Nonimmigrant Classes; Treaty Aliens; E Classification

SUMMARY: This rule amends the Immigration and Naturalization Service

(``the Service'') regulations by codifying existing policy guidelines

related to the ``E'' nonimmigrant treaty trader and treaty investor

visa classification. This rule closely tracks a rule being published

simultaneously by the Department of State (``State'') and is intended

to ensure consistent adjudication of applications for ``E''

nonimmigrant visa classification by the Service and State. It also

furthers Congress' intent to facilitate trade and investment between

the United States and countries with whom the United States has

treaties and agreements.

DATES: This final rule is effective November 12, 1997.

FOR FURTHER INFORMATION CONTACT:

Katharine Auchincloss-Lorr, Senior Adjudications Officer, Immigration

and Naturalization Service, 425 I Street, NW, Room 7215, Washington, DC

20536, telephone (202) 514-5014.

SUPPLEMENTARY INFORMATION:

Background.

The Service and State share responsibility for implementing section

101(a)(15(E) of the Act. That section of the Act provides authority for

the ``E'' nonimmigrant treaty trader and treaty investor visa

classification. On August 30, 1991, the Service published a proposed

rule and request for comments (due October 15, 1991) by parties

interested in this subject in the Federal Register. See 56 FR 42952-57.

On September 3, 1991, State published a proposed rule and request for

comments (due November 4, 1991) on the same subject matter. State is

publishing its final rule on ``E'' nonimmigrant visa classification, 22

CFR 41.51, simultaneously with this rule.

In response to the proposed rule, the Service received and reviewed

15 detailed comments, many covering extremely varied issues. In

addition, the Service reviewed 11 comments to State's proposed rule,

some identical or similar to those it received. Many of these

commenters noted that discrepancies in language between the two

proposed rules might lead to inconsistent adjudication and deviation

from established law and policy. These comments are well-taken. The

final rules of the Service and State have been drafted to be as uniform

in form and substance as possible.

In this regard, both agencies have harmonized their information and

documentation requirements for determining eligibility for E

nonimmigrant visa classification. The Service will in the future issue

a revised Form I-129, which will incorporate State's Form, the E Visa

Supplemental application Form, OF-156E, for determining eligibility for

E nonimmigrnat visa classification. Until that action occurs, this rule

implements use of the existing Form I-129 with E Supplement by

nonimmigrants seeking to change to or extend E classification in the

United States.

General Changes From the Proposed Rule

The Service has revised the format of its proposed rule to conform

with State's final rule. In addition, in response to comments, the

Service has modified the substance and language of its proposed rule

where appropriate. Substantive differences between the Service's

proposed rule and this final rule are explained in the discussion of

the comments.

Jurisdictional Issues

Some commenters argued that differences in Service and State

regulatory language and terminology could lead to substantial

discrepancies in interpretation and inconsistent adjudication, thereby

inhibiting trade and investment in contravention of the United States'

treaty obligations. These commenters urged the Service to defer to

State on treaty alien issues, noting that eligibility for E

nonimmigrant visa classification is based on treaties negotiated by

State, raising foreign policy concerns more appropriately addressed by

that agency. On the other hand, some commenters encouraged State

consular officers to facilitate the international travel and entry of E

nonimmigrnat visa holders by accepting automatically a Service-approved

change of status to E classification.

Under section 104 of the Act, State has exclusive jurisdiction over

visa issuance and, therefore, is not bound by Service determinations of

eligibility for E nonimmigrant classification. As State noted in its

proposed rule, it may not, under this provision, automatically approve

an application for an E nonimmigrant visa based on the Service's

approval of an application for change of nonimmigrant status to, or an

extension of stay in, E nonimmigrnat classification. Rather, State must

examine anew the alien's eligibility for E nonimmigrnat visa

classification, in accordance with current law and procedure, which is

applicable to other nonimmigrnat classifications, as well. For example,

an alien admitted into the United States in B-2 (visitor) status, who

subsequently applies for and is granted a change of nonimmigrant status

to F-1 (student) status, cannot depart and seek reentry as an F-1

unless a United States consular officer has determined the alien's

eligibility for an F-1 visa.

Conversely, under section 103 of the Act, the service has exclusive

jurisdiction to adjudicate applications for admission to this country,

as well as applications for change of nonimmigrant status to, or

extensions of stay in, E nonimmigrant classification. In this regard,

it should be noted that, unlike other employment-driven

classifications, E nonimmigrant visa classification is not conferred by

means of a petition, but instead by an application. Upon receipt of

such applications, the Service is required to recheck independently an

E nonimmigrnat visa-holder's qualifications for admission into the E

nonimmigrant visa classification. Moreover, consistent with section 103

of the Act, the Service may, but is not required to, consult with State

in adjudicating applications for E nonimmigrnat classification made

following entry to the United States.

Some commenters also inferred from the language of section

101(a)(45) of the Act, which delegates to State responsibility for

establishing what constitutes a ``substantial'' amount of trade or

capital, that congress intended to recognize State's ``primary''

jurisdiction over E nonimmigrant visa status eligibility. As previously

indicated, the Service does not share such a view of the Act. Section

101(a)(45) of the Act reflects congress' understanding that, because of

State's central role in negotiating, executing, and interpreting

Bilateral Investment Treaties, it is the appropriate agency for

interpreting this statutory term. Section 101(a)(45) is not intended,

however, to limit the Service's authority under section 103 of the Act

to adjudicate and determine requests for E nonimmigrant classification

in cases within its jurisdiction.

[[Page 48139]]

Table Comparing the Service's and State's Final E Rules

The following table provides a comparison of State's and the

Service's final E nonimmigrant treaty trader and investor visa

classification rules. An asterisk next to a State heading indicates

that it is different from the Service's heading. State's headings that

treat the same matter as those of the Service are marked ``SAME.'' An

asterisk next to a Service heading indicates there is no parallel State

heading.

------------------------------------------------------------------------

Service rule-- 8 CFR 214.2(e) State rule-- 22 CFR 41.51

------------------------------------------------------------------------

(1) Treaty trader (TT)..................... (a) SAME

(2) Treaty investor (TI)................... (b) SAME

(3) Employee of TT or TI................... (c) SAME

(4) Spouse/Children of TT and TI........... (d) SAME

(5) Nonimmigrant intent.................... (e) Representative of

Foreign Information Media

*

(6) Treaty country (TC).................... (f) SAME

(7) Nationality of the TC.................. (g) SAME

(8) Terms and conditions of E status *..... (h) Trade *

(9) Trade--definitions..................... (i) Item of Trade *

(10) Substantial trade..................... (j) SAME

(11) Principal trade....................... (k) SAME

(12) Investment............................ (l) SAME

(13) Bona fide enterprise.................. (m) SAME

(14) Substantial amount of capital......... (n) SAME

(15) Marginal enterprise................... (o) SAME

(16) Solely to direct and develop.......... (p) SAME

(17) Executive or supervisory character.... (q) SAME

(18) Special qualifications................ (r) SAME

(19) Period of admission *................. ...........................

(20) Extensions of stay *.................. ...........................

(21) Change of status *.................... ...........................

(22) Denial of treaty trade or investor ...........................

status to citizens of Canada or Mexico in

the case of certain labor disputes *.

------------------------------------------------------------------------

Definitions

Unlike the proposed rule, this final rule does not contain a

separate paragraph on definitions. Instead, terms are defined

throughout the regulations.

Treaty Trader and Treaty Investor, 8 CFR 214.2(e) (1) and (2)

(Corresponds With 22 CFR 41.51 (a) and (b))

The proposed rule's definition of ``primary treaty alien'' at

Sec. 214.2(e)(2)(i), has now been broken into separate definitions of

``treaty trader'' and ``treaty investor'' in this final rule at

Sec. 214.2(e) (1) and (2). In response to commenters' concerns, the

term ``primary,'' used in the proposed rule, has been replaced in the

final rule by the term ``principal'' for purposes of clarifying the

treaty alien's relationship to his or her spouse or children.

In determining whether an applicant is a treaty trader, commenters

urged the Service to consider conditions in the treaty alien's home

country which affect the alien's ability to carry on trade in

accordance with State's proposed rule. The final rule incorporates this

consideration as a factor in determining what constitutes substantial

trade, although obviously at some point country conditions, in and of

themselves, can become restrictive to trade that treaty eligibility

must be denied. The portion of this paragraph concerning consideration

of country conditions is adopted from State's definition of treaty

trader at 22 CFR 41.51(a)(1).

Employee of Treaty Trader and Treaty Investor, 8 CFR 214.2(e)(3)

(Corresponds With 22 CFR 41.51(c))

The terms ``manager'' and ``managerial'' used in the proposed rule

at 8 CFR 214.2(e) (2)(ii) and (6)(ii) are replaced in the final rule by

``supervisor'' and ``supervisory'' in response to comments indicating

confusion with the term ``managerial'' as it is used in the context of

section 101(a)(15)(L) of the Act.

Although the term ``treaty company'' was defined in the proposed

rule to describe entities capable of employing an alien in E-1 or E-2

nonimmigrant visa status, State's regulation contains no such

definition. In the interests of clarity, this final rule adopts State's

use of the term ``organization,'' as well as the statutory word

``enterprise,'' to refer to such entities. This change reflects the

fact that such an organization or enterprise derives the ability to

employ aliens in E nonimmigrant visa classification directly and

exclusively from its treaty trader or treaty investor owner.

Because employees derive E nonimmigrant visa status solely by

virtue of their employment for an E-1 or E-2 nonimmigrant visa

employer, or for an organization or enterprise qualified by reason of

its ownership, it is the Service's position that an employee cannot be

classified under section 101(a)(15)(E) of the Act if the employer is

lawfully classified under another nonimmigrant status at the time E

nonimmigrant visa classification is requested. For this reason, as

provided in the proposed regulation, a permanent resident may not be

the employer of a treaty alien, and the treaty alien status of an

employee terminates when the E nonimmigrant visa employer becomes a

permanent resident. It follows that the Service cannot adopt one

commenter's suggestion that individual owners of an enterprise should

be able to change to another nonimmigrant category without jeopardizing

the employee's eligibility for E treaty status.

Spouse and Children of Treaty Trader and Treaty Investor, 8 CFR

214.2(e)(4) (Corresponds With 22 CFR 41.51(d))

The definition of spouse and dependent children, in the proposed

rule at Sec. 214.2(e)(2)(iii), is now contained in this final rule at

Sec. 214.2(e)(4). Nonimmigrant Intent, 8 CFR 214.2(e)(5)

Note: This does not corresponds with 22 CFR 41.51(3),

Representatives of Foreign Information Media

The concept of dual intent found in the proposed rule at Sec.

214.2(e)(10) (i)

[[Page 48140]]

and (ii) has been moved to Sec. 214.2(e)(5) and retitled ``Nonimmigrant

intent.'' This provision reflects the agencies' understanding that,

under section 101(a)(15) of the Act, aliens in E nonimmigrant visa

classification need not maintain a foreign residence but must indicate

a clear intent to depart upon termination of status.

Although not specifically part of this final rule, the Service

shares State's position that representatives of foreign information

media should be considered for classification as nonimmigrants under

the provisions of section 101(a)(15)(I) of the Act before consideration

will be given to classifying such persons as nonimmigrants under the

provisions of section 101(a)(15)(E) of the Act. See 22 CFR 41.51(e).

Treaty Country, 8 CFR 214.2(e)(6) (Corresponds With 22 CFR 41.51(f))

The definition in the proposed rule at Sec. 214.2(e)(1) has been

moved to this paragraph.

Treaty Country Nationality, 8 CFR 214.2(e)(7) (Corresponds With 22 CFR

41.51(g))

The Service's final rule incorporates the substance of its proposed

rule. The proposed rule at 8 CFR 214.2(e)(6)(i), in turn, was based on

State's Notes to its Foreign Affairs Manual (FAM) at 9 FAM 41.51. Some

commenters urged the Service to consider the following major departures

from existing policy. As discussed below, the Service is unable to

adopt these suggestions.

One commenter indicated that the definition of corporate

nationality contained in the proposed rule was both unworkable and in

conflict with the law. The commenter argued that, by basing corporate

nationality on whether nationals of a particular country own 50 percent

of a corporation's shares, the proposed definition failed to account

for difficulties in proving foreign corporate ownership which arise due

to corporate ownership of shares, transfer of shares, and corporate

shareholder lists of identity which do not always disclose

shareholder's nationality. The commenter argued that requiring full

search and disclosure would encourage dishonesty regarding the true

owners of a company. Other commenters expressed their belief that a

corporation's nationality should be determined by location of

incorporation. In support of this argument, they cited certain

International Court of Justice rulings, in which large multi-national

corporations unable to trace nationality were permitted to look to

their country of incorporation to determine nationality. They expressed

the opinion that a definition based on control and ownership rather

than location of incorporation could discriminate against corporations

of treaty countries controlled by nationals of a third country. For

these reasons, the commenters argued that a test focusing on the

corporation's location would provide a more simple and enforceable

guideline.

It is the Service's position that, in the great majority of cases,

nationality based on ownership is the only appropriate way to determine

the nationality of an organization or enterprise. Section 101(a)(15)(E)

of the Act focuses on the efforts of individual nonimmigrants, as

opposed to organizations, to further treaty-sanctioned activity.

Consequently, simple registration in a jurisdiction to engage in

business activities, rather than stock ownership, is normally not an

acceptable standard for determining corporate nationality. Similarly,

the country of incorporation is, in most cases, irrelevant for purposes

of determining corporate nationality. On the other hand, because

ownership, and not corporate location, is critical, the Service agrees

with commenters who argued that domestically incorporated, but foreign-

owned, corporations can be deemed eligible for E nonimmigrant visa

classification. Accordingly, the reference to ``foreign'' corporations

in the proposed rule has been removed.

The Service recognizes a limited exception to the nationality-by-

ownership rule in the case of large, multi-national corporations that

are unable to determine ownership by stock ownership. See current 9 FAM

22 CFR 41.51, N3.2. Under this exception, corporations whose stock is

sold exclusively in the country of incorporation may be presumed to

have the nationality of the location of the exchange. Because the

burden, in all cases, remains on the applicant to demonstrate an

enterprise's treaty nationality, this presumption must be supported by

the best evidence available. In determining corporate nationality, the

Service will consider all the circumstances in each case.

Several commenters recommended an expanded definition of

``nationality'' so that individual owners or shareholders in immigrant

status, or in a nonimmigrant visa classification other than E, could be

counted toward meeting the 50 percent nationality requirement set forth

in 8 CFR 214.2(e)(3)(ii). The Service cannot adopt this suggestion. As

noted earlier, nonimmigrant employees in E classification in an

organization or enterprise derive their status directly from the

employing E nonimmigrant's ownership and treaty-based nationality. Such

classification, therefore, cannot be afforded to these employees if

less than 50 percent of the owners are persons who are in E

nonimmigrant visa classification if in the United States (or, if not in

the United States, would be classifiable as E treaty traders and

investors).

Terms and Conditions of E Treaty Status, 8 CFR 214.2(e)(8) (There is no

Corresponding State Rule)

The Service and State will determine the terms and conditions of E

treaty status, including any employment activity, at the time

classification under section 101(a)(15)(E) of the Act is granted. For

this reason, this paragraph incorporates proposed 8 CFR 214.2(e)(13).

Among other issues, procedures and responsibilities related to

transfers of employees among subsidiaries have been clarified in the

paragraph of the final rule. While the final rule allows an employee in

E nonimmigrant visa classification, under certain circumstances, to

move among subsidiaries, the rule does not relieve the employer from

compliance with all relevant regulations. Thus, in the case of such a

transfer, the alien's employer is responsible for compliance with the

employment eligibility verification requirements specified at 8 CFR

part 274a.

It has long been the policy of the Service that a treaty trader or

treaty investor, under certain circumstances, may engage in compensable

activities which are incidental to the terms and conditions of the

alien's E nonimmigrant visa classification. Acceptable incidental

activities are those which are reasonably related to and a necessary

outgrowth of the treaty employment forming the basis of the alien's E

nonimmigrant visa classification. For example, it would be reasonable

to expect that, during an emergency, a manager might be required to

perform temporarily the duties of those persons he or she supervises as

an incident to his or her managerial functions. To facilitate a

determination of what constitutes incidental activity, State has agreed

to request that consular officers overseas annotate E visas in a manner

sufficient to inform the Service and the alien of the terms and

limitations of the authorized employment activity.

An E nonimmigrant who wishes to change the terms of his or her E

status, for example, to change employers or work on terms substantively

different than those for which he or she was accorded entry, must

obtain prior

[[Page 48141]]

Service approval by filing Form I-129 with the E Supplement in

accordance with the instructions on, or attached to, that form. In the

alternative, an E nonimmigrant may obtain a new E visa from State

reflecting the new employment. Where the alien obtains Service approval

of the change in status, the treaty alien must obtain a new E visa from

State reflecting this change in order to return from travel abroad. The

only exceptions to this new visa requirement are where the alien is

applying for readmission to engage in the new treaty activity after an

absence not exceeding 30 days solely in contiguous territory, pursuant

to 22 CFR 41.112(d), or where an alien seeking admission presents a

Form I-797, Approval Notice, indicating prior Service approval of the

change in E treaty employment, together with his or her E visa.

Prior Service approval is not required if there is no fundamental

change that affects the underlying terms of the treaty status forming

the basis of initial E nonimmigrant visa classification. A non-

substantive change may occur when there is a mere change in name of the

treaty company, where one treaty national owner is replaced by another,

or in some mergers and acquisitions where there is no effect on the

alien's employment or relationship to the approved treaty activity.

What constitutes a non-substantive change necessarily will depend on

the specific facts of each case. To facilitate admission after such a

non-substantive change, the Service has provided the options set forth

at 8 CFR 214.2(e)(8)(iv). To determine if the change is non-

substantive, the Service has provided its customers with a process for

seeking advice at 8 CFR 214.2(e)(8)(v). Accordingly, an alien may file

with the Service Center Form I-129, with fee, and a complete

description of the change, to request a new Form I-797, Approval

Notice, reflecting the non-substantive change, or appropriate advice.

As noted previously, the Service plans to publish a revised Form I-

129, with the E Visa Supplemental Application Form. Until the revised

Form I-129 is approved by the Office of Management and Budget in

accordance with the Paperwork Reduction Act, and issued, applicants

will continue to use the existing Form I-129 and E Supplement. The

revised form will provide for the derivative spouse and minor children

of the trader and investor and eliminate the need for separate requests

when the trader or investor seeks to change the terms and conditions of

classification, extend status in, or change to E nonimmigrant

classification. The option of filing the Form I-539, with a copy of the

principal E visa-holder's Form I-94, will remain available, if the

family member will be seeking an extension of status at a time other

than the principal E nonimmigrant.

Trade--Definitions, 8 CFR 214.2(e)(9) (Corresponds With 22 CFR 41.51

(h) and (i))

The final rule modifies the proposed definition of trade by

eliminating the separate definitions of ``goods'' and ``services'' and

includes them as ``items of trade.'' This modification is not intended

to be substantive in nature, but is meant to bring the regulation into

conformity with that of State. The Service intends that the term

``service'' continue to be interpreted in an expansive fashion. In

addition, in response to the concerns of commenters, the final rules of

both the Service and State incorporate language recognizing trade where

binding contracts ``call for the immediate exchange of items of

trade.'' In response to comments that the definition of ``trade''

failed to include ``news gathering,'' an activity not precluded under

section 101(a)(15)(E) of the Act but inadvertently omitted from the

proposed rule, the Service has included this activity in the final

regulation. As discussed earlier, representatives of foreign

information media should first, however, be considered for

classification pursuant to section 101(a)(15)(I) of the Act before

consideration is given to possible classification under section

101(a)(15)(E) of the Act.

Substantial Trade, 8 CFR 214.2(e)(10) (Corresponds With 22 CFR

41.51(j))

Section 101(a)(15)(E) of the Act requires that, in order to qualify

for E-1 nonimmigrant visa classification, the underlying business must

be engaged in ``substantial trade.'' Several commenters felt strongly

that the proposed requirement of continued and frequent business

transactions, including business commitments scheduled for a future

time, was too restrictive and inconsistent with Congressional intent

and current guidelines. Section 101(a)(45) of the Act requires the

Service to defer to State's definition of substantial trade.

Accordingly, the Service incorporates in full State's position, as set

forth in its final rule and the preamble thereto, with respect to what

constitutes substantial trade for purposes of the E nonimmigrant visa

classification.

It bears emphasizing that E nonimmigrant visa classification cannot

be granted on the basis of a single transaction, even if that

transaction is of considerable value. Trade between partners foresees

long-term benefits and dedicated, ongoing activity, and is contrary to

the notion of a single transaction (however protracted or complex) and

the expiration of commercial activity.

In accordance with current practice, substantial trade may be

demonstrated by evidence from many sources including, but not limited

to, bills of lading, customs receipts, letters of credit, insurance

papers documenting commodities imported, purchase orders, carrier

inventories, trade brochures, and sales contracts, insurance papers

documenting commodities imported, purchase orders, carrier inventories,

trade brochures, and sales contracts.

Principal Trade, 8 CFR 214.2(e)(11) (Corresponds With 22 CFR 41.51(k))

With respect to what, for purposes of section 101(a)(15)(E) of the

Act, constitutes trade ``principally between the United States and the

foreign state'' of which the treaty trader is a national, several

commenters urged the Service to adopt State's proposed phraseology

``that over 50% of the volume of international trade of the trader must

be conducted between the United States and the treaty country of the

treaty trader's nationality.'' (Emphasis added). See proposed rule

Sec. 41.51(k), 56 FR 43569 (September 3, 1991). The Service has adopted

this language at 8 CFR 214.2(e)(11). Thus, for purposes of the

principal trade requirement, the Service will look only at the volume

of the enterprise's international, as opposed to total, trade.

Investment, 8 CFR 214.2(e)(12) (Corresponds With 22 CFR 41.51(l))

Investments are for-profit commercial efforts to generate funds.

This final regulation is consistent with the proposed rule and State's

regulation. On the question of risk, commenters questioned the

requirement that funds dedicated for the investment business be

irrevocably committed. They suggested that, by failing to protect the

investor in the event a visa was not issued, the regulation discouraged

alien investors unwilling to take such risk. investment was irrevocable

upon visa issuance. The final rule, like State's, explicitly permits

the use of mechanisms such as escrow to protect the investor if a visa

is not issued. In addition, the Service will apply FAM guidelines for

E-2 nonimmigrant visa classification when enterprises are still in the

pre-operational activity stage.

[[Page 48142]]

It is clear that investment funds may not have been obtained,

either directly or indirectly, from activities which are, under United

States law, criminal in nature. A clear example of this would be funds

obtained either directly through the trafficking of narcotics, or

through the laundering or funds received through the sale of such

controlled substance. On the other hand, it must be emphasized that

this rule is not meant to penalize certain activities which would be

recognized as lawful in the United States, but are deemed by a foreign

jurisdiction to be criminal in nature. For example, a foreign

jurisdiction may deem it to be illegal to transfer currency abroad,

while the same activity might be deemed to be perfectly legal in the

United States. Depending on the specific facts of such a case, an

examiner may be required to apply United States standards, and not

those of the foreign jurisdiction. In short, a determination of whether

funds were obtained by criminal means must always be made on a case-by-

case basis.

A number of commenters expressed the belief that the proposed

regulation's failure to count towards the ``substantial investment''

requirement loans that are secured with the assets of the investment

enterprise is inconsistent with modern financing practices. Commenters

stated that such loans should be counted toward the ``substantial

investment'' requirement if there is ultimate recourse to the investor

in the event of failure, and recommended that the final rule contain

the following language: ``Loans secured exclusively by the assets of

the investment enterprise itself, without ultimate recourse to the

investor, may not be counted toward the actual amount of capital

invested.''

The final rule reflects the positions of the Service and State that

assets of the treaty enterprise may not be used as collateral to secure

loans and, therefore, does not contain this suggested language. The

purpose of the risk provision is to place the risk of the investment

exclusively on the shoulders of the investor. Such risk would be

diluted if the assets of the business itself could be used as

collateral, since an investor lacking adequate capital to fully repay a

debt could simply ``walk away'' from a failure. The final rule,

therefore, adopts State's proposed definition of ``investment'' and

provides that only investments funded by capital for which the investor

is personally liable may be counted as investment funds. Loans secured

by the assets of the investment enterprise, such as mortgage debt or

commercial loans, may not be used to meet the investment requirement.

On the other hand, acceptable investment funds include such personal

assets as a second mortgage on a home, unsecured or unencumbered loans

or assets, and loans on the alien's personal signature.

State and the Service will determine the value of the investment

capital by the same means. The FAM notes continue to provide guidance

in this regard. See current 9 FAM N7.2-1 and N7.2-2. Accordingly, such

value may include payments in the form of leases or rents for property

or equipment in an amount limited to the funds devoted to that item in

any 1 month. Such value may also include payments for the purchase of

equipment and inventory on hand, provided that the alien can

demonstrate that the goods or equipment are being, or will be, put to

use in the investment enterprise and are for commercial, not personal,

use.

Bona Fide Enterprise, 8 CFR 214.2(e)(13) (Corresponds With 22 CFR

41.51(m))

Under this final rule, to be deemed a ``bona fide enterprise,'' the

enterprise may not be a paper organization or an idle, speculative

investment held for potential appreciation in value, such as

undeveloped land for stocks. Neither can the investment be in a

nonprofit enterprise or constitute merely an intent to invest at a

future time.

Some commenters argued that the effect of proposed 8 CFR

214.2(e)(5)(i)(A) was to improperly deem research facilities, market

research facilities and non-profit organization to be idle and

speculative investments. The commenters argued that such facilities are

viable, active, profitable, and growing, albeit at a slower pace than

other industries. They further argued that many multi-million-dollar

research laboratories add to marketing and product knowledge and

indirectly generate goods and services. The commenters concluded that

Congress intended to bring such research, which is vital to larger

enterprises, within the scope of the statute.

The Service recognizes the legitimacy of these arguments in the

final regulation as they relate to for-profit market and research

facilities. However, nonprofit institutions, such as colleges and

associations, are, and have been, historically ineligible for E

nonimmigrant visa status. The Service does not question the value of

such nonprofit institutions but, because the focus of the E

nonimmigrant visa classification is on commercial, for-profit

institutions that trade or invest, nonprofit institutions are not

included.

Substantial Amount of Capital, 8 CFR 214.2(e)(14) (Corresponds With 22

CFR 41.51(n))

Twelve commenters raised objections to the proportionality scale

set forth in the proposed rule. They were concerned that use of a

``bright line test etched in stone'' would preclude a case-by-case

analysis of whether the business was properly capitalized at a level of

funds appropriate for the particular industry and type of enterprise.

They further argued for elimination of the proportionality scale with

respect to small investors since, under the scale, very profitable

small businesses, particularly those where the investment was below

$500,000, might fail to meet the high minimum-investment requirements,

thereby rendering previously qualified investors ineligible for E

nonimmigrant visa classification.

Some of these commenters further noted that, under the proposed

rule, some joint ventures and large scale investors would not qualify

under the requirement that the investment be at least 75 percent of a

business valued at under $500,000. They urged the Service to consider

expanding eligibility for E nonimmigrant visa status to large companies

involved in sizeable joint ventures and major investments in United

States business operations

As previously noted, in enacting section 101(a)(45) of the Act,

Congress assigned State responsibility for determining, after

consultation with the Service and other appropriate agencies, what

constitutes ``substantial'' investment for purposes of E nonimmigrant

visa classification. For this reason, the Service is bound by State's

interpretation of ``substantiality'' as set forth in its final rule and

the preamble thereto. Consistent with section 101(a)(45) of the Act,

the Service, therefore adopts the guidelines set forth by State in its

preamble to its final regulation. The Service wishes to emphasize that,

under this interpretation, no minimum dollar figures can or should be

established for meeting the substantiality requirement. Instead, the

regulation requires a flexible, case-by-case assessment and provides a

very straightforward 3-part test for determining substantiality.

One commenter commended the Service for exempting large

corporations from the application of the ``inverted sliding scale,''

which is simply another way of describing the proportionality test that

was described in the proposed rule at 8 CFR 214.2(e)(5)(iii). However,

large corporations are not exempt from that analysis. Under such a

determination, the percentage of an

[[Page 48143]]

investment (in relation to total cost) necessary to meet the

substantiality requirement decreases gradually as the cost of start-up

or operating the business increases, to a point where the sheer

magnitude of an investment is considered substantial. Multi-million-

dollar investments by large corporations, therefore, would usually be

substantial even where the dollar amount invested is a relatively small

percentage of the total cost of starting up or developing the

enterprise.

In determining whether an investment is substantial, the Service

may consider all financial and other documents of the sort presented to

investors, banks, lenders, or financial analysts to assess an

investment. In weighing the probative value of such documents, the

Service will consider size and commercial value of the business and the

circumstances of each case. For instance, the originator of a document

may be relevant to an evaluation of the sufficiency of the proof. An

audit conducted by a relative may be of less value than one conducted

by a recognized, independent accounting firm and/or may need to be

scrutinized for accuracy and to determine if generally accepted

accounting principles were utilized.

Marginal Enterprise, 8 CFR 214.2(e)(15) (Corresponds With 22 CFR

41.51(o))

A number of commenters criticized the marginality test historically

used by State and the Service because it inhibits small business

investors, whose investments are the most likely to have been made

solely to provide a living, from investing in this country. The

commenters reasoned that, as a result of this policy, the nonimmigrant

investor visa classification has effectively been limited to wealthy

aliens with other major sources of income and foreign business

interests.

The purpose of the marginality requirement is to weed out

commercial enterprises, regardless of size, which will fail to become

viable, that is to grow and become profitable. Of relevance to this

question is the enterprise's prior commercial track record. Investors

who allow an investment to subside into marginality have not maintained

a fundamental condition of the investor's E-2 nonimmigrant visa

classification. The final rule provides adjudicatory guidelines for

evaluating what is a marginal enterprise. The determination of whether

an investment is marginal depends, in all cases, on the specific

circumstances and facts involved.

The proposed rule provided that ``a business may generate a minimal

income and still meet the marginality test if it offers employment

opportunities for United States workers and if the investor is not and

will not be primarily self-employed as a skilled or unskilled worker.''

See proposed rule at 8 CFR 214.2(e)(5). One commenter argued that the

question of whether an investor is or is not primarily employed as a

skilled or unskilled laborer bears no relationship to the question of

an enterprise's marginality. Instead, the marginality question, it was

argued, relates merely to whether the investment has an impact on

potential job-creation or the economy as a whole. The Service agrees

with this comment. Accordingly, the final rule deletes references to

skilled and unskilled labor, and provides that the capacity of an

enterprise to make a significant economic contribution is an

appropriate consideration in a marginality determination.

Both State's and the Service's proposed regulations were criticized

for defining as marginal those enterprises which lack the capacity ``to

generate more than enough income to provide a minimal living for the

alien and family,'' since such enterprises may employ American workers

and may involve a significant investment of capital. Although this

definition is retained, the final rule precludes a finding of

marginality where an enterprise demonstrates a present or future

capacity to make a significant economic contribution, such as providing

substantial employment.

Consistent with Congress' focus on the commercial nature of the

investment, the final rule requires that an applicant demonstrate that

an investment will generate a positive income within a reasonable

period of time. The burden is on the alien to demonstrate the

enterprise's capacity to become a viable commercial entity by

presenting a business plan showing that the business will provide more

than a subsistence living for the investor, within 5 years from the

onset date of normal business activities. This business plan will

assist the Service in determining whether the alien's intention in

making the investment is to establish a viable enterprise

The 5-year business plan enables the Service to gauge progress

toward tangible goals after the enterprise is in place. It recognizes

the business reality that often, in situations involving start-up,

change of ownership/management, or acquisitions, businesses may show

little actual initial profit, but with proper planning, development,

and direction, the business should generate more than enough income to

provide a minimal living for the investor and his or her family. The

Service must continue to assess whether the investor's enterprise is

marginal at every E adjudication, even after the initial 5-year period

is completed.

Solely to Develop and Direct, 8 CFR 214.2(e)(16) (Corresponds With 22

CFR 41.51(p))

Two commenters preferred State's language that an alien can meet

the ``develop and direct'' requirement of section 101(a)(15)(E) of the

Act by: (a) Controlling the enterprise through ownership of at least 50

percent, rather than more than 50 percent, of the business; (b)

possessing operational control through a managerial position or other

corporate device, or; (c) being in a position to control the enterprise

by other means. The final rule adopts this reasonable interpretation.

Some commenters stated that demanding a demonstration of actual

control would undermine United States treaty obligations to further

trade and investment by imposing the ``unworkable'' requirement that

the applicant present copies of stock certificates, rather than

permitting him or her to submit for review corporate records and stock

ledgers. These commenters argued that an investor who operates that

company alone and does all ``routine work'' without other employees

should be recognized for purposes of meeting the control requirement,

and that the form of the business organization should not be

determinative.

The requirement that an investor's entry be ``solely to develop and

direct the operations of an enterprise'' is statutory and cannot be

waived. Accordingly, the final rule permits an alien to demonstrate

that he or she (or his or her employer, in the case of an essential

employee) controls or will control the enterprise within a reasonable

period of time. In cases where the individual is in the process of

investing, at the time the investment attaches (e.g., the investment

funds are released from escrow) the individual must be in control of

the investment. In the final rule, the Service defines control broadly

to include operational control, ownership, management responsibility,

or use of other corporate devices for controlling the enterprise. The

Service recognizes that what constitutes control may vary depending on

factors such as the structure of the enterprise involved.

Given the control requirement, the Service cannot adopt the

suggestion that E nonimmigrant visa classification be accorded

automatically to large

[[Page 48144]]

companies involved in joint ventures since, often, no company

``controls'' the venture. E nonimmigrant visa classification for joint-

venture participants is inappropriate unless the applicant can

demonstrate operational control. Such operational control may be

demonstrated through ``negative control.'' See current 9 FAM 41.51,

N11.1. In all cases, the Service will adjudicate applications involving

joint ventures in a manner consistent with State.

Finally, it should be noted that, because of the requirement that a

treaty investor be entering ``solely to develop and direct'' the

operations of an enterprise, an alien who is seeking admission in order

to engage primarily in skilled or unskilled labor will be ineligible

for E nonimmigrant visa classification. Such an investor may, however,

perform ``hands on'' duties, provided they are purely incidental to his

or her developing and directing the operations of the enterprise.

Executive and Supervisory Character, 8 CFR 214.2(e)(17) (Corresponds

With 22 CFR 41.51(q)

With the exception of the change noted in the discussion of final 8

CFR 214.2(e)(3), there were no other comments on, or substantive

changes, to this paragraph.

Special Qualifications, 8 CFR 214.2(e)(18) (Corresponds With 22 CFR

41.51(r)

Thirteen commenters expressed an array of opinions on the proposed

requirements for establishing an employee's essentiality for purposes

of E nonimmigrant visa classification. Some commenters stated that

requiring specialized knowledge, unique skills, and a high level of

expertise or proprietary knowledge of the business operations was

overly stringent and included outmoded or discredited concepts. These

commenters noted that the term ``unique,'' previously used with respect

to the L nonimmigrant visa classification, was subsequently rejected by

both Congress and the Service.

It should be emphasized that there is no relationship between the E

and L nonimmigrant visa classifications. For this reason, the statutory

term ``specialized knowledge,'' found at section 101(a)(15)(L) of the

Act, is inappropriate in describing whether an alien employee is

``essential'' for purposes of E nonimmigrant visa classification.

Although section 101(a)(15)(E) of the Act is silent on whether

employees may be admitted in E nonimmigrant visa classification, the

Service has historically deemed appropriate the admission of non-

executive or supervisory employees having special qualifications which

make their skills essential, i.e., indispensable to the success of the

investment. The overriding consideration in the context of E

nonimmigrant visa classification is an employee's essentiality to the

enterprise.

The final rule does not require an essential employee's skills to

be ``unique'' or ``one of a kind.'' The possession of unique skills,

however, can usually be considered essential and, therefore, can be a

positive factor in determining whether the applicant is essential for

purposes of section 101(a)(15)(E) of the Act.

Some commenters expressed the opinion that the proposed

essentiality requirement would hinder the ability of international

companies to transfer personnel to critical projects in the United

States. These commenters argued that knowledge of foreign language,

culture, and country conditions should be considered in determining an

alien's essentiality. They also argued that requiring prior employment

or experience with the company abroad (i.e., ``transferred from an

overseas office'') violated treaty obligations which require only that

the employee be essential.

The Service adopts in full State's criteria, as set forth in its

final rule and the preamble thereto, for determining whether an

applicant is ``essential.'' There is no bright-line test for

determining whether an alien is essential to an enterprise. What

constitutes essentiality must be determined on the basis of the

particular facts of each case. Accordingly, skills such as knowledge of

a foreign language and culture, knowledge of conditions in the foreign

country that are unique to his or her nationality, and previous

employment with the enterprise in question, must be analyzed for their

essentiality to the investment enterprise and would not, by themselves,

meet the essential skills requirement.

Much comment was received regarding the requirement in the proposed

rule that a treaty trader or investor seeking an essential employee

demonstrate that qualified United States workers are unavailable to do

the job. Some commenters urged that the Service require treaty traders

or investors to provide statements from relevant public or private

sources or otherwise adopt a process of assessing United States worker

availability and obtaining input from labor organizations. Such public

or private sources may include, among others, chambers of commerce,

labor organizations, industry trade sources, or state employment

agencies.

Other commenters opposed requiring such a labor market test,

arguing that such a requirement was outside the scope of section

101(a)(15)E) of the Act, inconsistent with prior policy, and contrary

to United States treaty obligations. The commenters also argued that a

labor market test would have no application to cases where treaty

aliens create jobs. These commenters expressed concern that, in actual

practice, the Service would condition a finding of essentiality on the

existence of a labor shortage and/or an employer's commitment to train

United States workers to fill the position. These commenters noted that

the employing enterprise is in a better position than the Government to

determine the essentiality of particular employees.

The Service agrees that a labor shortage clearance requirement

would be tantamount to a labor certification process and there is no

legal authority for such a change. The final rule adopts a more

flexible process by requiring the adjudicator to consider whether the

needed skills are ``commonplace'' or readily available. This

requirement does not constitute a veiled labor certification test.

Rather, consideration of whether United States workers are available to

perform the duties in question is relevant to determining how essential

or indispensable the employee is to the enterprise. Although not

required, documentation from outside sources may prove helpful in

establishing the alien's essentiality.

As State has noted in its final rule at 22 CFR 41.51(r)(2), a skill

that is unique or essential at one point may become commonplace at a

later date. Consequently, while an applicant may be able to demonstrate

in a particular instance that his or her skills are essential for an

unspecified period of time, the alien is required to demonstrate his or

her essentiality in any subsequent application for E nonimmigrant visa

classification.

The proposed rule required that businesses develop training and

education programs for United States workers in areas where such United

States workers lack the requisite skill to fill the position offered.

The proposed rule further provided that businesses must, in the

alternative, demonstrate that the transfer of such skills is not

feasible. These proposals were the subject of 11 comments. Some

commenters suggested that such training regulations departed from prior

law and were beyond the scope of the Service's statutory authority. The

[[Page 48145]]

commenters also argued the proposed training requirement was

economically irresponsible, since many businesses can more easily and

cost effectively transfer an employee possessing such skills from

abroad. In addition, they noted that training would not be feasible if

a skill was needed only temporarily and the need for the skill

disappeared prior to completion of United States worker training. Some

commenters suggested that training requirements should be applied only

to companies which repeatedly request foreign technicians and, that

even in such cases, the absence of a training program should merely be

looked at as a negative, but not a determinative, factor in considering

future applications.

The Service has decided not to impose a training requirement for E

nomimmigrant visa classification exept in cases where the purpose of

the E nonimmigrant visa employee's entry is to train United States

workers. The question of the trainability of Untied States workers,

however, goes directly to whether the alien employee is essential to

the enterprise. If the skills are readily transferable to Untied States

workers, it is reasonable to conclude that the enterprise could use a

United States worker instead of the alien and skill function without

significant disruption.

It is the position of the Service that an alien's possession of

otherwise easily transferable skills typically can be deemed essential

only in certain cases involving a start-up or a new enterprise, or an

established enterprise which is undergoing expansion. An adjudicating

officer, therefore, may request traders or investors employing

essential start-up employees to set up a reasonable time frame within

which the enterprise must replace such alien workers with locally hired

United States employees. In this way, the Service can be assured that

the employer will not artificially prolong the essentiality of

employees by failing to plan for their replacement by locally hired

United States employes. The above procedure remains consistent with

current policy, as expressed in State's FAM notes.

The Service will monitor industry changes as necessary to determine

essentiality and ensure that employees have the skills essential to the

efficient operation of their ongoing investment enterprises. State and

the Service will continue to work together to ensure that applications

within given industries receive similar treatment.

Period of Admission, Extensions of Stay, Change of Status, 8 CFR

214.2(e) (19), (20), and (21) (There Are No Corresponding State

Regulations)

The final rule incorporates numerous changes from the proposed

regulation with regard to period of admission, extensions of stay, and

change of status.

The final regulation creates a 2-year period for an initial

admission and an unlimited number of 2-year extensions of status in E

nonimmigrant visa classification. This change is intended to alleviate

the confusion due to the different periods of time authorized for

initial admissions and extensions under the previous policy.

Procedures for requesting extensions of stay are clarified at 8 CFR

214.2(e)(20). The revised Form I-129, when published, will simplify the

procedures for requesting extensions of stay and, in this way, will

assist traders and investors in the United States.

The paragraph on change of status at 8 CFR 214.2(e)(21) is

consistent with the proposed rule.

Denial of Treaty Trader or Investor Status to Citizens of Canada or

Mexico in the Case of Certain Labor Disputes, 8 CFR 214.2(e)(22) (There

is no Corresponding State Regulation)

This paragraph has been added to clarify that the strike provisions

of the North American Free Trade Agreement (``NAFTA'') are applicable

to citizens of Canada and Mexico who seek nonimmigrant treaty trader or

treaty investor visa status. Since these work stoppage and labor

dispute provisions have the effect of law, see NAFTA Implementation

Act, Pub. L. 103-182, December 8, 1993, there is no need for pre-

publication notice and comment. However, the presence of these

provisions in this regulation promotes awareness of their applicability

to NAFTA visa holders in E nonimmigrant visa classification.

The Regulatory Flexibility Act

The Commissioner of the Immigration and Naturalization Service has

reviewed this regulation in accordance with the Regulatory Flexibility

Act (5 U.S.C. 605(b)) and, by approving it, certifies that this rule

will not have a significant economic impact on a substantial number of

small entities for the following reasons: This rule amends Service

regulations by codifying existing policy guidelines related to the

``E'' nonimmigrant treaty trader and treaty investor visa

classification. The economic impact of this rule, and its affect on

small entities, will not be significantly different from that of the

current regulation. This rule clarifies existing policy guidelines and

ensures consistency with the similar rule of the Department of State,

and will not, by itself, significantly increase or decrease the number

of aliens in this classification, or their economic impact on the

United States.

Executive Order 12866

This rule is considered by the Department of Justice, Immigration

and Naturalization Service, to be a ``significant regulatory action''

under Executive Order 12866, section 3(f), Regulatory Planning and

Review. accordingly, this regulation has been reviewed by the Office of

Management and Budget.

Executive Order 12612

The regulation herein will not have substantial direct effects on

the States, on the relationship between the National Government and the

States, or on the distribution of power and responsibilities among the

various levels of government. Therefore, in accordance with Executive

Order 12612, it is determined that this rule does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment.

Executive Order 12988

This final rule meets the applicable standards set forth in

sections 3(a) and 3(b)(2) of Executive Order 12988, ``Civil Justice

Reform''.

Unfunded Mandates Reform Act of 1995

This rule will not result in the expenditure by State, local and

tribal governments, in the aggregate, or by the private sector, of $100

million or more in any one year, and it will not significantly or

uniquely affect small governments. Therefore, no actions were deemed

necessary under the provisions of the Unfunded Mandates Reform Act of

1995.

Small Business Regulatory Fairness Act of 1996

This rule is not a major rule as defined by section 804 of the

Small Business Regulatory Enforcement Act of 1996. This rule will not

result in an annual effect on the economy of $100 million or more. In

addition, this rule will not result in a major increase in costs or

prices or in significant adverse effects on competition, employment,

investment, productivity, or innovation. This rule will not have

significant adverse effects on the ability of United States-based

companies to compete with foreign-based companies in domestic

[[Page 48146]]

and export markets. Moreover, this rule allows citizens of countries

with which the United States has treaties and agreements (such as

NAFTA) to enter this country in E classification to engage in trade and

investment. Such treaties and agreements permit the smooth and

efficient entry of traders and investors, in accordance with reasonable

standards provided by the Service and the Department of State as set

forth in this regulation, so that United States citizens are accorded

reciprocal rights to trade and invest in the country of the treaty or

agreement partner.

Paperwork Reduction Act

This final rule does not impose any new reporting or recordkeeping

requirements. The information collection requirements contained in this

rule have been cleared by the Office of Management and Budget under the

provisions of the Paperwork Reduction Act. Clearance numbers for these

collections are contained in 8 CFR 299.5, Display of control numbers.

List of Subjects in 8 CFR Part 214

Administrative practice and procedure, Aliens, Authority delegation

(Government agencies), Employment.

Accordingly, part 214 of chapter I of title 8 of the Code of

Federal Regulations is amended as follows.

PART 214--NONIMMIGRANT CLASSES

1. The authority citation for part 214 continues to read as

follows:

Authority: 8 U.S.C. 1101, 1103, 1182, 1184, 1186a, 1187, 1221,

1281, 1282; 8 CFR part 2.

2. Section 214.2 is amended by revising paragraph (e) to read as

follows:

Sec. 214.2 Special requirements for admission, extension, and

maintenance of status.

* * * * *

(e) Treaty traders and investors--(1) Treaty trader. An alien, if

otherwise admissible, may be classified as a nonimmigrant treaty trader

(E-1) under the provisions of section 101(a)(15)(E)(i) of the Act if

the alien:

(i) Will be in the United States solely to carry on trade of a

substantial nature, which is international in scope, either on the

alien's behalf or as an employee of a foreign person or organization

engaged in trade principally between the United States and the treaty

country of which the alien is a national, taking into consideration any

conditions in the country of which the alien is a national which may

affect the alien's ability to carry on such substantial trade; and

(ii) Intends to depart the United States upon the expiration or

termination of treaty trader (E-1) status.

(2) Treaty investor. An alien, if otherwise admissible, may be

classified as a nonimmigrant treaty investor (E-2) under the provision

of section 101(a)(15)(E)(ii) of the Act if the alien:

(i) Has invested or is actively in the process of investing a

substantial amount of capital in a bona fide enterprise in the United

States, as distinct from a relatively small amount of capital in a

marginal enterprise solely for the purpose of earning a living;

(ii) Is seeking entry solely to develop and direct the enterprise;

and

(iii) Intends to depart the United States upon the expiration or

termination of treaty investor (E-2) status.

(3) Employee of treaty trader or treaty investor. An alien employee

of a treaty trader, if otherwise admissible, may be classified as E-1,

and an alien employee of a treaty investor, if otherwise admissible,

may be classified as E-2 if the employee is in or is coming to the

United States to engage in duties of an executive or supervisory

character, or, if employed in a lesser capacity, the employee has

special qualifications that make the alien's services essential to the

efficient operation of the enterprise. The employee must have the same

nationality as the principal alien employer. In addition, the employee

must intend to depart the United States upon the expiration or

termination of E-1 or E-2 status. The principal alien employer must be:

(i) A person in the United States having the nationality of the

treaty country and maintaining nonimmigrant treaty trader or treaty

investor status or, if not in the United States, would be classifiable

as a treaty trader or treaty investor; or

(ii) An enterprise or organization at least 50 percent owned by

persons in the United States having the nationality of the treaty

country and maintaining nonimmigrant treaty trader or treaty investor

status or who, if not in the United States, would be classifiable as

treaty traders or treaty investors.

(4) Spouse and children of treaty trader or treaty investor. The

spouse and child of a treaty trader or treaty investor accompanying or

following to join the principal alien, if otherwise admissible, may

receive the same classification as the principal alien. The nationality

of a spouse or child of a treaty trader or treaty investor is not

material to the classification of the spouse or child under the

provisions of section 101(a)(15)(e) of the Act.

(5) Nonimmigrant intent. An alien classified under section

101(a)(15)(E) of the Act shall maintain an intention to depart the

United States upon the expiration or termination of E-1 or E-2 status.

However, an application for initial admission, change of status, or

extension of stay in E classification may not be denied solely on the

basis of an approved request for permanent labor certification or a

filed or approved immigrant visa preference petition.

(6) Treaty country. A treaty country is, for purposes of this

section, a foreign state with which a qualifying Treaty of Friendship,

Commerce, or Navigation or its equivalent exists with the United

States. A treaty country includes a foreign state that is accorded

treaty visa privileges under section 101(a)(15)(E) of the Act by

specific legislation.

(7) Treaty country nationality. The nationality of an individual

treaty trader or treaty investor is determined by the authorities of

the foreign state of which the alien is a national. In the case of an

enterprise or organization, ownership must be traced as best as is

practicable to the individuals who are ultimately its owners.

8. Terms and conditions of E treaty status--(i) Limitations on

employment. The Service determines the terms and conditions of E treaty

status at the time of admission or approval of a request to change

nonimmigrant status to E classification. A treaty trader, treaty

investor, or treaty employee may engage only in employment which is

consistent with the terms and conditions of his or her status and the

activity forming the basis for the E treaty status.

(ii) Subsidiary employment. Treaty employees may perform work for

the parent treaty organization or enterprise, or any subsidiary of the

parent organization or enterprise. Performing work for subsidiaries of

a common parent enterprise or organization will not be deemed to

constitute a substantive change in the terms and conditions of the

underlying E treaty employment if, at the time the E treaty status was

determined, the applicant presented evidence establishing:

(A) The enterprise or organization, and any subsidiaries thereof,

where the work will be performed; the requisite parent-subsidiary

relationship; and that the subsidiary independently qualifies as a

treaty organization or enterprise under this paragraph;

(B) In the case of an employee of a treaty trader or treaty

investor, the work to be performed requires executive, supervisory, or

essential skills; and

(C) The work is consistent with the terms and conditions of the

activity forming the basis of the classification.

[[Page 48147]]

(iii) Substantive changes. Prior Service approval must be obtained

where there will be a substantive change in the terms or conditions of

E status. In such cases, a treaty alien must file a new application on

Form I-129 and E supplement, in accordance with the instructions on

that form, requesting extension of stay in the United States. In

support of an alien's Form I-129 application, the treaty alien must

submit evidence of continued eligibility for E classification in the

new capacity. Alternatively, the alien must obtain from a consular

officer a visa reflecting the new terms and conditions and subsequently

apply for admission at a port-of-entry. The Service will deem there to

have been a substantive change necessitating the filing of a new Form

I-129 application in cases where there has been a fundamental change in

the employing entity's basic characteristics, such as a merger,

acquisition, or sale of the division where the alien is employed.

(iv) Non-substantive changes. Prior approval is not required, and

there is no need to file a new Form I-129, if there is no substantive,

or fundamental, change in the terms or conditions of the alien's

employment which would affect the alien's eligibility for E

classification. Further, prior approval is not required if corporate

changes occur which do not affect the previously approved employment

relationship, or are otherwise non-substantive. To facilitate

admission, the alien may:

(A) Present a letter from the treaty-qualifying company through

which the alien attained E classification explaining the nature of the

change;

(B) Request a new Form I-797, Approval Notice, reflecting the non-

substantive change by filing with the appropriate Service Center Form

I-129, with fee, and a complete description of the change, or;

(C) Apply directly to State for a new E visa reflecting the change.

An alien who does not elect one of the three options contained in

paragraph (e)(8)(iv) (A) through (C) of this section, is not precluded

from demonstrating to the satisfaction of the immigration officer at

the port-of-entry in some other manner, his or her admissibility under

section 101(a)(15)(E) of the Act.

(v) Advice. To ascertain whether a change is substantive, an alien

may file with the Service Center Form I-129, with fee, and a complete

description of the change, to request appropriate advice. In cases

involving multiple employees, an alien may request that a Service

Center determine if a merger or other corporate restructuring requires

the filing of separate applications by filing a single Form I-129, with

fee, and attaching a list of the related receipt numbers for the

employees involved and an explanation of the change or changes. Where

employees are located within multiple jurisdictions, such a request for

advice must be filed with the Service Center in Lincoln, Nebraska.

(vi) Approval. If an application to change the terms and conditions

of E status or employment is approved, the Service shall notify the

applicant on Form I-797. An extension of stay in nonimmigrant E

classification may be granted for the validity of the approved

application. The alien is not authorized to begin the new employment

until the application is approved. Employment is authorized only for

the period of time the alien remains in the United States. If the alien

subsequently departs from the United States, readmission in E

classification may be authorized where the alien presents his or her

unexpired E visa together with the Form I-797, Approval Notice,

indicating Service approval of a change of employer or of a change in

the substantive terms or conditions of treaty status or employment in E

classification, or, in accordance with 22 CFR 41.112(d), where the

alien is applying for readmission after an absence not exceeding 30

days solely in contiguous territory.

(vii) An unauthorized change of employment to a new employer will

constitute a failure to maintain status within the meaning of section

237(a)(1)(C)(i) of the Act. In all cases where the treaty employee will

be providing services to a subsidiary under this paragraph, the

subsidiary is required to comply with the terms of 8 CFR part 274a.

(9) Trade--definitions. For purposes of this paragraph: Items of

trade include but are not limited to goods, services, international

banking, insurance, monies, transportation, communications, data

processing, advertising, accounting, design and engineering, management

consulting, tourism, technology and its transfer, and some news-

gathering activities. For purposes of this paragraph, goods are

tangible commodities or merchandise having extrinsic value. Further, as

used in this paragraph, services are legitimate economic activities

which provide other than tangible goods.

Trade is the existing international exchange of items of trade for

consideration between the United States and the treaty country.

Existing trade includes successfully negotiated contracts binding upon

the parties which call for the immediate exchange of items of trade.

Domestic trade or the development of domestic markets without

international exchange does not constitute trade for purposes of

section 101(a)(15)(E) of the Act. This exchange must be traceable and

identifiable. Title to the trade item must pass from one treaty party

to the other.

(10) Substantial trade. Substantial trade is an amount of trade

sufficient to ensure a continuous flow of international trade items

between the United States and the treaty country. This continuous flow

contemplates numerous transactions over time. Treaty trader status may

not be established or maintained on the basis of a single transaction,

regardless of how protracted or monetarily valuable the transaction.

Although the monetary value of the trade item being exchanged is a

relevant consideration, greater weight will be given to more numerous

exchanges of larger value. There is no minimum requirement with respect

to the monetary value or volume of each individual transaction. In the

case of smaller businesses, an income derived from the value of

numerous transactions which is sufficient to support the treaty trader

and his or her family constitutes a favorable factor in assessing the

existence of substantial trade.

(11) Principal trade. Principal trade between the United States and

the treaty country exists when over 50 percent of the volume of

international trade of the treaty trader is conducted between the

United States and the treaty country of the treaty trader's

nationality.

(12) Investment. An investment is the treaty investor's placing of

capital, including funds and other assets (which have not been

obtained, directly or indirectly, through criminal activity), at risk

in the commercial sense with the objective of generating a profit. The

treaty investor must be in possession of and have control over the

capital invested or being invested. The capital must be subject to

partial or total loss if investment fortunes reverse. Such investment

capital must be the investor's unsecured personal business capital or

capital secured by personal assets. Capital in the process of being

invested or that has been invested must be irrevocably committed to the

enterprise. The alien has the burden of establishing such irrevocable

commitment. The alien may use any legal mechanism available, such as

the placement of invested funds in escrow pending admission in, or

approval of, E classification, that would not only irrevocably commit

funds to the enterprise, but might also extend personal liability

protection to the treaty investor in the event the application for E

classification is denied.

[[Page 48148]]

(13) Bona fide enterprise. The enterprise must be a real, active,

and operating commercial or entrepreneurial undertaking which produces

services or goods for profit. The enterprise must meet applicable legal

requirements for doing business in the particular jurisdiction in the

United States.

(14) Substantial amount of capital. A substantial amount of capital

constitutes an amount which is:

(i) Substantial in relationship to the total cost of either

purchasing an established enterprise or creating the type of enterprise

under consideration;

(ii) Sufficient to ensure the treaty investor's financial

commitment to the successful operation of the enterprise; and

(iii) Of a magnitude to support the likelihood that the treaty

investor will successfully develop and direct the enterprise.

Generally, the lower the cost of the enterprise, the higher,

proportionately, the investment must be to be considered a substantial

amount of capital.

(15) Marginal enterprise. For purposes of this section, an

enterprise may not be marginal. A marginal enterprise is an enterprise

that does not have the present or future capacity to generate more than

enough income to provide a minimal living for the treaty investor and

his or her family. An enterprise that does not have the capacity to

generate such income, but that has a present or future capacity to make

a significant economic contribution is not a marginal enterprise. The

projected future income-generating capacity should generally be

realizable within 5 years from the date the alien commences the normal

business activity of the enterprise.

(16) Solely to develop and direct. An alien seeking classification

as a treaty investor (or, in the case of an employee of a treaty

investor, the owner of the treaty enterprise) must demonstrate that he

or she does or will develop and direct the investment enterprise. Such

an applicant must establish that he or she controls the enterprise by

demonstrating ownership of at least 50 percent of the enterprise, by

possessing operational control through a managerial position or other

corporate device, or by other means.

(17) Executive and supervisory character. The applicant's position

must be principally and primarily, as opposed to incidentally or

collaterally, executive or supervisory in nature. Executive and

supervisory duties are those which provide the employee ultimate

control and responsibility for the enterprise's overall operation or a

major component thereof. In determining whether the applicant has

established possession of the requisite control and responsibility, a

Service officer shall consider, where applicable:

(i) That an executive position is one which provides the employee

with great authority to determine the policy of, and the direction for,

the enterprise;

(ii) That a position primarily of supervisory character provides

the employee supervisory responsibility for a significant proportion of

an enterprise's operations and does not generally involve the direct

supervision of low-level employees, and;

(iii) Whether the applicant possesses executive and supervisory

skills and experience; a salary and position title commensurate with

executive or supervisory employment; recognition or indicia of the

position as one of authority and responsibility in the overall

organizational structure; responsibility for making discretionary

decisions, setting policies, directing and managing business

operations, supervising other professional and supervisory personnel;

and that, if the position requires some routine work usually performed

by a staff employee, such functions may only be of an incidental

nature.

(18) Special qualifications. Special qualifications are those

skills and/or aptitudes that an employee in a lesser capacity brings to

a position or role that are essential to the successful or efficient

operation of the treaty enterprise. In determining whether the skills

possessed by the alien are essential to the operation of the employing

treaty enterprise, a Service officer must consider, where applicable:

(i) The degree of proven expertise of the alien in the area of

operations involved; whether others possess the applicant's specific

skill or aptitude; the length of the applicant's experience and/or

training with the treaty enterprise; the period of training or other

experience necessary to perform effectively the projected duties; the

relationship of the skill or knowledge to the enterprise's specific

processes or applications, and the salary the special qualifications

can command; that knowledge of a foreign language and culture does not,

by itself, meet the special qualifications requirement, and;

(ii) Whether the skills and qualifications are readily available in

the United States. In all cases, in determining whether the applicant

possesses special qualifications which are essential to the treaty

enterprise, a Service officer must take into account all the particular

facts presented. A skill that is essential at one point in time may

become commonplace at a later date. Skills that are needed to start up

an enterprise may no longer be essential after initial operations are

complete and running smoothly. Some skills are essential only in the

short-term for the training of locally hired employees. Under certain

circumstances, an applicant may be able to establish his or her

essentiality to the treaty enterprise for a longer period of time, such

as, in connection with activities in the areas of product improvement,

quality control, or the provision of a service not yet generally

available in the United States. Where the treaty enterprise's need for

the applicant's special qualifications, and therefore, the applicant's

essentiality, is time-limited, Service officers may request that the

applicant provide evidence of the period for which skills will be

needed and a reasonable projected date for completion of start-up or

replacement of the essential skilled workers.

(19) Period of admission. Periods of admission are as follows:

(i) A treaty trader or treaty investor may be admitted for an

initial period of not more than 2 years.

(ii) The spouse and minor children accompanying or following to

join a treaty trader or treaty investor shall be admitted for the

period during which the principal alien is in valid treaty trader or

investor status. The temporary departure from the United States of the

principal trader or investor shall not affect the derivative status of

the dependent spouse and minor unmarried children, provided the

familial relationship continues to exist and the principal remains

eligible for admission as an E nonimmigrant to perform the activity.

(iii) Unless otherwise provided for in this chapter, an alien shall

not be admitted in E classification for a period of time extending more

than 6 months beyond the expiration date of the alien's passport.

(20) Extensions of stay. Requests for extensions of stay may be

granted in increments of not more than 2 years. A treaty trader or

treaty investor in valid E status may apply for an extension of stay by

filing an application for extension of stay on Form I-129 and E

Supplement, with required accompanying documents, in accordance with

Sec. 214.1 and the instructions on that form.

(i) For purposes of eligibility for an extension of stay, the alien

must prove that he or she:

(A) Has at all times maintained the terms and conditions of his or

her E nonimmigrant classification;

(B) Was physically present in the United States at the time of

filing the application for extension of stay; and

[[Page 48149]]

(C) Has not abandoned his or her extension request.

(ii) With limited exceptions, it is presumed that employees of

treaty enterprises with special qualifications who are responsible for

start-up operations should be able to complete their objectives within

2 years. Absent special circumstances, therefore, such employees will

not be eligible to obtain an extension of stay.

(iii) Subject to paragraph (e)(5) of this section and the

presumption noted in paragraph (e)(22)(ii) of this section, there is no

specified number of extensions of stay that a treaty trader or treaty

investor may be granted.

(21) Change of nonimigrant status. (i) An alien in another valid

nonimmigrant status may apply for change of status to E classification

by filing an application for change of status on Form I-129 and E

Supplement, with required accompanying documents establishing

eligibility for a change of status and E classification, in accordance

with 8 CFR part 248 and the instructions on Form I-129 and E

Supplement.

(ii) The spouse or minor children of an applicant seeking a change

of status to that of treaty trader or treaty investor alien shall file

concurrent applications for change of status to derivative treaty

classification on the appropriate Service form. Applications for

derivative treaty status shall:

(A) Be approved only if the principal treaty alien is granted

treaty alien status and continues to maintain that status;

(B) Be approved for the period of admission authorized in paragraph

(e)(20) of this section.

(22) Denial of treaty trader or treaty investor status to citizens

of Canada or Mexico in the case of certain labor disputes. (i) A

citizen of Canada or Mexico may be denied E treaty trader or treaty

investor status as described in section 101(a)(15)(E) of the Act and

section B of Annex 1603 of the NAFTA if:

(A) The Secretary of Labor certifies to, or otherwise informs, the

Commissioner that a strike or other labor dispute involving a work

stoppage of workers is in progress at the place where the alien is or

intends to be employed; and

(B) Temporary entry of that alien may adversely affect either:

(1) The settlement of any labor dispute that is in progress at the

place or intended place of employment, or

(2) The employment of any person who is involved in such dispute.

(ii) If the alien has already commenced employment in the United

States and is participating in a strike or other labor dispute

involving a work stoppage of workers, whether or not such strike or

other labor dispute has been certified by the Department of Labor, the

alien shall not be deemed to be failing to maintain his or her status

solely on account of past, present, or future participation in a strike

or other labor dispute involving a work stoppage of workers, but is

subject to the following terms and conditions:

(A) The alien shall remain subject to all applicable provisions of

the Act and regulations applicable to all other E nomimmigrants; and

(B) The status and authorized period of stay of such an alien is

not modified or extended in any way by virtue of his or her

participation in a strike or other labor dispute involving a work

stoppage of workers.

(iii) Although participation by an E nonimmigrant alien in a strike

or other labor dispute involving a work stoppage of workers will not

constitute a ground for deportation, any alien who violates his or her

status or who remains in the United States after his or her authorized

period of stay has expired will be subject to deportation.

* * * * *

Dated: March 17, 1997.

Doris Meissner,

Commissioner, Immigration and Naturalization Service.

[FR Doc. 97-22314 Filed 9-11-97; 8:45 am]

BILLING CODE 4410-10-M