Update on What You Need to Know About Exporting to the USA: Logistics, Customs and Legal Options

Canadian construction companies possess a unique opportunity to capture market with relative ease in terms of transportation and logistics. The U.S. can be easily accessed from many land ports of entry. This makes it a desirable location to expand your service area. Our goal is to provide a series of scenarios and options in order to successfully expand your business into the U.S. This includes an overview on what you will need to know in order to bid on projects in the U.S. Once you obtain the bid you will also need guidance on the next steps.

Long Terms and Short Term Strategy Planning

Creating your realistic goals and developing your immigration strategy around those goals will lead to the smoothest transition into the U.S. We can assist in the creation of a business plan that will not only help with immigration, but with acquiring loans and other funding as well.

A few key questions to begin the business plan are:

1. Do you currently have clients/projects in the U.S.?
2. Where do you intend to locate the head office?
3. How many workers will you need?
4. How will you obtain them? (Employ or Subcontractor/Labor broker)
5. How many managers do you need?
6. Can you transfer managers from Canada?
7. Are there a proprietary processes or procedures you use?
8. Will you keep your Canadian operations open?
9. Will you establish a company in the U.S.?
10. When do you intend on making your move to the U.S.? (Timing)

In order to execute on a project or contract you will need the staff, expertise and managers in place in order to accomplish complete and on-time results. Illegal and undocumented immigrants were once the source of construction labour in the U.S. Since 9/11 the former INS was replaced by U.S. DHS. This new government agency, Department of Homeland Security, is just that. The focus has shifted from Immigration and Naturalization Services to Security focusing on keeping the U.S. safe from terrorists and the workforce safe form illegal and undocumented aliens.

The U.S. Commerce Department figures show a 67% decline in immigration to the U.S. from Mexico from 2006 to 2013. Employers’ use of the E-Verify online system for verifying employment eligibility has risen from almost nothing in 2001 to more than 27 million employment checks last year. The cost of a non-compliant audit can be devastating to an employer. The penalties range from first time offenders paying $375 per undocumented employee to $3,000 and jail time for pattern offenders.

1.      How an Immigration Downturn Has Contributed to the Construction-Worker Shortage http://blogs.wsj.com/economics/2015/09/21/how-immigration-has-contributed-to-the-construction-worker-shortage/

2.      Obama’s Immigration Plan Is a Game Changer for Undocumented Construction Workers https://newrepublic.com/article/120500/obamas-immigration-plan-will-help-undocumented-construction-workers

Immigration Options

Immigration options for those in the construction area revolve around the individual’s job duty within the organization. The most common status categories and work permit options for those in the construction field are:

B-1 Business Visitor

H-2B Temporary Worker

L-1 Intercompany Transfer

TN NAFTA Professional

E2 Investor

Permanent Residency

Each option has unique characteristics. Some options involve in person interaction with Immigration Officials and others involve no human contact at all. The options listed as “border” are benefits that are implied while crossing the border or obtained through interaction with a border official. The options listed as “service center” will need to be applied for at a particular filing office and do not require in person interaction. Some categories allow for you to make the choice of how to file. There are circumstances where one method may be more beneficial than the other.

B-1 Business Visitor (Border)

As Canadians, your access points to the United States are typically over a bridge or through the airport. Due to the North American Free Trade Agreement (“NAFTA”), when an Immigration Officer is finished asking their series of questions and they are satisfied that you are entering as a visitor (for pleasure or business) you are granted entry and sent on your way. You are typically not issued a formal document for this status and it is therefore known as “implied status.” Your implied B status gives you a valid period of authorization into the U.S. for up to 6 months but the actual period of admission will be for a period of time which is fair and reasonable for completion of the purpose of the visit (and therefore may be less than 6 months).  After 6 months, you will begin to accrue unlawful presence. There are severe penalties, including being barred entry to the U.S.

It is important to know what you can and cannot do while in the U.S. in B-1 status. Business visitor status is not intended for extended, long-term activity. It is your burden to prove that your entrance is for a definite and specific activity. It is permissible to conduct business activities on behalf of a foreign employer, but no salary may come from a U.S. source. In some cases, you may receive reimbursement for reasonable incidental expenses incurred while in the United States.

The B-1 visa is intended only for business activities that are a “necessary incident” to your business abroad. Necessary Incidents have been known to include: attending meetings, consulting with associates, engaging in negotiations, taking orders for goods produced and located outside the United States, attending conferences, and researching options for opening a business in the United States.

The threshold for violating B-1 status is when the activities fall into the range of what would constitute “employment for hire.” Basically, any activity you perform in the United States must be directly connected with and part of your work abroad or it will be considered employment for hire.

If you are coming to secure funding for a new business, you cannot remain in the United States after securing the funding to start actual operations or to manage the business, unless you change status to another classification that authorizes employment in the United States.

How to enter as a B-1 Visitor for Business (Border)

You must be able to show you have sufficient funds to cover the expenses of the trip and your stay in the United States. You must also be able to provide a detailed itinerary of your trip including a list covering the questions; with whom, about what, where and when. Finally, you must prove that you are not an intending immigrant and you will return to your home country.   This is proven through evidence that you maintain your residence abroad, which you have no intention of abandoning, and that you have other ties back to your home country. A good list of information and documentation to travel with includes: deed or lease, mortgage or rent payments, school information for children, bank accounts, cell phone records or bills, utility bills, and a letter from your foreign employer indicating that they aware of the trip and the date you are expected back to work.

H-2B Temporary Workers (Service Center)

The H-2B non-agricultural temporary worker program allows U.S. employers to bring foreign nationals to the United States to fill temporary non-agricultural jobs.

To qualify for H-2B non-immigrant classification, the petitioner must establish that:

• There are not enough U.S. workers who are able, willing, qualified, and available to do the temporary work.
• The employment of H-2B workers will not adversely affect the wages and working conditions of similarly employed U.S. workers.
• Its need for the prospective worker’s services or labour is temporary, regardless of whether the underlying job can be described as temporary.

L-1 Intercompany Transferee (Border or Service Center)

Construction companies in the process of setting up operations in the U.S. often discover that work permits for key managers and executives can make the transition into the U.S. market much easier. Managers, executives and employees with specialized knowledge from the Canadian Company can be transferred to the U.S. in L-1A or L-1B status.

The main framework involves the following:

1. Employed as a manager or executive for at least 1 year out of the past 3 years abroad;
2. The Canadian Company and the U.S. Company have a qualifying relationship, such as parent, affiliate, subsidiary, or branch office; and
3. The individual will be employed in the U.S. as a manager, executive or employee with specialized knowledge.

The L-1A for Managers and Executives is the golden standard of immigration options. It is one of few categories that allows for a permanent residency (green card) filing immediately without receiving a PERM approval from the Department of Labor. A well-prepared L-1 filing will allow you to enter the U.S. as necessary with little to no hassle. You will be able to solicit business, hire, fire and supervise construction project and staff, deal with any internal business issues, etc.

You are also able to completely relocate your immediate family to the U.S. Your spouse will be eligible for an open work permit. Your children will be eligible to enroll in school.

Possible Complications and Issues

The construction industry has unique complications or issues with the L-1 visa category. In order to qualify as an L-1 managers or executive you must prove that you are supervising professionals. Professionals are typically considered employees whose position requires a bachelor’s degree or higher. The construction industry will often use subcontracted workers and labor brokers or organizations. This can make it hard to show an organizational chart. A common mistake is a petition filed with a manager who is really a “front-line supervisor.” A well-constructed plan of action before entering the U.S. market will help to avoid these issues down the line. A functional manager may also be a resolution, however those petitions have been highly scrutinized as of late.

TN Visa (Border or Service Center)

The TN Visa work permit classification outlined in the North American Free Trade Agreement allows for a unique benefit to Mexicans and Canadians desiring to enter the U.S. labor market. It is a high demand category for two reasons: there is no annual numerical cap and there is no prevailing wage requirement. This means that qualified applicants can apply for a TN work permit at any time. There is also no minimum wage requirement to pay the TN worker, as the Department of State does not need to certify it. The wage does need to be reasonable, as an officer will not approve an application where he/she feels the employee will not be paid a salary or range that is normal for the industry and region.

The scientific technician and technologist category is a TN professional occupation, which has proven successful and useful in the construction industry. This has revolved around the applicant’s “theoretical knowledge” of engineering. While no degree or license is needed, the most successful applications are accompanied by at least two years of post high school formal education. Other TN categories that could be available to those in the construction profession include engineer, industrial designer, architect, land surveyor, interior designer, systems analyst, soil scientist, urban planner, or geologist.

Benefits and Detriments of TN Work Permit

The TN Work Permit can be obtained at a port of entry or preflight inspection and if the application is in order and proper, it will be approved on the spot with up to 3 years validity. Another benefit is that the government-filing fee for this permit is merely $56, by far the most cost effective work permit.

Potential downfalls of the TN status include its non-immigrant intent, effects of a denial, and spouse and familial issues. The TN is a non-immigrant visa category. This means that it cannot be your intent to permanently relocate to the US. You must be prepared to express to the officer your intent to return to Canada after the expiration of the TN or in the case of termination from the employment. There also could be issues if you pursue permanent residency (green card). While it is not prohibited to apply for permanent residency, if the employee is traveling and an Inspection Officer discovers the filing, then the employee could be denied entry due to immigrant intent. Finally, the spouse and children of a TN will be granted TD status, however the spouse is not entitled to a work permit simply by being a TD. A spouse would need to apply for work authorization in his or her own right.

E2 Investor Visa (Service Center and Consulate)

The E2 Investor option can be a valuable tool in expanding your construction business into the U.S. An E2 registered company must be at least 50% owned by a citizen of the treaty country. An E2 employee must be a manager, executive or hold specialized knowledge. The classification is a non-immigrant category so similar complications can exist when permanent residency is the end goal.

The E2 option works best for a company that looks to expand into the U.S. and has enough funds to qualify as an investment. There is no magic number or amount necessary. The standard has always been a balancing test of how much is necessary to open or sustain an operation of that type or industry in that geographical location. We have been extremely successful formulating solid arguments for our clients on the necessary amount of investment needed.

An E2 benefit can be applied for at the service center as a change of status with premium processing. If all the documents are in order, this can mean that status can be obtained within 15 calendar days of filing. If a change of status petition is approved, the individual has status while within the U.S. If the individual needs to leave the U.S. and subsequently reenter, they will need to first obtain a visa.   The visa can be applied for at a Consulate. The proper documentation will be sent ahead of time and the company can be registered for a period up to 5 years. The visa should also be issued for 5 years.

Permanent Residency (Green Card)

Permanent residency has its definite benefits. You will be allowed to live and work freely in the U.S. You will be afforded the majority of the same rights and benefits of a U.S. citizen and once you fulfill your residency requirement, you will be eligible to apply for U.S. citizenship.

You can apply for permanent residency as a commuter or permanent resident. A “commuter green card holder” typically does not enter the U.S. daily and does not reside in the U.S. A permanent resident typically resides inside the US. There are instances where one status may work better over another. This is best discussed on a case by case basis.

The most frequent questions we are asked revolves around dual citizenship. Canadians need not revoke their citizenship in order to obtain U.S. citizenship. They may maintain both passports. However, upon naturalizing as a U.S. citizen they must declare themselves as such upon entering the U.S.

Tax Issues

How does Foreign Account Tax Compliance Act (FATCA) effect my business:

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts. FACTA focuses on reporting:

• By U.S. taxpayers about certain foreign financial accounts and offshore assets
• By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

Under the law, banks from around the world will be asked to sift through their accounts to look for clients with U.S. connections, then share that information with the U.S. Internal Revenue Service. The U.S. is looking for tax cheats, but critics say innocent people are getting caught up in the hunt.

It is expected to cost banks substantial amounts of money to implement the systems required to find residents with U.S. connections, costs the banks may well pass along to all their clients. Some estimate it could cost $100 million for each financial institution.

Those directly affected by the law include dual citizens, Canadians with Green Cards and some snowbirds who spend considerable time in the U.S. Consult a tax professional to fully understand how these laws can and will affect you.