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Arizona Center Tackles Obstacles to Trade Pact

By Daniel B. WoodStaff writer of The Christian Science Monitor / January 19, 1993



TUCSON, ARIZ.

IN a small, pueblo-style house across from the University of Arizona at Tucson, Boris Kozolchyk asks the burning question: "If a Canadian buys an appliance from a Mexican dealer in Mexico City and pays with a check ... when does the Mexican dealer get his money?"

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The answer has to do with when, if, and how well the North American Free Trade Agreement (NAFTA) gets off the ground, beginning in January 1994. Once tariffs and other barriers to trade, services, and investment between Canada, the United States, and Mexico are dropped, North America will become the world's largest trading bloc.

But how well it functions depends on hundreds of details that need to be ironed out - from standardization of invoices and bills of lading to warehouse receipts and model franchise agreements. Some existing differences are purely mechanical in that they reflect incompatible or cumbersome legal formalities. Other differences are structural, reflecting sometimes firmly entrenched attitudes in the interpretation and enforcement of laws.

For now, the man and the organization with most answers is Mr. Kozolchyk and the National Law Center for Inter-American Trade (NLCIFT) which he directs at the University of Arizona here. A research and educational center with funding from Congress, the state of Arizona, and the university, the center opened last May.

"We are here to do away with legal obstacles so that free trade can happen quickly and efficiently," Kozolchyk says. Currently budgeted at about $350,000 for a staff of three people, the center has become the umbrella for dozens of volunteer lawyers in the US, Mexico, and Canada, as well as professional and student researchers. First few months busy

In the first few months, the center has worked on establishing procedures for letters of credit (legal instruments used to ensure payment for international goods or services), rules for selling Mexican securities on the Arizona stock exchange, and regulations on standardizing commercial invoices and designating surrogate nationals with the power of attorney.

One major achievement has been establishing guidelines for check-clearing. "The way things stood before, a Mexican holding a Canadian check might have to wait days, weeks, months, or even years," Kozolchyk says.

But in recent weeks, Kozolchyk has overseen meetings between the Association of Mexican Bankers, the US Council on International Banking (USCIB), and the Canadian Bankers Association. Guidelines have been agreed upon governing check-routing, deadlines for payment or rejection (24 hours), and uniform systems of microencoding. Checks changing hands

"The Canadians were hesitant to participate at first," Kozolchyk recalls. "But then they took a look at the volume of checks changing hands among NAFTA nations - literally millions per day - and they were flabbergasted and realized something needed to be done."

Kozolchyk is a Cuban-American law professor at the University of Arizona who is widely known as an expert on international banking and trade law. He represents the US before the United Nations Council on International Trade Law (UNCITRAL) and also represents the USCIB before the International Chamber of Commerce in Paris.

"Boris is an unusual visionary completely trained in both civil and common-law systems," says John Baker, director of the Foreign Trade Institute at Lousiana State University.

"Boris might be the only person alive who could have gotten banking bodies from three countries together and solved such a major problem so quickly," says James Byrne, a law professor at George Mason University in Fairfax, Va., and chief US delegate to UNCITRAL.

Another major hurdle will be the evolution to a paperless environment. William Von Rabb, the former commissioner of US Customs under President Reagan, introduced requirements that customs practices become as automated as possible, in large part to speed the processes of inspecting goods at customs stations.

"Customs documents are the bread and butter of international trade," Kozolchyk says. This month, Kozolchyk, the state department, and UN officials observed a new electronic-communications system between cus- toms brokers and US Customs in the border town of Nogales, Ariz.

Kozolchyk has helped the Mexican government form a Mexican counterpart. But efforts in Canada have been stalled over whether such a body should be designated federal or provincial. NLCIFT obtains help from volunteers in several countries who want to contribute their time while they glean valuable business information.

Kozolchyk, who has experience working with similar questions for the European Community (EC), says the imple- mentation of NAFTA should run more smoothly than that of the EC. "We have more complementarity in cultures and laws between Canada, the US, and Mexico than between, say, France and Greece, or Germany and Spain."

"Mexico's legal system is conceived on a framework that favors monopolization of private trade and the state sharing in that monopoly," Kozolchyk says.

The Mexican Congress is now contemplating antitrust legislation to eliminate some long-entrenched ways of doing business, he adds.

Other cross-border projects NLCIFT will tackle include reciprocal licenses for real estate brokers, a uniform franchising agreement, and increased judicial cooperation in enforcement of legal judgments and rules of evidence.

In the area of commercial credit, Kozolchyk is looking for ways to level the playing field for Mexican borrowers who pay as much as 40 percent for commercial loans.

Though he sees the potential for cross-border trade as "staggering," Spencer Gifford, owner of El Campo Tires in Tucson, is concerned about such stumbling blocks as tire-inspection qualifications that could delay profits for years.

"I expect Arizona to be one of the great beneficiaries of NAFTA, in large part because of the work of Kozolchyk," Ariz. Gov. Fife Symington (R) says.