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Chinese Quota Retrogression - Explained

 You have probably heard that the EB-5 quota for China is expected to retrogress in 2013. But what does that mean? Let me break it down for you.

Two-Step Process

To explain retrogression, I need to back up a little and explain how the U.S. greencard process works. There are two main ways that a foreigner can obtain a greencard in the United States: through a family relationship or through an employment relationship.

The application process is a two-step process: first you have to establish that you are eligible for a greencard under the prescribed categories. For example, if your brother is a U.S. citizen ("USC"). He can sponsor your greencard by filing a Form I-130. If your employer is sponsoring you for an employment greencard, they would file an I-140. And, if you are applying for an EB-5 (which is also an employment based visa) you would file an I-526.

This first-step is not subject to any quotas since it is only about the "basis" of the greencard. So in the examples above, the USCIS is looking to see if there is a valid sibling relationship in the I-130; if there is or will be a valid employment relationship in the I-140; and if there is a valid investment that can create the requisite 10 jobs in the I-526.

Once the immigrant petition (I-130, I-140 or I-526) is approved, the second step of the greencard process kicks in. By law, the United States has allocated a set number of immigrant visas (i.e. greencards) for each immigration category. The employment categories (EB-1, EB-2, EB-3, EB-4 and EB-5s) are allocated 140,000 visas a year, of which EB-5s gets 10,000. Any of the 10,000 that was not used up in a given year are handed over to the EB-1 category. And until now, there has never been a year when all 10,000 of the allocated visa numbers were used by EB-5 immigrants.

Cut-Off Dates

However, once a certain visa category is oversubscribed, new rules such as "per country" ceilings and "cut-off dates" enter the picture.

Let's use the sibling case as an example. There is an annual quota of 65,000 visas allocated for adult siblings of USCs. This quota has been consistently oversubscribed for many, many years so the average wait time is over 10 years. This wait time is measured based on the "Priority Date" of your immigration petition filing. So if your USC brother files an I-130 proving his sibling relationship to you, you will receive a "Priority Date" from the USCIS, which is basically when they received the I-130. That I-130 will be approved in about 6 months time. And once you have an approved I-130 in hand, you can then actually apply for a greencard at a U.S. Consulate office IF there are enough visa numbers for that particular visa category for that year. In other words, you have to wait in line for your turn. How do you know it is your turn? The Department of State published a "visa bulletin" every month listing what "Priority Date" petitions they have started processing for visas. These dates are the "cut-off" dates. Here's an example of the January 2013 Visa Bulletin for family-based visas:



F4 is the category for siblings of adult USCs. And we can see that as of January 2013, they are processing approved immigration petitions for siblings with a Priority Date of April 8, 2001 for everyone except those people from China, India, Mexico and the Philippines. These countries are called out because once categories are oversubscribed, any visas for any given country is capped at 7% of that total visa category number. (More on that later.)

Now compare the above with the chart below - also from the January 2013 Visa Bulletin, but for employment-based visas:






Do you see all those "C"s? That is short for "current" - which means, as soon as you have an approved immigration petition in hand, you can apply for a greencard because your visa number is "current" (i.e. there is no backlog).

As you can see, EB-5s (the last row) are current. So if you file for an I-526 and that I-526 is approved, you can take that approval notice and apply for a greencard at your local U.S. Consulate (or, if you are in the United States and in valid status on another type of visa, file an I-485 and "adjust" your status).

The Chinese Quota Retrogression

Ok, that was just the background. Now, because of the popularity of the EB-5 visa, the Department of State recently announced that in 2013, we might actually hit the 10,000 visa ceiling. (Note that this does not mean 10,000 I-526s are being filed: the I-526 is only being filed by the immigrant investor who is making the investment. Once that I-526 is approved, the investor + his or her spouse and the investor's unmarried children under the age of 21 will be eligible to apply for a greencard - so one I-526 will usually result in more than one EB-5 visa being issued.)

And, once the ceiling is hit, there will be people who have an approved I-526 in hand who will then have to wait for their "Priority Date" to become "current" before they can actually apply for a greencard. This waiting in line is what is referred to as "retrogression".

This will, however, at least in the foreseeable future, only impact people from China. This is because, once the quota ceiling is reached, the per country quota of 7% kicks in. So, once the quota is reached, only 700 (7% of 10,000) people per country will be able to get an EB-5 in that year.

Let's say, hypothetically, that 500 people from South Korea and 100 people from Venezuela and 60 people from the United Kingdom and 10,000 people from mainland China apply for EB-5 visas in FY2014. So we are 660 people over the 10,000 quota. However, since each country has a 700 visa quota, everyone from countries other than China will be ok. But of the 10,000 Chinese people, 660 of them with later Priority Dates will spill over to the following year. (Obviously China will not be capped at 700 if there are visas left over after everyone from other countries get their number.)

I hope this helps to clarify the possible China Quota Retrogression you have been hearing about. This has a number of implications if you are Chinese and have a child that is aging out soon, or hope to invest in a direct EB-5 project. This also has implications at the I-829 stage when it is time to remove conditions. I plan to address these issues one by one in future posts.

Archive of USCIS EB-5 Meeting Materials

As many of you already know, the USCIS hosts a (somewhat) quarterly public conference call to discuss EB-5 related topics with the stakeholder community. And occasionally there will be a one-off call with the USCIS Director or the staff economists. These calls are open to all and a very, very valuable communication tool for people in the EB-5 community. (Often, these calls are recorded and parsed like tea leaves by EB-5 practitioners (similar to how the banking community would try to read between the lines of Greenspan or Bernake after an FRB meeting!).) Usually, but not always, the USCIS will release presentation slides or statistics for a meeting and I often refer back to them to look up a specific item or number. I usually google until I find the right slides (which, inconveniently, are not located on a single page on the USCIS website) and today I had the brilliant idea to link all of the materials in one place so I can stop wasting time. So here they are! Enjoy and marvel at how far and how little we've come in the past three years. (Some of the links connect to my Box folder and others directly to the USCIS website. Please note that the USCIS website doesn't always work with non-Internet Explorer browers.)

September 2009 AILA & IIUSA & USCIS Meeting: Q&A

June 2010 Meeting: Executive Summary; EB-5 Presentation Slides

October 2010 Meeting: EB-5 Presentation Slides

December 2010 Meeting: EB-5 Presentation Slides

March 2011 Meeting: EB-5 Presentation Slides

June 2011 Meeting: Q&A; EB-5 Presentation Slides

September 2011 Meeting: EB-5 Presentation Slides

January 2012 Meeting: Executive Summary; EB-5 Presentation Slides 

March 2012 Meeting: EB-5 Presentation Slides 

May 2012 Meeting: Q&A; EB-5 Statistics

June 2012 Engagement with Director Mayorkas and USCIS Economists: no materials were distributed.

July 2012 Meeting: EB-5 Statistics

October 2012 Meeting: no materials were distributed.

December 2012 Conversation with Director Mayorkas: no materials were distributed.

I-526s are "Officially" Delayed

For the longest time, the USCIS published I-526 processing times in its Quarterly Stakeholder presentation slides.  But the last time they mentioned something in writing was in June 2011 when the slides said that the Target Processing Times for I-526s were 5 months and Actual Times were 5.5 months. Since then, the delays have been getting longer and longer, and the USCIS seems to have discontinued its usual practice of telling us in writing its Target vs. Actual processing times for EB-5 related applications. For about a year now, I've been telling my clients to think of it as a 9 month process and that seems to have been holding true for a lot of applicants (and some even longer).

Anyone can check processing times for immigration applications on the USCIS website. Go to the USCIS Processing Time Information page on the website (or just click here) and then click on the "Service Center Processing Dates" button for the California Service Center (CSC) - though if you are reading this blog post after the EB-5 Team moves from California to Washington D.C. sometime in the spring of 2013, this will not work.

Scroll down to I-526 and you will see that as of November 30, 2012 (which was when this page was last updated), they were processing I-526s that were filed on March 16, 2012. From this we can deduce that the USCIS is officially saying that it takes about 8.5 months for a petition to reach someone's desk.

We're Moving to Washington, DC!

It was announced to the EB-5 community on Monday's call with the USCIS Director Mayorkas that the EB-5 team will be making a move from the current California Service Center to Washington, D.C. In the long run this is supposed to help the EB-5 team become more specialized, etc., but in the short run, this can only mean one thing: DELAYS. Rather, EVEN MORE delays. With I-526 adjudications taking something like 9 months on a good day, and with I-924 Regional Center Applications taking a year or more, this was not the best news one could have hoped to hear on the call. As one of my old bosses used to say, it is what it is and we need to deal with it. I guess.

Guest Post: China's Regulatory System for EB-5 Agents

Today we have a guest post from a colleague on-the-ground in China.

EB-5 REGULATION IN CHINA

By Steven Blayney, Esq*

By some estimates, roughly 80% of EB-5 investors in the popular USCIS EB-5 regional center program are from China.    Given the importance of Chinese investment to the EB-5 regional center program, it is crucial that U.S. EB-5 regional center principals marketing EB-5 investments in China understand the Chinese regulatory framework for administering EB-5 in China.  The following brief overview of the Chinese EB-5 regulatory regime is based upon my review of  The Measures Concerning Implementation of Administration of the Activities of Emigration Agencies (effective January 1, 2002) issued by the Beijing Public Security Bureau, and the Beijing Administration for Industry and Commerce; the Circular Concerning Risk Prevention in Undertaking U.S. EB-5 Business issued by the Beijing Entry & Exit Service Association (2011 No. 029) (北京因私出入境中介机构协会 ); and my conversations with relevant Chinese government officials. 

The Chinese EB-5 Nutshell

At present, EB-5 investments in Mainland Chinese (excluding Hong Kong, Taiwan, and Macau) may only be sold through Chinese emigration intermediary service organizations (中介服务机构) that (a) have been licensed by relevant provincial-level Chinese Public Security Bureau Entry-Exit Administration Bureau; (b) have executed written cooperation agreements with qualified U.S. immigration lawyers with at least 3-years EB-5 experience; and (c) whose EB-5 projects have been vetted and approved by the relevant local Public Security Entry-Exit Administration Department.    A Mainland Chinese emigration agency may not sell an EB-5 investment unless it meets all three of the above criteria.  While Chinese emigration agencies are administered at the local provincial level by the relevant local Public Security Bureaus and relevant local Entry & Exit Service Associations (因私出入境中介机构协会 ), the general administrative framework is the same as in Beijing. 

The Chinese regulatory framework for administering Chinese emigration agencies in China is consistent with the standard dual overlapping State-Party administrative structure:  The relevant local Public Security Bureau Entry-Exit Administration Bureau administers matters within the State administrative structure, while the relevant Entry & Exit Service Association administers Party matters.  For example, item 1 on the last page of the Circular Concerning Risk Prevention in Undertaking U.S. EB-5 Business issued by the Beijing Entry & Exit Service Association states that Chinese emigration agencies in Beijing must implement risk prevention measures in respect of EB-5 projects, and when undertaking EB-5 business, must engage in “self examination and self-correction” (自查自纠) , which is Party administrative parlance for relevant persons writing reports on others and circulating such reports within the Party organizational web.   

Due Diligence

According to relevant Chinese government officials that I have spoken with, it is possible to undertake a limited due diligence investigation of a Chinese emigration agency by visiting the relevant local Public Security Bureau Entry-Exit Administration Department administering the Chinese emigration agent.  At a minimum, this government department should be able to tell you whether the Chinese emigration agent is licensed to engage in U.S. EB-5 specific work; whether the Chinese emigration agent has executed a written cooperation agreement with a qualified U.S. EB-5 immigration lawyer; and whether the specific EB-5 investment project has been vetted and approved for sale in China by the Chinese government.  According to my discussions with relevant Chinese government officials, no Chinese emigration agency may execute more than 2 cooperation agreements with U.S. EB-5 immigration lawyers.  Termination or amendment of the cooperation agreements with U.S. EB-5 immigration lawyers must be filed immediately with the relevant local Public Security Bureau Entry-Exit Administration Department.

Relevance to U.S. EB-5 Regional Centers – Who cares?

From the perspective of the U.S. EB-5 regional centers, blind reliance upon Chinese emigration agents to obtain Chinese government approval of EB-5 investment products for sale on the Chinese market may be problematic.  It is clear that the Chinese emigration agents have an incentive to make money.  It is reasonable, therefore, to assume that some Chinese emigration agents may be inclined to favor large EB-5 regional center projects that offer the highest commissions and require a large number of investors since such EB-5 regional center projects are the most profitable to the Chinese emigration agents.   Theoretically, such Chinese emigration agents may be inclined to not submit (or to not diligently push) some EB-5 regional center investment project approval applications with the relevant Chinese government approval authorities for sale on the Chinese market.  

For more information on how to undertake due diligence in China in respect of Chinese emigration agents and how to get your EB-5 regional center project investment approved for sale in China, please contact me at:     BlayneyConsulting8888@gmail.com

*Steven Blayney is a U.S. and Australian qualified lawyer admitted in Washington State, and Queensland, Australia.  Mr. Blayney has over 2 years’ experience with EB-5 in China. Mr. Blayney speaks and reads fluent Mandarin, Chinese. 

EB-5 Trend Numbers from 2001 to 2012

And, continued from the previous post about the Top Five EB-5 Originating Countries, here are the EB-5 visa numbers from FY2001 (188 visas) to FY2012 (7,641 visa). What a difference ten years makes! (Click on the chart to make it bigger.)

The State Dept. numbers refer to people who are overseas and obtain their greencards through consular processing, while the USCIS numbers refer to people who are already in the United States on a non-immigrant visa (such as student visas or work visas) and adjust their status through an I-485 petition.