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

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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.

How will the new H-1B rules impact German companies?

Zeit Online recently ran an article about announcement by the Trump administration that H-1B visas will be more closely screened than before, and that the focus on protecting US workers will increase. While these changes will (eventually) impact some companies, particularly in the tech area, many German investors will be impacted only indirectly by changes to the H-1B program.

Most small to mid-sized German companies (the so-called Mittelstand) look to two other options for their personnel needs in the USA – the L visa and the E-visa. Neither visa has a separate mechanism to protect US workers because of their limited scope and purpose, and because other limitations (such as specific qualifications or business requirements) limit their use. Neither visa has been subject to the same level of alleged abuse as the H-1B visa (although the L visa has suffered some collateral damage), and thus far neither program has been subject to the same level of animosity from the Trump administration.

The L-visa allows current or recent employees of a German company to be transferred to a US subsidiary or affiliate if they meet certain qualifications. Since the visa is for the transfer of an existing employee, and is to further the exchange of knowledge between related companies, typically only a relatively small number of people can qualify. As a result, there should be little threat to US workers on a larger scale, who wouldn’t have the knowledge necessary for the position anyway since it is specific to the transferring company.

The E-visa allows German companies who trade extensively with the US (E-1) or invest in the United States (E-2) to hire a German national in the US to oversee that trade or investment. The idea is that the investment or trade would not happen without the assistance of someone whom the investor trusts, or someone who has at least the same cultural background as the investor/trader. Since the program is limited to nationals of a specific country with specific qualifications, the overall risk posed by the program to US workers is also limited.

This is not to say that the kerfuffle over H-1B visas doesn’t impact German companies at all. First of all, when H-1B visas become difficult to obtain the strain on other visa categories becomes much greater. The L-1B visa for non-managerial workers in particular has been utilized by companies who can’t obtain enough H-1B visas, often in ways which weren’t really intended uses for the visa. As L-1Bs become more difficult to get, more employers seek to obtain the more preferable L-1A (for managers), which increases scrutiny of that category as well. Not surprisingly, all of the extra scrutiny in the L category makes the E-visa a more attractive option for German companies which, in turn, makes those more difficult to obtain.

Of course, German companies who have already managed to establish a subsidiary in the US (especially in the IT industry) often find that their help wanted ads are answered by foreign nationals, who in turn require a visa (often an H-1B) for employment. As one of my clients once mentioned to me, the German headquarters was not at all happy about having established a US entity at great effort and cost, for the purpose of having an “American” presence, only to turn around and hire Indian nationals and spend money on additional visa applications.

Overall, German companies with a solid business plan and a real need can still obtain the visas they need, although with a little more effort and scrutiny. So far, most (but not all) of those German nationals can still enter the US without too much trouble, although sometimes with more scrutiny and effort there as well. The bigger question for the US is whether the constant barrage of bad news and border control horror stories will make Germans reconsider investing in the US at all.

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.

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.

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.

Blocking the ad blockers

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Munich (but not the appellate court)

Advertisers don’t much like adblockers, and publishers in particular see them as a drain on revenue necessary for the production of content.

One of the most popular ad-blocking plugins is the not-so-cleverly-named Adblock, by the more cleverly named German company Eyeo GmbH, based in Cologne. According to a recent report by German IT news portal heise online, a recent attempt by three German media outfits to take Adblock offline has met with skepticism by Munich’s appellate court. The plaintiffs (which include my “other” hometown newspaper, the Süddeutsche Zeitung, threw everything they could at Eyeo, from copyright infringement to antitrust, but the court doesn’t seem to have bought into it. At issue, among other things, is the “whitelisting” process which allows Eyeo to make money on blocked ads.

This decision may vindicate Eyeo’s partial loss against Axel Springer, and follows a win in Hamburg against Spiegel Online. Either way, it looks as though efforts to block the adblocker will make their way to Germany’s Supreme Court in Karlsruhe sometime next year. Having failed in the courts before, however, German media isn’t putting all of their eggs in one basket. In addition to technical measures, the industry group for German newspapers is also pursuing the legislative route to see off Adblock.

Efforts to block Eyeo in France also seem to have faded, and in the US there has been little in the way of legal action against ad blocking software, probably due to different antitrust and competition laws. Thus far Eyeo has won more of these battles than it has lost, so adblocking will remain a thorn in advertisers’ sides for some time to come.

EU votes to impose restrictions on US travel

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While the big news in US travel has been President Donald Trump’s travel ban, there are indications that travel to the US has become more difficult for travelers from all around the world, including valuable trading partners like Western Europe and Asia. While much of that has been anecdotal, reports of overzealous border controls and immigration raids would appear to be impacting travel to the US. The Economist reported that searches for flights to the US dropped 17% since Trump became president, with business travel dropping 3.4% in the week following the order. Based on our office’s experience, travel to the US, even for business travelers from Europe, has become a more unpredictable experience than before.

Now it looks like the EU is preparing to make American travelers to Europe share in the pain. According to a report in the Independent, the EU has passed a non-binding resolution recommending that US citizens no longer be permitted to travel within the EU visa-free. If implemented, US travelers could be forced to apply for visas for travel within Europe within a little over one years’ time. The EU has also been considering a registration requirement for US travelers to Europe which would presumably be similar to the US ESTA program. While both changes have been under consideration for some time, the timing certainly suggests that US policies have bolstered support for actions which might otherwise hurt the European travel industry.

Whatever the long term results of this resolution, business travelers from both sides of the Atlantic can reckon with more bureaucracy and less flexibility when planning travel, at least until tensions between the US and EU lessen. Travelers to the US, even from visa waiver countries, should consider applying for a visa before traveling, particularly if they’ve traveled to the Middle East or other areas with connections to terrorism.

The Basics of US Employment Law Part III: Vacation Time

This blog in the US Employment Law series focuses on vacation time.

One of the key differences between United States employees and employees in most of Europe is the amount of vacation time employees have come to expect. American employees think that four weeks vacation is extremely generous. Europeans, on the other hand, commonly enjoy four or more weeks of vacation even at entry-level jobs, and many European countries mandate a minimum amount of vacation time.

In the US, there are no federal laws mandating how much paid time off an employee must receive. Absent a collective bargaining agreement or other employment contract, most US employers do not have to offer any paid time off to their employees. However, some local laws mandate a certain amount of paid time off, including my home city of Philadelphia, which requires employers with a minimum number of employees to offer a certain amount of paid sick leave. There are also laws governing unpaid time off, such as the federal Family and Medical Leave Act. So employers should be sure to check with their legal counsel about their particular requirements.

It is also important for employers to understand that although they may not be legally required to offer any paid time off, a certain amount of paid time off has come to be expected in the US as a matter of practice. One might say that vacation time in the US is largely governed by custom. Most salaried (i.e. non-hourly) employees expect to receive one to two weeks of paid time off per year. This paid time off may be in the form of some combination of vacation time, sick days, and personal days. As employees advance in their careers, they expect to receive more vacation time. In general, it is customary for employees to receive between two and four weeks of vacation time per year, depending on their level of experience and years of service, with more senior executives enjoying more generous paid time off packages. Most entry-level jobs provide up to two weeks vacation. Six or more weeks of vacation time is generally reserved for the most senior executives – those who have worked hard, proven their loyalty, and are being rewarded towards the end of their career.

A common problem multi-national companies face is when they bring over an employee from Europe to work in the US office. The European employee often expects to continue to receive her four to six weeks of vacation. This, however, may not go over too well with her US colleagues working in the same office at the same level, but who are only getting two weeks of vacation. Employers need to be sensitive to this potential land mine.