International Business

september 26, 2016

a n a d v e r t i s i n g s u p p l e m e n t t o t h e l o s a n g e l e s b u s i n e s s j o u r n a l

By MICHAEL BOSHNAICK AND CHAD BLOCKER

A fter years of Congressional inaction on immigration, in November 2014, President Obama introduced a num-ber of proposals that together would have paved the

way for significant reform of the U.S. immigration system. Although the U.S. Supreme Court recently struck down a key proposal that would have protected millions of undocu-mented individuals in the U.S., the Obama Administration is moving forward with a number of other immigration proposals. Among them is a mechanism, technically known as “Parole,” that would allow foreign entrepreneurs to come to the U.S. to establish businesses. After almost two years of waiting, on August 31, 2016, the Obama Administration issued the long-awaited details of the proposed entrepreneur rule. Specifically, it creates a temporary immigration pro-gram for foreign inventors, researchers, and entrepreneurs who are planning to establish a start-up business in the U.S. with substantial U.S. investor funding or with potential innovation or job creation.

This article provides an overview of the proposal, which will not become final until public comments are fully considered later in the Fall.

WHAT IS “PAROLE?”Parole is a technical term in immigration law that refers

to permission granted by U.S. Citizenship and Immigra-tion Services (USCIS) to an individual to enter or remain physically in the U.S. temporarily for a specific purpose, without being admitted in an actual visa category.

THE PROPOSED RULEUnder the new rule, the entrepreneur must have estab-

lished a U.S. start-up business in the three years prior to applying for Parole. The entrepreneur must have at least a 15% ownership interest in the startup, and must play an active and central role in the business operations.

The start-up must have received a capital investment of at least $345,000 from qualified U.S. investors or at least $100,000 in grants or awards from qualifying U.S. federal, state, or local government entities. If the foreign entrepre-neur only partially satisfies one or both funding criteria, he or she could show evidence of the start-up’s substantial potential for rapid growth and job creation.

Organizational investors must be a U.S. legal entity that is majority owned and controlled by U.S. citizens or Perma-nent Residents. Individual investors must be U.S. citizens or Permanent Residents. The entrepreneur’s investment would not count toward the investment threshold.

Once approved, the entrepreneur would be allowed to enter and remain in the U.S. for an initial period of up to two years to oversee and grow the business and would only be authorized to work for the start-up entity. Spouses and children would be allowed to accompany the entrepreneur to the U.S., and spouses would be eligible to apply for a work permit. An additional three years of Parole could be granted if it can be shown: that the entity continues to operate; that the entrepreneur continues to play a central role in the business; and that the business has created jobs, received substantial additional funding, and/or generated substantial revenue.

If at any time the start-up business stops operating or ceases to provide a significant public benefit to the U.S., USCIS could revoke the entrepreneur’s Parole.

OTHER OPTIONS?While the new Parole program is a welcome and

long-overdue mechanism to allow entrepreneurs to come

to the U.S., unfortunately it does not allow for an individ-ual’s long-term stay in the U.S. To that end, there are other options the entrepreneur may wish to consider. Those include permanent resident options such as the National Interest Waiver, which requires that the individual’s work is in the country’s national interest (economic and oth-erwise). In addition, the entrepreneur could consider the extraordinary ability petition, which requires a showing that the individual is extraordinary in his or her field. Yet another permanent resident option is the EB-5 program, which requires the investment of $1 million (or $500,000 if the business is in a high unemployment area) and the creation of ten full-time jobs.

Temporary visa options include the E-1 and E-2 visa categories, which result from bilateral treaties the U.S. shares with certain countries around the world. The E-1 visa is a Treaty Trader visa requiring the person entering the U.S. to carry on trade in goods, services and technolo-gy, principally between the U.S. and the individual’s home country. The E-2 visa is a Treaty Investor visa available to foreign nationals making a substantial investment in a U.S. enterprise. Those entering on an E-1 or E-2 visa may come as the owner, executive, manager, or as an essential employee. For the E-1 and E-2 visa, the trade or invest-ment must be “substantial,” which can be somewhat sub-jective but typically is evaluated based on the nature of the business and how much is typically required to establish such a business.

IN CONCLUSION…Providing an avenue for foreign entrepreneurs and

innovators to come to the U.S. to start a business is not only good immigration policy but also sound economic policy. While balancing national security interests, we encourage the government to do everything it can to promulgate a final rule that creates an entrepreneur Parole program that is efficient, user-friendly, and not administra-tively burdensome.

Michael Boshnaick and Chad Blocker are Partners at the Los Angeles office of Fragomen Worldwide. For more information about this subject please contact Michael Boshnaick at (310) 979-6825 or mboshnaick@fragomen.com and Chad Blocker at (310) 979-6818 or cblocker@fragomen.com.

New Entrepreneur Rule Gives Foreign Investors Another Immigration Option

Michael Boshnaick Chad Blocker

W O R L D W I D E

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56 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL SEPTEMBER 26, 2016

INTERNATIONAL BUSINESS

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A world of difference in immigration. From visas and work permits, to advisory services and corporate compliance, we work with each client to understand their business and immigration priorities. As the industry leader in immigration law, we’re here in Los Angeles working with individuals, investors (EB-5), families, small start-ups, mid-size local companies and large corporations in the state’s most prominent industries.

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W ith today’s reliance on technology and increased state of security awareness, international travel brings its own set of

challenges. Furthermore, American electronics often won’t work on international power outlets and location-based websites will usually display in the language of the country you’re in. With the help of Adam Bates, vice president of Insur-anceforTrips.com, here are five tips to help make international travel a breeze:

• Download travel assistance apps for your smartphone. These can include sites like the U.S. Department of State’s Smart Traveler app, which can help you find a foreign embassy, receive travel alerts and warnings, and help you stay safe in foreign lands.

• Download apps and save websites before leaving. Since overseas access can be complex, Bates recommends loading up on apps on your smartphone and saving relevant websites as favorites before leaving on your trip. Some apps Bates recommends are currency exchange cal-culators, navigation apps, translation apps, and travel review apps.

• Check your international coverage. “When preparing your trip, I recommend con-tacting your cellular provider and checking to see if you have voice and data coverage at your destination(s) as well as the additional cost,” Bates suggests. Often cell providers will allow you to switch to a more reasonable inter-national plan for the duration of your trip.

• Invest in a quad-band phone. If you travel often, consider finding a phone that will work with various types of SIM providers. This is also known as GSM technology, which works in many locations throughout the world, including Europe

and Asia. Tri-band phones will work in at least one network in these locations, but will be more limited than quad-band phones. Also, consider that some countries operate on different electricity from the States. You’ll not only need a converter to make your plug fit, but you’ll also need to check the voltage on your device to make sure it supports the voltage in the area you’re visiting.

• Plan for every contingency, including los-ing your laptop and cell phone. How would you access information on your local U.S. embassy? Bates provides travel insurance, as well as assis-tance, to those traveling abroad and advises

they have access to live assistance in the event they need it. Anything can happen to someone traveling abroad, including medical emergen-cies, natural disasters, and political situations. By being prepared, a small business owner can travel abroad safely.

• While planning your trip, keep in mind you may not have access to a store to meet your electronics needs. Before packing, make a list of every conceivable item you’ll need and check off each item as you pack it. Be sure to include all chargers and cables. If you have special devices designed only for use on your international trips,

leaving those in a suitcase specifically geared toward your overseas trips can help save time in the long run. Just be sure you test them several days before each trip so you can address any new problems before traveling far from home.

This article was provided by Concur, a leading pro-vider of integrated travel and expense management solutions. Founded in 1993 on the premise of help-ing drive costs out of businesses through innovation, Concur’s services are trusted by over 20,000 clients around the globe with around 30 million users. Learn more at www.concur.com.

International Travel for the Small Business Owner

NEW GUIDE IS DESIGNED TO HELP U.S. COMPANIES IDENTIFY COMMERCIAL ‘SMART CITY’ OPPORTUNITIES

Assistant Secretary of Commerce for Global Markets, and Director General of the U.S. and Foreign Commercial Service (U.S. Commercial Service) Arun Kumar today announced a the U.S. Department of Commerce has developed Smart Cities, Regions, and Communities: Export Opportunities (Guide) to assist U.S. companies to identify commercial Smart Cities opportunities during remarks at a U.S. American Chamber of Commerce in Singapore luncheon. A Smart City is one that leverages technology and data to become more energy efficient, clean, and green, while addressing citizen engagement, governance, and critical needs in education and healthcare.

“Smart Cities, Regions, and Communities: Export Opportunitiesis a guide designed to assist U.S. companies in competing for and winning business opportunities in the emerging Smart Cities space,” Kumar said to an audience of U.S. business leaders. “The Commerce Department has synthesized its Smart City activities into an Export Opportunities resource guide. Building on Secretary Pritzker’s Open for Business Agenda, this Guide should increase U.S. export opportunities and support American job creation by providing insights into new global opportunities and challenges through a deeper understanding of Commerce’s available resources.”

The Guide provides information on access to capital, trade promotion, industry sectors and Internet of Things along with a global calendar of events. It also showcases select U.S. government initiatives to inform and assist U.S. companies to play a greater collaborative

role in helping global cities address their urbanization challenges. It further profiles the Smart Cities initiatives of seven bureaus of Commerce, multilateral banks, more than 40 countries, and several U.S. private sector sponsor companies: AECOM, AT&T, CITI, Global Futures Group, Innovari, Microsoft, and 360 Water.

Kumar added that the resource guide will evolve as other U.S. Government agencies and U.S. companies continue their collaboration on Smart Cities.

Kumar is currently in Singapore leading nine U.S. companies on the Water Infrastructure Business Development Mission through the Association of Southeast Asian Nations (ASEAN) region. The region offers one of the world’s largest and most dynamic markets for American exporters. The region’s unprecedented pace and scale of economic development has led to increased demand for resources such as water.

The U.S. Commercial Service plans to highlight several regional countries and public-private sector smart initiatives at its upcoming Discover Global Markets: Building Smart Cities program later this year.

The International Trade Administration (ITA) is the premier resource for American companies competing in the global marketplace. ITA has more than 2,200 employees assisting U.S. exporters in more than 100 U.S. cities and 75 markets worldwide. For more information on ITA visit www.trade.gov.

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SEPTEMBER 26, 2016 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL 57

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58 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL SEPTEMBER 26, 2016

INTERNATIONAL BUSINESS

In terms of business, the world is constantly getting smaller. And the rules, playing field and best practices for success in international

commerce game continue to change – seem-ingly by the day.

To shed more light on the ever-evolving global landscape and the exciting and unpre-dictable realm it represents, the Los Angeles Business Journal has turned to one of the lead-ing experts on international business – Goran Lukic, Director of the International Services Office for RSM US LLP. Here’s how Lukic answered our questions.

u Of course, one of the biggest pieces of news on the international scene is Brex-it. What is the impact of Brexit on the middle market?

LUKIC: Once the separation is final, the depre-ciation of the currency should boost exports via the trade channel for manufactured goods and financial and insurance services, which should partially offset the loss of economic ac-tivity elsewhere. You should expect more price competition if your competitors are in the UK, and pricing pressures on your business/prod-ucts/services. If your client base is in Europe, from a UK perspective, services cost will in-crease. This will require a large number of free-trade agreements with the other 27 members of the EU, the U.K.’s largest trading partner, in a relatively short period of time. It is possible that, after a modest period of contraction, and as the economy shifts to a lower growth path, forward-looking policymakers may choose the opportunity to put in place reforms in entitle-ment spending, regulation and taxes that will result in a more efficient allocation of capital, thus spurring growth.

u How does BEPS compliance affect middle market companies globally?

LUKIC: While smaller MNEs will not need to comply with all of the disclosure requirements resulting from the BEPS Project, they will still have to deal with the same substance and international tax changes that affect other companies. They may even need to restructure operations. Furthermore, the impact of BEPS is broader than just tax. Its impact can be felt across finance, treasury and geographies, and implicates compliance, controversy and M&A deals.

Businesses doing business in foreign coun-tries need to track what is happening in each jurisdiction in which they operate. Companies should take a look at their global operational and tax footprints, engage in strategic plan-ning in order to be flexible enough to adapt to specific BEPS driven changes and evaluate current systems in light of preparedness for compliance obligation changes.

u What are the top risks facing middle market global companies?

LUKIC: The economic slowdown in China is sharper than what is indicated by official statistics. We’re seeing significant outreach to secondary markets, such as Indonesia and India, as costs increase in China yet growth slows down. The People’s Bank of China (PBOC) faces a choice between stabilizing growth and stabilizing the value of the yuan. We anticipate that it will choose growth via lower rates and a cheaper currency.

The Brexit holds economic risks that could result in political and economic retaliation from

the EU that might result in tariff and non-tariff barriers limiting UK exports to the EU.

Also worth mentioning are the global oil markets. The inability of oil to find a price floor raises concerns about a global growth recession based on a combination of oversupply and fall-ing demand. Oil-producing economies, eager to retain market share, continue to increase supply when the marginal cost of a barrel of oil already exceeds the open market price.

u How does India’s foreign direct investment affect middle market compa-nies?

LUKIC: In the midst of an uncertain global eco-nomic outlook, India is emerging as the new global economic hotspot. The Indian economy is estimated to grow at 7.6 % in financial year 2015-16 with a gross domestic product of 8 trillion (PPP basis) and is expected to grow at 7% to 7.75% in financial year 2016-17, making it the fastest-growing major economy in the world. As businesses confront a flat top line and falling bottom-line thanks to a slug-gish global economy, there is a greater need for internationally-active businesses to seek newer pastures. India represents a significant oppor-tunity for US and global businesses. There were major relaxations in India’s foreign direct investment (FDI) regime in November 2015, and likely to be further changes this year. We think India is certainly a place to look at for expanding operations as well as market share

u Argentina is considered to be a more stable economy than many other foreign nations – how does this impact middle market companies?

LUKIC: An initial series of crucial reforms has put Argentina on the path toward obtaining easier access to global credit, a significant ben-efit to that country’s middle market business community. The President’s decisions to adopt a free-floating currency regime, which has resulted in a de-facto 35 % devaluation of the peso, and to reach a $4.65 billion agreement with foreign creditors, represent a pivot in

Argentina’s domestic policy. These decisions bring to an end a nearly 15-year period of economic havoc within the economy. While the success of the reforms isn’t guaranteed, and further steps need to be taken to put the budget on a more sustainable path, one that may temporarily increase economic inequal-ity, they represent the best chance to reverse the damage done since the 2001 debt default. The reforms will also increase trade compet-itiveness and set the stage for the re-entry of Argentina back into the global commercial community.

u What is the risk around the negative interest rate policy?

LUKIC: Risks to the financial sector and the middle market via negative interest rate policies cannot be overstated. A negative interest rate policy would cause issues with tax planning for middle market firms. Under such conditions, middle market firms would likely turn to making prepayments on taxes and utilities to avoid the costs of holding cash. Under a framework of such policies, the benefits are limited but clear. Lower real rates then stimulate overall economic activity through the credit channel and trade channel via devaluation of the domestic currency and an improvement in competitiveness for do-mestic exporters. The risks around the policy, however, are asymmetric and fall under four general categories – avoidance and hoarding; policy alignment; distortion of markets; and asset bubbles.

u How do companies protect themselves in terms of money exchange when deal-ing with foreign companies?

LUKIC: US companies are increasingly dealing with foreign companies. We see this with small and mid-sized business becoming more global today than ever before.

This globalization exposes companies to fluctuating F/X rates. There are many factors that cause fluctuation, all of which are beyond a company’s control, but can have a material

impact on a company’s bottom line and long term viability.

Companies need a sound corporate F/X risk management strategy. They need to develop an understanding of exposures to fluc-tuating rates as well as the options available to mitigate risk. Many companies that do this successfully rely on specialists for advice and execution.

Proactive risk management is important especially in times of increased volatility. The June 2016 Brexit vote is a prime exam-ple. Overnight, the unexpected outcome of the British vote caused GBP to fall by over 12% against USD. Over the past 12 months the range was 20%.

u Describe some of the typical tax implications that international companies expe-rience.

LUKIC: One of the beauties of doing business internationally is discovering all the creative ways that governments find to tax goods and services. You may seek to

outsource services from Country X to a lower cost jurisdiction, but Country X considers that “exporting jobs and services to another country” and will tax those outsourced services at 35%.

Also when staffing new foreign operations, keep in mind, your definition of a “foreign contractor” may be a foreign country’s defini-tion of an “employee.” So consult with your international tax expert to craft a job descrip-tion and duties that don’t inadvertently create a “permanent (and taxable) establishment.” In other words, don’t hire a “contractor” in such a way that he/she will inadvertently become your first “local employee.”

Companies should also develop a defensi-ble transfer pricing policy. Failure to maintain documentation proving intercompany trans-actions are conducted at arm’s length could result in substantial penalties.

u What resources should be pursued by a company that is looking to expand internationally?

LUKIC: Let’s define “resources” in terms of “who should be at the table” rather than financial resources. Resources to bring to the table include legal, international tax planning, ac-counting, HR, Sales & Marketing, Operations and Supply Chain. They could be internal or external. Regardless of the reason for entering a foreign country (i.e., my client told me that we need to be there), a cost-benefit analysis is essential. Outside marketing resources can help a company create effective marketing strategy and understand “what is the upside.” Inside marketing can assess to what degree cur-rent clients can be leveraged by sales or intro-ductions. International tax expert during this phase is vital to analyzing the ITAX implica-tions associated with expansion. A company should call on a lawyer and an accountant to ensure that risks are being mitigated properly. Finally, a management consultant can help with assessing the overall pluses and minuses that you’ve identified along the way.

For more information about RSM, visit www.RSMUS.com.

A Look at International Business: Q&A with the Expert

GORAN LUKICDirector of International Services OfficeRSM US LLP

‘One of the beauties of doing business internationally is discovering all the creative ways that governments find to tax goods and services. You may seek to outsource services from Country X to a lower cost jurisdiction, but Country X considers that “exporting jobs and services to another country” and will tax those outsourced services at 35%. Also when staffing new foreign operations, keep in mind, your definition of a “foreign contractor” may be a foreign country’s definition of an “employee.”’GORAN LUKIC

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