required to comply with payroll tax, benefit, workplace safety, and other employment regulations – even if you are not physically located in that other country.
2. Pre-determine what law would apply to your business deals, and where any disputes would be resolved.
In your contracts, you can elect Choice of Law and Choice of Forum. Choice of law mean you decide which law applies, by inserting a clause in your contract (or website terms of service). Which law applies is governed per the conflict of law rules of where ever your lawsuit is located. Choice of forum means a clause in your contract/terms which states where any dispute will be resolved – private arbitration, mediation, an international court or arbitrator, the court of the country of one of the parties, or the court of the country of where the transaction/dispute/damages occurred.
And, just because you file a lawsuit about your business deal in state court in California, for example, doesn’t mean that California state law would apply and that the lawsuit would stay in that court. It could be removed to federal court, it could be dismissed so you could refile in another state/country, or it could stay in California but the court may apply the law of a different state, a federal law, or law of an international agreement, such as the UN Convention on Contracts for the International Sale of Goods (CISG) or NAFTA.
Not only does this matter because of convenience and expense, it also matters because the law may be radically different. For example, in some places, the loser pays the attorney fees of the winner of a lawsuit – but that’s not true in the United States except in particular circumstances. The laws themselves may be different – in one place you may have a contract – while in another country, the contract didn’t yet exist.
Obviously, the more this can be determined ahead of time, the better.
3. Review miscellaneous legal and logistical details of your transactions.
What currency are you using for this transaction, and what day are you calculating the exchange rate? Are there taxes owed on the transaction – and who pays those taxes? Who is responsible for the legal compliance?
Will your merchant account accept out-of-country addresses or credit cards, for your online transactions? Do you accept Paypal in those countries? Do you need an alternative merchant account for those transactions?
4. Does any of this matter if you’re not located in that country?
Yep, this is complicated. Obviously we can’t all learn the rules of over 100 countries.
So at what point is it worth it?
Here’s what can happen. Let’s say a foreign corporation gets sued in the United States by a U.S. company. Instead of hiring a local attorney, the foreign corporation just ignores it, thinking that since they are not located in the U.S., it doesn’t matter.
Are they right? Well … it depends.
The U.S. company gets a default judgment against them. They prove up damages and get a judgment against the foreign corporation. And then, they go to try to enforce the judgment. That means going after assets the other company has in the United States (bank account, inventory) or an associated company (insurance policy, subsidiary), or going to the foreign corporation’s country to enforce the judgment there (which is a very complicated process). It may be halting the foreign company’s ability to import those goods into the U.S. Perhaps they also wait until the CEO or other owner/officer is in town, and then serve them personally. Depending upon the circumstances, in some countries this could theoretically involve detainment and/or not being allowed to do business and/or even travel to that country.
So, if you only sell a few products/services in a country, have no assets there, and never travel there – perhaps the risk is low enough where you’re willing to not worry about the rules. That’s a judgment call.
But if you travel in person to that country, have assets there, and really need to continue to do business in that country – you need to know their laws and regulations so you can make an intelligent decision about which rule you will ignore – and which rules you’ll comply.
Ready to dive in? You don’t have to go it alone. Let’s connect on a Quick Call and work together!