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Law Office of Joseph C. Grasmick --Business Immigration--
Established in 1979

The L-1 Home Page-Intracompany Transferee: Cornerstone of Canada to U.S. Business Immigration

There is no substitute for visionary leaders who can motivate, communicate and steer a company into the top tier of global companies. ---Windle B. Priem, President and CEO, Korn/Ferry International

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Introduction to this Page

Proficient and resourceful employment managers are at ease with the L-1.

This page describes the L-1 Intracompany Transferee permit as it applies to Canadians. This L-1 is the cornerstone of immigration for multinational businesses.

We encourage you to consider this permit. Like the TN, high-level Canadian employees get the permit instantly...right at the border. (See a picture of the actual border permit.) There are advantages over the TN permit, as the information here reveals. Before leaving the L-1 for another choice contact our office. The L-1 is quite flexible and may best serve your needs

Proficient and resourceful employment managers are at ease with the L-1. The hr manager who can "make it happen" internationally will become indispensable to corporate management.

To make it happen, you must acquire the necessary information. Supplement the information on this page with:

Successful applications require high-level skills (including the foresight to outsource when necessary). This is because the L-1 is associated with:

  • high-level executives demanding special attention for their needs (and the needs of their families)
  • important international corporate development goals requiring U.S. travel on short notice
  • immigration paperwork requiring fluency in corporate ownership structure and employee organization

You will find many Chapter and Section references on this page. You can find the corresponding text for these references, in the full text version of the Canada-U.S. Business Immigration Handbook. You can order this Handbook on-line, directly from the publisher, Carswell Thomson Professional Publishing.

3.4 L-1 Status: Intracompany Transferee

L-1 At A Glance
Main procedural step: Send application to INS first or apply at border.
Initial duration of status: One-three year maximum/trip; renewable.
Total time-limit on the category: 7 years for executives/managers; 5 for others.
Processing time: Instant at border, four-six weeks otherwise.
Major advantage: Quick if at border, lasts a long time.
Major disadvantage: Eventual time cap; much paperwork.

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(a) Introduction to L-1 Status

With the institution of the Canada-U.S. free trade agreement (FTA), and the North American Free Trade Agreement (NAFTA), the use of L-1 visas has been supplemented by the use of E-1 and E-2 visas. However, the L-1 can be easier to apply for because it requires less documentation and can be immediately obtained at the border and other Ports of Entry. The L-1 visa, therefore, continues to be a useful immigration tool for companies that do not qualify for E status.

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(b) Requirements for L-1 Status

(i) Canadian company related to the U.S. company

To qualify for L-1 status, the Canadian company for which the L-1 employee works must have a specific relationship to the prospective employer (petitioner) in the United States. In other words, the two companies must have common control. In relation to the Canadian company, the petitioner must be one of the following:

  1. Parent or subsidiary
  2. Affiliate
  3. 50-50 joint venture
  4. Branch

("Affiliate" includes partnerships organized in the U.S.)

(1) Parent Company or Subsidiary

By general definition, a parent company is a corporation, partnership, sole proprietorship, or other legal business entity that has subsidiaries. As a practical matter, however, the Immigration and Naturalization Service (INS) is reluctant to grant L-1 status to sole proprietors and their employees. The INS recognizes four distinct business structures as subsidiaries:

  1. Any legal entity of which a parent company owns, directly or indirectly, more than 50% and controls the entity.
  2. A business owned 50% by a parent company with control of the entity.
  3. A 50-50 joint venture directly or indirectly owned 50% by the parent company and equally controlled by the parent company, in which the parent company has veto power.
  4. Any entity of which, directly or indirectly, a parent company owns less than 50% but over which the parent company exercises actual control.

The common element in all four cases is control by the parent company of both the alien employee's present Canadian employer and future U.S. employer. This control is almost always represented by ownership of voting shares. Convincing the INS that control exists via anything other than ownership of the majority of voting shares is difficult.

Figures 3.9 a), b), and c) are examples of a few of the possible corporate relationships and INS approval/denial results. These examples should provide assistance related to most readers' corporate structures.

. . .

(2) Affiliate

An affiliate is really a type of subsidiary. L-1 affiliates are usually either:

  1. One of two subsidiaries of a common parent.
  2. One of two entities owned by a common group of individuals. Each owner must own approximately the same share of each entity. (See Figures 3.10 a), b), and c).)

. . .

(3) 50-50 Joint Venture

A joint venture is another type of subsidiary, one that is owned by only 50%, rather than by more than 51%. Not long ago, a joint venture would not qualify for L-1 purposes, since the INS felt that 50% ownership did not represent a controlling interest. Thanks to imaginative immigration lawyers and flexible INS regulators, such ventures now do qualify on the basis that each 50% owner has veto power. Of course, if the Canadian employer owns more than 50% of the joint venture, this is also acceptable: it is no longer a 50-50 joint venture but rather is now a normal subsidiary [see Figures 3.11a), b), and c)].

(4) Branch

Any office or division of the same organization located in another country is considered to be a branch.

If a company has, for example, only a sales department in the United States, with all other functions located in Canada, the sales department is considered to be a branch and employees can be transferred there with L-1 status. Although there used to be tax advantages to this approach, most L-1 companies now form a separate U.S. company. Branches are not frequent L-1 users [see Figure 3.12].

. . .

(5) Documents Necessary to Prove Requirement:

  • Shareholders' register. This document, which is similar to cheque register, is by far the best way to show ownership, since it shows all outstanding shares. The shareholders' register should be in the corporate Minute book. The updated shareholders' register should be provided for each company in the ownership chain.
  • Alternate documents: See "L-1 Application Guidelines" [this section, (j) 9-12, 13 d) and e), 14-16]

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(ii) Company must continue operations outside the U.S.

The second major L-1 requirement is that the foreign company must continue to do business in a location outside the United States. New INS rules specify that, for example, a Canadian company does not have to continue to do business in Canada, but it must carry on business somewhere outside the United States.

The foreign company must continue to do business in a location outside the United States.

A qualifying organization must continue its non-U.S. operations for the entire duration of the intracompany transfer: Merely maintaining a foreign agent or office abroad is not sufficient: the foreign company must carry out the regular, systematic, and continuous provision of goods and services as long as employees are in the United States on L-1 status.

The INS rationale for this requirement is that the L-1 alien employee must have some place to transfer back to at the end of the assignment. This helps to ensure that the employee will be in the United States only temporarily, as required. Also, since the L category is not intended to accommodate the complete relocation of foreign businesses to the United States, this situation is also avoided by this requirement.

Case

An international group of U.K. wholly owned companies plans to transfer all of its Canadian operations to the United States. All Canadian managers of the Canadian subsidiary will move with the company to the United States.

Since the companies are owned by U.K. citizens, the Canadian managers will not qualify for E visas [3.3A (b) (iv)] and must apply for L-1 visas.

Solution:Emphasize that, even though the Canadian operation will be closed down, the U.K. parent company will continue substantial U.K. operations.

(1) Document Necessary to Prove Requirement

  • Guidelines [ (j) 6, 8, 10]

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(iii) Employee must have held executive or managerial position, or one requiring specialized knowledge, with the foreign company for one full year within the three years immediately preceding application date

Most L-1 denials are because of the Canadian employer's failure to meet the requirement that an employee must have served the company for one full year prior to L-1 status application, in a position requiring executive, managerial, or specialized knowledge skills. This service must have been full-time, continuous for one full year prior to filing the L-1 application , and performed outside the United States. For example, if an alien employee spent two months working in the United States on behalf of the Canadian company, this time must be deducted from the one-year requirement.

(1) Executive

To qualify as an executive, the alien employee's primary functions should have included direction of the management of the entire organization or one of its major components. The employee must have had broad discretion in decision making and have been subject to only general supervision by supervision by superiors. Employees actually involved in the production of goods or services are not eligible. Finally, the employee must have supervised some staff. Executive capacity does not include those who perform high-level but personnel-remote functions.

Note that an executive does not necessarily have to manage a large number, or tiers of employees. This fits into the description of manager, as discussed below.

(2) Managerial

"Managerial" describes a position in which the alien employee directs the organization, a department, or a subdivision. The manager must have the authority to control, direct, hire, and fire other employees. He or she must have discretion over day-to-day operations.

The law excludes first-line supervisors, except for those in charge of professional-level workers. It excludes employees primarily responsible for production of goods or provision of services. The general rule is that a manager must direct other managers or supervisory-level personnel. If this requirement presents a problem, one alternative is to show that the manager supervises people who have specialized degrees at the bachelor's level, required for their jobs [see Figure 3.13].

The new immigration law now makes it easier to qualify as a manager.

Managers no longer need supervise layers of people as described above and in Figure 3.13, if they are functional managers.

A functional manager is a person who is a senior person within the organization and/or who manages an essential function. These functional managers need not manage a department with employees they may now manage a function.

Of course it is always easier to show managerial status in the traditional way - a position in the organizational chart over layers of other employees [Figure 3.13]. Nevertheless, this is not always possible. New trends in flat management structures, partnerships with customers\suppliers, restructuring and team management approaches all tend to make traditional corporate employee charts obsolete.

The functional management concept creates new opportunities for thousands of Canadians who do not supervise people.

The functional management concept creates new opportunities for thousands of Canadians who do not supervise people. It is no longer necessary to show you have reached the high executive standard. You are no longer subject to the limitations of the specialized knowledge requirement [4.1(b)2].

This opportunity also produces new challenges. INS will draw the line on who qualifies as a functional manager.

To meet this challenge, this Handbook provides a framework [Figure 3.13a] to use, maximize your chance of success. The evidence listed in this framework exceeds existing requirements.

. . . .

Obtaining L-1 status for sales managers can also be difficult sometimes. For specific requirements, see "L-1 Application Guidelines"[Section (j) 13 g) xi].

Case

A high-level employee in a major Saskatchewan construction firm supervises only a secretary but directs the work of hundreds of subcontracted construction firms. His budget exceeds US$25 million.

Solution: Do not try to show this person is a manager: show that he is an executive. Ironically, regulations allow for an executive to be the supervisor of fewer employees than a manager [(1) this section].

(3) Specialized Knowledge

Specialized knowledge is the special knowledge possessed by an individual of a company's product, service, research, equipment, techniques, management, or other interests and its application in international markets. Specialized knowledge can also be an advanced level of knowledge or expertise in the company's processes or procedures.

The INS has identified the following characteristics of an employee with specialized knowledge, all of which should be present to ensure success. The employee must:

  1. Have knowledge that is valuable to the employer's competitiveness in the marketplace.
  2. Be especially qualified to contribute to the U.S. employer's knowledge of foreign operation conditions.
  3. Have been a key employee somewhere other than in the United States, with significant assignments that have enhanced the employer's productivity, competitiveness, image, or financial position.
  4. Have special knowledge that can usually be gained through extensive prior experience with the employer.

These four requirements constitute the latest INS policy under this fast-changing definition. Although the INS recently relaxed the specialized knowledge standards, these characteristics remain true.

Case

An employee with a specialized university degree in food technology has been with your Canadian food processing company for only two years. Previously, she worked for a competitor.

Despite the short time she has been with the company, this employee has contributed much to your company's advances in the industry. The L-1 application, however, requires that she "have knowledge that can be gained only through extensive prior experience with the employer."

Solution: Explain that an employee with her qualifications and specialized knowledge needs fewer years with one particular company to make significant contributions to the company. She can gain and use in-house proprietary knowledge more quickly than someone less qualified. If difficulties are encountered, consider using an H-1 visa, which does not require experience with your company.

(4) Documents Necessary to Prove Requirement

Executive and managerial:

  • Corporate employee organization chart [Section (2) above, Figure 3.13; also see Figure 3.13a]
  • Petitioner's supporting letter [Guidelines, Section (j) 13 g) i)-x) and (k) Figure 3.15, sample letter]

Sales managers:

  • Petitioner's supporting letter [Guidelines, Section (j) 13 g) xi)]

Specialized knowledge:

  • Petitioner's supporting letter [Guidelines, (j) 13 g) xii); also see Figure 3.14]

. . . . .

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(iv) Employee must perform executive, managerial, or specialized knowledge function at U.S. location

To fulfill this requirement, all aspects of the preceding position must be applied to the prospective U.S. one and the same types of documents provided. The employee's U.S. position does not have to be identical to the one held previously, however: the U.S. assignment could be a promotion, for example. That person must, however, be transferring into a position that is executive, managerial, or requires specialized knowledge.

The employee must be shown to be qualified to fill that position, having the appropriate education, training, and employment experience. (1) Documents Necessary to Prove Requirement

  • Same as for (iii) above

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(v) U.S. transfer to be temporary

Establishing the intent that the U.S. position is temporary requires a statement by the petitioner to that effect. Proof of the continuing operation of the organization abroad, with confirmation that the employee will be re-employed there, provides further evidence.

L-1 holders are not required to maintain a residence outside of the United States.

L-1 holders are not required to maintain a residence outside of the United States to demonstrate temporary intent. Such a residence can, however, help to prove temporary intent.

Similarly, the position does not have to be a temporary one --- only the beneficiary's placement in it must be shown to be temporary.

If the beneficiary is an owner or major stockholder, the L-1 application will require extra emphasis on the temporary nature of the beneficiary's services, showing how long these services will be required. It must include particularly strong evidence that the beneficiary will be transferred to an assignment outside the United States on completion of the temporary service. Identify what provisions have been made to operate the business when the beneficiary returns home. Refer to corporate assets abroad that will require the personal direction of the beneficiary, necessitating his or her return abroad.

(1) Document Necessary to Prove Requirement

  • Petitioner's supporting letter [Guidelines, (j) 13 g) xiv) and h)]

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(vi) Employer must have U.S. premises

(l) Document Necessary to Prove Requirement

  • Petitioner's supporting letter [Guidelines, (j) 4]

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(vii) No strike or lockout

There can be no strike or lockout from a labour dispute in beneficiary's job at the work site.

(l) Documents Necessary to Have in Your Files to Prove Requirement

  • Employer need not maintain documents. In the case of an investigation, the employer has the burden of proof to show that there were no relevant labour problems in the job classification.

. . . .

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2008 Law Office of Joseph C. Grasmick
Law Office of Joseph C. Grasmick, Business Immigration
300 International Drive
Williamsville, NY 14221 USA
Tel: 716/842-3100  jgrasmick@grasmick.com

This Internet Web page is http://www.grasmick.com/transfer.htm