Committee on Foreign Investment in the United States: General Overview

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In 1988, the United States Congress enacted the Exon–Florio Amendment to authorize the executive branch’s review foreign investment within the United States. The amendment was passed into law under the Omnibus Trade and Competitiveness Act of 1988 and amended Section 721 of Defense Production Act of 1950. Generally, pursuant to this provision the President of the United States may block any foreign investments that may pose a threat to national security.

As a direct result of this law, President Reagan delegated the process of reviewing foreign investments to the Committee on Foreign Investment in the United States (commonly known under its acronym “CFIUS”).

CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States. As mentioned above, CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (FINSA) (section 721) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800.

CFIUS review consists of a fairly complicated process, which has been the subject of significant reforms over the past several years (including numerous improvements in internal CFIUS procedures, enactment of FINSA in July 2007, amendment of Executive Order 11858 in January 2008, revision of the CFIUS regulations in November 2008, and publication of guidance on CFIUS’s national security considerations in December 2008).

CFIUS review can result from a voluntary notification by a domestic firm that is being acquired by a foreign firm or it can result from CFIUS’ own initiative. CFIUS reviews begin with a 30-day decision to authorize a transaction or begin a statutory investigation. If the latter is chosen, the committee has another 45 days to decide whether to permit the acquisition or order divestment.

While, most transactions submitted to CFIUS were approved without the statutory investigation, others were investigated by CFIUS. In some cases, CFIUS investigation had a material impact on proposed acquisitions.

CPT (Carriage Paid To)

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The purpose of this article is provide a general background to one of the most important terms in international contract drafting, Incoterms 2010 CPT.

General Provisions of CPT

CPT (Carriage Paid To) means that the seller delivers the goods to the carrier of another person nominated by the seller at an agreed place and that the seller must contract and pay the costs of carriage necessary to bring the goods to the named place of destination.  This means that the seller fulfils his obligation to deliver at the point when he hands the goods over to the carrier, not when the goods reach the place of destination.

The most important issue here is to understand that the risk and costs are transferred at different places. The risk passes to the buyer at the point of delivery to the carrier, whereas the costs are covered by the seller up to the agreed place of destination.  This is why It is crucial for the parties to identify as precisely as possible in the contract both the place of deliver and the place of destination.

What if several carriers are used for the carriage to the agreed destination point and the parties failed to agree on a specific point of delivery?  The default position under the Incoterms rules is that the risk passes when the goods have been delivered to the first carrier at the place that the seller chooses (i.e. buyer has no control).   In order to override the default rule, the parties must specify in their contract the stage or place at which the risk should pass to the buyer.

Also, note that if the seller incurs costs under his contract of carriage related to unloading at the named place of destination, the seller cannot recover such costs form the buyer (unless otherwise agreed between the parties).

Seller’s Export Clearance Obligations

CPT requires the seller to clear the goods for export, but not import (including any import duty or paperwork).  The export clearance obligation means that the seller will have to obtain, at his own risk and expense, any export license and carry out all custom formalities necessary for the export of the goods as well as for their transport through any country prior to the point of delivery.

Seller is Obligated to Procure the Carriage Contract, but Not Insurance

While the seller is obligated to procure a contract for the carriage of the goods from the agreed point of delivery to the named place of destination at his own expense, no such obligation for the insurance contract exists.  The seller is not obligated to make a contract of insurance, but the seller must provide the buyer, at the buyer’s request (as well as the buyer’s risk and expense) with information that the buyer needs for obtaining insurance.

Other Seller’s Obligations

In addition to the obligations above, Incoterms 2010 spell out other obligations of the seller under the CPT, such as: delivery obligations, allocation of costs, notices to the buyers, delivery documents, packaging, assistance with information, et cetera.

Let’s look now at the buyer’s obligations.

Buyer’s Obligation to Pay

The buyer’s first and foremost obligation is to pay the price of the goods as provided in the contract of sale.

Buyer’s Import Clearance Obligations

One of the other principal obligations of the buyer is to obtain, at its own risk and expense, any import license or other official authorization and carry out all customs formalities for the import of the goods.

The buyer must also ensure that everything is done in order for the goods to pass through any third country after they have been shipped from the seller’s country.  The chief exception is if such obligation is for the seller’s account under the contract of carriage.

Other Buyer’s Obligations

In addition to the obligation’s above, Incoterms 2010 set forth other important obligations of the buyer under the CPT, including: taking delivery, inspection of goods, notices to the seller, assistance with information and other obligations.   Some of these obligations may have important consequences with respect to the allocation of costs and transfer of risk under the CPT.

Contact Sherayzen Law Office NOW for Help with International Contracts

Obviously, the article above only gives some broad background information on CPT and should not be relied upon to make a legal determination in your particular situation.  Rather, if you are about to engage in a transaction involving an international delivery of goods, contact Sherayzen Law Office for legal help.  Our experienced international contract firm can assist you at every stage of your contract: negotiation, drafting and enforcement. We will provide a rigorous representation of your interests, protect your contractual rights, and strive to ensure that the contemplated transaction goes as smoothly as planned.

Baindurashvili v. Helpful Hands Transportation, Inc., No. A11-60, Unpub. (Minn. Ct. App. 11/21/2011) (A case recently won by Sherayzen Law Office)

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This is a copy of the Minnesota Court of Appeals unpublished opinion in the case recently won by Mr. Eugene Sherayzen, the owner of Sherayzen Law Office, on November 21, 2011.

 

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2010).

STATE OF MINNESOTA
IN COURT OF APPEALS
A11-60

Avtandil Baindurashvili,
Respondent,

Vyacheslav Kirkov,
Respondent,

vs.

Helpful Hands Transportation, Inc.,
Relator,

Department of Employment and Economic Development,
Respondent.

Filed November 21, 2011
Reversed and remanded
Kalitowski, Judge

Department of Employment and Economic Development
File Nos. 25886858-3, 26006922-4

Avtandil Baindurashvili, Crystal, Minnesota (pro se respondent)

Vyacheslav Kirkov, Burnsville, Minnesota (pro se respondent)

Eugene A. Sherayzen, Minneapolis, Minnesota (for relator)

Lee B. Nelson, Amy R. Lawler, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent Department of Employment and Economic Development)

Considered and decided by Stoneburner, Presiding Judge; Kalitowski, Judge; and
Peterson, Judge.

U N P U B L I S H E D   O P I N I O N

KALITOWSKI, Judge

In this certiorari appeal, relator transportation company challenges the determination by an unemployment-law judge (ULJ) that respondents, drivers who transported patients for relator, were employees rather than independent contractors and accordingly were eligible for benefits under the unemployment-benefits laws.  Relator argues:  (1) the ULJ’s findings do not support a determination that respondents were employees; (2) the ULJ erred by failing to follow the structural framework set forth in Minn. R. 3315.0555 (2009); and (3) the ULJ’s decision was arbitrary and capricious.  Because the ULJ made findings that are inconsistent with a determination of employee status and failed to follow the analytic structure of Minn. R. 3315.0555, we reverse and remand.

D E C I S I O N

Respondents Avtandil Baindurashvili and Vyacheslav Kirkov worked as drivers for  relator Helpful Hands Transportation, Inc. (Helpful Hands) from 2003 and 2007, respectively, until June 2010.  Helpful Hands contracts with insurance companies to provide nonemergency medical transportation and hires drivers to transport patients. Prior to 2009, Helpful Hands classified drivers as employees.  In April 2009, Helpful Hands began to treat drivers as independent contractors.

Baindurashvili and Kirkov applied for unemployment benefits after their separations from Helpful Hands.  Respondent Department of Employment and Economic Development (DEED) conducted an audit and determined that the drivers were employees for purposes of unemployment-benefits law.  Helpful Hands appealed the determinations and the matters were consolidated for a telephone hearing before the ULJ. The ULJ determined that Baindurashvili and Kirkov were employees of Helpful Hands.

Employers must contribute to the unemployment trust fund based on wages paid to employees.  See Minn. Stat. § 268.035, subd. 25 (2010).  But payments to independent contractors do not constitute wages under Minnesota unemployment law.  Nicollet Hotel
Co. v. Christgau, 230 Minn. 67, 68, 40 N.W.2d 622, 622-23 (1950).

Whether an individual is an employee or an independent contractor is a mixed question of law and fact.  Nelson v. Levy, 796 N.W.2d 336, 339 (Minn. App. 2011).  This court reviews a ULJ’s factual findings in the light most favorable to the decision and will not disturb them if sustained by substantial evidence.   Skarhus v. Davanni’s Inc., 721 N.W.2d 340, 344 (Minn. App. 2006).   Questions of law are reviewed de novo.  Ywswf v. Teleplan Wireless Servs., Inc., 726 N.W.2d 525, 529 (Minn. App. 2007).

Five factors are used to determine whether a worker is an employee or an independent contractor:  “(1) The right to control the means and manner of performance; (2) the mode of payment; (3) the furnishing of material or tools; (4) the control of the premises where the work is done; and (5) the right of the employer to discharge.”  Guhlke v. Roberts Truck Lines, 268 Minn. 141, 143, 128 N.W.2d 324, 326 (1964) (codified at Minn. R. 3315.0555, subp. 1).  Of these five factors, the two most important are “the right or the lack of the right to control the means and manner of performance,” and the right or the lack of the right “to discharge the worker without incurring liability.”  Minn. R. 3315.0555, subp. 1.   Subpart 3 sets forth  criteria to be considered when evaluating whether the right to control the means and manner of performance exists.  Minn. R. 3315.0555, subp. 3.  Subpart 2  provides additional factors that may be considered if analysis of the five essential factors is inconclusive.  Minn. R. 3315.0555, subp. 2.

Helpful Hands argues that the ULJ’s findings of fact as to the issue of control are contradictory and  inconsistent with his  ultimate conclusion  that the drivers are employees.  We agree.  The ULJ found,

A  driver, usually the driver in the most convenient location who is available, is contacted the day the service is needed and asked if he is able and willing to accept the assignment. If the driver declines, another driver is contacted. . . . [Helpful Hands] does not dictate how a driver does his job or what  route is driven and it does not require drivers to work specific hours.

The ULJ concluded, “ultimately there is little if any control to be had over how the actual transport is conducted.”  These findings suggest that Helpful Hands did not retain the right to control the drivers’ means and manner of performance and tend to support
independent-contractor status.

The ULJ did make other findings of fact that weigh in favor of employee status. But if the ULJ determined that other factors in the  Minn. R. 3315.0555 analysis outweighed these findings on the issue of control, explanation was necessary.  Because the ULJ failed to set forth  such  analysis, we are unable to review  the decision to determine whether it is supported by substantial evidence.   See Minn. Stat. § 268.105, subd. 7(d) (2010) (providing that this court may reverse or modify the decision of a ULJ if a party has been prejudiced by findings, inferences, conclusions or decisions that are unsupported by substantial evidence in view of the entire record as submitted).

We do not suggest that all factual findings relating to the factors in Minn. R. 3315.0555 must support the final determination of worker status.  Indeed, the various factors may  tend to support either determination and may be inconsistent with one another.  See St. Croix Sensory, Inc. v. Dep’t of Emp’t & Econ. Dev., 785 N.W.2d 796, 800-04 (Minn. App. 2010) (finding that some factors indicated control and an employment relationship, while others indicated a lack of control and an independentcontractor relationship, and holding that on the totality of the circumstances the workers were independent contractors).   But there must be a logical link between the findings on the important factor of the right to control the means and manner of performance and the ultimate conclusion.

Helpful Hands next argues that the ULJ failed to follow the analytic framework set forth in Minn. R. 3315.0555.  We agree.  The ULJ determined that analysis of two of the essential factors—the right to control the means and manner of performance and the right to discharge without incurring liability—was inconclusive but did not make a finding as to whether analysis of all five essential factors was inconclusive before addressing the additional factors.  See Minn. R. 3315.0555, subp. 1 (providing that if the five essential factors of subpart 1 are inconclusive, the additional factors of subpart 2 should be considered).  The ULJ also considered certain subpart 3 criteria as stand-alone factors and thus did not properly weigh them in his analysis of control of the means and manner of performance.  See id. at subp. 3 (setting forth “criteria for determining if the employer has control over the method of performing or executing services”).

Finally, Helpful Hands contends that the ULJ’s decision is arbitrary and capricious because the ULJ relied on a factor—the importance of the worker to the company—that is not included in Minn. R. 3315.0555.  We disagree.  An agency ruling is arbitrary and capricious if the agency relied on factors not intended by the legislature.   Citizens Advocating Responsible Dev. v. Kandiyohi Cnty. Bd. of Comm’rs, 713 N.W.2d 817, 832 (Minn. 2006).  The ULJ’s discussion of the importance of the drivers to Helpful Hands’s business informed the ULJ’s analysis of whether the workers’ activity was performed in the course of the employer’s business.  Minn. R. 3315.0555, subp. 2H includes whether services are performed in the course of the employer’s business as an additional factor in the worker-status analysis, and provides,  “services  which  are a part or process of the employer’s trade or business are generally performed by individuals in employment. . . . Process refers to those services which directly carry out the fundamental purposes for which the organization, trade, or business exists . . . .”  The ULJ’s consideration of the importance of the drivers to the company did not depart from the rule and was  not arbitrary and capricious.

In conclusion, we reverse and remand for findings of fact and conclusions of law consistent with this opinion in such proceedings as the ULJ deems appropriate.

Reversed and remanded.

Eugene Sherayzen, Esq. Wins a Minnesota Court of Appeals Case

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On November 21, 2011, the Minnesota Court of Appeals ruled in favor of Helpful Hands Transportation, Inc. (HHT) – the client of Sherayzen Law Office – and reversed the unemployment law judge’s (ULJ) determination that HHT’s workers should be classified as employees. Judge Kalitowski wrote the opinion.  Two respondents were listed as “pro se”, but the opinion of the ULJ was defended by Minnesota Attorney General’s Office on behalf of the Department of Employment and Economic Security (DEED). Mr. Eugene Sherayzen represented our client throughout the case.

At the center of the issue was whether the ULJ erred in its determination that HHT’s workers were employees.  Mr. Sherayzen’s chief arguments were: (1) the ULJ’s factual findings are inconsistent with his legal conclusion, and (2) the ULJ failed to follow the analytical framework of Minnesota Rule 3315.0555.   The Court of Appeals agreed with both arguments and reversed the decision.

A copy of the court opinion will be posted on our website later.

Contact Sherayzen Law Office For Appellate Litigation

If you have a case that you wish to appeal to the Minnesota Office of Administrative Appeals, Minnesota Court of Appeals or Minnesota Supreme Court, contact Sherayzen Law Office.  Our experienced appellate tax firm will assist you in filing the case, constructing efficacious legal arguments, drafting compelling legal briefs,  and zealously representing your interests in applicable courts.

Limited Liability Limited Partnerships

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A Limited Liability Limited Partnership (LLLP) is a relatively recent modification of a traditional limited partnership, and about half of the states in the U.S. have adopted statutes for their formation. In this article, I will highlight some of the most prominent features of the LLLPs.

As I already mentioned above, LLLPs are a modification of limited partnerships. By definition, limited partnerships consist of one or more general partners, and one or more limited partners. In a standard limited partnership, the general partners have joint and several liability for the debts and obligations of the limited partnership, whereas limited partners will not have such liability for these debts and obligations beyond any amount of their capital contributions.

In contrast, in an LLLP, general partners will also have limited liability for the debts and obligations of the limited partnership that arise during the time that the LLLP form is elected. Thus, general partners in an LLLP may have significantly less liability, and are not likely to be personally liable for the debts and obligations of the partnership; rather, the liability of a general partner is limited to the amount of his capital contribution.

Despite the differences in the liability, LLLPs are usually managed in a manner similar to the LPs – in an LLLP, general partners usually manage the partnership, while limited partners only have a financial interest. Similarly, tax-wise, an LLLP election has no effect on the pass-through taxation aspects of a partnership.

As noted above, only about half the states allow for an LLLP form; therefore, you need to check your local statutes to see if you have an option to make such an election. In practice, LLLPs are often formed by converting existing limited partnerships into such a form (in order to take advantage of the benefits of an LLLP).

Contact Sherayzen Law Office NOW For Legal and Tax Help With Partnerships

Forming partnerships, LLPs, LLLPs, and other similar business entities involve complex issues, and often legal issues arise that necessitate experienced planning beyond merely the formation of an entity. This article only attempts to provide a general background information that should not be relied upon in making the determination of your specific situation. Please contact Sherayzen Law Office for legal help with this issue. Our experienced business firm will guide you through the complex web of rules concerning business partnerships and their various forms (general, LPs, LLLPs, et cetera).