Tariffs, immigration policies create headwinds
By Richard Westlund
For many South Florida businesses, U.S. tariff and immigration policies are creating serious challenges in the coming year. But the changing international geopolitical and economic landscape is also opening the door to new opportunities, according to leading attorneys. Here is a look at the 2019 outlook for four vital aspects of South Florida’s diverse international sector.
Shifting trade lanes
Higher U.S. tariffs on imports from China, may shift some manufacturing and assembly operations to Southeast Asia, Central America and Mexico, says Lenny P. Feldman, managing member of the Miami of Sandler, Travis, & Rosenberg, P.A. “I think we will see shifts in the trade lanes away from China in 2019,” he says. “That could mean some of those operations will move back into South Florida’s back yard.”
However, China’s retaliatory tariffs on U.S. goods have put some South Florida exporters in a difficult position. For example, U.S. lobsters harvested in the Florida Keys now face 25 percent tariffs, and Chinese seafood distributors will be looking at sources in other countries, Feldman says.
Electronics is another sector where imports from China will be affected by higher tariffs and duties.
“It’s possible that some Chinese products transiting South Florida for the Caribbean or Latin America could escape those duties,” Feldman said. “However, they would need to be moved in sealed containers and held in bonded-facilities.”
Meanwhile, China is still looking to expand its role in Latin America, including project finance, as well as looking at lower-cost manufacturing facilities in Africa. “It’s a global market, and U.S. and international companies are always looking for sourcing opportunities to improve the bottom line,” Feldman says.
E-commerce is another trend that is affecting the region’s logistics and trade community by making it easier to ship smaller parcels directly to consumers and businesses, rather than relying on large containers unloaded at seaports. This can result in substantial cost savings to both shippers and purchasers, Feldman says.
“I see South Florida as the flourishing ecommerce hub of the Americas,” Feldman said. “While it comes to international air freight to Latin America, Miami International Airport (MIA) is on the top. We will see how that trend plays out in 2019, especially if the regulatory framework catches up with technology.”
Banking and finance
South Florida is a powerful magnet for international financial services companies, according to Carlos Loumiet, a partner with Nelson Mullins in Miami. “We are seeing a huge number of institutions flocking to South Florida, including hedge funds, private equity companies and broker-dealers,” he says.
But it is difficult today for international banks to open offices here because of the high level of U.S. supervision now required, Loumiet adds. Nonetheless, several banks in Spain, Chile and Brazil have been able to expand their presence here.
Loumiet, who has advised business and financial clients for more than 40 years, says the current banking environment bears some resemblances to the early 1980s when domestic banks were prohibited from crossing state lines. “At that time, we saw the money center banks opening Edge Act offices, mortgage companies and other subsidiaries in South Florida,” he says. “When interstate banking was approved, it took away the driving force behind many of those operations.”
In 2019, South Florida will become an even more important international financial center for the accumulation and management of money, Loumiet says. “Private banking, family offices and foundations are thriving, creating opportunities for legal, tax and financial professionals to provide support services,” he says. “The 2017 tax reform legislation will also provide a boost as individuals and firms consider moving from high-cost tax environments. “With modern technology, South Florida is a convenient and logical place to conduct financial operations domestically and internationally,” Loumiet says.
From complex cross-border transactions to international mergers and acquisitions (M&A), more multinational companies are engaging South Florida law firms. It’s a trend likely to continue in the next few years, according to Francisco J. Cerezo, a partner and the U.S. Head, Latin America Corporate, at DLA Piper in Miami.
“Every year more national and global law firms plant their flags in Miami as a cornerstone in their international practice areas,” he says. “Now, clients from Latin America and other locations around the world are looking at Miami as the first stop for legal services, rather than flying directly to New York.”
Cerezo sees three types of international practices that are gaining particular traction here in South Florida, beginning with arbitration.
“Twenty years ago, the dispute mechanism for a stock purchase agreement would likely have been New York or Europe,” he said. “Now, it is increasing accepted that cross-border arbitration matters can be handled effectively and efficiently in Miami.”
Another growth sector is federal financial compliance and enforcement matters, which have tended to be handled by firms’ New York and Washington, D.C., offices, Cerezo said. However, an increasing number of Foreign Corrupt Practice Act (FCPA) and tax-related matters are being driven by South Florida attorneys who are familiar with jurisdictions in the Caribbean and Latin America.
“Clients are also more comfortable arranging their M&A deals here in Miami,” Cerezo says. “Rather than think of South Florida as a vacation destination, it’s now seen as a place to do serious business, and that will be an important trend in the coming year.”
Overall, Cerezo expects an increase in 2019 in the volume of international business transactions in South Florida.
“Regardless of U.S. politics, all the indicators point to greater activity,” he says. “Some Latin American economies like Colombia are doing well, creating more interest in inbound and outbound transactions. Others countries like Venezuela are in serious economic distress. But as the business hub for Latin America, Miami tends to benefit from both booms and difficult times in other countries.”
Multinational professional talent
Stringent U.S. immigration policies and practices are making it more difficult for South Florida multinationals to bring in professional and executive talent. “When it comes to international staffing and retention, all bets are off,” says Jorge R. Lopez, shareholder and chair of the Global Mobility and Immigration Practice Group at Littler in Miami. “Multinationals today find it’s almost impossible to avoid the visa issue,” Lopez says.
For example, last year U.S. immigration authorities started asking a majority of professional visa applicants for a “request for evidence” if they need clarification or feel there might be a problem, says Lopez, who is board certified in immigration and nationality law. “In addition, denial rates have more than doubled,” he added.
Companies seeking international executives and professionals also need to plan for longer timeframes at every step of the way. That might mean months for the adjudication of a visa application rather than a few weeks, as in the past, Lopez said.
The challenging immigration environment isn’t likely to change in 2019—a situation that poses particular problems for South Florida startups and smaller businesses, Lopez says. “Larger companies have more resources as well as more options available,” he added. “If a multinational can’t bring someone into the States, for instance, he could be assigned to a London office.”
But visas aren’t the only immigration challenge facing South Florida employers in the coming year. They also need to be prepared for a federal investigation or tax form I-9 audit seeking to find undocumented aliens in the workplace. In 2017, there were about 1,700 reviews of I-9 documents nationwide, but Lopez expects the number to rise to more than 6,000 in 2018 and as many as 15,000 in 2019.
“We are seeing fines and penalties increasing across the board, mostly due to paperwork issues rather than trying to skirt the law,” Lopez says. “You have to be careful as an employer to stay on top of your documentation and avoid civil and criminal penalties.” •