Contract documents

January 13, 2022

Professional Advisors

Constructing a project in a foreign country can be exciting and full of opportunity.  It can also be fraught with risk.  As such, it is important that a U.S. contractor consult with professionals who can minimize risk, including:  1) an insurance broker who can provide worldwide and any other required coverages; 2) a tax advisor who can advise about tax and withholding impacts on payments from other countries, individual and corporate income taxes associated with visas and work permits, and the tax effects of creating a permanent establishment in a foreign country; and 3) an attorney who can offer counsel about the laws and regulations of the foreign jurisdiction where the project is located.  An attorney can also assist a contractor in meeting any licensing requirements of the foreign jurisdiction.  These professionals should all be consulted prior to commencing work in an overseas jurisdiction.

Entry via Passports, Visas, and Work Permits

Passports: To enter a foreign country for construction work, a U.S. contractor should always be prepared to present its personal and/or business passport.  Prior to traveling, verify that the passport is not nearing its expiration date.

Visas: A foreign country may require documents other than a passport for entry, such as a visa.  The contractor should learn if a visa is needed, the type – such as an entry, work, long stay, or other type – and the length of time for which the visa is valid.  Whether obtaining a business passport or visa from a foreign consulate, a contractor should plan its time accordingly, as there may be many steps involved.  Examples of common types of visas include:

1.      Entry visa – this may be sufficient for a short meeting in the foreign country. Sometimes an entry visa can be obtained upon entering the country, but in many cases, must be obtained months in advance of the foreign travel.

2.      Work visa – an overseas owner may be required to write a letter explaining the nature of the contractor’s work or visit to the country.  (Sometimes the owner is also required to write such a letter for an entry visa.)

3.      Tourist visa – using this for a business trip may be problematic.  A customs official may question such a presentation, causing the contractor to be detained and require assistance from the U.S. Embassy.

There are other rules of traveling to a foreign country to perform work for which a contractor should be aware prior to executing a contract with a foreign owner.  For example, some countries do not admit individuals with a passport stamp from a country with which it does not have diplomatic relations.  Additionally, it may be preferable to enter with a visa rather than a passport, especially in situations of locating a missing person. Guidance on other travel and entry rules can be obtained from the International Trade Administration and the U.S. Treasury.

Work Permits:  Apart from requiring a visa, some countries may require a work permit, which serves a different purpose.  While a business visa typically allows holders to only participate in tasks that are not considered work or gainful employment, a work permit grants holders the ability to perform services that are considered a job or labor.  The definition of what constitutes work or gainful employment varies by country, so a contractor should learn about specific requirements in advance of traveling.

Lastly, a contractor should consider enrolling in the Smart Traveler Enrollment Program (STEP) offered through the Department of State.  This free service allows U.S. citizens and nationals traveling and living abroad to enroll their trip with the nearest U.S. Embassy or Consulate.  More information is available at https://step.state.gov/.  Additionally, the Department of State issues advisories about traveling to foreign countries, which should be reviewed prior to traveling: https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories.html/.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.