Source: https://www.everycrsreport.com/reports/RL33844.html
Timestamp: 2020-03-31 10:19:02
Document Index: 206830492

Matched Legal Cases: ['§548', '§101', '§101', '§203', '§610', '§548', '§548', '§41', '§548', '§101', '§101', '§203', '§1324', '§ 39', '§204', '§204', '§204', '§204', '§204', '§204', '§204', '§ 206', '§ 39', '§101', '§214', '§ 17', '§214', '§214', '§214', '§214', '§214', '§41', '§41', '§214', '§214', '§214', '§214', '§214', '§214', '§41', '§214', '§ 17', '§501', '§101']

Foreign Investor Visas: Policies and Issues - EveryCRSReport.com
With the current economic downturn, Members of the 111th Congress are likely to be faced with many policy options aimed at economic improvement, including the possible consideration of amending visa categories for foreign investors. Foreign investors are often viewed as providing employment opportunities for U.S. citizens rather than displacing native workers. Yet, extending foreign investor visas provides several potential risks as well, such as visa abuses and security concerns. Thus, a potential policy question for Congress—and particularly legal permanent resident (LPR) investors—is whether the benefits reaped from allocating visas to foreign investors outweigh the costs of denying visas to other employment-based groups.
There are currently two categories of nonimmigrant investor visas and one category of immigrant investor visa for legal permanent residents (LPR). The visa categories used for nonimmigrant investors are: E-1 for treaty traders; and the E-2 for treaty investors. The visa category used for immigrant investors is the fifth preference employment-based (EB-5) visa category. According to Department of Homeland Security (DHS) statistics, there were 230,647 nonimmigrant treaty trader and investor visa arrivals in the United States in FY2008. For the same time frame, DHS reported the granting of 1,360 investor visas.
When viewed from a comparative perspective, the investor visas of the United States are most closely mirrored by those of Canada. The LPR investor visa draws especially strong parallels to the Canadian immigrant investor visa, since the latter served as the model for the former. Comparing the admissions data between these two countries, however, reveals that the Canadian investor provision attracts many times the number of investors of its United States counterpart. Yet, both countries showed an upward trend in immigrant investor visas in the last two years.
The investor visas offered by the United States operate on the principle that foreign direct investment into the United States should spur economic growth in the United States. According to the classical theory, if these investments are properly targeted towards the U.S. labor force’s skill sets, it should reduce the international migration pressures on U.S. workers. To attract foreign investors, research indicates that temporary migrants are motivated most significantly by employment and wage prospects, while permanent migrants are motivated by professional and social mobility. Theoretically, however, it is unclear to what extent potential migration provides additional incentive for investment activity. Investors from developed countries may sometimes lack incentive to settle in the United States since they can achieve foreign direct investment (FDI) and similar standards of living from their home country. Yet, in cases where foreign investors have been attracted, the economic benefits have been positive and significant.
Immigrant investors have been subject to notable administrative efforts in the past couple of years. In 2005, DHS developed the Investor and Regional Center Unit (IRCU) to govern matters concerning LPR investor visas and investments to better adjudicate petitions and coordinate investments. In the 111th Congress, authorizing language in the Department of Homeland Security Appropriations Act, 2010 (P.L. 111-83, §548), extends the authorization of the Regional Center Pilot Program through September 30, 2012.
January 27, 2010 (RL33844)
LPR Investor Visa Numbers
Nonimmigrant Investor Visa Numbers
U.S. and Canadian Comparisons
Analysis of the Relationship Between Investments and Migration
Temporary and Permanent Investors
IRCU Expansion
Current Legislation and Potential Issues for Congress
Figure 1. LPR Investor Visas Issued by Type, FY1998-FY2008
Figure 2. E Treaty Trader and Investor Visas Issued by Region, FY2009
Figure 3. Immigrant Investors to Canada and the United States, 1996-2008
Table 1. United States LPR Investor Visa Admissions, FY1996-FY2007
Table 2. Nonimmigrant Treaty Trader and Investor Admissions, FY2008
Table 3. E Treaty Traders and Investors Admitted by State of Destination, FY2008
Table A-1. E-Class Visa Privileges by Year of Attainment
Appendix A. E-Class Visa Privileges by Year of Attainment
Appendix B. Immigrant Investor Pilot Program Projects
The investor visas offered by the United States operate on the principle that foreign direct investment into the United States should spur economic growth in the United States. According to the classical theory, if these investments are properly targeted towards the U.S. labor force's skill sets, it should reduce the international migration pressures on U.S. workers. To attract foreign investors, research indicates that temporary migrants are motivated most significantly by employment and wage prospects, while permanent migrants are motivated by professional and social mobility. Theoretically, however, it is unclear to what extent potential migration provides additional incentive for investment activity. Investors from developed countries may sometimes lack incentive to settle in the United States since they can achieve foreign direct investment (FDI) and similar standards of living from their home country. Yet, in cases where foreign investors have been attracted, the economic benefits have been positive and significant.
With the current economic downturn, Members of the 111th Congress are likely to be faced with many policy options aimed at economic improvement. A focus of past debates has been on the impact immigrants have on jobs and wages. Yet, these discussions frequently take on a different focus when it comes to foreign investors, in part because such visas are targeted at immigrants that are poised to inject capital into the economy and create employment. Foreign investors are often viewed as providing employment opportunities for U.S. citizens rather than displacing native workers. Thus, Congress has in previous years been willing to set aside both temporary and permanent visas for foreign investors with the goal that this visa distribution would net positive economic effects. Yet, extending foreign investor visas provides several potential risks as well, such as visa abuses and security concerns.
With the extension of the immigrant investor visa pilot program—a program aimed at granting permanent immigrant visas for investments into certain limited liability corporations—until September 30, 2012,1 Members of Congress will have to decide if the current policy towards foreign investors should be maintained, or if a different set of policies should be implemented. The central policy question surrounding foreign investors—and particularly legal permanent resident (LPR) investors—is whether the benefits reaped from allocating visas to foreign investors outweigh the costs of denying visas to other employment-based groups. The subsequent analysis provides a background and contextual framework for the consideration of foreign investor visa policy. After a brief legislative background, this report will provide discussions of immigrant and nonimmigrant investors visas, a comparison of U.S. and Canadian immigrant investor programs, an analysis of the relationship between investment and migration, and finally a review of current issues.
Since the Immigration Act of 19242 the United States has expressly granted visas to foreign nationals for the purpose of conducting commerce within the United States. Although foreign investors had previously been allowed legal status under several Treaties of Friendship, Commerce and Navigation treaties, the creation in 1924 of the nonimmigrant treaty trader visa provided the first statutory recognition of foreign nationals as temporary traders. With the implementation of the Immigration and Nationality Act of 1952 (INA), the statute was expanded to include nonimmigrant treaty investors—a visa for which trade was no longer a requirement.3 Nonimmigrant visa categories for traders and investors have always required that the principal visa holder stems from a country with which the United States has a treaty.4 The nonimmigrant visa classes are defined in §101(a)(15) of the INA. These visa classes are commonly referred to by the letter and numeral that denotes their subsection in §101(a)(15) of the INA, and are referred to as E-1 for nonimmigrant treaty traders and E-2 for nonimmigrant treaty investors.
Unlike nonimmigrant investors, who come to the United States as temporary admissions, immigrant investors are admitted into the United States as LPRs.5 With the Immigration Act of 1990,6 Congress expanded the statutory immigrant visa categories to include an investor class for foreign investors. The statute developed an employment-based (EB-5) investor visa for LPRs,7 which allows for up to 10,000 admissions annually and generally requires a minimum $1 million investment. Through the Regional Center Pilot Program, investors may invest in targeted regions and existing enterprises that are financially troubled. This pilot program was extended by the Basic Pilot Program Extension and Expansion Act of 20038 to continue through FY2008.
Foreign investors are generally considered to help boost the United States economy by providing an influx of foreign capital into the United States and through job creation. For investor immigrants, job creation is an explicit criterion, while with the nonimmigrant visa categories economic activity is assumed to spur job growth. Additionally, foreign investors are often associated with entrepreneurship and increased economic activity. Critics, however, believe that such investors may be detrimental since they potentially displace potential entrepreneurs that are United States citizens.
There is currently one immigrant class set aside specifically for foreign investors coming to the United States.9 Falling under the employment-based class of immigrant visas, the immigrant investor visa is the fifth preference category in this visa class.10 Thus, the immigrant investor visa is commonly referred to as the EB-5 visa.
The basic purpose of the LPR investor visa is to benefit the United States economy, primarily through employment creation and an influx of foreign capital into the United States.11 Although some members of Congress contended during discussions of the creation of the visa that potential immigrants would be "buying their way in," proponents maintained that the program's requirements would secure significant benefits to the U.S. economy.12 Proponents of the investor provision offered predictions that the former-Immigration and Naturalization Service (INS) would receive approximately 4,000 applications annually. These petitioners' investments, the drafters speculated, could reach an annual total of $4 billion and create 40,000 new jobs.13 The Senate Judiciary Committee report on the legislation states that the provision "is intended to provide new employment for U.S. workers and to infuse new capital into the country, not to provide immigrant visas to wealthy individuals" (S.Rept. 101-55, p.21).
As amended by the Immigration Act of 1990,14 the Immigration and Nationality Act (INA) provides for an employment-based LPR investor visa15 program designated for individuals wishing to develop a new commercial enterprise16 in the United States (INA §203(b)(5)). The statute stipulates that
The enterprise must employ at least 10 U.S. citizens, legal permanent residents (LPRs), or other work-authorized aliens in full time positions. These employees may not include the foreign investor's wife or children.
The investor must further invest $1 million17 into the enterprise, such that the investment goes directly towards job creation and the capital is "at risk."18 However, if an investor is seeking to invest in a "targeted area"19 then the required capital investment may be reduced to $500,000.20 For each fiscal year, 7.1% of the worldwide employment-based visas (roughly 10,000 visas) are set aside for EB-5 investors, of which 3,000 are reserved for entrepreneurs investing in "targeted areas."21
The business and jobs created must be maintained for a minimum of two years.22
According to regulations, enterprises being proposed need not be backed by a single applicant.23 Multiple applicants may provide financial backing in the same enterprise, provided that each applicant invests the required minimum sum and each applicant's capital leads to the creation of 10 full-time jobs. The applicant may also combine the investment in a new enterprise with a non-applicant who is authorized to work in the United States. Furthermore, each individual applicant must demonstrate that he or she will be actively engaged in day-to-day managerial control or as a policymaker.24 Petitions as a passive investor will not qualify.25 However, since limited partnership is acceptable, regulations do not prevent the investor from living in another location or engaging in additional economic activities.
The Regional Center Pilot Program differs in certain ways from the standard LPR investor visa. Established by §610 of P.L. 102-395 (October 6, 1992), the pilot program was established to achieve the economic activity and job creation goals of the LPR investor statute by encouraging investors to invest in economic units known as "Regional Centers."26 Regional Center designation must be approved by the Department of Homeland Security's (DHS) United States Citizenship and Immigration Service (USCIS), and is intended to provide a coordinated focus of foreign investment towards specific geographic regions. Areas with high unemployment are especially likely to receive approval as a Regional Center, since they are less likely to receive foreign capital through foreign direct investment (FDI)27 (although the basic requirements apply to all regional petitions).28 Up to 5,000 immigrant visas29 may be set aside annually for the pilot program. These immigrants may invest in any of the Regional Centers that currently exist to qualify for their conditional LPR status.30
The Basic Pilot Program Extension and Expansion Act of 200331 scheduled the program to sunset in FY2008. However, the Department of Homeland Security Appropriations Act, 2010 (P.L. 111-83, §548), extends the authorization of the Regional Center Pilot Program through September 30, 2012. Following the 2003 legislation, USCIS decided to develop a new unit to govern matters concerning LPR investor visas and investments.32 On January 19, 2005, the Investor and Regional Center Unit (IRCU) was created by the USCIS, thereby establishing a nationwide and coordinated program. USCIS believes that the IRCU will serve the dual purpose of guarding against EB-5 abuse and encouraging investment.33
The USCIS approximates that between 75-80% of EB-5 immigrant investors have come through the pilot program since it began, and that limited partnerships constitute the most significant portion of this group.34
In contrast to the high number of applications for other employment-based LPR visas,35 the full allotment of almost 10,000 LPR investor visas per fiscal year has never been used. As Table 1 below shows, the number of LPR investor admissions reached 1,361 admissions in FY1997, or 13.6% of the program's visa supply. In subsequent years, the program declined markedly, before increasing up to 1,360 in FY2008. Despite the low numbers of overall investor admissions, the program has seen a marked increase since the implementation of the Regional Center Pilot Program expansion in 2004.
From FY1992 to FY2004, the cumulative total amount invested into the United States by LPR investor visa holders was approximately $1 billion and the cumulative number of LPR investor visas issued was 6,024.36 Since FY2004, an additional 1,901 immigrant investor visas have been issued. In the earlier years of the program, it attracted a relatively higher rate of derivatives than principals.37 However, in the last three years the distribution of visas between principals and derivatives has more closely approximated parity. Derivatives have historically accounted for approximately 66% of immigrant investor visa recipients, while principals account for 34%.
Table 1. United States LPR Investor Visa Admissions,
FY1996-FY2007
Principalsa
Derivativesa
Source: CRS presentation of U.S. Department of Homeland Security Office of Immigration Statistics FY2008 data.
Notes: In FY2008, of the total admissions, 1,029 were new arrivals and 331 were adjustments of status. The new arrivals included at least 304 principals and 714 dependents, while the adjustments of status included at least 123 principals and 208 dependents.
a. DHS withheld the information on some individuals to limit disclosure. Thus, the total admissions does not reflect the sum of principals and derivatives for FY2007 and FY2008.
According to data from DHS, in the time span of FY1992 through May 2006, authorities had received a cumulative total of 8,505 petitions for immigrant investor visas. Of these petitions, 4,484 petitions had been granted while 3,820 had been denied38—an approval rate of 52.7%. Furthermore, in this same time span, officials received 3,235 petitions for the removal of conditional status39 from the LPRs of immigrant investors. These petitions were granted in 2,155 cases (a 66.6% approval rate), while the remaining 910 petitions for the removal of conditional status were denied.
Although numerous possible explanations for the overall low admission levels of LPR investor visas exist, the notable drop in admissions in FY1998 and FY1999 is due in part to the altered interpretations by the former-INS of the qualifying requirements that took place in 1998.40 The 21st Century Department of Justice Appropriations Act (2002)41 provided remedies for those affected by the former-INS' 1998 decision, and provided some clarification to the requirements to promote an increase in petitions.42
A 2005 report from GAO43 listed a number of contributing factors to the low participation rates, including the rigorous nature of the LPR investor application process and qualifying requirements; the lack of expertise among adjudicators; uncertainty regarding adjudication outcomes; negative media attention on the LPR investor program; lack of clear statutory guidance; and the lack of timely application processing and adjudication. It is unknown how many potential investors opted to obtain a nonimmigrant investor visa or pursued other investment pathways. A recent law journal article on investor visas suggested that the two year conditional status of the visa and the alternate (and less expensive) pathways for LPR status often dissuaded potential investors from pursuing LPR investor visas.44 Yet, since FY2003, the number of immigrant investor visas issued has increased on an annual basis.
According to the GAO study, of the LPR visas issued to investors, 65345 had qualified for removal of the conditional status of LPR visa (not including dependents).46 GAO estimates that these LPR investors invested approximately $1 billion cumulatively into their collective enterprises and 99% kept their enterprise in the same state where it was established.47 The types of enterprises these investors established were often hotels/motels, manufacturing, real estate, or domestic sales, with these four categories accounting for 61% of the businesses established by LPR-qualified investors. Furthermore, an estimated 41% of the businesses by LPR-qualified investors were set up in California. The subsequent states with the highest percentages of established enterprises were Maryland, Arizona, Florida and Virginia with 11%, 8%, 7%, and 7% respectively (for examples of current investment projects see Appendix B).
As Figure 1 shows, persons obtaining LPR investor visas to the United States between FY1998 and FY2007 has fluctuated in number. While 824 persons obtained such LPRs in FY1998, the total for FY2003 was 64. From FY2003 through FY2008, the total number grew by 2,125% to a total of 1,360. Thus, despite a notable recent upward trend in growth, the issuance of LPR investor visas has not yet recovered to the levels of the mid-to-late 1990s. Additionally, during the time period depicted in Figure 1, 38.9% of the 3,754 visas issued were for individuals adjusting status. The remaining 61.1% were issued to new arrivals. The majority of these new arrivals occurred in FY2006-FY2008.
Source: CRS presentation of data from the DHS Yearbook of Immigration Statistics 2008.
Notes: Figure does not include information on some individuals where DHS chose to limit disclosure. Thus, the total admissions does not reflect the sum of new arrivals and adjustment of status individuals for FY2007 and FY2008.
When coming to the United States as a temporary investor, there are two classes of nonimmigrant visas which a foreign national can use to enter: the E-1 for treaty traders and the E-2 for treaty investors. An E-1 treaty trader visa allows a foreign national to enter the United States for the purpose of conducting "substantial trade" between the United States and the country of which the person is a citizen.48 An E-2 treaty investor can be any person who comes to the United States to develop and direct the operations of an enterprise in which he or she has invested, or is in the process of investing, a "substantial amount of capital."49 Both these E-class visas require that a treaty exist between the United States and the principal foreign national's country of citizenship.50
In the majority of cases, a commerce or navigation treaty serves as the basis for the E-class visa extension (though other bilateral treaties and diplomatic agreements can also serve as a foundation).51 A number of countries offer both the E-1 and E-2 visas as a result of reciprocal agreements made with the United States, although many countries only offer one. Currently there are 75 countries who offer the treaty class visas. Of these countries, 28 offer only the E-2 treaty investor visa while 4 countries offer only the E-1 treaty trader visa (see Appendix A). In the cases where a country offers both types of visas, an applicant who qualifies for both types of visa may choose based upon his or her own preference. Such decisions, however, would depend upon the specific nature of the business as the E category visas carry different qualifying criteria for renewal.
Although each category has some unique requirements, other requirements cut across all categories of nonimmigrant investor visas. An applicant for any of the nonimmigrant investor categories must satisfy the following criteria:
the principal visa recipient must be a national of a country with which the United States has a treaty.52
the principal visa recipient must be in some form of executive or supervisory role in order to qualify as a treaty trader or investor53
the skills the principal visa recipient possesses must be essential and unique to the enterprise under consideration54
the visa holder must show an intent to depart the United States at the end of the visa's duration of status55
if investing in an existing enterprise, the applicant must show that the employer of the treaty trader or investor must be at least 50% owned by nationals of the treaty country.56
A person granted an E-class visa is eligible to stay in the United States for a period of two years.57 Although an applicant is obligated to show intent of departing the United States at the end of the visa duration, the E-class visas may be renewed for an indefinite number of two year periods provided that the individual still qualifies.58 Spouses and child dependents are granted the same visa status and renewal as the principal visa holder so long as the child is under the age of 21, after which the child must apply and qualify for his or her own visa.59
Generally with the E-class visas, the individual may not engage in other employment than that which is stipulated,60 although incidental activities are generally allowed.61 If any E-class individual wishes to change employer, he or she is under obligation to contact the Department of State (DOS) and apply for adjustment of status.62
E-1 Treaty Trader63
The E-1 formally traces back to the 1924 Immigration Act, although merchants working under treaty terms were recognized visa holders prior to this act.64 Under current law, the E-1 visa is to be issued to an individual who engages in substantial trade between the United States and his or her country of nationality. According to immigration regulations, trade is defined as "the exchange, purchase or sale of goods and/or services. Goods are tangible commodities or merchandise having intrinsic value. Services are economic activities whose outputs are other than tangible goods."65 This expanded definition of trade into the service sector allows for a fairly broad understanding of what trade may entail.
The term "substantial trade" has never been explicitly defined in terms of monetary value. Rather, the term is meant to indicate that there is an amount of trade necessary to ensure a continuing flow of international trade items.66 For smaller businesses, regulatory qualification for treaty trader status may be derived from demonstrating that the trading activities would generate an income sufficient to support the trader and his or her family.67 The qualifications for sufficient volume or transaction have not been explicitly set in the regulations,68 but a minimum qualification is that more than 50% of the business's trade must flow between the United States and the treaty country from which the E-1 visa holder stems.69
The E-2 investor visa is a visa category that stems from the 1952 Immigration and Nationality Act (INA). The qualifying applicant for such a visa is coming to the United States in order to "develop or direct the operations of an enterprise in which he has invested, or is in the process of investing a substantial amount of capital."70 Unlike the E-1 visa, the business need not be engaged in trade of any kind. However, the same rules concerning ownership are still applicable.71 In cases of ownership of an enterprise, the regulations require that the E-2 visa holder control at least a 50% interest in an enterprise.72 The burden of proof for E-2 qualification lies with the applicant in the same manner as with the other E-class visas.73
There is no explicit monetary amount for what constitutes a "significant amount of capital." The DOS has operated under a regulatory proportionality principle that dictates that the amount an individual invests must be enough to ensure the successful establishment and growth of an enterprise, and there must be some level of investment risk assumed by the treaty investor.74 Because of this proportionality regulation, an investment in a small to medium-sized enterprise is acceptable.75 For smaller sized investments, the DOS generally requires that the investment amount be a higher percentage of the enterprise value.76 For higher valued enterprises the investment percentage becomes less relevant, provided that the monetary amount is deemed substantial.77
As further grounds for regulatory qualification for an E-2 investor visa, investments in marginal enterprises are not eligible for acceptance.78 Consequently, the DOS applies a two-pronged test for marginality.79 On the one hand, the enterprise in which the applicant seeks to make an investment must be capable of providing more than a minimal living for the investor and his or her family. However, the rules are capable of recognizing that some businesses need time to establish themselves and become viable. Consequently, as a second prong of the test, the investor's enterprise must be deemed capable of making a significant economic impact within five years of starting normal business activity. If neither of these prongs is successfully passed, the enterprise is deemed marginal and the application is rejected.80
An additional category of E-class nonimmigrant visa—the E-3 visa for Australian nationals—does exist, but it is set aside for use by specialized workers, and not for investors or traders.81
E-class visas are largely distributed to foreign nationals from the regions of Asia and Europe. This result is not surprising since the majority of treaty countries are in these two regions. Furthermore, one could reasonably expect that the financial requirements embedded in nonimmigrant investor visa categories would result in a high correlation between the nationality of qualifying applicants and country membership in the Organization for Economic Cooperation and Development (OECD)—an organization of capital abundant countries.
As Figure 2 shows, the Asian region was issued the highest number of E-class visas in FY2009, with a total of 14,843 visas issued. These Asian issuances constitute more than any other region, and represent 45.5% of the worldwide total. Within the Asian region, the biggest user of the E-class visa is Japan, whose nationals accounted for 9,533 of the visa issuances in FY2009, a figure representing 29.2% of the 32,655 worldwide E-class visas issued that fiscal year. Europe's 10,943 E-Class visas accounted for 33.5% of the worldwide total, while the North American share of 3,897 visas represented 11.9%. Oceania's issuance accounted for 2,387 visas, or 7.3% of the total. South America and Africa each accounted for less than 1.7% of the worldwide total, and combined their nationals represented approximately 1.8% of the worldwide E-class visa issuances for FY2009.
Source: Data are from the Department of State, Bureau of Consular Affairs, Report of the Visa Office, 2009.
Notes: The figure does not include the one visa issued to an individual with no registered nationality. E-3 visas issued are not included in the figure.
The admissions data on nonimmigrant investors offers more detailed insights into the origins of the visa holders. Table 2 provides cumulative totals of E-class visa admissions into the United States in FY2008 by region of origin, with a detailed breakdown of the Asian region. The figures listed in Table 2 show that the Asian region accounted for approximately 47.7% of the nonimmigrant investor visa admissions into the United States. In FY2008, Japan accounted for the majority of nonimmigrant investor admissions with 85,175 admissions.82 South Korea's 13,801 nonimmigrant investors admitted account for 6.0% of the United States total for FY2008. It is worth noting that the fast growing markets of China and India (the world's two largest population centers) combined for slightly less than 900 admissions. The second largest region of origin for nonimmigrant investor admissions was Europe, with slightly more investors admitted than Japan. And while Europe's 87,787 admissions accounted for 38.1% of the total U.S. nonimmigrant investor admissions in FY2008, the 276 admissions of nationals from African countries accounted for approximately one-tenth of 1% of this same total.
Notes: The data not include the 12,739 admission of free trade workers with E-3 visas from Australia.
a. Denotes People's Republic of China, Hong Kong, and Macau.
The Department of Homeland Security (DHS) offers statistics on the admissions of nonimmigrants and their destination state. Table 3 indicates the destination states of nonimmigrant treaty trader and investor visa admissions into the United States for FY2008. The state with the highest number of nonimmigrant investors as their destination in FY2008 was California with 46,835 admissions, accounting for 20.3% of the admissions total. Following California, the next three biggest recipients of nonimmigrant investors were New York, Florida, and Texas with 27,252, 24,668, and 22,126 admissions each, respectively. In the respective order, these state admissions accounted for 11.8%, 10.7% and 9.6% of the admissions total in FY2008. The only other states with a combined total of more than 10,000 nonimmigrant treaty trader and investor visa admissions were Michigan and New Jersey. Michigan was the destination state of 12,331 nonimmigrant investors admitted, while New Jersey attracted 11,748 admissions. These totals accounted for 5.3% and 5.1% of the United States admissions total, respectively. The remaining states represented the destination states for approximately 37.2% of nonimmigrant traders and investors.
Notes: The data not include the 9,294 admission of free trade workers with E-3 visas from Australia.
Historically, more investors have applied to enter the United States as nonimmigrants than immigrants, possibly because the less stringent requirements for the nonimmigrant investor visa make it easier to obtain. However, relative to other nonimmigrant categories, the admission levels of investor nonimmigrants are low. With the ease of movement, technological advances, and ease of trade restrictions, many investors may be choosing to invest in the United States from abroad and enter the United States on B-1 temporary business visas or visa waivers.83
Although there are many countries with investor visa programs—including the United Kingdom, Australia, and New Zealand—the Canadian investor program has the strongest parallels to those of the United States. These parallels are in part due to the fact that the U.S. immigrant investor program was modeled after its Canadian counterpart. The Canadian program allows investors who have a net worth of at least $800,000 (Cdn) to make a $400,000 (Cdn) investment through Citizenship and Immigration Canada (CIC).84 The Canadian government additionally offers an entrepreneurial visa for foreign nationals with a net worth of $300,000 (Cdn).85 These nationals are required to invest and participate in the management of a certain sized business, and they must produce at least one new full-time job for a non-family member.86 Between 1986 and 2002, the Canadian investor visa program attracted more than $6.6 billion (Cdn) in investments.87 From FY1992 through FY2004, United States LPR investor immigrants had invested an estimated $1 billion in U.S. businesses.88
According to published accounts, the Canadian investor visa was developed initially to attract investors from the British colony of Hong Kong.89 The visa was created in 1986 in response to the significant numbers of investors seeking to migrate from Hong Kong in anticipation of the transfer of the colony from British to Chinese control. For these investors, the visa offered an opportunity to establish legal permanent residence in a country that was perceived to be more embracing of individual property rights and open markets.90 These immigrant investors from Hong Kong, along with other immigrant investors, have cumulatively invested over $3 billion in the Canadian economy.91
As Figure 3 demonstrates, the annual number of immigrant investor visas issued over the past decade has remained multiple times higher than that of its United States counterpart. The margin between these two programs was closest in 1997, when the Canadian issuance of 5,595 immigrant investor visas was approximately 400% higher than the U.S. total of 1,361 immigrant investor visas issued. Although these ratios have fluctuated, the sizable Canadian advantage in this measure has remained. In terms of the absolute levels, the Canadian immigrant visa level for 2008 represented a 13-year high, while the U.S. level for the same time period roughly equaled its 13-year high. Both countries have shown an upward trend in immigrant investor visas since 2003.
Source: Data are from the United States Government Accountability Office (2008) and Citizenship and Immigration Canada (2008).
What is unclear from the data is whether the competition between the U.S. and Canadian program (as well as investor programs in other countries) constitutes a zero-sum game. There are no data available showing the motive for migration among investors, or if they perceive the United States and Canada as interchangeable investment locations. If the investors are motivated purely by the economic returns, then economic theory92 suggests that equalizing the program financial requirements should result in more equal rates of petitions. Furthermore, a lowering of the financial requirements should increase the supply for both countries. However, if the immigrant investors are motivated to migrate by non-financial considerations, then equalizing the United States program requirements with its Canadian counterpart is likely to have little impact on the current trends.
Classical economic theory has posited that trade liberalization (including the reduction of investment restrictions) establishes a conditional inverse theoretical relationship between foreign direct investment (FDI) and migration.93 In other words, as trade increases, migration pressures decrease. The theory posits that an increased level of FDI should reduce migratory pressures through growth in the targeted economy. As economic growth produces a higher demand for labor, workers in that economy feel less pressure to seek employment in foreign economies, provided that the new jobs complement the workforce's skills. For example, if economic growth creates demand for skilled labor, then an unskilled labor force should not experience any reduced migration pressures. Thus, while FDI increases host-country growth, there is not necessarily a direct reduction in host-country migration pressures.
The investor visas offered by the United States operate on the principal that FDI into the United States should spur economic growth in the United States. According to the classical theory, if these investments are properly targeted towards the U.S. labor force's skill sets, it should reduce the migration pressures on U.S. workers. Such economic growth from FDI should further spur greater demand for trade. In FDI between capital abundant countries such as the OECD member states (between whom a marked majority of FDI flows), the empirical evidence has largely supported this notion.94 Furthermore, it has provided an increased per capita income in these states, as well as boosted the general standard of living.
What is less clear from the empirical research is the degree to which potential migration provides any additional incentive for investment activity in the United States. The classical trade theory asserts that trade and migration are substitutes,95 and that trade liberalization should reduce migratory pressures.96 These basic propositions are generally agreed to hold in the long term. Consequently, in the long term classical trade theory suggests there should be little migration of investors from countries with liberalized trade arrangements with the United States.97 Instead, these investors would achieve their investments through conventional FDI. Furthermore, the theory suggests that investors would be more likely to migrate from countries with restrictive trade policies (a policy more highly correlated with less economically developed countries).
Critics of the classical economic models contend that despite elegant predictions, the models produced by the theory frequently do not capture the costs of international finance. Such critics argue that foreign investments often occur at the expense of local businesses, and result in exploitive practices of local labor.98 These criticisms are particularly common when critiquing the economic relationship between capital abundant countries and less economically developed countries (LEDC). According to the argument, more powerful countries can leverage their power to construct investment relationships that shift a disproportionate amount of profits to the capital abundant countries. Simultaneously, a greater share of the costs99 are shouldered by the less powerful country. Classical economists generally respond by noting that these investments are still producing growth in the LEDCs, making the countries better off than without the investments. However, LEDCs remain a source of contention between the classical economic theorists and their critics.
Some scholars have expressed doubt about the posited trade/migration substitutability, suggesting that the relationship in the short or medium term could look different from the long term.100 One of the arguments put forward is that trade and migration are complementary for countries with different levels of development.101 Under such a scenario, economic growth in a sending country would provide potential migrants with the economic means to overcome relatively high migration costs. Other observers point to such factors as imperfect credit markets and currency fluctuations as significant "push" factors for potential migrants.102 These latter factors, however, are generally more highly correlated with LEDCs. Therefore, both the complementary and substitutability theories of trade and migration suggest that higher demand for investor out-migration should currently lie in the populations of LEDCs. However, as noted earlier, investor visas issued to regions with LEDCs are relatively few.
What makes the visa program distinct from conventional FDI is that it involves trade through the import of human capital. Consequently, these visas have potential for creating a so-called "brain drain" migration out of less-developed sending-countries.103 LEDCs are by definition limited in their capital levels, and economic theory would suggest that exporting capital from a capital scarce country would inhibit its growth and development.104 Classical theorists would argue that the United States would be better served by sending FDI into LEDCs, thereby promoting economic growth in LEDCs and a subsequent higher demand for U.S. goods.105 Such investment, the theory dictates, would promote job growth both in the United States and abroad.106 Instead, targeting investors from capital abundant countries for sector specific investments would serve a more complementary role for the global market.107 By attracting capital abundant country investors, the United States' economic growth and productivity could be stimulated without adversely affecting the consumption and trade potential of the investor's country of origin.
Some recent scholarly work has drawn a distinction between the decision-making factors of potential temporary and permanent migrants.108 Amongst temporary migrants, it is the employment prospects and wage differentials that are significant variables in deciding whether to migrate. Differences in both gains and price levels should affect the cost/benefit calculation of the potential migrants, as these variables will affect potential levels of consumption and savings. For permanent migrants, however, the prospects for professional and social mobility are the main motivating factors.
The distribution of visas among Asian countries shows marked country-specific tendencies among investor visa petitioners. Specifically, the polarization among petitioners towards either immigrant (permanent) or nonimmigrant (temporary) visas suggests that a significant proportion of applicants are substituting immigrant visas for nonimmigrant visas, or vice versa. For example, while Japan accounted for 36.9% of all the foreign nationals arriving on nonimmigrant treaty trader and investor visas in FY2008 (Table 2), its nationals represented only 1% of all the LPR investor visas issued since FY1992. Conversely, nationals of Taiwan accounted for roughly 40% of immigrant investors issued since FY1992, but only 1.5% of nonimmigrant arrivals in FY2008. In the context of the aforementioned theory, these opposite behaviors suggest that Japanese investors are seeking to capitalize on wage differentials, while Taiwanese, Chinese, and (to some extent) South Korean investors are pursuing professional and social mobility.
Although some considerations weigh more heavily on the decisions of immigrant and nonimmigrant investors, no single explanation accounts for the behavior of investor visa petitioners. Japan, for example, has some trade restrictions with the United States through voluntary export restraint agreements limiting auto and steel exports to the United States, suggesting from the theoretical standpoint that Japanese investors would choose to temporarily migrate.109 The Japanese governments have also complained that the post-9/11 customs regulations and practices of the United States inhibit U.S./Japanese trade.110 Despite the suggestion by these factors that Japanese investors are temporarily substituting trade with migration, it is also plausible that Japan's weak economic performance has reduced the professional mobility opportunities—a motivation associated with permanent migration. From 1991-2000, Japan's real (adjusted for inflation) average GDP growth rate was 1.4%, and it fell to 0.9% from 2001 to 2003.111 Yet, regardless of motivation, Japanese investors are predominantly choosing to temporarily migrate to the United States.
The fact that China, Taiwan and South Korea have had strong economic performance in the last decade and relatively higher levels of immigrant investors to the United States, suggests that these investors are migrating for more than financial purposes. These investors may be more strongly motivated by the family and/or social network connections to previously migrated investors and other LPRs in the United States. These theoretically derived motives, however, must be further tested empirically before any conclusive behavioral statements can be made.
Classical economic theory holds that investments provide for multiplier effects throughout the economy by increasing demand for other goods and services. For example, an increase in demand for corn may increase the demand for storage facilities, which results in an increase in construction contracts. The U.S. Department of Commerce has quantified these effects through the Regional Input-Output Modeling System (RIMS II).112 The RIMS II multipliers have become a significant factor in assessing indirect economic activity and employment effects for Regional Center Pilot Program petitions.113 Using the regional multipliers for various industries, foreign investment funds are frequently shown to yield increases in demand across an economy that are several times higher than the direct input by an investor. Thus, despite the relatively low number of investors entering the United States, the impact of each investment by a foreign investor is a multiplied factor greater than the direct investment, depending upon which industry and region is being invested in. Furthermore, studies showing the direct economic investments of foreign investors may not fully capture the economic impact of these investors upon a region.114
In recent years, significant efforts have been made by administrative agencies to both promote investment by foreigners in the United States economy, and to close perceived loopholes for visa exploitation. At the center of these efforts has been the USCIS' changes to the Regional Center Pilot Program, which addressed fraud concerns and the development of a Regional Center unit for coordination and targeting of foreign investments.
During the late 1990's, the LPR investor visa was suffering from high levels of fraudulent applications.115 There has been concern that potential immigrants could use schemes of pooling their funds and transferring the money to demonstrate the existence of sufficient capital.116 Furthermore, applicants could potentially use promissory notes that would allow for their repayment after a six year time period. Since the LPR was only conditional for two years, some observers feared that these investors could pull out of their respective investments after being granted their LPR, have the promissory notes forgiven, and the enterprise would collapse. As a result, the USCIS has engaged in a policy of not accepting promissory notes, although the regulations state that petitions with promissory notes may be considered for approval.117 Additionally, the creation of the Investor and Regional Center Unit (IRCU) within USCIS has allowed greater scrutiny of applications through increased resources and coordination of petitions processing. Petitioners now must provide extensive documentation that traces the source of their funds to show that the capital was legally obtained.118
Prior to the creation of IRCU, the former-INS had been criticized for becoming more restrictive in application reviews for Regional Center designation, including allowing some applications to remain pending for more than three years.119 In 2005, concerns were raised by both Members and advocates that the IRCU still did not process applications quickly enough,120 and that staff members had competing obligations within IRCU.121 Proponents of the Regional Center Pilot Program believe it has attracted a significant amount of capital and that addressing these criticisms would further increase the levels of foreign investments through the LPR investor visa.122 USCIS has responded to these criticisms by expanding the number of Regional Centers available for LPR investor investments.
Working with foreign financing from the immigrant investor program has become highly attractive for many domestic investors. A number of current investment projects are using LPR investor financing because it is less costly for the domestic investors. For domestic investors, employing LPR investor funds becomes a significantly cheaper option than a bank loan, since there is no requirement to pay interest on the financing. Additionally, because the enterprises are less saddled with financing debt they are more quickly able to turn a profit. The LPR investor visa petitioners are still able to qualify for conditional LPR status under these investment structures through the multiplier rules for employment and capital that the USCIS employs. Thus, limited partnerships of domestic investors with LPR investor visas has become a popular option for financial stabilization and enterprise start-up in Regional Centers as diverse as Philadelphia and South Dakota.
In the efforts to rebuild the sections of New Orleans damaged by Hurricane Katrina, developers and officials alike have taken an interest in attracting foreign capital. USCIS officials are working closely with New Orleans officials to establish New Orleans as another Regional Center for LPR investor visa investments. Officials at USCIS are hopeful that the program success that the Philadelphia targeted center is experiencing can be replicated in New Orleans. Since being designated a Regional Center, Philadelphia has attracted over 100 LPR investors and most of their investments are being used to help finance the renovation and transformation of the 1,100 acre shipyard (for further discussion, see Appendix B).
Current Legislation and Potential Issues
In the 111th Congress, authorizing language in the Department of Homeland Security Appropriations Act, 2010 (P.L. 111-83, §548), extends the authorization of the Regional Center Pilot Program through September 30, 2012. The Senate-passed version of the act had included language to permanently reauthorize the EB-5 Regional Center Pilot Program, but this language was not included in the conference agreement. On July 22, 2009, the Senate Judiciary Committee held a hearing to assess the Regional Center Pilot Program, with some members expressing support for the program's permanent authorization.123 Some legislation has also proposed modifying the qualifying criteria as a targeted area to lower the threshold for investment amounts in some geographic regions as a means of enticing more applications by potential immigrant investors.124 There are currently no other programs for targeting investments by immigrant investors to the United States.
Additional investor visa issues that could surface may relate to temporary investors. In terms of nonimmigrant visas, the Danish government has been lobbying the United States to grant E-2 treaty investor visas to Danish nationals. Originally, this provision was granted to the Danes on May 2, 2001 as part of a protocol to the treaty granting nationals of Denmark E-1 nonimmigrant trader visa eligibility. The protocol was never ratified, however, due to congressional objections over the inclusion of immigration provisions in a trade agreement. Subsequently, Representative Sensenbrenner introduced H.R. 3647 in the 109th Congress, which was passed in the House on November 16, 2005, and would have allowed nationals of Denmark to enter and operate in the United States as investors under E-2 treaty investor nonimmigrant visas. Currently, Danish nationals are only allowed E-1 treaty trader visas. Denmark is one of four countries whose nationals are eligible for E-1 treaty trader visas, but not E-2 treaty investor visas (see Appendix A).
Year of Visa
Congo (Kinshasa)a
Trinidad & Tobagoa
Source: CRS presentation of data from the U.S. Department of State Foreign Affairs Manual, 9 FAM §41.51.
a. Countries with only E-2 visa privileges.
b. Countries with only E-1 visa privileges.`
Appendix B. Immigrant Investor Pilot
There are currently numerous targeted economic regions set up for the Regional Center Pilot Program for the EB-5 visa category. These targeted areas have focused on different types of investments in order to achieve economic benefits for the given region. Below are descriptions of a couple of the projects that are currently in place under the Regional Center Pilot Program and the results these projects are producing.
The South Dakota International Business Institute (SDIBI), Dairy Economic Development Region (DEDR) is the only regional targeting center currently run by a state government. Approved in June 2005, this Regional Center was the result of a state-wide effort to find an improved method of attracting foreign capital to South Dakota. From the state's perspective, the EB-5 pilot investor program offered a more promising solution than the E-2 nonimmigrant visa, since officials could offer investors the benefit of LPR status.125 Additionally, the job-creation criterion of the EB-5 visa aligned well with the state's focus on job creation from foreign investments (as opposed to isolated capital injections). In its application for Regional Center designation, the state said it would focus its efforts on attracting dairy farm investors. USCIS agreed to the designation on the condition that South Dakota would allow for limited partnerships of foreign investors with domestic farmers.126 As a result, South Dakota currently has enterprises fully owned and operated by foreign investors, as well as limited partnerships.
Since the regional designation took effect, South Dakota has attracted 60 foreign investors to its dairy industry (with an additional 10 applications still pending).127 These foreign investors have injected approximately $30 million into the South Dakota economy, with an additional $6 million in matching funds coming from local farmers. Furthermore, this combined $36 million in invested funds has resulted in almost $90 million in bank financing for the various dairy investment projects. As a direct consequence of these foreign investments, 240 additional jobs have been created and 20,000 additional cows have been brought to South Dakota.128 Using the RIMS II multipliers for investment and employment,129 the foreign investments from EB-5 immigrants have resulted in a total of 638 additional jobs and over $360 million in additional funds to the regionally targeted economy.
According to SDIBI/DEDR Director Joop Bollen, the pilot program has afforded South Dakota "a tremendous opportunity," not only because of the direct investments and multiplier effects, but because of the other investments made by the foreign investors.130 According to Director Bollen, the attraction of foreign investors has had significant spillover effects into the restaurant and meat packing industries. As a result, SDIBI/DEDR hopes to focus on attracting additional investments for its meat packing plants. As such, Director Bollen stated that it was of paramount concern to the SDIBI/DEDR that USCIS have sufficient resources to quickly adjudicate EB-5 immigrant visa petitions. If the adjudication process is too long, Director Bollen stated, then the opportunity cost may make a South Dakota dairy investment unappealing to foreign investors.131
CanAm Enterprises is a private financial advising group which serves to structure, promote and administer the Philadelphia Industrial Development Center (PIDC) Regional Center.132 The group works in conjunction with the City of Philadelphia through the PIDC to facilitate the city development (mainly in the city's shipyard area) and provide investor credibility. This public/private partnership was developed to aid the transition of Philadelphia from a manufacture-based to a service based economy.133 The main strategy has been to use collateralized loans to attract investments in industries that provide long-term full time employment. By doing so the city hopes that investors will wish to invest in other projects and sectors of the city's economy.134
When the Philadelphia Naval Base was closed as part of the base closures of the 1970s, the base was handed over to the PIDC for transformation to civilian use. Despite the city's efforts the shipyard was unable to remain competitive in the ship construction industry.135 However, with the passage of requirements following the Exxon Valdez oil spill136 (and the ongoing regulations from the Jones-Shafroth Act),137 the civilian shipbuilding industry in the United States became economically viable again.138 The federal government and the city of Philadelphia combined to invest over $400 million into the Philadelphia shipyard. Additionally Norwegian shipbuilding companies were brought in as investors in the shipyard and provided valuable training and human capital to the shipyard. Since production restarted, EB-5 investors have become increasingly important for providing funds to remove production bottlenecks. A recent example includes the use of EB-5 funds for the development of a more advanced painting technology for the ships.139
Philadelphia is one of the Regional Centers that has been most successful in attracting foreign investors through the EB-5 visa. There are approximately 60 EB-5 visa investors in Philadelphia who have invested a total of $75 million into the city.140 Additionally, there are around 30 petitions that are under review for other investment projects. The lead official at CanAm Enterprises told CRS that while they believe the funds have been important to the city, the human capital the investors bring is equally important. This official stated that the investors being brought to the United States represented highly competent entrepreneurs, who not only made investments in the city beyond their initial investment, but also facilitated greater economic activity through exchanges with their existing foreign networks.141
P.L. 111-83, §548.
43 Stat 153.
INA §101(a)(15)(e)(ii).
INA §101(a)(15)(e).
The two basic types of legal aliens are immigrants and nonimmigrants. As defined in the INA, immigrants are synonymous with legal permanent residents (LPRs) and refer to foreign nationals who come to live lawfully and permanently in the United States. The other major class of legal aliens are nonimmigrants—such as tourists, foreign students, diplomats, temporary agricultural workers, exchange visitors, or intracompany business personnel—who are admitted for a specific purpose and a temporary period of time. Nonimmigrants are required to leave the country when their visas expire, though certain classes of nonimmigrants may adjust to LPR status if they otherwise qualify.
INA §203(b)(5).
P.L. 108-156, 8 USC §1324a note.
The INA provides for a permanent annual worldwide level of 675,000 legal permanent residents (LPRs), but this level is flexible and certain categories of LPRs are permitted to exceed the limits, as described below. The permanent worldwide immigrant level consists of the following components: family-sponsored immigrants, including immediate relatives of U.S. citizens and family-sponsored preference immigrants (480,000 plus certain unused employment-based preference numbers from the prior year); employment-based preference immigrants (140,000 plus certain unused family preference numbers from the prior year); and diversity immigrants (55,000). Immediate relatives of U.S. citizens as well as refugees and asylees who are adjusting status are exempt from direct numerical limits. For further discussion, see CRS Report RL32235, U.S. Immigration Policy on Permanent Admissions, by [author name scrubbed].
The INA provides that each category of immigrants has a set of preferences for the classes within that category. These preferences determine the priority of visa distribution for each category depending on certain formulas provided for in the INA. In the case of the LPR investor visa, being the fifth preference (and therefore the lowest) within the employment-based category, it has an annual maximum visa allocation of 10,000.
3 Charles Gordon, Stanley Mailman, and Stephen Yale-Loehr, Immigration Law and Procedure, § 39.07 (Matthew Bender, Rev. Ed.).
For debate on this issue, see Congressional Record, vol. 136 (July 12, 1990), pp. S7768-S7775.
The West Group. New Pilot Program for Immigrant Investors. 70 Interpreter Releases 1129. August 30, 1993.
This visa category is for permanent immigrants and should not be confused with the E-2 Treaty Investor nonimmigrant visa.
Since 2002, applicants have also been allowed to invest funds in "troubled businesses." These businesses must have been in existence for at least two years, and must have incurred a net loss of at least 20% of the business' net worth (prior to the loss) during the twelve- or twenty-four-month period prior to filing the petition (8 CFR §204.6(e)).
These funds must be demonstrated to have been obtained lawfully. Generally, any burden of proof to show qualifying status for an EB-5 lies with the applicant (8 CFR §204.6(j)).
Depositing the funds into a corporate account does not qualify as making the investment "at risk." Clear guidelines for demonstrating that the capital is "at risk" do not exist in the regulations (8 CFR §204.6(j)).
"Targeted areas" are either rural areas or areas with unemployment rates of at least 150% of the national average. A "rural area" is defined as one not within a metropolitan statistical area or the outer boundary of a city or town with a population of 20,000 or more.
8 CFR §204.6(f).
8 CFR §204.6(j).
8 CFR §204.6(g).
This latter criterion may be demonstrated through board membership, status as a corporation officer, or qualifying as a limited partner under the Uniform Limited Partner Act (ULPA) (8 CFR §204.6(i)).
8 CFR § 206.6.
FDI is defined as an investment made by a foreign individual or company in an enterprise residing in an economy other than where the foreign direct investor is based.
The basic requirements for Regional Center designation state that applicants must show how their proposed program will:
focus on a geographic region (8 CFR 204.6(m)(3)(i));
promote economic growth through increased export sales, if applicable;
promote improved regional productivity (8 CFR 204.6(m)(3)(i));
create a minimum of 10 jobs directly or indirectly per investor (8 CFR 204.6(m)(3)(ii));
increase domestic capital investment (8 CFR 204.6(m)(3)(i));
be promoted and publicized to prospective investors (8 CFR 204.6(m)(3)(ii));
have a positive impact on the regional or national economy through increased household earnings (8 CFR 204.6(m)(3)(iii)); and
generate a greater demand for business services, utilities maintenance and repair, and construction jobs both in and around the center (8 CFR 204.6(m)(3)(iv)).
These 5,000 visas represent a subset of the approximately 10,000 visas allocated for the LPR investor visa.
USCIS does not publish an official list of the number of EB-5 Regional Centers that exist. However, in November 2007, USCIS released to the American Immigration Lawyers Association a list of regional centers that were "active" as of October 2007. This list included 20 active centers. The list is available at http://vkvisalaw.wordpress.com/2007/11/12/updated-list-of-eb-5-investor-visa-regional-centers-as-of-oct-2007/.
P.L. 108-156.
USCIS, EB-5 Immigrant Investor Pilot Program, Background, June, 2004.
Based on CRS discussions with Morrie Berez, Chief Adjudications Officer, USCIS Investor and Regional Center Program, November 20, 2006.
According to the Department of State (DOS) Visa Bulletin (No. 111, Vol. VIII) there are backlogs only for all employment-based immigrants in the third preference categories, and for nationals of India and China in the second preference category. All other categories have numbers available for qualified applicants.
U.S. Government Accountability Office, Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors, GAO-05-256, April 2005, pp. 8-11.
Principals are the actual investors. Derivatives are comprised of spouses, children, and other dependents.
The discrepancy between the petitions granted, denied, and received is due to some petitions remaining unadjudicated.
"Conditional status" for an LPR immigrant means that the final approval of the LPR is contingent upon fulfilling certain requirements. For immigrant investors, the conditional status lasts for two years before the applicant is reviewed for final approval.
The West Group, Sections 203(b)(5) and 216A of the Immigration and Nationality Act, 75 Interpreter Releases 332, March 9, 1998.
3 Charles Gordon, Stanley Mailman, and Stephen Yale-Loehr, Immigration Law and Procedure, § 39.07 (Matthew Bender, Rev. Ed.)
Mailman, Stanley, and Stephen Yale-Loehr. "Immigrant Investor Green Cards: Rise of the Phoenix?" New York Law Journal, April 25, 2005. At http://www.millermayer.com/EB5NYLJ0405.html, visited January 23, 2007.
Of these investors, 247 (or 38%) applied for U.S. citizenship.
The fact that they qualified for LPR status means that they had successfully maintained their business and 10 full-time qualifying employees for more than two years.
GAO's report stated it could not provide reliable figures on the number of jobs created by these enterprises.
§101(a)(15)(E)(i) of the Immigration and Nationality Act (INA).
8 CFR §214.2(e)(6).
2 Charles Gordon, Stanley Mailman, and Stephen Yale-Loehr, Immigration Law and Procedure, § 17.06[2][a] (Matthew Bender, Rev. Ed.).
Spouses and child dependents are not subject to the same nationality requirements as they can be nationals of any country, regardless of whether that country has treaties with the United States or not.
There is no set formula for determining whether a person's role is sufficient to qualify, but is determined on a case by case basis using a number of different factors. These factors normally include such considerations as salary, position, duties, degree of control, and the number of employees under the applicant's supervision.
A nominal position (e.g. having the title of manager) or title is not sufficient grounds to qualify for an E-class visa. Individuals with highly specialized skills or knowledge pertinent to the employer's business may also qualify, although if the individual's skills are determined to be of only a specialized nature that person must qualify for an H-1B visa (for highly skilled professionals). An example of a skill that has been rejected by DOS as an essential skill is knowledge of a foreign language.
8 CFR §214.2(e)(2)(iii).
This criterion is more salient in the cases of smaller companies since ownership is more constant and concentrated. Large publically traded companies are largely not saddled with having to demonstrate ownership by nationals.
8 CFR §214.2(e)(19).
8 CFR §214.2(e)(20).
8 CFR §214.2(e)(4).
8 CFR §214.2(e)(8).
The rules on such incidental activities are quite flexible. The governing principle of such incidental activities is that the primary trade or investment activity remains paramount (see 9 FAM §41.40 n7 (Visa TL-872 February 20, 1975, i.e. prior to 1987 revision) and 9 FAM §41.11 n.3.1).
Although technically being a "trader" category as opposed to an "investor" category, there is sufficient grounds for believing that the E-1 traders should be included with the other investor categories. Although their activities must be related to trade, they are still allowed to make investments in United States enterprises. Also, investor categories such as the LPR investor visa have previously held requirements that investments must positively effect export levels in the industry where an investment is occurring (USCIS, EB-5 Immigrant Investor Pilot Program, Background, June, 2004).
The term "treaty merchant," for example, traces its roots at least back to the 1880 treaty with China to conduct trade (Treaty Between the United States and China, Concerning Immigration, November 17, 1880, art. I, 22 Stat. 826).
8 CFR §214.2(e)(2), as amended by 56 Fed. Reg. 10978, 10979 (1989).
8 CFR §214.2(e)(10).
8 CFR §214.2(e)(11).
8 CFR §214.2(e)(3)(ii).
Certain joint ventures have been deemed permissible by the United States, provided that each joint venture partner have veto power over decisions by the other partner.
8 CFR §214.2(e)(12).
8 CFR §214.2(e)(14).
9 FAM §41.51 n.10.4, as amended, TL:VISA-322 (October 10, 2001).
Visa Bulletin, Vol. V, No. 20—Nonimmigrant Treaty Investors U.S. Department of State, Visa Office (1982).
8 CFR §214.2(e)(15).
2 Charles Gordon, Stanley Mailman, and Stephen Yale-Loehr, Immigration Law and Procedure, § 17.06[3][c] (Matthew Bender, Rev. Ed.).
A special category of nonimmigrants classified as the E-3 visa has been established and is only available to nationals of Australia. Although agreed upon under the Australian Free Trade Agreement, the agreement itself contained no explicit immigration provision. Rather, the FY2005 supplemental appropriations for military operations in Iraq and Afghanistan (P.L. 109-16) included §501 creating the E-3 visa category. This visa permits the employment by any United States employer of a qualifying Australian national for a specialty occupation. Unlike the other E-class visas, the E-3 carries an annual cap which is currently set at 10,500. However, the other rules generally remain the same as E-1 and E-2 visas, with admissions for two years and unlimited extensions for qualifying individuals.
The E-3 resembles the H-1B-1 visa which allows for similar admissions of specialized workers from Chile and Singapore. After legislation was passed implementing the Chile and Singapore Free Trade Agreements (P.L. 108-77 and P.L. 108-78, respectively), these new laws carved out a portion of §101(a)(15)(H) of the INA for professional workers entering through the free trade agreements. Unlike the other H-1B requirements, H-1B-1 recipients are only required to be specialized workers as opposed to highly specialized. This visa category also differs from the E-3 visa in that it allows for an 18 month admission and carries an annual cap of 1,400 for Chilean nationals and 5,400 for nationals of Singapore. For further discussion on the E-3 and H-1B-1 visas, see CRS Report RL30498, Immigration: Legislative Issues on Nonimmigrant Professional Specialty (H-1B) Workers, by [author name scrubbed], and CRS Report RL32982, Immigration Issues in Trade Agreements, by [author name scrubbed].
Admissions figures differ significantly from visa issuance figures because individuals may leave the United States and return on the same visa, as long as the visa is still valid. Thus, some individuals may be counted multiple times in the admissions data.
According to the DHS Office of Immigration Statistics' 2005 Yearbook of Immigration Statistics, in FY2005 there were 2,432,587 admissions of B-1 visa holders and 2,261,354 admissions for business purposes on visa waivers.
Citizenship and Immigration Canada, "Business Immigrant Links: FAQs," March 31, 2007, at http://www.cic.gc.ca/english/information/faq/immigrate/business/index.asp.
Mailman, Stanley, and Stephen Yale-Loehr. "Immigrant Investor Green Cards: Rise of the Phoenix?" New York Law Journal, April 25, 2005. At http://www.millermayer.com/EB5NYLJ0405.html.
Denton, Herbert H. "Canada Lures Hong Kong Immigrants: Well-Off Businessmen Willing to Invest Are Granted Special Status." Washington Post, March 8, 1986, pp. A11, A18.
Xenogiani, Theodora. "Migration Policy and Its Interactions with Aid, Trade and Foreign Direct Investment Policies: A Background Paper." OECD Development Centre, Working Paper No. 249, June, 2006.
For a brief discussion, see Xenogiani, Theodora. "Migration Policy and Its Interactions with Aid, Trade and Foreign Direct Investment Policies: A Background Paper." OECD Development Centre, Working Paper No. 249, June, 2006, p.36.
For further discussion on immigration and trade, see CRS Report RL32982, Immigration Issues in Trade Agreements, by [author name scrubbed].
This migratory pressure reduction should occur through the increased exports of unskilled labor-intensive goods, as well as the resulting fact-price equalization and subsequent convergence of wages.
There exists the possibility that foreign investment and capital trade objectives of many investors are accomplished through multinational corporations. Under the construct of a multinational corporation, returns to the investor are achieved through the foreign direct investment by the corporation and through the migration of managers and technical experts to facilitate production efficiency.
For example, see Banerjee, Subhabrata Bobby, and Stephen Linstead, "Globalization, Multiculturalism and Other Fictions: Colonialism for the New Millennium?" Organization, vol. 8, no. 4 (2001), pp. 683-722.
These costs may include tax shelters, government sponsored benefits, subsidies, and the like.
Schiff, M. "How Trade, Aid, and Remittances Affect International Migration." World Bank Policy Research Working Paper No. 1376, Washington, DC, 1994.
Xenogiani, Theodora. "Migration Policy and Its Interactions with Aid, Trade and Foreign Direct Investment Policies: A Background Paper." OECD Development Centre, Working Paper No. 249, June, 2006, p. 31-33.
A large majority of the issued visas have been to foreign nationals from relatively capital abundant countries.
For further discussion of FDI into the United States, see CRS Report RS21857, Foreign Direct Investment in the United States: An Economic Analysis, by [author name scrubbed].
FDI does entail some degrees of risk and reward for both the home and host economies. For the home economy, FDI can improve competitiveness and performance of firms by providing value-added activities, better employment opportunities, better export performance, and higher national income. At the same time, engaging in FDI also runs the risks of lower additions to both domestic investment and capital stock, as well as loss of competitiveness and jobs in certain parts of the economy. For the host economies, the benefits include increases in employment and potential multiplier effects on other parts of the economy through productivity growth. Accepting FDI, however, does run the risk that domestic firms are crowded out of the market (United Nations World Investment Report, 2006).
From the classical economic perspective, the immigrant investor pilot program is counter-intuitive. In the case of investors from developed countries there is little incentive for them to settle in the United States since they can achieve similar standards of living and all of their FDI objectives from their home country. As for LEDCs, a drain of their capital may provide short-term benefits to the United States, but would inhibit growth and trade in the long run. The flight of investors from Hong Kong in the late-1980s and the 1990's was a unique economic situation that has since subsided. Other than the Hong Kong scenario, there is seemingly little incentive for investors to relocate.
The complementary roles would be achieved through what economists refer to as "comparative advantage." Theoretically, each country should be able to produce a good or service more efficiently than the world average, thereby making the good or service exportable. By attracting investments in these comparatively advantaged sectors, costs should decrease while production increases. Thus, consumers at both ends of a trading relationship are able to consume more goods.
CRS Report RL32649, U.S.-Japan Economic Relations: Significance, Prospects, and Policy Options, by [author name scrubbed].
For an explanation of the RIMS II multiplier, see U.S. Department of Commerce, Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (RIMS II), Third Edition, March, 1997.
According to the USCIS Chief Adjudications Officer for EB-5 visas, well established input-output models such as RIMS II are useful in assessing investments for limited partnerships, where the direct effects of an investment are difficult to demonstrate (based on CRS discussions with Morrie Berez, Chief Adjudications Officer, USCIS Investor and Regional Center Program, November 20, 2006). Such established economic models are permitted under regulations (8 CFR 204.6(m)(3)).
A recent study commissioned by the National Venture Capital Association found that over the past 15 years, immigrants have started 15% of venture-backed U.S. public companies. The value of these companies currently exceeds $500 billion, and most of the companies were in technology-related industries. The study found that these companies employ 220,000 people in the United States, and 400,000 globally. Some of the more prominent companies included by the study's criteria include Google, Yahoo!, eBay, and Intel (Stuart Anderson and Michael Platzer, American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness, National Venture Capital Association, November 15, 2006, pp. 5-8).
Although the study shows the potential benefits of immigrant entrepreneurs, it does not directly reflect on the investor visa categories. Most of the immigrants that founded these enterprises came to the United States as children, teenagers, graduate students, or were hired on H-1B visas in their mid-twenties. Thus, it is unclear to what extent these individuals would have qualified as either immigrant or nonimmigrant investors under the current regulations. Furthermore, the study's findings includes numbers from both companies wholly founded by immigrants and companies founded through partnerships with United States citizens (Ibid).
Some have expressed concern regarding the investor visas being a means for some foreign nationals to channel illegal funds into the United States. Opponents of the LPR investor visa raised objections during congressional debates by asserting that the LPR investor category would allow individuals to become United States citizens who had profited from drug cartels. According to DHS, there does exist documented past abuses in the alien investor program (U.S. Government Accountability Office, Immigrant Investors: Small Number of Participants Attributed to Pending Regulations and Other Factors, GAO-05-256, April 2005, pp. 39.). However, since the implementation of the "no promissory notes" policy, the fraudulent cases have largely disappeared.
This practice has made it especially difficult for investors from countries with business practices based on convention (as opposed to legal documentation) to qualify for investor visas. Documentation requirements may force a potential investor to trace funds back several decades, effectively disqualifying investors from countries where credible historical records of income tax documents do not exist (Wolfsdorf, Bernard P., Naveen Rahman-Bhora, Tien-Li Loke Walsh, and Kim Tran. "A Review of the Immigrant Investor Program." Immigration Law Today, July/August, 2006, pp. 27-33).
Lincoln Stone, INS Decisions Cloud Future of Investor Pilot Program, 6 Bender's Immigration Bulletin 233 (March 1, 2001).
Rep. Sensenbrenner wrote a letter to USCIS Director Eduardo Aguirre on April 6, 2005 asking the USCIS to institute premium processing and concurrent filing for immigrant investor petitions (Mailman, Stanley, and Stephen Yale-Loehr. "Immigrant Investor Green Cards: Rise of the Phoenix?" New York Law Journal, April 25, 2005. At http://www.millermayer.com/EB5NYLJ0405.html, visited January 23, 2007.).
Letter from Lincoln Stone, Chair of the Investor Committee of the American Immigration Lawyers Association, to Michael Aytes, USCIS Acting Associate Director of Operations, November 16, 2005.
Lincoln Stone, the Chair of the Investor Committee of the American Immigration Lawyers Association, noted the generated level of capital in four targeted areas. According to an informal survey Stone had conducted of four targeted centers (California Consortium for Agricultural Export, Philadelphia Investment Development Corporation, Golden Rainbow Freedom Fund, and South Dakota international Business Institute), these centers had attracted $121.3 million in capital in their two-year existence (Letter from Lincoln Stone, Chair of the Investor Committee of the American Immigration Lawyers Association, to Michael Aytes, USCIS Acting Associate Director of Operations, November 16, 2005.).
U.S. Congress, Senate Committee on the Judiciary, Promoting Job Creation and Foreign Investment in the United States: An Assessment of the EB-5 Regional Center Program, hearing on S.Amdt. 1407 to H.R. 2892, 111th Cong., 1st sess., July 22, 2009.
For example, see H.R. 4321.
Based on CRS discussion with Joop Bollen, Director of the South Dakota International Business Institute, November 28, 2006.
Letter from William R, Yates, Associate Director of USCIS Office of Operations, to Joop Bollen, Director of the South Dakota International Business Institute, June 11, 2005.
For the South Dakota targeted region, the RIMS II multipliers are 2.9 for investment and 2.66 for employment.
On April 26, 2008, CanAm published a press release stating: "CanAm Enterprises, LLC is pleased to introduce the Los Angeles Film Regional Center, which was designated by USCIS on March 24, 2008, and will specifically target investments in the motion picture and television industry in Los Angeles County, California." (CanAm Enterprises, "CanAm Introduces the LA Film Regional Center," Press release, April 26, 2008, available at http://eb5dvd.com/news.php?inc=3&nid=59.
Based on CRS discussions with Tom Rosenfeld, President & CEO, CanAm Enterprises, November 28, 2006.
The Jones-Shafroth Act is a section of the Merchant Marine Act of 1920 (46 U.S.C. 883; 19 CFR 4.80 and 4.80b). Designed to protect the United States shipping fleet, the law requires that cargo moving between U.S. ports be carried by ships that are built in the United States and at least 75% owned by American citizens or corporations.