EB-5 Retrogression for China in Mid-2014—Not Really a Reason to Be Alarmed?

EB-5 Retrogression for China in Mid-2014—Not Really a Reason to Be Alarmed?

 On January 10, 2014 the Department of State provided a tentative projection for EB-5 retrogression which may occur in or after July 2014 for applicants from mainland China, as such applicants account for more than 80% of the 10,000 EB-5 visa usages. This article discusses what causes retrogression, how the retrogressed visas are processed, why retrogression seems only to affect mainland China EB-5 cases and the consequences of projected retrogression for China in the EB-5 industry, which contrary to some recent scare-mongering opinions, will make little difference to the EB-5 industry. 

What is Retrogression?

INA §201 limits the employment-based preference immigrants each fiscal year

[1] for all categories, not just for EB-5 applicants.   In order to apply for, or to adjust status to that of legal permanent resident, an immigrant visa must be available to the applicant at the time of filing the legal permanent resident application.  The DOS (Department of State) publishes visa availability each month. If there are sufficient numbers in a particular category to satisfy all reported documentarily qualified demand, the category is considered “Current.“

Whenever the total of qualified applicants in a category exceeds the supply of numbers available for allotment for the particular month, the category is considered to be “oversubscribed” and this particular visa category retrogresses. When visa retrogression occurs, a visa availability cut-off date is established. The cut-off date is the priority date of the first documentarily qualified applicant who could not be accommodated for a visa number. Thus, visa “retrogression” occurs to those applicants whose priority date is on or later than the cut-off dates. If an applicant’s priority date is before the cut-off date, he or she can apply for an immigrant visa. Retrogression typically occurs toward the end of the fiscal year as visa issuance approaches the annual category, or per-country limitations. When the new fiscal year begins on October 1, a new supply of visas is made available and usually, but not always, returns the dates to where they were before retrogression. 

How is the Per-Country Limit Calculated?

Section §201 of the INA sets the worldwide annual level for immigrant EB cases, while INA §202 sets the per-country limit at 7% of the total annual Employment-based preference limits. Thus only 9,940 (140,000 x 7% = 9,940) EB-5 visas are available in any Fiscal Year, unless there are unused visas from the family-based categories that would be reallocated to the employment-based categories.[2]

The annual per-country limitation of 7% is a cap, meaning visa issuances to any single country may not exceed this figure. This limitation is not a quota to which any particular country is entitled, however. The per-country limitation serves to avoid monopolization[3] of virtually all the visa numbers by applicants from only a few countries.  The per-country limit does not indicate, however, that a country is entitled to the maximum number of visas each year, rather it cannot receive more than that number. Most countries do not reach this level of visa issuance. What happens if the per-country quota ceiling is reached for the EB-5 visa? The 7% country quota applies. That means out of the approximately 10,000[4] EB-5 visas, China will have 700 visas allocated (10,000 x 7% = 700).

Retrogression only for China?

China accounts for more than 80% of EB-5 investors. Since there is a limit on the number of immigrant visas issued each year and it appears that more investors from China will continue to apply the EB-5 visa quota ceiling will be reached and visa retrogression will occur. However, if  applicants from other countries do not use up the per-country limit visas, Chinese applicants will be able to receive much more than 700 visas in a Fiscal Year.

At this time, the EB-5 category has approximately 10,000 visas per fiscal year, not 10,000 spots for I-526 petitions. Usually each EB-5 investor brings a spouse and any unmarried children under 21 years old. Thus, each EB-5 investor requests more than one EB-5 visas to be issued. Assuming each EB-5 investor has one child, approximately 3,000 families can apply for the EB-5 visas per year.

It should be noted that the EB-5 visa retrogression only have an adverse impact on the Chinese investors from mainland China. Investors from Hong Kong, Macau and Taiwan (China) and from other countries will not be affected.

How USCIS Process Retrogression Visa Cases?

If retrogression in the EB-5 category occurs, Chinese nationals who have an approved I-526 will no longer be able to apply for the consulate interview and (adjustment of status if the applicants are in the US) immediately. The investors will have to wait longer to enter the US or to obtain conditional permanent residency. As with other EB-cases that face retrogression issues, applicants in the US on certain non-immigrant visas, such as H-1, may continue to receive extensions.

In Fiscal Year 2013, 8,564 EB-5 visas were used; a 12% increase from 7,640 visas in Fiscal Year 2012. USCIS indicated that there will be 6,500 I-526 petitions pending for Fiscal Year 2014. If assuming only half of those pending petitions are approved and assuming each investor only has one child, each EB-5 investor would request 3 visas issued for the investor himself or herself, the spouse and the child, the visa numbers for Fiscal Year 2014 can only fulfill the demand of the half of the pending EB-5 investors.

If, at the time of adjudication, an applicant’s priority date is no longer current, due to retrogression, his or her case must be held in abeyance until a visa once again becomes available.  In EB-5 cases, where the adjudication of Form I-485 will not require an in-person interview at a USCIS office, the case will be subsequently held at the USCIS Service Center where the application was initially filed.  If an EB-5 investor and his or her derivatives have been interviewed at a USCIS office and a visa is not available, then USCIS may hold the case at Texas Service Center (“TSC”) until a visa becomes available.

Consequences of EB-5 Visa Retrogression for the Investor

EB-5 visa retrogression will have adverse impact on investors with children nearing 21 years old. It should be noted that the Child Status Protection Act (CSPA) only applies to children during the I-526 adjudication period. Once the petition is approved, the child’s age is no longer frozen. If retrogression occurs, the child may be “aged out” and can no longer accompany the immigrant investor.

With regard to the job creation requirement, in the Direct EB-5 context, the investor is the manager of the business. Visa retrogression may delay the investor’s entry in the US for years. As an alternative, the investor may consider obtaining a nonimmigrant visa to enter the US first to start up the business or to employ a local US person to start up and manage the company until the visa number becomes available and the investor is given permission to enter the US.

How Retrogression would affect EB-5Projects? Advantages?

It is important to note that there is no difference for investors investing in regional centers as opposed to direct EB-5 petitions. There are an increasing number of EB-5 projects that consent to release the investment funds upon receipt of the I-526, though many projects continue to hold the funds in escrow until a positive adjudication. The good news for projects is that retrogression will not make any difference to the timing of the release of EB-5 funds.  In fact the project will obtain additional time to create the required jobs, canceling the need for many projects to create any “reasonable time” argument to USCIS. 

According to the EB-5 regulation[5] and policies, ten qualifying jobs need to be created within two years, the two-year period is deemed to commence six(6) months after the adjudication of the I-526 petition.[6] In the case of retrogression, it is likely that the jobs will be created utilizing the EB-5 capital before the investor even enters the US. Neither the regulations nor the policies require the investor to prove the requisite jobs at the time the I-829 Removal of Condition petition is filed. It is unclear whether the investor will have to prove the job creation before even entering the US and becoming a permanent resident.

Thus, for this investor, will he be allowed to show the job creation at the consulate/ adjustment level and thus obtain a permanent 10 year green card rather than a conditional one? This situation would be similar to that of a spouse who applies for adjustment of status through a marriage which has already been longer than 2 years.[7] In such a situation there would be no need to file an 829 petition at all. If time was not an issue for the investor, retrogression could be seen as an advantage.


Retrogression is not a new issue. The Department of State predicted the likelihood of EB-5 retrogression for China as far back as in December 2012. The EB-5 Program is a plausible and creditable mechanism to attract direct foreign investment, create jobs for Americans using zero tax-payers money. Retrogression may affect the competitiveness of the investment immigration program in the US compared to similar programs in other countries. The impact, though widely debated has given cause for scaremongering by EB-5 practitioners. The effect may not be significant at all; delays merely being months not in years. Nonetheless, projected retrogression in the EB-5 category calls for the passing of the Comprehensive Immigration Reform Act and to allocate other less used or less beneficial visa categories to the EB-5 visa category.   

[1] The Fiscal Year for the federal government starts from October 1 and ends on September 30

[2] 8 U.S.C. §§1151, 1152 and 1153

[3] Brief Explanation of Retrogression by Immigration Support Services (last retrieved in December 2013)

[4] The available number of EB-5 visas is 9,940 per fiscal year. For the ease of calculation, the number is rounded up to 10,000.

[5] 8 C.F.R. §204.6(j)(4)(i)(B) states “The need for not fewer than ten qualifying employees will result within the next-year period of conditional residence.”

[6] AFM 22.4©(4)(D)(ii)

[7] Marriage to a USC results conditional residence (CR) unless it is more than 2 years old at the time of granting immigrant status INA §216

 Mona Shah, Esq. is the principal of Mona Shah & Associates in New York City. The firm has assisted many Regional Centers and Investors in navigating this complex, nuanced and constantly changing area of immigration law. Mona has more than 18 years of legal experience in immigration law and extensive knowledge in EB-5 law. Mona's substantial litigation background includes her representation of clients in both state and federal courts. She has handled complex immigration law appeals before the US Circuit Courts of Appeal nationwide.  Before coming to the US, Mona was a crown prosecutor in the UK. Mona has authored and published numerous articles and has spoken extensively both in the US and overseas.

 Yi Song, Esq. is an attorney at Mona Shah & Associates focusing on EB-5 and securities law. She is admitted to practice law in New York and People’s Republic of China. She has authored many published articles on EB-5 financing and securities law. She practiced tax law in China and has experience in class action securities litigation cases. Yi is a graduate from Georgetown University Law Center in Washington, DC.

Mona Shah & Associates reserve and hold for their own use, all rights provided by the copyright law, including but not limited to distribution, producing copies or reproducing, sales of this document. This article is a general summary of complex legal issues. No legal advice is provided in this article. Please consult the securities attorney for advice applicable to your particular circumstances.

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