Red Flags for Consuls in E Visa Cases
1) Overly complicated company structures
Consular officers take pride in their ability to process complex E visa cases, and many of them have a pretty sophisticated understanding of complicated business structures, but they also have limited time to analyze them. If an E visa application describes a corporate structure that cannot be quickly or easily grasped, this will be an irritant for the consul (and the E visa unit) and will raise questions about the credibility of the arrangement for purposes of satisfying the E-2 regulations. Consuls are aware that the existing work authorizing visa categories are inadequate and that many companies struggle to find a fit within the E category. However, they are also leery of the creative use of business law to craft an elegant, and intricate, ownership structure that stretches the boundaries of ownership and control. If the structure of the business that is seeking E-2 designation is too complicated to explain in one paragraph, or requires a detailed organizational chart, a favorable visa outcome is less likely.
2) Show me the money – obscure money trails and cute fiscal arrangements
Investment funds provided by E-2 investors must belong to the investor and must be at risk when the visa application is presented. Both of these requirements give consular adjudicators heartburn when the “at risk” funds do not appear to be irrevocably committed, and when the chain of ownership of the funds is obscure.
Escrow arrangements can be a red flag for consuls adjudicating E visas if they are not transparent and straightforward. The E-2 regulations acknowledge that escrowed funds are considered to be at risk when the conditions of escrow have them moving out of escrow once the visa has been approved. But for consuls, the devil is in the details. Does the escrow agreement clearly set forth this contingency? Is the escrow arrangement one that is sensible and irrevocable, such as finalizing the purchase of an investment property, or is it one that involves too many moving parts and contingencies, such as the sale of an asset unrelated to the investment itself that is anticipated to result in sufficient funds for the investment? And, crucially, does the arrangement make sense? Would a prudent buyer and a prudent seller find it acceptable? If a consul doesn’t agree, the arrangement is at risk of being seen merely as an effort to minimally satisfy the E-2 requirements, not a legitimate commercial arrangement.
Similarly, an investor who has only recently obtained the investment funds presented to satisfy the E-2 requirements is likely to face closer scrutiny to confirm that the assets are legitimately her own, and not part of an arrangement to help her application pass muster. This is particularly problematic when a younger investor represents that the funds in her possession came from a recent inheritance or were given or loaned to her by a close family member. Although both gifted funds and family loans can be used to demonstrate investment funds for E purposes, consuls are aware that for many would-be E-2 investors, the principle objective may be to establish themselves in the United States on behalf of a family business or enterprise rather than to support a genuine entrepreneurial endeavor they have launched on their own. If that investor can’t adequately demonstrate that the investment funds arose from their own commercial or investment activity, a consul may well conclude that the origin of the funds lies in a third party, who will ultimately control their utilization in the commercial endeavor, or that the financial arrangement is principally designed to achieve another objective, to create a foothold in the United States, rather than to invest in the United States and create jobs.
As a rule of thumb, if the financial arrangements a client presents to you to demonstrate her ownership and control of at-risk investment funds seem unusual or murky, you can count on them appearing the same way to the adjudicating consul.
3) Investment amounts are too small
Consuls will scrutinize very carefully a relatively modest E-2 investment proposal. The E regulations wisely do not specify a numerical bottom line below which an investment is not considered to be substantial, and a talented and entrepreneurial investor can make an entirely credible case both in writing and in person for a commercial enterprise that begins with a modest capital infusion. But for every case of that sort encountered by consuls, there are many more where the available funds simply do not demonstrate credibility. In general, if the proposal presented to the consul involves a small enterprise, a new office, or a sole proprietorship, the size of the investment proportionate to the value of the business will be key; if your client wants to invest $50,000 in a business valued at $150,000, that may be considered substantial, whereas the investment of the same amount in a business valued at $1 million may not. Market research that can compare investment amounts for similar startup commercial endeavors can be valuable in addressing consular concerns about substantiality. In some cases, expert opinion letters confirming that the investment amount is credible and proportionate can be helpful.
Smaller investors also face greater difficulty demonstrating that their investment will enable them to achieve their commercial objectives and, importantly, advance the objectives of the E-2 visa category, which is to encourage and increase investment in the United States and grow jobs. A small investment that is submitted along with ample documentary evidence of how that investment will be used to grow the U.S. business and create jobs can pass consular muster, whereas one that does not will probably fail. Consuls are not investment advisors; however, they are pretty good at identifying prospective investors who have no realistic prospects of advancing either E-2 objective.
4) No job creation
As previously noted, many investors consider the E-2 visa principally as a means to establish themselves and their family in the United States. This does not sit well with consular adjudicators, especially in light of the BAHA guidance they now utilize. An E investment vehicle that has no other employees and an investor with no credible business plan explaining how his investment will lead to job creation makes a marginality denial much more likely. Similarly, an E-2 enterprise that seeks to bring in more than a handful of foreign employees in E status is likely to get pushback.
5) No storefront
For consular officers, a business enterprise that operates out of a virtual office or a private home pushes a lot of hot buttons. How can such an enterprise effectively employ individuals other than the investor? Is the business actually engaging in commercial activity? Is it viable? The more times a consular officer has to ask herself these questions, the less likely the investment is to pass muster. Even a start up with just one employee, the investor, will have less difficulty demonstrating credibility if the enterprise has actual offices, signage, and a legitimate work space.
6) E visa renewal with no changes
E Visa Units at U.S. Consulates are like elephants, they never forget. If an E investor who successfully registered her company and obtained an E-2 visa applies for renewal of that registration and visa at the Consulate, her initial business plan will be reviewed in light of the company’s activities at the time of the renewal. If the original submission promised income growth and job creation, and neither took place, the investor faces an immediate hurdle of having to explain why as re-approval is not a given. Similarly, if the initial investment was for one kind of enterprise, but the renewal makes it clear that the commercial activities of the business were of an entirely different, unrelated kind, renewal might be problematic, especially if the consul concludes that the investor never intended to conduct that kind of business in the first place.
7) Not enough bilateral trade/intangible trade
Eighty percent or more of all E visa adjudications are for E-2, not E-1, visas. This means that many consuls may be unfamiliar with the E-1 requirements and may have difficulty identifying the kind of bilateral trading activity requisite for E-1 eligibility. This is particularly true when the trade itself is of limited quantity, and when there is insufficient evidence of ongoing trade over time. An E-1 submission based on a handful of sizeable trades, for example, will need to be accompanied by considerable credible evidence that future trading activity will take place, in the form of signed contracts, for example, to satisfy the consul that the trade is in fact ongoing and was not a one-off.
Another consular concern arises when the trading activity itself involves non-tangible goods, such as services. While consuls understand that the reality of trade in 2018 involves far more than coal and cotton, they are increasingly asked to evaluate sophisticated and esoteric rationales for E-1 eligibility using a regulatory framework that reflects an economic past when most trade involved commodities that could be seen and measured. This places a premium on the ability of the E visa applicant to describe clearly and succinctly commercial trading arrangements that involve the ongoing exchange of professional expertise. You should not simply accept a client’s rationale that the activity in which he or she wishes to engage falls into that category; if you have trouble understanding and documenting the activity, so will the consul.
8) Change of status in the United States
Someone legally present in the United States can obtain a change of status to E-1 or E-2 status, but that may not always be a good idea. Consular officers, not USCIS adjudicators, are the experts in E adjudications, and for many consuls, the appearance of an E-2 visa applicant following a change of status requires very careful scrutiny. It’s not that consular officers think their USCIS counterparts are not up to the task of determining whether someone qualifies for E status, but they consider the personal interview to be the crucial determining factor in deciding whether an individual qualifies for an E visa. A paper adjudication by USCIS will carry little weight with a consul; consular officers will review the entire case as if it were a first-time submission, and if the visa interview does not go well, or if the submission is deficient, a denial is likely, despite USCIS approval of the change of status request.
Consuls may be concerned about the rationale given by the applicant for having changed status in the first place. Did the applicant obtain a B visa for a short business trip, only to have stayed for almost six months before applying to change status? For a consul, this could point to misrepresentation. If the E-2 enterprise was one that might have encountered some difficulties passing muster at an initial consular adjudication because of questions of marginality, the size of the investment, or the expertise of the investor, the consul will frequently apply more scrutiny to the case and the investor could face a very probing examination. This could lead to a conclusion that the investor opted to change to E status out of concern that a consular adjudication might not succeed. Too often, this becomes a self-fulfilling prophecy.
9) Extended prior stays in the United States
Consuls may be concerned by prospective trader or investor actions that have little to do with the bona fides of the investment or trade and everything to do with the investor’s motives. If an investor has been spending extended periods of time in the United States, for example, and ultimately pursued E status after learning that this could no longer be done, such as after being denied entry at a U.S. port of entry, at the completion of an extended period of student status, or following the expiration of a five or seven year stay in L status, a consul adjudicator may legitimately question the applicant’s intentions in now seeking E status. This can happen even when the E investment or trading activity is well documented, credible, and economically viable. It bears repeating – E visa applicants are subject to section 214(b) of the Immigration and Nationality Act (INA). A consul who considers that an E visa applicant’s actions point towards an intention to remain indefinitely in the United States as the primary purpose for the E application will deny the applicant for having immigrant intent. The risk of this happening is greater when the applicant is a recent graduate with little in the way of business expertise or experience and a family with deep pockets and existing commercial connections in the United States.
Source: AILA Doc. No. 18102433.