Final munich ppt 97 2003 march 19 2013 aerospace legal de

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Final munich ppt 97 2003 march 19 2013 aerospace legal de

  1. 1. 20753626 1Ihr Erfolg im US-Luftfahrtmarkt:Die juristischen SchlüsselstrategienWilliams Mullen8300 Greensboro DriveSuite 1100Tysons Corner, VA 22102USADirect: 001.804.420.6482Eliot Normanenorman@williamsmullen.comwww.williamsmullen.com/practice/international-law
  2. 2. The New Southeast AerospaceCluster2
  3. 3. • Mobile, AL (Airbus)• Melbourne, FL (Embr)• Savannah, GA (Gulfstream-General Dynamics)• Charleston, SC (Boeing)• Greensboro, NC (Hondajet)• Durham, NC (GE Aviation)• Prince George, VA (Rolls-Royce) 3
  4. 4. WHY THE SOUTHEAST?• Large Number of Graduates fromUniversity Engineering Programs• NASA (provides a highly qualifiedaerospace engineering pool)– NASA Langley (VA)– NASA Stennis (AL)– NASA Melbourne (FL) 4
  5. 5. Best-in-class manufacturers & Virginia’s flagshipuniversitiesDelivering “production-ready” manufacturing solutions while combiningthe speed & ROI expectations of business with the intellectual rigor andinnovation of universities.CCAM (Virginia)5
  6. 6. • A global Center of Excellence inadvanced manufacturing research– Manufacturing Systems– Surface Engineering• Focus on translation research– Accelerate new technologies intocommercialization– Reduce cost and improve quality– Complement with workforce trainingefforts• CCAM growth in 5-10 years to:– 10 year business plan & financial modelcomplete– ~60 Employees (49 PhD Researchers)– 35 graduate research assistants residentat CCAM– 35 undergraduate interns resident atCCAM– More than 30 Industry Members– $15-20 Million annual research budgetAerospaceEnergyShipbuildingTransportationElectronicsAutomotiveDefenseVisionCCAM6
  7. 7. The Opportunities: FairfaxCounty (Va) Location• Washington, D.C. metroarea (8.7 million people)• 60% of the U.S.population within one totwo-hour flight of FairfaxCounty:• Immediate Access toU.S. Government andDept. of Defense $55Billion market• 24 Hour deliveries toNew SoutheastAerospace Cluster 7
  8. 8. Einführung: Amerika alsHerausforderung8
  9. 9. 5/26/2013 99Gelten für Sie faireBedingungen?
  10. 10. For example: Will the BUYAMERICA ACT Stop your Sales?•Waivers under Buy America Act( BAA);•Substantial Transformation after importation; or•50% test for U.S. content; and•Use of Trade Agreements Act to overrule the BuyAmerica Act– FAR 225.872-1 provides: it is “inconsistent to applyrestrictions of BAA to acquisition of certain qualifyingcountry end products from the following countries:Germany, France, Belgium, Sweden, UK, other EUcountries, Canada and Israel– Products must have value greater than $203,00010
  11. 11. 5/26/2013 111111Seien Sie zuversichtlich: DasFrühstück Ihrer amerikanischenAnwälte
  12. 12. Level Playing Field? Yes, but• To be competitive, German aerospace companiesshould:– Consider assembling or manufacturing in the dollar zone– Respect and comply with U.S. government regulations:FAA, Export Controls, Government contracts, FCPA,antitrust– Americanize or localize your supply agreements;– Know how to limit your liability under standard Americansupply agreements;– Take advantage of the international commercial treatiesfavoring German trade with and investment in the USA: E-2 visas; Tax Protocols; Trade Agreements Act, NAFTA;– Consider using Southeast USA as additional center foryour worldwide exports, taking advantage of U.S.government subsidies for exports from the USA and localcommercial advantages (Exim Bank; IC DISC)– Work with an attorney who knows how to make the U.S.legal system work in favor of German suppliers 12
  13. 13. 13The Top 61. Visas: Moving your key personnel to the USAcan be the key to your success2. What corporate structure for what project?3. U.S. employment laws: « Right to Work » ButU.Sl laws may not always be that liberal?4. Export Controls and use of export subsidies5. Contract administration and negotiation6. Legal strategies to help accelerate yourgrowth in the U.S. market
  14. 14. Nr. 1 Visa undpraktischeImmigrationslösungen(Handbook FAQ # 6)14
  15. 15. 5/26/2013 15Hiermit fängt alles an
  16. 16. 16Attention!Homeland Security is in charge ofimmigration to the USA
  17. 17. 5/26/2013 17Case Illustration: L-1 ou E-2 Intra-Company New Office TransfersX&Z Aerosupply , Inc.Fairfax, Virginia USAX&Z Aerosupply GmbHMunich, GermanyManagers, ExecutivesSoftware DevelopersElectrical EngineersProject ManagersandSpecialistsCompositesEngineersX&Z, Ltd.Bucharest, Romania
  18. 18. 18Visas: Practical Solutions for Visitors• Reforms in use of « Shengen » type visas– Visa Waivers (ESTA);– Can work under B-1 in support ofinterntional supply agreement– B-1 in lieu of H-1B (design engineers)
  19. 19. Nr. 2WelcheGesellschaftsstrukturfür welches Projekt?19
  20. 20. CCorporationLimitedLiabilityCompany
  21. 21. USA Holding Co.US FactoryUS StartupBusiness
  22. 22. Joint VentureGerman USSubsidiaryUS Company
  23. 23. 5/26/2013 23Letzte Frage:Wo wird die Gesellschaft gegründet?• Delaware or other states• Qualifying to do business in other states• See Handbook FAQ # 6
  24. 24. 5/26/2013 24Last Word? TaxesChoice of LLC or C Corporation:100% “Tax Driven”• Consult your fiscal advisors in the United States andin Europe before deciding which entity to use
  25. 25. IC DISC StructureSummary of Benefits1. IC DISC can be paid commissions• Statutory formula – not required to be Arms Length• Greater of 40% of gross export sales from theUSA, or 50% of taxable income on those sales2. Can get Rate Arbitrage• Commission deduction – up to 40% benefit (Fed &States)• Payment from IC DISC to Qualified Foreign Co –likely zero Withholding Tax.• Replaces dividends from fully taxed income of ABCAerospace, Inc. (USA) with deductiblecommissions followed by Dividend from IC-DISC3. IC DISC may also be used for export finance• May receive factoring fees of 2-3%• Additional Commission $3M for $100M exportsales, resulting in additional $1.2M tax savingsIssues1. Need to structure properly to get rate benefitABC Aerospace GmbH(MunichABC Aerospace USAInc. (Virginia) )(deducts Commissions)IC DISC (ABC Exports, Inc.Non-taxable(Virginia )CommissionsDividendsBottom Line: Reduce U.S. Taxes on Exports by 35% to 40%.
  26. 26. 5/26/2013 26BehördenmarktGovernment Classified Market• Very important market• Foreign companies can participate by• Using a SSA or Proxy• Examples: Fairfax County Companies
  27. 27. European CompaniesSources: Fairfax County Economic Development Authority, Dun & Bradstreet27
  28. 28. .. of which are Aerospace Firms28
  29. 29. Nr. 3 Arbeitsrecht:„Recht auf Arbeit“,aber vielleicht nichtso liberal, wie essich deutscheUnternehmenvorstellen?29
  30. 30. 5/26/2013 30Human Capital• Role of federal government• Role of the states• Real advantages of Virginia,for example, as a “right to work”state?– Example of Boeing• With « Right to Work » alsocomes « Employment at Will »
  31. 31. 31Must still conform to Federal Laws• FLSA (overtime rules)• IRS et DOL: controls on use and abuse of independentcontractors• FMLA: family medical leave act• Strict controls with jury damage verdicts for discrimination(race, sex, age, disability ) (Title VII, ADEA, ADA), above allsexual harassment and retaliation claims: solution: propertraining of management, employment handbooks.• Whistleblowers and liability: be careful when entering intofederal government contracts• Benefits and federal regulation under ERISA• OHSA safety enforcement• IRCA (Immigration Reform Control Act) to control illegalworkers, immigration reform will only complicate obligationsof employers (Alabama example)
  32. 32. Umsetzung am Arbeitsplatz inden USA
  33. 33. 33Key ConsiderationsYour legal advisor can help you to:• Prepare your employment agreements, your handbooks andmanuals and effectively train your managers in compliance withfederal employment statutes• Non-competition, confidentiality agreements: protect tradesecrets• Advise on formulating a benefits plan, incorporting the newregulations under Obama Care (Affordable Health Care Act), aswell as stock options life and medical insurance, to make yourcompany competitive with other U.S. employers.• Help you take advantage of “Right to Work” laws to minimizeunion activity• Defend you in case of employee claims under any of the federalor state laws regulating employment
  34. 34. Nr. 4Ausfuhrkontrollen.34
  35. 35. U.S. Export Laws & RegulationsInternational Traffic in Arms Regulations (ITAR)– Requires registration and licenses for the export andtemporary import of defense articles and technicaldata, provision of defense services, and brokering ofdefense articles. U.S. Dept. of StateExport Administration Regulations (EAR)– Requires export licenses for exports of commercialequipment, software and technologies to certaincountries, end-users and end-uses.– Enforces Anti-Boycott Laws: U.S. Dept. ofCommerce.– OFAC Sanctions Programs– In most cases, US corporations are prohibited fromtransacting any business with sanctioned countries (e.g.,Cuba, Iran, Syria) and entities (e.g., narcotics traffickers,terrorism supporters, WMD proliferators). 35
  36. 36. Export Defined: actual and“deemed”“Exports” include:• Sending or taking an item out of the U.S.• Providing technical data or technologies toforeign persons, whether in the US orabroad:• Emailing technical data to foreignpersons• Discussing technical data with foreignpersons• Giving a facility tour to a foreign person36
  37. 37. Regulierte Güter– Defense Hardware,Technical Data & Servicescontrolled for export by StateDepartment– Commercial Goods,Software and Technologiescontrolled for export by theCommerce Department– Only Public DomainInformation is not controlled37
  38. 38. Unternehmen mit dem höchsten RisikoDefense Contractors: Almost all items/services aredefense articles subject to strict export control.• Examples include everything from drones (UAVs) tonavigation systems to military encryption.• Also includes parts, components, software, etc.High Tech Companies: More sophisticated products andtechnologies are subject to more strict export controls.• Examples include navigation and avionics, sensors andlasers, commercial encryption, certain materials, etc.• Companies may need to collaborate with foreign vendorsto outsource part and component manufacturing• Many companies have foreign employees38
  39. 39. 39Reformen derAusfuhrkontrollen
  40. 40. COMSAT• On January 3, 2013 President Barack Obamasigned the National Defense Authorization Act forFiscal Year 2013 (NDAA) into law, restoring thePresidents authority to transfer commercialcommunications satellites and related items(COMSATs) from International Traffic in ArmsRegulations (ITAR) jurisdiction to the lessrestrictive dual-use (dual military and commercialor consumer use) export controls under theExport Administration Regulations (EAR).• Recent Announcement: March 8: moving aircraftand turbine engines to CCL from ITAR list– Eliminate duplication in licensing40
  41. 41. Impact of ReformsImpact on German companies in Germany– Increased ability to purchase certain USsystems, subsystems, parts and componentswithout being subject to strict ITAR controls– increases competition in Europe & Germanyfrom U.S. exporters of components and partsImpact on German companies in US– Increased ability to manufacture certain aircraft,systems, subsystems, parts and components in theUS without being subject to strict ITAR controls
  42. 42. Wie können wir Ihnen helfen?1. Determine export jurisdiction and classification forthe company’s products (ITAR or EAR): “Are myproducts on the List”?2. Strategize with the company to determine whichproducts are appropriate for production in theUnited States3. Assist with obtaining any necessary exportlicenses, including resolving “deemed export”issues for foreign persons working in the US4. Advise on export issues related to brokers,distributors and resellers [B.A.E. issues]5. Establish an effective Compliance Program
  43. 43. 5/26/2013 43U.S. Munitions List (USML)• Category 1: Firearms, weapons• Category 2: Guns and armaments• Category 3: Ammunition, ordinance• Category 4: Launch vehicles, missiles,rockets• Category 5: Explosives, incendiaryagents• Category 6: Naval vessels• Category 7: Military vehicles• Category 8: Aircraft and equipment• Category 9: Military training services,equipment• Category 10: Protective personnelequipment and shelters• Category 11: Military electronics• Category 12: Optical and guidancecontrol equipment• Category 13: Auxiliary equipment(cameras, encryption, camouflage)• Category 14: Toxicological, chemical,biological agents, protectiveequipment• Category 15: Space systems andequipment• Category 16: Nuclear weapons,technology• Category 17: Classified technicaldata and services• Category 18: Directed energyweapons• Category 19: Reserved• Category 20: Oceanographicequipment• Category 21: Other items designedor adapted for military use
  44. 44. 5/26/2013 44Examples of USML Items• Electronic equipment which isspecifically designed, modified orconfigured for military application• Drone aircraft• Navigation systems• Command, control andcommunications systemsincluding radios (transceivers)and identification equipment• Military training services andequipment• Underwater sound equipment• Flight control products, softwareand technologies• Satellites, launch vehicles andground control equipment,including parts, technologies andsoftware• Classified products, technicaldata and software• Anti-gravity and pressure suits,atmosphere diving suits• Body armor• Naval vessels and relatedequipment, parts, technologiesand software• Protective personnel equipmentand shelters• Auxiliary military equipment
  45. 45. Nr. 5Vertragsmanagementund Verhandlung45
  46. 46. 5/26/2013 46Contracts: the American way
  47. 47. Warnhinweis!• Read the entire contract• The traps can be found in articleswith such names as :– « miscellaneous »– « definitions »– « flow-through » ou« incorporation by reference »• RTBC! RTBC!47
  48. 48. Key Contract Clauses• Liquidated Damages• Limitations on consequential damages• Limitations on Punitive damages• Maximum liability for damages• Seller Indemnification of buyer for 3rd party claimsonly• Best efforts,• Time is of the essence• Product warranties & representations• Choice of Law: which state? UCC?• Dispute resolutionSolution: Use a Model Manufacturing SupplyAgreement as a starting point in the negotiations 48
  49. 49. Konventionalstrafen: DieVorzüge (Liquidated Damages)• “ liquidated damages” for late deliveries• Seller: reduces its uncertainty by capping its liability, even if the capturns out to be greater than actual damages to Buyer• Buyer: reduces its uncertainty by fixing at least acceptable level ofcompensation• Dispute Resolution: Eliminates calculation of damages, streamlinesdispute resolution to proof of delay only, reduces litigation costs• U.S. Law: Uniform Commercial Code: UCC 2-719:– Be specific –fix the amount to type of breach– State difficulty to estimate damages– Liquidated damages are reasonable estimate of damages– Liquidated damages are the exclusive remedy for the specifiedbreach ( , late delivery, defective medical devices etc. )– Avoid right to elect alternative remedies– creates risk thatliquidated damages will be viewed as penalty and unenforceable49
  50. 50. Liquidated Damages: ModelClauseLiquidated Damages. If the Seller fails to deliver theProducts by the Delivery Date (the "Seller Breach"), theSeller shall pay to the Customer an amount equal to $2500per day for each day a Seller Breach continues (the"Liquidated Damages"). The parties intend that theLiquidated Damages constitute compensation, and not apenalty. The parties acknowledge and agree that theCustomers harm caused by a Seller Breach would beimpossible or very difficult to accurately estimate at thetime of contract, and that the Liquidated Damages are areasonable estimate of the anticipated or actual harm thatmight arise from a Seller Breach. The Sellers payment ofthe Liquidated Damages is the Sellers sole liability andentire obligation and the Customers exclusive remedy forany Seller Breach. 50
  51. 51. FolgeschädenConsequential Damages51
  52. 52. Lösung: Ausschließen vonFolgeschäden/indirekten Schäden11.1. NO LIABILITY FOR CONSEQUENTIAL OR INDIRECT DAMAGES.IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR CONSEQUENTIAL,INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE ORENHANCED DAMAGES[, LOST PROFITS OR REVENUES OR DIMINUTIONIN VALUE], ARISING OUT OF OR RELATING TO ANY BREACH OF THISAGREEMENT, REGARDLESS OF (A) WHETHER SUCH DAMAGES WEREFORESEEABLE, (B) WHETHER OR NOT THE OTHER PARTY WASADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND (C) THE LEGALOR EQUITABLE THEORY (CONTRACT, TORT OR OTHERWISE) UPONWHICH THE CLAIM IS BASED, AND NOTWITHSTANDING THE FAILUREOF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE.52
  53. 53. Schadloshaltung: Fallen fürVerkäufer• Clearly Limit Indemnification to 3rdParty Claims only against the Buyer• You will need language that says:– « Seller indemnifies Buyer solely for lossesarising out of a Third Party Claim directlycaused by a breach of the contract bySeller, subject to certain exceptions, etc. »• Obtain insurance coverage53
  54. 54. 54Final Points: Management of Contracts• « Americanize » your agreements !• Examine with care your commercial contracts: ask for legaladvice to interpret and apply under the law of the state that willgovern any dispute:• Pay close attention to liability provisions, including responsbilityfor defective products, liquidated and consequential damages,and the obligation to indemnify against third party claims.• Government contracts present special problems and allprovisions must be understood and respected;• Consider dispute resolution solutions:MediationArbitration• It is often far less expensive and must faster to resolvedisputes before the Federal U.S. District Courts.
  55. 55. Bußgelder für Produkthaftung:• McDonald’s: customer spilled coffee,millions in damages ?• Legal reality is different• limitations on punitivedamage by Supreme Courtand Courts in Virginia
  56. 56. Products Liabiity• Adopt the same steps and good sense thatyou use to sell in Germany and to othermarkets• Matter of insurance coverage• Advantages of mediation and federal courtsin Virginia: rapid decisions and pro-business• American laws protect businesses againstfrivolous lawsuits and set a ceiling or limiton punitive damages.
  57. 57. Other Important Contracts• See Handbook FAQ #7• Manufacturer Supply Agreements• Other sales agreements• Technology license agreements• Government contracts and subcontracts• Distribution and agency agreements• Teaming agreements• Joint Ventures (JV)57
  58. 58. 5/26/2013 58Teaming Agreements• Teaming Agreement: Defined• Major Elements and Protectionsfor French Company as Teaming Partner &subcontractor: exclusivity, scope of work, dataexchange subject to NDA (accords deconfidentialite), pricing within prime contractor’starget ranges, easy termination.• Sample Teaming Agreement Checklist: PDF fromenorman@williamsmullen.com• Substantial advantages over typical prime-subrelationships
  59. 59. Example: Joint Venture59
  60. 60. Joint VentureCommon development of a new landing gear andlanding gear doorQuestions to Consider:– Division of profits;– Liability: one venture partner binds the other– Resolution of disputes– What acts can be undertaken independent of andoutside the JV– Who owns the improvements? Cross-licensing– Termination and grounds for withdrawal– What structure for the JV?5/26/2013 60
  61. 61. Final Thoughts: Joint Venture• Define well the scope of the joint ventureagreement and use an american contract• Know how to end it before you sign it• Plan for the divorce before you getmarried61
  62. 62. Nr. 6 Rechtsstrategienzur Förderung IhresWachstums auf demUS-Markt62
  63. 63. Strategie 1: Ihr Wachstum auf dem US-Markt mit Fusionen und Übernahmenbeschleunigen• Benefits of M&A– localize and americanize your business– add to your competitivity– create a level playing field with your americancompetitiors– Less complex, ultimately more profitable than a JV– Gives your company the ability to raise capital fromprivate equity and commercial banks in the USA63
  64. 64. 5/26/2013 64M&A: Practical Considerations• Legal concept: New York Minute!• Legal point: Importance of non-binding Letter of Intent (LOI)to give you exclusivity until signing of Stock PurchaseAgreement• Legal Point: Great American Bait and Switch in Reverse!– Bid at $11 million , buy at $9 million– your weapon: your lawyers and their due diligence.• Stock Purchase Agreement: Representations andWarranties• Post-Acquisition Issues: Deal with Them Pre-Acquisition tocement the deal: Employment Agreements; GoldenParachutes, Consulting/Non-compete Agreements:• Momentum to close the deal• IP/ employment and immigration issues post-acquisition• Deposits and Break-Up Fees: Be Prepared
  65. 65. Strategie 2: Südöstliche Bundesstaatenals Zentrum für den Export aus den USA• Manufacture or assemble in the dollar zone:avoid Euro/Dollar exchange issues. Yourcontracts may be in dollars.• Benefit from savings of 15% or more on the costsof production in Europe• Export from the United States with subsidies fromU.S. government:– IC DISC : 2 companies, one tax free receivescommissions on the sales– reduces by 35% to 40% the taxes on profitsfrom exports– availability of financing from Ex-Im Bank 65
  66. 66. Strategie 3: Kapitalaufnahmenfür Expansion in den USA• Your expansion to the USA presents anopportunity for raising private equity capital• U.S. sources will finance an acquisition (M&A)• « the dry powder » of Private Equity• Key point: show a contract to obtain the financing• Documentation: American-style Term Sheet orPrivate Placement Memorandum• US JOBS ACT: makes capital raises easier• Commercial bank financing…. yes and no66
  67. 67. Strategy # 4: Negotiation ofFinancial Incentives• Be cautious of “conditions” in offers of financial incentives• Seek legal advice in negotiations• Proper analysis of long-term costs and benefits of yourlocation decision may depend more these factors thanincentives:• Availability of qualified professional workforce andeducation levels– R&D resources– multiple markets: commercial and government– quality of life– Pro-business environmental regulations– transportation and infrastructure: ports, airports– long term cost of doing business in the location67
  68. 68. Zusammenfassung68
  69. 69. 69Conclusion : Your success for a SoftLanding in the USA will depend upon:• Choice of correct visa solutions for keypersonnel: “It all starts here”• Choice of correct corporate structure• Careful planning of your approach to handlingemployment questions while maximizing use of“Right to Work” laws in states like Virginia• Recognizing importance of governmentregulations, notably Export Controls• Proper management and negotiation of yourManufacturing Supply Agreements and otherimportant contracts to limit your liability andreduce your risks• Adopt strategies for M&A, Exporting and RaisingCapital to permit you to accelerate your growth inthe U.S. market and• Finding legal advisors with the experience andexpertise to help you succeed with yourinvestment project in the USA.
  70. 70. 70The desired results
  71. 71. 71Thank YouEliot Norman, Esq.enorman@williamsmullen.comwww.williamsmullen.com001/804.420.6000Fairfax County/Washington, DC USAwww.williamsmullen.com/practice/international-law
  72. 72. 72QUESTIONS ?Eliot NormanWilliams Mullen8300 Greensboro DriveSuite 1100Tysons Corner (Fairfax County)Virginia 22102 USADirect Line: +1.804.420.6482enorman@williamsmullen.comwww.williamsmullen.com/practice/international-law

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