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Testimony
Testimony of Mr. Austin T. Fragomen,
Jr.
July 29, 2003
Mr. Austin T. Fragomen, Jr.
American Council on International Personnel (ACIP)
U.S. Senate Subcommittee on Immigration, Border Security and
Citizenship
Good afternoon Chairman Chambliss, Senator Kennedy, and distinguished
Members of the Committee. On behalf of the American Council
on International Personnel (ACIP), it is a privilege to have
the opportunity to testify before this committee today. For
over 30 years, the L visa category for Intracompany Transferees
has been essential to international investment and economic
expansion in the United States. The L visa is a tool that
allows U.S. multinational companies to fully participate in
the Twenty-first century global economy, and it has become
a model for other countries seeking to capture a greater share
of the global marketplace by facilitating the international
transfer of knowledge, skills and talent. ACIP shares the
Committee’s concern about possible fraud and abuse in
the L visa program. Appropriate sanctions should be imposed
upon those who misuse our immigration system. However, because
the L visa is critical to the continued participation of U.S.
companies in the Twenty-first century global economy, we urge
that Congress move forward deliberately and with caution,
should it consider making amendments to the L visa category.
Today, ACIP will put forward three recommendations. First,
that the allegations of abuse in this program that is to say
that U.S. workers have been laid-off and replaced with cheaper
foreign workers extend to a limited group of L-1B specialized
knowledge workers and companies. Therefore any corrections
should be targeted at this problem and not at the L visa category
as a whole. The most effective approach to meet this objective
would be to clearly delineate what does and does not constitute
specialized knowledge. Second, the detection of fraudulent
credentials, questionable business entities, and inappropriate
uses of the program can be enhanced through the expansion
of precertification programs such as the blanket L visa. Limited
resources demand that we increase information sharing and
cooperation between the government and U.S. employers, and
the L blanket has been a model program in this regard for
many years. And, finally, ACIP believes that the issues spurring
many of the concerns expressed today derive from changes in
the global economy and not deficiencies in the L visa category
or regulations. Congress has a duty to consider the impact
of new business models such as offshoring on opportunities
for U.S. workers. It is imperative, however, to consider
the whole picture. The need to reduce costs to maintain profitability,
tax laws, education policy and workforce preparedness, intellectual
property rights and many other factors are driving companies
to locate work abroad. The L visa is but a small piece of
this puzzle. A study to determine how to retain America’s
edge in this changing economy would be appropriate. Each
of these recommendations is addressed in more detail later
in this statement.
ACIP is a not-for-profit association of over 300 corporate
and institutional members with an interest in the movement
of personnel across international borders. Each of our members
employs at least 500 employees worldwide; and, in total, our
members employ millions of U.S. citizens and foreign nationals
in all industries throughout the world. ACIP sponsors seminars
and produces publications aimed at educating in-house legal
and human resource professionals on compliance with immigration
laws, and works with Congress and the Executive Branch to
facilitate the movement of international personnel. ACIP members
have extensive experience with the L visa program and have
been instrumental in developing the laws and regulations facilitating
the transfer of intracompany transfers so vital in a global
economy.
I have practiced various aspects of immigration law for the
past 35 years, and was privileged to serve as Staff Counsel
for the Immigration Subcommittee in the U.S. House of Representatives
when the L visa category was enacted in 1970. Currently, I
chair ACIP’s Board of Directors, and serve as Managing
Partner of Fragomen, Del Rey, Bernsen & Loewy, PC, the
world’s largest firm practicing exclusively in the field
of global immigration and nationality law.
Global Mobility and L-1 Visa Usage by International
Companies
To understand the L visa, it is important to understand the
scope of international personnel transfers, commonly referred
to as global mobility. A recent survey of just 181 small,
mid-size, and large companies with offices in 130 countries
revealed that they have a combined expatriate population of
more than 35,150 employees.[i]
Unlike years past when primarily upper-level executives were
transferred abroad for a few years to gain an international
perspective and broader knowledge of markets and business,
today’s transfers include professionals from all levels
and operating units within the company. The goals for international
assignments range from filling a skills gap to launching new
endeavors, technology transfer and building management expertise.[ii]
Many companies have made international experience a prerequisite
to promotion within the organization and devote extensive
resources to developing an international staff capable of
functioning around the world. International assignments may
last from less than six months to over three years.[iii]
Depending upon the nature and duration of the assignment,
the employee may be placed on either the home country or host
country payroll. Expatriate compensation packages include
benefits such as housing and education allowances, travel
and expense reimbursement, tax equalization, language and
cultural training, and spousal career assistance.[iv]
The L visa and its equivalents in other countries play a critical
role in facilitating global mobility.
Congress created the L visa category in 1970 in recognition
of the need for international companies to have an avenue
for temporarily transferring employees from abroad to the
United States. The L-1 statutory provisions have been modified
several times since then, to reflect evolving business practices,
including more explicit definitions of qualifying capacities.
The L visa plays a vital role in a company’s ability
to remain competitive in the global market, by allowing it
to transfer employees with specific experience and skills
from a company abroad to the same company, parent, affiliate
or subsidiary within the United States. These employees must
have been continuously employed by the company for one of
the past three years, or for six months if the visa application
is filed under an approved blanket petition. By their nature,
L visa holders have experience with and knowledge of the company’s
operations, products and processes, and most are transferred
only after many years of employment. This experience and expertise
distinguishes them from other types of nonimmigrant workers
who may be new hires from a competitor or recent college graduates.
Even within the L category, however, important distinctions
are drawn between the two types of L visas, the L-1A for executives
and managers and the L-1B for employees with specialized knowledge.
L-1A executives direct the management of an organization
or a major component or function of an organization. Similarly,
L-1A managers have the primary duty of directing an
organization, or area of an organization, and supervision
or control of the work of others, or management of an essential
function at a senior level in the organization’s hierarchy.
L-1A executives and managers tend to be transferred for longer-term
assignments as their skills involve oversight, implementation
and standardization of projects, processes and investments,
integration of business units, and the opening of markets.
Generally, their families are relocated with them at significant
expense to the company. L-1A managers and executives are
sometimes sponsored for legal permanent residency if it is
in the company’s and employee’s best interest to
have the employee remain in the United States. For example,
a number of CEOs and other executives playing leading roles
in U.S. companies initially transferred to the United States
on L-1 visas.
L-1B employees have specialized knowledge of the company,
its product and its application in international markets,
or have an advanced level of knowledge of processes and procedures
of the company. [v]
L-1Bs are engineers, technicians, programmers, auditors and
others with very specific skills. As companies have integrated
their global operations, the mobility of these employees has
increased. Tremendous gains in productivity can be realized
by transferring international teams who already have the knowledge
and experience to implement a project either in-house or for
a client in a timely and cost-efficient manner. L-1B assignment
duration tends to be shorter, often less than six months,
and their families may or may not accompany them. A typical
L-1B assignee may be an engineer who has overseen the installation
of a manufacturing process or software system abroad that
will be replicated in the United States. Most L-1B workers
are not sponsored for legal permanent residence as the goal
for their assignment is to utilize their skills on a specific
project and then send them on to their next assignment.
Congress has recognized the importance of the timely transfer
of international assignees. The L was the first visa to mandate
that the former Immigration and Naturalization Service (INS)
process petitions in less than 30 days. While this deadline
has not always been met, the Service rightly prioritizes these
cases. In addition, Congress approved the Blanket L program.
Under the blanket L option, a company is pre-certified to
utilize the L visa program, either by meeting certain size
and income requirements, or through a demonstrated track record
of case approvals. In addition to managers and executives,
only specialized knowledge workers regarded as professionals
who hold a bachelor’s degree may enter the United States
through the use of a blanket petition. The blanket petition
conserves the government’s resources while maintaining
compliance and security. The Bureau of Citizenship and Immigration
Services (BCIS) undertakes an up-front review of the corporation
and its qualifying entities, and this certification is reviewed
after three years. The blanket L program eliminates the requirement
that an individual application be submitted to BCIS. Instead,
the transferring employee presents himself or herself to the
U.S. Consulate abroad. A Department of State (DOS) Consular
Official determines whether the employee meets the criteria
for issuance of an L visa and performs a security check.
If there are concerns about the employee’s eligibility,
Consular Officials frequently require the company to submit
an individual application to BCIS. Consulates are tending
to develop more specific guidelines to determine when managers,
executives and specialized knowledge workers may utilize the
classification without an approved BCIS petition. A broad
range of ACIP member companies report more stringent reviews
over the past year, particularly where the employee may be
spending some of his or her time working off-site. We believe
that such rigorous review by BCIS adjudicators and consular
officers is appropriate when driven by clear, concrete guidance
from Congress and/or the agency headquarters.
The majority of the employers who utilize the L visa program
are large, global companies because of the legal requirements
for the visa category. In Fiscal Year 2002, the Department
of State issued 57,721 L-1 visas, according to the U.S. Department
of State Visa Office, with a similar number issued to immediate
family members (spouses and children) who accompany the principal
visa holder. The Visa Office also has indicated that as
of July 17, 44,565 L-1 visas have been issued for Fiscal Year
2003. It has been estimated that approximately half are L-1A
and half are L-1B. Given that the current fiscal year ends
on September 30, it appears that there will be no increase
in demand for L-1 visas. Reports that over 300,000 L-1 workers
enter the United States each year are highly misleading, as
they reflect multiple entries by the same highly mobile L
visa holders.
The L visa provides companies the flexibility necessary in
a global market place to best utilize the skills available
to integrate global research, development, sales and marketing
initiatives as well as international mergers and acquisitions.
As anticipated when the program was initiated in 1970, the
cross-fertilization of ideas and the movement of personnel
contribute significantly to international business operations.
By definition, L-1 personnel entering the United States already
have a proven track record with the business organization.
Managers and executives typically are overseeing projects,
essential functions or entire business units. They bring expertise
to the United States and transmit corporate knowledge and
culture to overseas operations. Specialized knowledge workers
are coming to the United States because of their experience
in working with a given process, tool or product that is integral
to the particular company’s way of doing business. Thus,
the L-1 visa category permits global business organizations
to build and invest in a global pool of talent, a major source
of their strength. The level of international trade and
investment inherent in today’s economy would not be possible
without this type of visa classification. Virtually every
industrial country has a visa equivalent to the L-1 that allows
for the exchange of personnel without a test for labor market
impact.
The Difference Between L-1 and H-1B Visas
It is important to note that the L-1 visa category is distinct
in its origins and usage from the H-1B visa and in its relationship
to U.S. workers. Their differing legislative constructs make
certain attestations and procedures appropriate for H-1B visas
inappropriate for L visas. The L-1A classification is clearly
different from the H-1B visa, as it may only be utilized by
managers and executives rather than all levels of professionals.
The L-1B classification requires the employee to have specialized
knowledge that has been obtained as a result of his or her
unique pre-existing relationship with a company; in contrast,
the H-1B professional typically possesses educational credentials
and/or a skill set that was developed elsewhere and is present
when the worker first seeks employment with the employer.
In fact, most global companies use both types of visas depending
upon the qualifications of the employee and the nature of
the assignment. In most instances, H-1B employees are able
to obtain employment because of the nature of their professional
degree, often obtained at a U.S. university, or their experience
with a competitor in the United States or abroad. L-1B employees,
on the contrary, are transferred to the United States on the
basis of proven records, resources and special or advanced
knowledge that a company values and wishes to utilize in the
United States as part of its effort to grow and remain competitive.
L-1B stays are frequently of a shorter duration than the typical
H-1B visitor, and they often remain on foreign payrolls, separate
and apart from their U.S. colleagues. This is in contrast
to a majority of H-1B workers who are sponsored for permanent
residence. While many L-1 workers meet the statutory requirements
for an H-1B visa, their criteria are distinct and narrowly
drawn and serve different purposes for the company.
As H-1B workers might be drawn from the domestic or international
marketplace, Congress in 1990 sought to assure that the employment
of these foreign nationals did not adversely affect the wages
and working conditions of U.S. workers. The labor condition
attestation and related wage requirements were meant to create
a level playing field for U.S. and foreign workers. Under
this framework, H-1B workers are typically only hired when
they either have superior skills, knowledge, expertise and/or
accomplishments that are of great value to an employer, or
alternatively, when U.S. workers are unavailable. In the
L-1 category on the other hand, only a limited pool of workers
are available for L-1 classification: members of a business
organization’s existing workforce. The L-1 category
was enacted in 1970 and amended in 1990 with the expectation
that it would be carefully monitored and regulated by the
INS, now the BCIS. This expectation has largely been met,
with adjudicators closely scrutinizing petitions, often questioning
and sometimes denying cases that would appear approvable.
ACIP member companies are gravely concerned by legislative
proposals that would attempt to superimpose the H-1B program
on top of the L visa by establishing numerical quotas well
below current usage, requiring a prevailing wage without taking
into consideration global compensation packages, eliminating
the blanket L visa program that facilitates the timely and
efficient transfer of personnel, and imposing strict time
limits on L visas that may not meet companies’ assignment
needs. The impact of these proposals on legitimate global
business users of the L visa category would be dramatic and
unacceptable. These changes would not address the concerns
of displaced U.S. workers associated with offshoring, but
would place the United States at a relative disadvantage to
our trading partners who are increasingly using streamlined
visa policies to attract trade and investment.
The New Offshoring Business Model and Its
Impact on Visa Usage
A series of recent media articles, as well as congressional
hearings, have focused on L visa usage in the context of the
outsourcing of information technology and other white-collar
services. A company may choose to outsource for a variety
of reasons including where it wishes to reduce costs in order
to maintain profitability, lacks the in-house expertise to
complete the project, to limit in-house services to core competenencies
in order to enhance quality, to obtain enhanced services from
the outside firm, or simply because outsourcing is more efficient
in terms of time and costs. Outsourcing is not a new business
model and we acknowledge that it often comes with painful
adjustments for U.S. workers. What has changed is that increasingly
the outsourced work is going to offshore firms or offshore
subsidiaries of U.S. firms as opposed to different companies
also located in the United States.
Typically, there is not a one-for-one replacement of a U.S.
employee by a foreign or outsourced worker. Rather, the
companies that win the contracts utilize alternative business
models. A company that wins a competitive bid to provide services
will assign a team to the account. This team will be comprised
of some combination of U.S. and foreign workers in the United
States, as well as a team of employees operating at a center
abroad. The U.S.-based workers typically collect information
and coordinate activities with workers abroad. Examples of
work contracted offshore include software development, back-office
financial operations, and customer service call centers. The
cost savings occur not in the United States, because L workers
receive global compensation packages similar to U.S. workers,
but overseas where the majority of the work is done.
Immigration laws, in particular the L-1B visa, certainly
facilitate these business arrangements but they are a byproduct
rather than an impetus of the offshoring model, as it has
come to be called. Congress, and the nation, should appropriately
consider what efforts must be made to ensure the United States
is an attractive locale for investment, that the wages and
working conditions of U.S. workers are not unfairly undercut,
and that U.S. workers are prepared to meet the technological
challenges and opportunities of this new economy. Proponents
argue that while offshoring may cause some temporary dislocation
in the U.S. workforce, particularly in today’s sluggish
economy, it will also keep industries competitive, provide
investment in poorer nations, and eventually create new markets
for U.S. goods and services that will spur future economic
growth. Whether you agree with this assessment or not, the
trend toward outsourcing and offshoring will not be halted
by changes to our immigration laws.
We are concerned that proposals to prohibit placement of
L employees at client or customer sites are overly broad and
would restrict legitimate contractual arrangements and accepted
business practices. There are many instances where the nature
of a job requires the presence of an L visa holder at a customer
site. For example, an auditor engaged in reviewing the client’s
worldwide operations may enter the United States on an L visa
but work primarily at the client’s site, as this is where
the necessary information is located. Similarly, sales professionals
spend most of their time visiting customers. BCIS and DOS
regularly distinguish these legitimate uses from other, more
questionable, outplacement arrangements and we applaud these
efforts. This job could be made easier through revised definitions
of specialized knowledge and enhanced use of precertification
programs.
Recommendations
ACIP has attempted to explain the importance of L visas in
the Twenty-first century global economy, to distinguish the
L visa from the H-1B and to explain the larger economic forces
surrounding offshoring and the displacement of U.S. workers.
In our efforts to protect U.S. workers, we must not impose
new burdens on global companies that make the United States
an even less attractive locale for business operations and
investment. ACIP would like to offer the following recommendations
for consideration by Congress:
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Clarification of L-1B Specialized Knowledge. ACIP
notes that the business world has changed dramatically
in the past 30 years and that it is not always easy to
identify which corporate arrangements or positions qualify
for the L visa, particularly the L-1B. The agencies’
efforts to identify illegitimate uses of the program could
be aided by legislative or regulatory clarification of
some of the terms and definitions already in our laws.
Better explanation of what experience and expertise qualify
as specialized knowledge would be particularly effective.
The allegations of abuse in the media have involved L-1B
specialized knowledge visas, not L-1A visas for managers
and executives. ACIP acknowledges that there has been
ongoing disagreement about how the concept of specialized
knowledge should be defined. Recently, BCIS and DOS offices
have been taking a rather restrictive stance, at least
in terms of how longstanding definitions of specialized
knowledge are applied. More specificity in terms of
the regulatory definition could lead to clearer standards
that ultimately make it easier for companies to rely on
continued utilization of this classification.
ACIP strongly supports a joint review by Congress, the
relevant agencies, and industry organizations to craft
a meaningful, clear and appropriate definition of specialized
knowledge. Input from all interested parties will be vital
to ensuring that today’s complex business relationships
are appropriately accommodated by our laws. ACIP firmly
believes that with appropriate guidance BCIS and DOS are
well equipped to make determinations regarding eligibility
for and appropriate usage of L visas. It is not necessary
to rewrite our L laws, add significant new regulatory
burdens for all L visa employers or create a new regulatory
scheme.
-
Expansion of Precertification Programs to Identify
Legitimate Users. ACIP acknowledges that the L visa
program is not without fraud and abuse, but we would posit
that it involves a small percentage of cases. Nonetheless,
the use of fraudulent credentials and bogus corporations
are particularly troubling and cast a pall over all legitimate
users. ACIP member companies have worked closely with
Consulates, particularly in India and China, to identify
and stop fraud. ACIP has previously testified before
Congress about ways to reduce fraud and abuse.[vi]
We would like to reiterate our support for the expansion
of precertification programs today.
The Blanket L program is one model for precertification.
A detailed, initial review of qualifying business relationships
by experienced BCIS officials produces more consistent
and reliable results than the adjudication of tens of
thousands of individual petitions. It allows for up-front
clarification of complex issues, such as the company’s
relationship to the overseas entity, while still requiring
Consular officials to review the bona fides of each particular
employee. This streamlined process inherently conserves
scarce government resources, while providing for even
more thorough, consistent and fair adjudications. Many
ACIP members have taken the blanket program a step further
by establishing relationships with consular officials
in countries where they have a significant presence.
This allows the company to educate and give advance notice
to consular officials about their global operations and
intended plans for transferring personnel. We believe
this type of government-private interaction and programs
that identify legitimate users should be encouraged by
formalizing mechanisms for companies to seek pre-certification
at the consulates and establishing more direct lines of
communication between the consulates and companies to
resolve problem cases. These changes would benefit both
the government and employers.
- Study on Competitiveness in the Twenty-first Century
Global Economy. Although today’s hearing focuses
on L visas, a wide variety of policies trade, labor, investment,
education and tax must be considered in determining how
to maintain U.S. competitiveness in the Twenty-first century.
A strong economy will provide opportunities for those U.S.
workers who have the education and training to meet the
technological challenges of the new economy. ACIP member
companies have supported legislation such as No Child Left
Behind that benefits today’s and tomorrow’s workers.
We will continue to work with our member companies on a
variety of education and workforce issues to ensure we have
access to the talent needed to compete in the Twenty-first
century global economy.
Demographic trends show that access to talent will be a
vital issue for years to come. Over the course of this next
century, ACIP believes that immigration policy will increasingly
become a tool that countries employ to attract trade, investment
and talented workers to their shores. We should not let
short-term economic difficulties blind us to long-term economic
opportunities. ACIP recommends that Congress commission
a study, with the input of business experts, that examines
emerging economic trends and examines the array of policies
necessary to ensure future economic growth and opportunities
for U.S. workers.
Conclusion
The L visa program, particularly the blanket L program, has
been extremely important in facilitating global commerce for
U.S. companies for over thirty years. It has been a model
of success in an often-broken immigration system. Our challenge
is to create a secure and efficient immigration system that
protects U.S. workers while anticipating employers’ needs
for access to talent from around the world. ACIP stands ready
to work with you to build such a system.
Thank you for your time and consideration. I have submitted
a full statement for the record, and look forward to answering
any questions that you might have.
03GM099
[i]
Global Relocation Trends 2002 Survey Report. Sponsored by
GMAC Global Relocation Services, the National Foreign Trade
Council, Inc. and SHRM Global Forum.
[ii]
Ibid.
[iii]
Ibid.
[iv]
KPMG’s Global Assignment Policies and Practices Survey
2003.
[v]
INA 214(c)(2)(B).
[vi]
Statement of Lynn Shotwell, ACIP, before the House Subcommittee
on Immigration and Claims, May 5, 1999.
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