It’s All About Compliance

Part 1 – Value

This Alert is one in an occasional series of articles providing tips about various topics which arise routinely with import and export transactions. These tips are published with the intention to aid international traders in their ongoing efforts to get their declarations right the first time, and are based on situations we commonly see occurring. Whether it is reasonable care on the import side or not self-blinding on the export side, compliance is a key for many different reasons, including protecting your bottom line.

Given the ever increasing attention being paid by the U.S. government to compliance by companies of all sizes, and especially in light of the recent informed compliance letter sent out by CBP’s Regulatory Audit in Houston, TX, now is the time to review how to value goods correctly.

The same basic value code is used throughout the world, at least among all the World Customs Organization member countries, although most assess duty on the C.I.F. value of the imported goods, whereas the U.S. assesses duty on the F.O.B. cost of goods. While admittedly each country has its own interpretation and they vary a tad, the basics are: (more…)

Immigration Tips

By John E. Exner IV

10 tips to prepare for the most frequent immigration scenarios faced by startups:

World map created with passport stamps, travel concept

  1. If the company will be owned, in-whole or in-part by a foreign investor, immigration planning should start as early as possible – even before the company is established. There are visas available to foreign entrepreneurs who are investing a significant amount of money into a new U.S. business. This visa application process should be handled in concert with the creation of the business.
  2. If the U.S. business will have a foreign office (parent, subsidiary, or affiliate) the managers, executives, and essential personnel from the foreign office(s) may be able to travel to the United States on multinational transferee visas.
  3. If the U.S. business is recruiting from local U.S. universities and colleges, many of these candidates may be foreign nationals on U.S. student visas. These individuals may be eligible for at least one year of employment authorization in the U.S. following graduation.
  4. Make note that citizens of certain countries have access to specific U.S. work visas that are not available to other countries. Usually, this is the result of trade agreements and treaties between the U.S. and the specific foreign country.
  5. The most common U.S. work visa (the “H-1B visa”), is subject to an annual lottery. The government only issues 85,000 H-1B numbers each year, more than 200,000 petitions are filed each year for those available numbers. The government conducts a random automated lottery to select the cases that will be processed. As a result, identifying alternatives to the H-1B visa is increasingly necessary.
  6. Individuals who have previously held an H-1B visa may be eligible to “recapture” time on that prior visa. This is essential information, as it allows the individual to bypass the annual H-1B lottery.
  7. Individuals who have earned awards and significant recognition in their field may be eligible for an “extraordinary ability” visa. This visa is available to foreign nationals working in any field, provided they can demonstrate a significant level of extraordinary accomplishments and/or original contributions to the field.
  8. Immigration is not always employment-based. Many times, foreign national candidates have access to legal status and employment authorization through U.S.-based family members.
  9. U.S. work visas are often limited in duration and availability. Temporary immigration solutions are often accompanied by, or influenced by long-term immigration solutions and strategies for obtaining U.S. permanent resident status (a “green card”).
  10. Immigration is never a one-size-fits-all process. The majority of immigration cases are highly tailored solutions that accommodate specific needs of the company and the individual.

Corporate & Business Transactions Tips

By Bryan Wasser

Here are 5 tips for positioning the strongest possible partnership when starting your new company:

1. FREQUENT AND DETAILED COMMUNICATIONS ARE ESSENTIAL.
The most effective CEOs and CFOs are sophisticated communicators. They understand their role in managing the flow of information between the VC or PE firm and the other members of the management team. and can quickly communicate developments in the business to the VC or PE firm’s representatives. Investors expect their CEOs and CFOs to be straightforward and open about the challenges the portfolio company faces. what management is doing about those challenges and the likelihood of successful outcomes.

2.  MANAGEMENT MUST POSSESS A CONSTANT SENSE OF URGENCY.
VC and PE firms strive to foster an action-oriented culture with a bias towards crisp decision making. They expect their CEOs and CFOs to be willing to do the work rather than just manage the work. To that end. they often work with management to develop a list of key performance indicators or metrics which give both management and the board a general sense of the company’s health. In fast-growing companies. the organizational structure often lags behind the rapid needs of the business. so senior executives have to be entrepreneurial and self-starting. In essence. they are looking for executives who will treat the money they invested as their own and drive results. (more…)

Important New Guidance on Charitable Remainder Annuity Trusts

 

By David Wheeler Newman

The Internal Revenue Service has issued important new guidance that can allow a charitable remainder annuity trust (CRAT) to qualify under Internal Revenue Code section 664 in a low-interest environment.

Background

Section 664 confers substantial tax benefits on charitable remainder trusts that meet its requirements. These are irrevocable trusts that during their term distribute a formula amount to one or more non-charitable beneficiaries, with the remainder distributed to charity upon termination of the trusts. There are two allowable formulas. A charitable remainder unitrust (CRUT) distributes a fixed percentage of the value of trust assets determined every year. There are some allowable variations for CRUT distributions, but in general this means that distributions from a CRUT can go up or down from year to year, depending on increases or decreases in the value of trust assets. While CRUTs are by far the more popular of the two main varieties, some clients and donors prefer the CRAT, which distributes the same amount every year during its term, which is fixed at the time the trust is created and which must be at least 5% of the value of assets contributed to the trust. (more…)

Labor and Employment Tips

By Samantha E. Becker

Here are 10 employment tips to prevent labor-and-employment-tips-imageyour start-up from losing ground before it gets started:

  1. Make sure you understand the differences between employees and independent contractors and follow all legal requirements when it comes to wages, benefits and terms of employment. Distinguishing employees from independent contractors is complex and fact-specific (the IRS uses a 20-factor test!) and errors can result in costly litigation down the road.
  2. Don’t classify employees as salaried to avoid paying for overtime and/or other benefits. Most employees in a company should be paid on an hourly basis and even salaried employees can later try to sue for unpaid wages and overtime, penalties, and attorneys’ fees.
  3. You cannot pay equity to avoid paying minimum wages. Make sure you pay employees for their regular and overtime hours worked based on the rates set forth by state and federal laws. (more…)

Hanjin Shipping Sinks in Korea

With the bankruptcy filing of Hanjin Shipping having just occurred on the 31st, many of their shipping customers are only now beginning to feel the disruption to their supply chains and are trying to sort out how to get their goods moving. It would be reasonable to expect similar bankruptcy filings in some major countries such as the U.S. and at least one in Europe, but until that happens, here are some tips for getting your goods moving. (more…)

Don’t Show Me The Money

Massachusetts Pay Equity Law Has Implications for California and New York Employers That Seek or Use Applicant Wage History

By Samantha Grant and Erica Parks
August 23, 2016

The Massachusetts Equal Pay Act (“MEPA”) has prohibited employers from paying men and women differently for “work of like or comparable character” since 1945, nearly two decades before the federal Equal Pay Act (“EPA”) was passed and before any other state passed pay equity legislation.  This month, Massachusetts Governor, Charlie Baker, signed into law Senate Bill 2119 (“S.2119”), which makes several significant changes to the MEPA, most of which are similar to recent amendments to California and New York equal pay legislation.  Notably, however, S.2119 makes Massachusetts the first in the nation to prohibit employers from requesting or seeking an applicant’s salary history.  S.2119 can be read in full here.

Once S.2119 goes into effect, on July 1, 2018, the previously undefined term “comparable character” will be replaced by “comparable work,” which is defined as “work that is substantially similar in content and requiring substantially similar skill, effort, and responsibility and performed under similar working conditions.”  This new definition mirrors California’s recently expanded Fair Pay Act (“CFPA”), which broadened the scope of claims that can be pursued under the law from claims for jobs that require “equal skill” to claims for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” By comparison, New York Labor Law § 194(1) (“NYLL”) and the federal EPA require equal pay for “equal work.”

The MEPA currently permits variations in pay based on differences in seniority.  Once S.2119 goes into effect, however, employers can defend allegedly disparate pay practices by showing that any such disparity is based on: (i) seniority, provided that pregnancy, parental, family and medical leave does not reduce seniority; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; (iv) geography; (v) education, training or experience to the extent such factors are reasonably related to the particular job in question and consistent with business necessity; or (vi) travel that is a necessary condition of the particular job. By comparison, the CFPA and NYLL currently place a different burden on employers to justify wage differentials. For example, geography is not a defense under the CFPA.  Likewise, while pay disparities based on seniority, merit, or earnings measured by quantity/quality are permitted under both the CFPA and NYLL, any other factor must be job-related and consistent with “business necessity.” Similarly, both the CFPA and NYLL provide that an employee can defeat certain employer defenses by showing that an alternative practice exists that would serve the same purpose without causing a pay disparity. (more…)

ACE Allows for Stricter Customs Enforcement

First published by Journal of Commerce, August 2016

In the face of its recent reorganization and enhanced computer system, it was really only a matter of time before the trade community started to see Customs and Border Protection (“CBP”) better organize its enforcement efforts, and now the first tangible step has been publicly disclosed.

When the concept for the Centers for Excellence and Expertise was rolled out, it was logical to expect that CBP would combine the enhanced computer capabilities of the Automated Commercial Environment with information developed from the industry focused CEEs. That meant, we would eventually see CBP relying on computer analytics and internal expertise to help the agency pinpoint where to focus its enforcement efforts. Over the years, we had seen those with the most experience retire. CBP and Immigration and Customs Enforcement seemed to lose their ability to make serious fraud cases. Yes, criminal cases for trade fraud, involving for example for antidumping and export license violations, continued to be brought, but it has been a long time since we have heard about a really significant civil penalty. Sure, some smaller fish got caught, and many of them did some really dumb things. Others who got caught just plain cheated. Now, however, CBP has launched a round of “informed compliance” letters, which are really warning letters to the trade community. (more…)

Intellectual Property Tips

By Emily F. Evitt

businesswoman holding Light bulb lamp on blackboard background with copy space

Here are 10 ways to build a rock-solid foundation for your new
company and avoid constructing a masterpiece on top of quicksand:

  1. Make sure your company’s name isn’t already taken. As a starting point, search the name on Google and other Internet search engines. Then search the U.S. Patent and Trademark Office website (uspto.gov). Important: repeat this process each time you pick the name of a new product or service.
  2. Check if the domain name you want is available – if so, get it. Create Twitter, Facebook and Instagram accounts for your company, and start using them. (more…)

4 Things Beneficiaries Who Receive IRS Form 8971’s Schedule A Must Know

By Jacey L. Hayes

When someone inherits assets, he or she is supposed to have a tax basis in the inherited asset for income tax purposes equal to the “fair market value” of the inherited asset at the date of death. The IRS is concerned that it is losing billions of dollars due to improper basis reporting for inherited assets: that is, the executor reports the assets on the estate tax return at one value, and then when those same assets are later sold, exchanged, or transferred by the beneficiary, the beneficiary reports the basis at a higher value. To tackle this concern, all estates which file an estate tax return after July 31, 2015, also must now file, within 30 days after filing the estate tax return, new IRS Form 8971, and provide a Schedule A to each beneficiary. A beneficiary’s Schedule A must also be given to the beneficiary within the same time frame. (Note that for all estate tax returns filed between August 1, 2015 and May 31, 2016, the due date of Form 8971 was postponed to June 30, 2016, leading to a flood of recent filings.) (more…)