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91–789 PDF 2004

S. HRG. 108–327

THE L–1 VISA AND AMERICAN INTERESTS IN

THE 21ST CENTURY GLOBAL ECONOMY

HEARING

BEFORE THE

SUBCOMMITTEE ON IMMIGRATION, BORDER 

SECURITY AND CITIZENSHIP

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JULY 29, 2003

Serial No. J–108–31

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ORRIN G. HATCH, Utah, Chairman 

CHARLES E. GRASSLEY, Iowa 

ARLEN SPECTER, Pennsylvania 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

LARRY E. CRAIG, Idaho 

SAXBY CHAMBLISS, Georgia 

JOHN CORNYN, Texas 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

JOHN EDWARDS, North Carolina 

BRUCE ARTIM, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

SUBCOMMITTEE ON IMMIGRATION, BORDER SECURITY AND CITIZENSHIP

SAXBY CHAMBLISS, Georgia, Chairman 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LARRY E. CRAIG, Idaho 

JOHN CORNYN, Texas 

EDWARD M. KENNEDY, Massachusetts 

PATRICK J. LEAHY, Vermont 

DIANNE FEINSTEIN, California 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

JOHN EDWARDS, North Carolina 

JOE JACQUOT, Majority Chief Counsel 

JAMES FLUG, Democratic Chief Counsel 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS

Page

Chambliss, Hon. Saxby, a U.S. Senator from the State of Georgia ..................... 1

Cornyn, Hon. John, a U.S. Senator from the State of Texas ............................... 30

Feinstein, Hon. Dianne, a U.S. Senator from the State of California ................. 26

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah, prepared 

statement .............................................................................................................. 72

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ... 2

Leahy, Hon. Patrick J. Leahy, a U.S. Senator from the State of Vermont, 

prepared statement .............................................................................................. 74

WITNESSES 

Buffenstein, Daryl R., General Counsel, Global Personnel Alliance, Atlanta, 

Georgia .................................................................................................................. 14

Dodd, Hon. Christopher J., a U.S. Senator from the State of Connecticut ......... 3

Fluno, Patricia, former Siemens Technologies Employee, Lake Mary, Florida .. 7

Fragomen, Austin T., Jr., Chairman, American Council on International Personnel, Inc., Washington, D.C. ............................................................................ 16

Gildea, Michael W., Executive Director, Department for Professional Employees, AFL–CIO, Washington, D.C. ....................................................................... 11

Verman, Beth R., President, Systems Staffing Group, Inc., on behalf of the 

National Association of Computer Consultant Businesses, Bala Cynwyd, 

Pennsylvania ........................................................................................................ 9

Yale-Loehr, Stephen, Adjunct Professor of Law, Cornell Law School, Ithaxa, 

New York .............................................................................................................. 18

SUBMISSIONS FOR THE RECORD 

Buffenstein, Daryl R., General Counsel, Global Personnel Alliance, Atlanta, 

Georgia, prepared statement ............................................................................... 34

Fluno, Patricia, former Siemens Technologies Employee, Lake Mary, Florida, 

prepared statement .............................................................................................. 46

Fragomen, Austin T., Jr., Chairman, American Council on International Personnel, Inc., Washington, D.C., prepared statement ......................................... 50

Gildea, Michael W., Executive Director, Department for Professional Employees, AFL–CIO, Washington, D.C., prepared statement .................................... 63

Verman, Beth R., President, Systems Staffing Group, Inc., on behalf of the 

National Association of Computer Consultant Businesses, Bala Cynwyd, 

Pennsylvania, prepared statement and attachment ......................................... 76

Yale-Loehr, Stephen, Adjunct Professor of Law, Cornell Law School, Ithaxa, 

New York, prepared statement ........................................................................... 84

(1)

THE L–1 VISA AND AMERICAN INTERESTS IN 

THE 21ST CENTURY GLOBAL ECONOMY 

TUESDAY, JULY 29, 2003 

UNITED STATES SENATE, SUBCOMMITTEE ON IMMIGRATION, BORDER SECURITY AND

CITIZENSHIP

COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:34 p.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Saxby Chambliss, 

Chairman of the Subcommittee, presiding. 

Present: Senators Chambliss, Grassley, Cornyn, Kennedy, and 

Feinstein. 

OPENING STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. 

SENATOR FROM THE STATE OF GEORGIA 

Chairman CHAMBLISS. The Subcommittee will come to order. We 

are here today for a Subcommittee hearing on the Immigration and 

Border Security Subcommittee for the purpose of reviewing the L–

1 visa program. 

I appreciate our panel of witnesses testifying today on ‘‘The L–

1 Visa and American Interests in the 21st Century Global Economy.’’ 

Congress created the L–1 visa to allow international companies 

to move executives, managers and other key personnel within the 

company and into the United States temporarily. A current concern 

is whether some companies are making an end-run around the visa 

process by bringing in professional workers on an L–1 visa who are 

not solely intra-company transferees. With media reports that some 

American workers have been displaced, cause for closing the socalled L–1 loophole are increasing. 

Today we will hear from a full range of perspectives and will 

evaluate what actions can be taken without potentially adverse 

consequences. 

One particular issue is with companies who bring in workers not 

just to transfer within the company, but also for outsourcing them 

to other companies. For example, an alleged problem arises when 

an offshore company obtains L–1 visas to transfer foreign workers 

who had general professional skills that are shared broadly by U.S. 

workers. Once these L–1 workers arrive in the United States, they 

are outsourced to a third-party company, often to work with computer software that is widely available. When an outsourced L–1 

worker sits at a desk next to his U.S. counterpart doing the same 

work, a concern is whether the foreign worker really has the kind 

2

of specialized knowledge of his company’s product that was anticipated by the statute or whether this is a clever legal use of the L–

1 visa that evades the intent of Congress. 

Some critics of the L–1 visa have advocated legislation, and that 

may be appropriate, yet we must be careful not to impose overlyburdensome requirements on United States businesses. Unnecessary restrictions often backfire by limiting flexibility, deterring investment, and hurting the very businesses that we agree already 

use the L–1 as Congress intended. We need the best people in the 

world to come to the United States, to bring their skills and innovative ideas, and to support our business enterprises, and the L–

1 visa is an important tool to achieve these purposes. 

We look forward to our witnesses’ presentations today, and before we get to our panels, I want to call on my distinguished Ranking Member from Massachusetts, Senator Kennedy, for any comments he wishes to make. 

STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR 

FROM THE STATE OF MASSACHUSETTS 

Senator KENNEDY. Thank you very much, Mr. Chairman. Thank 

you for having the hearing today. 

In today’s world, the title of the hearing suggests, commerce, like 

communication, is global. Every other country in the world is within America’s reach, and we are within their reach too. In this new 

world, Americans earn their livelihood in peaceful competition and 

peaceful cooperation with the entire world. For the good of the Nation and its economy, we must not adopt an immigration policy 

whose goal is to isolate our Nation. 

Curtailing legal immigration in a way that impedes the flow of 

highly-skilled foreign professionals or top-level foreign executives 

and managers may well undermine our economic and competitive 

leadership in the world. 

At the same time, we must make sure that companies do not 

misuse the temporary visa programs to lay off U.S. workers and replace them with cheaper foreign workers. 

There have been a number of media stories about companies firing talented U.S. employees and replacing them with foreign workers brought in under L visas, willing to work longer hours for less 

pay. In the most flagrant instance, the replaced workers have even 

been asked to train their foreign replacements. Our immigration 

laws must contain protections to guards against such abusive layoffs. 

The L visa program was created to enable multinational corporations to transfer their top level executives, managers or employees 

with specialized knowledge of the corporation to assist its affiliates 

in the United States. The program was not intended to be used to 

admit rank-and-file employees who have no special knowledge of 

the corporation but who would compete with U.S. workers. 

In contrast, the H–1B visa was designed to admit workers who 

possessed a needed specialized skill, even though they did not have 

any specialized knowledge of the corporation. To address the problem of U.S. worker displacement, Congress required companies 

seeking H–1B visas to demonstrate they were not able to find 

qualified U.S. workers for their positions. 

3

Recent press reports indicate that some international companies 

may be misusing L–1 visas to circumvent the worker protections in 

the H–1Bs and displace American workers. Others claim that the 

press reports exaggerate the problem and that there is no widespread abuse of the L–1 visa. 

The witnesses at our hearing today represent a wide array of 

views on the issue. Clearly there is anecdotal evidence of abuses of 

the L visa program. The issue is the extent of the abuses and 

whether safeguards are needed, either by administrative changes 

or statutory reforms. Our immigration laws, regulation and procedures must be fair and reasonable, must address the needs of employers and protect the rights of workers. While this task may not 

be easy, it will be made easier if both opponents and proponents 

of the L–1 visa program provide this Committee with the assistance in assessing the extent of the problem and suggesting corrective action. 

I look forward to the witnesses. I thank the Chair for having the 

hearing. 

Chairman CHAMBLISS. Thank you, Senator Kennedy. 

Before we move to our panel, we have one of our distinguished 

colleagues here, Senator Chris Dodd, who has a presentation he 

wishes to make on this particular issue. 

Senator Dodd, welcome. We look forward to hearing from you. 

STATEMENT OF HON. CHRISTOPHER J. DODD, A U.S. SENATOR 

FROM THE STATE OF CONNECTICUT 

Senator DODD. Thank you very much, Mr. Chairman. I will keep 

this very, very brief, and I want to extend my appreciation to you 

for allowing me to come by and share some few brief thoughts 

about the issue. 

Let me first of all commend the Committee for looking into this 

very specific issue. Like many of my colleagues, while I do not sit 

on this Committee, I felt I knew the immigration laws fairly well, 

and certainly the H–1B visa program and others. The L–1 program 

was something I was not terribly familiar with until the issues that 

you have identified and Senator Kennedy has identified came to 

my attention in my own state. 

Let me state the obvious at the outset, something I am sure that 

every single member of this Committee and our colleagues would 

agree with, and that is that we strongly believe that citizens from 

other nations have made and will continue to make a very sound 

and enormous contribution to the overall well-being of our Nation. 

We are after all a Nation that was founded by immigrants, and we 

have been sustained, and grown as a result of the contribution of 

millions of people who have come to our shores from around the 

globe over the last two centuries, and we have remained vibrant 

and creative because our doors have remained open to supplement 

the talents of a very gifted and skilled American workforce. I emphasize the word ‘‘supplement,’’ Mr. Chairman. Not that I did not 

say ‘‘substitute.’’ That is really what we are talking about here 

today. I am sure that none of us believe that American workers 

should be treated as second-class citizens when it comes to the security of their jobs here at home, and that security should not be 

jeopardized by U.S. Government programs and policies related to 

4

the temporary employment of certain nonimmigrant visa holders. 

At the very least laws enacted by Congress should ensure that 

workers living in my home State of Connecticut or elsewhere 

around the country confront a level playing field when competing 

for jobs. No member of Congress would knowingly support Government programs that cause American workers to lose their jobs, nor 

do I mean to suggest that this is a stated purpose of the L–1 visa 

program that is the subject of this hearing. The stated purposes of 

the program, I have now grown to learn, allow, as you pointed out 

and Senator Kennedy has, for intracompany transfers of certain executives, managers and individuals with specialized skills from foreign offices of companies to their U.S. operations on a temporary 

basis. 

During the economic boom of the 1990’s, when jobs were easy to 

find, evidence now suggests that abuses of L–1 and H–1B visas 

often went unchecked, but the state of the job market has changed, 

of course. Massive layoffs have occurred at companies both large 

and small and it now takes months for laid-off workers to find new 

jobs. The unemployment rate is now over 6 percent. 

There is clearly a growing body of anecdotal evidence to suggest 

that both L–1 and H–1B visa programs have been and are being 

misused by some employers because of weaknesses in existing law 

and implementing regulations, and because of ineffective or absent 

Government enforcement. Between 1997 and 2002 some 3.4 million 

H–1B and L–1 visas were approved by U.S. Immigration authorities. 70,000 of those visa holders have been employed in my State 

of Connecticut. The L–1 visa program has grown significantly during that time period, from 203,000 visas issued in 1997 to nearly 

314,000 in 2002. This growth in visa approvals has occurred while 

domestic unemployment has risen in the latter portion of that time 

period. 

One of the witnesses that the Committee will hear from this 

afternoon will give additional credibility to the belief that at least 

some of these employers have not hesitated to take advantage of 

weaknesses in the L–1 visa program to replace American workers 

with lower cost L–1 visa holders. I have come to the conclusion, 

Mr. Chairman, that it is time for Congress to take a serious look 

at the L–1 and H–1B visa programs and to propose remedies for 

the offensive weaknesses in those programs, weaknesses that are 

hurting our own citizens, and hope these hearings will be the first 

step in that process. 

I sought to take some steps of my own in that direction a weak 

or so ago with the introduction of S. 1452, the USA Jobs Protection 

Act of 2003. I was pleased to be joined in that effort by our colleague, my colleague from Connecticut, Republican House member 

Nancy Johnson, who I know, Mr. Chairman, you served with in the 

House. She and I have brought together the various House proposals, and have combined it in a single proposal which she has offered there and I have offered in the Senate, and I would ask unanimous consent that a copy of that bill be included in your record 

if it is all right. 

Chairman CHAMBLISS. Without objection. 

Senator DODD. Once enacted into law, we think that this would 

ensure the L–1 visa program is utilized, continue to be utilized for 

5

the purposes which it was originally intended, and that was not to 

displace American workers with lower-cost foreign visa holders. 

This legislation would also tighten the law with respect to H–1B 

visa programs, but I will not go into that today. That is not the 

subject of your hearing. 

Very simply, let me just say what the bill would do, and you 

have already commented on some of the suggestions. First, it would 

end the practice of allowing L–1 visa holders to be subcontracted 

by one employer to another. This is becoming a growing feature of 

this program. That was never the intent of the legislation initially. 

It would also take away a big incentive for replacing American 

workers with L–1 visa holders by requiring that these new workers 

are paid the prevailing wage of the job that they would be replacing. It requires that before a U.S. employer seeks to bring a specialized worker from a foreign affiliate of his or her company, that 

a documented, good faith effort should be made to fill the position 

with American workers. The L–1 visa program was established to 

allow companies to temporarily bring to the United States managers and executives with an institutional memory of the firm’s 

practices and policies to pass on that knowledge. I agree that such 

institutional expertise is invaluable to the success of a company’s 

operations in the United States. But the individuals that are granted visas under this provision should have a well-established work 

history with a company to qualify for such a visa. That is why we 

have included a provision in our bill that would require individuals 

seeking L–1 visas must have been employed by the company seeking their transfer to the United States for two of the last 3 years, 

rather than 6 months of 1 year required under existing law. 

I mentioned earlier that there is a growing body of anecdotal evidence that suggested that both the L–1 and H–1B visa programs 

are creating problems with certain categories of American workers. 

Why do we not have more hard data on this important issue? I 

would say to the Committee that this is because there has been 

very little Government oversight or enforcement of these programs, 

particularly the L–1 program. I have attended to address this deficiency. Our bill contains provisions that would require the Labor 

Department to oversee this program. It will finally provide the 

Labor Department with the authority it currently lacks to investigate potential violators of the law and to impose sanctions. The 

bill would also make a number of reforms in the H–1B visa program. I will not go into that right now. I will submit some of that 

for the record if I may. 

I know the Committee has a number of witnesses you are going 

to hear from today which I think can offer some additional light on 

this subject matter. 

Mr. Chairman, based upon many Connecticut families that I 

have heard from on the subject, together with the testimony you 

are going to hear today, I believe the L–1 and H–1B visa programs 

have contributed to the growth in unemployment in Connecticut 

and elsewhere. It is within this Committee’s legislative responsibility to analyze these problems created by the current law and 

practices, and propose remedies. As you do so, I would urge members to give consideration to the bill that Congresswoman Johnson 

and I have submitted, and I will be willing to work with you as 

6

we try and fashion some remedies here to try and straighten this 

situation out. What is self-evident of course is that the status quo 

is not acceptable. American workers have the right to expect the 

Congress to do what is necessary to protect their jobs from this 

kind of activity so that the will be able to continue to provide for 

their families. 

I certainly look forward to working with you and other members 

of the Committee to provide that kind of leadership on this issue, 

and I thank you immensely for allowing me to share some of these 

thoughts with you and the Committee. 

Chairman CHAMBLISS. Senator Dodd, thank you very much for 

being here. We appreciate your insight and your hard work to this 

point on the issue, and we look forward to the referral of your bill 

and continuing to dialogue and work with you as we solve this in 

the way that is most beneficial to the American worker and the 

American business community. 

Senator DODD. Thank you very much, Mr. Chairman. I appreciate it. 

Senator KENNEDY. May I just thank you for your presence here. 

In the H–1B we have a requirement for $1,000 fee. Actually I 

thought it ought to be higher. That fund is used for training Americans so that they can develop those skills over the period of time. 

One of the things that we see in short supply is the resources, even 

for the Department of Labor, to look into these abuses, whether it 

is H–1B or the L visas. Do you think it would make sense if they 

were doing a similar kind of thing, bringing in these foreign workers for the L–1, that they might also participate in a similar kind 

of a program in terms of the skills? You might just take a look at 

it and let us know what you might think. 

Senator DODD. In fact, the bill I have introduced has that provision. 

Senator KENNEDY. It has that provision? 

Senator DODD. We think that is sound judgment. 

Senator KENNEDY. Is it $1,000? 

Senator DODD. I think we used $1,000. We can say it pays for 

itself. We do not have a dollar amount in the bill. 

Senator KENNEDY. Okay. 

Senator DODD. I think it is a very good suggestion as well, and 

I know that you are going to look into the H–1Bs and I supported 

it back a few years ago. I mean my State is a good example. It is 

a high-tech State, a lot of information technology, and there was 

a real demand back a few years ago. We raised the caps on the H–

1B visa program, and I think we did so wisely at the time. That 

is only a 3-year deal. You are going to have to reconsider that now, 

and I would hope when you are looking at it, we take a look at this 

new environment we are operating in now before allowing that 

number to go back up to the years we have had previously, just as 

a suggestion. 

Chairman CHAMBLISS. You are correct. It has to be reauthorized 

by the end of September, and Senator Kennedy and I intend to 

make sure we thoroughly review it between now and then. 

Senator DODD. Good. Thank you very much. 

Chairman CHAMBLISS. Again, thanks very much. 

7

We will now call panel members up. Patricia Fluno, who is a 

former Siemens Technologies employee from Lake Mary, Florida; 

Beth R. Verman, President, Systems Staffing Group, a member of 

the National Association of Computer Consultant Businesses from 

Bala Cynwyd, Pennsylvania. I hope I said that right. Michael W. 

Gildea, Executive Director, Department for Professional Employees 

from the AFL–CIO here in Washington, D.C.; Daryl Buffenstein, 

General Counsel, Global Personnel Alliance from Atlanta, Georgia; 

Mr. Austin T. Fragomen, Jr., Chairman, American Council of International Personnel, Washington, D.C.; and Mr. Stephen YaleLoehr, Adjunct Professor, Cornell Law School, Ithaca, New York. 

As we introduce you individually here, we will recognize you for 

opening statements. We are going to start over here with you, Mr. 

Yale-Loehr. Excuse me. We are starting over here with Ms. Fluno. 

And if you will, due to the size of our panel, we will be happy to 

take any statements you want to put in the record, but if you will 

limit your opening comments to 5 minutes or less, we will greatly 

appreciate it so we can get to questions from the members to you. 

So, Ms. Fluno, welcome. Thank you for coming up from Lake 

Mary, Florida, and we look forward to hearing your story, which 

we have all read about, and we appreciate you being here today. 

Thank you. 

STATEMENT OF PATRICIA FLUNO, FORMER SIEMENS 

TECHNOLOGIES EMPLOYEE, LAKE MARY, FLORIDA 

Ms. FLUNO. Thank you very much. My name is Pat Fluno. I am 

a computer programmer from Orlando, Florida. My coworkers and 

I lost our jobs to visa holders from India. I would like to begin by 

reading excerpts from a letter I wrote to Representative John Mica 

in August of 2002, asking for help. 

We are employees in the data processing department of Siemens 

ICN, at both the Lake Mary and Boca Raton sites. We are all U.S. 

citizens and full-time salaried computer programmers and analysts 

ranging in age from 33 to 56. 

Approximately 15 employees have letters dated August 19, 2002, 

indicating a layoff date in conjunction with the restructuring of IT. 

At that time, employee meetings were held informing us that the 

department would be outsourced. During the months of May and 

June management had meetings with outsourcing companies on 

site. We were interviewed by several of those companies and all expressed surprise that we had already been given definitive layoff 

dates. During the last week of June, the outsourcing company was 

announced as Tata Consulting Services of India. People from TCS 

were on site July 1st. They immediately begin interviewing us on 

how to do our jobs. Layoffs of Americans began on July 15 and 

were scheduled to continue through August 30. 

We are being laid off and TCS personnel are taking our jobs. Siemens management has told us to transition our work to TCS and 

show them how to continue the development and support work already begun by Americans. My letter to Representative Mica ends 

by asking for help to prevent this injustice. 

We lost our jobs and we had to train our replacements so there 

would be little interruption to Siemens. This was the most 

humiliating experience of my life. 

8

Our visa-holder replacements are sitting at our old desks, answering our old phones, and working on the same systems and programs we did—but for one third the cost. This is what a manager 

at Siemens told me. 15 people were laid off. At an average hightech salary of $75,000 each, that is over $1.1 million of gross wages 

lost to Federal and State income taxes, from just 15 people. The 

visa holders do not pay income taxes. Representatives of TCS will 

tell you that their programmers make $36,000 per year, which is 

just under the average starting salary range for American programmers. But what is the breakdown of that money? $24,000 of 

that is nontaxable living expenses for working out of town. That 

leaves just $12,000 of real salary paid to them in equivalent Indian 

rupees. $12,000, close to the U.S. minimum wage. An American 

having an income of $36,000 would have to pay taxes, but not these 

visa holders. There are no salary rules for L–1 visas. 

How can they come to the U.S. so easily? The L–1 states that 

they must be a specialized knowledge worker familiar with the 

products and services of the company. There are many legitimate 

uses for the L–1 to transfer employees from one company subsidiary to another. But transferring a worker from Tata India to 

Tata U.S. for work at Siemens is not what was intended by the L–

1 visa. They are not working on Tata’s computer systems, but on 

those of Siemens. In our particular case, Tata knew Americans 

were being laid off, so they did not use the H–1B visas. Instead 

they fraudulently used the L–1. There are no regulations regarding 

the misuse of L–1s and only limited penalties for H–1B abuse. 

Where is the INS? Where is the DOL? There are hundred of thousands of L–1 and H–1B workers in the United States taking jobs 

that Americans can do and that Americans want to do. Every H–

1B and L–1 visa given to outsourcing companies like Tata is a job 

an American should have. 

What is happening here? In a time when our National security 

is paramount, we are making ourselves dependent on third world 

nations for our computer technology. We are giving these countries 

the ability to access, modify and break the very computer systems 

that run the U.S. economic infrastructure. 

Yet, we have an even greater parasite on our economy, and it 

comes from American companies. U.S. corporations are taking entire departments and relocating them to an Indian subsidiary. 

Hundreds of data processing, payables, and call center jobs are lost 

at one time. Ask Microsoft. Ask IBM. Ask Cigna. Ask almost any 

large U.S. corporation and you will find they have sent jobs offshore. The term ‘‘offshore’’ is just a euphemism for American jobs 

that are lost and will never return. What is the economic impact 

of this? In the short term these companies say they are cutting 

costs, but in the long term they are undermining their consumer 

base. Where will our children find jobs? In marketing perhaps? 

Marketing to whom? 

We need incentives to keep jobs in the U.S. We need monitoring 

of visa holders. We need fines for abuse and punitive damages for 

affected American workers. Current H–1B penalties only apply to 

certain types of companies. Misuse is misuse. It must apply to all 

situations equally. We need to enforce the laws we already have. 

Why can a company like Tata, operating in the United States, 

9

mock our equal opportunity and ethnic diversity laws? Where is 

the EEOC? 

I have one question to ask all the CIOs and all the CEOs who 

have laid off U.S. citizens in favor of cheap labor. How does it feel 

to know you have personally contributed to the decline of the 

American economy? How does it feel? 

Thank you. 

[The prepared statement of Ms. Fluno appears as a submission 

for the record.] 

Chairman CHAMBLISS. Thank you very much. 

Ms. Verman, welcome. 

STATEMENT OF BETH R. VERMAN, PRESIDENT, SYSTEMS 

STAFFING GROUP, INC., ON BEHALF OF THE NATIONAL ASSOCIATION OF COMPUTER CONSULTANT BUSINESSES, BALA 

CYNWYD, PENNSYLVANIA 

Ms. VERMAN. Thank you, Chairman Chambliss, members of the 

Subcommittee. 

My name is Beth Verman. I am President of Systems Staffing 

Groups, Inc. My company is located just outside of Philadelphia, 

and I am appearing today on behalf of the National Association of 

Computer Consultant Businesses, the NACCB. The NACCB has 

approximately 300 member firms with operations in over 40 States 

and is the only national trade association exclusively representing 

information technology, IT services companies. On behalf of 

NACCB we thank you for allowing us to address this important 

issue. 

My company, like other IT services firms, serves the need for 

flexibility in the IT workforce. It does not make economic sense for 

most clients to stay fully staffed for all potential IT development 

projects. That would be like permanently employing every construction trade for an office building project that may be needed some 

time in the future. Most large companies maintain a split between 

in-house employees and outside consulting resources. Consulting 

resources can be shifted to respond to a client’s needs for different 

skill sets and different levels of demand. IT consultants are utilized 

to both augment existing in-house personnel as well as provide 

teams to help develop and integrate technology projects. This staffing flexibility helps make full-time employees more secure and 

gives their employer the flexibility needed in our rapidly changing 

environment. 

After over 12 years in the IT staffing business, I founded Systems Staffing Group, a certified woman-owned business, in September 2000. My company specializes in placing IT professionals 

such as java programmers and software engineers with Fortune 

500 insurance and financial services companies. Most of my clients 

are located in Pennsylvania, Delaware, New York, New Jersey and 

Connecticut. I am a small business, averaging 20 consultants on 

billing, and I anticipate doing over $2.5 million in gross revenue 

this year. I was honored to have recently received one of Philadelphia’s top ‘‘40 under 40’’ minority executive awards. 

While I am proud of my firm’s progress to date, particularly in 

light of becoming a new mother this year, I have been frustrated 

that its growth has been hampered because of unfair competition 

10

with large foreign-based consulting companies that are not playing 

by the same set of rules my domestic company plays by. Let me 

give you a specific example. In prior years we typically place 12 or 

more consultants a year at a major insurance company. Since January 1st of this year, we have only placed 2 consultants at the 

same client site. This is not a result of lack of demand. Rather, 

many of the consultants we have placed at this large insurance 

company, along with many direct employees of the company, have 

been replaced by individuals brought into the United States by 

large foreign consulting companies on L–1B intracompany transfer 

visas reserved for persons with specialized knowledge. I have personally seen similar arrangements at other client sites, and the 

NACCB has reports from other members experiencing the same 

kind of displacement. 

The L–1B visa was established to allow multinational companies 

to bring persons with specialized knowledge of the petitioning company’s products, procedures and processes to the U.S. to work for 

a related U.S. company. The specialized knowledge is supposed to 

be an advanced level of skill that does not involve skills readily 

available in the U.S. labor market. The foreign IT workers that 

have been placed at some of my client sites are not utilizing any 

specialized knowledge. They are in effect staffing assignments at a 

third party client site. Although these firms often package their 

services as fixed price or time and material projects, the L–1B IT 

workers they employ are performing the same jobs, sitting at the 

same desks as consultants I had placed on a staff augmentation 

basis with the same client. Based on my observations, the IT workers brought in on L–1B visas possess no unique skills; their skill 

sets are readily available in this country. By simply posting an 

available position to a major Internet job board, my recruiters 

could quickly generate hundreds of qualified candidates who possess the required skills being filled by workers who have entered 

the country on L–1B visas. Why then are so many of these foreign 

companies using the L–1B specialized knowledge visa? The answer 

is it gives them an unfair competitive advantage in selling IT services against U.S. based companies. 

By squeezing IT workers into the L–1B visa category, it appears 

that these companies are circumventing many of the requirements 

of the H–1B visa program. Under the L–1B program, unlike the H–

1B program, there is no obligation to pay a prevailing wage, no obligation to pay $1,000 fee to support education and training of U.S. 

workers, no obligation to attest an effort has been made to recruit 

a U.S. worker or attest that there has not and will not be a layoff 

of a U.S. worker for H–1B dependent companies. Finally, by its nature, the L–1B visa is only available to companies with an offshore 

presence, leaving firms such as my company with only a U.S. presence at a competitive disadvantage. 

By utilizing the L–1B program, large foreign consulting companies are able to undercut my client billing rates by 30 to 40 percent. The only way to undercut billing rates to that extent is to pay 

IT workers significantly less than an equivalent U.S. worker. Further, NACCB has serious concerns whether L–1B visa holders and 

their petitioning employers are meeting all of their U.S. tax obligations. 

11

While I believe there are flaws in the current L–1B visa program, NACCB and I remain strong supporters of business immigration. During the talent shortage that this country experienced 

in the late 1990’s and into 2000, which was particularly acute in 

technology-related positions, NACCB supported an increase in the 

H–1B visa cap. While most of the consultants I place with clients 

are U.S. citizens or legal residents, I do place H–1B consultants 

brought in by other firms. NACCB and I believe that responsible 

business immigration contributes to U.S. competitiveness and is an 

essential business tool in a global economy. 

As this Subcommittee considers the current L–1B program, I 

would hope you would consider some modest changes that will 

allow the legitimate use of the L–1 visa to continue, but eliminate 

the current abuses of the visa. NACCB has provided you in our legislative changes, those changes that we would like to see. 

Some have called for more drastic measures such as prevailing 

wage requirements and annual caps. NACCB and I believe that 

these measures are neither necessary nor advisable. Given the differences in pay scales between the United States and many other 

nations, prevailing wage requirements would exclude the entry of 

many executives, managers and individuals with substantial 

knowledge of proprietary processes that contribute to U.S. competitiveness. Likewise, annual caps, which are notoriously difficult to 

set with any degree of accuracy, would potentially restrict the legitimate use of the L–1 visa without addressing the problem. By 

limiting the use of the visa for the purposes for which it was originally intended through modest statutory changes, the abuses can 

be eliminated without overly restricting the movement of individuals for legitimate business purposes. 

Mr. Chairman, in conclusion, I am ready, willing and able to 

compete aggressively in the marketplace. I not only welcome competition, I relish it. I have always succeeded in highly-competitive 

environments. Such an environment requires me to continually improve and deliver greater value to my clients. However, I am being 

asked to compete against foreign consulting companies that are 

provided an unfair competitive advantage by stretching my own 

country’s immigration laws. To use a football metaphor, the L–1B 

visa program as it is currently being used allows foreign IT services companies the ability to start with the ball on my 10 yard line, 

whereas I must start with the ball on my own 20. All we ask is 

that U.S. laws are clarified, upheld and enforced so we have a level 

playing field. I urge this Subcommittee to begin the process of leveling this playing field. Thank you for the opportunity to express 

my views and the views of many U.S.-based IT services companies. 

[The prepared statement of Ms. Verman appears as a submission 

for the record.] 

Chairman CHAMBLISS. Thank you very much. 

Mr. Gildea, pleased to have you today. 

STATEMENT OF MICHAEL W. GILDEA, EXECUTIVE DIRECTOR, 

DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL–CIO, 

WASHINGTON, D.C. 

Mr. GILDEA. Thank you, Mr. Chairman. 

12

My name is Mike Gildea, and I am the Executive Director of the 

Department for Professional Employees for the AFL–CIO, a consortium of 25 national units representing nearly 4 million professional 

and technical employees in both the public and private sectors. 

Mr. Chairman, we appreciate the opportunity to present our 

views here today. Mr. Chairman, we also appreciate your comments and those of Senator Feinstein and other members of the 

Subcommittee during full Committee deliberations on the ChileSingapore Free Trade Agreements. Hopefully, the USTR will refrain from dabbling in immigration law in future agreements in 

light of the bipartisan bicameral backlash that has resulted. 

That confrontation did serve to raise a much larger issue related 

to guest worker visa policies, and that is that there is no coherent 

national policy regarding professional guest workers. 

Whether it is L–1, H–1B, TN visas or other such programs, each 

operates under different standards, limitations and rules of accountability where they may exist. Given the adverse impact that 

these programs are having on U.S. professionals, perhaps now is 

the time to develop a more holistic coordinated Federal policy in 

this regard. 

What is particularly baffling about these programs is there is no 

nexus between the unusually high current of unemployment among 

professional and technical workers, and the fact that the guest 

worker population now numbers over 1 million according to some 

estimates. As a result, well-qualified American professionals are 

forced to compete against foreign workers here in the us for domestic jobs. In our opinion, there is something seriously wrong with 

this picture. 

I strongly urge the Subcommittee to address these and other 

public policy anomalies as you consider badly-needed reforms in 

both the L–1 and H–1B programs. Key policy questions need to be 

addressed. What is the total number of guest workers that should 

be allowed into the U.S. under all such programs? To what extent 

should there be uniformity across all programs with regard to protections, eligibility, qualifications, enforcement protocols, et cetera? 

Should employers be limited in the total number of temporary foreign workers they can have on a payroll from all guest worker programs? 

As to L–1, it is intended to facilitate intracompany transfer for 

purposes of training strategic personnel with global corporations 

that have U.S. facilities. 

We have no problem with this concept. But now it has morphed 

into something that has victimized highly-skilled, well-educated 

American professionals like Patricia Fluno. 

The L–1 program has few limitations, and such, it is ripe for 

fraud and abuse. There are no statutory prohibitions against using 

L–1s to replace an American worker. Such replacements should be 

banned, and stiff penalties including civil fines and debarment for 

violation should be imposed along with strengthening DOL enforcement tools. In addition, the relevant sections of the ‘‘dependent employer requirement’’ under H–1B should also be applied. 

There is no annual limit on the number of L–1 visas that can be 

issued. According to State Department statistics from 1995 to 2001 

the number of L–1 visas doubled from 29,000 to over 59,000. Given 

13

these numbers, we suspect that some employers are job-churning 

the L–1s, that is, bringing them in for 3, 4, or 5 years, and then 

replacing them with second and third general L–1s. We would recommend that a cap be imposed that reflects the utilization average 

over the last decade, about 35,000. 

Another problem is the renewability of the visa, an issue that 

was a major point of controversy regarding the misnamed ‘‘temporary entry’’ provisions of the trade agreements. L–1 has a twotier renewal scheme for the 1-year visa. For those with specialized 

knowledge it is 5 renewals. We do not believe that 5 years is a temporary program. 2 to 3 years is sufficient, especially if these L–1s 

posses a high degree of specialized knowledge. 

Subcontracting by outsourcing firms is another abuse. I doubt 

that Congress envisioned the likes of Tata Consultancy Services, 

Wipro and Infosys Technologies, all Indian-owned firms, when it 

created the program 33 years ago. As some of the more senior 

members of this Subcommittee know, some of these firms and others like them have a troubled history under H–1B. Today they are 

among the biggest users of the L–1 program. Their outsourcing 

under it appears to contradict the original intent of the program. 

On this point, the statutory language seems clear, so it would be 

a reasonable clarification of law to specifically prohibit subcontracting. 

During deliberations on the trade agreements, Congress forced 

the USTR to agree to the same fee that is applicable under H–1B, 

$1,000 per visa, and that should be applied to the L–1 program 

with the bulk of the proceeds going to oversight and enforcement 

by the appropriate Federal agencies. The imposition of the $1,000 

fee would serve as a modest disincentive to discourage overuse of 

the program and accomplish a better degree of fee uniformity 

across all professional guest worker programs. 

In the Siemens case, according to the San Francisco Chronicle, 

Tata Consultancy acknowledged that it paid wages below the average local wages for basic programmers, which was far below the 

wages paid to U.S. employees who were fired. Requiring the payment of a prevailing wage to L–1 workers would discourage those 

who would try to use the program as a back door to cheap labor. 

Mr. Chairman, we have detailed for the Subcommittee other 

problem areas and reform proposals in our written submission. I 

would therefore like to close by raising one final concern that your 

Judiciary Committee colleague, Senator Lindsey Graham, reference 

at each of the recent full Committee sessions on the trade agreements, the outsourcing of professional and technical jobs overseas. 

This matter was the subject of a recent hearing in the House Small 

Business Committee. 

Recently there has been a spate of news article about this troubling phenomenon. The reason I raise it in the context of your 

hearing is that there is a connecting thread and that is Tata, Wipro 

and Infosys, the firms I mentioned earlier. They are not just brokerage houses for L–1B and H–1B visas, they are among the primary players involved in the transfer of tens of thousands of U.S. 

jobs and tens of millions in payroll. 

A recent study by Forrester Research estimates that if current 

trends continue over the next 15 years, the U.S. will lose 3.3 milVerDate 0ct 09 2002 15:38 Feb 25, 2004 Jkt 091789 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91789.TXT SJUD4 PsN: CMORC
14

lion high-end service jobs and $136 billion in wages. Today major 

U.S. firms from many sectors are falling all over themselves to get 

into the outsourcing exodus. 

As they used to say in one of this Nation’s greatest technology 

initiatives, the space program, ‘‘Houston, we’ve got a problem,’’ and 

I would suggest it is a big one. One this time it is not textile, steel, 

machine tool and other manufacturing jobs. Many of them are long 

gone. Now it is the high-tech, high-paying jobs that are headed out 

of town. The question for this Subcommittee is to what extent are 

guest worker programs under your jurisdiction contributing to the 

outsourcing tidal wave? I would suggest that it is significant. 

In conclusion, professional technical workers in this Nation have 

made enormous personal sacrifices to gain the education and training necessary to compete for the knowledge jobs in the so-called 

new American economy. They deserve better than to be victimized 

by immigration programs like L–1 and H–1B. Congress can make 

a long-overdue start in cleaning up guest worker visa programs by 

implementing badly-needed reforms. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Gildea appears as a submission 

for the record.] 

Chairman CHAMBLISS. Thank you very much, Mr. Gildea. 

Mr. Buffenstein, welcome, and we look forward to your testimony. 

STATEMENT OF DARYL R. BUFFENSTEIN, GENERAL COUNSEL, 

GLOBAL PERSONNEL ALLIANCE, ATLANTA, GEORGIA 

Mr. BUFFENSTEIN. Thank you, Mr. Chairman. 

The Global Personnel Alliance, Mr. Chairman, is a group of companies, a loose consortium of companies that are very interested in 

immigration and global mobility issues because of the effect on generating employment in the United States and on maintaining the 

competitiveness of U.S. industry abroad. 

Mr. Chairman, we would like to commend your comments and 

the comments of Senator Kennedy to the extent that they reflect 

a sincere intention to look carefully at this problem before rushing 

to legislation. 

We are not here to dispute or question any facts that have been 

asserted by any witnesses today. Indeed, everyone should have profound sympathy with anyone who has lost their job for whatever 

reason. There may well be circumstances where people on L–1 

visas have been improperly classified. But if I may borrow a term 

that Al Simpson used on this Committee when he chaired it many 

years ago. Professor—Senator Simpson, sorry. 

Senator KENNEDY. Better be careful now which one you use. 

[Laughter.] 

Mr. BUFFENSTEIN. He is now a professor, that is correct. But as 

Senator Simpson would have said, ‘‘We are a couple of tacos short 

of a combination plate.’’ 

[Laughter.] 

Mr. BUFFENSTEIN. The issue we have heard about today, Mr. 

Chairman, is a small slice of a very big picture, and that picture 

is the story of international investment creating jobs in this country in small towns across the country, the very kind of jobs Mr. 

15

Gildea talked about having disappeared, manufacturing jobs, bread 

and butter, meat and potatoes jobs throughout the country, the 

story of how American companies keep competitive on international 

markets by bringing in a select cadre of specialists, managers, executives, technologists, who bring the technologies here so that we 

can export, who bring the technologies for research and development facilities that stay here so that we can keep jobs here rather 

than sending them offshore. In all the cited instances that we have 

heard about today, all the articles that have been written on this 

subject recently, and there have been a good number of them, reflect a very specific and particular phenomenon, and that is a phenomenon where an L–1 visa holder is working off site at another 

company that is not the company that brought the L–1 visa holder 

in, using knowledge that more often than not, as Ms. Fluno mentioned, appears to be generic knowledge and not specialized knowledge. 

So we ask you not to throw the baby out with the bath water. 

If there is legislation it needs to be focused exactly on that problem. In looking at that problem it should be remembered that 

many of the instances in which an employee works off site, as we 

will show in a while, are very legitimate instances. 

Mr. Chairman, there is not one Governor in this country I think 

that has not taken a trip abroad. Many States have offices simply 

to encourage foreign investment, to encourage international investment. Georgia has 250,000 jobs attributable to foreign companies. 

Massachusetts has almost exactly the same amount. Texas has 

something like 475,000 jobs, New York close to 500,000 jobs, and 

California a whopping 750,000 jobs attributable to international 

companies. That investment would not be here without the people 

that bring it, the specialists who bring in the know-how, and the 

technologies. 

There is a small German-owned company in South Carolina that 

set up a manufacturing facility to manufacture transmission belts 

that has manufacturing operations in Ohio as well, that has 470 

workers and just one L–1 visa holder. But that person is necessary 

to bring in technology from a manufacturing facility in Sweden 

that is now used to manufacture in the United States. 

There is a Belgian company that is based on Georgia that just 

bought a manufacturing company in Utah that already has 100 

employees. By bringing in specialized digital signage technologies 

from Europe, that company believes it can increase that manufacturing facility to 300 people within two to 3 years. 

These are not unique examples, Mr. Chairman. They are examples that are bound. There are as many examples as they are foreign companies operating in each State, and in Georgia, there are 

1,500 with 600 manufacturing facilities counted in that number. 

But the role of the L visa in creating American exports and developing American competitiveness abroad is even more compelling. A 

major airline with 60,000 employees, 58,000 of them in the United 

States, used the L visa to bring in a pricing analyst who had competitive knowledge of foreign markets, confidential knowledge of 

that airline’s position on foreign markets. That airline, out of 

58,000 employees, has only 12 L–1s, .0002 of its workforce. A major 

manufacturer in Ohio has a select cadre of some 30 L–1s in a workVerDate 0ct 09 2002 15:38 Feb 25, 2004 Jkt 091789 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91789.TXT SJUD4 PsN: CMORC
16

force of 60,000, that bring in key knowledge of its foreign markets 

so it can customize equipment for sale abroad. 

In many instances, or at least some instances, Mr. Chairman, 

there are circumstances where people are placed, as I have said, 

at other employers. A California developer of optical lenses needed 

to bring in a key global developer of that lens coating and have 

that person work as a joint venture partner. That development will 

create hundreds of jobs and would not have been possible without 

that person. The State Department, in its operating guidelines, has 

developed a scenario whereby those situations should be differentiated. Maybe sometimes it has not been honored, but many other 

limitations on the L visa that have been suggested go way beyond 

that initial scenario we have talked about. What we need here is 

a surgical instrument to look at the problem and devise legislation, 

not a sledge hammer that will knock off every company from its 

competitive advantage. 

Mr. Chairman, thank you for the opportunity to talk to you 

today. 

[The prepared statement of Mr. Buffenstein appears as a submission for the record.] 

Chairman CHAMBLISS. Thank you very much, Mr. Buffenstein. 

Mr. Fragomen, welcome. We look forward to hearing from you. 

STATEMENT OF AUSTIN T. FRAGOMEN, JR., CHAIRMAN, AMERICAN COUNCIL ON INTERNATIONAL PERSONNEL, INC., 

WASHINGTON, D.C. 

Mr. FRAGOMEN. Good afternoon, Chairman Chambliss, Senator 

Kennedy, distinguished members of the Committee. 

The American Council on International Personnel is a nonprofit 

corporation founded in 1972 with over 300 members, all of whom 

are large global corporations, who collectively thousands of L petitions. For over 30 years the L-visa category for intracompany 

transfers has been essential to international investment and economic expansion. It is a tool that allows U.S. companies to participate in the global economy, and it has become a model for other 

countries seeking to capture a share of the global marketplace by 

facilitating the international transfer of knowledge, skills and talent. ACIP shares a concern of the Committee and of the previous 

witnesses regarding possible fraud and abuse in the program, and 

I think we all agree that appropriate sanctions should be imposed 

upon those who misuse the immigration system. However, the L 

visa is critical to the continued participation of U.S. companies in 

the 21st century global economy, and we urge Congress to move 

forward deliberately and with caution, which we can take from this 

hearing seems to be the predisposition of the Committee. 

To understand the L visa, it is important to understand the scope 

of international personnel transfers which fall in the general category of global mobility. I mention in my paper that a recent survey of 181 companies revealed that they have a combined expat 

population of over 35,000 employees. Unlike years past when primarily upper level executives were transferred abroad for a few 

years to gain international perspective and broader knowledge of 

markets and business practices abroad, today’s transferees include 

17

professionals from all levels and operating units within the company. 

Where the problem has been created is, as pointed out by several 

witnesses and recent media articles, Congressional hearings, focusing on L visa usage in the context of outsourcing information technology and other professional services. A company may choose to 

outsource for a variety of reasons including where it wishes to limit 

in-house services to core competencies, to obtain enhanced services 

from expert service providers, or simply to reduce cost and maintain profitability. Outsourcing is not a new business model, but we 

acknowledge that it often comes with painful adjustments for U.S. 

workers. 

What has changed is that increasingly outsourced work is going 

to offshore firms or offshore subsidiaries of U.S. firms. Immigration 

laws, in particularly the L–1B, certainly facilitate these business 

arrangements, but are a by-product rather than an impetus for the 

offshoring model. Congress should consider what efforts must be 

made to ensure that the U.S. is an attractive locale for investment, 

that wages and working conditions of U.S. workers are not unfairly 

undercut, and that U.S. workers are prepared to meet the challenges and opportunities of the new economy. 

Proponents argue that while offshoring may cause some temporary dislocation in the U.S. workforce, it will also keep industries 

competitive, provide investment in developing countries and eventually create new markets for U.S. goods and services that will 

spur future economic growth. Whether one agrees with this assessment or not, the trend toward outsourcing and offshoring will not 

be halted by changes to the immigration laws. 

We have few recommendations. First, allegations that U.S. workers have been laid off and replaced by cheaper foreign workers extend to a very limited group of L–1B specialized knowledge employees who work off site. Therefore, any correction should be targeted 

at this perceived problem and not at the L visa category as a 

whole. The most effective approach to meet this objective would be 

to clearly delineate what does and does not constitute specialized 

knowledge. For example, knowledge of generic programming languages should not constitute specialized knowledge. ACIP firmly 

believes that with the appropriate guidance from Congress, BCIS 

and DOS are well-equipped to make determinations regarding eligibility for an appropriate usage of L–1 visas. It is not necessary 

to rewrite the entire L law, add significant new regulatory burdens 

for all L visa employers or create a new regulatory scheme. 

Second, the detection of fraudulent credentials, questionable 

business entities and inappropriate use of the program can be enhanced through precertification programs where companies frequently filing L visa applications under the L-blanket petition of 

established criteria and protocols, limited resources demand that 

we increase information sharing and cooperation between the Government and employers. 

Finally, ACIP believes that the issues spurring many of the concerns expressed today derive from changes in the global economy 

and not deficiencies in the L category or regulations. Congress has 

a duty to consider the impact of new business models such as 

offshoring and opportunities for U.S. workers. However, the L visa 

18

is but a small piece of the puzzle. ACIP and member companies 

have and will continue to work on and support a variety of education and workforce initiatives to ensure we have access to the talent needed to compete in the 21st century global economy. We 

should not let short-term economic difficulties blind us to long-term 

economic opportunities. ACIP recommends that Congress commission a study with the input of business experts that examines 

emerging economic trends and examines the array of policies necessary to ensure future economic growth and opportunities for U.S. 

workers. 

The L visa program, particularly the blanket program, is extremely important in facilitating global commerce for U.S. companies and has been for over 30 years. It is a model of success in an 

often broken immigration system. Our challenge is to create a secure and efficient immigration system that protects U.S. workers 

while anticipating employers’ needs for access to talent from 

around the world. ACIP stands ready to work with you in building 

such a system. 

So I thank you for your time and consideration, and request that 

our full statement be included in the record. Thank you. 

[The prepared statement of Mr. Fragomen appears as a submission for the record.] 

Chairman CHAMBLISS. Certainly we will be happy to include your 

full statement, and thank you, Mr. Fragomen. 

Professor Yale-Loehr, we are pleased to have you and look forward to your testimony. 

STATEMENT OF STEPHEN YALE-LOEHR, ADJUNCT PROFESSOR 

OF LAW, CORNELL LAW SCHOOL, ITHACA, NEW YORK 

Mr. YALE-LOEHR. Thank you very much. Mr. Chairman, distinguished members of the subcommittee, I teach immigration law at 

Cornell Law School. I am also a co-author of a 20-volume immigration law treatise that is the standard reference work in the field. 

So I am testifying today from an academic background to try to 

give you some overview and perspective about the L–1 visa category. Much of what is in my written testimony has already been 

mentioned before so I am not going to tell you about the differences 

between the L–1A or the L–1B. Instead let me first focus on how 

the L–1 visa category is being used. 

As my grasp in statistics and my testimony indicate, L–1 visa 

usage has waxed and waned over the last 10 years or so. It has 

always been much less used than another common visa category, 

the H–1B. At its peak in fiscal year 2001 the State Department 

issued 59,000 L–1 visas. Even that, though it sounds like a lot, was 

only 37 percent of the H–1B visa usage for that year, and that 

59,000 L–1 visas constituted less than 1 percent of all nonimmigrant visas issued that year. Moreover, as you have heard 

from the other witnesses, the controversy within the L–1 context 

focuses on one subset of L–1s, and that is L–1B’s. The State Department does not separately categorize how many L–1B visas it 

breaks out, and that is one thing that I would recommend, is to try 

to find out how the L–1B visa usage has increased over the years, 

because I think that it is common consensus that there is no real 

problem with the L–1A visa category for executives and managers. 

19

Similarly, on numbers, I want to point out, some people have 

said, for example, that there ar 300,000 L–1s that come into the 

country every year. That number derives from statistics by the Bureau of Citizenship and Immigration Services as to the number of 

entrants, admissions each year by L–1 visa users, and L–2 spouses 

and children. Therefore, that number is exaggerated because on average the BCIS estimates L–1 visa holders come in about 5 times 

a year. So that is not a true picture of the usage. It is rather how 

many times they are coming in back and forth. Therefore, it gives 

you an idea of how often L–1 visas are used for multiple travel over 

the years rather than being here just one time continuously in the 

United States. 

One other thing I want to focus on is the difference between the 

L–1 category and the H–1B visa category because I think it is important they are for two different reasons, and we need to keep 

those differences distinct. 

The H–1B visas are granted to professionals who have at least 

a college degree or equivalent. They are needed to provide unique 

skills, relieve temporary worker shortages or supply global market 

expertise. By contrast, the L–1 visa is designed for a narrower purpose, as we have heard, to help international companies bring in 

managers, executives or people with specialized knowledge on a 

temporary basis to assist their U.S. operations. There is no degree 

required for L–1 eligibility because general educational requirements are not relevant for this category. Instead what we need are 

people who have inside knowledge about the company’s operations 

and who bring that kind of background to bear when they come to 

the United States. A degree may be irrelevant, and as Mr. 

Buffenstein’s written testimony indicates, in some instances there 

are people who do not have college degrees, but because of their 

unique knowledge of the company’s operations, the L–1 visa category is the only way they can come into the United States. So we 

should not impose a professional degree requirement on the L–1 

visa category. 

Similarly, there are differences between the H–1B and the L–1 

such as there is no portability of employment to unaffiliated entities in the L–1 category, and there are no extensions of L–1 stay 

beyond the statutory cap of 5 or 7 years. Thus, in these respects 

the L–1 category is in fact more restrictive than the H–1B visa category. 

I also want to talk a little bit about globalization because that 

is sort of the sub-theme of this hearing. It is certainly an important 

characteristic of this century and affects all countries. Rather than 

paint too broad a brush, I want to point out that globalization contains both potential pitfalls and advantages for the United States. 

Assistant Secretary of Commerce for Technology Policy 

Mehlman, testified before the House of Representatives last month 

overseas outsourcing of IT, which is one subset of globalization, can 

actually benefit the United States and create jobs for U.S. workers. 

He stated in his testimony that so far the majority of work sent 

offshore is low-wage, represents a small fraction of the overall market for software and IT services and does not displace a large majority of the work done here in the United States. He continued 

that the Bureau of Labor Statistics projected in December of 2001 

20

that the number of professional IT jobs in the United States will 

grow by 72 percent between then and 2010. The Bureau of Labor 

Statistics have also indicated that there is going to be a shortage 

of service sector jobs of about 9 million by 2010. So even though 

there is some overseas offshoring going on, on the whole the prospects for employment in the IT and service areas is still bright. 

Obviously, Congress needs to consider globalization and offshore 

outsourcing, but in my view the L–1 visa category, if properly administered and monitored, can be an anecdote to concerns about 

overseas outsourcing. Use of L–1 visas encourages both foreign investment in the United States and can help keep and grow jobs in 

the United States. 

In conclusion, like others have stated here, I think that we need 

to take a surgical approach to considering changes to the L–1 visa 

category. The narrow area of concern and possible abuses in the L–

1B area where people claim to have specialized knowledge but do 

not really when they come into the United States and they are 

placed at third-party sites. We need to look at that narrow issue 

and see what we need to do about it, and it is possible that we can 

do that administratively rather than through legislation. 

Thank you very much. 

[The prepared statement of Mr. Yale-Loehr appears as a submission for the record.] 

Chairman CHAMBLISS. Thank you very much. 

To all of our witnesses, we certainly have the spectrum covered 

here, which is great. That is exactly what we wanted to try to do. 

Ms. Fluno, let me start with you. Your displacement took place 

in the year 2002. What has been the result or the follow on with 

you and your coworkers at Siemens with respect to finding other 

employment in this high-tech community? 

Ms. FLUNO. About one third of the people managed to get positions within Siemens, but another third are—they have been employed, but most are under employed, meaning that they are making less than they used to, and in fact, one gentleman cannot get 

a job in programming. He is mowing lawns. About one third are 

still unemployed. 

But I have learned a new term here this afternoon. I am going 

to tell them that they are having a short-term economic difficulty, 

and to tell that to the mortgage company. 

Chairman CHAMBLISS. Do you know whether or not your replacement had ever previously been employed by Siemens? 

Ms. FLUNO. I do not believe so. 

Chairman CHAMBLISS. Mr. Fragomen, your firm represents Tata 

Services which has been mentioned here any number of times. 

Could you explain what kind of specialized knowledge Tata’s products or services that Tata L–1 workers have? 

Mr. FRAGOMEN. I can make a few general remarks. I am not really testifying on behalf of Tata, but I would be happy to address the 

Chairman’s question. 

Essentially the standard that is used by the American Consulate 

in India for the various consular posts in issuing L–1 visas, which 

is pretty much followed by other consular posts around the world, 

is that the job applicant has to have two things. First of all, L–1 

blanket petitions require the applicant to have a professional deVerDate 0ct 09 2002 15:38 Feb 25, 2004 Jkt 091789 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91789.TXT SJUD4 PsN: CMORC
21

gree, so they have to have a degree in computer science or a degree 

that is very, very specifically related to what they are doing. Secondly, they have to have experience working with the software of 

the company with whom they are going to be placed, or alternatively, working with proprietary software that Tata has developed that would be utilized within specific industries. So it is very, 

very narrow in terms of defining specialized knowledge. 

The consul would not grant a visa to someone who just had generic programming skills, for instance. It has to be a situation 

where the person is both a professional and has prior experience 

with the specific proprietary software. That would be the answer 

to the question. 

Now, I cannot relate that specifically to the Siemens situation because I do not have knowledge, but I would be happy to make an 

inquiry and see whether I could provide some information to the 

Committee. 

Chairman CHAMBLISS. If you could provide some specifics on 

that, we would appreciate that. 

Mr. FRAGOMEN. I would be pleased to do that. 

Chairman CHAMBLISS. Ms. Verman, as a businesswoman running 

a competitive consulting company, do you believe that too much 

Government interference and over regulation is a concern with legislation that would tighten up the L–1 visa, and could you give us 

any example of how you might think that would interfere? 

Ms. VERMAN. I believe your question is how do I feel that the 

Government interference on the L–1 visa will affect my business? 

Chairman CHAMBLISS. Will affect the issuance and the practical 

day-to-day operation of L–1 visa issuance. 

Ms. VERMAN. I think it would affect it tremendously. I think that 

it is not an even playing field at this point in time, that I am asked 

to compete against, at a disadvantage against foreign consulting 

companies where they have competitive advantage of transferring 

L–1B visa foreign workers here, and they put them here at a lower 

cost. I cannot compete with U.S. workers here for the same price. 

Chairman CHAMBLISS. Are most of your workers that you obtain 

visas for domestic workers? Are they U.S. citizens? 

Ms. VERMAN. Most are U.S. citizens, legal residents, or I do also 

employ H–1B visa consultants as well. 

Chairman CHAMBLISS. Mr. Buffenstein, would you explain how 

Global Personnel Alliance members use L–1 visas, and particularly 

what ways L–1 benefits American interests as those companies use 

it? 

Mr. BUFFENSTEIN. Mr. Chairman, a classic example is a U.S. 

company, such as the airline I mentioned, that needs to remain 

competitive on international markets and needs to bring in a key 

process or some confidential knowledge about the operations 

abroad to the United States in order to fuel exports or to make that 

company more competitive. The manufacturer that I mentioned in 

the Midwest is a good example. They make truck drive parts and 

axles. They need to customize them for Latin American or Asian 

markets. In order to do that they need to bring in a couple of key 

people with specialized user requirement knowledge for those markets in order to facilitate those exports. 

22

In another circumstance, the same company brought in a key individual who had knowledge of a European manufacturing process 

of a design modification that had been done in Europe that they 

wanted to bring back to the United States to introduce it into this 

manufacturing facility because they thought it something that 

would help their exports. Again, we are talking about 30 people, 35 

people in a workforce of 60,000. One of the examples in that same 

company, Mr. Chairman, I think is instructive. It is a Canadian individual who is the global leader for Brand Management and Marketing, and he is on an L–1, but he divides his time between Canada and the United States. That is something that I think is greatly ignored, that many L–1s are not in the United States on a fulltime basis, but rather divide their time between the United States 

and abroad. There is a paper company, small paper company with 

2,000 employees based in the Southeast that has a number of key 

experts, just 4 of them on L–1 visas, but these people are probably 

here once a month, or every 3 months they come here in order to 

attend to some very complex and expensive machinery that that 

company needs in order to sustain its 2,000 employees. 

For example, one of our companies has a managing director who 

is British, who comes to the United States and works here just one 

week out of every quarter. So for a total of 4 weeks a year that person is working here. Because the person is employed in the United 

States and actually performing a job when he is here, he cannot 

use a B or other kind of visa. He needs to get an L–1. So he gets 

an L–1, but that is literally for 4 weeks a year. 

What this all points out, Mr. Chairman, is that there really 

needs to be some study of some of the circumstances. Where are 

these L–1s working? Are they in California? Are they mainly in 

Georgia? What do they do? What occupations are they in? This 

kind of information is sorely lacking, and I would hope that as any 

part of the action that your Committee takes, that you would solicit 

some of this kind of information before too drastic a remedy is 

taken. 

Chairman CHAMBLISS. Thank you. 

Senator Kennedy? 

Senator KENNEDY. Thank you very much. 

Of course, the Immigration Service is supposed to know that 

when they grant the visa. I mean we do not need to go back in and 

all have another study. They are supposed to meet the requirements. The idea basically is if you have a specialized worker, the 

basic concept was because they are going to provide some specialized knowledge which means it is going to mean more workers and 

more jobs for people, but what we are talking about are the abuses 

I think here we have seen. 

I remember very clearly the 1965 debate on the immigration 

issue, eliminated the national origin quota system. We had the 

western hemisphere compromise. We eliminated the Asia-Pacific 

triangle. In 1970 the needs came because we had the beginning of 

the internationalization, and this was a very specialized kind of a 

program. I was trying to look back in the debates. They are virtually nonexistent because we were just trying to fill a very specialized concept, and that is the highly-skilled people for companies 

that are coming in here who had been a part of the company famVerDate 0ct 09 2002 15:38 Feb 25, 2004 Jkt 091789 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91789.TXT SJUD4 PsN: CMORC
23

ily, may not have the degrees, but had that special knowledge that 

was very important for that company to be expanding and expanding employment here. 

The concern that we have is whether they are growing with all 

of these abuses, and how extensive are they. That is what we are 

trying to get at today. 

But I an enormously sympathetic to Beth Verman, what she has 

said, and that is, if we let abuses go on, here is a company that 

is trying to compete, and if they can jiggle the system, whether it 

is the L–1 or whether the H–1B, and they can jiggle the system 

and get people in there and pay them a hell of a lot less, how is 

an American company, who is trying to play by the rules, trying 

to employ Americans, trying to deal and compete, they are at a significant disadvantage. I mean I may be putting more in your 

mouth than you said, but I hear the argument and have heard it 

for a long time, and I think that that is being unfair to American 

companies. So this is a complicated issue and question. 

I would like to get back to the issue about the definition of ‘‘specialized knowledge.’’ We have not got a lot of time. But a number 

of you talked about specialized knowledge. Is there a general understanding? Maybe Beth and Michael, you will be able to talk 

about it. Is there a sense that specialized knowledge is being 

abused? And we ought to understand what that specialized knowledge is and come back? I mean I would be interested. Ms. Verman, 

could you comment on it again? 

Ms. VERMAN. I feel that the term ‘‘specialized knowledge’’ is very 

broad, and it needs to be more defined. That seems to be where one 

of the abuses are. 

Senator KENNEDY. Mr. Gildea? 

Mr. GILDEA. If you look at the Siemens case, you wonder what 

kind of specialized knowledge they had when the workers, who 

were later to be displaced, were asked to train these folks, so what 

was the specialized knowledge base there for those workers? We 

are concerned about that under this program. 

Senator KENNEDY. How much of this, Mr. Gildea, is the enforcement? I think we have had hearing after hearing, year after year 

after year, Department of Labor, under Democrats and Republicans. There are not a lot of resources. The restrictions in terms 

of the enforcement. We tried attestation, was sort of a newer concept, thinking that the business community would play by the 

rules, and I think the great majority have. There are abuses on it, 

and I do not know how we are going to be able to deal with it, but 

how much of this is the fact that we are not getting enforcement? 

We ought to try and hold accountable, or try to provide additional 

resources or do whatever we can with the Labor Department in 

terms of enforcement. How much of it is an enforcement problem, 

and how much of it do you think is the definition, how much of it 

is legislative? Is there any way to quantify it? 

Mr. GILDEA. I think it is a little of each. In the case of enforcement you had OIG reports from the Department of Labor, GAO reports as well, looking at both L–1s and H–1Bs, and they do not 

have sufficient authority to enforce in some cases. The issue of 

blanket petitions, you wonder if the volume is such in the consular 

24

offices that they do not have time to look at these petitions in the 

way they need the kind of oversight. 

I do think that your suggestion regarding the fee makes sense. 

It is what we have recommended. And that the bulk of that should 

go into enforcement functions for DOL, for BCIS and for the consul 

offices to do the job that needs to be done in terms of screening and 

monitoring and data collection, gathering the information that they 

can report to you so that the Congress, House and Senate can do 

its oversight responsibilities and know exactly what is going on in 

these programs, and hopefully before these kinds of abuses set in, 

take action to prevent the abuses. 

Senator KENNEDY. I had a favorite of 3,000. Then we got to 

2,000, and then we are down to 1,000. These are just a small number, but they are highly specialized. The company needs them. We 

talked about training and enforcement, and it does not seem to be 

unreasonable. 

Let me ask you on sort of an issue, Mr. Gildea, and then any of 

the others on the panel, as I see that time is going on. I listened 

to what Professor Yale-Loehr talked about in terms of the foreign 

investment and basically low wages. You know, enormously interesting, it caught my eye last night, in Newsweek, a long article in 

Newsweek. They talked about the shift, not just about low-wage 

jobs, but about the handling customer service, telemarketing, paperwork, biggest corporations, firms like GE, American Express, 

prefers to use them now. Now Fortune 500, Microsoft, is sending 

not just low wage, but are talking about the managerial and above 

workers, or at least those kinds of jobs overseas. In this case it 

mentioned particularly in India, and used the comparison in terms 

of what managers were getting, some managers were getting, an 

enormous disparity. How should we be dealing with this? That is 

a little bit off this, although some have referred that this is not unrelated. I have been listening and trying to understand better how 

it is related. I would be interested in what ideas you have on this, 

where are we going with it? Maybe you would take a crack at it, 

and I will ask Mr. Gildea and if anybody else has a comment. Then 

my time is up. 

Mr. YALE-LOEHR. Yes, Senator Kennedy. I think globalization is 

a large issue that needs to be addressed by Congress comprehensively. As other witnesses have said, immigration restrictions are 

not going to stop globalization. That is a phenomenon that is too 

big that one little immigration legislation is going to be able to 

stop. I think we need to look at that comprehensively. I think within globalization the L–1 visa category is actually one way to try to 

keep jobs in the United States. By bringing in key people, managers, executives, people with true specialized knowledge that will 

enhance and create jobs in the United States, that can offset some 

of the negative aspects of globalization. 

Mr. GILDEA. Senator, we do not see it that way. What we see 

some of these outsourcing firms doing is bringing in the lower wage 

workers, particularly from India, bring them in to get the skills 

and jobs of people like Patricia Fluno, and over time taking the 

knowledge and the skills back to India and working with the same 

companies that are responsible for setting up huge high-tech centers in India, and shipping hundreds of jobs going in the reverse 

25

direction. That is what our concern is with respect to these higher 

level jobs. 

Senator KENNEDY. What do we do about that? 

Mr. GILDEA. In terms of the visa fix we are— 

Senator KENNEDY. I am thinking of going the other way. I am 

interested in what you think about what is happening here, but I 

mean, how in the world are you going to stop companies from going 

and shipping these managerial jobs and higher-paying jobs over to 

India or these other countries? They are going to be appealing to 

what is a 30,000 or $40,000 job here, goes for 3,000 or 4,000 jobs 

over in these other countries. They are going not just do it for low 

income, but they are looking at these other skilled jobs. Should we 

be worried about it, and what are we going to do about it? 

Mr. GILDEA. I think you should be worried about it. It is what 

indeed has happened in the manufacturing sector, where those jobs 

have gone to the lower wage rates. Even now you see, as a result 

of NAFTA and the maquilladora developers in Mexico, even those 

jobs, as Mexican workers’ wages rise, those jobs are headed out of 

Mexico. If globalization, which for many U.S. workers means the 

unemployment line, is about that, we have got a tough problem in 

front of us, and it is not just the manufacturing jobs any more. 

Chairman CHAMBLISS. Mr. Buffenstein, do you have a comment? 

Mr. BUFFENSTEIN. Mr. Chairman, I think in response to Senator 

Kennedy’s question, it is not really possible to legislate a macroeconomic phenomenon. The problem with the globalization phenomenon, especially in the information technology industry, is that 

that is an industry which is highly mobile. It so opens that India 

has got a population fluent in English and proficient in this regard. 

We cannot legislate against companies moving businesses to India. 

But we can do, in information technology and elsewhere, is help 

U.S. business and industry be as competitive as conceivably possible and make sure that we have the ability to bring jobs here in 

industries where it is close to markets and where companies want 

the manufacturing to be. 

If you take the members of this Subcommittee, Mr. Chairman, 

alone, just the States represented by the members of this Subcommittee, 3 million jobs in those States are attributable directly 

to income-producing, employment-generating international investment, and lots of their manufacturing facilities in Massachusetts 

and Georgia that specifically are close to market, optical equipment, transmission equipment, all kinds of bread-and-butter manufacturing jobs that we need to encourage and bring to this country. 

In the information technology area, for example, one of our members has a developer in Ireland that they have brought to the 

United States that is helping educational proprietary software be 

developed here, whereas otherwise those jobs would have gone 

abroad. We need to encourage and facilitate that. 

Senator KENNEDY. Thank you very much, Mr. Chairman. 

Chairman CHAMBLISS. Thank you. 

Senator Feinstein? 

26

STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR 

FROM THE STATE OF CALIFORNIA 

Senator FEINSTEIN. Thank you very much, Mr. Chairman. I 

think it is correct that we take a good look at the L visa. 

I am sorry to be late. I was on the floor speaking on the trade 

agreement. You know, it is interesting, the more I am really looking into the trade agreement, having immigration staff look into it, 

it really is a stealth permanent immigration program. These visas 

are renewable forever. What I did not know is L visas do not pay 

taxes. So you are going to have people here that do not pay taxes, 

and replaces. Ms. Fluno said she makes $98,000 a year— 

Ms. FLUNO. Did. Did, that is past tense. 

Senator FEINSTEIN. Did. Trained the worker that is going to 

make a third what she makes. And this is good for us? 

Four years ago, and I represent California, I had a whole bunch 

of CEOs come to me, how they needed more H–1B visas, et cetera, 

et cetera. I bought the argument and I went along with it. So now 

we are faced with a trade agreement, Singapore, Chile, that has 

this L–1 visa program attached to it. Then I began taking a big 

look at some of the numbers involved in these so-called temporary 

worker programs. What you find is, at this time in the country, we 

have 5.2 million people taking jobs in this country under temporary 

visa categories, and 40,400 are Chileans, and 29,400 are Singaporeans, for a total of 70,000 workers in these other visa categories. 

So I have to wonder why are we increasing this L–1 visa? I understand the L–1A, which I thought was the purpose of the program, that if you want to send a manager temporarily to give some 

advice to their counterparts in this country and then return, that 

is fine. But I do not really think that is what is happening. I think 

what is happening is, through this treaty, which I gather was to 

be a precedent for other treaties, to have a program where there 

is no labor certification, there is no labor investigation, and therefore, Ms. Fluno cannot even complain and have that complaint investigated as to whether she is being replaced for monetary reason. 

And I hazard a guess that is exactly what this program is going 

to be used to do. 

What I have also found, that fraud is increasing in all of these 

programs, and I just documented that on the floor of the Senate 

with numbers and dollars in fines. 

Now, I appreciate global competition. I come from a State that 

is a high-cost State, and the American dream has always been for 

a worker to be able to own a home and buy a car and educate their 

kids, and it is very hard to do it on $32,000 paying taxes. Now we 

are going to have $32,000 and no taxes. I really think to have 

workers that are able to come into this country—and that is the 

second part of the L program, the L–1B—and be here for 7 years 

and pay no taxes and replace American workers, that is not something I want to be a part of. I come from the State that has the 

biggest, I guess, technology industry, and I would hope that computer firms and chip firms and others in my State would not do 

that. 

As a matter of fact, when we expanded the L–1 visa program, it 

was really TechNet in California—and Senator Kennedy will remember this—that came up with the $1,000 fee that they would 

27

match and create a program to better educate domestic workers. 

Suddenly, 5 years later, we have lost all that. 

So I would like anybody to tell me that, give me a better reason 

why there should be an L–1B program where you do not pay taxes, 

where you can replace an American worker, where there is no prevailing rate? Why should we have that in this country? Somebody 

defend it. 

Mr. BUFFENSTEIN. Senator, I would like to take a shot if I may. 

I am not aware of any manufacturer in this country—and over 25 

years I have worked with many of them that bring in L–1 workers—who have L–1 workers that are not paying taxes in this country. The IRS regulations specifically require that if someone is resident here, meaning that they are more than a certain 181 days a 

year, or over a period of time, 3 months, 120 days, 4 months, that 

they are residents, and they have to pay taxes just like you and 

me. 

There may be some financial arrangements involving the specific 

instances of abuse that have been cited, where people are not complying or where they have arranged certain mechanisms, but that 

certainly is not the mainstream of manufacturing. So the problem 

is, when you have a manufacturer— 

Senator FEINSTEIN. Would you just clarify that? Are you speaking to the L–1B or the L–1A? 

Mr. BUFFENSTEIN. The L–1B and the L–1A. 

Senator FEINSTEIN. To both. 

Mr. BUFFENSTEIN. Both. 

Senator FEINSTEIN. You are saying neither pays any taxes. 

Mr. BUFFENSTEIN. No, ma’am. I am saying that in both circumstances the overwhelming number of manufacturers, certainly 

every one that I have worked with, those individuals, if they are 

resident in the United States have to pay taxes as residents, just 

as you and I do. 

Senator FEINSTEIN. What is the definition of ‘‘residency?’’ What 

do we mean by that? 

Mr. BUFFENSTEIN. Well, it gets into a complex regulatory issue, 

but the definition of residency is quite simple. Anyone who in any 

1 year is here more than 181 days, or someone who over a period 

of time is here more than—it is a complex formula, whereby you 

add a sixth of the previous year and third of the year before. Basically, if you are here for more than 120 days a year, you are a resident. There are some treaties that exempt you in certain circumstances, if you are being taxed by the other country. 

But the point I am making here—because I do not know, and I 

am not disputing, what the circumstance was that Ms. Fluno encountered in Florida. What I am saying is that the vast majority 

of companies are neurotically desperate to be compliant with the 

law, both from a tax standpoint and from an immigration standpoint. They employ batteries of internal compliance people and outside lawyers who try to do this. And the manufacturers, like the 

one that I mentioned in the Midwest or like the optical lens manufacturer in Northern California, are companies that need an L–1B 

in order to bring in a needed technology to integrate that technology into the United States so that manufacturing can occur 

here. 

28

Mr. FRAGOMEN. I would like to— 

Senator FEINSTEIN. Please, go ahead, and then I will come back. 

Mr. FRAGOMEN. I just wanted to add to Mr. Buffenstein’s remark, 

that even if a person is not a resident for tax purposes, as a nonresident they pay tax at a statutory 30 percent rate without deductions. So virtually everybody pays taxes. 

On the issue of the—on the other issue— 

Senator FEINSTEIN. Not if it is the product of a trade agreement. 

Mr. FRAGOMEN. To my knowledge—and we would be happy to 

submit some information for the Committee to the record, but to 

my knowledge, even if it is pursuant to a trade agreement, that 

taxes are still paid. It is just a question of whether they are paid 

as resident or as a nonresident. 

Senator FEINSTEIN. I am told something else, so I would really 

appreciate any information you could provide, specific information 

of specifics involving what kind of taxes people pay, and we are 

going to ask CRS to clarify this for us so that we know exactly. 

Mr. Buffenstein, let me ask you this. I think many U.S. companies see the L–1 program as a way to import foreign workers without the restrictions and costs of the H–1B program. Restrictions 

that apply to H–1B but not L–1 include an annual limit on the 

number of visas issued and a requirement that the visa applicants 

have a bachelor degree or higher. H–1B visa applicants, as you 

know, have to pay the $1,000 fee we have just talked about, toward 

training American workers. L–1 applicants do not. Visa law also requires workers with H–1Bs to be paid the prevailing wage in the 

region where they work, while L–1 visa carries no salary requirements. Would you be supportive of a prevailing rate requirement? 

Mr. BUFFENSTEIN. Senator, firstly, the airline that I mentioned 

earlier that employs 60,000 workers and brought in a pricing analyst to the United States, that individual who helped them be competitive on international fare markets and brought very specialized 

and in many respects confidential knowledge about their fares on 

European markets did not have a degree and would not have qualified if some of the proposals that are flying around now were enacted. 

In addition if there was a quota and the quota had been reached 

for that particular year, we would have had to tell that airline, 

well, sorry, you cannot have this person now. You have to wait a 

year, by which time the foreign carriers would have got the financial advantage. So some of those issues I think are best addressed 

qualitatively rather than quantitatively. In terms of— 

Senator FEINSTEIN. That was not my question, sir. 

Mr. BUFFENSTEIN. I am sorry, ma’am. You mentioned in terms 

of prevailing wage requirements specifically. 

Senator FEINSTEIN. The question was, would you support a prevailing rate attached to the L–1 visa? 

Mr. BUFFENSTEIN. As long as the mechanism was one in which 

international companies could continue to pay home country benefits, continue to keep people on international compensation systems, and there were a way of devising that that the Department 

of Labor certainly has not shown with respect to the current H–

1B program. Because when you have someone who is brought, for 

example, for 6 months to the United States or for 9 months, and 

29

then taken to Canada for a few months, you cannot keep on moving 

that person onto a different payroll. There are apples and oranges 

questions with respect to benefits. It is enormously expensive to 

transfer personnel to the United States. Many of these multinational companies that bring these key experts here pay enormous amounts of money and equalize compensation and tax burden 

for their individuals. 

The pricing analyst that I mentioned with respect to the major 

airline, is one who was relocated abroad earlier, because once the 

person’s sojourn was complete in the United States, it is an expensive thing to keep the person here, so they were sent back immediately. So it all depends. The devil is very much in the detail on 

that issue, Senator. 

Senator FEINSTEIN. But if the individual were here, I do not 

know what portion of L–1 visas that are here utilize the entire 7-

year period, but I suspect it is a large number. Does anyone know? 

Mr. FRAGOMEN. We did a study among our member companies, 

and the average stay in the United States on L–1 visas is approximately 2 years, and there are very few persons who stay more than 

3 years, so very much, unlike the H–1, where there are a large percentage of persons who convert to permanent residents, it is very 

large in the L visa category. It may interest you that among the 

companies that do the offshore development work, for instance, 

that many of them have no permanent residents program at all. 

Everyone is rotated out within a year or two of when they come 

to the United States. 

Senator FEINSTEIN. Then let me ask you this. Why, in the two 

trade agreements we have before us, are they providing for unlimited years, you can renew the visa forever? Why would that be necessary if people do not stay that length of time? 

Mr. FRAGOMEN. Basically in the trade agreements you have two 

categories. You have your L visas, and then you have your free 

trade entries, the TNs, as in the North American Free Trade 

Agreement. The TNs are much more an abbreviated H–1 essentially, and those people frequently stay for a long time. But there 

is not any particular reason that there would have to be a cap on 

L–1 time. I mean most L–1s just do not remain in the United 

States. Statistically, the number that convert to permanent residence is very small. 

Senator FEINSTEIN. Do you have data on how many countries 

that would allow the same thing in reverse? 

Mr. FRAGOMEN. Actually, I do. One of the practice areas in which 

we are engaged is global immigration, and I can give you a rundown of 10 or 20 countries. You will see that every one of them has 

the equivalent of an L visa category to facilitate international mobility. 

Senator FEINSTEIN. That are not limited in number? 

Mr. FRAGOMEN. No, they are not limited in number. The basic 

concept behind L visas is to try to limit usage by defining the category sufficiently narrowly so there are not negative competitive 

impacts on the local labor market. That is the basic concept, unlike 

the H–1, which is driven much more by labor market tests or at 

least creating a level playing field in terms of a labor market. But 

I would be happy to provide this information. 

30

Senator FEINSTEIN. I would appreciate that, because again, in 

the trade agreement we have before us, they dropped the word 

‘‘highly’’ before ‘‘specialized’’ and actually provided for a number of 

occupational categories that do not require a bachelor’s degree as 

well, which is rather interesting. So it is clearly meant to be a 

broader L–1 program, I guess not like what you are saying if what 

you are saying is right, that individuals can come in and effectively 

remain for the rest of their lives. It is mandatory that they are able 

to bring their families. And if there is any different point of view 

on the pattern of entry, we have to submit it to an international 

tribunal for decision, a very unusual agreement in that regard. 

Thank you, Mr. Chairman. 

Chairman CHAMBLISS. Senator Cornyn. 

STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM 

THE STATE OF TEXAS 

Senator CORNYN. Thank you, Mr. Chairman. One benefit to being 

a junior member of this Subcommittee is most of the obvious questions are already asked by the time it gets to me. 

Chairman CHAMBLISS. But you are a lot smarter about L–1. 

[Laughter.] 

Senator CORNYN. Thank you. I would just like to make an observation perhaps, and that is this whole subject of this hearing and 

also the hearings that you have held previously in this Subcommittee, I think have demonstrated how broken in so many respects our immigration system is, and certainly I hope what comes 

out of this hearing and the other hearings that you have convened 

is that we address not only the policy but obviously the enforcement issues, because no matter what Congress does in terms of 

writing a new law, if it is not enforced, that policy not only fails 

to be implemented, but it also breeds, I believe, disrespect for the 

law generally. Right now I am sorry to say I do not see our immigration laws being adequately enforced pretty much across the 

board. 

I think what we need to make sure we do is to make sure that 

any changes in this area obviously are fair to domestic workers, 

that it is predictable for employers and those workers, and that it 

is enforced diligently, as I think we all agree it should be. 

The amazing thing about this is that it seems to cut across so 

many different policy areas. One reason of course we bring in foreign workers, particularly those with specialized knowledge, because our education system some say is not producing those workers, so it implicates that. Obviously, it implicates our domestic 

economy and the global economy, as we have heard. It implicates 

homeland security concerns as we have heard previously, where 

some 300,000 people are currently in this country under final orders of deportation and we simply do not know where they are. 

In the hearing last Friday before Senator Graham’s Subcommittee on the Judiciary Committee on Crime, the Border Patrol 

told us that they apprehend about 1 million people who come into 

this country illegally each year, but they cannot tell us how many 

they do not apprehend, but the best estimate is between 8 and 10 

million undocumented immigrants are currently in the United 

States now. While we hope, and certainly I would expect that most 

31

are here because they want what immigrants have always wanted, 

which is an opportunity for a better life for themselves and their 

families, in a post 9/11 world the demands of border security and 

homeland security I think require us to be far more diligent in that 

area. 

As we have heard Senator Feinstein, in the two free trade agreements that we have before us, I think could even be tonight, with 

Chile and Singapore, we have concerns that now the Executive 

Branch wants to get involved in immigration policy, which under 

the Constitution is reserved to the Congress. 

So I commend you for this hearing. I found it very edifying, like 

others here. It is also disconcerting in a lot of ways, and I hope and 

I expect that this Subcommittee and the Judiciary Committee, and 

hopefully the Senate as a whole will address these concerns, not 

just in a piecemeal fashion but in a comprehensive way so that our 

immigration system can be credible and fair, predictable and enforced. 

Thank you. 

Chairman CHAMBLISS. Thank you, Senator Cornyn. 

Let me direct this to Mr. Buffenstein, Mr. Fragomen and Mr. 

Yale-Loehr. You know Ms. Fluno’s story. You know the facts. She 

has related them again today. In my mind the use of L–1 visa is 

not consistent with the allowance of an individual to come in and 

replace an existing worker. You have all talked about the need for 

bringing in technical workers to engage from the standpoint of 

being able to assist with productivity or assist in the high-tech end 

of the manufacturing segment, but they should not be allowed to 

come in to replace a worker. Am I wrong about that, or do you disagree with that? Would you all take a shot at that? 

Mr. BUFFENSTEIN. Mr. Chairman, I think you are precisely correct because the definition of specialized knowledge would be violated if the knowledge was readily available here and was generic, 

where someone could just come and replace someone in a job which 

if the company could have found some people in the United States 

who were qualified for it. And that is the point I made earlier, and 

I would like to reiterate it, is that every instance of cited abuse, 

most particularly, Ms. Fluno’s, but every instance of cited abuse, 

whether in the articles, what the people have talked about on this 

panel, all relate to the specific circumstance where there has been 

a contracting out or a leasing out of employment to a second employer, where there is no affiliation between the first and the second employer than a contractual agreement, and where the knowledge is generic knowledge, not to suggest that Ms. Fluno’s knowledge was not substantial, but it is not knowledge that is possessed 

within that company or specifically by that company abroad, and 

that is what distinguishes the L–1. 

So if there is going to be a legislative solution, and not an administrative one, it should be targeted very specifically at that situation, bearing in mind that there are situations where it is very 

valid for a company, for example, an airline, to send someone to a 

code share airline in order to conduct a project, and not to throw 

that baby out with the bath water, but that is where it should be 

targeted. So I agree with you 100 percent. 

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Mr. FRAGOMEN. I would agree with Mr. Buffenstein as well. I 

would just like to perhaps try to draw the distinction between 

maybe slightly different uses of L–1B visas. In a typical job shop 

situation, where a company is essentially just providing employees 

in the U.S., importing them and then essentially contracting them 

out, where they are working on another employer’s premises and 

they become absorbed in the workforce or displace U.S. workers, 

and they have generic computing skills, software, hardware, et 

cetera, I think we all agree that that is not an appropriate L–1 

usage because they do not possess specialized knowledge. 

But in an offshoring situation, we talked a little bit about how 

the development centers are created abroad, and these development centers actually do the software development, programming, 

et cetera. The companies send persons to the U.S. as part of a 

team, and part of this team is to feed information back to the development centers abroad, and the personnel of the companies 

come over and have very specialized knowledge of the particular 

software involved, meaning the proprietary software of the company for whom they are rendering this service, come and feed information back, and it is a cooperative kind of an effort. 

Now, in that kind of a situation, that is very different than the 

situation of a job shop. Now, personnel in those circumstances 

might only be in the United States for 6 months, for a year. Then 

they go back abroad. Then they are frequently reassigned to 

projects in other countries. So it is not a matter of just working the 

U.S. 

Now, this offshoring model can result, and frequently does result, 

unfortunately, in that it constitutes a form of outsourcing, it results 

in U.S. workers losing their jobs because the entire function is contracted out to this company who performs part of the work abroad 

and then has employees in the U.S. as well. That is why it is a 

complicated issue because it is really a subset of the outsourcing 

phenomena, which is actually what causes the loss of jobs. So it is 

not a one-to-one displacement situation. 

Mr. YALE-LOEHR. I could add two things to that. I agree with the 

previous two statements, but adding two things to that. Number 

one is in 1996 the State Department sent out guidance to its consular posts about this use of the L–1B visa usage, where they are 

placing them at third-party sites. That policy guidance, under 

which circumstances it is acceptable and when it is not acceptable 

is quoted in my testimony. Therefore, to the extent that you want 

to look at that particular aspect of L–1B usage, you might look at 

that State Department guidance and see if either administratively 

or legislatively that would be a good starting point to try to curb 

the abuse in that particular area. 

Second and more broadly, I think that you might consider seeing 

ways that you could encourage foreign countries to adopt legislation that meets international standards for protecting workers, and 

that way the economic advantages of outsourcing work in countries 

that do not honor employment norms will be lessened and the corresponding disadvantage of doing business in the United States 

will be overcome. 

Chairman CHAMBLISS. Ms. Feinstein’s question to you relative to 

prevailing wage, if I understand what you just said, and my underVerDate 0ct 09 2002 15:38 Feb 25, 2004 Jkt 091789 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91789.TXT SJUD4 PsN: CMORC
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standing of L–1, prevailing wage really is irrelevant because we are 

not replacing somebody, if this thing works the way it is supposed 

to work, we are not replacing somebody, so prevailing wage really 

should not be of any import to us. Am I correct in that? 

Mr. BUFFENSTEIN. Precisely, Senator. 

Chairman CHAMBLISS. Obviously, it looks as though what is 

going on is that we have got, from a conceptual standpoint, a program that was needed, probably is still needed to whatever extent 

companies need to bring in highly-skilled people for specific assignments, but we are seeing an abuse of that program, and the practical day-to-day operation of it has affected Ms. Fluno and Ms. 

Verman particularly directly. 

I think what we are going to do, we have a number of bills out 

there now. You all have seen these bills. When you get back and 

you put your feet on the table and have an opportunity to think 

about it, if you want to give us any comments on what you think 

with respect to those bills. My guess is we are going to try to hone 

in on tightening this law up to try to prevent the abuse that somebody like Ms. Fluno is having to go through right now. 

This type of thing really does generate a lot of emotion out of 

politicians especially, because Ms. Fluno’s story is very, very real, 

and there are a lot more of Ms. Flunos out there. You probably 

know a lot more examples about it than we do. 

We are going to make every effort to try to tighten this thing up, 

so we would appreciate any comments any of you have with respect 

to what we might specifically look at it as we move forward. We 

do not want to destroy the whole program. It obviously is a good 

program conceptually and is something that we need to continue, 

but we certainly do need to tighten it up. 

I want to thank all of you for being here today. I know some of 

you have made a very special effort to be here, and we appreciate 

your written as well as your verbal testimony. 

I ask unanimous consent that we keep the record open until 5:00 

o’clock this Friday for any additional information. If any of you 

wish to submit any additional information or any member of the 

Subcommittee wishes to, we will accept it. 

That being the case, we will stand adjourned. Thanks again. 

[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.] 

[Submissions for the record follow.]

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