The EB-1A visa, or Alien of Extraordinary Ability visa, doesn’t require an employer to sponsor a foreign national. The Petitioner who is an athlete or coach may “self-sponsor” in this specific visa classification. Yet, the Petitioner has a very challenging standard to meet as he or she must be able to demonstrate extraordinary ability in athletics through sustained national or international acclaim. Success is not guaranteed with this visa no matter how accomplished the Petitioner. Rather, if the athlete or coach really wants to get to the US to be engaged in sport – then consider first obtaining the non-immigrant visa for athletes and coaches (P-1A). This visa is much easier to satisfy the criteria as a practical matter and much less expensive to process with professional help as a financial matter. Later, once inside the US and engaged in sport, then the Petitioner applies for an “adjustment of status” to obtain the EB-1A “Green Card” Immigrant Visa. “Free agency” is what every athlete wants – but – playing the visa “game” smarter than the other guy is the better guarantee of success on the field.

Petition for Extraordinary Ability Classification: Overview of Two-Step Evidentiary Review

Step 1	Assess whether evidence meets regulatory criteria: Determine, by a preponderance of the evidence, which evidence submitted by the petitioner objectively meets the parameters of the regulatory description that applies to that type of evidence (referred to as “regulatory criteria”).
Step 2	Final merits determination: Evaluate all the evidence together when considering the petition in its entirety for the final merits determination, in the context of the high level of expertise required for this immigrant classification.

The reasons for an athlete or coach to select an EB-1A visa as a self-sponsor rather than follow the P-1A non-immigrant visa are twofold.¹ The EB-1A is a “Green card” immigrant visa, and the P-1A is not. The

EB-1A “theoretically” does not require an employer sponsor (more on that infra), while the P-1A mandates a sponsor, employer or “agent.” The material detriment of the Green Card Immigrant Visa classifications also include the higher processing cost and the restricted number of visas in the EB-1A. If the athlete or coach wants to be in the US to play for a specific season – then the P-1A is really the best viable option with the highest percentage of success.²

The processing delays and evidentiary hurdles for the P-1A as a non-immigrant temporary work visa are far fewer in practice. The practical approach for the athlete or coach is to come to the US on a P-1A and then while engaged in sport (either as player or coach) apply to “adjust status” to the EB-1A (self- sponsored) thus become a “free agent” in the particular sport of your petition selection.³ The experience in the P-1A status makes the Petitioner a “stronger” player on the visa field and will validate the credibility of the Petitioner’s claims of “extraordinary abilities.” The work experience may also resolve to the examiner’s satisfaction the essential criterion – “Continuing to Work in the Area of Expertise” and may collaterally address the implied criterion that the Petitioner must prove he or she earns above 125% of the Poverty Guidelines (more on both infra).

Evaluate the condition of the field before the Petitioner commences play. Consider first the essential criteria for the EB-1A Self-Sponsored Visa –

•       Extraordinary Ability – Do You Really Have It?

The regulations describe various types of evidence that the Petitioner must submit in support of a petition as documentation of the beneficiary’s extraordinary ability. This evidentiary standard (in the context of the EB-1A) is high.

In general, the Petitioner must submit evidence that:

• The person has sustained national or international acclaim; and
  • The person’s achievements have been recognized in the field of expertise;
  • This initial evidence must include either evidence of a one-time achievement (for example, a major internationally recognized award, such as the French Open are the Coupe des Mousquetaires (men’s singles) and the Coupe Suzanne Lenglen (women’s singles)) OR

• At least three (3) of the types of evidence listed in the regulations.

USCIS determines if the person was the recipient of prizes or awards. Nothing precludes the person from relying on a team award, provided the person is one of the recipients of the award. The description of this type of evidence in the regulation indicates that the focus should be on the person’s receipt of the awards or prizes, as opposed to the employer’s (team’s) receipt of the awards or prizes.

USCIS determines whether the award is a lesser nationally or internationally recognized prize or award which the person received for excellence in the field of endeavor. As indicated by the plain language of the regulation, this criterion does not require an award or prize to have the same level of recognition and prestige associated with the Masters Golf Tournament Green Jacket or another award that would qualify as a similar one-time achievement. Some nationally or internationally recognized awards for excellence, which might be construed as “lesser” by the visa examiner could be more properly contextualized for importance if explained in context. The Petitioner should prepare a separate supplement laying out the award, the context, the past recipients, and any other relevant factors which are such that they may create a totality of the circumstances sufficient to satisfy the requirements of this criterion.

There are no “magic words” which must accompany any award used to support the petition. The evidence provided in support of the petition need not specifically use the words “extraordinary.” Rather, the material should be such that it is readily apparent that the Petitioner’s contributions to the sport are qualifying. Also, although some of the regulatory language relating to evidence occasionally uses plurals, it is entirely possible that the presentation of a single piece of evidence in a specific evidentiary category may be sufficient to meet this requirement. The analysis is very fact driven and the Petitioner controls how many facts to disclose and what importance to assign to these facts.

•       DIY Is Not Recommended for the EB-1A and Form I-140 – Too Many Places To Go Wrong!

The Petitioner may apply for him or herself by filing a Form I-140, Petition for Alien Worker.⁴ The regular fee is $715 for the Petitioner plus a fee to support the asylum program (see infra). If the I-140 petition is approved, the spouse and unmarried children under the age of 21 may be eligible to apply for admission to the United States in E-14 or E-15 immigrant status, respectively. There is no duplicate fee for their admission to the US under the I-140 though there are other fees that apply. ⁵ DIY completion of the I-140 is not advisable. It is full of unintentional “traps” for a person not experienced with the USCIS forms. For example, an annotation of a dependent’s intention to either apply for adjustment of status (if inside the USA) or an immigrant visa abroad (if outside the USA) as seen in Part 7 of Form I-140 is not binding, but should reflect the dependent’s intent at the time of the Petitioner’s filing of Form I-140. That intent is measured at the time of the application and later circumstances might change the spouse or child’s intent – but the spouse or child needs to be prepared to address such “inconsistencies” when interviewed. Knowing how these statements will be used in the future can help the Petitioner avoid “unforced errors.”

When the Petitioner files the USCIS Form I-140, frequently a DIY and even a few experienced filers will fail to make the correct payments. The payment with the petition for the full $600 Asylum Program Fee, is absolutely required unless the Petitioner clearly qualifies for a reduced Asylum Program Fee of either

$300 or $0. The petition must have ample unequivocal proof of the reduced fee qualifications (in a separately set forth series of statement(s) and exhibits). If Petitioner does not provide the correct Asylum Program Fee, in addition to the $715 filing fee, USCIS will absolutely reject the filing. Note- Discounts are available where forms are filed online ($50 discount) but getting the fee correct is really more important than harvesting a $50 discount.

•       Sustained National or International Acclaim – The Critical Threshold!

When filing a petition for a person with extraordinary ability, the Petitioner must submit evidence that the person has “sustained national or international acclaim” and that the person’s achievements have been recognized in the field of sport. In determining whether the Petitioner has enjoyed “sustained” national or international acclaim, the visa examining officer will consider that such acclaim must be maintained (currently) or continued over time (past & present though episodic).⁶ However, the term “sustained” does not imply an age limit on the Petitioner or a quantity of accomplishments. A Petitioner may be very young or early in his or her career and still be able to show sustained acclaim. There is also no definitive time frame on what constitutes sustained. This criterion is highly subjective.

If a Petitioner was recognized for a particular achievement, the officer should determine whether the Petitioner continues to maintain a comparable level of acclaim in the field of expertise since the Petitioner was originally afforded that recognition. A Petitioner may, for example, have achieved national or international acclaim in the past but then failed to maintain a comparable level of acclaim thereafter. The evidence in support of some measure of acclaim lesser than “first prize” (if the level of acclaim has fallen) needs to be developed and (more important) explained in context to the examiner. The level of acclaim must be explained in the totality of the circumstances with evidence to support any factual or opinion based assertions upon which the Petitioner wishes the visa examiner to rely.

In order to demonstrate the Petitioner’s sustained national or international acclaim and that Petitioner’s achievements have been and are currently recognized in the field of sport the Petitioner must either include evidence of a one-time achievement (major internationally-recognized award) or prove 3 of the listed criteria below (or comparable evidence if any of the criteria do not readily apply):

• Evidence of receipt of lesser nationally or internationally recognized prizes or awards for excellence (team prizes also accepted);

• Evidence of Petitioner’s membership in associations in the field which demand outstanding achievement of their members (ranking of the team and league where employed now or in the very recent past);
  
• Evidence of published material about Petitioner in professional or major trade publications or other major media (news reports and online profiles);
  
  Evidence of Petitioner’s original athletic contributions of major significance to the sport (new plays, training, professionalism, mentoring);
  
• Evidence of Petitioner’s performance of a leading or critical role in distinguished organizations (similar to associations above but focused on the teams, leagues, or larger organizations with which the Petitioner performed);
  
• Evidence that Petitioner command(s) a high salary or other significantly high remuneration in relation to others in the field.

Evidence that satisfies these criteria is and must be very well detailed, explained in context, and frequently supported by attestations, sport league or association letters of support, and peer or judge endorsements. The visa examiner must be assumed to be uniformed of the nature of the sport and the honors earned in that sport. Great care must be taken to lay out the specifics in what would be considered “painful” detail in the Petitioner’s native land because these facts are so well know or are “obvious” back home. The visa examiner is unlikely to be from “back home” and will need to be spoon- fed the facts upon which the Petitioner homes to rely.

• “Continuing to Work in the Area of Expertise” – This Is The Constant Point of Failure For the Self-Sponsor Petitioner –

The absence of an “employer” sponsor makes it almost impossible for a “team sport” player or coach to satisfy this requirement of the EB-1A self-sponsored visa criteria. Solo sport players may have an easier nurdle to cross.

“To qualify as a person with extraordinary ability, the beneficiary must intend to continue to work in the area of his or her expertise.”

The examining officer may encounter instances where it is difficult to determine whether the person’s intended employment falls sufficiently within the bounds of his or her area of extraordinary ability.

Athletes intending to “play” clearly do not get any presumption of being able to play as a “free agent” (absent an employer sponsor). If applying as a “free agent” then the athlete must match at least the minimum threshold of proof for this status either currently, in the recent past, or with evidence of the high probability of this status in the near future. That proof alone may not be sufficient.

A solo player is compelled by the totality of the visa criteria to lay out the events, tournaments, and any other known sources of competition which will be evidence of his or her satisfaction of this criteria.

Merely listed events is never sufficient. The Petitioner must describe the event, the admission criteria, how the Petitioner satisfies the criteria, the earnings from or the payment to the event in order to participate. The supporting documentation must be granular in detail sufficient for the examining officer to rely upon the Petitioner satisfying these requirements.

In general, coaching as the “work” is even harder to prove up the criterion where the sport is small in scale within the US. Some of the most problematic cases are those in which the beneficiary’s sustained national or international acclaim is based on his or her abilities as an athlete, but the beneficiary’s intent is to come to the United States and be employed as an athletic coach or manager.

If a Petitioner has “clearly achieved recent national or international acclaim as an athlete and has sustained that acclaim in the field of coaching or managing at a national level, examining officers can consider the totality of the evidence as establishing an overall pattern of sustained acclaim and extraordinary ability such that USCIS can conclude that coaching is within the beneficiary’s area of expertise,” and the coach will work as a coach in this field throughout the duration of the visa [emphasis added]. There is a burden on the player who tries to coach that focuses on the reasonable expectation of a job. The more probable the Petitioner can make the job appear then the more likely the visa examiner will allow for the player to transition to coaching as a part of this visa.

The evidence on this single criterion routinely fails for the self-sponsored athlete and/or coach.⁷

• Build An Architecture Of The Sport & The Petitioner’s Role As Important In The Sport – Satisfy the Criterion “Entry to Substantially Benefit the United States”

The Petitioner will fail the visa criteria if the petition treats, in an unserious manner, the criterion of “entry must substantially benefit the United States in the future.” Although neither the statute nor the regulations specifically define the phrase “substantially benefit” it has been interpreted broadly. Whether the Petitioner demonstrates that the person’s employment meets this requirement requires a fact- dependent assessment of the case. The successful Petitioner will build a narrative with supporting evidence that lays out the architecture of the structure of the sport in the home country, the Petitioner’s position or role in that structure, and any connection that the Petitioner can make to these facts and the needs of the USA based sport community in the same sport.

As an example, assume the Petitioner is a rugby athlete from one of the provincial teams (“unions”). He would explain in the supporting documents that the Rugby Union in South Africa is centrally administered by the South African Rugby Union, which consists of fourteen provincial unions. Each of these unions administers a senior professional rugby team that participates in the domestic Currie Cup and SA Cup competitions. In addition, these unions are responsible for amateur club rugby in their region. Clubs participate in provincial leagues organised by the unions; university sides also participate in the annual Varsity Cup competition, while non-university sides participate in the annual Gold Cup.⁸ The Petitioner must stress and explain his or her role on the team(s) and within the structures. The Petitioner would explain his or her volunteer and mentoring activities in sport, and all of the sport related activities which add to his or her popular profile which must be documented with evidence for the examining officer. The Petitioner, as a self-sponsored EB-1A would then need to “bind” the scrum in the application showing how all of this extraordinary ability will benefit rugby in the US at some level or specific point. It is a harder exercise than it seems at first.

•       Other Evidentiary Considerations:           Use Letters of Support

The several criteria where the petition can fail from a lack of compelling evidence may be propped up with letters of support. These specific devices, Letters of Support (statements by fact witnesses), while not without weight, will not form the cornerstone of a successful claim for this extraordinary ability classification. Rather, the letter authored by the witnesses should be corroborated by documentary evidence placed in the record by the Petetioner. The letters should explain in specific factual detail why the witnesses believe the Petitioner to be of the caliber of a person with extraordinary ability. Letters that merely reiterate USCIS’ definitions relating to this classification or make general and expansive statements regarding the beneficiary and the beneficiary’s accomplishments are generally not persuasive.

The most effective letters are ones which define in detail (1) the relationship or affiliation between the Petitioner and the witness; and (2) the importance of the witness in the sport; Both of these details are factors the examining officer will consider when evaluating the significance of witnesses’ letters. It is generally expected that a Petitioner whose accomplishments have garnered sustained national or international acclaim would have received recognition for their accomplishments well beyond the circle of their personal and professional acquaintances. Accordingly, the weight given to letters penned by outsiders or by people who are not confidants of the Petitioner will be weightier.

Avoid letters from witnesses in the Petitioner’s sport which merely make general assertions about the Petitioner, and at most, indicate that the Petitioner is a competent, respected figure within the field of sport. These letters lack sufficient, concrete evidence supporting meaningful and reliable statements addressing the criterion. These weak letters should be considered by the examining officer, but do not necessarily show the Petitioner’s claimed extraordinary ability. These are weak letters and the “faint praise” can even dilute the other strong letters. The application needs to have a curated selection of support letters to address the criteria – rather than some general statements of a hagiographic nature. The petition preparer should resist a “Hail Mary” type pass including all the letters and instead select the letters that support in the most detail the criterion.

•       Dirty Little Secrets For Successful Visa Petitions – Use the P-1A and Wait Before Trying The EB-1A Self-Sponsored Visa –

The dirty little secret for athletes and coaches wishing to Live/Work – USA is that the P-1A is the better choice for most Petitioners. The P-1A as a non-immigrant visa is more relaxed in the review of the criteria than the EB-1A “Green Card. The P-1A is better suited to athletes or coaches from the “minor” leagues of a sports union or association who wish to “break into” sport in the US market.

The P-1A requirement to participate in a “competition” can be extended to a season, or league, or more than one game or event with the properly prepared petition.

The non-immigrant status of the visa allows for this more relaxed approach by the visa examiner as set forth in the Guidance Manual –

“Rather, it is sufficient for the petitioner to show that the competition is at an internationally recognized level of performance such that it requires that caliber of athlete or team to be among its participants or that some level of participation by internationally recognized athletes is required to maintain its current distinguished reputation in the sport.”⁹

There is a P-1A pathway into the US where the state of play by the Petitioner is not at the top of the game. “Individual athletes who are internationally recognized may also be coming to the United States to join a U.S.-based team.” The US will admit athletes or coaches performing in the minor leagues wherein the Petitioner may develop the additional credentials necessary to meet the defacto higher level of “extraordinary ability” criteria necessary to get an EB-1A visa in the future. Once playing at the higher levels of US sport the “adjustment of status” to the EB-1A becomes much more predictably successful.

The Petitioner who plays rugby in South Africa, for example, has a difficult pathway to meet the criteria for an EB-1A self-sponsored visa because the US does not have a “professional” rugby league comparable to the national football, baseball, and basketball leagues¹⁰ The absence of an immediate equivalent in the US sport world for the South African rugby player makes the self-sponsor at risk of failing the “substantially benefit the United States” criterion. The lack of paying team positions in this specific sport example also erodes the confidence of the visa examiner that the self-sponsored athlete or coach can meaningfully “intend to continue to work in the area of his or her expertise”¹¹ because of the apparent lack of opportunities.

The P-1A resolves these at-risk criteria in favor of the Petitioner because there is an “employer” sponsor – in the form of either a team, event or series, or an “agent.”¹² A P-1A visa sponsor is an U.S. employer or agent who initiates and pays for a P-1A visa for a foreign athlete. The sponsor can also be a foreign employer through a U.S. agent. The agent acting as the Petitioner sponsor must show they are “in business as an agent,” though is not required to show that the agent normally serves as a talent agency or athletic manager as their main occupation (i.e., agent might be a lawyer or a coach who as a sideline acts as a sponsor).¹³ There are additional criteria (not addressed here as beyond the scope of the brief ) which apply in the P-1A visa classification. However, it will be sufficient for the Petitioner to consider that having an “agent” sponsor makes the P-1A the easiest, surest, and most successful “play” of the game to get started with a Live/Work- USA experience as an athlete or coach.

The complexity of the sports world and playing for money in the US makes a DIY application a “three-point shot” from the center court with a high probability of failure. The Petitioner should approach the visa “game” with the same rigor and professionalism as he or she does the sport. Planning, preparation and professional assistance are the better guarantors of success than any measure of “luck” will provide.

References

¹ The criteria are substantial the same for the EB-1A and the P-1A. https://www.uscis.gov/policy- manual/volume-2-part-n-chapter-2 Individual athletes who are internationally recognized may also be coming to the United States to join a U.S.-based team are usually seeking P-1A.

² USCIS Premium Processing is a service that speeds up the processing of certain immigration benefit requests. You can request Premium Processing for a P-1A petition by filing Form I-907 with U.S. Citizenship and Immigration Services (USCIS).

³ There frequently is a faster processing time for the change in status if the Petitioner returns to the home country and applies using consular processing. The need to file a separate Adjustment of Status (I-485) application and pay the additional fee of $1,440 is avoided.

⁴ For more information on Extraordinary Ability, read Guidance Manual Volume 6, Part F,

⁵ There are hidden costs.as follows:

• This visa classification requires a medical examination within 30 days of the scheduled consular appointment. Form I-693, Report of Immigration Medical Examination .The medical examination is only performed by an approved doctor. The current fee is reported to be R1,550.
• Biometric data collection and background investigation fee is included in the application but you may be required to separately schedule a biometric collection date which may well be separate from your interview. Data is now collected digitally at the consular post – so any advice to obtain fingerprint cards (found on the Internet) is outdated and unhelpful.
• The DS-260 form filed with the Department of State for the consulate to process the visa which is placed inside the Petitioner’s passport is $325, with a separate and same fee for the spouse and minor children visas that are pendent upon the EB-1A visa. If you seek to get an immigration visa to live and work in the United States, one form you will need to fill out is the Form DS-261 Choice of Address and Agent form. This document provides information to the U.S. government about how to contact you for the processing of your immigration visa. The form also allows you to appoint someone—an agent—to receive the correspondence related to your immigration visa application which is helpful if you are overseas while applying. The fee is

$120 and must be paid online before the DS-260 fee is paid – The fee for processing the DS-260 is paid online only after the National Visa Center (NVC) processes the DS-261. The Petitioner cannot access the DS-260 form to make the consular appointment until the NVC processes the payments.

⁶ A tennis player or golf player may have a “ranking” that varies over time or over a career with some highs and lows. The examiner is encouraged by the Guidance Manual to consider this “arc” of the career in sport. A single massive achievement is also good enough in the right context (Olympic medals or the foreign equivalent of a team Superbowl ring).

⁷ The companion to this point of visa failure is the Petitioner’s in ability to prove that the Petitioner earns, will earn, or has saved sufficient assets (cash) to finance the stay inside the USA at a level in excess of 125% of the annual poverty guideline for the year in which the application is filed. This standard is expressly articulated in many visa classifications. However, EB-1A has only anecdotal reports of the standard being applied to athletes and coaches who self-sponsor.

⁸ https://en.wikipedia.org/wiki/List_of_South_African_rugby_union_teams

⁹ https://www.uscis.gov/policy-manual/volume-2-part-n-chapter-2

10 USA Rugby https://usa.rugby/ is not the equivalent of the National Football League or the National Basketball Association. It is essentially a club sport elevated to a quasi-professional league more akin to the Serie “B” Italian Football League by comparison. https://1divisione.fidaf.org/

¹¹ There is also the companion problem of the Petitioner remaining at an income level above 125% of the Poverty Guidelines.

¹² The credentials for the “agent” and the requirements placed upon the agent in the context of the P-1A are readily addressed by an immigration professional. Seek advice when selecting an agent as sponsor for the P-1A to reduce the opportunities for disappointment.

¹³ USCIS Memorandum, D. Neufeld, Requirements for Agents and Sponsors Filing as Petitioners for the O and P Visa Classifications (Nov. 20, 2009), AILA Doc. No. 09113064. “The regulations do not specify the evidence for establishing that the petitioner of multiple employers is “in business as an agent.” Adjudicators should consider evidence that shows that it is more likely than not that the petitioner is in business as an agent for the series of events, services, or engagements that is the subject of the petition. The focus should be on whether the petitioner can establish that it is authorized to act as an agent for the other employers for purposes of filing the petition. This means that the petitioner does not have to demonstrate that it normally serves as an agent outside the context of this petition.”

Traveling for the holidays to the US? Everyone appearing at a US Customs and Border Protection (“CBP”) Port of Entry (“POE”) is subject to a warrantless physical search, and to the search of “devices” which includes anything with a chip or a battery. No “reason” is needed to justify a physical search. If you insist on traveling with electronic devices containing resident memory or Internet enabled storage access, then everything accessible on the device might be searched and could be seized by the US government. What to do to protect your privacy?

First, disable the mobile data, WiFi and Internet access for your device (use “airplane mode”). Second, remove all storage media from the device. If you have stored any data on the SIM cards or an expansion SD card, then put these in your pocket before you get off the plane. Third, clear your Internet browser histories from all accounts accessible from the devices with which you are traveling. Protect your privacy. Take all of these steps before “deplaning” in particular if you are traveling on a non-USA flagged carrier on an international flight. Avoid placing yourself in the position of refusing a “request” to unlock your devices by protecting your privacy before you travel.

There is one notable exception to the warrantless search of devices at a POE. As of July 2024, John F. Kennedy International Airport (JFK) is the only airport in the U.S. where it is illegal to search your “devices” without a court order or warrant. In United States v. Sultanov, a New York federal trial court in the Eastern District of New York ruled that border agents must obtain a warrant based on probable cause before conducting searches of electronic devices at the border. The court ruled that searches of cell phones or other electronic devices are “nonroutine,” bringing them outside the “border search exception” to the Fourth Amendment. US. v. Sultanov (22- CR-149) Memorandum & Order (E.D.N.Y)(July 24, 2024). Compare., U.S. v. Vergera 884 F.3d 1309 (11 Cir 2018)(11^th Circuit Court of Appeals held the inverse – namely “[t]he Supreme Court has consistently held that border searches are not subject to the probable cause and warrant requirements of the Fourth Amendment” and that “[a]t the border, the highest standard for a search is reasonable suspicion,..”); Compare., U.S. v. Cano, 934 F.3d 1002, 1019-21 (9th Cir. 2019) (in a search after an arrest for drugs smuggling but declared to be a “border search” by the CBP the Ninth Circuit threw out the evidence seized and held that the “border search” exception authorized warrantless cell phone searches only when directed at finding “digital contraband.”¹); Compare., U.S. v. Kolsuz, 890 F.3d 133 (4th Cir. 2018) Forensic searches require reasonable suspicion in 4^th Circuit. The appellate court held that these searches are, by their nature, more intrusive than manual searches. It has deemed them non- routine and therefore has required reasonable suspicion (holding that “a forensic border search of a phone must be treated as nonroutine, permissible only on a showing of individualized suspicion.”)

Travelers should put the risk into perspective – In Fiscal Year (FY) 2023, less than 0.01 percent of arriving international travelers encountered by CBP at a port of entry had their electronic devices searched. A total of 41,767 searches were made without warrants from a total of 394,569,408 total passengers for FY2023. However, of that 41,767 searches a total of 33,110 were “non-citizens” and a further 3,989 of the searches were “advanced media searches” as opposed to “basic media searches.” That means that 79.27% of the searches were on visa holders. When a visa holder considers that the visa is an “invitation” which may be withdrawn at the POE at the discretion of the officer, then deciding whether to cooperate with the officer when “asked” to provide your phone and password is not a simple matter of “rights.” Your “consent” to be searched in this circumstance has been found to be “voluntary” in at least one US trial court.² So, the criminal consequences of the discovery what data might be on your device should be considered well before surrendering it for inspection.

The “right” a visa holder and a citizen share is the “right” to refuse inspection. The consequences of a refusal, however, are vastly different. In presenting themselves at the POE for admission to the USA, travelers are obligated to present for inspection themselves and their electronic devices and the information “resident” on the devices in a condition that allows for the examination of the device and its contents by the officer. If the electronic device cannot be inspected because it is protected by a passcode or encryption or other security mechanism, then, at a minimum, that device may be subject to exclusion, detention, seizure, or other appropriate action or disposition. The saga doesn’t necessarily stop there. https://www.cbp.gov/document/directives/cbp- directive-no-3340-049a-border-search-electronic-devices

A search of the device itself, without connectivity to the cloud or any reader equipment, is defined as a “basic search” for which no warrant is required in all other jurisdictions (other than JFK Airport at the moment). See., CBP Directive No.3340-049A §5.1.3. Any more intrusive search level requires the articulation of “a reasonable suspicion of activity in violation of “ law, and the approval of a Grade 14 level supervisor or higher. Such as search is defined as an “advanced search” [See., CBP Directive No.3340-049A §5.1.4] and such search may be performed without the traveler present. See., CBP Directive No.3340-049A §5.1.6. The device can be held for five (5) days on the authority of the appropriate level supervisor, and the hold can be extended for an initial period of fifteen (15) days and then again in increments of seven (7) days with appropriate supervisory approvals. There is no required end of the seizure period, and in criminal matters the seizure can be involuntary and indefinite.

CBP officers document border searches of electronic devices in the “Electronic Media Report” module of TECS (the law enforcement data system), which provides information on why the traveler was selected for an examination. Furthermore, at every stage after the traveler is referred to “secondary inspection,” CBP maintains records of the examination, detention, retention, or seizure of a traveler’s property, including any electronic devices. This history is theoretically available for inspection by the traveler on the CBP Privacy Impact Assessments page.³ However, if a law enforcement motivation is flagged then the information may not be available online or even through an agency specific public records request (“FOIA”).

The traveler’s personal data – all of it – of any kind – will remain the property of the CBP⁴ (1) if there is probable cause to believe the information contains evidence of a violation of law that CBP is authorized to enforce or administer, or (2) if the information relates to immigration, customs, or other enforcement matters. The information seized may be retained in CBP’s Automated Targeting System (ATS) for a period 15 years, after which time the records are required to be deleted. The traveler’s exclusive administrative remedy for this search and seizure is to complain as set forth on a “tear sheet” the officer will provide afterwards. https://www.cbp.gov/travel/cbp-search-authority/border-search-electronic-devices . Good luck with that. See., CBP Directive No.3340-049A §5.4.1.3.

Generally, border searches are authorized by law at any POE and within 100 miles of an US international border. See., 19 U.S.C. §507. The Sultanov case (supra) presents an unsympathetic set of facts – the photos on the phone seized were described by the prosecutor as “child pornography” – but these bad facts raised the civil rights stakes sufficiently for the trial court to suppress the evidence seized and to issue a very careful analysis (as seen in the order) to the application of the U.S. constitutional Fourth Amendment right against “unreasonable search and seizure.” The trial court wrote – “This raises the unsettled issue — one that is percolating among district courts within this Circuit, but which the Second Circuit has not yet addressed — whether the historical exemption to the warrant requirement at the border must yield to the heightened privacy interests implicated by the search of a modern cell phone. Because “[c]ell phones differ in both a quantitative and a qualitative sense from other objects” a traveler might bring across the border, the Court concludes that it must so yield, and that the government should have obtained a warrant before conducting its search. Riley v. California, 573 U.S. 373, 393 (2014).” In the analysis the trial court reached the core issue of “what is the reasonable expectation of privacy associated with international travel” as described in U.S. v. Flores-Montano, 541 U.S. 149, 153 (2004) when related to a mobile or “cellular” phone in the modern era? Most travelers would assert that the expectation of privacy (today) is substantially greater than ever before due to all of the private personal information held on current generation smart phones.

The CBP officers are not well advised by the Department in CBP Directive No.3340-049A relating to Border Search of Electronic Devices (January 4, 2018) which did not fully anticipate the morphing of the phone into a portable personal data assistant and archive. The current generation of “Smart Phone” is used for and contains everything from biometric data through banking information all of which is typically held by the traveler to be sacrosanct. In a practical manner, there is a substantial difference in privacy expectations between checking a mobile phone or laptop case for an explosive content as opposed to searching the same for the data resident thereon. However, the 2018 era guidance has been updated to keep pace with the evolving public expectations of privacy, and thus, courts are beginning to add uncertainty into the routine law enforcement practices at the border such as seen with the Sultanov decision.

The traveler must carefully consider what happens to the visa status if the traveler refuses an inspection or if the results of an inspection yields data “deemed problematic” to the CBP officer.⁵ In the absence of any higher level guidance the field officers have unfettered discretion to exclude a traveler at the border.⁶ A traveler is well advised to take steps in advance to avoid being placed into the position of “refusing” a request to unlock a device.

The traveler should spend a reasonable amount of time to inspect the devices with which the traveler is crossing the border prior to presenting at the POE. The consequences of a failure of reasonable diligence can be tragic and consequential. For example. U.S. border officials denied entry to a 17-year-old Harvard freshman just days before classes were set to begin due to social media posts found on his Smart Phone at the POE. Ismail Ajjawi⁷, a Palestinian student living in Lebanon, had his student visa cancelled and was put on a flight home shortly after arriving at Boston Logan International Airport. Customs & Border Protection officers searched his phone and decided he was ineligible for entry because of his friends’ social media posts found on his phone. The anecdotal evidence remains that of the almost 33,000 visa holders inspected in FY2023 that some number were excluded from the U.S. POE⁸ after the CBP reviewed devices which contained messages either sent to or received from friends, family or even strangers. These inspections, typically, include reviews of images or videos obtained from social media sites like Facebook and Twitter, and encrypted messaging apps like WhatsApp, which were downloaded to the traveler’s phone.⁹ It is not publicly reported whether Internet browser history is also inspected and if so used as a basis for exclusion from the US.

Once you are at the POE the CBP officer has access to your online visa application which will include a list of the traveler’s disclosed social media accounts. First, make absolutely certain that your device and your visa application list exactly the same accounts. Do not “omit” or “forget” anything on the visa application which shows up on your device menu. Second, those travelers who apply for U.S. visas must disclose their social media handles and profiles completely – and it can be considered “fraud” if you fail to do so. For example – what was that AOL or Yahoo account you used in 2000? What was your .edu email address while at university or your email address at work five years ago? If you forgot these items then you should go find them and disclose it on the visa application even if you haven’t used it in years. USCIS officers look for social media content that may raise a reasonable suspicion that the traveler falls within established grounds for denial of admission. Content checked by USCIS officers may be videos, photos and comments that are publicly available to anyone online. The officers’ motives are “pure” in as much as the officers want to ensure that people who are applying for visas or who present at the POE are “who they claim to be” and that they are being transparent about their reasons for coming to the United States. The traveler should disclose social media platforms, handles, and email addresses on the travel visa applications usually processed at the consular level (i.e., forms DS-160, DS-156, DS-260). It is not possible to predict what images or links found on your devices will cause a secondary inspection or an eventual “inadmissibility” determination by the CBP.

References

¹ The agents conducted the first and second searches manually, examining Cano’s text messages and call log, and recording some of the listed phone numbers. During the third search, the agents used Cellebrite software to download data from Cano’s phone. The agents declared the searches as “border searches” and thus “warrantless.” The motion to suppress the evidence was denied by the trial court. The Ninth Circuit overruled the trial court and suppressed the warrantless evidence. The reasonable expectation held in a personal phone was sufficiently high at the border that only warrantless searches “directed at determine[ing] whether the phone contains contraband” were allowed as warrantless at the border.

Fishing expeditions for evidence of ‘border related crimes’ were expressly outside the border area exception to the warrant requirement of the 4^th amendment .

²           See., e.g., U.S. v. Gavino, 2024 WL 85072 (E.D.N.Y. Jan. 7, 2024)(Defendant’s decision to unlock his phone for CBP was voluntary despite a totality of circumstances implying prolonged seizure if consent were withheld).

³           Click on “CBP” at the left and then “DHS/CBP/PIA-009 TECS System: CBP Primary and Secondary Processing” and “DHS/CBP/PIA-021 TECS System: Platform”.

⁴           https://www.washingtonpost.com/technology/2022/09/15/government-surveillance-database-dhs/ Washington Post reports September 15, 2022 that CBP is retaining the call logs of the phones searched at the border. “***thousands of agents have access to a searchable database without public oversight is a new development in what privacy advocates and some lawmakers warn could be an infringement of Americans’ Fourth Amendment rights against unreasonable searches and seizures.”

⁵           If you are not a U.S. citizen or lawful permanent resident, you may be denied entry to the United States for a refusal to answer questions. The federal Immigration and Nationality Act describes a number of reasons why foreign nationals might be inadmissible into the country. The Department of State applies these considerations when it decides whether to grant a visa, and CBP applies them again at the border. CBP has broad discretion to determine that a foreign national meets one or more of the grounds for inadmissibility and can rule a person inadmissible notwithstanding that the State Department concluded otherwise when it issued a visa. Once CBP denies you admission into the country, it is very difficult to challenge its decision. If CBP denies you admission, it most likely will revoke your visa stamp. It may also, if it chooses, initiate “expedited removal” proceedings that will result in a five-year bar on you entering the United States. CBP may, but is not required to, offer you the option of “withdrawing your petition” to enter the United States. If CBP offers you the option to withdraw, you should strongly consider accepting it, because if you do not, CBP may initiate expedited removal.

If you are a citizen and have been referred to Secondary Screening, you have the right to ask for a lawyer to be present during your questioning. If you are not a U.S. citizen, federal officials will not permit you to make a phone call to seek assistance from counsel or others once you have been referred to Secondary Screening.

⁶           If you are inadmissible under any ground in INA 212(a), including INA

212(a)(9)(B)(i) and INA212(a)(9)(C)(i)(I), you generally cannot obtain a visa from the U.S. Department of State, enter the United States at a port of entry, or obtain an immigration benefit such as adjustment of status to lawful permanent resident (a Green Card) in the United States unless you first obtain a waiver or another form of relief (such as consent to reapply for admission).

⁷           https://www.nytimes.com/2019/08/27/us/harvard-student-ismail-ajjawi.html

⁸           https://techcrunch.com/2019/09/02/denied-entry-united-states-whatsapp/⁹https://www.cbsnews.com/news/senators-letter-mayorkas-border-search-phone-data-warrant/

US. Expatriation Tax Provisions Apply Whenever A Green Card Is Surrendered or Revoked – The Income Tax Is Triggered By The Involuntary Loss Or Surrender Of Green Card Status – Think Twice and Pay Attention To Your Travel!

If the Green Card holder is out of the country for more than 180 days then be prepared with all the documentary evidence to present at the border to prove that the US remains your “permanent residence.” Avoid involuntary surrender of the Green Card through thoughtless neglect.

The visa remains an “invitation” to enter the US but not a “right” to enter the US regardless of the years held, or the nature of the LPR status. Any officer at the POE can “turn you away” so be alert to the circumstances at all times.

Loss or Surrender of the Green Card has significant penalties for a financially secure person. The United States imposes income tax on the worldwide income of Lawful Permanent Residents (“LPR”) (U.S. green card holders). In order to avoid the tax a LPR may wish to consider “surrendering” his or her green card. But, if the LPR waits eight or more years to do so (as calculated as total days within a 15 year time block), then be ready for the “expatriation tax penalty” on your global assets. IRC §877A. There are certain assets which are exempt from the tax (IRC §877A(d)-(f), there is an ability to defer some tax (with interest) on certain assets, there are some assets for which a 30% withholding is required in the alternative, and there is a $866,000 income exemption (2024) for those assets subject to the expatriation tax penalty. The tax analysis also takes into consideration assets held before the LPR status vested and provides for “stepped up basis” to the fair market value (“FMA”) of that property at the time the LPR status began. All of the taxation effort is focused on a presumption that the worldwide assets were sold at FMV on the date of the surrender of the green card (a “deemed sale”). Imagine that the LPR sold all of his/her global assets on the day the green card is surrendered and paid income tax at the appropriate (capital gains and ordinary income) rates. Who would want to surrender a green card with this penalty tax lurking in the bushes? You would be surprised how this issue arises.

The tax is triggered by the loss or surrender of green card status. There are LPRs who fail to pay attention to the US residency requirements and find that the LPR status is either effectively surrendered or suspended or at least under question when they arrive at the border. In sum, if an LPR spends more than 180 days of any 12 month period outside the US, then there arises an effective presumption of green card surrender. That presumption is possible to overcome, and the green card may only be “taken” if (1) voluntarily surrendered by the LPR or (2) ordered surrendered by an immigration law judge. Don’t be fooled into voluntary “surrender” in which a Form I-407 is presented to the LPR with all sorts of encouragements (threats) to sign and “be on your way.” Every LPR is entitled to a day in court if the CBP wants to wrestle away that green card.

The USCIS has issued clear guidance to the airlines that an unexpired LPR is sufficient to allow travel to the US. You can get on the plane! If the LPR is out of the country for more than 180 days then be prepared (in addition to the careful conversations) with all the documentary evidence to present at the border to prove that the US remains your “permanent residence.” At the port of entry (“POE”) the CBP officers may well elect to question the LPR in a manner that gives rise to a secondary inspection. The POE is where “casual answers” to an officer’s questions most often result in further inspections or refusal of entry. Statements by the LPR which imply a diminished intent to reside in the US will guarantee an inspection. Nothing the CBP officer asks is “casual” and the LPR must treat all interactions seriously. The visa remains an “invitation” to enter the US but not a “right” to enter the US regardless of the years held, or the nature of the LPR status. Any officer at the POE can “turn you away” so be alert to the circumstances at all times.

Alternatively, an LPR may obtain tax residence in a ZERO tax haven, and in doing so decide that the US no longer is a beneficial tax jurisdiction. Surrender of the LPR status can make tax sense under certain circumstances and under the assumption that the LPR no longer needs to “work” inside the US. The circumstance arises with entrepreneurs in particular whose income and assets are “portable.”

The critical issues in surrendering the green card to avoid taxation on worldwide assets by the US, though discussed here, are not intended as tax advice as per Circular 230.

Executive Order Dated February 10, 2025 and the “Pause” of Enforcement of The United States Foreign Corrupt Practices Act Doesn’t Create Immunity For Criminal Acts Overseas.

The single most powerful tool in the hands of American businessmen working overseas is the universal knowledge that “we can’t pay bribes!” and anyone who does any where in the world facing prosecution, fines and jail time. The Foreign Corrupt Practices Act (FCPA) provided this shield against extortion since 1977. On February 10, 2025 Presidential Executive Order “paused” enforcement of this law by the U.S. Department of Justice.¹ The message may well be received overseas that “finally! the Americans will pay too!”

Why Corruption Never Benefits the Common Person –

Corruption ruins both businesses and national economies. There are best practices to consider adopting in order to avoid legal and ethical entanglements.² Honest and ethical business practices are not measured by a universal standard. Rather, the custom and practice of the business location often dictates the boundaries of what is “dishonest” when compared to what is “culturally sensitive.” However, local custom means absolutely nothing when confronted with criminal prosecution by the United States Department of Justice (USDOJ). You and your company need to observe the lessons of those prosecuted under US anti- corruption laws in order to identify what the USDOJ considers “ethical” regardless of where the acts are performed. Follow the discussion in brief of the USA law known as the Foreign Corrupt Practices Act (FCPA).³

The Executive Order Doesn’t Waive the Statute of Limitations –

Criminal charges will follow a corrupt action and the American who performs it well after the Executive Order or the new enforcement policies are replaced by a new President, Attorney General, or court ruling. There is no immunity from prosecution afforded by either. The statute of limitations for Foreign Corrupt Practices Act (FCPA) violations is five (5) years, but can be extended to eight (8) years. This extension is possible through tolling based on Mutual Legal Assistance Treaty (MLAT) requests.⁴ The conduct that might be criminal may well not be investigated or enforced under the current Administration through this revised “policy” developed by the current Administration. However, Americans need to worry about enforcement actions against this same conduct by the next or another Administration which determines it is conduct worthy of investigation and enforcement actions. The exercise of “prosecutorial discretion” remains an executive prerogative in the US.⁵

Under the federal criminal justice system, the prosecutor has wide latitude in determining when, whom, how, and even whether to prosecute for apparent violations of federal criminal law. The prosecutor’s broad discretion in such areas as initiating or foregoing prosecutions, selecting or recommending specific charges, and terminating prosecutions by accepting guilty pleas has been recognized on numerous occasions by the courts.⁶

Note that the Executive Order only instructs the Attorney General, as the chief law enforcement officer of the United States, to review the existing enforcement “policy” and consider a revision of that policy.⁷ This process is substantially different from an Administrative Rule change. When a defendant seeks to assert the “policy” as an affirmative defense such a claim will quickly fail because a policy has no protective weight of any kind, unlike an Administrative Rule, which has considerable weight.⁸

Common Sense Must Govern – Not “The Purge” Hollywood Capitalist Fever Dream-

An Executive Order doesn’t create the setting for a white collar version of the hit movie “The Purge” or its sequels “Anarchy” or “Election Year.”⁹ Please be “practical” as a business leader working with overseas interests. Recognize, for example, that the ruling party (in South Africa and elsewhere in post- colonial Africa) frequently deploys “party cadres” (loyalists) to government positions or government influenced positions in publicly owned businesses. These deployments pose a risk to you (personally) and to your company that you may inadvertently engage in one or more corrupt practices. South Africa, due to its political choices, has made the risk of corruption higher, and thus the business climate less attractive to USA based investment. No American wants to risk reputation and fortune in order to bring progress and prosperity to South Africa (or any country).

The Business Facilitators or Fixers Can Get You Into Trouble –

Doing business across borders involves more than the financial returns so business leaders should engage local “guides” to identify corruption risks and mitigate them. USA citizens, non-citizens, and USA companies are all subject to the long arm of American anti-corruption legal jurisdiction which includes Africa and companies (and officers) who wish to work in Africa. As a business leader you must be alert to the myriad types of conduct which is “dishonest” and which violates the FCPA without regard for local customs. Be alert to connections to Politically Exposed Persons also known as Prominent Influential Persons (PIP) are individuals who hold or have held prominent public positions or have close associations with such individuals.

There is no legal exception for culturally accepted behaviors. In particular, ruling party cadre deployments (i.e., the children of government members or employees) may fall within the definition of the “officials” the FCPA is intended to isolate away from the USA business leaders.

An American business leader who engages with a PEP will have an obligation to comply with the reporting laws. FICA PEP reporting is the process of reporting suspicious transactions to the Financial Intelligence Centre (FIC) in South Africa. The FIC is responsible for overseeing compliance with the Financial Intelligence Act (FICA).¹⁰ You are responsible for reporting to them. Seek local assistance to identify whether the intended investment will involve “officials” directly or indirectly.

FCPA Isn’t The Only Law That Can Reach An American Working Overseas –

South Africa and most other developed and developing countries have a law which mirrors the FCPA. For example, in South Africa, South Africa’s Prevention and Combating of Corrupt Activities Act (PRECCA) is the primary anti-corruption law in the country. It is similar to the UK’s Bribery Act. PRECCA has extraterritorial reach, which means that South African citizens and companies can be prosecuted for corruption in other countries.

The ruling African National Congress (ANC) is well known to make state owned enterprise (SOE) positions available exclusively to party members (without regard for competence).¹¹ There are court cases brought by the opposition parties challenging the constitutional basis of such hiring preferences.¹² The allegations of the court cases should raise the level of concern and the level of conduct scrutiny for all business leaders wishing to remain in compliance with the FCPA, and the South African equivalent.

As a practical matter all American business people are on “notice” that the employee or board member, or officer to whom they are speaking or with whom they are working may well be considered an “official” under the anti-corruption laws of several major economies. Frequent news stories identify suspect business transactions involving “officials” in the form of family members near and not so near, recognized confidants, and intimate or business partners.¹³

FCPA Is A Shield Against Extortion By Corrupt Leaders –

The Foreign Corrupt Practices Act (FCPA)¹⁴ was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the payment of money (or giving anything of value) to a foreign official to influence the foreign official in his or her official capacity. “Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.”¹⁵

Violations of the FCPA start with any sort of “payment” or “value delivered” to an “official” for the purpose of advancing the business interests of the giver. The U.S. Department of Justice (DOJ) has historically adopted aggressive interpretations of the statute that apply with particular force.

There are three significant issues: (1) the meaning of “foreign official”; (2) the meaning of “anything of value”; and (3) the use of third parties that make pass through payments to officials.¹⁶ The law is so all inclusive that the hiring of the children of officials or the relatives of officials has been viewed by the US DOJ as a violation.¹⁷ The USA based bank, JPMorgan Chase, in November 2016, was fined $264M for a program it named “Sons & Daughters” which gave internships to the children of Chinese officials. The implications are clear that “dishonest” conduct can also be conduct which seems on its face to be innocuous. The risk of unintended corrupt conduct is sufficiently greater in less than transparent countries that a local guide should be engaged to identify risk and mitigate the risk.

Foreign Corrupt Practices Act and other anti-bribery laws must be carefully evaluated in the context of the alleged FCPA violation. The FCPA’s anti-bribery provisions contain two affirmative defenses: (1) that the payment was lawful under the written laws of the foreign country, or “the local law defense,” and

(2) that the money was spent as part of demonstrating a product or performing a contractual obligation, the “reasonable and bona fide business expenditure” defense. Because these are affirmative offenses, the defendant bears the burden of proving them.¹⁸

Penalties for violations can be civil or criminal. They can include fines, imprisonment, disgorgement of any ill-gotten profits, debarment from receiving federal awards, and loss of export control licenses.

Prohibition against corrupt payments appears simplistic and straightforward on its face. Corporations and other entities convicted of violating the FCPA’s accounting provisions face a maximum fine of $25 million per violation. Individuals convicted of violating the accounting provisions face maximum penalties of 20 years in prison and a $5 million fine. Enforcement is real.¹⁹

Change is Coming Now That The President Has Spoken to MAGA –

The fact that the President has laid down his personal marker (Executive Order) for his MAGA minions in which the FCPA is tarred as an “obstacle” preventing the realization of his vision of Make America Great Again, then we all can expect change in some manner to the law. The most reasonable change which would not kick off a race to the bottom of the ethical barrel would be to legislate to allow the JPMorgan Chase “Sons & Daughters” program. Another change would be to empower the Department of Education (or what is left of it) to issue financial grants to universities that admit foreign students who are PEP. The cultural change that could be stimulated by these small changes would be profound overseas and miniscule in the context of “corruption” of the business environment.

Consider The History & Make Better Choices & Lead The Way –

Corruption is a global problem. In the four decades since Congress enacted the FCPA, the extent of corporate bribery has become clearer and its ramifications in a transnational economy starker. The Anti- Bribery Convention came into force on February 15, 1999, with the United States as a founding party. Together these laws have “globalized” the fight against corruption tilting the business opportunities away from the consumer and into the pockets of the powerful.

Corruption impedes economic growth by diverting public resources from important priorities. Foreign bribery is a scourge that must be eradicated. It undermines the rule of law, empowers authoritarian rulers, distorts free and fair markets, disadvantages honest and ethical companies, and threatens national security and sustainable development.

As Americans abroad we all are ambassadors for the “brand” that is America. We are internationally known for our optimism, innovations, and our indefatigable “can do it!” spirit. In our business dealings we all should consider our roles and the history we are writing with each deal concluded, each promise kept, and each handshake respected. Our national leaders who passed into law the FCPA thought the same

– “The payment of bribes to influence the acts or decisions of foreign officials, foreign political parties or candidates for foreign political office is unethical. It is counter to the moral expectations and values of the American Public…” U.S. House of Representatives 1977. “Corporate bribery is bad for business. In our free market system it is basic that the sale of products should take place on the basis of price, quality, and service. Corporate bribery us fundamentally destructive of this basic tenet….” U.S. Senate 1977. International corruption also undercuts good governance and impedes U.S. efforts to promote freedom and democracy, end poverty, and combat crime and terrorism across the globe. We should not participate in or encourage others to do so. We are Americans.

References

¹     Sec. 2. Policy of Enforcement Discretion. (a) For a period of 180 days following the date of this order, the Attorney General shall review guidelines and policies governing investigations and enforcement actions under the FCPA. During the review period, the Attorney General shall:

(i)    cease initiation of any new FCPA investigations or enforcement actions, unless the Attorney General determines that an individual exception should be made;***

² https://doi.org/10.1787/18151957 OECD(2003), “Business Approaches to Combating Corrupt Practices”, OECD Working Papers on International Investment, 2003/02, OCD Publishing.

³ 15 U.S.C. 78dd-1 et seq.

⁴ 18 U.S.C. § 3292 is the MLAT tolling statute. The Mutual Legal Assistance (MLA) process involves states requesting and providing legal assistance to investigate, prosecute, or punish criminal offenses. The process is governed by treaties, domestic legislation, or a combination of both.

⁵ This discretion exists by virtue of the prosecutor’s status as a member of the Executive Branch, and the President’s responsibility under the Constitution to ensure that the laws of the United States be “faithfully executed.” U.S. Const. Art. II § 3. See Nader v. Saxbe, 497 F.2d 676, 679 n. 18 (D.C. Cir. 1974).

⁶ See, e.g., United States v. LaBonte, 520 U.S. 751, 762 (1997); Oyler v. Boles, 368 U.S. 448

(1962); United States v. Fokker Services B.V., 818 F.3d 733, 741 (D.C. Cir. 2016); Newman v.

United States, 382 F.2d 479 (D.C. Cir. 1967); Powell v. Ratzenbach, 359 F.2d 234 (D.C. Cir.

1965).

⁷ Sec. 2. (a) ***         (iii) issue updated guidelines or policies, as appropriate, to adequately promote the President’s Article II authority to conduct foreign affairs and prioritize American interests, American economic competitiveness with respect to other nations, and the efficient use of Federal law enforcement resources.***

(d) After the revised guidelines or policies are issued under subsection (a) of this section, the Attorney General shall determine whether additional actions, including remedial measures with respect to inappropriate past FCPA investigations and enforcement actions, are warranted and shall take any such appropriate actions or, if Presidential action is required, recommend such actions to the President.

⁸ But see contra., The previous doctrine of “Chevron deference” held that courts should defer to an agency’s interpretation of a statute if the statute was ambiguous. Chevron U.S.A. v.

Natural Resources Defense Council, 467 US 837 (1984). This was based on the idea that agency experts are better able to understand how new laws should be implemented. In a 2024 case, Loper Bright Enterprises v. Raimondo is Loper Bright Enterprises v. Raimondo, 603 U.S.

      (2024) https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf the Supreme Court ruled that courts should only defer to an agency’s interpretation if the agency’s decision was reasonable and within the bounds of its statutory authority.

⁹ The story line is as follows – In 2014, a political party called the “New Founding Fathers of America” are voted into office following an economic collapse and pass a law sanctioning the “Purge”, an annual event wherein all crime (including murder) is legal, and emergency services are unavailable for 12 hours. The result is that the United States is said to have become virtually crime-free, with legal unemployment rates having dropped to 1%. The tale just gets worse from the premise described here.

¹⁰ https://www.fic.gov.za/wp-content/uploads/2023/09/2021.12-PCC-PCC-51-FPPO-DPIP.pdf

¹¹ https://theconversation.com/south-africas-ruling-party-has-favoured-loyalty-over- competence-now-cadre-deployment-has-come-back-to-bite-it-199208

¹² https://ewn.co.za/2023/01/30/first-of-two-da-cases-against-anc-cadre-deployment-policy- resumes-at-high-court

¹³ https://www.news24.com/news24/southafrica/news/r125m-ppe-scandal-govt-acts-against- top-officials-in-limpopo-20220317 ; https://www.news24.com/news24/southafrica/news/four- sandf-members-in-court-for-ppe-corruption-worth-r273m-20220926 ; https://www.iol.co.za/news/south-africa/mpumalanga/top-official-arrested-in-connection-with- r21m-in-ppe-corruption-443cd016-e6f3-4a40-be26-a268d37c1652

¹⁴ Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq.

¹⁵ https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act

¹⁶ https://www.lehmanlaw.com/resource-centre/faqs/administrative-law/faq-relating-to- fcpa.html#:~:text=The%20FCPA%20prohibits%20the%20giving,common%20way%20of%20 doing%20business.

¹⁷ https://www.hg.org/legal-articles/hiring-children-of-foreign-officials-may-expose-bank-to- bribery-charges-31177 ; https://www.hg.org/legal-articles/hiring-children-of-foreign-officials- may-expose-bank-to-bribery-charges-31177 ; https://money.cnn.com/2016/11/17/investing/jpmorgan-china-hiring-bribery- settlement/index.html

¹⁸ FCPA’s bribery prohibition also contains a narrow exception for “facilitating or expediting payments made in furtherance of routine government action.” This exception applies only when a payment is made to further “routine governmental action” that involves non- discretionary acts. https://www.justice.gov/criminal/criminal-fraud/file/1292051/dl

¹⁹ https://fcpa.stanford.edu/statistics-keys.html

The 2022 SAG-AFTRA Commercials Contract and Audio Commercials Contract will expire on March 31, 2025. The advertisers’ (business) joint negotiating team is warning its members to get all productions wrapped up before the March 31st deadline or brave the consequences. The payment terms on existing or future contracts should address extending the time of authorized use of the commercials made, and extending the payment terms of these contracts (if appropriate).

This is not the same as the 2023 strike that immediately comes to mind. The threat of a strike by the “talent” this time is the advertising talent and it is not merely hypothetical since many of the same issues are present as were found in the 2023 strike. Advertising has a very short “period of use” when measured against other content.1 The demand to refresh the advertising content is a large incentive for the industry to reach an agreement. The large inventory of talent for advertisements and the relatively low barriers to entry are theoretical inducements to an early agreement.

In the 2023 strike, the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) the result was a massive loss time and content for theaters and streaming services effecting the entire “content” industry represented by the Alliance of Motion Picture

and Television Producers (AMPTP) – which represents Walt Disney, Netflix and other media companies. The strikes by SAG-AFTRA (Film & TV)(118 days) and the Writers Guild of America (148 days) downed tools for most of 2023.2 The reasons for the 2023 strike have not been “resolved” in all portions of the industry. The popularity of streaming platforms has led to a shift in the entertainment industry, with writers and actors not seeing the same increase in pay. Writers and actors are concerned about dwindling compensation, especially residuals, which are payments made when a show becomes a hit. Writers are concerned that studios will use AI to create the first draft of scripts, leaving them to only polish and edit the work. They also demanded safeguards to protect their jobs from AI. Streaming services have shorter seasons than broadcast shows, which means writers get paid less per job. Actors were fighting for better working conditions including writers demanding mandatory staffing of TV writing rooms.3

The warning to advertisers dated December 17, 2024 came from the Joint Policy Committee, LLC, which represents advertisers and advertising agencies who have authorized the Committee to collectively bargain on behalf of advertisers with SAG-AFTRA and the American Federation of Musicians, on the collective bargaining agreements that govern the use of performers and musicians in commercials. The warning included additional recommendations to advertisers for terms & conditions desirable in future contracts for advertisement such as include in new or negotiated contracts that during a strike (i) the performer may not withdraw consent to use a commercial,4 (ii) the Maximum Period of Use clock will be suspended, (iii) installment payments of residuals due to the performer are suspended,5 and (iv) negotiate immediately the use of commercials in which the Period of Use will expire as of the strike date.

Ready yourself or your client for the likelihood of a strike by the “talent” performing in the advertisements which the advertiser has either already contracted for or is planning to contract for in the near future. The strike may prevent completion of the advertisement production or interfere with the broadcast of completed advertisements. Expect this strike to address many of the same issues raised in the 2023 SAG-AFTRA & Writers Guild of America strike. The outcome may well be different based upon the advertising “talent” having a weaker bargaining position.

References

¹ The maximum period of use (MPU) is the amount of time a commercial can be used, and it can vary depending on the type of contract and the content being used. The MPU for a SAG- AFTRA commercial is 21 months, starting from the earliest of the commercial’s first use or 13 weeks after the last production day. More than one commercial may be filmed in a single “session” and a performer may be “cut” (outgraded) and no longer earn any fees from the commercial (residuals).

² Previously, the Writers Guild of America 2007 thru 2008 (99 days), and Commercial Actors in 2000 (182 days).

³ The deal will bring immediate 11% wage increases for background actors, as well as immediate 7% wage increases for others, SAG leaders said last month. The studios cannot create a digital replica of an actor without first obtaining their consent, and actors will receive payment based on the type of work the digital replica performs on-screen. The contract provides protections for background performers so that their digital replicas cannot be used without consent; a new $40 million fund to pay performers for future viewings of their work on streaming platforms; institutes a requirement for intimacy coordinators for scenes involving nudity or sex; and includes terms to “ensure that sets have proper hair and makeup for all performers” (Black actors and other actors of color have long reported racist practices in Hollywood hair and makeup departments, including being told that productions “didn’t have the budget” to style their type of hair).

⁴ The talent will include the principal actor (“talent”) and the extras. The Contract provides that extra performers or background actors that are non-identifiable within frames. This category includes body doubles, stand-ins, and hand models.

⁵ Under the SAG-AFTRA Commercials Contract, residuals are compensated to principal actors in addition to their daily wages.

Receipt of money prior to the delivery of the service or goods is the receipt of “unearned revenue” which has its own classification under GAAP and the U.S. Internal Revenue Service regulations. This is not a universal method of tax treatment – and it is another reason why companies should favorably consider establishing a U.S. branch or affiliate through which to transact international business.

The law known as the Tax Cuts and Jobs Act of 20171 amended Internal Revenue Code

§451 to allow accrual-basis taxpayers to defer recognizing income until it is taken into account in their applicable financial statements as defined by §451(b)(3). The taxpayer makes an election to defer the income. This rule can eliminate some book-tax timing differences regarding unearned revenue, also known as deferred revenue. Taxpayers have relied on Rev. Proc. 2004-34 to defer the recognition of income for tax purposes on prepayments. In general, taxpayers were able to defer income from advance payments for tax purposes if they (1) adopted the accrual method and (2) deferred the income for financial reporting purposes for not longer than the next tax year. Taxpayers are able to defer income recognition based on how the income is recognized in their applicable financial statements as a result of the amendment to §451. However, there is no such exception for advance payments of rent, insurance premiums, and other payments.2 Further, taxpayers generally are not able to defer the income recognition beyond the year following the year of receipt. The Act expires December 31, 2025 though some provisions of the Code will not be effected.

Unearned revenue, sometimes referred to as deferred revenue, is payment received by a company from a customer for products or services that will be delivered at some point in the future. The term is used in accrual accounting, in which revenue is recognized only when the payment has been received by a company AND the products or services have not yet been delivered to the customer.

Accounting reporting principles state that unearned revenue is a liability for a company that has received payment (thus creating a liability) but which has not yet completed work or delivered goods. The rationale behind this is that despite the company receiving payment from a customer, it still owes the delivery of a product or service. If the company fails to deliver the promised product or service or a customer cancels the order, the company will owe the money paid by the customer.

Generally, unearned revenues are classified as short-term liabilities because the obligation is typically fulfilled within a period of less than a year. However, in some cases, when the delivery of the goods or services may take more than a year, the respective unearned revenue may be recognized as a long-term liability.

The Internal Revenue Code provides that, generally, gross income means all income from whatever source derived. §162 provides a deduction for all ordinary and necessary expenses paid or incurred in carrying on a business. Under GAAP, the accrual method of accounting is required where revenue and expense straddle more than one tax year, and, therefore, expenses and revenues should be properly reflected in each accounting period to avoid distorting income for any one accounting period.

References
¹ The TCJA lowered most individual income tax rates, including the top marginal rate from

39.6 to 37 percent. The law maintained the seven-bracket rate structure, but the income thresholds were updated. TCJA increased the standard deduction to $12,400 for single filers and $24,800 for married filers (tax year 2020), compared with $6,500 (single) and $9,550 (married) under prior law. The bill eliminated the personal exemption and a variety of other miscellaneous deductions along with limiting certain itemized deductions like the state and local tax (SALT) deduction, mortgage interest deduction (MID), and charitable contribution deduction. TCJA increased the Child Tax Credit (CTC) from $1,000 to $2,000—the first

$1,400 of which is refundable—and increased the income thresholds from $110,000 to

$400,000. The TCJA lowered the corporate income tax (CIT) rate from 35 to 21 percent starting in 2018. The measure also allows full and immediate expensing of short-lived capital investments for five years and increases the section 179 expensing cap from $500,000 to $1 million. The bill eliminated or curtailed a variety of business taxes and expenditures, including the deductibility of net interest, net operating loss carrybacks and carryforwards, and the corporate alternative minimum tax (AMT). Additionally, the TCJA moved the United States toward a territorial tax system and instituted rules to prevent base erosion.

² Under §451(c)(4)(B), advance payments for the following items are not eligible for deferral:

(1) rent; (2) insurance premiums; (3) payments with respect to financial instruments; (4) payments with respect to warranty or guarantee contracts under which a third party is the primary obligor; (5) payments subject to §871(a), 881, 1441, or 1442; and (6) payments to which §83 applies.

The South Africa’s Digital Nomad Visa (DNV) refers to a remote work long-term visitor visa.¹ The visa became reality with the publication in the gazette on October 9, 2024 of the Third Amendment of the Immigration Regulations which amended §11(1)(b)(iv) of the Immigration Act of South Africa.² The DNV allows foreign nationals to live and work (remotely) in the South Africa for up to 36 consecutive months.³ The spouse and family are allowed to accompany the DNV but do not have work or study

authorizations. This visa is distinctly different than a §11(2) Short Term Work Visa though there is some overlap between the two visas which may be beneficial for employers to consider.⁴

• File application and pay R425 fee;

• Valid Passport (with two blank visa pages and an expiration date at least 30 days longer than your planned date of departure);

• Departing flight evidence (ticker or reservation);⁶

• Evidence of remote work in the form of a “valid contract of employment signed by both the applicant and the foreign based employer;”⁷

• Proof of prior earnings (wages or other earnings) of a minimum annual remuneration of no less than the equivalent of R650,796.00 ($37,000 USD)⁸;

Practice Tips – The application form doesn’t require it but as a result of other practical experience with

§11(1)(B)(iv) class visas an applicant should be prepared to show that he/she has/have (1) travel medical insurance with treatment coverage in-country or evacuation provisions; (2) a criminal record background check for all countries lived in for 90 consecutive days or more in the past 10 years including South Africa (if ever visited at all); and (3) bank statements for at least the prior three (3) months reflecting the income required by the criterion or more bank statements which reflect when averaged the required income threshold (“assets” are not sufficient to demonstrate compliance with the threshold since this is an “earnings” tested criterion);⁹

The DNV differs from traditional tourist visas in that it offers long-term (36 months) work authorized residency without requiring a local employment contract. The DNV initially allows for a one-year stay, offering this quality of visa and the offer should make South Africa even more attractive for the remote working generation.

Death & Taxes – Taxes are addressed in part by the legislation. Generally, the Digital Nomad who stays in South Africa for more than 183 days (six months) within a 12 month period, must register with the South African Revenue Service (SARS) and pay income taxes on income “earned” in South Africa. For stays under 183 days, the Digital Nomad must still register with SARS (unless your country of origin is Double Taxation Agreement “DTA” or treaty exempt)¹⁰ but is eligible for a tax exemption.¹¹ In either event the DNV has an obligation to register with SARS and to file an annual earned income tax return regardless of the length of stay.

The nasty bit for the unsuspecting Digital Nomad is the “global earnings tax” which South Africa can levy if the Digital Nomad is not alert to the “time in-country” requirements for tax assessment purposes. The taxes applied to the Digital Nomad were not addressed by the legislation at a more detailed level (at least not yet) which would address this nasty bit so the general rules of taxation will apply and SARS is its own master when it comes to taxes.

Generally, the global earnings of the Digital Nomad are subject to tax in South Africa¹² if the Digital Nomad satisfies one of these two main tests to determine “tax residency” ¹³ for people resident in South Africa – (1) the Ordinarily Resident test¹⁴ and (2) the Physical Presence test.¹⁵ If the Digital Nomad is deemed a “tax resident” in South Africa, then tax must be paid on worldwide income regardless of source, even if the Digital Nomad claims permanent residence abroad or all earned income is derived from work performed remotely.

country with a Double Taxation Agreement or treaty with South Africa (such as the USA), and extends only to the extent that South Africa credits taxes paid elsewhere against taxes owed in South Africa. The Digital Nomad will still get tagged for the highest marginal taxes¹⁶ which, for the US taxpayer, will likely be South African.

Risk Management for Foreign Companies – The legislation is silent on more granular tax questions which foreign companies “engaging” the Digital Nomad will find uncomfortable. The foreign “employer” of the Digital Nomad will have several unanswered taxation questions and employment questions such as whether engaging the Digital Nomad makes the foreign company an “employer” or builds a “substantial presence” (or has a “Permanent Establishment”) in South Africa for legal jurisdictions.¹⁷

It is less likely that South Africa will treat a Digital Nomad as creating a “Permanent Establishment” for the foreign company that engages the Digital Nomad.¹⁸ Treaties may use different variations on decades old language for defining the term however none of the existing language supports interpreting a Digital Nomad (as envisioned) as creating such as presence. The silence of the legislation simply creates a risk that may influence the informed foreign company when it considers engaging a Digital Nomad working from South Africa. The risk includes that the foreign company gets tagged as an “employer” in South Africa which would trigger both an obligation to register as an employer and potentially also a corporate tax liability. The newly minted “employer” would also have to pay “skills development” levies and the “employee.”¹⁹

Better Than All The Rest – Desperately needed and new legislation will yield unexpected results in any environment but in South Africa the ability to hold a dialog with the implementation authorities usually results in a better outcome than expected by foreign company executives. Everyone in South Africa wants the Digital Nomad to succeed from the highest level of government on down to the Border Management Authority (BMA). This visa is a national priority.²⁰ Additionally, there is really no competition in the sub- Saharan SADC countries.²¹ The neighboring countries offer nothing comparable to the South African DNV.²² No such DNV exists in Zimbabwe, Botswana, and Mozambique. Namibia offers only a six month non-renewable visa.²³ The Southern African Development Community (SADC) is a regional economic community made up of 16 countries in Southern Africa and none of these countries is offering the quality and terms of the South African DNV.

References
¹ South Africa’s Department of Home Affairs has announced a significant reform in the country’s immigration policy. The Trusted Employer scheme adopts a new points-based system for foreign worker visas. For general work visas outside the Trusted Employer Scheme, a minimum gross annual income threshold of R650,796 has been established to protect local jobs while attracting high-end skills. This threshold includes Digital Nomad Visas.

² §11(1)(b)(iv) of the Immigration Act of South Africa allows a foreigner to apply for a visitor’s visa for a period of up to three years for prescribed activities. The prescribed activities include:

• Working for a foreign employer in South Africa for a contract that requires certain activities to be carried out in the country
• Teaching at an international school
• Working in the entertainment industry in South Africa, such as an actor, cameraman, or make-up artist
• Working as a foreign journalist seconded to South Africa by a foreign news agency
• Working as a visiting professor, lecturer, or academic researcher
• Working as an artist who wishes to write, paint, or sculpt
• Working as a tour leader or host

To apply for a visitor’s visa under Section 11(1)(B)(iv), the applicant must provide the following documents:

• A completed and signed application form
• A statement or documentation explaining the purpose and duration of the visit
• A valid return air flight ticket or proof of reservation
• Proof of sufficient financial means, such as three months of bank statements
• A valid passport that expires at least 30 days after the intended departure date

³ An initial visa for 12 months renewable for an additional 24 months if criteria are satisfied.

⁴ The Digital Nomad Visa (aka “Remote Work Visa”) is a visa under §11(1) and differs from the short term work visas under §11(2). These are two distinctly different purpose built visa classes. The Digital Nomad Visa is designed for individuals who wish to live in South Africa while working remotely for foreign employers. This visa promotes a flexible lifestyle and supports the local economy by attracting high-earning individuals. In contrast, the Short Term

Work Visa under §11(2) is intended for short-term work assignments. It allows foreign nationals to engage in specific work-related activities in South Africa for a limited period. This visa is suitable for individuals who need to visit the country temporarily to fulfil specific duties on behalf of a foreign employer at a local host company. The §11(2) authorization is a once-off non-renewable visa application (i.e., cannot be extended while in South Africa) to address an immediate short term or urgent need for a limited duration of employer work needed.

⁵ The criteria in excess of the express criteria on the visa application form are “imputed” criteria. The DNV arises under §11(1)(B)(iv) and thus the history and practice of the Department of Home Affairs in reviewing visa applications under §11(1)(B)(iv) suggests (rather than demands) certain evidence in support of the application will aid in its approval. ⁶ It is reasonable to be concerned if the intent is to stay in South Africa longer than 365 days that a return air ticket or reservation is proof the applicant will not have available. However,

applying common sense the successful applicant will make the reservation to depart regardless of the actual intent to depart simply to “tick the box” on this particular criterion.

⁷ This “contract” requirement is a curveball in the legislation. Freelancers, influencers, and Internet personalities are simply not considered in this particular criterion. A work-around is to establish a foreign owned company with which to contract if the applicant is a freelancer etc. That “contract” should be sufficient to “tick the box” on this criterion until the government issues an update influenced by experience with the visa.

⁸ The application demands evidence of R650,796 in previous foreign earnings but several online articles refer to R650,976 as the sum – a difference of approximately $500. It is not clear where the articles came upon the alternative amount compared to the application form stated amount.

⁹ https://www.dha.gov.za/images/notices/8october24/Remote_Work_Visa_-_requirements_-

_9_Oct_2024.pdf ; https://www.dha.gov.za/index.php/notices/1824-remote-work-visa- requirements-9-oct-2024

¹⁰ The Third Amendment now provides that foreign remote workers who are tax resident in a country that has concluded a Double Taxation Agreement (DTA) with South Africa will be required to register with SARS if they are present in the Republic for longer than an aggregate period of 183 days during any 12-month period (which aligns with the terms of most DTAs). Digital nomads from countries that do not have DTAs with South Africa will be required to register with SARS regardless of how long they remain in South Africa.

¹¹ Initially, the amendments provided for foreign remote workers to be exempt from registering with SARS if their visas were issued for a period of less than six months in a 12-month period. This period was then tightened to less than six months in a 36-month period; and rather than an automatic exemption, the regulations entitled the employee to apply to be exempted by SARS from registering as a taxpayer.

¹² The United States taxes the global income of all citizens and Legal Permanent Residents (LPR) regardless of sources and origins. There is a Foreign Earned Income Tax exemption which replaces other deductions on the Form 1040 and it has its own requirements. https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income- exclusion

¹³ Criteria for Individuals to be considered a tax resident. Under South African law a resident is defined by the Income Tax Act, 1962, as either an individual who meets the physical presence test or an individual who is ordinarily resident in South Africa under South African common law.

¹⁴ “Ordinarily Resident” means that South Africa is the country to which that person will naturally and as a matter of course return to after his or her wanderings.

¹⁵ To meet the requirements of the physical presence test that person must be physically present in South Africa for a period or periods exceeding:

• 91 days in total during the year of assessment under consideration, and
• 91 days in total during each of the five years of assessment preceding the year of assessment; and
• 915 days in total during those five preceding years of assessment.

¹⁶ South Africa will not tax foreign earned retirement income of a tax resident. Section 10(1)(gC)(ii). However, social security or pension contributions made in the US will be taxed for US citizens in the US and in South Africa. The United States has entered into agreements, called “totalization agreements,” with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be considered when determining whether an individual is subject to U.S. Social Security/Medicare tax, or whether a U.S. citizen or resident is subject to the social security taxes of a foreign country. A list of countries with whom the United States currently has totalization agreements and copies of those agreements may be obtained at U.S. International Social Security Agreements. South Africa is not one of these countries.

¹⁷ A foreign company is required to register (within 20 days) as an “external company” with CIPC if it conducts or intends to conduct business in South Africa. Section 23 of the Companies Act, 2008, lists a series of activities which will be regarded as conducting business. One of the criteria for registration is “entering into contracts of employment.” Unfortunately, this is the “same” criterion for granting a Digital Nomad Visa (whether or not intentional on the part of the legislation).

¹⁸ Note that the definition of a PE is typically similar under both the Organization for Economic Cooperation and Development (OECD) model treaty standard language and US model treaty standard language.

• Whether the corporation has a fixed place of business within the target country, as defined under the language of a specific treaty
• Whether the corporation operates in the target country through a dependent agent that habitually exercises the authority to conclude contracts on behalf of the corporation in the target country.

South Africa has its own additions to the PE definition which include an evaluation of the “management or control” of the company originating in South Africa; the providing of “services” inside South Africa for ‘an extended period of time” using employees or contractors; and other uniquely South African fact driven assessments of PE status.

¹⁹ Effective 22 December 2023, new South African tax legislation requires non-resident employers with a permanent establishment (PE) in the country to register as employers for employees’ tax (PAYE) purposes and to withhold PAYE from remuneration paid to their employees. This change could have a significant impact on employers with employees that opt to work in South Africa remotely, a situation that has become common recently. These foreign employers are also required to contribute to the Skills Development Levies (SDL) and the Unemployment Insurance Fund (UIF) through the South African Revenue Service (SARS), regardless of whether the foreign employer has a subsidiary or offices in South Africa.

²⁰ IT Web reports as follows: “In a statement issued yesterday (October 9, 2024) , the DHA says the move is in line with the Government of National Unity’s (GNU’s) collective mandate to “overhaul the visa regime to attract skills and investment, and grow the tourism sector”, as outlined by president Cyril Ramaphosa. Says home affairs minister Leon Schreiber: “The gazetting of all required elements for the remote work visitor visa and the new points-based system for work visas amounts to the single most progressive and pro-jobs regulatory reform South Africa has seen in decades.”

https://www.itweb.co.za/article/visa-regime-overhaul-begins-as-digital-nomad-visa- gazetted/rxP3jMBEdY17A2ye

²¹ Angola, Botswana, Comoros, Democratic Republic of the Congo, Eswatini (formerly Swaziland), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, United Republic of Tanzania, Zambia, and Zimbabwe.

²² https://www.freedomiseverything.com/digital-nomad-visa/

²³ The Namibia Digital Nomad Visa grants a six-month stay. There is a laundry list of documentation required to be filed with the visa application. https://nipdb.com/nomadvisa/ The highlights are as follows:

• The Namibia Digital Nomad Visa is non-renewable;
• Returning applicants can only reapply 12 months after the date of expiry.
• No change of visa status or condition is allowed on a Namibia Digital Nomad Visa;
• Applicants interested in the Namibia Digital Nomad Visa will have to prove that they earn enough money to be self-sufficient.
• Applicants need to demonstrate proof of income/funds (Payslip/Employment Contract) to sustain themselves and dependents (USD2000 – Applicant, USD1000 – Accompanying Spouse, USD500 – per accompanying child per month).
• Applicants must have valid travel documents (passport), health or travel insurance covering risks while in Namibia.
• Approximately USD124 (NAD2200) will be required upon arrival as payment for the Visa.

U.S. Trade Representative’s Office §301 Investigation if China Results in Rule Making With Million Dollar Penalties For Chinese Ships Landing in US Ports – Are You Ready For the Disruption?

China has demonstrated in the past its willingness to weaponize dependencies for purposes of economic coercion. China’s targeted dominance of the maritime, logistics, and shipbuilding sectors also serves a broader purpose to strengthen all of China’s instruments of national power through China’s Military-Civil Fusion (MCF) strategy. China has exercised influence on other nations’ policies in China’s favor and overtly punished other countries for policies that offend China.

The U.S. Trade Representative’s Office (USTR) has proposed charges of up to $1.5 million to Chinese ships docking in U.S. ports and $500,000 for ship operators with only one vessel in their fleet built in China or ordered from a Chinese shipyard. The January 16, 2025 report commissioned by the Biden Administration¹ “Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance” included a recommended initiative which seeks to promote

U.S. shipping and penalize Chinese domination in global shipping. The Federal Register announced a public comment period by the USTR on these proposed fees and restrictions beginning on February 21, 2025.² A hearing³ is scheduled for March 24 with the comment period closing the same day.⁴

China’s targeting of these sectors for dominance has undercut competition and taken market share with dramatic effect: raising China’s shipbuilding market share from less than 5 percent of global tonnage in 1999, to over 50 percent in 2023; increasing China’s ownership of the commercial world fleet to over 19 percent as of January 2024; and controlling production of 95 percent of shipping containers and 86 percent of the world’s supply of intermodal chassis, among other

components and products. The USTR has indicated that in 1975, U.S. shipyards were building 70 ships, but just five annually today. In this Section 301 investigation, USTR found China’s acts, policies, and practices to be unreasonable and to burden or restrict US commerce. The proposed rule followed.

The bi-partisan US policy position is to prevent the entrenchment of China’s dominance in the international maritime trade logistics. Absent an aggressive policy to counter-act the offensive official Chinese national industrial policies there would be a future where US trade were “carried out on vessels made in China, financed by state- owned Chinese institutions, owned by Chinese shipping companies, and reliant on a global maritime and logistics infrastructure increasingly dominated by China” according to the USTR.

Disincentives & Dissuasion Techniques Proposed –

To obtain the elimination of China’s acts, policies, and practices, and in light of China’s market power over global supply, pricing, and access in the maritime, logistics, and shipbuilding sectors, USTR proposes to impose certain fees and restrictions on international maritime transport services related to Chinese ship operators and Chinese-built ships, as well as operators with pending orders for Chinese built ships.⁵

Disincentives are focused on Chinese maritime transport operators operating Chinese- built ships would pay up to $1.5 million per port entry. Those with a fleet greater than 50% Chinese-built would pay $1 million per vessel entry regardless of origin. The fee would fall to $750,000 if the Chinese fleet percentage was between 25% and 50% and

$500,000 if under 25%.⁶

Operators with Chinese made ships on order would also pay fees in similar amounts if the vessels are due to arrive from Chinese shipyards over the 24 months from the effective date of the proposed rule.

Operators are also saddled with a “quota” of annual exports which must be on US “flagged” vessels.⁷ The operators must increase the volume of US exports on US flagged vessels from one percent on year one to three percent in year two, to five percent in year three and 15 percent in year seven.

Incentives to promote the transport of U.S. goods on U.S. vessels are included in the proposed rule. According to the notice, the proposed rule would “remit” to the operator up to $1,000,000 per port entry for each US build vessel.

Findings of Anti-Competitive State Sponsored Private Enterprise Actions –

China’s objective is to ultimately displace foreign competitors throughout the maritime value chain in domestic and foreign markets, which increases the world’s dependence on its companies, products, services, and technology. The institutions that issue these plans provide insight into their respective importance. National economic and social development five-year plans are overseen by the CCP with the National Development and Reform Commission (NDRC)— China’s state planner and industrial policy regulator in charge of coordinating input and drafting.66 These plans are ratified by the National People’s Congress, China’s legislature.

Industry-specific and overarching industrial plans may be drafted by a range of government and Party organizations. The highest-level industry-specific and overarching plans are issued jointly by the State Council—China’s executive branch—and the CCP Central Committee—the body of around 200 members that leads the Party and governs China.⁸

Diminished choice which creates dependencies is itself an unfair, anti-competitive outcome. China has demonstrated in the past its willingness to weaponize dependencies for purposes of economic coercion.

China exerts extraordinary control over the maritime, logistics, and shipbuilding sectors in order to achieve its targeted dominance of these sectors. Adherence to the objectives of China’s industrial plans is effectively mandatory. Both state actors and Chinese companies move toward the goals set by the central government and have little discretion to ignore China’s industrial targets. China’s targeted dominance of the maritime, logistics, and shipbuilding sectors also serves a broader purpose to strengthen all of China’s instruments of national power through China’s Military-Civil Fusion (MCF) strategy.

U.S. companies are severely constrained to compete for business in the global recapitalization of the commercial fleet. Low priced Chinese ships, which result from China’s targeted dominance, are among the constraints that U.S. companies face to compete for business. China’s state sponsored and -supported logistics services platform, LOGINK,⁹ continues to gain global dominance and impede the development of a fair and competitive market for such platforms, including at the expense of a now-defunct U.S. provider of similar services, due to China’s aggressive acquisition of management authority over ports in nations other than China.¹⁰ China controls 46 African ports among the many alleged to be under its indirect influence through companies structures.¹¹

China now owns 93 ports in 53 countries’ including Nigeria, Tanzania and Namibia, with China’s Ambassador to Namibia calling Walvis Bay port the ‘most brilliant pearl’ on Africa’s Atlantic coast. Of African Belt & Road Initiative (BRI) countries, 70% are located on the north, east, west or south coast with key investments made in ports near the Gulf of Aden and the Suez Canal, including Djibouti port, Port Sudan, Port Said–Port Tewfik, Ain Sokhna port, Zarzis port, El Hamdania port and the newly financed and commissioned Lekki deep seaport in Lagos, West Africa’s largest. The ports are specifically improved to accommodate Chinese military vessels

and infrastructure according to the reporting – a so called “dual-use model” – allows China to charge the host country to construct the facilities yet allows China to downplay the military significance of its port investments by quietly reducing the port fees disbursed to the host country as the debt is repaid.¹²

Ships and shipping are vital to U.S. economic security and the free flow of commerce. Globally, more than 80 percent of goods are transported by sea. In 2022, ships moved 44.6 percent of U.S. international goods trade by value ($2.3 trillion) and 78.6 percent of U.S. international goods trade by weight (1.6 billion tons). By value, ships move 61 percent of U.S. international goods trade with Asia and 45 percent of U.S. international goods trade with Europe. Today, China controls nearly a fifth of the world’s commercial shipping fleet. China can influence the pricing and availability of ships for international trade through its greater than 50 percent market share of production. It produces over 70 percent of ship-to-shore cranes, 86 percent of intermodal chassis, 95 percent of shipping containers, and increasing shares of other components and products.

USTR and Section 301 Are Powerful Tools In A Trade War –

The power delegated by Congress to the USTR must not be underestimated in the context of the evolving trade war. The Administration through mere “rule making” can significantly affect US industrial policy, employment, and the costs of consumer goods. The list of nations currently suffering Section 301 determinations is lengthy.¹³

Section 301 of the Trade Act of 1974, as amended (Trade Act), is designed to address unfair foreign practices affecting U.S. commerce. The Section 301 provisions of the Trade Act provide a domestic procedure through which interested persons may petition the U.S. Trade Representative to investigate a foreign government act, policy, or practice and take appropriate action. Section 301(b) may be used to respond to unreasonable or discriminatory foreign government acts, policies, and practices that burden or restrict U.S. commerce.

On March 12, 2024, five national labor unions filed a petition requesting an investigation into the acts, policies, and practices of China targeting the maritime, logistics, and shipbuilding sectors for dominance. The U.S. Trade Representative found that China’s targeting for dominance is unreasonable and burdens or restricts U.S. commerce. The rule making ensued.

The Law Of Bad Timing – Costly Port Calls & Major Alliance Over Capacity On The Seas

–

The law of bad timing resulting in unintended consequences applies to all things including maritime trade and the ships on which it sails. The proposed levy on Chinese ships calling at US ports could trigger moves to switch out Chinese built ships from US trades that would cause widespread disruptions over the coming months. Chinese carriers would be most affected by the levies and their potential exodus would create a void in the market as they account for 17% of US container imports from the Far East.

These uncertainties add to the current challenges that carriers are facing, with freight rates continuing to slide and carriers unable to maintain capacity discipline. The restructuring of carrier alliances is causing a short-term capacity shift in the trans-Pacific, giving cargo owners about 20% more functional capacity this month compared with a year ago but still 8% less than in January 2025.¹⁴ Forward schedules show capacity increases across the board in March and unless carriers reverse course soon, freight rate hikes will continue to prove elusive.¹⁵ EC freight futures fell sharply on early week trading due to carriers’ aggressive price cuts and the SCFIS’ 11.2% drop published after market close will fuel further price weakness in the coming week.

Capacity cuts in early February has translated to a sharp drop in the number of ships departing the Strait of Singapore last week to just 97,950 teu, against the 13-week average of 286,000 teu but will rebound over the coming weeks with March capacity at 288,000 teu. EC prices declined by

3-9%.¹⁶ MSC will have better market coverage and a larger market share compared to the Gemini Cooperation despite operating as the sole independent carrier on the East-West trades following the alliance reshuffle in February 2025.¹⁷ MSC will be able to offer the same or a larger number of weekly sailings on all of the 4 main routes than Maersk and Hapag-Lloyd, using its self- operated services as well as selective partnerships with Premier Alliance on the North Europe and Med routes and with Zim on the US. The Premier Alliance of ONE,¹⁸ Yang Ming and HMM is the newly named version of the former THE Alliance, which Hapag-Lloyd departed to partner with Maersk. The Federal Maritime Commission approved the Premier Alliance to take effect Feb. 9, 2025.

The only grouping remaining intact come February 1, the Ocean Alliance, made up of COSCO, OOCL, CMA CGM and Evergreen, will also be the one with the largest market share and widest market coverage this year.¹⁹ The Gemini, ONE and Premier alliances control 80% of worldwide container capacity.²⁰

Consequences –

Whether any of them comment on the proposed rule will illuminate the likelihood of litigation postponing the effective date of the proposed rule. Lower rates, increased surplus capacity, and stress of armed conflict on the preferred shipping lanes²¹ all add up to a decreased capacity to absorb the USTR proposed penalties for using Chinese made cargo vessels. The American consumer is going to feel an immense price impact when the number of vessels landing at US ports decreases dramatically or the cost of goods landed increases dramatically as a result of this proposed rule.

References

¹ https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-china- targeting-maritime-logistics-and-shipbuilding-sectors-dominance

² https://ustr.gov/about-us/policy-offices/press-office/press-releases/2025/february/ustr-seeks- public-comment-proposed-actions-section-301-investigation-chinas-targeting-maritime

³ Those wishing to testify at the hearing must submit a written request to the USTR on or before March 10, 2025.

⁴ https://www.federalregister.gov/documents/2025/02/27/2025-03134/proposed-action-in- section-301-investigation-of-chinas-targeting-of-the-maritime-logistics-and

⁵   90 Fed.Reg.38.pp10845 (Feb 27, 2025) *** Service Fee on Maritime Transport Operators with Prospective Orders for Chinese Vessels: An additional fee based on the percentage of vessels ordered from Chinese shipyards: (a) for operators with 50 percent or greater of their vessel orders in Chinese shipyards or vessels expected to be delivered by Chinese shipyards over the next 24 months, the operator will be charged up to $1,000,000 per vessel entrance to a

U.S. port; for operators with greater than 25 percent and less than 50 percent of their vessel orders in Chinese shipyards or expected to be delivered by Chinese shipyards over the next 24 months, the operator will be charged up to $750,000 per vessel entrance to a U.S. port; for operators with greater than 0 percent and less than 25 percent of their vessel orders in Chinese shipyards or expected to be delivered by Chinese shipyards over the next 24 months, the operator will be charged up to $500,000 per vessel entrance to a U.S. port; or (b) a fee of up to

$1,000,000 per vessel entrance to a U.S. port will be charged to a vessel operator if 25 percent or more of the total number of vessels ordered by that operator, or expected to be delivered to that operator, are ordered or expected to be delivered by Chinese shipyards over the next 24 months.***

⁶ 90 Fed.Reg.38.pp10844-45 (Feb 27, 2025) ***Service Fee on Chinese Maritime Transport Operators: A vessel operator of China to be charged a fee on the international maritime transport being provided (a) at a rate of up to $1,000,000 per entrance of any vessel of that operator to a U.S. port; or (b) per entrance of any vessel of that operator to a U.S. port, at a rate of up to $1,000 per net ton of the vessel’s capacity. *** Upon the entrance of a Chinese- built vessel to a U.S. port, a fee to be charged to that vessel’s operator on the international maritime transport provided via that vessel (a) at a rate of up to $1,500,000; (b) based on the percentage of Chinese-built vessels in that operator’s fleet: for operators with 50 percent or greater of their fleet comprised of Chinese-built vessels, the operator will be charged up to $1,000,000 per vessel entrance to a U.S. port; for operators with greater than 25 percent and less than 50 percent of their fleet comprised of Chinese-built vessels, the operator will be charged a fee up to $750,000 per vessel entrance to a U.S. port; for operators with greater than 0 percent and less than 25 percent of their fleet comprised of Chinese-built vessels, the operator will be charged a fee up to $500,000 per vessel entrance to a U.S. port; or (c) based on the percentage of Chinese-built vessels in an operator’s fleet: an additional fee of up to $1,000,000 will be charged to a vessel operator per vessel entrance to a U.S. port if the number of Chinese-built vessels in the operator’s fleet.***

⁷ 90 Fed.Reg.38.pp10845 (Feb 27, 2025) The terms “flagged” and “built” are not synonymous so it is presumed the distinction is intentional. ***”U.S. goods are to be exported on U.S.- flagged, U.S.-built vessels, but may be approved for export on a non-U.S.- built vessel provided the operator providing international maritime transport services demonstrates that at least 20 percent of U.S. products, per calendar year, that the operator will transport by vessel, will be transported on U.S.-flagged, U.S.-built ships.”***

⁸ In March 2015, China released Made in China 2025’s (“MIC2025”) foundational document, the State Council’s Made in China 2025 Notice. MIC2025 implements the first 10 years (2015-2025) of China’s Strong Manufacturing Nation Strategy, a 30-year plan divided into 10- year segments to make China the world’s preeminent advanced manufacturing power before the 100th anniversary of China in 2049. An official interpretation of Made in China 2025 [hereinafter “MIC2025”] describes maritime engineering equipment as, “a general term for all kinds of equipment used to develop, utilize, and protect the ocean.” See Interpretation of Made in China 2025: Promoting the Development of Maritime Engineering and High-Technology Ships, Ministry of Industry and Information Technology [hereinafter “MIIT”] (May 12, 2016), https://www.gov.cn/zhuanti/2016-05/12/content_5072766.htm.

⁹ 90 Fed.Reg.38.pp10845 (Feb 27, 2025) ***Actions to reduce exposure to and risks from China’s promotion of the National Transportation and Logistics Public Information Platform (LOGINK) or other similar platforms, such as recommending that relevant U.S. agencies investigate alleged anticompetitive practices from Chinese shipping companies, restricting LOGINK access to U.S. shipping data, or banning or continuing to ban terminals at U.S. ports and U.S. ports from using LOGINK software.***

¹⁰ Several international ports around the world are controlled by Chinese companies, including the Port of Piraeus in Greece, the Port of Valencia in Spain, the Port of Hamburg in Germany, the Port of Kingston in Jamaica, and various ports in Africa, with companies like China Harbour Engineering Company and China Merchant Port Holdings being key players in these investments; this is largely driven by China’s Belt and Road Initiative, which aims to expand its global infrastructure influence.

¹¹ 2024 – Mar-12.Hamlyn.B. RUSI.China in Sub-Saharan Africa_ Sanction-Proof Supply Lines and Dual Use Ports; https://www.rusi.org/explore-our- research/publications/commentary/china-sub-saharan-africa-sanction-proof-supply-lines-and- dual-use- ports#:~:text=China%20now%20owns%2093%20ports,pearl’%20on%20Africa’s%20Atlantic

%20coast.

¹² 2024 – Mar-12.Hamlyn.B. RUSI.China in Sub-Saharan Africa_ Sanction-Proof Supply Lines and Dual Use Ports¹³https://ustr.gov/issue-areas/enforcement/section-301-investigations

¹⁴ https://www.universalcargo.com/trans-pacific-capacity-dips-with-alliance-reshuffling-so- freight- rates/#:~:text=The%20restructuring%20of%20carrier%20alliances,by%20maritime%20intellig ence%20firm%20eeSea.

¹⁵  https://www.linerlytica.com/post/market-pulse-2025-week-08/

¹⁶ https://www.linerlytica.com/post/25-week-08-freight-futures-watch/

¹⁷ As the only carrier opting to go-it-alone with no alliance in 2025, MSC unsurprisingly showed the strongest growth, in terms of teu slots in 2024. https://theloadstar.com/alliance- reshuffle-will-increase-box-ship-shortage-as-carriers-hunt-buffers/

¹⁸ ONE (Ocean Network Express) was formed in 2016 as the integrated container businesses of Japan-based trio Kawasaki Kisen Kaisha (K-Line), Mitsui O.S.K. Lines (MOL) and Nippon Yusen Kaisha (NYK). Headquartered in Singapore, ONE focuses on key east-west routes and collectively operates more than 240 vessels with capacity of 1.9 million twenty-foot equivalent units, on 165 services to 120 countries. The new Gemini Cooperation joins the Hapag-Lloyd and Denmark’s Maersk, which left the pioneering 2M 10-year vessel-sharing agreement (VSA) formed in 2015 with Mediterranean Shipping Co. (MSC). The Gemini partners have been public about their goal of providing 90% schedule reliability in an industry that has struggled to make good on half its promised arrivals amid disruptions stretching back to the start of the pandemic. The simplified, hub-and-spoke network similar to those pioneered by airlines features mostly single operator loops and fewer port calls per service, calling high-efficiency terminals with 29 mainliner services and interregional shuttle services, and covers the full scope of U.S. trades including Asia to the West and East coasts, and trans-Atlantic.

¹⁹  https://splash247.com/global-liner-alliances-retrench/

²⁰ https://www.freightwaves.com/news/what-shippers-should-know-about-ocean-carrier- alliance-changes-in-2025

²¹ https://www2.deloitte.com/us/en/insights/economy/spotlight/conflict-climate-among- current-issues-in-maritime-industry.html

ICC International Court of Arbitration as Administered by the International Chamber of Commerce

A Primer on Case Initiation (2014)

Summary –        The ICC International Court of Arbitration operates under its own rules of procedure which are known as the ICC Rules of Arbitration (the “Rules”) and these are found on the web site for the ICC at http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/icc-rules-of-arbitration . Each party appearing before the ICC must follow the rules in order to get the case positioned to be decided. These rules are not the same as those found in the courts of North American or European jurisdictions. However, the similarities are sufficient that most differences will not cause undue additional expense for the parties. The best contracts will be ones which are aware of the Rules and provide the parties with the easiest methods of invoking the ICC jurisdiction in the matter which is the subject to the dispute. The ICC stresses that it is not a “court” in the judicial sense but that it administers the arbitration panels which are the decision makers in the resolution of any dispute before the ICC. The first steps in the ICC arbitration process are referred to as “case initiation” and these are reviewed here to aid business in drafting an effective contract.¹

First Filing –     The ICC will open a case file and assign a case number once two criteria are satisfied pursuant to the Rules Article 4.4: First, the party seeking the ICC jurisdiction must submit a “Request for Arbitration” pursuant to Article 4.1 of the Rules. Second, the party must wire the required fee (as set forth on the fee schedule found on the ICC web site at http://www.iccwbo.org/products-and-services/arbitration-and- adr/arbitration/cost-and-payment/cost-calculator/ ). The Request for Arbitration must contain sufficient information for the Secretariat to assign a caption and case number. The specific information is listed in the Rules Article 4.3 (a) – (h). In summary the petitioner must identify itself and its counsel, then identify the respondent. The documents which give the ICC authority to hear the case must be included, as must any clear and concise statement of the particulars of the dispute, and the relief the petitioner seeks from the ICC. The required fee is wired to the ICC contemporaneous with the filing of the Request for Arbitration.

The wiring instructions are found on the web site but for convenience as of this date the instructions are as follows:

Beneficiary (Account holder): INTERNATIONAL CHAMBER OF COMMERCE 33-43 avenue du Président Wilson

75116 Paris, France Bank of Beneficiary: UBS SA
Address:           35, rue des Noirettes
P.O. Box 2600
1211 Geneva 2, Switzerland Account no.:    240-224534.61R

¹ The Rules referred to here are those in effect on January 1, 2002 and the ICC reserved the right to change those rules at any time. No warranty is made herein to the accuracy and effectiveness of the writing, and independent counsel should be obtained before relying upon anything written here.

IBAN:               CH06 0024 0240 2245 3461 R
Swift Code (BIC): UBSWCHZH12A

Serving the Respondent – The Rules Article 3.1 require that all “pleadings and other written communications submitted by any party as well as any documents annexed thereto, shall be supplied in a number of copies sufficient to provide one copy for each party…” which the Secretariat interprets to mean that the party filing must “serve” the Respondent with the documents. The challenge arises from the nature of the agreement between the Petitioner and Respondent on the issue of how the Notices are “served” or delivered to the parties.

The ICC relies upon the agreement of the parties for the particulars of how documents are served. In all cases the ICC requires the party to demonstrate through documents how service was accomplished. In the practical perspective a party should carefully look at the Notice provisions in the agreement to simplify the manner and method of service. Each participant should consider how to assure that it receives a Notice in sufficient time to respond and how to issue a Notice which is received with little opportunity for delay by the recipient. There are as many ways to avoid timely delivery of a Notice as there is imaginative people, so keep the Notice delivery provisions in the contract as simple as possible in light of the country in which the Notice must be received. The parties should make sure that the contract includes a physical address if the parties are agreeing to the use of an overnight courier or hand delivery service. If the parties are agreeing to electronic mail or facsimile service, then the contract should anticipate the possibility that the email file will be too large or that the facsimile should be accompanied by a confirmation of successful transmission by the machine.

Do you sell online – and – Have you ever sold to a customer in California? If the answer is “yes” then you need to read on and make some significant changes to your “click-consent” contracts on your web page.

California now requires mandatory online disclosures as of January 1, 2025 for digital “goods” sold online in California, USA. The disclosure requirement attaches (1) at the time of sale and before executing ‘each’ transaction; and (2) attaches to the sale of virtually any electronic “goods” including audio, video, games or (potentially) block-chain assets.

The law, AB 2426,1 amends False Advertising Law, Business and Professions Code §175002

to add new law at §17500.6 which protects the “public in this [California] state” by prohibiting;

• Selling or renting digital assets using the words “buy” “purchase” or similar terms implying permanence or unrestricted ownership – when in fact – the asset is held subject to a license agreement;
• The law further provides that the license agreement must contain a clear and conspicuous statement that the customer is only getting a use license the terms of which are made readily available; and
• The seller’s transaction documentation must expressly obtain (click-consent) in an “affirmative acknowledgement” from the customer that the sale is;
  • (1) for “ a license to access the digital good;”
  • (2) contains a complete list of the license restrictions; and the sale is wholly subject to the license, and
  • (3) resulting in the digital access being revoked as per the license. The State maintains that the violation of law is a “misdemeanor” subject to civil penalties.3

There are several exemptions from the law. Items delivered online for free, or items which are downloaded by the user onto a device (no longer under the control of the supplier). Further, it is not yet possible to determine if the purchase of an NFT is subject to the law. Typically, an NFT or block-chain transaction is “irrevocable” but then again there is the artist Banksy and his ilk to contend with when applying the law to “art.” The law is silent on a class of online gaming products known as “Freemium” games in which the platform is free but there are “features” available to be purchased while inside the gaming architecture. These uncertain points of law arise from the broad definition of a “Digital Good” under the law. The courts will be busy with this one.

Existing law4 (False Advertising Law, Business and Professions Code § 17500)5 makes it unlawful for any person doing business in California and advertising to consumers in California to make any false or misleading advertising claim.6 Existing law makes a person who violates specified false advertising provisions liable for a civil penalty, as specified, and provides that a person who violates those false advertising provisions is guilty of a misdemeanor. A Code § 17500 violation is a misdemeanor, punishable by up to six months in jail or by a fine of up to

$2,500.00. Also, violations may expose the company to private claims for restitution or injunctive relief under the False Advertising Law.

This bill AB 2426 adds Section 17500.6 to the Business and Professions Code, which would, subject to specified exceptions, additionally prohibit a “seller of a digital good” from advertising or offering for sale a digital good, as defined, to a purchaser with the terms “buy, purchase, or any other term” which a reasonable person would understand to confer an unrestricted ownership interest in the digital good. The new law also prohibits many predictable “work- arounds” such as an option for a “time-limited rental”. The new law states that the seller must receive “at the time of each transaction” an affirmative acknowledgment from the purchaser that the seller is not obtaining any ownership in the digital good. Alternatively, the seller provides (pushes) to the consumer before executing “each transaction” a clear and conspicuous statement, of the absence of ownership in the digital good.7

California’s new law forces digital stores to admit that the customer is just licensing content, and not buying it.8 Gamers who lose access to a game, for example, may not be protected from the loss – but – they will know in advance of purchase in the future that they are just “borrowing” the game and the game may be shut off at any time the license agreement allows.

Imperfect Laws Will Guarantee Imperfect and Inconsistent Results When Tested – The new law does not define “purchaser” or “purchase”. Is a business considered a “purchaser” as much as an individual? This is one of several legislative omissions that may result in plenty of future litigation (i.e., how much contact with California is required before the “seller” is subject to personal jurisdiction in California? Does long-arm personal jurisdiction statute apply to one or more violations of the law for Internet sales?) However, the California Uniform Commercial Code (“UCC”) defines “purchaser” as “a person that takes by purchase”. Cal. Comm. Code § 1201(b)(30). The UCC defines “purchase” to mean “taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property”. Cal. Comm. Code § 1201(b)(29). Thus, a “purchaser” may be a whole list of entities or individuals under the UCC. However, AB 2426 amends the Business & Professions Code at §17500 (the Consumer Protection Act “CPA”) rather than amends the UCC (referenced here). Thus, the UCC definitions of “purchaser” and “purchase” as applied by law in the UCC context are not controlling for the purpose of judicial decisions involving the interpretation of the CPA and AB 2426. While, it is reasonable to expect that judicial interpretations will read the terms in tandem with other provisions of the Consumer Protection Act and more or less consistent with the Uniform Commercial Code, it is not a sure thing that anyone should rely upon in the absence of legislation clarifying the matter.

You Are Not “Selling Inside California!” Too Bad – They Can Still Get You! – The California long-arm statute allows any California court (State and federal) to exercise jurisdiction over a “seller” from another state or country if they have a judicially defined “connection” to California. While the new law AB 2426 doesn’t expressly reference the long-arm statute it is reasonable to believe that eventually the courts will find apply the precedents of Business & Professions Code §17500, and find that the long-arm statute applies to the Internet activities regulated by Business & Professions Code at §17500.6 and AB 2426. Who are Internet based “sellers” whose transactions deliver enough products to a California resident for personal jurisdiction to arise?9

Specifically, California’s long-arm statute, Section 410.10 of the Code of Civil Procedure10, gives California courts the authority to exercise jurisdiction over out-of-state defendants in a wide range of circumstances in particular in the context of consumer protection laws and companion regulations.11 The cases arising under the Code Section 17500 are heard by a judge rather than a jury, and nothing in AB 2426 appears to change this established precedent of denial of a right to a jury trial.12

Protect Your Business From California Laws – It is possible to take simple steps through online tools to protect your business from California “haling you into court”13 under this new consumer protection law AB 2426 which changes the rules on Internet sales.

• First, the business may block sales which use a California postal code or address for the payment method.
• Second, more sophisticated software will allow the business to block access to potential customers using a California based Internet Service Provider (“ISP”).
• Third, comply with the new law and amend the business disclosures in the manner the law demands.

The burden remains on the business to Know Your Customer (“KYC”) and California is the 5th largest economy in the world so any business using the Internet to conclude sales will eventually encounter a California customer. Perform KYC using your online sales engine and monitor your business for compliance on a random basis. The legal penalties are simply too significant to ignore the possibility of a California lawsuit entangling the business regardless of where the business calls “home.”

References

1 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=17500.6.&la wCode=BPC

2 https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=BPC&division=7.& title=&part=2.&chapter=4.&article=2.

³ https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB2426

4 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=17500.&law Code=BPC

⁵ In California, there are usually three statutory based consumer claims: (1) the Unfair Competition Law (“UCL”); (2) the False Advertising Law (“FAL”); and (3) the Consumer Legal Remedies Act (“CLRA”).

⁶ The law prohibits businesses from making any statement that is untrue or misleading, including claims that are based on factual evidence or compare the product to others.

⁷ https://digitaldemocracy.calmatters.org/bills/ca_202320240ab2426

⁸ https://www.engadget.com/entertainment/new-california-law-will-force-companies-to-admit- you-dont-own-digital-content-203053750.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&gu ce_referrer_sig=AQAAACIEXLYFn8QOFqZFA_N8_n- dayENFGGzaedwv3JacFV_CSSG9Y7ApIn16KRVfFJlaQ75- yAv5_pc5chTkeRohMwMnBawH2_j1C7M0uNw9IexzJgRrr4tavtLkNsIiOfd9tItGkJqhhObU4 k7nQ20OidU_TCygKirL8vsemK3ZQEn

⁹ There is precedent in California that small or random amounts of Internet connection to the State is not sufficient to invoke a more general personal jurisdiction over the charged party. In particular where the federal government has a strong presence in the area of law (such as Internet trade regulations) the laws of a State could, might, maybe, “preempted” by the federal presence even to the extent of becoming unenforceable laws. For example, where a defendant’s only contacts with California (in an antitrust case) are through the Internet, the court found that the amount or nature of this contact was not sufficient contacts for to give rise to personal jurisdiction in California over the defendant even when the defendant knows that its conduct may violate the law in California. Pavlovich v. Superior Court, 29 Cal. 4th 262 (2002). California looks closely at Internet based claims and distinguishes between passive and active solicitations of California customers when assessing whether there is personal jurisdiction over the Internet seller. Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 418 (9th Cir. 1997).

¹⁰ “ A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States”

¹¹ The statute allows courts to exercise jurisdiction on any basis that doesn’t violate the California or US Constitution. It’s considered the most comprehensive long-arm statute in the country. It’s intended to establish personal jurisdiction, which is the ability of a court to make decisions. See., Goehring et al v. Bernier, 62 Cal. App. 4^th 900 (1989) California’s long-arm statute permits California courts to exercise jurisdiction on any basis not inconsistent with the federal or state Constitution. (Code Civ. Proc., § 410.10.) Under the federal Constitution’s due process clause, a court may assume jurisdiction over a nonresident defendant if the defendant has constitutionally sufficient “minimum contacts” with the forum state. Vons Companies, Inc. v. Seabest Foods, Inc., (1996) 14 Cal. 4th 434, 444, 58 Cal. Rptr. 2d 899, 926 P.2d 1085 “The overriding constitutional principle is that maintenance of an action in the forum must not offend ‘traditional conception[s] of fair play and substantial justice.’ [citation omitted] The defendant’s ‘conduct and connection with the forum State’ must be such that the defendant ‘should reasonably anticipate being haled into court there.’ [citations omitted] see, Vons Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th at pp. 444-448.) A court may assert general jurisdiction over a defendant if the defendant’s contacts with the forum state “are ‘substantial . . . continuous and systematic.’ [Citations omitted]” see., Vons Companies, Inc. v. Seabest Foods, Inc., supra, 14 Cal.4th at p. 445. Where general jurisdiction cannot be established, a court may assume specific jurisdiction over a defendant in a particular case if the plaintiff shows: (1) “the defendant has purposefully availed himself or herself of forum benefits”; (2) the ” ‘controversy is related to or “arises out of” a defendant’s contacts with the forum’ “; and (3) the assertion of jurisdiction ” ‘would comport with “fair play and substantial justice.” ‘ ” (Id. at pp. 446-447 [citations omitted].

¹² Nationwide Biweekly Administration, Inc. v. Superior Court of Alameda County. 462 P. 3d 461, 9 Cal. 5th 279, 261 Cal. Rptr. 3d (2020) (Claims under California Business & Professions Code Sections 17200 et seq. and 17500 et seq “***there is no right to a jury trial under California law either as a statutory or constitutional matter”).

¹³ Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 418 (9th Cir. 1997)