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Latest Anti-Offshore Outsourcing Bill Dies in the Senate

Senate Bill 3816, called the "Creating American Jobs and Ending Offshoring Act," was introduced on September 21 by several Democrats and would have provided tax breaks to companies that bring jobs back to the U.S. from abroad, and would have ended some tax breaks for U.S. companies that move operations overseas and import their products for sale in the U.S. However, a week later the bill failed to obtain the number of votes required to bring it to the floor for a full debate, and the Senate adjourned shortly thereafter to focus on mid-term elections. Although Democrats claimed that they were responding to voter concern regarding the impact of outsourcing on the state of the economy (as evidenced in recent nation-wide polls), Republicans criticized the bill as a political ploy targeted at garnering votes during the upcoming election season.

Senate Bill 3816 comes right on the heels of the enactment of a law that significantly raises the fees for H-1B and L visa applications for the next four years. (We summarized this bill in a recent client alert.) H-1B and L visas are heavily relied on by many of India's largest outsourcing companies as one of the very few means of bringing skilled foreign talent into the U.S. to work on client projects, and the Indian outsourcing community immediately criticized the U.S. for enacting the law. About a month after enactment of this new law, U.S. Trade Representative Ron Kirk met with India's Minister of Commerce and Industry to discuss the law as well as other recent developments affecting international trade and jobs.

The State of Ohio has also recently entered the anti-offshoring fray. In August, Ohio's governor Ted Strickland signed an executive order that prohibits the spending of public funds for services provided offshore. Ohio already had in place procurement procedures that restrict the purchase of offshore services, but the executive order was designed to extend these restrictions to funds obtained from any and all sources, including federal stimulus grants which had apparently been used to purchase services from a domestic company which provided some of those services offshore. As with the Senate bill, critics of the executive order claim that Governor Strickland is merely taking steps to secure his reelection this year in a state that has been particularly impacted by the economic downturn.

Whatever the rationale for the string of recent anti-offshoring sentiment within our federal and state governments, it appears that, unlike during prior election seasons, these concerns will survive long after November.

This client alert is a publication of Loeb & Loeb LLP and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.

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