Visas: Documentation of Nonimmigrants Under the Immigration and Nationality Act, as Amended; Business and Media Visas; Treaty Trader and Treaty Investors

DEPARTMENT OF STATE

Bureau of Consular Affairs

22 CFR Part 41

[Public Notice 2594]

Visas: Documentation of Nonimmigrants Under the Immigration and

Nationality Act, as Amended; Business and Media Visas; Treaty Trader

and Treaty Investors

AGENCY: Bureau of Consular Affairs, State Department.

ACTION: Final rule.

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

SUMMARY: This rule amends the nonimmigrant visa regulations, by adding

a definition of the term ``substantial'' to section 41.51 in order to

implement the provisions of section 204(c) of Pub. L. 101-649. This

rule adds a new section 101(a)(45) to the Immigration and Nationality

Act (INA) for purposes of defining this term as used in section

101(a)(15)(E) of the INA. Furthermore, this rule incorporates into

regulation the underlying principles of the treaty trader/treaty

investor visa classification which have been published in the form of

interpretive note material in Volume 9 of the State Department's

Foreign Affairs Manual.

EFFECTIVE DATE: November 12, 1997.

FOR FURTHER INFORMATION CONTACT:

Stephen K. Fischel, Director, Legislation, Regulations and Advisory

Assistance, 202-663-1184.

SUPPLEMENTARY INFORMATION: Public Notice 1468 at 56 FR 43565, September

3, 1991, proposed adding regulations to title 22, part 41, Code of the

Federal Regulations. The proposed regulations were required to

implement the provisions of section 204(c) of the Immigration Act of

1990, Pub. L. 104-649 which requires the Secretary of State to

promulgate a regulatory definition of the term ``substantial'' after

consultation with the appropriate agencies of the United States

Government. The proposal was discussed in detail in Notice 1468, as

were the Department's reasons for the regulations. The Department

received 14 timely comments in responds to the Notice of Proposed

Rulemaking.

Analysis of Comments

General Comment

The Department's proposed rule and the Immigration and

Naturalization Service's proposed rule on the treaty visa

classification were published within a few days of each other. Although

the rules were intended to be identical in substance, each agency

selected different language to articulate its rules. This difference in

language led readers to reach the unintended conclusion that the rules

were substantively different if not at odds with each other in a few

critical ways.

Many commenters expressed their concern about the apparent

differences in two ways. First, commenters requested that the agencies

work together to publish rules that were clearly identical in

substance. The agencies certainly recognize the need for one set of

principles to administer the law and have worked together to achieve

that goal. Furthermore, commenters suggested that, since the Department

of State has the greatest amount of experience in administering treaty

trader/investors visa rules, and since INS has been deferring to the

Department of State's regulations and interpretations, the INS should

continue to defer to the Department and to apply the Department's

regulations. Such deference, it was suggested, could involve the

specific reference, in the Immigration and Naturalization Service

(Service) regulations, to the Department of State's regulations, or the

publication of the Department's entire treaty visa

[[Page 48150]]

regulations in Title 8 of Code of Federal Regulations.

The two agencies agree in principle with these objectives. Although

the Department and the Service are each publishing their own

regulations, they are intended to be substantively the same. To further

uniform application of these rules, the Service will be expressly

authorized by the INS Operations Instructions to consult with the

Advisory Opinions Division of the Visa Office of the Department of

State on treaty visa issues.

The Advisory Opinions Division renders opinions on legal issues

relating to visa law on behalf of the Visa Office to United States

consular officers serving at United States embassies and consulates

abroad. Opinions rendered by this division on questions of law, as

opposed to the application of the law to the facts of a particular

case, are generally binding on consular officers. (See 22 CFR

41.121(d)). A significant distinction is made between this current

departmental practice and the projected consultation process with the

Service. Guidance offered at the request of the Service will be purely

advisory in nature and will not be binding on the Service in any way.

The Service will continue to posses exclusive authority and

responsibility for the adjudication of treaty visa cases submitted to

them in accordance with applicable law and procedure.

This consultation process will merely constitute a means of sharing

the Department's knowledge gained from the experience of adjudicating

treaty visa cases for many years. The INS will possess the option of

drawing upon such expertise, but will be under no obligation to consult

with the Visa Office. The exercise of this option is left to the

discretion of that agency.

One commenter had expressed the hope that not only the Service and

the Department would promulgate the same regulations but that consular

officers abroad would automatically accept a Service's change of status

determination in an ``E'' visa case rather than subject the alien to

readjudication of the visa application.

Consular officers posses exclusive authority to issue and refuse

visas (INA 104). Not only must they determine an alien's eligibility

under INA 212(a) but, in the case of all nonimmigrant visa

classifications, they must assess whether the alien has met all the

requirements of that particular nonimmigrant visa classification. Even

in petition-based nonimmigrant visa classifications the consular

officer retains the authority, and the responsibility, to review the

petition to make sure the alien is appropriately and properly

classified; this is not just because mistakes may happen, but because

the consular officer may have access to information not available to

the INS officer. If the review results in a finding that the officer

knows or reasonably believes that the alien is not entitled to the

given classification, the petition is returned pursuant to regulation

to the appropriate office of the Immigration and Naturalization Service

for appropriate action.

As treaty visa cases involve no INS approved petitions, the

consular officer has the responsibility to adjudicate all aspects of

the visa application. Under this regulation and these administrative

procedures, the consular officer will continue to have that

responsibility. It is anticipated, however, that in view of the newly

adopted procedures more uniform application of these visa regulations

will be achieved, thus reducing the possibility of disparate results.

Several commenters expressed disappointment that the Department

proposed regulations on treaty visas without even mentioning the Board

of Immigration Appeals decision in the Matters of Walsh and Pollard,

Int. Dec. #3111 (BIA 1988). Since this case was not cited in the

preamble to the proposed rule, some commenters inferred that the

Department did not agree with the holding of the decision.

The Department finds this decision to be useful on at least two

points. First, the Board followed the Department's interpretation that

substantial investment is determined by application of the

proportionality test, not by application of a set minimum dollar

figure. Secondly, the Board agreed that the concept of ``develop and

direct'' applies to the ``principal'' treaty investor, not to each

employee of the treaty investor.

This decision unquestionably contributes significantly to the body

of administrative case law on treaty visas, but it does have a

shortcoming. The decision has been read to imply that the treaty

investor visa classification is appropriate for the creation of certain

``job shop'' arrangements. The principles upon which the decision is

founded to do support that inference. These regulations, likewise, do

not endorse that inference.

As clear recognition of the significance of this case, special

treatment is accorded this decision in the interpretive note material

in the Foreign Affairs Manual. It should be noted, however, that the

``job shop'' inference is also accorded appropriate discussion.

Employee of Treaty Trader or Treaty Investor

The Department received one comment on the long-standing regulation

at section 41.51(c), which requires the employer to hold treaty visa

status or, if not in the United States, to be so classifiable. The

commenter prefers removing the requirement that the employer hold

treaty visa status and instead allowing the employer to be lawfully

classified under any other nonimmigrant status. The purpose of this

commenter's suggestion is to allow employees to qualify for treaty

visas regardless of the nonimmigrant classification of the employer.

Although the Department recognizes the practicality of such a

suggestion, we believe that the current regulation is to proper

interpretation of the law. The statutory section addresses the

conditions whereby the ``principal'' treaty traders and treaty

investors may qualify for an E visa. No mention is made of employees.

Employee status is the logical creation of regulation. Persons in that

status derive that status directly and exclusively from ``principal''

treaty traders or treaty investors. Without a qualifying relationship

to a principal which has been accorded treaty trader or treaty investor

status, the alien cannot likewise be accorded treaty visa status. This

derivative relationship is analogous to other relationships more

explicitly defined in the Act such as the relationship of spouse and

children to a principal accorded lawful immigration status under the

INA. One can not derive status from a person who does not possess such

status.

Nationality

One commenter expressed the hope that an easier method could be

found to ``register'' large enterprises to qualify for ``E'' visa

status. This issue is similar to that raised by two other commenters

who expressed strenuous dissatisfaction with the proposed rules for

determining the nationality of an incorporated entity. The problem

arises in cases involving corporations that sell stocks on exchanges in

more than one country.

The standard of practicability was adopted in recognition of this

problem. This standard contemplates the applicant submitting the best

evidence available and the consular officer reaching a reasonable

decision considering the particular circumstances in each case. This is

not intended to be an onerous paper production exercise.

The statute speaks of granting special treatment for ``nationals''

of treaty

[[Page 48151]]

partners. Nationality of enterprises based on ownership captures the

essence of the statue and the bilateral relationship. Although

registration of businesses in a jurisdiction to engage in business

activities in that jurisdiction has been accorded recognition for

national treatment in other contexts by other laws and some courts,

mere registration has not been and is not accepted as the proper

standard for determining nationality under INA 101(a)(15)(E).

This issue was addressed in Matter of N---S---, 7 I&N Dec. 426

(1957). Recognizing the Congress' review of this longstanding rule

during the formulation of the Immigration and Nationality Act during

the early 1950's, the decision states at Dec. 428 that, ``there being

no substantial change in language between the present statute and

regulations as compared with the preceding statute and regulations on

the same subject, the rulings and principles previously enunciated and

which are presumed to have been known to the Congress must be deemed to

be presently applicable.'' For similar reasons, we believe that the

regulations as proposed are consistent with Congressional intent.

Trade

Three commenters suggested that the Department incorporate the

concept of ``business commitments'' in its definition of existing

international trade. The proposed rule reiterated the statutorily

mandated principle that the trade for treaty trader purposes must be in

existence in order to qualify for such status. The Department agrees,

however, that the concept of ``business commitments'' as described in

Matter of Seto, 11 I&N Dec. 290 (1965), should be included within the

definition of trade. Drawing from a Supreme Court decision and a Court

of Appeals decision, this decision holds that ``existing trade includes

successfully negotiated contracts which call'' for the exchange of

goods within the meaning of INA 101(a)(15)(E)(i). But on the other

hand, the decision states that transactions which are in the state of

negotiation do not by themselves constitute trade for this purpose.

The Department not only agrees with this principle, but it has been

incorporated into the regulation. Additionally, the appropriate

guidance will be provided in the Foreign Affairs Manual.

Substantial trade

An identical comment was submitted in two letters concerning the

definition of trade. The specific language of the proposed rule

expressly prohibits a single transaction from qualifying as substantial

trade. The underlying principle of substantial trade is that a

continuing flow or exchange of trade items exist. The commenters

expressed fear that this definitional language would be interpreted to

exclude the circumstance of a single large transaction exchanged

annually or periodically over extended periods of time.

The language of the regulation incorporated the essence of the

language which has been used in the interpretive notes in the FAM. The

wording was specifically selected to avoid the establishment of any

specific time limitations. The thrust of the definition is to

disqualify a ``one shot'' deal but to consider all other continuing

exchanges of value. Determinations have been and will continue to be

made upon case by case analysis. It appears that the meaning of this

definition is exactly the meaning sought by the commenters. To further

clarify the regulations, the Department has amended the language

accordingly.

A commenter expressed disappointment that the Department did not

incorporate into the regulations a certain note in the FAM describing

substantial trade. That note states that for smaller businesses income

derived from international trade which is sufficient to support the

treaty trader and his or her family should be considered to be a

favorable factor when assessing the substantiality of trade in a

particular case. The Department adheres to this concept. The regulation

has been amended to include this concept.

Treaty investment

Investment capital

Risk

Several commenters agreed with our statement in the preamble of the

proposed regulation that the rule regarding risk did not square with

business reality. A couple of commenters did offer the suggestion of

amending the rule by use of the following language: ``loans secured

exclusively by the assets of the investment enterprise itself, without

ultimate recourse to the treaty investor, may not be counted toward the

actual amount of capital investment''.

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

investment totally and exclusively on the shoulders of the treaty

investor. As this suggested language would dilute the element of risk

by including the possibility of using the business as collateral, the

Department will retain the language as proposed. In addressing the

issue of ``irrevocable commitment'', several commenters suggested that

language be added to the regulations that would formally recognize the

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

visa were not issued in a certain case. Such mechanisms have long been

recognized as proper safeguards by the Department. The Department's

opinion has been published broadly, including in the Interrogatories in

Matters of Walsh and Pollard which have been disseminated widely not

only in the private sector but also within the Foreign Service as

instructional material. The regulations have been amended to

accommodate this request.

Substantial capital

One commenter expressed dislike for the proportionality test but

failed to offer any suggestions for an alternative test. The commenter

questioned why the proportionality test was selected in light of the

Congressional mandate to define ``substantial'' investment, why a

minimum investment amount was even considered in light of the Matters

of Walsh and Pollard, Int. Dec. #3111 (BIA 1988), why no economic

studies were undertaken in this exercise, and why the Immigration and

Naturalization Service proposed a different formula when the Secretary

of State was given authority to promulgate the regulatory definition.

The supplemental information portion of the proposed rule explained

the entire exercise undertaken to reach a definition, as required by

the statute. Comprehensive letters were prepared explaining the purpose

and requirements of the treaty visa classification and soliciting

comments and suggestions from each agency. The agencies, Department of

Commerce, Labor, the Treasury, and the Small Business Administration,

the U.S. Trade Representative, and, of course, the Immigration and

Naturalization Service, each responded. All but one felt competent to

provide constructive input into the analysis. The agencies

overwhelmingly favored continued use of the proportionality test. The

general conclusion was that this test appears to have worked

successfully in the past and that no superior test could be devised

which would capture the essence of this requirement.

The fact that Congress required that the definition be codified in

regulatory form does not necessarily suggest, as stated by this

commenter, that Congress was dissatisfied with the current test.

Legislative history of this provision and predecessor versions in

earlier bills

[[Page 48152]]

suggest that Congress sought primarily the establishment of a test to

be applied uniformly by both agencies. Secondarily, the Congress

accorded the Secretary of State the responsibility of preparing such

regulations in light of the extensive experience in adjudicating treaty

visa applications as well as the obvious jurisdictional tie to the

treaty function.

The Congress did require the Secretary of State to consult ``with

appropriate agencies of Government''. This requirement was carried out

as described above and in the preamble of the proposed regulation. A

great cross section of agencies was selected as indeed no independent

economic study was either required by Congress or undertaken by the

Department of State. It was anticipated that the agencies that monitor

the pulse of the economy would provide relevant input into the

formulation of the test. None of these agencies nor any of the others

perceived the necessity to undertake an economic study. Based upon such

responses from interested agencies, the Department was satisfied that

sufficient avenues had been explored.

The establishment of a minimum amount of investment had to be

considered during this review, as the Department bore the

responsibility of considering all viable alternatives. A set minimum

dollar figure is always the first test offered as an alternative to the

proportionality test. While such a test has certain administrative

advantages, the agencies overwhelmingly rejected it in favor of the

proportionality test.

Lastly, the commenter suggested that INS' proposed regulations

differed from the Department's on this issue of substantial investment.

That issue has been rendered moot by the Service's decision to

promulgate regulations consistent with the Department's regulations.

Three other commenters discussed the proportionality test. Two

commenters expressed concern over the application of the ``inverted

sliding scale'' thinking that it differs from the proportionality test

now in use. The term ``inverted sliding scale'' is merely a descriptive

characterization of the proportionality test. No substantive change is

intended by the use of this term. The test is intended to apply as it

has in the past.

Concern was expressed over the use of presumptions and that there

were only three such benchmarks. It was feared that these percentages

would be used in those designated ranges as bright line tests and not

as guidelines as intended. In view of the lower cost needed to

establish certain types of businesses, the commenters felt a need for a

designation for a $100,000 investment or even lower. Several commenters

felt that the third benchmark of 30% was too high for exceptionally

large investment figures. It was opined that the sheer magnitude of

such investments should be considered to be substantial regardless of

the percentage.

In an attempt to avoid the use of the presumptive percentages as

bright line tests, the three presumptive benchmarks have been removed.

The regulation merely defines the test, whereas in the FAM note

material examples will be provided. Any examples given are not intended

to be binding but are intended to demonstrate to adjudicating officers

and the public the general range of the proportionality test. The fear

that the percentages used in such examples will be applied by

adjudicators as bright line tests cannot be totally abated; however,

through instructional material in the FAM, advisory opinions, and other

relevant material, the adjudicating officers will be instructed to use

these figures as flexible guidelines on a case by case basis.

The commenter also suggested that some of the descriptive language

used in the FAM note material and/or language used in the supplemental

information of the proposed rule should be incorporated into

regulation. Although some of this descriptive language has been

incorporated into regulation, the general definitional language has

been somewhat rewritten to more prominently feature the underlying

ingredients of ``substantial amount of capital''.

The language describing the application of the proportionality test

has been altered for clarity. Although the preamble of the proposed

regulation stated that the figure representing the actual cost of

establishing a business must be used in arriving at the investment

percentage, the proposed rule has been interpreted to permit the use of

a figure of an amount of investment needed to establish a business of

that nature, regardless of what the enterprise in question might cost.

The regulation is amended to more accurately reflect the explanation in

the preamble.

Marginality

The comments save one were generally favorable of the Department's

treatment of marginality. The single negative comment essentially

stated that the proposed language would bar viable enterprises from

qualifying for treaty visa status thus shutting off the infusion of

foreign investment. The commentary wrongly imparted this intent to the

Department.

The Department has no desire to bar viable enterprises, but as the

supplemental information provided with the proposed rule clearly lays

out, the Department does have as one of its objectives to weed out

those enterprises that are indeed nonviable. Recognizing that no rule

is perfect, the Department attempted to craft the regulation to achieve

its objective. Unfortunately, that commenter offered no alternative to

the proposal.

The other comments, however, suggested that the rule be clarified

so that the capacity to generate income be cast not only in the present

tense but also in the future. Although the proposed rule was intended

to address this very concern, more specific language has been added. By

including the language of ``present and future'' to the capacity to

generate income and to the capacity to make an economic contribution,

the question now arises as to when in the future must such capacity be

realized. Is it realistic to allow an treaty investor to realize this

capacity 20 years in the future? We think not. A reasonable standard

should be established.

When establishing entitlement to treaty investor classification the

alien bears the burden of satisfying the consular officer that the

enterprise is a viable commercial entity with the requisite income

generating capacity. To demonstrate that capacity, a business plan of

some sort is often presented. This plan projects the amount of income

contemplated considering the expenses of establishing and/or using the

enterprise and factoring in the marketability of the service or

commodity to be provided or sold. The Department accepts the reality

that many start-up businesses will not generate any profits initially.

It is, also, the Department's understanding that a five year term is

considered a standard period of time to gauge profitability of such a

business. The Department finds it reasonable that from the date the

principal treaty investor commences operation of normal business

activities that the business is projected to be generating the

requisite income or making the requisite economic contribution within a

five year period. For further clarity, economic contribution replaces

economic impact to signify that a positive economic impact is

contemplated.

Develop and direct

One of the four comments received on this issue referred to the

typographical error in the September 3, 1991 printing

[[Page 48153]]

of the proposed rule. The word ``marginal'' was intended to read as

``managerial'' and has been corrected.

A favorable comment was received which applauded the ability to

meet the develop and direct requirement not just by ownership but by

managerial or other corporate or structural means.

Another comment focused on the fact that the Department's proposed

regulations required that the treaty investor be in a position to

develop and direct rather than ``solely'' develop and direct the

enterprise in which the alien had invested. The distinction made by the

commenter lies in the possibility of being in a position to control

without exercising such control.

The language used by the Department derives from Matter of Lee, 15

I&N Dec. 187 at 189 (1975). This decision cites the statutory language

and then provides its interpretation. ``Section 101(a)(15(E)(ii) of the

Act requires the treaty investor to be coming solely to develop and

direct the operations of the enterprise in which substantial investment

has been or is in the process of being made. In order for a treaty

investor to develop and direct the operations of an enterprise, it must

be shown he has a controlling interest; otherwise other individuals who

do have the controlling interest are in a position to dictate how the

enterprises is to be developed and directed.''

The observation made by the commenter was presented in the form of

a question. The query focuses on whether the statutory language

requires an alien personally to develop and direct an enterprise or

whether the alien must be in a position to develop and direct an

enterprise. In the latter case, the alien may not personally develop or

direct the enterprise but may afford a third party the opportunity to

do so. Although the Department has consistently interpreted the

proposed regulation to mean that the treaty investor must demonstrate

that his or her purpose of entry is to develop and direct the

enterprise, the language has been amended to comport more directly with

the statute and to remove any hint of ambiguity.

The last commenter made two suggestions. The first was to have the

Department accord ``E'' visa status to large companies involved in

joint ventures. In the opinion of the commenter no company ``controls''

the sizable joint venture, the develop and direct requirement should,

therefore, be waived. As the develop and direct requirement is

statutory and the law contains no authority for it to be waived, the

Department cannot accede to this suggestion. (This does not mean,

however, that this develop and direct requirement cannot be met by

other means, such as through the concept of ``negative control''.)

The same result attaches to the second suggestion. The commenter

proposed that treaty investors with investments of a minimum of

$10,000,000 be exempt from the develop and direct requirement if the

treaty investor otherwise met the ``E'' visa requirements. Although the

Department understands the motivation behind this suggestion as well,

the statute does not provide the authority to waive the requirement.

Employee: Executive or Supervisor

The Department received several comments on this proposed

regulatory provision. As all the comments were favorable and no changes

were recommended, the regulation stands as proposed.

Essential employee

The proposed language drew quite a few comments addressing

different aspects of the proposal. The first comment took issue with

the concept that the employer must demonstrate that replacement by a

U.S. worker is not feasible or that the employer is making reasonable

and good faith efforts to train U.S. workers. The commenter questioned

the advisability and the legality of trying to modify our treaty

obligations by administrative regulations. In light of the change we

are making to this regulation the comment is rendered moot. On the

other hand, the statute, regulations, and the treaty contain nothing

that would prohibit the imposition of such regulatory requirements.

Three commenters objected to the requirement in proposed

Sec. 41.51(r)(2) that the alien must in each case affirmatively

establish that the alien's eventual replacement by a U.S. worker is not

feasible or that the employer is making reasonable and good faith

efforts to recruit and/or train U.S. workers to perform the

responsibilities of the alien's prospective position. Two commenters

made reference to the interpretive note material in the FAM at 22 CFR

41.51 N4-3 and found these notes to be instructive. They suggested that

perhaps this requirement should be imposed only on those aliens

claiming to posses essential skills who will engage in activities which

may involve manual duties as explained in Sec. 41.51 N.4-3(b). This

requirement should not be imposed across the board. These comments

continued by recommending that the regulatory language be altered to

expressly provide that aliens with special skills that have not become

commonplace might remain in the United States indefinitely, and any

training/recruitment/feasibility requirement should be expressly

limited to the exceptions listed in the FAM notes.

The Department accepts and recognizes these suggestions as valid

and having merit. The intent of the proposed regulation was to put the

applicant and the applicant's employer on notice that indeed not all

positions that require specialized skills might be considered

``essential'' on a continuing basis. It was thought that, through the

usual application process of assessing ``essentiality'', this

requirement of feasibility/training would be met. Certainly, aliens

with skills unique to them or at least not commonplace in the United

States would by the very nature of the activity establish ipso facto

that such skills would be essential on a continuing basis and that

training, etc. would not be feasible. The Department agrees that the

proposed language appears more burdensome than intended.

Consequently, the Department has changed section 41.51(r)(2) to

better capture the essence of the concept that the establishment of

``essentiality'' is an ongoing process. A key to this adjudication

exercise is the determination of whether the specialized skills are

commonplace in the United States. Certainly, some such skills will be

found not to be commonplace on a continuing basis and other skills will

be found to become commonplace at some point in time. When that point

in time is reached, the alien may not qualify as an essential employee.

The employer will than have to fill the position by other means.

In order to reflect more clearly this principle, the regulation has

been amended to remove all references to affirmative responsibilities

requiring a feasibility assessment or training requirements. The

guidance in the FM note material cited above has been incorporated into

the regulation. The operation of this regulation will follow the stated

objective which comports with the two commenters' suggestions.

A commenter objected to the use of the term ``unique'' skills as a

means to determine essential skills. The commenter stated that this was

too high a standard to impose on aliens to qualify as an essential

employee. Furthermore, while it is no longer used for L-1 adjudication,

it should not be used in this context.

The characterization of a skill as ``unique'' has a long

association with the E visa classification. This is descriptive of a

skill which clearly is

[[Page 48154]]

one-of-a-kind and is, thus, not commonplace. It does not and never has

been intended to constitute a minimum standard for meeting the

requirement of essential skills. To the contrary, skills of unique

character would so greatly exceed any minimum standard of

``essentiality'' that persons blessed with unique skills coming to fill

positions requiring such unique skills would in the overwhelming number

of cases be considered to be ``essential''. As ``unique'' continues to

be a useful descriptive term in the adjudication process, the

regulations and interpretive guidance in the FAM will continue to use

it.

Final Rule

This final rule of Sec. 41.51 would: provide a general definition

of treaty trader (paragraph (a)); provide a definition of treaty

investor (paragraph (b)); define an alien employee (paragraph (c));

extend treaty classification to the spouse and children of the

principal alien (paragraph (d)); and authorize ``E'' status to certain

foreign information media (paragraph (e)). The remaining paragraphs

constitute definitional provisions.

This rule is not expected to have a significant impact on a

substantial number of small entities under the criteria of the

Regulatory Flexibility Act. The information collection contained in

this rule has been submitted to the Office of Management and Budget in

compliance with provisions of the Paperwork Reduction Act of 1980. This

rule has been reviewed as required by E.O. 12778 and certified to be in

compliance therewith, and reviewed in light of E.O. 12866 and found to

be consistent therewith.

List of Subjects in 22 CFR Part 41

Aliens, Treaty Trader or Investor.

In view of the legislative mandate of Pub. L. 101-649, Part 41 to

Title 22 would be amended as follows:

PART 41--[AMENDED]

1. The authority citation for Part 41 is revised to read:

Authority: INA 104, 66 Stat. 174, 8 U.S.C. 1104; sec. 109(b)(1),

91 Stat. 847; sec. 204, 104 Stat. 5019, 8 U.S.C. 1101 note.

2. Part 41, Subpart F--Business and Media Visas, is amended by

revising section 41.51 to read as follows:

Sec. 41.51 Treaty trader or treaty investor.

(a) Treaty trader. An alien is classifiable as a nonimmigrant

treaty trader (E-1) if the consular officer is satisfied that the alien

qualifies under the provisions of INA 101(a)(15)(E)(i) and that the

alien:

(1) 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 foreign

state of which the alien is a national, (consideration being given to

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

(2) Intends to depart from the United States upon the termination

of E-1 status.

(b) Treaty investor. An alien is classifiable as a nonimmigrant

treaty investor (E-2) if the consular officer is satisfied that the

alien qualifies under the provisions of INA 101(a)(15)(E)(ii) and that

the alien:

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

substantial amount of capital in 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; and

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

and

(3) Intends to depart from the United States upon the termination

of E-2 status.

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

of a treaty trader may be classified E-1 and an alien employee of a

treaty investor may be classified 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 services to be

rendered essential to the efficient operation of the enterprise. The

employer must be:

(1) A person having the nationality of the treaty country, who is

maintaining the status of treaty trader or treaty investor if in the

United States or if not in the United States would be classifiable as a

treaty trader or treaty investor; or

(2) An organization at least 50% owned by persons having the

nationality of the treaty country who are maintaining nonimmigrant

treaty trader or treaty investor status if residing in the United

States or if not residing in the United States who would be

classifiable as treaty traders or treaty investors.

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

spouse and children of a treaty trader or treaty investor accompanying

or following to join the principal alien are entitled to 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 INA

101(a)(15)(E).

(e) Representative of foreign information media. Representatives of

foreign information media shall first be considered for possible

classification as nonimmigrants under the provisions of INA

101(a)(15)(I), before consideration is given to their possible

classification as nonimmigrants under the provisions of INA

101(a)(15)(E) and of this section.

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

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

Commerce, and Navigation or its equivalent exists with the United

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

treaty visa privileges under INA 101(a)(15)(E) by specific legislation

(other than the INA).

(g) Nationality of the treaty country. The nationality of an

individual treaty trader or treaty investor is determined by the

authorities of the foreign state of which the alien claims nationality.

In the case of an organization, ownership must be traced as best as is

practicable to the individuals who ultimately own the organization.

(h) Trade. The term ``trade'' as used in this section means 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. This exchange

must be traceable and identifiable. Title to the trade item must pass

from one treaty party to the other.

(i) Item of trade. Items which qualify for trade within these

provisions include but are not limited to goods, services, technology,

monies, international banking, insurance, transportation, tourism,

communications, and some news gathering activities.

(j) Substantial trade. Substantial trade for the purposes of this

section entails the quantum of trade sufficient to ensure a continuous

flow of trade items between the United States and the treaty country.

This continuous flow contemplates numerous exchanges over time rather

than a single transaction, regardless of the monetary value. Although

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

consideration, greater weight is given to more numerous exchanges of

larger value. In the case of smaller businesses, an income derived from

the value of numerous transactions which is

[[Page 48155]]

sufficient to support the treaty trader and his or her family

constitutes a favorable factor in assessing the existence of

substantial trade.

(k) Principal trade. Trade shall be considered to be principal

trade between the United States and the treaty country when over 50% 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.

(l) Investment. Investment means the treaty investor's placing of

capital, including funds and other assets, 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 given

to the particular circumstances of each case. The alien may use any

legal mechanism available, such as by placing invested funds in escrow

pending visa issuance, that would not only irrevocably commit funds to

the enterprise but that might also extend some personal liability

protection to the treaty investor.

(m) Bona fide enterprise. The enterprise must be a real and active

commercial or entrepreneurial undertaking, producing some service or

commodity for profit and must meet applicable legal requirements for

doing business in the particular jurisdiction in the United States.

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

constitutes that amount that is:

(1)(i) Substantial in the proportional sense, i.e., 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.

(2) Whether an amount of capital is substantial in the

proportionality sense is understood in terms of an inverted sliding

scale; i.e., the lower the total cost of the enterprise, the higher,

proportionately, the investment must be to meet these criteria.

(o) Marginal enterprise. 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 capacity should generally be realizable within five

years from the date the alien commences normal business activity of the

enterprise.

(p) Solely to develop and direct. The business or individual treaty

investor does or will develop and direct the enterprise by controlling

the enterprise through ownership of at least 50% of the business, by

possessing operational control through a managerial position or other

corporate device, or by other means.

(q) Executive or supervisory character. The executive or

supervisory element of the employee's position must be a principal and

primary function of the position and not an incidental or collateral

function. Executive and/or supervisory duties grant the employee

ultimate control and responsibility for the enterprise's overall

operation or a major component thereof.

(1) An executive position provides the employee great authority to

determine policy of and direction for the enterprise.

(2) A position primarily of supervisory character grants 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.

(r) 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 enterprise.

(1) The essential nature of the alien's skills to the employing

firm is determined by assessing the degree of proven expertise of the

alien in the area of operations involved, the uniqueness of the

specific skill or aptitude, the length of experience and/or training

with the firm, the period of training or other experience necessary to

perform effectively the projected duties, and the salary the special

qualifications can command. The question of special skills and

qualifications must be determined by assessing the circumstances on a

case-by-case basis.

(2) Whether the special qualifications are essential will be

assessed in light of all circumstances at the time of each visa

application on a case-by-case basis. A skill that is unique at one

point may become commonplace at a later date. Skills required to start

up an enterprise may no longer be essential after initial operations

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

in the short-term for the training of locally-hired employees. Long-

term essentiality might, however, be established in connection with

continuous activities in such areas as product improvement, quality

control, or the provision of a service not generally available in the

United States.

(s) Labor disputes. Citizens of Canada or Mexico shall not be

entitled to classification under this section if the Attorney General

and the Secretary of Labor have certified that:

(1) There is in progress a strike or lockout in the course of a

labor dispute in the occupational classification at the place or

intended place of employment; and

(2) The alien has failed to establish that the aliens entry will

not affect adversely the settlement of the strike or lockout or the

employment of any person who is involved in the strike or lockout.

Dated: May 13, 1994.

Editorial note: This document was received in the Office of the

Federal Register on September 9, 1997.

Mary A. Ryan,

Assistant Secretary for Consular Affairs.

[FR Doc. 97-24260 Filed 9-11-97; 8:45 am]

BILLING CODE 4710-06-M