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Nonimmigrant Visas - all classifications - E-1 Treaty Traders
TREATY TRADERS AND INVESTORS - THE E CATEGORY
Overview
The E Visa category was established to give effect to those treaties between the United States and foreign countries that provide for reciprocal benefits to nationals of each country who invest in the other or who conduct trade between the two countries. The basis of this classification lies in treaties which were entered into, at least in part, to enhance or facilitate economic and commercial interaction between the United States and the treaty country.
Section 101(a)(15)(E) of the Immigration and Nationality Act (INA), 8 USC '1101(a)(15)(E), defines the E-1 and E-2 classifications. The regulations are published in 8 CFR 214.2(e) and 22 CFR 41.51. In addition, although they are not binding, the Operating Instructions at OI 214.2 (e) and the Foreign Affairs Manual (FAM) at 41.51 contain useful information.
General Guidelines
The "E" classification process may be difficult to master until one becomes familiar with the following general rules:
1.The "E" classification is available only if a "treaty of friendship, commerce or navigation", "bilateral investment treaty" or "free trade agreement" providing for nonimmigrant entries is in existence between the United States and the foreign country. Depending on the language of the treaty, and the treaty country's reciprocal treatment of U.S. nationals, aliens may be admitted to the U.S. as both treaty traders (E-1) and treaty investors (E-2), or only as one or the other. Therefore, eligibility must be verified in every case. The list published by the Department of State in the FAM should be consulted in every case.
2.Successfully petitioning under this classification requires compliance with a lengthy list of requirements; many are subject to the exercise of a great deal of judgment and discretion. As in the case of any visa application, the burden of proof to establish the right to any particular status rests with the alien. If the alien's qualifications for E‑1 or E‑2 classification are uncertain, the Immigration or consular officer may request whatever documentation he or she deems necessary to overcome uncertainty.1
3.Applications for "E" visas can be made directly to a United States consulate abroad. The State Department has not implemented the use of Form OF-156E, the standardized E visa application form developed by The State Department in 1993. Therefore, practitioners must check with the Consul where presentation will be made to secure their particular application form and processing times. There is wide variation in the use of consular specific application forms for issuance of "E" visas abroad and the length of time necessary for adjudication.
4.In processing an application for change of status for beneficiaries in the United States, clients must be advised of the need to reprocess their applications abroad for visa issuance prior to return to the United States from their first trip overseas, in many instances resulting in a new adjudication and causing considerable delay. Therefore, many practitioners feel it is better to process the case directly with the American Consul overseas and bypass filing for a change of status.
5.Applicants may request an approval for up to two years if filing for a change of status or an extension of stay, if already in the United States. Visas are issued for varying time frames depending on visa reciprocity varying from several months to several years, but, each time an "E" entrant returns to the United States he/she will only be issued an entry good for one year from the date of admission. Therefore, the entry will not necessarily coincide with the visa or prior "E" extension or change of status. Care must be taken to track all entries and departures for all family members due to the varying expiration dates that family members may hold.
6.The E classification can be extended indefinitely - as long as the alien affirms an unequivocal intent to return when the "E" status ends and an appropriate treaty or similar instrument remains in effect allowing for "E" classification.
7.Aliens in "E" classification do not need to maintain a foreign residence abroad during their United States stay, so long as they affirm their intention to leave the United States when their period of stay, plus any authorized extensions, expires.
8.The "E" classification is extremely useful for business owners, executives, managers and key employees who need to remain in the United States for extended periods of time in order to conduct trade between the United States and the company's country of majority ownership (under the E-1 classification), or oversee investment in the United States (under the E-2 classification).
9.The "E" classification can be used by a single investor, a partnership/joint ventures, parent or subsidiaries of a large multinational corporation.
10.The "E" classification can also be used by the company's principals or by its employees, as long as they are performing functions approved by the applicable rules, discussed in greater detail below.
11.In order to qualify under one of the treaties, the company or individual engaging in trade or investment in the U.S. must have the same nationality as the treaty country.
12.There is no requirement that an "essential" employee have had previous employment with the qualifying employer such as is required for L-1 issuance.
Requirements for (E‑1) Treaty Trader Status
An E-1 is a national of a country with which the U.S. has a treaty of friendship, commerce, and navigation who is coming to the U.S. to engage in substantial trade between the U.S. and the alien's country of nationality.
In evaluating E‑1 applications, consular officers will determine whether:
(1)the requisite treaty exists;
(2)the individual and/or business possesses the nationality of the treaty country;
(3)the activities engaged in constitute "trade" within the meaning of INA 101(a)(15)(E);
(4)such trade is substantial;
(5)such trade is principally between the United States and the treaty country;
(6)the applicant, if an employee, is to take an executive/supervisory position or has skills essential to the firm's operations in the United States; and
(7)the applicant intends to depart the United States when the E‑1 status terminates.2
Requirements for E‑2 Treaty Investor Status
An E-2 is a national of a country with which the U.S. has a bilateral investment treaty or agreement, who is coming to the U.S. to direct and develop the operations of an enterprise in which he\she has invested or is in the process of investing substantially.
In evaluating E‑2 applications, consular officers will determine whether the:
(1)requisite treaty exists;
(2)individual and/or business possess the nationality of the treaty country;
(3)applicant has invested or is actively in the process of investing;
(4)enterprise is a real and operating commercial enterprise;
(5)applicant's investment is substantial;
(6)investment is more than a marginal one solely for earning a living;
(7)applicant is in a position to "develop and direct" the enterprise;
(8)applicant, if an employee, is to occupy an executive/supervisory position or has skills essential to the firm's operations in the United States; and
(9)applicant intends to depart the United States when the E‑2 statues terminates.3
A review of the following excerpts from the Foreign Affairs Manual is very helpful in understanding the foregoing requirements and determining whether an individual will qualify for E classification.
Qualifying Treaties
The Immigration and Nationality Act, in Section 101(a)(15)(E) requires the existence of a treaty of Friendship, Commerce, and Navigation (FCN) between the United States and another country in order for the E visa classification to be accorded. Although it has been many years since such an FCN has been negotiated, bilateral investment treaties (BITS) have been held to be equivalent to the FCN treaty. Treaties, or the equivalent, in effect between the United States and other countries under which nonimmigrant classification under INA 101(a)(15)(E) may be accorded, are listed in '41.51, Exhibit I of the FAM and are attached as Exhibit A of this article.4
Nationality
The treaty trader or investor must, whether an individual or business, possess the nationality of the treaty country. The nationality of the individual is determined by the authorities of the country of which the alien claims nationality. The nationality of a business is determined by the nationality of the individual owners of that business.5
Fifty‑percent Rule
Pursuant to 22 CFR 41.51(c), at least 50 percent of the business must be owned by nationals of the treaty country in question. In corporate structures one looks to the nationality of the owners of the stock. If a business in turn owns another business, then nationality of ownership must be traced to the point of reaching the fifty percent rule with respect to the parent organization. In most cases, this should pose no real problem but, in modern business structures and layered relationships, consular officers will have to rely heavily on the evidence presented to adjudicate whether the business entity in question possesses the requisite nationality.6
Place of Incorporation
The country of incorporation is irrelevant to the nationality requirement for E visa purposes. In cases where a corporation is sold exclusively on a stock exchange in the country of incorporation, however, one can presume that the nationality of the corporation is that of the location of the exchange. The applicant should still provide the best evidence available to support such a presumption. In the case of a multinational corporation whose stock is exchanged in more than one country, then the applicant must satisfy the consular officer by the best evidence available that the business meets the nationality requirement. In view of the complex corporate structure in these cases, consuls may avail themselves of Department of State assistance by submitting an advisory opinion request.7
Dual Nationality
An alien who has dual nationality must hold him or herself as a national of the treaty country in question to qualify under INA 101(a)(15)(E). Consequently, this alien must be documented and be admitted into the United States as a national of the treaty country from which the treaty benefits accrue.8
"TRADE" FOR E-1 PURPOSES
Elements of Trade
"Trade" for E‑1 purposes consists of three requirements, each of which must be present in all E‑1 cases. The three requirements are:
(1)Trade must constitute an exchange;
(2)Trade must be international in scope; and
(3)Trade must involve qualifying activities.9
Trade Entails Exchange
There must be an actual exchange of qualifying commodities such as goods, moneys, or services to constitute transactions considered trade within the meaning of INA 101(a)(15)(E)(i). An exchange of a good or service for consideration must flow between the two treaty countries and must be traceable or identifiable. Title to the trade item must pass from one treaty party to the other.10
Trade Must be International
The purpose of these treaties is to develop international commercial trade between the two countries. Development of the domestic market without international exchange does not constitute trade in the E‑1 visa context. Thus, engaging in purely domestic trade is not contemplated under this classification. The traceable exchange in goods or services MUST be between the United States and the other treaty country.11
Trade Must be in Existence
An alien cannot qualify for E‑1 status for the purpose of searching for a trading relationship. Trade between the treaty country and the United States must already be in progress on behalf of the individual or firm to entitle one to treaty trader classification. Existing trade includes successfully integrated contracts binding upon the parties which call for the immediate exchange of qualifying items of trade.12
Activities Considered to Constitute Trade
As noted above, trade for E‑1 purposes involves the commercial exchange of goods or services in the international market place. In the rapidly changing business climate with an increasing trend toward service industries, many more services, whether listed below or not, might benefit from E‑1 visa classification.
To constitute trade in a service for E‑1 purposes, the provision of that service by an enterprise must be the purpose of that business and, most importantly, must itself be the saleable commodity which the enterprise sells to clients. The term "trade" as used in this statute has been interpreted to include international banking, insurance, transportation, tourism, communications, and news gathering activities. Aliens engaged in news gathering activities, however, should usually be classified under INA 101(a)(15)(I). These activities do not constitute an all inclusive list but are merely examples of the types of services found to fall within the E‑1 meaning of trade.13
Substantial Trade
The word "substantial" is intended to describe the flow of the goods or services which are being exchanged between the treaty countries. That is, the trade must be a continuous flow which should involve numerous transactions over time. Consular officers should focus primarily on the volume of trade conducted but consider the monetary value of the transactions as well. Although the number of transactions and the value of each transaction will vary, greater weight should be accorded to cases involving more numerous transactions of larger value.
The smaller businessman should not be excluded if demonstrating a pattern of transactions of value. Thus, proof of numerous transactions, although each may be relatively small in value, might establish the requisite continuing course of international trade which is sufficient to support the treaty trader and family should be considered as a favorable factor when assessing the substantiality of trade in a particular case.14
Trade Must Be Principally Between United States and Country of Alien's Nationality
The general rule requires that over 50 percent of the total volume of the international trade conducted by the treaty trader regardless of location must be between the United States and the treaty country of the alien's nationality. The remainder of the trade in which the alien is engaged may be international trade with other countries or domestic trade. The application of this rule requires a clear understanding of the distinctions in business entities described below.15
Measurement of Trade
To measure the requisite trade one must look to the trade conducted by the legal "person" that is the treaty trader. Such trader might be an individual, (which was often the case many years ago), a partnership, a joint venture, a corporation (whether a parent or subsidiary corporation), etc. It is important to note that a branch is not considered to be a separate legal person or trader but part and parcel of another entity. In contrast, a subsidiary is a separate legal person/entity. Thus, to measure trade in the case of a branch, the consular officer shall look to the trade conducted by the entity of which it is a part, usually a foreign‑based business (individual, corporation, etc.)16
Effect on Employee's Responsibilities in United States
If the trader, whether foreign‑based or U.S. based meets this percentile requirement, the duties of an employee need not be similarly apportioned to qualify for an E‑1 visa. For an example, if a U.S. subsidiary of a foreign firm is engaged principally in trade between the United States and the treaty country, it is not material that the E‑1 employee is also engaged in third‑country or intra‑U.S. trade or that the parent firm's headquarters abroad is engaged primarily in trade with other countries. As noted above, this would not be true in the case of a branch of a foreign firm.17
APPLICANT MUST HAVE INVESTED OR IN PROCESSING OF INVESTING
Concept of "Investment" and "In Process of Investing"
The INS or consular officer must assess the nature of the investment transaction to determine whether a particular financial arrangement may be considered an "investment" within the meaning of INA 101(a)(15)(E)(ii). The core factors relevant to this analysis is whether the applicant actually has invested, or is in the process of investing, in an enterprise as discussed below.18
Possession and Control of Funds
The alien must demonstrate possession and control of the funds invested. If the investor has received the funds by legitimate means, e.g., savings, gift, inheritance, contest, etc. and has control and possession over the funds, the proper employment of the funds may constitute an E‑2 investment. It should be noted, however, that inheritance of a business does not constitute an investment. Furthermore, the statute does not require that the source of the funds be outside the United States.19
Investment Connotes Risk
The concept of investment connotes the placing of funds or other capital assets at risk, in the commercial sense, in the hope of generating a financial return. E‑2 investor status shall not, therefore, be extended to non‑profit organizations. If the funds are not subject to partial or total loss if business fortunes reverse, then it is not an "investment" in the sense intended by INA 101(a)(15)(E)(ii). If the funds' availability arises from indebtedness, these criteria must be followed:
(1) Indebtedness such as mortgage debt or commercial loans secured by the assets of the enterprise cannot count toward the investment, as there is no requisite element of risk. For example, if the business in which the alien is investing is used as collateral, funds from the resulting loan or mortgage are not at risk, even if some personal assets are also used as collateral.
(2) On the other hand, loans secured by the alien's own personal assets, such as a second mortgage on a home, or unsecured loans, such as a loan on the alien's personal signature, may be included, since the alien risks the funds in the event of business failure.
In short, at risk funds in the E‑2 context would include only funds in which personal assets are involved, such as personal funds, other unencumbered assets, a mortgage with the alien's personal liability. A reasonable amount of cash, held in a business bank account or similar fund to be used for routine business operations, may be counted as investment funds.20
Funds Must be Irrevocably Committed
To be "in the process of investing" for E‑2 purposes, the funds or assets to be invested must be committed to the investment, and the commitment must be real and irrevocable. As an example, a purchase/sale of a business which qualifies for E‑2 status in every respect may be conditioned upon the issuance of the visa. Despite the condition, this would constitute a solid commitment if the assets to be used for the purchase are held in escrow for release/transfer only on the condition being met. The point of the example is that to qualify to be in the process of investing, the investor must have, and in this case would have, reached an irrevocable point of commitment.
Moreover, for the alien to be "in the process of investing," the alien must be close to the start of actual business operations, not simply in the stage of signing contracts (which may be broken) or scouting for suitable locations and property. Mere intent to invest, or possession of uncommitted funds in a bank account, or even prospective investment arrangements entailing no present commitment, will not suffice.21
CONSIDERATION OF OTHER FINANCIAL TRANSACTIONS AS "INVESTMENTS"
Payments for Leases or Rents as Investments
Payments in the form of leases or rents for property or equipment may be calculated toward the investment in an amount limited to the funds devoted to that item in any one month. However, the market value of the leased equipment is not representative of the investment and neither is the annual rental cost (unless it has been paid in advance) as these rents are generally paid from the current earnings of the business.22
Value of Goods or Equipment as Investment
The amount spent for purchase of equipment and for inventory on hand may be calculated in the investment total. The value of goods or equipment transferred to the United States (such as factory machinery shipped to the United States to start or enlarge a plant) is considered an investment, provided the alien can demonstrate that the goods or machinery will be put, or are being put, to use in an ongoing commercial enterprise. The applicant must establish that the purchased goods or equipment are for business, not personal purposes.23
Commercial Enterprise Must Be Real and Active
The enterprise must be a real and active commercial or entrepreneurial undertaking, producing some service or commodity. It cannot be a paper organization or an idle speculative investment held for potential appreciation in value, such as underdeveloped land or stocks held by an investor without the intent to direct the enterprise. The investment must be a commercial enterprise, thus it must be for profit, eliminating non‑profit organizations from consideration.24
INVESTMENT MUST BE SUBSTANTIAL
Interpretations of "Substantial" Investment
No set dollar figure constitutes a minimum amount of investment to be considered "substantial" for E‑2 visa purposes. This requirement is met by satisfying the "proportionality test." The test is a comparison between two figures: The amount of qualifying funds invested, and the cost of an established business or, if a newly created business, the cost of establishing such a business.
(1)The amount of the funds or assets actually invested must be from qualifying funds and assets as explained above.
(2)The cost of an established business is, generally, its purchase price, which is normally considered to be the fair market value.
(3)The cost of a newly‑created business is the actual cost needed to establish such a business to the point of being operational. The actual cost can usually be computed as the investor should have already purchased at least some of the necessary assets and, thus, be able to provide cost figures for additional assets needed to run the business. For example, an indication of the nature and extent of commitment to a business venture may be provided by: Invoices or contracts for substantial purchases of equipment and inventory; appraisals of the market value of land, buildings, equipment, and machinery; accounting audits; and records required by various governmental authorities. If the consular officer questions these figures, he or she may seek additional evidence to help establish what would be a reasonable amount. Such evidence may include letters from chambers of commerce or statistics from trade associations. Unverified and unaudited financial statements based exclusively on information supplied by an applicant normally are insufficient to establish the nature and status of an enterprise.25
Value of Business Determined by Nature of Business
The value (cost) of the business is clearly dependent on the nature of the enterprise. Any manufacturing business, such as an automobile manufacturer, might easily cost many millions of dollars to either purchase or establish and operate. At the extreme opposite pole, the cost to purchase an on‑going commercial enterprise or to establish a service business, such as a consulting firm, may be relatively low. As long as all the other requirements for E‑2 status are met, the cost of the business per se is not independently relevant or determinative of qualification for E‑2 status.26
Proportionality Test
The amount invested in the enterprise should be compared to the cost (value) of the business by assessing the percentage of the investment in relation to the cost of the business. If the two figures are the same, then the investor has invested 100 percent of the needed funds in the business. Such an investment is substantial. The vast majority of cases involve lesser percentages. The proportionality test can best be understood as a sort of inverted sliding scale. The lower the cost of the business the higher a percentage of investment is required whereas, a highly expensive business would require a lower percentage of qualifying investment. The following examples set forth in the FAM are provided only to demonstrate the concept of the test and are not to be viewed as bright‑line requirements. Assessing proportionality requires the use of judgment that takes into account the totality of the factors involved; it is not a simple arithmetic exercise.
(1)A newly‑created business, a consulting firm, might only need $50,000 investment to be set up and to become fully operational. As this cost figure is relatively low, a higher percentage of investment is anticipated. An investment approaching 90‑100 percent would easily meet the test.
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