Outsourcing: Prepare Now for Anti-Offshoring Laws

By Stephanie Overby , CIO |  Business, outsourcing

Whether any future U.S. jobs bills will contain anti-offshoring measures remains up in the air. But outsourcing customers don't have to wait to protect themselves from potential protectionist legislation.

President Barack Obama emphasized what some see as his anti-offshoring sentiment in his State of the Union address earlier this year, when he reasserted that the U.S. government should terminate tax breaks for American companies that ship jobs overseas and introduce tax advantages for those creating local jobs. (See also, "a href="http://www.cio.com/article/492414/The_Truth_About_Obama_s_Tax_on_Outsourcing_">The Truth About Obama's Tax on Outsourcing.)

It's not just the federal government that has outsourcing customers concerned. Although states can't outright ban offshore outsourcing by a private company, several have enacted or are considering laws to slow the pace offshoring.

Such regulations may come in many forms-from restrictions on the export of personal data to changes in tax law, grants and incentive programs, to various reporting requirements about where work is being done and by whom. Thus far, the state laws that have been enacted have focused on government sourcing, not private transactions.

One way outsourcing customers can protect themselves from anti-offshoring legislation is to modify the "change in laws" provisions that are often included in contracts to address compliance issues. "No consensus has emerged," says George Kimball, an attorney in the San Diego office of Baker and McKenzie."But some contracts now provide for a process of consultation and adjustment that might lead to relocation of operations, equitable adjustment of charges, or in extreme situations, termination if future legislation prohibits, restricts or taxes offshore operations so severely that they cannot practically or economically continue."

Kimball offers this short sample clause:

Originally published on CIO |  Click here to read the original story.
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