Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 48149

(C) Has not abandoned his or her

extension request.

(ii) With limited exceptions, it is

presumed that employees of treaty

enterprises with special qualifications

who are responsible for start-up

operations should be able to complete

their objectives within 2 years. Absent

special circumstances, therefore, such

employees will not be eligible to obtain

an extension of stay.

(iii) Subject to paragraph (e)(5) of this

section and the presumption noted in

paragraph (e)(22)(ii) of this section,

there is no specified number of

extensions of stay that a treaty trader or

treaty investor may be granted.

(21) Change of nonimigrant status. (i)

An alien in another valid nonimmigrant

status may apply for change of status to

E classification by filing an application

for change of status on Form I–129 and

E Supplement, with required

accompanying documents establishing

eligibility for a change of status and E

classification, in accordance with 8 CFR

part 248 and the instructions on Form

I–129 and E Supplement.

(ii) The spouse or minor children of

an applicant seeking a change of status

to that of treaty trader or treaty investor

alien shall file concurrent applications

for change of status to derivative treaty

classification on the appropriate Service

form. Applications for derivative treaty

status shall:

(A) Be approved only if the principal

treaty alien is granted treaty alien status

and continues to maintain that status;

(B) Be approved for the period of

admission authorized in paragraph

(e)(20) of this section.

(22) Denial of treaty trader or treaty

investor status to citizens of Canada or

Mexico in the case of certain labor

disputes. (i) A citizen of Canada or

Mexico may be denied E treaty trader or

treaty investor status as described in

section 101(a)(15)(E) of the Act and

section B of Annex 1603 of the NAFTA

if:

(A) The Secretary of Labor certifies to,

or otherwise informs, the Commissioner

that a strike or other labor dispute

involving a work stoppage of workers is

in progress at the place where the alien

is or intends to be employed; and

(B) Temporary entry of that alien may

adversely affect either:

(1) The settlement of any labor

dispute that is in progress at the place

or intended place of employment, or

(2) The employment of any person

who is involved in such dispute.

(ii) If the alien has already

commenced employment in the United

States and is participating in a strike or

other labor dispute involving a work

stoppage of workers, whether or not

such strike or other labor dispute has

been certified by the Department of

Labor, the alien shall not be deemed to

be failing to maintain his or her status

solely on account of past, present, or

future participation in a strike or other

labor dispute involving a work stoppage

of workers, but is subject to the

following terms and conditions:

(A) The alien shall remain subject to

all applicable provisions of the Act and

regulations applicable to all other E

nomimmigrants; and

(B) The status and authorized period

of stay of such an alien is not modified

or extended in any way by virtue of his

or her participation in a strike or other

labor dispute involving a work stoppage

of workers.

(iii) Although participation by an E

nonimmigrant alien in a strike or other

labor dispute involving a work stoppage

of workers will not constitute a ground

for deportation, any alien who violates

his or her status or who remains in the

United States after his or her authorized

period of stay has expired will be

subject to deportation.

* * * * *

Dated: March 17, 1997.

Doris Meissner,

Commissioner, Immigration and

Naturalization Service.

[FR Doc. 97–22314 Filed 9–11–97; 8:45 am]

BILLING CODE 4410–10–M

DEPARTMENT OF STATE

Bureau of Consular Affairs

22 CFR Part 41

[Public Notice 2594]

Visas: Documentation of

Nonimmigrants Under the Immigration

and Nationality Act, as Amended;

Business and Media Visas; Treaty

Trader and Treaty Investors

AGENCY: Bureau of Consular Affairs,

State Department.

ACTION: Final rule.

SUMMARY: This rule amends the

nonimmigrant visa regulations, by

adding a definition of the term

‘‘substantial’’ to section 41.51 in order

to implement the provisions of section

204(c) of Pub. L. 101–649. This rule

adds a new section 101(a)(45) to the

Immigration and Nationality Act (INA)

for purposes of defining this term as

used in section 101(a)(15)(E) of the INA.

Furthermore, this rule incorporates into

regulation the underlying principles of

the treaty trader/treaty investor visa

classification which have been

published in the form of interpretive

note material in Volume 9 of the State

Department’s Foreign Affairs Manual.

EFFECTIVE DATE: November 12, 1997.

FOR FURTHER INFORMATION CONTACT:

Stephen K. Fischel, Director,

Legislation, Regulations and Advisory

Assistance, 202–663–1184.

SUPPLEMENTARY INFORMATION: Public

Notice 1468 at 56 FR 43565, September

3, 1991, proposed adding regulations to

title 22, part 41, Code of the Federal

Regulations. The proposed regulations

were required to implement the

provisions of section 204(c) of the

Immigration Act of 1990, Pub. L. 104–

649 which requires the Secretary of

State to promulgate a regulatory

definition of the term ‘‘substantial’’ after

consultation with the appropriate

agencies of the United States

Government. The proposal was

discussed in detail in Notice 1468, as

were the Department’s reasons for the

regulations. The Department received 14

timely comments in responds to the

Notice of Proposed Rulemaking.

Analysis of Comments

General Comment

The Department’s proposed rule and

the Immigration and Naturalization

Service’s proposed rule on the treaty

visa classification were published

within a few days of each other.

Although the rules were intended to be

identical in substance, each agency

selected different language to articulate

its rules. This difference in language led

readers to reach the unintended

conclusion that the rules were

substantively different if not at odds

with each other in a few critical ways.

Many commenters expressed their

concern about the apparent differences

in two ways. First, commenters

requested that the agencies work

together to publish rules that were

clearly identical in substance. The

agencies certainly recognize the need for

one set of principles to administer the

law and have worked together to

achieve that goal. Furthermore,

commenters suggested that, since the

Department of State has the greatest

amount of experience in administering

treaty trader/investors visa rules, and

since INS has been deferring to the

Department of State’s regulations and

interpretations, the INS should continue

to defer to the Department and to apply

the Department’s regulations. Such

deference, it was suggested, could

involve the specific reference, in the

Immigration and Naturalization Service

(Service) regulations, to the Department

of State’s regulations, or the publication

of the Department’s entire treaty visa
48150 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

regulations in Title 8 of Code of Federal

Regulations.

The two agencies agree in principle

with these objectives. Although the

Department and the Service are each

publishing their own regulations, they

are intended to be substantively the

same. To further uniform application of

these rules, the Service will be expressly

authorized by the INS Operations

Instructions to consult with the

Advisory Opinions Division of the Visa

Office of the Department of State on

treaty visa issues.

The Advisory Opinions Division

renders opinions on legal issues relating

to visa law on behalf of the Visa Office

to United States consular officers

serving at United States embassies and

consulates abroad. Opinions rendered

by this division on questions of law, as

opposed to the application of the law to

the facts of a particular case, are

generally binding on consular officers.

(See 22 CFR 41.121(d)). A significant

distinction is made between this current

departmental practice and the projected

consultation process with the Service.

Guidance offered at the request of the

Service will be purely advisory in

nature and will not be binding on the

Service in any way. The Service will

continue to posses exclusive authority

and responsibility for the adjudication

of treaty visa cases submitted to them in

accordance with applicable law and

procedure.

This consultation process will merely

constitute a means of sharing the

Department’s knowledge gained from

the experience of adjudicating treaty

visa cases for many years. The INS will

possess the option of drawing upon

such expertise, but will be under no

obligation to consult with the Visa

Office. The exercise of this option is left

to the discretion of that agency.

One commenter had expressed the

hope that not only the Service and the

Department would promulgate the same

regulations but that consular officers

abroad would automatically accept a

Service’s change of status determination

in an ‘‘E’’ visa case rather than subject

the alien to readjudication of the visa

application.

Consular officers posses exclusive

authority to issue and refuse visas (INA

104). Not only must they determine an

alien’s eligibility under INA 212(a) but,

in the case of all nonimmigrant visa

classifications, they must assess

whether the alien has met all the

requirements of that particular

nonimmigrant visa classification. Even

in petition-based nonimmigrant visa

classifications the consular officer

retains the authority, and the

responsibility, to review the petition to

make sure the alien is appropriately and

properly classified; this is not just

because mistakes may happen, but

because the consular officer may have

access to information not available to

the INS officer. If the review results in

a finding that the officer knows or

reasonably believes that the alien is not

entitled to the given classification, the

petition is returned pursuant to

regulation to the appropriate office of

the Immigration and Naturalization

Service for appropriate action.

As treaty visa cases involve no INS

approved petitions, the consular officer

has the responsibility to adjudicate all

aspects of the visa application. Under

this regulation and these administrative

procedures, the consular officer will

continue to have that responsibility. It is

anticipated, however, that in view of the

newly adopted procedures more

uniform application of these visa

regulations will be achieved, thus

reducing the possibility of disparate

results.

Several commenters expressed

disappointment that the Department

proposed regulations on treaty visas

without even mentioning the Board of

Immigration Appeals decision in the

Matters of Walsh and Pollard, Int. Dec.

#3111 (BIA 1988). Since this case was

not cited in the preamble to the

proposed rule, some commenters

inferred that the Department did not

agree with the holding of the decision.

The Department finds this decision to

be useful on at least two points. First,

the Board followed the Department’s

interpretation that substantial

investment is determined by application

of the proportionality test, not by

application of a set minimum dollar

figure. Secondly, the Board agreed that

the concept of ‘‘develop and direct’’

applies to the ‘‘principal’’ treaty

investor, not to each employee of the

treaty investor.

This decision unquestionably

contributes significantly to the body of

administrative case law on treaty visas,

but it does have a shortcoming. The

decision has been read to imply that the

treaty investor visa classification is

appropriate for the creation of certain

‘‘job shop’’ arrangements. The

principles upon which the decision is

founded to do support that inference.

These regulations, likewise, do not

endorse that inference.

As clear recognition of the

significance of this case, special

treatment is accorded this decision in

the interpretive note material in the

Foreign Affairs Manual. It should be

noted, however, that the ‘‘job shop’’

inference is also accorded appropriate

discussion.

Employee of Treaty Trader or Treaty

Investor

The Department received one

comment on the long-standing

regulation at section 41.51(c), which

requires the employer to hold treaty visa

status or, if not in the United States, to

be so classifiable. The commenter

prefers removing the requirement that

the employer hold treaty visa status and

instead allowing the employer to be

lawfully classified under any other

nonimmigrant status. The purpose of

this commenter’s suggestion is to allow

employees to qualify for treaty visas

regardless of the nonimmigrant

classification of the employer.

Although the Department recognizes

the practicality of such a suggestion, we

believe that the current regulation is to

proper interpretation of the law. The

statutory section addresses the

conditions whereby the ‘‘principal’’

treaty traders and treaty investors may

qualify for an E visa. No mention is

made of employees. Employee status is

the logical creation of regulation.

Persons in that status derive that status

directly and exclusively from

‘‘principal’’ treaty traders or treaty

investors. Without a qualifying

relationship to a principal which has

been accorded treaty trader or treaty

investor status, the alien cannot

likewise be accorded treaty visa status.

This derivative relationship is

analogous to other relationships more

explicitly defined in the Act such as the

relationship of spouse and children to a

principal accorded lawful immigration

status under the INA. One can not

derive status from a person who does

not possess such status.

Nationality

One commenter expressed the hope

that an easier method could be found to

‘‘register’’ large enterprises to qualify for

‘‘E’’ visa status. This issue is similar to

that raised by two other commenters

who expressed strenuous dissatisfaction

with the proposed rules for determining

the nationality of an incorporated entity.

The problem arises in cases involving

corporations that sell stocks on

exchanges in more than one country.

The standard of practicability was

adopted in recognition of this problem.

This standard contemplates the

applicant submitting the best evidence

available and the consular officer

reaching a reasonable decision

considering the particular

circumstances in each case. This is not

intended to be an onerous paper

production exercise.

The statute speaks of granting special

treatment for ‘‘nationals’’ of treaty
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 48151

partners. Nationality of enterprises

based on ownership captures the

essence of the statue and the bilateral

relationship. Although registration of

businesses in a jurisdiction to engage in

business activities in that jurisdiction

has been accorded recognition for

national treatment in other contexts by

other laws and some courts, mere

registration has not been and is not

accepted as the proper standard for

determining nationality under INA

101(a)(15)(E).

This issue was addressed in Matter of

N---S---, 7 I&N Dec. 426 (1957).

Recognizing the Congress’ review of this

longstanding rule during the

formulation of the Immigration and

Nationality Act during the early 1950’s,

the decision states at Dec. 428 that,

‘‘there being no substantial change in

language between the present statute

and regulations as compared with the

preceding statute and regulations on the

same subject, the rulings and principles

previously enunciated and which are

presumed to have been known to the

Congress must be deemed to be

presently applicable.’’ For similar

reasons, we believe that the regulations

as proposed are consistent with

Congressional intent.

Trade

Three commenters suggested that the

Department incorporate the concept of

‘‘business commitments’’ in its

definition of existing international

trade. The proposed rule reiterated the

statutorily mandated principle that the

trade for treaty trader purposes must be

in existence in order to qualify for such

status. The Department agrees, however,

that the concept of ‘‘business

commitments’’ as described in Matter of

Seto, 11 I&N Dec. 290 (1965), should be

included within the definition of trade.

Drawing from a Supreme Court decision

and a Court of Appeals decision, this

decision holds that ‘‘existing trade

includes successfully negotiated

contracts which call’’ for the exchange

of goods within the meaning of INA

101(a)(15)(E)(i). But on the other hand,

the decision states that transactions

which are in the state of negotiation do

not by themselves constitute trade for

this purpose.

The Department not only agrees with

this principle, but it has been

incorporated into the regulation.

Additionally, the appropriate guidance

will be provided in the Foreign Affairs

Manual.

Substantial trade

An identical comment was submitted

in two letters concerning the definition

of trade. The specific language of the

proposed rule expressly prohibits a

single transaction from qualifying as

substantial trade. The underlying

principle of substantial trade is that a

continuing flow or exchange of trade

items exist. The commenters expressed

fear that this definitional language

would be interpreted to exclude the

circumstance of a single large

transaction exchanged annually or

periodically over extended periods of

time.

The language of the regulation

incorporated the essence of the language

which has been used in the interpretive

notes in the FAM. The wording was

specifically selected to avoid the

establishment of any specific time

limitations. The thrust of the definition

is to disqualify a ‘‘one shot’’ deal but to

consider all other continuing exchanges

of value. Determinations have been and

will continue to be made upon case by

case analysis. It appears that the

meaning of this definition is exactly the

meaning sought by the commenters. To

further clarify the regulations, the

Department has amended the language

accordingly.

A commenter expressed

disappointment that the Department did

not incorporate into the regulations a

certain note in the FAM describing

substantial trade. That note states 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

assessing the substantiality of trade in a

particular case. The Department adheres

to this concept. The regulation has been

amended to include this concept.

Treaty investment

Investment capital

Risk

Several commenters agreed with our

statement in the preamble of the

proposed regulation that the rule

regarding risk did not square with

business reality. A couple of

commenters did offer the suggestion of

amending the rule by use of the

following language: ‘‘loans secured

exclusively by the assets of the

investment enterprise itself, without

ultimate recourse to the treaty investor,

may not be counted toward the actual

amount of capital investment’’.

The purpose of the risk provision is

to place the risk of the investment

totally and exclusively on the shoulders

of the treaty investor. As this suggested

language would dilute the element of

risk by including the possibility of using

the business as collateral, the

Department will retain the language as

proposed. In addressing the issue of

‘‘irrevocable commitment’’, several

commenters suggested that language be

added to the regulations that would

formally recognize the use of

mechanisms such as escrow to protect

the treaty investor if a visa were not

issued in a certain case. Such

mechanisms have long been recognized

as proper safeguards by the Department.

The Department’s opinion has been

published broadly, including in the

Interrogatories in Matters of Walsh and

Pollard which have been disseminated

widely not only in the private sector but

also within the Foreign Service as

instructional material. The regulations

have been amended to accommodate

this request.

Substantial capital

One commenter expressed dislike for

the proportionality test but failed to

offer any suggestions for an alternative

test. The commenter questioned why

the proportionality test was selected in

light of the Congressional mandate to

define ‘‘substantial’’ investment, why a

minimum investment amount was even

considered in light of the Matters of

Walsh and Pollard, Int. Dec. #3111 (BIA

1988), why no economic studies were

undertaken in this exercise, and why

the Immigration and Naturalization

Service proposed a different formula

when the Secretary of State was given

authority to promulgate the regulatory

definition.

The supplemental information

portion of the proposed rule explained

the entire exercise undertaken to reach

a definition, as required by the statute.

Comprehensive letters were prepared

explaining the purpose and

requirements of the treaty visa

classification and soliciting comments

and suggestions from each agency. The

agencies, Department of Commerce,

Labor, the Treasury, and the Small

Business Administration, the U.S. Trade

Representative, and, of course, the

Immigration and Naturalization Service,

each responded. All but one felt

competent to provide constructive input

into the analysis. The agencies

overwhelmingly favored continued use

of the proportionality test. The general

conclusion was that this test appears to

have worked successfully in the past

and that no superior test could be

devised which would capture the

essence of this requirement.

The fact that Congress required that

the definition be codified in regulatory

form does not necessarily suggest, as

stated by this commenter, that Congress

was dissatisfied with the current test.

Legislative history of this provision and

predecessor versions in earlier bills
48152 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

suggest that Congress sought primarily

the establishment of a test to be applied

uniformly by both agencies.

Secondarily, the Congress accorded the

Secretary of State the responsibility of

preparing such regulations in light of

the extensive experience in adjudicating

treaty visa applications as well as the

obvious jurisdictional tie to the treaty

function.

The Congress did require the

Secretary of State to consult ‘‘with

appropriate agencies of Government’’.

This requirement was carried out as

described above and in the preamble of

the proposed regulation. A great cross

section of agencies was selected as

indeed no independent economic study

was either required by Congress or

undertaken by the Department of State.

It was anticipated that the agencies that

monitor the pulse of the economy

would provide relevant input into the

formulation of the test. None of these

agencies nor any of the others perceived

the necessity to undertake an economic

study. Based upon such responses from

interested agencies, the Department was

satisfied that sufficient avenues had

been explored.

The establishment of a minimum

amount of investment had to be

considered during this review, as the

Department bore the responsibility of

considering all viable alternatives. A set

minimum dollar figure is always the

first test offered as an alternative to the

proportionality test. While such a test

has certain administrative advantages,

the agencies overwhelmingly rejected it

in favor of the proportionality test.

Lastly, the commenter suggested that

INS’ proposed regulations differed from

the Department’s on this issue of

substantial investment. That issue has

been rendered moot by the Service’s

decision to promulgate regulations

consistent with the Department’s

regulations.

Three other commenters discussed

the proportionality test. Two

commenters expressed concern over the

application of the ‘‘inverted sliding

scale’’ thinking that it differs from the

proportionality test now in use. The

term ‘‘inverted sliding scale’’ is merely

a descriptive characterization of the

proportionality test. No substantive

change is intended by the use of this

term. The test is intended to apply as it

has in the past.

Concern was expressed over the use

of presumptions and that there were

only three such benchmarks. It was

feared that these percentages would be

used in those designated ranges as

bright line tests and not as guidelines as

intended. In view of the lower cost

needed to establish certain types of

businesses, the commenters felt a need

for a designation for a $100,000

investment or even lower. Several

commenters felt that the third

benchmark of 30% was too high for

exceptionally large investment figures.

It was opined that the sheer magnitude

of such investments should be

considered to be substantial regardless

of the percentage.

In an attempt to avoid the use of the

presumptive percentages as bright line

tests, the three presumptive benchmarks

have been removed. The regulation

merely defines the test, whereas in the

FAM note material examples will be

provided. Any examples given are not

intended to be binding but are intended

to demonstrate to adjudicating officers

and the public the general range of the

proportionality test. The fear that the

percentages used in such examples will

be applied by adjudicators as bright line

tests cannot be totally abated; however,

through instructional material in the

FAM, advisory opinions, and other

relevant material, the adjudicating

officers will be instructed to use these

figures as flexible guidelines on a case

by case basis.

The commenter also suggested that

some of the descriptive language used in

the FAM note material and/or language

used in the supplemental information of

the proposed rule should be

incorporated into regulation. Although

some of this descriptive language has

been incorporated into regulation, the

general definitional language has been

somewhat rewritten to more

prominently feature the underlying

ingredients of ‘‘substantial amount of

capital’’.

The language describing the

application of the proportionality test

has been altered for clarity. Although

the preamble of the proposed regulation

stated that the figure representing the

actual cost of establishing a business

must be used in arriving at the

investment percentage, the proposed

rule has been interpreted to permit the

use of a figure of an amount of

investment needed to establish a

business of that nature, regardless of

what the enterprise in question might

cost. The regulation is amended to more

accurately reflect the explanation in the

preamble.

Marginality

The comments save one were

generally favorable of the Department’s

treatment of marginality. The single

negative comment essentially stated that

the proposed language would bar viable

enterprises from qualifying for treaty

visa status thus shutting off the infusion

of foreign investment. The commentary

wrongly imparted this intent to the

Department.

The Department has no desire to bar

viable enterprises, but as the

supplemental information provided

with the proposed rule clearly lays out,

the Department does have as one of its

objectives to weed out those enterprises

that are indeed nonviable. Recognizing

that no rule is perfect, the Department

attempted to craft the regulation to

achieve its objective. Unfortunately, that

commenter offered no alternative to the

proposal.

The other comments, however,

suggested that the rule be clarified so

that the capacity to generate income be

cast not only in the present tense but

also in the future. Although the

proposed rule was intended to address

this very concern, more specific

language has been added. By including

the language of ‘‘present and future’’ to

the capacity to generate income and to

the capacity to make an economic

contribution, the question now arises as

to when in the future must such

capacity be realized. Is it realistic to

allow an treaty investor to realize this

capacity 20 years in the future? We

think not. A reasonable standard should

be established.

When establishing entitlement to

treaty investor classification the alien

bears the burden of satisfying the

consular officer that the enterprise is a

viable commercial entity with the

requisite income generating capacity. To

demonstrate that capacity, a business

plan of some sort is often presented.

This plan projects the amount of income

contemplated considering the expenses

of establishing and/or using the

enterprise and factoring in the

marketability of the service or

commodity to be provided or sold. The

Department accepts the reality that

many start-up businesses will not

generate any profits initially. It is, also,

the Department’s understanding that a

five year term is considered a standard

period of time to gauge profitability of

such a business. The Department finds

it reasonable that from the date the

principal treaty investor commences

operation of normal business activities

that the business is projected to be

generating the requisite income or

making the requisite economic

contribution within a five year period.

For further clarity, economic

contribution replaces economic impact

to signify that a positive economic

impact is contemplated.

Develop and direct

One of the four comments received on

this issue referred to the typographical

error in the September 3, 1991 printing
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 48153

of the proposed rule. The word

‘‘marginal’’ was intended to read as

‘‘managerial’’ and has been corrected.

A favorable comment was received

which applauded the ability to meet the

develop and direct requirement not just

by ownership but by managerial or other

corporate or structural means.

Another comment focused on the fact

that the Department’s proposed

regulations required that the treaty

investor be in a position to develop and

direct rather than ‘‘solely’’ develop and

direct the enterprise in which the alien

had invested. The distinction made by

the commenter lies in the possibility of

being in a position to control without

exercising such control.

The language used by the Department

derives from Matter of Lee, 15 I&N Dec.

187 at 189 (1975). This decision cites

the statutory language and then

provides its interpretation. ‘‘Section

101(a)(15(E)(ii) of the Act requires the

treaty investor to be coming solely to

develop and direct the operations of the

enterprise in which substantial

investment has been or is in the process

of being made. In order for a treaty

investor to develop and direct the

operations of an enterprise, it must be

shown he has a controlling interest;

otherwise other individuals who do

have the controlling interest are in a

position to dictate how the enterprises

is to be developed and directed.’’

The observation made by the

commenter was presented in the form of

a question. The query focuses on

whether the statutory language requires

an alien personally to develop and

direct an enterprise or whether the alien

must be in a position to develop and

direct an enterprise. In the latter case,

the alien may not personally develop or

direct the enterprise but may afford a

third party the opportunity to do so.

Although the Department has

consistently interpreted the proposed

regulation to mean that the treaty

investor must demonstrate that his or

her purpose of entry is to develop and

direct the enterprise, the language has

been amended to comport more directly

with the statute and to remove any hint

of ambiguity.

The last commenter made two

suggestions. The first was to have the

Department accord ‘‘E’’ visa status to

large companies involved in joint

ventures. In the opinion of the

commenter no company ‘‘controls’’ the

sizable joint venture, the develop and

direct requirement should, therefore, be

waived. As the develop and direct

requirement is statutory and the law

contains no authority for it to be

waived, the Department cannot accede

to this suggestion. (This does not mean,

however, that this develop and direct

requirement cannot be met by other

means, such as through the concept of

‘‘negative control’’.)

The same result attaches to the second

suggestion. The commenter proposed

that treaty investors with investments of

a minimum of $10,000,000 be exempt

from the develop and direct requirement

if the treaty investor otherwise met the

‘‘E’’ visa requirements. Although the

Department understands the motivation

behind this suggestion as well, the

statute does not provide the authority to

waive the requirement.

Employee: Executive or Supervisor

The Department received several

comments on this proposed regulatory

provision. As all the comments were

favorable and no changes were

recommended, the regulation stands as

proposed.

Essential employee

The proposed language drew quite a

few comments addressing different

aspects of the proposal. The first

comment took issue with the concept

that the employer must demonstrate that

replacement by a U.S. worker is not

feasible or that the employer is making

reasonable and good faith efforts to train

U.S. workers. The commenter

questioned the advisability and the

legality of trying to modify our treaty

obligations by administrative

regulations. In light of the change we are

making to this regulation the comment

is rendered moot. On the other hand,

the statute, regulations, and the treaty

contain nothing that would prohibit the

imposition of such regulatory

requirements.

Three commenters objected to the

requirement in proposed § 41.51(r)(2)

that the alien must in each case

affirmatively establish that the alien’s

eventual replacement by a U.S. worker

is not feasible or that the employer is

making reasonable and good faith efforts

to recruit and/or train U.S. workers to

perform the responsibilities of the

alien’s prospective position. Two

commenters made reference to the

interpretive note material in the FAM at

22 CFR 41.51 N4–3 and found these

notes to be instructive. They suggested

that perhaps this requirement should be

imposed only on those aliens claiming

to posses essential skills who will

engage in activities which may involve

manual duties as explained in § 41.51

N.4–3(b). This requirement should not

be imposed across the board. These

comments continued by recommending

that the regulatory language be altered

to expressly provide that aliens with

special skills that have not become

commonplace might remain in the

United States indefinitely, and any

training/recruitment/feasibility

requirement should be expressly limited

to the exceptions listed in the FAM

notes.

The Department accepts and

recognizes these suggestions as valid

and having merit. The intent of the

proposed regulation was to put the

applicant and the applicant’s employer

on notice that indeed not all positions

that require specialized skills might be

considered ‘‘essential’’ on a continuing

basis. It was thought that, through the

usual application process of assessing

‘‘essentiality’’, this requirement of

feasibility/training would be met.

Certainly, aliens with skills unique to

them or at least not commonplace in the

United States would by the very nature

of the activity establish ipso facto that

such skills would be essential on a

continuing basis and that training, etc.

would not be feasible. The Department

agrees that the proposed language

appears more burdensome than

intended.

Consequently, the Department has

changed section 41.51(r)(2) to better

capture the essence of the concept that

the establishment of ‘‘essentiality’’ is an

ongoing process. A key to this

adjudication exercise is the

determination of whether the

specialized skills are commonplace in

the United States. Certainly, some such

skills will be found not to be

commonplace on a continuing basis and

other skills will be found to become

commonplace at some point in time.

When that point in time is reached, the

alien may not qualify as an essential

employee. The employer will than have

to fill the position by other means.

In order to reflect more clearly this

principle, the regulation has been

amended to remove all references to

affirmative responsibilities requiring a

feasibility assessment or training

requirements. The guidance in the FM

note material cited above has been

incorporated into the regulation. The

operation of this regulation will follow

the stated objective which comports

with the two commenters’ suggestions.

A commenter objected to the use of

the term ‘‘unique’’ skills as a means to

determine essential skills. The

commenter stated that this was too high

a standard to impose on aliens to qualify

as an essential employee. Furthermore,

while it is no longer used for L–1

adjudication, it should not be used in

this context.

The characterization of a skill as

‘‘unique’’ has a long association with

the E visa classification. This is

descriptive of a skill which clearly is
48154 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

one-of-a-kind and is, thus, not

commonplace. It does not and never has

been intended to constitute a minimum

standard for meeting the requirement of

essential skills. To the contrary, skills of

unique character would so greatly

exceed any minimum standard of

‘‘essentiality’’ that persons blessed with

unique skills coming to fill positions

requiring such unique skills would in

the overwhelming number of cases be

considered to be ‘‘essential’’. As

‘‘unique’’ continues to be a useful

descriptive term in the adjudication

process, the regulations and interpretive

guidance in the FAM will continue to

use it.

Final Rule

This final rule of § 41.51 would:

provide a general definition of treaty

trader (paragraph (a)); provide a

definition of treaty investor (paragraph

(b)); define an alien employee

(paragraph (c)); extend treaty

classification to the spouse and children

of the principal alien (paragraph (d));

and authorize ‘‘E’’ status to certain

foreign information media (paragraph

(e)). The remaining paragraphs

constitute definitional provisions.

This rule is not expected to have a

significant impact on a substantial

number of small entities under the

criteria of the Regulatory Flexibility Act.

The information collection contained in

this rule has been submitted to the

Office of Management and Budget in

compliance with provisions of the

Paperwork Reduction Act of 1980. This

rule has been reviewed as required by

E.O. 12778 and certified to be in

compliance therewith, and reviewed in

light of E.O. 12866 and found to be

consistent therewith.

List of Subjects in 22 CFR Part 41

Aliens, Treaty Trader or Investor.

In view of the legislative mandate of

Pub. L. 101–649, Part 41 to Title 22

would be amended as follows:

PART 41—[AMENDED]

1. The authority citation for Part 41 is

revised to read:

Authority: INA 104, 66 Stat. 174, 8 U.S.C.

1104; sec. 109(b)(1), 91 Stat. 847; sec. 204,

104 Stat. 5019, 8 U.S.C. 1101 note.

2. Part 41, Subpart F—Business and

Media Visas, is amended by revising

section 41.51 to read as follows:

§ 41.51 Treaty trader or treaty investor.

(a) Treaty trader. An alien is

classifiable as a nonimmigrant treaty

trader (E–1) if the consular officer is

satisfied that the alien qualifies under

the provisions of INA 101(a)(15)(E)(i)

and that the alien:

(1) Will be in the United States solely

to carry on trade of a substantial nature,

which is international in scope, either

on the alien’s behalf or as an employee

of a foreign person or organization

engaged in trade, principally between

the United States and the foreign state

of which the alien is a national,

(consideration being given to any

conditions in the country of which the

alien is a national which may affect the

alien’s ability to carry on such

substantial trade); and

(2) Intends to depart from the United

States upon the termination of E–1

status.

(b) Treaty investor. An alien is

classifiable as a nonimmigrant treaty

investor (E–2) if the consular officer is

satisfied that the alien qualifies under

the provisions of INA 101(a)(15)(E)(ii)

and that the alien:

(1) Has invested or is actively in the

process of investing a substantial

amount of capital in bona fide

enterprise in the United States, as

distinct from a relatively small amount

of capital in a marginal enterprise solely

for the purpose of earning a living; and

(2) Is seeking entry solely to develop

and direct the enterprise; and

(3) Intends to depart from the United

States upon the termination of E–2

status.

(c) Employee of treaty trader or treaty

investor. An alien employee of a treaty

trader may be classified E–1 and an

alien employee of a treaty investor may

be classified E–2 if the employee is in

or is coming to the United States to

engage in duties of an executive or

supervisory character, or, if employed in

a lesser capacity, the employee has

special qualifications that make the

services to be rendered essential to the

efficient operation of the enterprise. The

employer must be:

(1) A person having the nationality of

the treaty country, who is maintaining

the status of treaty trader or treaty

investor if in the United States or if not

in the United States would be

classifiable as a treaty trader or treaty

investor; or

(2) An organization at least 50%

owned by persons having the

nationality of the treaty country who are

maintaining nonimmigrant treaty trader

or treaty investor status if residing in the

United States or if not residing in the

United States who would be classifiable

as treaty traders or treaty investors.

(d) Spouse and children of treaty

trader or treaty investor. The spouse and

children of a treaty trader or treaty

investor accompanying or following to

join the principal alien are entitled to

the same classification as the principal

alien. The nationality of a spouse or

child of a treaty trader or treaty investor

is not material to the classification of

the spouse or child under the provisions

of INA 101(a)(15)(E).

(e) Representative of foreign

information media. Representatives of

foreign information media shall first be

considered for possible classification as

nonimmigrants under the provisions of

INA 101(a)(15)(I), before consideration

is given to their possible classification

as nonimmigrants under the provisions

of INA 101(a)(15)(E) and of this section.

(f) Treaty country. A treaty country is

for purposes of this section a foreign

state with which a qualifying Treaty of

Friendship, Commerce, and Navigation

or its equivalent exists with the United

States. A treaty country includes a

foreign state that is accorded treaty visa

privileges under INA 101(a)(15)(E) by

specific legislation (other than the INA).

(g) Nationality of the treaty country.

The nationality of an individual treaty

trader or treaty investor is determined

by the authorities of the foreign state of

which the alien claims nationality. In

the case of an organization, ownership

must be traced as best as is practicable

to the individuals who ultimately own

the organization.

(h) Trade. The term ‘‘trade’’ as used

in this section means the existing

international exchange of items of trade

for consideration between the United

States and the treaty country. Existing

trade includes successfully negotiated

contracts binding upon the parties

which call for the immediate exchange

of items of trade. This exchange must be

traceable and identifiable. Title to the

trade item must pass from one treaty

party to the other.

(i) Item of trade. Items which qualify

for trade within these provisions

include but are not limited to goods,

services, technology, monies,

international banking, insurance,

transportation, tourism,

communications, and some news

gathering activities.

(j) Substantial trade. Substantial trade

for the purposes of this section entails

the quantum of trade sufficient to

ensure a continuous flow of trade items

between the United States and the treaty

country. This continuous flow

contemplates numerous exchanges over

time rather than a single transaction,

regardless of the monetary value.

Although the monetary value of the

trade item being exchanged is a relevant

consideration, greater weight is given to

more numerous exchanges of larger

value. In the case of smaller businesses,

an income derived from the value of

numerous transactions which is
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 48155

sufficient to support the treaty trader

and his or her family constitutes a

favorable factor in assessing the

existence of substantial trade.

(k) Principal trade. Trade shall be

considered to be principal trade

between the United States and the treaty

country when over 50% of the volume

of international trade of the treaty trader

is conducted between the United States

and the treaty country of the treaty

trader’s nationality.

(l) Investment. Investment means the

treaty investor’s placing of capital,

including funds and other assets, at risk

in the commercial sense with the

objective of generating a profit. The

treaty investor must be in possession of

and have control over the capital

invested or being invested. The capital

must be subject to partial or total loss if

investment fortunes reverse. Such

investment capital must be the

investor’s unsecured personal business

capital or capital secured by personal

assets. Capital in the process of being

invested or that has been invested must

be irrevocably committed to the

enterprise. The alien has the burden of

establishing such irrevocable

commitment given to the particular

circumstances of each case. The alien

may use any legal mechanism available,

such as by placing invested funds in

escrow pending visa issuance, that

would not only irrevocably commit

funds to the enterprise but that might

also extend some personal liability

protection to the treaty investor.

(m) Bona fide enterprise. The

enterprise must be a real and active

commercial or entrepreneurial

undertaking, producing some service or

commodity for profit and must meet

applicable legal requirements for doing

business in the particular jurisdiction in

the United States.

(n) Substantial amount of capital. A

substantial amount of capital constitutes

that amount that is:

(1)(i) Substantial in the proportional

sense, i.e., in relationship to the total

cost of either purchasing an established

enterprise or creating the type of

enterprise under consideration;

(ii) Sufficient to ensure the treaty

investor’s financial commitment to the

successful operation of the enterprise;

and

(iii) Of a magnitude to support the

likelihood that the treaty investor will

successfully develop and direct the

enterprise.

(2) Whether an amount of capital is

substantial in the proportionality sense

is understood in terms of an inverted

sliding scale; i.e., the lower the total

cost of the enterprise, the higher,

proportionately, the investment must be

to meet these criteria.

(o) Marginal enterprise. A marginal

enterprise is an enterprise that does not

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. An

enterprise that does not have the

capacity to generate such income but

that has a present or future capacity to

make a significant economic

contribution is not a marginal

enterprise. The projected future capacity

should generally be realizable within

five years from the date the alien

commences normal business activity of

the enterprise.

(p) Solely to develop and direct. The

business or individual treaty investor

does or will develop and direct the

enterprise by controlling the enterprise

through ownership of at least 50% of

the business, by possessing operational

control through a managerial position or

other corporate device, or by other

means.

(q) Executive or supervisory character.

The executive or supervisory element of

the employee’s position must be a

principal and primary function of the

position and not an incidental or

collateral function. Executive and/or

supervisory duties grant the employee

ultimate control and responsibility for

the enterprise’s overall operation or a

major component thereof.

(1) An executive position provides the

employee great authority to determine

policy of and direction for the

enterprise.

(2) A position primarily of

supervisory character grants the

employee supervisory responsibility for

a significant proportion of an

enterprise’s operations and does not

generally involve the direct supervision

of low-level employees.

(r) Special qualifications. 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.

(1) The essential nature of the alien’s

skills to the employing firm is

determined by assessing the degree of

proven expertise of the alien in the area

of operations involved, the uniqueness

of the specific skill or aptitude, 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. The question of special skills

and qualifications must be determined

by assessing the circumstances on a

case-by-case basis.

(2) Whether the special qualifications

are essential will be assessed in light of

all circumstances at the time of each

visa application on a case-by-case basis.

A skill that is unique at one point may

become commonplace at a later date.

Skills required to start up an enterprise

may no longer be essential after initial

operations are complete and are running

smoothly. Some skills are essential only

in the short-term for the training of

locally-hired employees. Long-term

essentiality might, however, be

established in connection with

continuous activities in such areas as

product improvement, quality control,

or the provision of a service not

generally available in the United States.

(s) Labor disputes. Citizens of Canada

or Mexico shall not be entitled to

classification under this section if the

Attorney General and the Secretary of

Labor have certified that:

(1) There is in progress a strike or

lockout in the course of a labor dispute

in the occupational classification at the

place or intended place of employment;

and

(2) The alien has failed to establish

that the aliens entry will not affect

adversely the settlement of the strike or

lockout or the employment of any

person who is involved in the strike or

lockout.

Dated: May 13, 1994.

Editorial note: This document was

received in the Office of the Federal Register

on September 9, 1997.

Mary A. Ryan,

Assistant Secretary for Consular Affairs.

[FR Doc. 97–24260 Filed 9–11–97; 8:45 am]

BILLING CODE 4710–06–M