Brexit: The Possibilities

Francisco A. Laguna & Amy Turner

 This week, we conclude our Brexit series with an examination of the possibilities of how the withdrawal process may take shape. Since the 23 June 2016 Brexit vote, several questions have arisen. Within Europe, a dispute has started about whether the decision to invoke Article 50 is the prerogative of the UK government, or if it requires Parliamentary assent. Government lawyers advised that invoking Article 50 is a government prerogative. However, the repeal of the European Communities Act by Parliament is a prerequisite, which automatically involves the UK parliament.

Another question is the extent to which the Northern Ireland Executive, Scottish Government and Welsh Government will have to be involved in the process. In this regard, Scottish Prime Minister Nicola Sturgeon has stated that legislative assent to act to implement withdrawal from the EU would be given by the Scottish Parliament.

According to Article 50, the negotiations concerning changes over budgets, voting allocations and policies due to the withdrawal of member states are the responsibility of the remaining members of the EU. However, as we discussed last week, since Article 50 has not been official invoked, official negotiations the UK, the other states and the European Commission cannot yet begin.

The decision was made to forgo any discussions until the UK formally invokes Article 50 during a meeting of Heads of States. Indeed, President of the European Commission Jean-Claude Juncker took a strong stance and ordered that EU members not engage with UK parties regarding Brexit. This lead to Donald Tusk, the president of the European Council, to state that access to the European Single Market would not be given to the UK until they accept its “four freedoms of goods, capital, services, and people”.

The changing relationship with the UK and the remaining EU members could evolve several ways. For example, the UK could remain in the European Economic Area (EEA) as a European Free Trade Association (EFTA) member (alongside Iceland, Liechtenstein, Norway and Switzerland). The UK could attempt to join the EEA as an EFTA member. Under this plan the UK would be required to follow EU internal market legislation without being able to participate in its development or vote on its content. However, the EU is required to conduct extensive consultations with non-EU members beforehand via its many committees and cooperative bodies.

Under the EEA Agreement, certain policy areas are not apply to EFTA members such as: Common Agriculture and Fisheries Policies; Customs Union; Common Trade Policy; Common Foreign and Security Policy; direct and indirect taxation; and Police and Judicial Co-operation in Criminal Matters. This allows the EFTA members to set their own policies in those areas. Common Agriculture and Fisheries Policies, Customs Union, Common Trade Policy, Common Foreign and Security Policy, direct and indirect taxation, and Police and Judicial Co-operation in Criminal Matters. In order to access the internal market, EFTA countries must contribute to the EU budget.

Another option could be that the UK would use the Swiss model and seek to negotiate bilateral terms via a series of interdependent sectoral agreements. The Swiss agreements contain free movement for EU citizens. Interestingly, the Swiss immigration referendum of February 2014 voted narrowly in favor of an end to the “free movement” agreement by February 2017. If this path is chosen, Britain must keep in mind that the bilateral treaties between Switzerland and the European Union are all co-dependent. This means that if one is terminated, then all are terminated. Barring a compromise, Switzerland’s unilateral choice to end the “free movement” agreement by Switzerland could cause all EU and Swiss agreements to become invalid.

Despite the fact that many politicians had weighed in on how they think a plan should work, no real plan has been established.  However, it is very clear that membership rights require input from every individual member, and many few the Brexit vote as a snub and the UK’s failure to invoke Article 50 as a means of continuing to benefit from its membership in the EU for as long as possible.

Contact TransLegal with your questions concerning Brexit and how it may impact your business.


India’s Latest Foreign Direct Investment Rules

Francisco A. Laguna

Last month, India further relaxed its laws governing foreign direct investment in various sectors.  This article summarizes the more significant amendments to the FDI Policy.

Broadcast Carriage Services & Cable Networks

Foreign investment in Broadcast Carriage Services and Cable Networks is now permitted up to 100% under the automatic route.  Previously, FDI above 49% required Government approval. However, change of control of the Indian company will require prior approval from the Government unless the same is subject to approval by the relevant sectoral regulator.

Civil Aviation

100% FDI is now permitted in existing airports and air transport services. Government approval is required for FDI above 74% in existing airports and 49% in air transport services. There is some debate as to whether airlines operated by Indian companies which are majority foreign owned will be permitted to fly international routes, but this should be resolved in a short while.


Until now, Foreign direct investment in the defense industry has be permitted up to 49% under the automatic route and above 49% with Government approval if such higher investment was likely to result in access to technology within India. The Press Note clarifies that defense products include small arms and ammunition and confers discretion on the Government to consider any other reasons deemed relevant for granting approval for FDI above 49%. All other conditions continue as before.

Hong Kong Kinder Joy - Made in India.  By Okstartnow (Own work) [CC BY-SA 4.0 (], via Wikimedia Commons

Hong Kong Kinder Joy – Made in India. By Okstartnow (Own work) [CC BY-SA 4.0 (, via Wikimedia Commons

Foods “Made in India”

With government approval, 100% FDI is now permitted for companies selling food products wholly manufactured or produced in India, including sales through e-commerce.  This should allow for in-store cafés or shops in food courts and will add to the overall retail experience for Indian consumers.  Note, however, that the 100% FDI is only for foods manufactured or produced in India.  Foreign investors are hopeful that this liberalization will soon be applied to other food products.


While foreign investment in brownfield projects has been permitted up to 74% under the automatic route (it was earlier capped at 49% for the automatic route), the following new conditions are applicable to any investment in brownfield projects. These projects involve the purchase or lease by a company or government entity of existing production facilities to launch a new production activity.

  • Maintenance of production level of items falling within the National List of Essential Medicines for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI);
  • Maintenance of R&D expenditure for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI); and
  • Complete information on technology transfer, if any, must be provided to the relevant Ministry.

Private Security Agencies

The cap on FDI has been increased to 74%; FDI between 49% & 74% requires Government approval.

By Nazrila - Originally from en.wikipedia; description page is/was here, Public Domain,

By Nazrila – Originally from en.wikipedia; description page is/was here, Public Domain,

Technology Products

The new rules allow the Government discretion to relax sourcing norms for single-brand retailers that sell products using “state-of-art” or “cutting-edge” technology, in cases where local sourcing is not possible (Technology Products). The Department of Industrial Policy and Promotion (DIPP) issued Press Note 5 of 2016 Series on 24 June 2016 that states that sourcing norms will not apply for 3 years as of the commencement of business for such Technology Products. The Government’s approach of relaxing the norms, rather than providing a waiver, promotes its “Make in India” program.  It will be interesting to track whether FDI increases as a consequence of this provision, and, specifically, whether Apple and other tech companies will make FDIs in the country as a result.

All of the reforms discussed in this post are important and underline the incremental policy change which has long been hoped for. There is also a fair case to be made for the proposition that the FDI Policy is now fairly liberal and that the Government is open to considering proposals for FDI even more favorably where investment is coupled with capacity development and manufacturing.

TransLegal represents companies doing business in India in the biotechnology, foods and industrial sectors.  Call us with your questions related to doing business in India and how these new FDI rules may affect your business.

Long-Term Business Opportunities Await in Morocco

Francisco A. Laguna & Wojciech Kornacki

Morocco’s business and foreign direct investment opportunities are red hot. The World Bank reports that in the last 5 years, Morocco has been undergoing sweeping economic reforms which are expected to generate high potential growth in the country. Most recently, Morocco was listed in the top 48 most innovative economies in the world. The UK Trade & Investment Ministry reports that Morocco has been identified as a member of a group of “fast-growing nations described as ‘African Lions’.”

About Morocco

Map of Morocco Photo Credit: US CIA WF via Wikimedia Commons

Map of Morocco
Photo Credit: US CIA WF via Wikimedia Commons

Morocco is located in Northeastern Africa, between Algeria and Western Sahara. It is separated from Europe by the Mediterranean Sea. Spain and Portugal are its Northern neighbors. Its economy has been growing at the rate of approximately 4.5% since 2001. Its population of slightly over 33 million offers a qualified and relatively inexpensive labor force. Morocco also offers political and economic stability to potential investors – two key advantages – which prove elusive for other Northeastern African countries.

Strengths and Weaknesses of the Moroccan Market:

Morocco offers following strengths: (1) Strategic location between Europe and North and West Africa; (2) improving communication and transportation networks; (3) competitive labor costs; and (4) tax incentives and ease of repatriation for profits. Potential weaknesses include: (1) growing competition from non-EU countries; (2) corruption and bureaucracy; (3) informal economy; and (4) delays in implementing reforms. Despite the weaknesses, most experts agree that Morocco offers attractive growth and investment opportunities.

Free Trade Agreement

Moroccan government has prioritized the development of its renewable energy industry. This creates countless opportunities in infrastructure projects, safety, financing, security and other related industries. This picture shows solar cell panels in Eastern Morocco.   Courtesy of http://

Moroccan government has prioritized the development of its renewable energy industry. This creates countless opportunities in infrastructure projects, safety, financing, security and other related industries. This picture shows solar cell panels in Eastern Morocco. Courtesy of http://

Morocco is a signatory of the U.S.-Morocco Free Trade Agreement and other free trade agreements giving potential investors access to over 1 billion consumers world-wide. For U.S. exporters, this also means that almost all goods exported to Morocco are tariff free. According to the Moroccan Investment Development Company, Morocco has lower business taxes than China and Spain and lower export costs than Turkey and Egypt. Thus, smart and well-timed investment in Morocco may be less expensive, and has the potential to offer greater return in the future.

Solar and Renewable Energy Investment Opportunities

Morocco has recently completed Stage I of one of the world’s largest solar thermal power plants located at the edge of Sahara desert, near the town of Ouarzazate. Once the project is completed, Morocco will become a major world solar power. The new design allows the plant to deliver the energy at night as well. Recently, even NASA commented on the project.

Morocco is also heavily investing in wind and water energy projects. Direct foreign investment opportunities in renewable energy in Morocco will continue to expand in the years to come as Morocco is aiming to become energy self-sufficient, and eventually sell its energy to Europe.

Infrastructure Development Project Opportunities

Infrastructure projects as another investment opportunity in Morocco. In the last several years, Morocco has been spending billions of dollars to improve its transportation infrastructure to become more attractive to international investors. This includes expanding the high speed rail system, road system and electric power grid. The Moroccan construction industry is expected to grow at the rate of over 6% per year until 2020. Its proximity to Europe and ready access to many emerging markets in Africa make the country a regional project and infrastructure powerhouse, and US investors are looking at Morocco when exploring to expand in the region. Earlier this year, Renault and its partners announced that they would invest $1 billion in Morocco. Shell Vivo Energy, GlaxoSmithKline, Unilever, and many other companies already operate in Morocco.

Investment Opportunities in other Moroccan Industries

Morocco offers pristine beaches, Mediterranean climate, countless historic sites, and well developed and growing hospitality industry. In addition, its open skies policy has allowed many airlines establish direct flights to Morocco.  Courtesy of http://

Morocco offers pristine beaches, Mediterranean climate, countless historic sites, and well developed and growing hospitality industry. In addition, its open skies policy has allowed many airlines establish direct flights to Morocco. Courtesy of http://

The stock exchange in Morocco is the second largest in Africa and has recently partnered with the London Stock Exchange. This creates tremendous opportunities for banking, insurance, capital markets and public private partnerships.

The national Investment Development Agency reports that other sectors of Moroccan economy are also growing.  Between 2005 and 2010, the number of tourists visiting Morocco has increased by 3 million.

The new infrastructure, renewable energy and tourism projects also offer opportunities in fire safety, border control, surveillance, cyber security and greater education and training.

If you would like more information about investment opportunities in Morocco, contract TransLegal.

The Trans-Pacific Partnership Series: Donald J. Trump

Part 4

Francisco A. Laguna & Amy Turner

Today, we continue our series on the Trans-Pacific Partnership (TPP), focusing on the views expressed by Donald J. Trump, the presumptive Republican nominee for President.

The GOP has been historically pro-trade agreements.  The party’s platform says, “A Republican President will complete negotiations for a Trans-Pacific Partnership to open rapidly developing Asian markets to U.S. products.” However, Donald Trump surprised many last year when he broke with his party’s position and called TPP a “bad deal” that will “send jobs overseas.” Trump does not have a political record; therefore, we cannot examine past votes or actions, so let us examine his words.

In May 2015, a month before officially becoming a candidate for President, Trump was already taking a stance on TPP. Trump said, “Yet again, the politicians are allowing our president to reinforce the lack of respect countries like China and Japan now have for the United States. They will devalue their currency, exploit our trade agreements, continue to destroy our economy and put Americans out of work. Politicians are all talk and no action. Instead of fast tracking TPP, Congress should pass legislation that holds China and Japan accountable for currency manipulation. This would send a message to the world that there are consequences for cheating the United States.”

Trump continued to define his position when, on October 5, 2015, he asked, “Why are we striking trade agreements with countries we already have agreements with? Why is there no effort to make sure we have fair trade instead of ‘free’ trade that isn’t free to Americans? Why do we not have accompanying legislation that will punish countries that manipulate their currencies to seek unfair advantage in trade arrangements? Why has the Congress not addressed prohibitive corporate tax rates and trade agreements that continue to drain dollars and jobs from America’s shores?”

On November 10, 2015, he was asked about trade at the Fox Business Republican Debate. Trump laid out his stance, stating he is a “free trader;” however; he does not support the TPP. “The TPP is a horrible deal. It is a deal that is going to lead to nothing but trouble. It’s a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone. It’s 5,600 pages long. So complex that nobody reads it……  They passed it; nobody read it. And look at the mess we have right now. And it will be repealed. But this is one of the worst trade deals. And I would, yes, rather not have it. With all of these countries, and all of the bad ones getting advantage and taking advantage of what the good ones would normally get, I’d rather make individual deals with individual countries. We will do much better. We lose a fortune on trade. The United States loses with everybody. We’re losing now over $500 billion in terms of imbalance with China, $75 billion a year imbalance with Japan.


Donald Trump New Hampshire Town Hall, August 19, 2015, Pinkerton Academy, Derry, NH, by Michael Vadon - Own work, CC BY-SA 4.0

Donald Trump New Hampshire Town Hall, August 19, 2015, Pinkerton Academy, Derry, NH, by Michael Vadon – Own work, CC BY-SA 4.0

When given a follow up question concerning whether parts of the deal were “badly negotiated,” Trump further hardened his position, “Yes. Well, the currency manipulation they don’t discuss in the agreement, which is a disaster. If you look at the way China and India and almost everybody takes advantage of the United States, China in particular, because they’re so good. It’s the number-one abuser of this country. And if you look at the way they take advantage, it’s through currency manipulation. It’s not even discussed in the almost 6,000-page agreement…… you understand very well from the Wall Street Journal, currency manipulation is the single great weapon people have. They don’t even discuss it in this agreement. So I say, it’s a very bad deal, should not be approved. If it is approved, it will just be more bad trade deals, more loss of jobs for our country. We are losing jobs like nobody’s ever lost jobs before. I want to bring jobs back into this country.”

Recently, Trump doubled down on his view of the TPP. He penned an op-ed on March 16, 2016 stating, “The number of jobs and amount of wealth and income the United States have given [a]way in so short a time is staggering, likely unprecedented. And the situation is about to get drastically worse if the TPP is not stopped. One of the first casualties of the TPP will be America’s auto industry, and among the worst victims of this pact will be the people of Ohio. The TPP will send America’s remaining auto jobs to Japan.”

Like Senator Sanders and Secretary Clinton, Mr. Trump opposes the TPP, each based on different reasons.  Now that Senator Sanders has dropped out of the race, either Clinton or Trump (barring what may happen at the Democratic Convention in Philadelphia or the Republican Convention in Cleveland) will bring his / her own distinct view on trade and the TPP to the Oval office. What happens with the TPP and TTIP will very much be determined by what happens with the election. So stay tuned……………

Next week, we turn to the international perspective on the TPP.

Call TransLegal with your questions concerning the TPP or trade agreements in general.

The Challenges Facing Brazil’s Temer Administration

This week, we continue our two-part series on current political situation in Brazil.  Many thanks to our correspondent, Rodrigo Correia da Silva, for contributing these articles.

The current political scenario in Brazil is quite similar to that of 1992, after the resignation of President Fernando Collor de Mello, when then Vice President, Itamar Franco, assumed the leadership position. Some view this as a positive harbinger for the success of Michel Temer’s interim government to overcome the existing political-institutional and economic crisis.

By User:Jurema Oliveira -, Copyrighted free use

By User:Jurema Oliveira –, Copyrighted free use

The Itamar government was faced with an equal crisis, and it was able to lead the country into a period of economic growth and fiscal and social prosperity.  The Temer government must address a domestic and global downturn in the economy; it needs to overhaul the government, grappling with corruption and cronyism; and it needs to implement realistic and effective austerity measures.  Some of these actions, especially the overhaul of the country’s ministries, discussed in our post last week, are likely to wreak short-term havoc, especially for the regulatory sector.  Temer will need both popular support and the support of the 3 major political parties to succeed.  Ordinary Brazilians, many of whom opposed the large expenditures on hosting the 2015 World Cup and the upcoming Olympics, are hopeful that Temer’s reforms will, indeed, alleviate some of the economic issues they have been confronting.

The main similarity between Itamar and the current Temer government is certainly the economic crisis. During Itamar, Brazil was experiencing a troubled period when hyperinflation was at 1,100 % in 1992, reaching 2,708.55 % the following year, not to mention the total stagnation of the GDP. Temer, too, is facing challenges in the economic arena, while having to overhaul the political system.

Favela Vidigal in Rio de Janiero By Jeff Belmonte - Flickr, CC BY 2.0

Favela Vidigal in Rio de Janiero By Jeff Belmonte – Flickr, CC BY 2.0

It is noteworthy that both Franco and Temer are both members of the Brazilian Democratic Movement Party (PMDB), and the impeachment of Presidents Collor and Dilma were motivated or influenced by allegations of corruption and the inability / unwillingness to work with the National Congress.

At the end of Franco’s term, Brazil was on a path of economic recovery, which earned the country a deserved spot on the international stage.  Now, it is Temer’s turn to push the reforms required to regain the investment-trust of the international community.

To be successful, Temer will have to work closely with the National Congress as well as the members of his administration and cabinet.  His past political experience bodes well for Temer as does the fact that his choices for ministers are experts in their fields as well as politicians.

TransLegal will keep you updated on how the interim government fares.


How Will the Temer Adminstration Affect Brazil

This week, we begin a two-part series on current political situation in Brazil.  Many thanks to our correspondent, Rodrigo Correia da Silva, for contributing these articles.

Brazil’s President Dilma Rousseff attends the opening ceremony of the National Policy Conference for Women in Brasilia, Brazil, May 10, 2016. (Reuters/Ueslei Marcelino)

Brazil’s President Dilma Rousseff attends the opening ceremony of the National Policy Conference for Women in Brasilia, Brazil, May 10, 2016. (Reuters/Ueslei Marcelino)

Brazil has entered a tenuous political reality with the Senate’s impeachment of former President Dilma Rousseff, ending the 13-year rule of the left-wing Worker’s Party (PT).  The Senate’s final decision will be issued in 180 days, but it is highly anticipated that the Senate will uphold its initial impeachment decision.  In the interim, former Vice President Michel Temer will assume the presidency, and expectations are high for his administration. Economic recovery, combatting the Zika virus, maintaining security at the Summer Olympics and restoring “political face” are a few of the challenges confronting the Temer, and indeed, any successor administration.

Michel Temer is a skilled politician who, throughout his political career, has demonstrated an ability to reconcile varying interests, a much needed skill to confront the current political moment. His political dexterity arose from being a three-time President of the House of Representatives combined with the technical and legal knowledge he brings as a preminent Constitutional Law Professor and the fact that he has led Brazil’s largest political party, the Brazilian Democratic Movement Party (PMDB), for the past 15 years.

Brazilian President Michel  Temer (Wikipedia)

Brazilian President Michel Temer (Wikipedia)

The Temer administration will seek solutions to increase domestic and foreign investment to revitalize the stagnant economy, including resuming productive dialogue with the private sector. Concurrently, the new government will attempt to balance the national budget, and implement meaningful reform in such broad categories as taxes, social security, labor and political corruption. Temer will need to demonstrate concrete steps and successes, even limited, to fuel future investments.

The outlook, initially, is positive. Michel Temer, who does not intend to run for reelection in 2018, is likely to promote privatization and public-private partnerships and pave the way for major structural reforms for the country.

Temer will face challenges and on-going investigations alleging wrong-doing and financial improprieties, including Operation Car-Wash (Lava-Jato), operation Zelotes, and the Parliamentary Inquiry Committee investigation of deviations of monies from the National Bank for Economic and Social Development (BNDES) and state pension funds.  In addition, the State Accounts Tribunal is reviewing the management of the accounts of the Rousseff / Temer political campaign.  A negative ruling by the Tribunal could disqualify Temer from office and result in new elections.  On a practical basis, however, it is likely that the court will review the accounts of Rousseff and Temer separately, and a ruling is not expected before the end of Temer’s term.

With regards to foreign policy and international trade, Temer seems to understand that Argentina is back as a player on the world stage.  Argentina’s absence from meaningful participation during the Fernandez de Kirchner administration greatly benefitted Brazil; now, the two countries will be vying for the same foreign direct investments.  To be competitive, Brazil will have to demonstrate that it is capable of making true reforms.

Local elections will be held in October 2016, and it is expected that the Workers Party will lose ground.  This will affect the 2018 presidential elections, and political parties and forces will have to realign. The question is whether Brazil is ready to emerge as a stronger democracy and fight cronyism.

Restructuring Federal Government Ministries

Before assuming the presidency, Temer suggested changes to the structure of the federal government. These changes will now be immediate. Functions will be reassigned among existing ministries, some ministries will be downsized, and others will be combined.  Plans call for scaling down from 32 ministries to 22.

This restructuring will result in changes to the vast system of public employment and the at times overwhelming nature of the Brazilian bureaucracy.  As of yet, it is unclear how top tier and career government officials will be affected.  What is clear is that during the restructuring process, regulatory issues may become quite a nightmare.

By Mario Roberto Duran Ortiz - Own work, Public Domain,

By Mario Roberto Duran Ortiz – Own work, Public Domain,

Temer’s restructuring plans purport to prioritize the creation of ministries capable of implementing the changes to reorganize the country.  Temer’s cabinet is composed of experienced politicians with expertise in their fields, who (we hope) will make sound decisions and changes that are not based on political motivations.

Ministers will be selected from the political parties with the greatest number of seats in the National Congress. The PT, PMDB and Brazilian Social Democratic Party (PSDB) are the largest parties, which suggests that the chances of adopting new legislation, especially those that may be unpopular, are significant.

Most ministers are lawyers, economists and company administrators and also have political experience.  It is expected that they will play an important role in bridging the government’s current contentious relationship with many sectors of society and the National Congress, allowing for the construction of a positive agenda for the country.

The States with most ministers are Rio Grande do Sul and Pernambuco, each with 3 ministers, followed by Rio de Janeiro, with two.  Rio de Janeiro, which will host the Olympics in 2016, heads the Ministry of Sport.

Next week, we will compare the proposed agenda of the Temer administration with that of Itamar Franco, who took over after the resignation of President Fernando Collor de Mello.

TransLegal represents companies doing business in Brazil, including the establishment of foreign subsidiaries, the approval of genetically modified organisms for industry and food use and other regulatory issues.  Call us with your questions concerning Brazil and how the Temer administrations planned changes will affect your business.

Foreign Workers Guide to Avoiding Disaster during a Corporate Merger

United States Immigration Series Post No. 12

 Francisco A. Laguna & Rolanzo White

Picture this: you are a skilled Mexican citizen who is working for a United States company. For the holiday season, you and your family go to Mexico City, to spend time with your parents and upon return to the US, you are denied access because your H-1B visa has been invalidated because the employer that originally sponsored your visa is no longer in existence due to a merger. You work for the new, merged company, but the company that sponsored you is no longer your employer.

By Gulbenk - Own work, CC BY-SA 3.0,

By Gulbenk – Own work, CC BY-SA 3.0,

This denial of entry results from the fact that most work visas are employer-specific.  Therefore, changes in a company’s structure could affect the validity of a foreign national employee’s nonimmigrant visa status or a pending green card application. Determining whether a corporate restructuring affects the employer that filed the visa petition with the U.S. Citizenship and Immigration Services (USCIS) or Department of State (DOS) is essential. The consequences of a merger or acquisition depend upon the type of nonimmigrant visa the company’s employees hold. In this post, we focus on the H-1B visa because it is the most common temporary work visa and the rules applicable to H-1Bs are echoed by many of the other forms of visas. For the sake of comprehensiveness, non-immigrant workers normally fall within the H-1B, L, E and TN visa categories as well as on training tied to J-1 and F-1 visas.

H-1B Visa

The problem arises because an employee must have a valid H-1B visa annotated with the petitioning employer’s name.  In the event a company is absorbed by another entity during a merger, the petitioning employer, essentially, no longer exists.

By United States Department of Labor (DOL) -, Public Domain

By United States Department of Labor (DOL) –, Public Domain

H-1B visas are the most common temporary visa for U.S. companies that hire foreign national workers for specialty jobs. Workers are required to have at least a bachelor’s degree, and they must work in a specific geographic location in a specific position for a specific salary. When a company hires an H-1B worker, it is required to make an attestation to the U.S. Department of Labor (DOL) they will comply with the H-1B requirements. This attestation is made as part of a Labor Condition Application (LCA).

The USCIS requires an amended H-1B visa petition to be filed if there are any “material changes” in the terms and conditions of an H-1B worker’s employment or eligibility. However, USCIS does not automatically require the filing of a new LCA and amended H-1B petition where a new corporate entity keeps the employee on in the same position and accepts the LCA and H-1B requirements and obligations, in other words, becomes a “successor-in-interest.” Here, the successor-in-interest, must make available for public inspection a sworn statement that it accepts all the obligations and liabilities of the LCAs filed by the predecessor entity, a list of affected LCAs, their dates of certification by DOL, a description of the new entity’s actual wage system and the federal employer identification number (EIN).

By AgnosticPreachersKid - Own work, CC BY-SA 3.0

By AgnosticPreachersKid – Own work, CC BY-SA 3.0

The filing of the new LCA and must be done before the H-1B workers can work for the new company, or, in our example, return to the country legally. When there is a material change, like location change, then a new LCA or amended H-1B petition must be filed with DOL prior to the relocation of the employee in order to avoid filing an amended H-1B visa petition. Similar rules apply for L-1 (executives, managers and specialized knowledge employees), E-1 (treaty traders) and E-2 (investor) visas.

There are now expensive consequences for non-compliance with the requirement to notify USCIS of material changes, including:

  • At the federal level, the Department of Homeland Security is aggressively targeting employers for I-9 and work visa compliance audits; failed audits can result in significant fines and even jail time.
  • At the state level, new laws in dozens of states allow authorities to fine employers, revoke business licenses and eliminate access to state contracts for immigration law violations.
  • Employees on work visas are suing companies for negligence when employees fall out of legal status, have problems pursuing permanent residency, and face bars on coming back to the United States as a result of the companies’ actions.
  • Major companies now include strong immigration compliance provisions in their vendor contracts, violations of which can result in the termination of the contract in question.
  • Bad press that can impact the company’s economic performance and stock price.

These matters are often complicated, and there are strong laws protecting employees, even foreign workers. Call TransLegal with your questions concerning immigration filing requirements in the event of corporate mergers and acquisitions.

US Customs Reauthorization Bill Signed into Law

Francisco A. Laguna

On February 24, 2016, President Obama signed the Trade Facilitation and Trade Enforcement Act of 2015, H.R. 644 (Customs Reauthorization Bill), into law.

The law, which we summarized over the past two weeks, contains the most far reaching set of changes since the Customs Modernization (MOD) Act, including significant changes to the operations and programs of US Customs and Border Protection (CBP), new provisions for combating evasion of the antidumping (AD) and countervailing duty (CVD) laws, and the inclusion of brand new measures to protect intellectual property rights (IPR).

A CBP Officer directs a truck with a seaport container to an inspection area at a port.

A CBP Officer directs a truck with a seaport container to an inspection area at a port.

CBP officials have indicated the agency will be busy developing and implementing regulations for the law. Some key dates laid out in the law include:

Section 901 – De Minimis Level

This section amends 19 U.S.C. § 1321(a)(2)(C) to raise the de minimis threshold from $200 to $800. This amendment shall apply to merchandise imported or withdrawn from the warehouse for consumption on or after March 10, 2016.

Section 304 – Copyright Enforcement while Application Pending

Section 304 calls for a process to enforce copyright protection for marks after the filing of a registration application, but before the application has been approved and the registration is in full force and effect. These steps are to take effect by August 2016.

US Commerce Department.  www.commerce.govSection 421 – Enforcement of AD/CVD Orders

The Department of Commerce has been authorized to administratively investigate AD/CVD evasion and requires CBP to collect or preserve for collection AD/CVD duties owed on evading imports. These amendments are effective August 2016. Regulations to put the changes into effect are also called for by August 2016.

Section 303 – IPR Enforcement – Circumvention Devices

Section 303(a) expands CBP’s seizure and forfeiture authority to explicitly include unlawful circumvention devices, as defined under 17 U.S.C. § 1201(a)(2) or (b)(1).  CBP has to prescribe regulations implementing this process by February 2017.

Section 116 – Importer of Record (“Known Importer”) Program

Section 116(b) requires the Commissioner to submit a report to Congress no later than August 2016 containing recommendations for determining the most timely and effective way to require foreign nationals to provide customs brokers with appropriate and accurate information (comparable to that which is required of United States nationals concerning the identity, address and other related information), and for establishing a system for customs brokers to review information maintained by relevant Federal agencies for purposes of verifying the identities of importers, including nonresident importers, seeking to import merchandise into the United States.

As with all landmark legislation, the regulatory process is where the details will be provided.  While regulations may not be issued immediately, importers may still feel the effects of this law sooner rather than later. For example, CBP has been taking steps to increase enforcement of AD/CVD and IPR provisions in anticipation of the passage of the law using existing processes. Importers are likely to see the effects of CBP enforcement under current processes.

Contact TransLegal with your questions concerning the Trade Facilitation and Enforcement Act of 2015 / Customs Reorganization Bill.

US Passes Trade Facilitation and Enforcement Act

Francisco A. Laguna

 This week, we continue our summary of the changes to US trade law to be implemented by Trade Facilitation and Enforcement Act of 2015 (2015 Trade Enforcement Act) which passed earlier this month by the Senate.

Small Business and State Trade Promotion Programs (Title V)

Title V contains various provisions aimed at aiding small businesses in export promotion activities. For example, it requires further outreach to small businesses on the potential impact of new trade agreements. It also establishes a grant program to states to carry out programs such as foreign trade missions, trade shows, and other forms of marketing and training for small businesses. States will undoubtedly take advantage of this program, and smaller companies should look into it if interested in international sales.

Other Enforcement Measures (Title VI)

Title VI establishes a Trade Enforcement Trust Fund to be used by the United States Trade Representative (USTR) and other agencies to enforce US trade agreements and trade rights under the World Trade Organization (WTO) and US free trade agreements (FTAs). The trust fund could also be used for trade capacity building efforts.

By Kevin McCoy, CC BY-SA 2.0

By Kevin McCoy, CC BY-SA 2.0

Title VI also requires US Customs and Border Protection (CBP) and Immigration and Citizenship Enforcement (ICE) to institute certain measures to stop illegal honey transshipment; and requires that the two agencies train and employ sufficient personnel to detect, identify, and seize cultural property, archeological or ethnological materials, and other fish, wildlife or plants that violate US laws. Title VI also codifies the establishment of the Interagency Trade Enforcement Center (ITEC).

Currency Manipulation (Title VII)

Title VII addresses issues regarding currency undervaluation, a main thorn in the recent trade promotion efforts. Among other things, Title VII:

  • requires the International Trade Administration (ITA) to investigate alleged currency undervaluation in countervailing and antidumping duty investigations and provides a method for calculating the amount of undervaluation;
  • requires the administration to actively engage with those countries found to manipulate exchange rates in order to urge implementation of monetary policies that would address the issue;
  • sets criteria on what constitutes currency manipulation similar to existing International Monetary Fund standards;
  • creates an advisory committee for the US Treasury Department on currency issues; and
  • directs Treasury to take certain steps if it believes currency manipulation has occurred.
By Project Manhattan - Own work, CC BY-SA 3.0,

By Project Manhattan – Own work, CC BY-SA 3.0

The most contentious dispute involved competing proposals on currency manipulation that were not enacted in the final legislation, with the original Senate bill including a strict provision that would have enabled the US Department of Commerce to treat undervalued foreign currency as a prohibited government subsidy in countervailing duty investigations.



Renewal and Expansion of CBP Operations/Programs (Title VIII)

Title VIII of the Act consists of two parts. First is the US Customs and Border Protection Authorization Act, which formally establishes the US Customs and Border Protection, along with operational offices within CBP and the positions of the Commissioner and Deputy Commissioner. Although the Act provides for a number of name changes to the internal offices within CBP and structure of their leadership, it is largely a formal codification of the existing structure and role of the agency. In fact, Section 802 specifically affirms that CBP shall continue to carry out the functions, missions, duties, and authorities previously vested within CBP prior to the passage of this legislation, and all rules regulations and policies issued by CBP remain in effect.

The second part of Title VIII is the Preclearance Authorization Act of 2015, which authorizes CBP to operate preclearance locations in foreign countries, provided an aviation security preclearance agreement is in effect. The provisions of Preclearance Authorization Act of 2015:

  • set forth various reporting requirements to Congress prior to entering into a preclearance agreement with a foreign country to enable Congress to comprehensively assess the appropriateness of commencing the preclearance operations and monitor the resources allocated to preclearance locations;
  • incorporate certain security measures, including requiring Transportation Safety Administration (TSA) to prescreen passengers and their baggage if the foreign government has not maintained security standards comparable to the US, and prohibiting preclearance locations in foreign countries that do not routinely provide stolen passport information to INTERPOL or the United States; and
  • allow CBP to enter into cost-sharing agreements with the airport authorities (where preclearance locations are established) in foreign countries for preclearance operations costs, immigration services, and agricultural inspection services, enabling CBP to receive payments in advance of the incurrence of the costs or on a reimbursable basis.

Miscellaneous (Title IX)

Title IX covers a broad array of miscellaneous provisions, though “miscellaneous” may be a misleading description as some of the provisions were the most sought after changes advocated by the trade community. Among the changes provided for in this Title are the following:

  • By Henryvb at German Wikipedia, CC BY-SA 3.0

    By Henryvb at German Wikipedia, CC BY-SA 3.0

    raises the amount allowed to be entered on a “manifest entry” as de minimis from $200 – $800 (Sec. 901);

  • increases the time required for consultations with Congress on certain administrative actions involving international trade and requiring certain minimum time periods for consulting with business on such actions (Sec. 902);
  • enhances certain provisions of Chapter 98 regarding goods returned to the United States to both enlarge the scope and make them more user friendly (Sec. 904);
  • removes the entry requirement for certain bulk cargo residue returning to the United States in Instruments of International Traffic after export from the US (Sec. 905);
  • provides for numerous changes to the current duty drawback statute, including requiring certain substitution drawback determinations to be based on classification in the same 8-digit tariff heading, amending the requirements for establishing “proof of export” and certain time periods for filing claims, and providing for joint liability for the claimant and the importer (Sec. 906);
  • makes technical corrections to certain tariff classifications for recreational performance outerwear and to Additional US Note for Chapter 64 relating to certain protective active footwear (Sec. 912 and 913);
  • creates a trade preference for Nepal similar to African Growth and Opportunity Act (Sec. 915);
  • Allows for the implementation of Aisa-Pacific Economic Cooperation Agreement providing for duty reductions on certain environmental goods (Sec. 916);
  • adopts specific country of origin marking requirement for certain steel castings (Sec. 917);
  • extends the period for which certain customs fees may be charged and the rate charged (Sec. 920);
  • increases the penalty for the failure to file certain tax returns (Sec. 921); and
  • imposes a moratorium on certain internet taxes being imposed by the States or other localities (Sec. 922).

Contact TransLegal with your questions concerning the Trade Facilitation and Enforcement Act of 2015.

US Passes Trade Facilitation and Enforcement Act

Francisco A. Laguna

After more than two years of debate, last week, the United States Senate passed the Trade Facilitation and Enforcement Act of 2015 (2015 Trade Enforcement Act). The legislation contains the most far reaching set of changes since the Customs Modernization (MOD) Act. Of particular significance is the inclusion of brand new measures to protect intellectual property rights and to combat antidumping and countervailing duty violations, including a mandate that Customs and Border Protection (CBP) establish its own program for these purposes.

By U.S. Customs and Border Patrol

By U.S. Customs and Border Patrol

Surprisingly, the major provisions of the Act received almost universal support from the trade community. The House had passed the bill last year, but it got bogged down in the Senate because of an unrelated internet sales tax provision. While the provision remains in the final version of the law passed by the Senate, the Senate leadership in return has agreed to take up new Internet sales tax legislation this year. President Obama is anticipated to sign the legislation into law this week.

The 2015 Trade Enforcement Act makes some significant changes to the operations and programs of CBP, adds new provisions to the antidumping and countervailing duty laws, including new procedures to combat evasion of AD/CVD orders, and revamps the drawback laws.

This week, we begin a short summary of the more significant changes. We will continue our summary next week.

Trade Facilitation and Trade Enforcement (Title I)

Title I establishes a various trade facilitation and enforcement programs. It:

By WestportWiki - Own work, CC BY-SA 3.0,

By WestportWiki – Own work, CC BY-SA 3.0,

  • requires CBP to work with the private sector and other federal agencies to ensure that all CBP partnership programs provide meaningful trade benefits to program participants;
  • authorizes CBP programs, including customs modernization efforts such as the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS), also known as the “Single Window” approach to collecting trade data;
  • formalizes the Commercial Customs Advisory Committee (COAC) and the Centers of Excellence and Expertise (CEEs);
  • creates a National Targeting Center (NTC) within the Office of Field Operations that will gather data and assess risk on each of CBP’s Priority Trade Issues (PTIs): 1) agricultural programs; 2) antidumping and countervailing duties; 3) import safety; 4) intellectual property rights; 5) revenue; 6) textiles and wearing apparel; and 7) trade agreements and preference programs;
  • requires CBP to develop criteria for assigning importer-of-record identification numbers; and
  • establishes a new importer program that directs CBP to adjust bond amounts for new importers based on the level of risk assessed by CBP for revenue protection. CBP is required to develop risk-based guidelines and procedures to ensure increased oversight of imported products of new importers, including new non-resident importers.

Import Health and Safety (Title II)

Title II creates an interagency import safety working group, chaired by the Secretary of Homeland Security. The group is responsible for developing a joint import safety rapid response plan to establish protocols and practices that CBP, in conjunction with other federal, state and local authorities, must use when responding to cargo that poses a threat to the health or safety of US consumers. Title II also requires joint exercises with these entities and training for CBP port personnel in enforcement of import health and safety laws.

Import-Related Protection of Intellectual Property Rights (Title III)

Enforcement of intellectual property rights remains one of CBP’s highest priorities. Accordingly, the provisions of Title III will be one of the most scrutinized areas of the 2015 Trade Enforcement Act. Specifically, Title III:

  • authorizes and directs CBP to share information with rights holders so that they could help to quickly identify whether a product entering the United States is in violation of a copyright or trademark. Rights holders could even examine and test the merchandise;
  • authorizes CBP to seize merchandise if it is found to be in circumvention of IPR laws;
  • requires CBP to notify an injured right holder if they are included on an annually revised, CBP-maintained list (i.e., if rights are recorded with CBP);
  • establishes a National Intellectual Property Rights Coordination Center within CBP to coordinate actions with other agencies and conduct outreach to importers; and
  • calls for an increase in IPR enforcement personnel.

Enforcement of Trade Remedy Laws (Title IV)

The Act adds significant new provisions to deter evasion of antidumping (AD) and countervailing duty (CVD) orders. Directed largely at steel imports, the new provisions, called the “Enforce and Protect Act of 2015” are likely to be invoked frequently by US producers combating imports under an AD or CVD order.

U.S. Customhouse, 555 Battery St, San Francisco

U.S. Customhouse, 555 Battery St, San Francisco

In particular, the new law establishes a whole new procedure within CBP which allows US producers or wholesalers, unions, foreign manufacturers or exporters, or trade associations of a covered product to file an allegation that a party has entered covered merchandise through evasion. Importers beware!  As soon as CBP can get this procedure up and running, it is likely to be very active.

Once a complaint is filed and accepted, CBP is required to conduct a formal investigationwith specific deadlines.

CBP can issue questionnaires just like in a trade remedy cases to importers and foreign producers.

Failure to respond will result in “adverse inferences” regarding the alleged evasion.

If evasion is found, CBP can suspend liquidation, order payment of duties owed, and pursue an enforcement action.

The new anti-evasion measures of Title IV also include various directives for CBP to target and investigate potential evasion of AD and CVD orders, including setting up a new Trade Remedy Law Enforcement Division to more aggressively investigate possible evasion cases, and conducting aggressive auditing of firms at high risk. Failure to cooperate in an investigation by an importer or foreign exporter may result in a finding of evasion.

Contact TransLegal with your questions concerning the Trade Facilitation and Enforcement Act of 2015.