Today’s guest post is from Eric Carlson. Carlson is a Shanghai-based partner of Covington & Burling LLP. He specializes in anti-corruption compliance and internal investigations, with a particular focus on China and other regions of Asia. He speaks Mandarin and Cantonese and can be contacted here.
In recent years, some 17 settled FCPA enforcement actions involved, in whole or in part, allegations of improper travel benefits to Chinese citizens, often involving leisure travel to the United States.
This post outlines travel restrictions imposed by the Chinese government on its citizens and how companies may inadvertently facilitate leisure travel through visa invitation letters.
Until relatively recently, the Chinese government imposed significant restrictions on Chinese citizens to travel outside of mainland China, including special permissions, health checks, and proof of large cash deposits in a Chinese bank to ensure that the person would return to China. In recent years, those restrictions have relaxed significantly for private citizens. (Many applicants must still return to their hometowns where their household registrations (户口) are located to apply for and renew passports and travel passes for Hong Kong, Macau, and Taiwan.)
For “state functionaries” (国家工作人员 i.e., most government officials, certain senior officers at state-owned enterprises, and certain private personnel serving on government-organized or government-affiliated committees or foundations), the restrictions have been tightened in recent years. This tightening stems from concerns about (1) misuse of public funds for leisure travel, (2) corrupt officials fleeing China with their ill-gotten gains, and (3) national security (i.e., officials with classified information leaving China). While state functionaries typically have a personal passport and an official passport, such state functionaries must obtain preapproval from their agencies in almost all cases, regardless if the travel is for official business (因公出国) or personal (因私出国).
Private Chinese citizens traveling to the United States on business often request the hosting US company to issue a visa invitation letter to support a non-immigrant visa for business or tourism (B-1/B-2). While this letter is generally not a formal requirement, it is often recommended to be included as a supporting document in the visa application package submitted to the US embassy or consulate.
The visiting Chinese citizen will often request a hosting US company to issue such a visa invitation letter on company letterhead. We have advised our clients on a few different factual scenarios:
- The Chinese citizen is traveling to the United States for business and plans to visit the US company, and actually does visit the company during the period described in the letter.
- The Chinese citizen is traveling to the United States for business and plans to visit the US company, but also plans to visit other areas in the United States for business or leisure for periods outside the visit to the US company. (For example, the visitor plans to visit the US company in Houston only on March 21, but wants the invitation letter written to cover March 20-29, as the visitor wants also to visit New York and Los Angeles.) Matters can be further complicated if the visitor decides to cancel the trip to the US company’s offices after the visa letter is received.
- The Chinese citizen is traveling to the United States for business or leisure travel and does not actually plan to visit the US company, but asks for the corporate invitation letter as a “favor.”
We have seen variations of the scenario above in requests to issue invitation letters for accompanying spouses and friends.
While the text of the FCPA, FCPA enforcement actions, and DOJ/SEC guidance do not resolve the question whether a visa invitation is itself “anything of value” under the FCPA, one can imagine the potential compliance risks — real and optical — posed by some of the scenarios above. Accordingly, companies who receive requests for visa invitation letters should consider putting in place processes for the review and approval of such requests.
 Qualcomm (2016), PTC (2016), SciClone (2016), BMS (2015), BHP Billiton (2015), Avon (2014), Bruker (2014), Pfizer (2012), Biomet (2012), IBM (2012), Alliance One (2010), Daimler (2010), UTStarcom (2009), Avery Dennison (2009), Control Components (2009), Siemens (2008), and Lucent (2007).