At the 2013 AILA EB-5 Investors & Regional Centers Conference in Chicago on August 22-23, there were panels on a variety of EB-5 topics. During the last panel before the Q&A, Bernard P. Wolfsdorf, Robert Gaffney, Yi Song and Charles Oppenheim lead a discussion titled “China Issues.” However, the presentation took an unexpected turn when Charles Oppenheim from the US Department of State announced that a visa backlog for Fiscal Year 2014 existed for Chinese investors. As a result, no new Chinese investors could be issued EB-5 visas for the rest of the fiscal year. The prepared slides and talking points went out the window and a new discussion on the backlog and the future between China and the US EB-5 program began. It was breaking news for the conference.
As I mentioned in a previous post, the EB-5 investor visa program is predominantly made up of Chinese investors (70-85% depending on the year). Aside from determining how the programs are marketed and the approaches that immigration lawyers are taking to attract projects and clients, the high numbers also impact a federal limitation on how many investors can come from each country.
Each country is restricted to 7% of the total numbers of visas issued each year in any visa category. This includes EB-5. Prior to this year, the restrictions have not mattered, because (1) there were enough spots for anybody that was able to pass the application process, and (2) China was able to use the extra spots that other countries weren’t using. As of August the EB-5 program is now gaining enough popularity in other nations that China is no longer getting to use the extra spots.
In other words, the Chinese EB-5 community has been benefitting tremendously from other nation’s lack of knowledge or interest in the program.
Yi Song, an attorney at Mona Shah & Associates in New York City (as well as a fellow alumnus of Beijing Foreign Studies University) explained this to me in a conversation after the conference, “Other countries have not used up the maximum number of visas available. The rule is the unused numbers from other countries will be allotted for China. The investors from China have used approximately 8,500 visas each year.”
This indicates a more realistic approach by USCIS to the policy than one of objective fairness. The demand exists in China in a much bigger way than it does anywhere else.
The 7% figure that I mentioned earlier is estimated at around 700 people each year. That means that the Chinese EB-5 market has been benefitting to the tune of 7,800 extra investors each year. Imagine being a part of a cell phone family plan, but the four other members of your family combined are only using 15% of the allotted minutes. China’s been benefitting from a rollover of 1100%.
If the program is intended to continue under the existing regulations, that means that competition for other nation’s investors is bound to increase.
While the limit has been reached for this fiscal year, you can breathe easy. The time period will be restarted on October 1, 2014. As far as planning ahead, there are two ways to read into what has happened. First, that EB-5 is spreading in popularity and those involved in the investor end of the program are going to be more cognizant of timelines if they want to work in China. Second, a proverbial “wild west” of investors in other nations exists and will be easier to capitalize on if Regional Centers and law firms are willing to take the risk of working with migration agents in South Korea, Iran and Mexico.
Furthermore, USCIS may be taking a new approach to this issue. Charles Oppenheim, who is the Chief of Immigrant Visa Control and Reporting Division for the U.S. Department of State, also announced that he anticipated a specific cut-off date for China that will be announced for the next fiscal year. This would be put in place to help regulate the flow of investors who are given the “rollover” visa spots.
In the meantime, this shouldn’t affect Chinese investors in any stage of their EB-5 process. Robert Gaffney explained that he does “not expect to see a dramatic slowdown in demand for EB-5 visas by Chinese applicants.”
Gaffney, who is a Certified Specialist in Immigration and Nationality Law and founder of the Law Offices of Robert P. Gaffney & Associates (as well as a fellow alumnus of the University of Michigan) has been working in immigration law for over twenty years. He brought up an interesting parallel to the backlog.
“Those familiar with the Canadian investment visa program will know that for as long as that program was in existence, Chinese applicants were willing to get in line for visas even when the wait was 4 or 5 years long.”
As far as exploring other countries for investors, Gaffney adds, “Investment immigration from countries like South Korea and Mexico is driven by domestic factors in those countries and not what happens to China EB-5 numbers.” However he also expects Regional Centers to start developing strategies that include other countries.
There is a third strategy that might become a possibility for Regional Centers: changing the law. The oft tread topic that EB-5 is depicted as a controversial program in the public realm (here is a recent example) when in reality it successfully generates jobs without using one cent of tax payer money was brought up at the conference during most of the panels. Panelists encouraged the immigration lawyer community to write their congressmen and try to have the laws changed.
I asked past AILA President Bernard P. Wolfsdorf what members of the EB-5 community could do to change the regulations. “Encourage the White House to count investors, not family.” Though this is a topic I will delve into more deeply in the future, it is important to understand that of the 10,000 EB-5 visas that are issued this year, most of them belong to the spouses and children of the actual investor. Spouses and children under 21 are permitted to get visas along with the grantee. On the one hand, this clogs the channels of investment. On the other, it provides the ever important driver of American education for parents seeking to offer better options for their children.
Brian Su, president of Artisan Business Group, summarized this point nicely during a panel in 2012, “Basically the decision making involves the entire family… the husband, the wife and their children. Typically the wife and the kids make the key decision.”
So cutting family out completely is not a feasible option. There are very few visa programs without country specific limitations but a change to the law could mean that families are counted in some other way.
I mentioned this in my last article, but the more I speak with newcomers to EB-5 in the U.S., I realize that they don’t understand that the typical Chinese investor is not concerned with their return on investment. It may sound crazy to you, but miniscule to nonexistent returns are the norm. They are driven by their families.
Yi Song commented on this very topic, “The Chinese investors do not invest in the program for the sake of investment per se. I would say 80% of Chinese investors invest in EB-5 projects for their children to receive a better education in the US. Their top consideration is the permanent residence in the US.”
She added, “Most investors do not receive any return on their investment.”
Considering the level of importance that families and education play in the mind of an investor, any new solutions will have to continue the policy of allowing family members to receive visas as well. Whether these will continue to be counted among the 10,000 in future years is unknown. Few long term visas are granted without some kind of country specific limitations.
