At the rate we’re going, we’ll soon be traveling with books and cassettes

IMG 1917

Let’s not go here again

As I watched the luggage carousel spin slowly around I was pretty well aware what I would see there – nothing, or at least nothing which belonged to me. We had barely made our connection in Frankfurt, after circling for hours, and the only thing which made it through to Philadelphia was a cat. I don’t even like cats.

No problem, right? We could just run out and buy luggage on the airline’s dime.

Or not. Airline liability for lost or damaged baggage on international flight is regulated by a treaty called the Warsaw Convention, which limits airline liability for checked baggage significantly. According to Delta’s website, that’s $9.07 per pound up to a maximum of $640. Normally the answer is simple – if it’s valuable, don’t check it. The proposed ban on laptops and tablets for flights to the US from Europe, however, adds a new wrinkle to that otherwise simple advice, since most business travelers don’t really have an alternative to traveling with a laptop. Most road warriors won’t be terribly happy about seven to nine hours of lost work time, to say nothing of that low-res airline entertainment. They’ll be even less happy if they can’t retrieve the laptop at the end of that long flight.

The bigger issue, of course, is security. A lost laptop means lost data, and lost data can result in all sorts of headaches depending on what’s actually on the laptop. While encryption can limit the damage, that still won’t compensate for the loss of productivity for business travelers who depend on their laptops for their daily work.

While business travel won’t stop, the laptop ban combined with other issues which make international travel more onerous may well hit the bottom line of airlines with international routes. It will also increase the interest in everything from insurance for lost luggage to rentals of laptops and similar equipment overseas (which brings with it additional security concerns). Some frequent travelers may even consider storing electronics at offices or apartments overseas, to ensure that they are able to get back to work quickly upon arrival.

In the grand scheme, however, Skype begins to look pretty attractive when the alternative is eight hours of airline entertainment or watching TV on a cell phone followed by a full cavity search on arrival.

Of course, you could always fly via Canada.

State of Incorporation

State of Incorporation

Alas, not the most popular state to incorporate in

Europeans often think that they are catching up to the US, at least in terms of harmonized and consistent laws, but in many instances our system is actually more federalized than that of Europe. Whereas you can now form a European corporation, US corporations are formed under the laws of a particular state, rather than under the federal (United States) law. Typically, that means you’ll have to decide between the state in which you’ll actually be headquartered or operating (assuming you know which state that is) and one of the states which has advantageous tax or corporate laws for corporate formation.

Traditionally, Delaware has been the first choice of most corporations because of its favorable tax and corporation laws, but other states such as Nevada, Alaska, and Wyoming have also been trying to get into the lucrative business of corporate services in recent years. If you’ll be operating completely within the border of a single state, you might as well incorporate in that state, but most German businesses are seeking to sell throughout the United States so a Delaware (or other law-tax state) corporation will be more advantageous. There is no equivalent to the European Corporation (SE) in the United States, so every US company will have to choose a state of incorporation.

Even more confusing, if you will be operating in a state outside of your state of incorporation you will have to file for authorization to do business in that state (or those states) as a foreign corporation. That’s right, a Delaware corporation doing business in California or even neighboring Pennsylvania is considered “foreign” for the purposes of state law, just as a German corporation would be, and may have to register as a foreign corporation. Although state laws regarding filing for authorization differ, it’s a safe bet to say that if you’ll have employees or physical assets based in a particular state you’ll be required to register in that state.

So, for example, if you form a corporation under the laws of Delaware, but will have your offices in New Jersey, you’ll form the corporation in Delaware and then file for authorization to do business in New Jersey. If you also have branch offices in California and North Carolina, you’ll need to file for authorization in those states as well. Filing for authorization in a particular state triggers other obligations as well, including the obligation to file an annual tax return and, usually, to file papers with the state relating to labor, taxes, and other fees. For any state in which you do not have a physical presence you’ll also need to pay a registered agent to accept mail and service of legal process on your behalf, which usually costs no more than $200 per year.

This is the first in an occasional series of posts on starting your business in the US.

New Green Card! Still Green!

Green Card

She’s having some well-founded second thoughts.

USCIS announced last week that the green card and employment authorization document (or EAD) would receive a makeover, in order to increase security and reduce the likelihood of tampering. The green card is granted to foreign nationals who wish to remain in the United States permanently, and who have passed through all of the (varied, but mostly lengthy) processes needed to become a permanent resident. The Employment Authorization Document, or EAD, is a document which is used to show that a foreign citizen is permitted to work in the United States.

The new green card remains largely green, and shows the Statue of Liberty. The EAD card will display the bald eagle and be red according to the USCIS, although they look a little more pink/purple to me. While the new cards will become available May 1, 2017, the USCIS will continue issuing the older-format cards for a while, in order to use up the existing inventory of card stock. Older green cards remain valid until they expire.

As a side note, I have to give them credit for that. For years, as a teenager, I cleaned the office of our local Congressman. At some point during that time the government clearly changed letterhead (as far as I can tell, it was a change from blue to black, that’s it). Either way, I ended up carrying out huge piles of pristine and unused stationary, letterhead, and envelopes to the trash for no sensible reason whatsoever.

Anyway, will have photos front and back, and will no longer display the individual’s signature. For more information about the green card, check out the USCIS webpage. Apparently, the cards were issued as part of the “Next Generation Secure Identification Document” project being carried out by the Department of Homeland Security, but I wasn’t able to find a single reference to that project other than announcements of the new green card.

Germany’s DeNIC offers (a bit) more privacy for some registrants

Whois screengrab

With the increasing focus on privacy in Europe, and ongoing challenges to the US-European “Privacy Shield” agreement, domain name registrants from Europe see domain names as (yet another) weak link in privacy rights. They wouldn’t be wrong in that – in order to protect domain name registrants in the case of the failure of a domain name registrar, all registrars are required to put the underlying registrant data in escrow with an accredited data escrow provider. Until recently, however, the only ICANN-approved data escrow provider has been the US company Iron Mountain, and as a result all of the agreements (and the underlying data) were subject to US law. That, of course, means they were subject to US law enforcement and civil litigation demands as well.

That has recently changed. According to heise online (in German), DeNIC, the German company in charge of the .de country level domain, has recently been accredited by ICANN as a third party data escrow provider for registrar data. DeNIC’s accreditation provides a European alternative to Iron Mountain, and provides some assurances that European data remains in Europe subject to European privacy laws. While that’s an improvement, domain registries must also escrow data, and there’s only a single provider for those services as well (can you guess who that might be?). DeNIC, looking to close that weak link in data protection, is actively seeking accreditation there as well.

While this particular service may not impact US business to any great extent, it does demonstrate an increasing interest in European alternatives under the current political climate. No doubt companies like XING (a German LinkedIn alternative) and UK online bookseller Wordery will seek to capitalize on increasing European concern over US service providers.

At the rate things are going, US disregard for privacy may create the European Internet champions that European lawmakers could not.

For more on DeNIC’s accreditation and continuing efforts, see this press release.

Of Cherry Blossoms and Business Cards

Japan

In my practice, I work with people from all around the world, but a large number of them come out of Europe, more specifically, Germany. While that has made me very sensitive to the cultural quirks of different European cultures, I’m not nearly as familiar with the dos and don’ts of Asian culture. That’s why, when I was asked to meet with a prospective Japanese client, I reached out to a friend and colleague for advice. His tips are below, for your reading pleasure.

  • Don’t be uncomfortable with silence. Japanese often pause for long periods, or sit in silence. It is crazy uncomfortable for a westerner.
  • Small grunts (mmm, mmmm) are not signs of agreement, but just I’m listening. The reverse is also true and can help with number 1.
  • Japanese occasionally close their eyes in meeting and look like they are going to sleep (and in large meetings many do sleep). It is not considered rude at all.
  • You probably read this but don’t put the business card away. When they hand it to you study it, and when you sit, put it in front of you. If more than one person comes, you line them up in front of you in the order the people sat (don’t make a stack).
  • Unless this is a very western Japanese person, he or she will want to establish a relationship with you before bringing you on board. They may say they’re hiring you, but you might see just little dribbles of work until you get a good relationship. Wine and dine and spend time with them, visit them, give them attention. The more comfortable they are with you the more biz you’ll get.

I found these pretty helpful, and some probably apply in most cultures to differing degrees.

For those of you in the Philadelphia area with an interest in things Japanese, the Cherry Blossom Festival (above, unfortunately this blog post is too late for that) is a great event. See the Japan America Society of Greater Philadealphia for more events.

Huge Crackdown on H-1B visas!!! Not really.

For a moment, it looked like the H-1B filing deadline was going to pass without much change from the previous administration. Other than a shot across the bow the Trump administration did little to indicate any real changes to the program. Yesterday’s announcements didn’t really change that in any substantive way, although they did add a new sense of concern over whether – and how – the administration would go after companies it perceives are putting US workers in a “disfavored status.” DoNotEnter

After all, the tests for obtaining an H-1B visa don’t really measure, or even attempt to measure, whether an available US worker was overlooked. Rather, the goal is to ensure that there is no wage incentive to hire foreign workers over similarly qualified US workers, the idea being that market forces would do the rest. In some sense, that’s a very Republican approach to regulation, and for some time it worked pretty well.

Since the late nineties, however, the H-1B visa program has become much more controversial. For many it’s seen as a vehicle to bring in cheaper workers with lesser qualifications to unfairly complete for US jobs. The tech industry, on the other hand, insists that these visas are critical for the US IT industry.

There’s no doubt that there is abuse in the H-1B program (and, as a result, the L-1B visa program as well), and that the program could readily be improved. There’s also little doubt that the pool of ready, willing, and qualified US workers looking to step into these positions is limited. Indeed, many of my clients, coming in from overseas to start doing business in the United States, have been extremely frustrated to find that the pool of qualified workers in their area is made up largely of other non-US workers for whom expensive and time-consuming visa applications are required. The program would definitely benefit from a balanced review by Congress and some smart modifications, as have been proposed by any number of practitioners and law professors. A good start might be limiting the use of H-1B visas and L-1B visas by so-called body shops, since those employers have the market power to push down H-1B wages significantly over time.

Unfortunately, that’s not what’s happening, and the administration’s ad hoc method of changing immigration law is sowing uncertainty while giving companies neither the time nor the tools to plan for change. Had this announcement been made in January, companies whose use of the H-1B visa was perhaps unnecessary or improper would have at least had the chance to test the US market and determine whether the non-US worker was actually needed. As with the travel ban, however, this most recent announcement comes after all of the applications have been prepared, checks have been cut and, frankly, most everything was already in the mail. As with the travel ban, that’s not fair to the companies or the people who are planning on those visas for their livelihood.

The quality of the answer depends on the question

People hate to pay lawyers, possibly even more than they hate to pay accountants and dentists. First of all, a lawyer’s stock in trade is essentially words, and Americans in particular don’t like to pay for words, whether it’s for online news or advice about a great business idea. Secondly, questions to lawyers seem to result in a lengthy screed which doesn’t answer the question, followed by a short but hefty invoice. As a result, many US businesses don’t have an ongoing relationship with a lawyer, and some don’t use a lawyer at all. A study by Legal Shield (pdf link) suggests that 60% of small businesses with some sort of legal issue will struggle through without the assistance of an attorney.
There are some valid reasons for that. Lawyers and other professionals can be very expensive, and sometimes the results are – shall we say – less that satisfactory. You can eliminate some of that frustration and expense, however, by following a few simple rules:

  • When you ask a question, provide enough context that the lawyer can understand the underlying transaction in as efficient a manner as possible. Thirty minutes spent summarizing the steps which caused the problem (or opportunity), along with a few key documents, can save hours of lawyer time.
  • Make sure you are asking the right question. If you have a one-line e-mail which ends with “will I have to pay tax?” or “can I do that?” then you probably haven’t provided enough information (see above) and you haven’t asked the right question. You know enough about your business to ask the most relevant, specific question, so don’t make your attorney guess at it.
  • That brings up another point – there should be a clear answer to the question “who is your attorney?” It may seem strange to have “an attorney” when you don’t have a legal issue, but an attorney who understands your business can more readily (and efficiently) answer questions as they arise, since that attorney already knows some of the context. That and, by recognizing issues before they become problems, the attorney can save you significant legal costs down the road.
  • Be a critical – but fair – client. If you get an answer you don’t understand, ask the lawyer to clarify the answer. If you get an answer which doesn’t have an actual answer, or at least a concrete recommendation as to how to proceed, ask for one. If you don’t understand why the cost is what it is, ask for a detailed report.

I’m not going to pretend that all questions can be answered efficiently or cost-effectively every time, even if you follow the above steps. After all, the law is messy, with lots of potential conflicts and complications, and sometimes the very fact you’ve omitted is the one which is crucial to getting the right answers. That being said, if you’ve asked a well-thought out question and provided the necessary context, it’s fair to expect a well-thought out and relevant answer, since that’s what you’re paying for. If you’re still not getting good advice maybe it’s time for a new lawyer. Remember, though, that time you spend up front will pay significant dividends down the line.

How about Estonian law with your morning cuppa’

DailyTimes screengrab

It’s like the Hotel California, you can subscribe any time you like but you can never leave.

It’s not often you start the morning with an international legal dispute, and that before one’s morning coffee. This morning, from the kitchen, I was treated with the dulcet tones of my wife arguing with the London Times about cancellation of her online subscription. It turns out they only accept cancellations from the US via passenger pigeon on odd Tuesdays which have a full moon, and then only when written in the blood of a recently slain unicorn. Ok, not really, but as we haven’t actually figured out how one successfully cancels a subscription, that may in fact be the cancellation policy. Pro tip – don’t subscribe to the London Times.

Anyway, the interesting thing about that kerfuffle is the degree to which the average consumer worldwide is entering into contracts with companies in other countries, ostensibly under the laws of those countries. As consumers, however, those individuals remain protected under the consumer protection and other laws of their respective countries (or, in the case of the US, an odd patchwork of federal, state, and local laws). As a result, even as simple transaction as a newspaper subscription or Facebook registration can give rise to significant legal cases with an international impact.

Many of those cases involve privacy and the EU-US privacy shield. Europe isn’t alone in its concern for the privacy of citizens, however, with a new decision extending the protections of Canadian Privacy to data disseminated outside of Canada (hat tip to Daniel Solove). While the US doesn’t really care as much (or perhaps at all) about privacy, there are laws like the Speech Act which attempt to protect US residents (in this case writers) from the effects of foreign laws which are against US public policy (in this instance, the right to free speech).

There are a host of other issues which arise from these contracts, however. Do companies like the Daily Times understand and follow US legal requirements like the Fair Debt Collection Practices Act or, in the case of selling (and upselling), the Telephone Consumer Protection Act? Even if they do, how does one collect a relatively small debt in a foreign country in an efficient and cost-effective way? In the other direction, Europe has extended its controversial “right to forget” worldwide, creating a compliance nightmare for Google and other big US tech companies, and an unresolved conflict for others without as much skin in the game in Europe.

The Internet makes international business possible from your kitchen table. What that means for public policy and protection for the consumer remains largely unresolved.

A cold wind on privacy

AMadison screenshot

Not just your moment; yours, Verizon’s, Amazon’s …

Standing outside in the chill of what passes for “spring” these days, with a cold breeze numbing the end of my uncovered ears (it’s SPRING for God’s sake), I listened to my fellow soccer parents discussing the merits of the Senate’s recent vote to rescind the FCC’s as-yet unimplemented rules on privacy for ISPs. Overall, I think most of the parents were pretty ok with the loss of some privacy in exchange for the perceived benefits of data sharing. Most of that had to do with the cool things technology can do when provided with access to data, like make sure your latté is ready before you actually arrive at Starbucks in the morning.

Listening, I was trying to think of why I’m not on board with that logic (other than the fact that I’m not a huge latté fan). Aside from the many concerning ways in which ISPs can and have used data, the bigger problem would seem to be that there’s no real guarantee that the data will remain with the ISP or their marketing partners.

First of all, big companies of all stripes are pretty terrible at keeping data secure. That means that, in addition to that cool relocation feature which allows you to pre-order a late on the drive to that early-morning soccer tournament, you may be letting hackers from the Ukraine into details about your life which may (or may not) allow them to hack into your bank accounts or determine the content of that highly sensitive e-mail you received.

Secondly, as lawyers well know, data of all types is discoverable in litigation, so those “innocent” late night visits to Ashley Madison may not be as private as you think they are. While much of that data is already available and discoverable from your e-mail provider or home computer, giving ISPs an incentive to keep and distribute that data certainly won’t improve matters any. Increasing the amount of data available also means more data available to the government, and while it’s nice to believe that only matters if you’ve done something wrong, that’s not always true. In Europe, the public and the courts have been fighting against mandatory data retention rules, even as the US arguably incentivizes the private collection of data.

For or against, there’s not much you can do to protect yourself against data collection – most Americans have limited choice in ISPs, and some have no choice at all. Short of running everything through a VPN, or simply not using the internet, it looks as though consumers have to get used to the idea that their traffic will be collected and shared by ISPs, the government, and pretty much everyone else who has access to it.

ESTA changes of status, or maybe you’re not going to Disneyland after all

ESTA Homepage screenshot

While most of the attention on the immigration front has been on the “travel ban” (or maybe not a ban, depending on who you’re listening to), there also appears to have been an increase in scrutiny throughout the immigration system. While reports of detention or increased inspection upon entry have increased, we are also hearing (mostly anecdotally) of increases in last-minute ESTA changes of status. Those changes – from approved to not approved – can wreak havoc on travelers to or through the US, and can result in significant costs due to rebooked or cancelled business travel or vacations.

For those who don’t know, ESTA, short for “Electronic System for Travel Authorization,” is a sort of pre-registration for travelers to the US who are not required to apply for a visa. These so-called “visa waiver” travelers apply for travel authorization online before traveling and generally receive a (relatively) prompt approval (as little as 4 seconds according to this blog). That authorization is good for two years. Unless, of course, it’s not.

Some unfortunate souls, either days before or even minutes before boarding their flight to the United States, find out that their ESTA status has changed, and that they will not be permitted to board a flight which stops in the US. That change can take place for almost any reason imaginable, or for essentially no reason at all, and likely reflects some sort of flag on the record which would indicate either that there may be a security issue or that the traveler is likely to remain in the US for longer than permitted. The options for appealing are very limited and often too slow to prevent costly interruptions in travel.

While there’s no way to prevent a last-minute change of status, travelers at an increased risk of additional scrutiny should consider applying for a B-visa for business or just to visit at their home consulate to help prevent any unwanted surprises. Generally, non-US citizens who meet any of the following criteria should seriously consider obtaining a visa before travel to or even through the US.

  • Individuals who have traveled to any of the countries which we’ve banned in the recent past, including Syria, Iran, Libya, Somalia, Sudan and Yemen (although I’d include Iraq for good measure)
  • Individuals with extensive travel throughout the Middle East in general, or who have resided for a period of time in the Middle East, particularly in countries which are less friendly to the United States
  • Individuals who have traveled very frequently to the United States, particularly for stays in excess of a few weeks.
  • Individuals who have been arrested, particularly for felonies or drug offenses

Other travelers should check their ESTA status before making reservation and again before leaving for the airport. Finally, while I’m not a huge proponent of travel insurance, travelers to the US, particularly those who meet the above criteria, might consider obtaining insurance which covers cancellations due to revocation of authorization to travel. Of course, as the new ban works its way through the courts things can and probably will change.