PART 1 – WHAT CANADIANS SHOULD KNOW ABOUT DOING BUSINESS IN THE US: CROSSING THE BORDER

The threshold issue for Canadians conducting business in the US is crossing the border.  How can we ensure that Canadian business visitors will be admitted to the US?  Due to the 1994 North American Free Trade Act (“NAFTA”), Canadians enjoy advantaged access to the US compared to other countries in the world.  However, applications for admission for the purpose of working (rather than visiting) in the US are technical and must follow very complex rules and regulations.

1       Temporary Business Visits vs. “Working” in US.  As a general rule, a Canadian “business visitor,” unlike business visitors from other countries, does not need a visa to enter the US for a short trip.  However, a common misconception is that a Canadian may enter the US as a “business visitor” and then work.  This is not correct.  Canadians are welcome to come to the US for business purposes without a formal visa and they may cross the border for business visits, but permissible activities are extremely limited and include attending business meetings, participating in conferences and conventions, investigating business opportunities, and conducting other additional business activities that involve commerce, but do not involve hands‑on work.  For example, a Canadian may enter the US as a business visitor without a visa to attend a board meeting or to investigate a potential purchase.  However, if the purpose of the visit is to roll up the sleeves and perform work or engage in activities that a US company would have to hire another to perform, the individual is not a “business visitor” and needs a work visa.  It is important to note that the business person’s presence in the US must be temporary and the shorter the duration of stay the better.  Frequent and sustained travel in a business context will alert the US border authorities to the potential the person is coming to the US to work.  The Canadian business visitor bears the burden of showing he or she is coming to the US to engage in commerce (as opposed to work) and the more frequent visits become, the more likely that US Customs and Border Protection will reach the conclusion that the individual is working and that work authorization is required.

2       H-1B Authorization for Canadians Engaging in a Specialty Occupation in the US.  For a Canadian who wishes to work in the area of their college degree in the US for a US employer, the H‑1B petition is a commonly used vehicle that may provide an opportunity for work authorization.  An individual must have a four‑year college degree (not a three‑year degree that some Canadian universities grant) in a specific professional area.  The wage offered by the US employer must equal or exceed the “prevailing wage” as determined by the US Department of Labor.  The H‑1B category may be used for a wide variety of professionals who wish to come to work in the US.  Petitions must be approved in the US before the individual attempts to cross at the border or at pre-flight inspection at the Canadian airport.  There are a number of restrictions that may prevent the use of the H-1B petition in certain situations.  First, there is a quota of 65,000 H-1B petitions with an additional 20,000 for individuals with graduate degrees from US colleges.  This quota is often filled and, accordingly, there are significant timing issues associated with when the H-1B application must be filed.  Second, the US charges $2,000 in tax for each initial H‑1B application.  Third, the prevailing wage determination can be problematic in that the US Department of Labor wage levels tend to be higher than normal private sector wages.  Fourth, there can be a significant wait in processing the application (during which time the individual cannot enter from Canada).  This may be relieved with the payment of an additional “Premium Processing” fee of $1,225.  Notwithstanding these limitations, the H-1B category is a useful one and it allows an initial term of three years of employment in the US that may be renewed for an additional three years.

3       L-1 Intercompany Transfers from Canadian Company to US Company.  One of the benefits of having a subsidiary or branch office in the US is that it makes the L‑1 category available to transfer Canadian workers to the US.  The workers may either be managers (L‑1A) or specialized knowledge employees (L‑1B).  Managers must have subordinate employees or manage an important and critical function for the Canadian company and must be transferred to the US for the same purposes.  “Specialized knowledge” includes extremely specific knowledge of employer’s products, services, research, equipment, technology or international procedures.  In addition, the Canadian must have worked for the Canadian parent or subsidiary in a managerial or specialized knowledge capacity for one full year in the three years immediately preceding the application for entry into the US. The applicant need not have a college degree.  Documentation for L‑1 status may be presented at the port of entry (i.e., a border post or pre-flight inspection at a Canadian airport) and if successful, the individual can begin work immediately.  L‑1 status is granted for an initial period of three years and can be maintained for up to seven years for managers and executives, and up to five years for specialized knowledge employees.  A significant advantage of the L-1A category is that there is a direct and relatively simple process to pursue a green card in the US if the Canadian worker’s employment becomes permanent in nature.  The simplified transition to green card works only for L‑1A managers.  A more difficult process is required for L‑1B specialized knowledge workers.

4       TN Status for Limited Category for Canadian Professionals Working for US Employers.   A Canadian employee who does not qualify for the broadly applicable H-1B or L‑1 categories may, nonetheless, be able to work directly under the auspices of NAFTA as a professional in TN status.  There is a list of 60 individual professions that qualify for TN consideration.  These are heavily weighted toward the sciences.  However, other professional fields, including accountants, engineers, lawyers, graphic designers and systems analysts can take advantage of TN status.  With just two exceptions, a Canadian applying for TN status must have a four­‑year university degree.  Management consultants and certain scientific technicians are exempt from degree requirements, but qualification for these categories is difficult and management consultants is a disfavored category because of overuse.  An initial TN application must be made at a US port of entry or pre-flight inspection at a Canadian airport and work permission is for an initial three‑year term that is extendable indefinitely.  A major limitation to TN status is it is not generally available to Canadian businessmen such as executives, managers or professional sales staff with valuable experience but no specific college training or profession.   Like the other work‑based categories, the TN category is not available to self‑employed individuals and it does not lead to a green card without an additional (and difficult) process.

5       E-1/E-2 Treaty Trader/Treaty Investor Visa – A Canadian with no US employer may be able to work in the US if he creates his own job through a substantial investment in the US economy.  A Canadian who makes a substantial business investment that is material and at risk may be eligible for an E‑2 visa.  An individual who is an executive,  manager or specialized knowledge employee with a Canadian‑owned company with a US subsidiary may also apply for an E‑2 visa.  In addition, an individual who is an executive, manager or specialized knowledge employee of a Canadian‑owned company that does a majority of its trade between the US and Canada may also come into the US as a treaty trader on an E‑1 visa.  A target business in the US must have active operations; a passive investment such as real estate holdings or securities held for investment will not support an E‑2 visa.  E‑1 and E‑2 visa applications are reviewed by the appropriate US consulate in Canada and unlike the other nonimmigrant visa categories described above, it requires an actual E visa stamp to be issued by a consul into the passport.  The E‑2 requires a detailed application with a comprehensive business plan showing that the E‑1/E‑2 business will not merely generate employment for the Canadian, but is designed to grow a business that will increase the size of the US economy and employ US workers.  Like the other categories, the E‑1/E‑2 category is complex and requires professional assistance to develop a winning application.

Business ventures into the US raise various business, tax and immigration issues.    They are complicated — primarily because they are different than the Canadian equivalents — but very manageable, as corroborated by the strength of the US economy.  We welcome the opportunity to assist you in bringing your goods and services to markets in the US.

 

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