India has filed a complaint against the United States in the World Trade Organization alleging that a recent U.S. law that increases H-1B and L-1B visa fees for certain employers violates international trade agreements.

The new fees were passed by Congress in December under an omnibus budget bill and affect certain employers sponsoring high-skilled foreign workers on temporary U.S. visas. Specifically, employers whose workforce comprises 50 or more U.S. employees of whom more than half are H-1B or L-1 workers must pay $4,000 for each H-1B petition and $4,500 for each L-1 petition. The new fees apply to initial petitions as well as extensions and amount to a doubling of previous fees.

The complaint, filed Thursday, formally initiates dispute proceedings, and India and the U.S. now have 60 days to reach an agreement. If they cannot agree, India may request that a WTO panel decide the matter.

India claims that the fee hikes are inconsistent with U.S. obligations under the 1995 General Agreement on Trade in Services (GATS), a key agreement that binds members of the WTO and requires members to liberalize trade in services by not impeding international movement of individuals and entities. Exceptions apply if a country imposes restrictive measures to ensure compliance with immigration laws or to prevent deception or fraud. This agreement encompasses employees of foreign-owned businesses, but whether it also covers foreign employees of domestic companies remains unclear.

If India and the U.S. do not settle the matter and the visa fees are found to violate the GATS, the WTO may recommend that the U.S. change the fees to comply with the GATS. If the U.S. does not comply, India may then seek permission from the WTO to impose retaliatory measures against the U.S.

BAL Analysis: The new H-1B and L-1 fees face a serious risk of being found inconsistent with the GATS if they do not fall under an exception to GATS and are found to be high enough to restrict trade in services. In 2010, BAL provided legal analysis to a report by the National Foundation for American Policy predicting that proposals to significantly raise H-1B and L-1 fees (at that time, fees of $10,000 to $50,000 were proposed) would be “highly vulnerable to challenge from WTO members whose companies use H-1B and L-1 visas to perform services in the U.S.,” and could lead to retaliation against U.S. companies. In addition, the report concluded that several additional proposals to restrict H-1B and L-1 visas had a “significant likelihood of being found inconsistent with U.S. commitments under GATS.” Some of those provisions have been reintroduced in current pending legislation. The full report by the National Foundation for American Policy may be viewed here.

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