On August 23, 2014, the day we feared finally came. At the American Immigration Lawyers Association (AILA) EB-5 Conference in Chicago, Mr. Charles Oppenheim, the Chief of Immigrant Visa Control and Reporting Division in the US Department of State, announced that the maximum EB-5 visa numbers for the EB-5 applicants from mainland China during FY 2014 has been reached. Mona Shah & Associates Attorney Yi Song shared the China Issue panel with Mr. Oppenheim along with Robert Gaffney of San Francisco and Bernard Wolfsdorf of Los Angeles.
Effective immediately August 23, 2014, the Employment-Based Fifth preference category for applicants from China has become unavailable for the remainder of the Fiscal Year 2014 (“FY-2014”), or from August 23, 2014 to September 30, 2014. The EB-5 visa numbers will become available again on October 1, 2014 for the new Fiscal Year 2015.
What does “Visa Unavailability” mean to EB-5 Investors from Mainland China?
How does the “visa unavailability” affect the visa processing in Guangzhou Consulate? In the statement issued by Mr. Oppenheim, he states that “the establishment of a monthly cut-off or ‘current’ status for a numerically controlled preference category applies to those applicants who were reported documentarily qualified prior to the determination of cut-off dates and allocation of visa numbers for that month.”
To translate it into plain English, if the EB-5 investors have been scheduled for an interview, regardless whether the actual interview date is before or after August 23, 2014, at the Guangzhou Consulate, they are not impacted by the brief visa unavailability.
For the investors who postponed their interview dates and for those who have not been scheduled for an interview, the EB-5 visas will become unavailable to them from August 23, 2014 to September 30, 2014. The only exception would be if the Consulate has otherwise unused visa number available, because other applicants either failed to appear at the interview or failed to overcome a refusal at the interview, the unused visa number would the allotted to these investors. The approximately 10,000 new visas will become available on October 1, 2014.
How would the visa unavailability affect the USCIS processing?
The unavailability of visas will not affect the processing and adjudicate of cases from China by USCIS. USCIS will continue to accept and approve I-526 petitions submitted by the investors from mainland China. However, upon approval, instead of being forwarded to National Visa Center or for Adjustment of Status, the approved cases will be held in the Visa Office’s “Pending Demanding” file until October 1, 2014. At tht time, all eligible cases will be automatically authorized from the “Pending Demand” file to utilize the visas available for FY 2015.
Further Impact of the Visa Backlog for China
According to the statistics released by USCIS on August 21, 2014, there are 10,375 pending I-526 applications so far. There are only 10,000 EB-5 visas available each Fiscal Years, which means the visa numbers can only accommodate 3,500 to 4,000 families to immigrate to the US under the EB-5 Investor Immigrant Program.
The authors believe the current visa unavailability would not cause much damage to the Chinese investors. What is of significant concern is the fact that the real impact will occur in May/June 2015. By then Mr. Oppenheim anticipated a cut-off date would be established, we will learn as early as on and about April 9, 2015 in the May Visa Bulletin.
The next important question is when the cut-off is going to be? There are many factors that would affect the date, such as USCIS adjudication time, approval rate and the number of cases processed, etc. Mr. Oppenheim stated on the AILA EB-5 Conference that the cut-off dates can be as early as June 2013, and no later than September 2013.
To translate it into plain English, for example, the cut-off date is established to be June 2013. If the investor submitted the I-526 petition and obtained a priority date before June 2013, upon the I-526 approval, the investor will be able to apply for consulate processing or adjustment of status. If an investor’s priority date is, say July 1, 2013, he/she is out of luck. The investor with a priority date of July 1, 2013 will have to wait until the visa number becomes available again.
Mr. Oppenheim further stated that once the cut-off date is established, the EB-5 visa number may no longer be “current” again. The wait list for the EB-5 applicants from China can be as long as 2-3 years.
Who will be Affected the Most by the Visa Backlog?
Chinese EB-5 investors’ beneficiaries, in particular unmarried children under 21 years old need to pay close attention to the visa backlog situation. It is untrue that the child’s age is forever locked in if the I-526 petition is filed before the child turns 21. Upon I-526 approval, if the investor encounters the visa backlog, the child will continue to age. At the time that the visa number becomes available, the child may be aged out long ago.
If the wait list is going to be 2-3 years long, investors with children of 17-18 years old should start planning the EB-5 application. The visa backlog adds uncertainties to the pre and post immigration planning. The investors should consult experienced EB-5 counsel as early as possible.
In addition, the dedicated Chinese tiger moms who keep their children in school and file “follow to join” applications should reconsider the strategy. The children may be left behind because of the visa backlog. It may take years before the visa number is available again for the children, if they have not aged out and still be included in the application.
Students who are on last year of F1 student visa and Optional Practical Training (OPT) shall play close attention to the cut-off date and consult experienced EB-5 counsel immediately.
Questions Remain Unanswered
The visa backlog creates even more ambiguity in EB-5 practice. Direct EB-5 investors who are either investing their own job creating entities or in a pooled investment project need to travel to the US to manage their business (either through active daily management or through policy formulation). With the visa backlog, the investors may not be able to enter the US years after the I-526 is approved. It is unclear whether they can enter the US on a B1/B2 or other non-immigrant visa given that they have clear immigrant intent.
Another pressing question is how long does the direct job have to be maintained if the visa backlog occurs? The authors believe that there is no statutory basis to “maintain” the jobs. The jobs need to be “created” and the investment capital needs to be “maintained”. But the reality is often at the I-829 adjudication, USCIS requires the direct jobs be in existence evidencing by W-2 forms and payroll records. The visa backlog may prolong the EB-5 process into 7-8 years.
For regional center projects, the visa backlog affects the timing of the capital deployment. If the EB-5 process is prolonged to 7-8 years, most regional center projects obtain a term loan from the EB-5 investors for 5 years. Can they return the capital to the EB-5 investors prior to the I-829 adjudication? What about returning the capital to the new commercial enterprise, if not to the individual investor?
Micro v. Macro Impact to the Industry
The EB-5 Program has evolved into a multi-billion dollars industry. In New York City alone, 4-5 mega projects have raised $250 million each from 499 investors, the maximum number of investors allowed under the securities law for a private offering. The biggest real estate developers in NYC have been using EB-5 financing to build and reshape the city’s skyline. One project has raised EB-5 capital from 1,000 investors, primarily from China. USCIS clarification on these important questions is necessary to stabilize the EB-5 program, from a macroeconomic perspective; it is to maintain the stability of the capital market in the US.
Mona Shah has over 17 years of legal experience, with more than 13 years concentrated in U.S. immigration and family law and litigation. Mona’s extensive knowledge of all facets of U.S. immigration law, and her practical expertise ranges from specialist business petitions to complicated, multi-issue deportation and removal litigation. Her firm, Mona Shah and Associates, represents individual, high profile and corporate clients from all over the world.
Mona is highly proficient and experienced in EB-5 law and practice, and is the author of a published book for investors on the EB-5 laws and procedures (EB5 for the Chinese Investor, available on Amazon). The second updated edition is scheduled to be published shortly. Mona has been voted Top 25 EB-5 Attorneys by eb5investors.com and Top 10 EB-5 Attorneys by eb5info.com. She is also an adjunct professor at the Zicklin School of Business at Baruch University.
Yi Song is an attorney at Mona Shah & Associates in New York City. She is also licensed to practice law in People’s Republic of China. Before joining Mona Shah & Associates, she worked at a securities litigation firm in Manhattan. She clerked at China’s high court – the Supreme Court of People’s Republic of China. At Mona Shah & Associates, Yi practices EB-5 law and securities law and works on many successful EB-5 capital raising projects. She obtained her LL.B. degree from Beijing Foreign Studies University and she is a graduate from Georgetown University Law Center in Washington, DC. Her articles on EB-5 and securities law are published by LexisNexis, AILA, eb5info.com, ILW. Yi is a native speaker of mandarin Chinese. She speaks fluent English and basic French.
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. The information may not be accurate as it is subject to constant change. No legal advice is provided in this article. Please consult the EB-5 counsel for advice applicable to your particular circumstances.
All rights reserved by Mona Shah & Associates ©
For more information about LexisNexis products and solutions, please connect with us through our corporate site.