On September 12, 1997, the Department of State and the Immigration and Naturalization Service issued regulations governing the Treaty Trader (E-1) and Treaty Investor (E-2) nonimmigrant visa categories. Until now, there have been very few regulations actually covering this visa category. This rule marks the end of an exceptionally long regulatory process that began in August 1991 with the publication by the INS of a proposed rule. Shortly thereafter, the State Department published its own proposed regulation. Though the two proposed rules were supposed to be identical in substance, each agency’s use of differing language led many to conclude that the rules were at odds with each other. The substantial delay in issuing a final rule is apparently the result of the two agencies trying to work through these differences.
Though the new rule is intended to codify existing policy guidelines, there are some important issues addressed.
First, the INS will revise its application form for those changing to E visa status from within the US. The INS will issue a revised Form I-129 that will incorporate the State Department’s OF-156E E Visa Supplemental Application Form. Until that new form is issued, the INS will continue to use the existing I-129 and E visa supplement.
Second, INS and DOS refused to follow a comment’s suggestion that the long-standing regulation that an employer hold E visa status or, if not in the US, to be so classifiable in order for an employee to qualify for E status. According to the INS, to allow an owner who is another nonimmigrant classification or in another status would be contrary to the statute. Since employees derive their status from the employer, the employer must have the same visa classification.
Third, the INS and DOS have addressed the complaint that determining corporation “nationality” based on the nationality of the majority of shareholders is impractical for some large companies that do not have this information available. Some commenters suggested that the place of incorporation should control. The INS and State Department did not buy this argument stating that “nationality of enterprises based on ownership captures the essence of the statute and the bilateral relationship.” Further, this might encourage people to set up a corporation in a treaty country in order to get a visa even though the only connection to the country is on paper. A limited exception has been created in the regulation for large, multi-national corporations that are unable to determine ownership by stock ownership. Those firms who trade their stock exclusively in the country of incorporation may be presumed to have the nationality of the location of the exchange.
Fourth, the definition of trade for E-1 purposes has been expanded to include “business commitments” instead of just successfully completed transaction. Thus, new firms may have an easier time demonstrating substantial trade even if they have not yet completed a large number of transactions. However, the State Department is clear to point out that transactions which are merely in the state of negotiation do not by themselves constitute trade.
Fifth, the regulation now includes the concept that for smaller businesses, income derived from international trade which is sufficient to support the treaty trader and his or her family should be considered to be a favorable factor when addressing the substantiality of trade in a particular case.
Sixth, the long held policy of allowing the use of mechanisms like escrow accounts to protect treaty investors if a visa is not issued was codified even though the law requires a “irrevocable commitment” for the issuance of an E-2 visa.
Seventh, the INS and State Department will now determine whether an investment is substantial by using inverted sliding scale test – that is, the lower the total cost of the enterprise, the higher, proportionately, the investment must be. Examples will be provided in the Foreign Affairs Manual. The new rule states that a substantial amount of capital constitutes that amount if
- it is substantial in the proportional sense (i.e. in relation to the total cost of either purchasing an established enterprise or creating the type of enterprise under consideration)
- it is sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise; and
- it is of a magnitude to support the likelihood that the investor will successfully develop and direct the enterprise.
Eighth, representatives of news gathering organizations may now apply for E-1 Treaty Trader status but only after attempting to seek I visa classification.
Ninth, the final rule rejected a commenter’s argument that loans that are secured by the assets of the investment enterprise should count toward the determination of a substantial investment. According to DOS and INS, the risk should be “exclusively on the shoulders of the investor” and such risk would be diluted if the assets of the business itself could be used as collateral. Loans are acceptable, but only if the investor is personally liable.
Tenth, the proposed rule that would have deemed research facilities and market research operations ineligible for E classification because the investment would be too speculative has been modified and such investments can be approved. However, investments in non-profit enterprises still will not qualify.
Eleventh, the new rule modifies the term “marginality” to incorporate the traditional notion that an enterprise must have the present OR FUTURE capacity to generate more than enough income to provide a minimal living for the treaty investor and his or her family. The concept of future capacity is new, though the projected future capacity should be realizable within five years from the date the alien commences normal business activities.
Twelfth, the new rule states that an individual must be in a position to “develop and direct” the enterprise by owning at least 50% of the business or by having operational control through a managerial position or other corporate device or through other means.
Thirteenth, the new rule states that in addition to executives, employees having supervisory (as opposed to the previous notion of managerial) duties and employees that have “special qualifications that make the services to be rendered to the efficient operation of the enterprise” may get E visa status. “Special qualifications” are those skills and or aptitudes that an employee in a lesser capacity brings to a position or role that are essential to the successful or efficient operation of the enterprise. Whether the skills are essential is determined by assessing
- the degree of proven expertise of the alien,
- the uniqueness of the specific skill or aptitude and whether such skills are “commonplace” or readily available,
- the length of experience and/or training with the firm
- the period of training or other experience necessary to perform effectively the projected duties, and
- the salary the special qualifications can command
Special qualifications are to be determined on a case-by-case basis and failure to meet each of the above criteria will not necessarily mean one will be denied. Further, special qualification will be re-evaluated at each visa application since some skills are essential only in the short-term.
Fourteenth, the new INS regulations create a two year period for an initial admission and an unlimited number of two year extensions.
Finally, new rules have been added to clarify NAFTA’s strike provisions by stating that Mexicans and Canadians are not entitled to E visa status if there is a strike or lockout in the alien’s job category in the place of intended employment AND the alien fails to show that his or her entry will not adversely affect the settlement of the strike or lockout.
Disclaimer: This newsletter is provided as a public service and not intended to establish an attorney client relationship. Any reliance on information contained herein is taken at your own risk. The information provided in this article has not been updated since its original posting and you should not rely on it until you consult counsel to determine if the content is still valid. We keep older articles online because it helps in the understanding of the development of immigration law.