The world has increasingly become one global village. Thus, the most crucial challenge facing businesses today is globalization ( Dicken , 2003) . In particular, businesses are finding it increasingly difficult to identify and establish internalization strategies ( Khanna et al., 2005). Choosing the countries to do business in is also not an easy fit. Companies in the 21 st century are expected to interrogate their strategies and develop options that can help them to conquer new markets ( Dicken , 2003; Raluca, 2010 ). Only strategies that are responsive to today’s globalized world will ensure entrepreneurial success as new markets emerge and as competition increases ( Khanna et al., 2005; Saradjzadeh , 2005). This narrative applies to different types of businesses. This paper aims to explore the essential requirements of starting a global children's clothing distribution business from an international business law perspective.
Background: Globalization of Business
Understanding Globalization
Globalization can be conceptualized as the process via which worldwide interconnections occur in almost all spheres of life. While some of these interconnections result in global integration and unity, some do not. The global interconnections, coupled with the relationships they inspire, represent a process that is unprecedented historically. This process is currently reshaping the context within which different activities take place. Globalization has resulted in blurred boundaries between and within nations, organizations, and global interests ( Khanna et al., 2005; Saradjzadeh , 2005; Parker , 2005). Globalization entails several vital aspects. These include growing global interconnections and discontinuous, rapid change. It is also characterized by increased managerial complexity and increased diversity and the number of those participating in it.
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Numerous unique events stimulate the growing global interconnections. However, the achievement of these interconnections has not been achieved via a steady or clear path. While prediction is possible for some interconnections, for others, this is impossible. For instance, a region, nation, and people can be drawn into global trade and activities by the presence of adequate natural resources and proximity to transportation infrastructure and vibrant markets ( Parker , 2005). Conversely, limited resources, educational constraints, corruption, lack of opportunities, and lack of interest in going global are bound to prevent nations and individuals from embracing globalization. While globalization has occurred rapidly, its pace has not been steady. Instead, it has followed an upward, jagged, and discontinuous trajectory. Due to these discontinuities, anticipating, interpreting, or planning for the future has been difficult for not only individuals but also business entities. Likewise, events of global importance often have differential effects and proceed at different speeds. This results in discontinuities since businesses, industries, individuals, and nations are affected differently and at different times.
Engaging in global businesses is not limited by the size of the business. Thus, large, medium, and small business entities can participate. Likewise, businesses from small, developing, and large economies can take part. Further, both publicly and privately owned firms can become global. With globalization, constraints to business activities have been removed, implying that more organizations and individuals can now participate ( Saradjzadeh , 2005; Parker , 2005). This has increased the diversity of participants with those engaged in global business, varying in motives, size, shape, and behaviors. Due to this, global management has become more complex and less certain. This is particularly owed to the different perspectives that result from increased interconnections. The experiences and strength of global interconnections undoubtedly differ. Thus, a single global event may create opportunities for some individuals while threatening others. Likewise, peoples' perception of global business also differs. These attributes are bound to increase the managerial complexity of businesses.
Strengths and Shortcomings of Globalization
Globalization presents businesses with many advantages. Firstly, globalization gives businesses access to new and foreign cultures. The resultant diversity cannot be overestimated in the success of businesses in the 21 st century. Secondly, globalization allows nations around the world to be connected. This ensures that technological advances and knowledge can spread quickly ( Dicken, 2003; Raluca, 2010). By globalizing, a business is able to tap into these technological advances and knowledge, ultimately enhancing its performance. Thirdly, by globalizing businesses are able to find ways of producing their products at a lower cost. Likewise, the competition associated with globalization not only lowers the price of products, but also presents consumers with an increased variety of products to choose from. In this regard, for businesses to remain competitive and thrive in the age of globalization, they have to innovate continuously ( Raluca, 2010).
Globalization has been associated with improved standards of living. This implies that individuals have increased purchasing power. Thus, by placing themselves strategically, businesses can take advantage of this. Globalization gives businesses access to new and emerging markets. Consequently, the business entity gains access to new customers and able to diversify its revenue streams. For any business to take advantage of these opportunities, it has to look for and embrace innovative ways of gaining access to overseas markets. A business does not need to establish a foreign office for it to expand overseas. This is because employing people in other nations compliantly has become increasingly easy. Further, globalization gives businesses access to new talent ( Raluca, 2010). This way, businesses can take advantage of specialized and fresh talent that may not be accessible in their primary locations. Globalization has thus made it possible for business entities to access talented individuals even in the least noticeable countries.
Globalizing businesses are bound to encounter various challenges. Recruiting internationally, although simplified by International Professional Employer Organizations (PEOs), is not easy. For instance, the process of interviewing and vetting potential candidates may be challenging. Also, for a business to be successful in recruiting internationally, it has to comply with the benefits and salaries benchmarks for different countries for it to remain competitive ( Dicken, 2003 ). Complying with the tax and employment laws in different countries is also not easy, especially in cases where operations of a business span multiple markets. Other notable challenges include language barrier, cultural barriers, and time zone differences.
Due to the dynamic nature of immigration laws, securing visas for foreign employees presents a key challenge. This is particularly the case as different countries tighten these laws. Thus, companies have to devise ways of navigating new and varying legal systems to avoid any negative legal implications ( Dicken, 2003 ). Global businesses often incur export and tariff fees. This is particularly true for entities focused on selling their products abroad. Depending on the market, getting these products overseas may be expensive. While globalization results in cultural diversity, some cultures may end up losing their unique features. This may be counterproductive for a global business.
Globalization of Business and International Law
The era of globalization has led to increased complexities of the law. Consequently, there is a need to make several vital changes. These include emphasizing transnational legal processes, creating non-governmental and governmental networks, and enhancing judicial cooperation and influence across borders (Dicken, 2003; Berman, 2004). In order for globalization to succeed, international law has to expand its focus. Linking law to globalization offers an opportunity for understanding how legal norms are disseminated in this new era. Globalization of the economy has increased pressure for a wide range of markets, national borders, and economic sectors to be deregulated (Sassen, 2000; Dicken, 2003; Berman, 2004). It has led to increased privatization of public sector operations and firms.
Globalization of the economy has influenced the formation of a system of power that is transnational. For instance, some functions of national public governance have been relocated to transnational private realms. Economic globalization entails more than crossing geographic borders as envisioned by international trade and investment. Instead, it includes the repositioning of states in a broader power field combined with a reconfiguration of the efforts of states ( Sassen, 2000 ). This broadened field of power has partly emerged following the creation of a novel private institutional order that is closely associated with a global economy. It has also emerged owing to the increased importance of various institutional orders.
Globalization has led to the emergence of an international institutional order that is increasingly private. In this new order, national governments of key government are not the strategic agents. Instead, private entities act as strategic agents. Sassen ( 2000 ) argues that t his arrangement may reduce international law's exclusivity and scope. The author also reckons that this new order is characterized by a normative authority. This normativity arises from the point of private power but is greatly felt in the public domain. This narrative results in the denationalization of what has conventionally been directed towards national goals and state projects.
The new institutional order is also characterized by an increased ability to privatize what was traditionally public, as well as de-nationalizing policy agendas and resources that were initially national. The ability to de-nationalize and privatize is both caused by and as a result of specific transformations that have taken place in the national state. It is thus clear that globalization has not brought states as we know them to an end. Instead, it has created a shift, implying that states are not the sole or most crucial agents in the new arrangement. Secondly, states have undergone unprecedented transformations in their quest to become compliant and accommodative of globalization’s most important dynamics ( Sassen , 2000 ). The change is likely to alter or weaken the organizational architecture required in implementing international law. This is especially true given that in the age of globalization, implementing latter is dependent on national states’ institutional apparatus.
In the global economy, nations bear the responsibility of negotiating the intersection of foreign actors and their national laws. This is unlike in the past. Notable foreign actors, in this case, include markets, firms, and supranational entities. Doing business in a globalized world is thus distinctive in several ways. Firstly, there is an elaborate body of law that is aimed at securing national states’ territorial authority. Secondly, globalization has resulted in the institutionalization of cross-border transactions, supranational organizations, and non-national firms by various countries. These developments have laid the foundation necessary for the actualization of globalization ( Sassen , 2000 ).
Globalization has led to the creation of explicit obligations for all countries taking part in it. For example, states act as guarantors of the right for individuals and firms to access global capital. This entails the protection of property rights and contracts. In this regard, states play a vital role in the regulation of global economic transactions ( Sassen , 2000 ; Dicken, 2003). Entities with transnational operations have to ensure that states continue undertaking the functions that they traditionally undertook in the realm of the national economy. Specifically, states have to guarantee contracts and property rights. The existing international legal regime aids in entrenching the guarantee of a right to capital. For example, the United States (U.S), being the dominant power in the age of globalization has made sure that other states have adopted such obligations to access global capital. Overall, states play a crucial role in producing the legalities around new and emerging forms of economic activity due to globalization. In the new emerging structure of doing business, entities are subject to laws of different states.
Establishing a Global Children’s Clothing Distribution Business
In setting up this form of business entity, an entrepreneur would be exposed to various laws, and in different jurisdictions. Breaking down this process into steps would aid in promoting understanding and compliance.
Buying Fabric in India
India and China dominate the textile export market. This makes India an ideal location for buying fabric intended for starting the children's clothing business. However, there is a need for any entrepreneur to establish good connections with the targeted manufacturers. The buyer should know the specific Indian Tariff Code (ITC) for the targeted fabric. Documentation and other important formalities can be simplified by the trade agreement (unilateral, multilateral, or bilateral) between India and the entrepreneur’s country. Terms of payment and delivery have to be duly agreed upon between the fabric seller and the buyer. Once all terms and conditions are met, a proforma invoice and export order are issued. Both terms and export and delivery have to be agreed upon. Other considerations include the financing of the purchase, insurance, quality check, and proper packing.
To buy fabric in India, government registration is required. The registration is done at the Foreign Trade government office. An Import Export Code Number (IEC) is also required. This can be obtained from India’s Directorate General of Foreign Trade (DGFT). This number allows the buyer to export fabric freely from India. Buying Indian fabric is subject to an Excise Policy. The two key excise duties include 15% Additional Excise Duty (AED) and Basic Excise Duty (BED) ( Verma, 2002). The two apply to cotton yarn and all blended or man-made fibre and yarn. Additionally, the AED applies in instead of sales tax on the power processed fabric. The buyer also has to pay particular attention to the quality of the fabric bought. This is particularly due to the quality restrictions that exist in Europe and the U.S.
Ship ment of F abric from India to China via C arrier
Shipping fabric from India to China requires a party to meet the numerous rules and regulations that govern export. These regulations are applicable before one clears an export order via India’s customs. Firstly, the fabric seller has to give the buyer a commercial invoice. Secondly, a packing list is necessary. This list would contain details of the fabric that is due for shipment. Thirdly, the carrier is expected to submit copies of this packing list, the commercial invoice, combined with other vital documents to India’s customs authority. A shipping bill, or customs declaration is also necessary. Before issuing a Let Export Order (LEO), the customs office assesses this declaration and its supporting documents. It is only after being satisfied that the officer would release the fabric shipment for loading onto the preferred carrier vessel. Once the cargo is loaded, the freight or carrier forwarder raises either a bill of lading (targeting ocean freights) or air waybill (targeting air freight). The fabric buyer would need a copy of this vital document for claiming the shipped fabric on arrival in China.
India’s economy is undoubtedly growing at an unprecedented pace compared to that of many other large nations. This had led to growth in India’s ocean freight ( Saravanan & Kumar , 2013). As a result, the freight capacity is high, particularly with increased competition. Likewise, more trade lanes have opened up while carrier services have also increased. The emergence of more carrier services implies that there is an abundance of carrier services in India. This is an advantage, especially for a business that is shipping from India for the first time. Due to India’s geographic location, ocean distances to various continents are also relatively short. For instance, routes between China and India are not only the shortest but also the busiest. This will ensure efficiency in shipping the fabric.
Air freight might be ideal in case the buyer seeks to expedite the shipment. However, the quantity shipped is limited in this case. Besides security and speed air freight is advantageous owing to the availability of numerous flights every day. Likewise, the freight network is highly extensive ( Saravanan & Kumar , 2013). This implies that the fabric can be shipped to any city in China in record time. This is further assisted by China’s close proximity to India.
C onvert ing the F abric into C hildren's S hirts in China
Before contracting a Chinese firm to convert the fabric into children's shirts, a number of preliminary steps are necessary. Firstly, the Indian fabric producer has to ensure that any patent related to the fabric is also filed in China. This is aimed at ensuring that Chinese competitors do not copy the technology used, thus exporting it to other countries. In some instances, fabric producers use different locations to complete different processes, thus reducing the possibility of disclosing the entire process. Secondly, the fabric supplier has to ensure clarity of their license contract terms, particularly when defining the use of patents and trademarks by end-users. Vigilance also has to be maintained to deter competing end-users and suppliers.
Mostly, clothing manufacturers in China produce on-demand. They also specialize in particular product categories. Thus, if the shirts have to be Global Organic Textile Standard ( GOTS ) certified a manufacturer specialized in producing GOTS-certified shirts has to be used. Most manufacturers also have a Minimum Order Quantity (MOQ). Thus, the entrepreneur has to pay attention to the number of units required by the client. In most nations, especially the U.S, Australia, and Europe, clothing textiles are highly regulated. For instance, California Proposition 65 and Europe's Registration, Evaluation, Authorisation, and R estriction of C h emicals (REACH ) have restrictions on pollutants, heavy metals, and chemicals ( Davies, 2015).
Since the shirts’ market is in the U.S, Canada, and France, the chosen manufacturer has to have a track record of compliance as shown via test reports. These reports have to be issued by a third party such as SGS. Moreover, it is important to go through the Business Social Compliance Initiative (BSCI) and the Supplier Ethical Data Exchange (Sedex) audit reports. The two entities carry out social compliance audits in most factories globally ( Tudor et al., 2014). Most manufacturers are likely to be members. The BSCI and Sedex rank manufacturers based on several core social principles.
Ship ping the Shirts to Canada, France, and the U nited States for Sale in Department Stores
A number of requirements have to be met before the shirts can be allowed to enter Europe and U.S. Some are mandatory, while others are voluntary. For the shirts to enter Canada and France, they have to comply with the legal requirements related to the use of chemicals (REACH), labelling, and quality. With regard to safety, they have to show compliance with the General Product Safety Directive (GPSD) 2001/95/EC ( Al Sagoff & Ismail, 2018). The two governments often check if products meet the safety requirements that are applicable. The REACH legal requirement, on the other hand, restricts the use of a broad category of chemicals in textile products ( Davies, 2015). This will thus apply in Canada and France. Many retailers in Europe have also come up with restricted substances lists (RSLs) (Das, 2013; Davies, 2015). In this case, the shirts have to comply with the RSLs for the targeted department stores to stock them.
Europe has a particular standard that has to be met in order to ensure children's safety. This regulation covers such aspects as buttons and has to be adhered to in France and Canada. Proof also has to be provided, confirming that no intellectual property (IP) rights have been violated in the shirts' production. Moreover, the material content of the shirts has to be specified ( Koszewska, 2011; Kosińska , 2014). This is in accordance with Regulation 1007/2001. The U.S also boasts three key laws governing what manufacturers and importers ought to include on their clothing labels. This is enforced by the U.S. Customs and Border Protection (CPS) and the U.S. Federal Trade Commission (FTC) . These laws include the Fur Products Labeling Act, the Wool Products Labeling Act, and the Textile Fiber Products Identification Act.
The other agencies involved in monitoring compliance to garment import requirements in the U.S include C onsumer Product Safety Commission (CPSC) , E nvironmental Protection Agency (EPA) , Federal Trade Commission (FTC) , and the U.S. Department of Agriculture (USDA) . Sale of the shirts in the U.S is also likely to be determined by compliance to such laws as California Proposition 65 , Flammable Fabrics Act (FFA) , Federal Hazardous Substances Act (FHSA) , and Consumer Product Safety Improvement Act (CPSIA) .
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