Comment: Retrogression Myths

Immigration Daily commented on India EB-5 retrogression recently, full text reproduced below. We received a number of phone calls, emails and even public discussion on our editorial comment. In particular, two commentaries from EB-5 industry veterans demonstrate that even those with considerable experience in EB-5 harbor misconceptions about Indian retrogression.

COMMENTARY 1: [This commentary is from a noted industry blogger.] [Immigration Daily] estimates that “India generated close to $500 million in EB5 investments in 2018, and it is on track to generate $1 Billion in 2019 and $2 Billion in 2020. Indian EB-5 is a $3 Billion opportunity in the coming two years.” [Immigration Daily] goes on to rightly correct misconceptions about how EB-5 visa allocation works, but omits one important calculation: what happens if one puts $3 billion dollars (12,000+ visa applicants) from one country in line to a gate that can only issue about 700 visas annually.

If we want to make Row A in that table a reality, and how wonderful that would be, then we have to deal with the constraints that turn successful markets into backlog tragedies.

COMMENTARY 2: [This commentary is from an attorney with 25 years immigration law experience.]
I couldn’t help but delve into your article suggesting many of us misunderstand retrogression, and I thought to myself – while it may be that India applicants don’t stand in line behind China applicants for India’s annual quota of 700 visas, there are a large number of China applicants with earlier priority dates than most of the India applicants, so to the extent India uses up its 700 visas it will stand in line behind China for any unused visas from the other countries in the EB5 worldwide quota. You explain this... but then conclude “Result: Indians will not be in the line behind the Chinese.” This seems misleading given that India will stand in line behind China for any unused visas from the other countries in the EB5 worldwide quota because the many China applicants by and large have earlier priority dates...Your article then seems to suggest you don’t think India will exceed 700 by much, and the two-plus-year I-526 processing time will result in visas being available around the time of adjudication anyhow. The data I’m looking at suggests India’s EB-5 visa usage will continue on its upward trajectory.

Many points in these commentaries are true but their conclusions are erroneous for the following three reasons.

1) Impact of waiting times is relative: Projected wait times for EB-2 and EB-3 for India are 75 to 100 years, five times longer than the most extreme projections of EB-5 wait times for India (such as 17 years in the above example). From the investor point of view, wait times are relative to alternatives--10 to 20 years would be very long for a Chinese investor, but the same 10 to 20 years would be fine for an Indian investor. That's why we expect that Indian EB-5 investments will keep roaring even when confronted with very long wait times. Further, half of Indian applications are from those already on H-1B and already in the US. These individuals are already in US so they are not waiting to get in--hence their perspective on the wait is different than investors waiting outside of the US.

2) Multi-year Perspective is Needed: Indians will stand in front of lines ahead of Chinese because the per country limit of 700 is large as compared to 1000, 2000 or 3000 applications expected from India- 70%, 35% and 23% of Indian applications will fit into 1 year's quota (dependents excepted, see below). Most people see the 700 number from a single year perspective, but the story is different when you look at it from a 2-3 year perspective. This means that significant and meaningful fractions of Indian investors will not be standing behind Chinese investors over a 1, 2 & 3 year time-frame. An attorney giving advice to a real estate project about Indian EB-5 retrogression should explain wait times over several years--not just 1 year. For those raising money in India in 2021 retrogression will be a factor, but not in 2019 or 2020. (Also note that the retrogressed time is irrelevant to an investor if such time is lower than processing time of I-526 applications.)

3) DOS waiting times are Volatile: The 5.7 year waiting time projected by Charles Oppenheim as of October 2018 is based on an assumption of a number of dependents which is at variance with the reality of Indian EB-5 . 50% of those applying are already on H-1B in US and have US citizen children who do not count towards the quota. A significant fraction of investors are single as well. Furthermore DOS estimates of waiting times are volatile when retrogression commences for a specific country in a specific visa category. It takes one to two years for the DOS estimates of waiting times to be relatively stable. Therefore this DOS estimate of 5.7 years must be taken with liberal pinches of salt.

In conclusion, for 2019 and 2020 India will remain the hottest EB-5 market--approximately 50% of the world. For issuers it makes sense to put half to all their eggs in the India basket. We encourage those concerned about India EB-5 retrogression to look at the matter from a holistic perspective, taking into account three pertinent points: 1) Impact of waiting times is relative 2) Multi-year Perspective is Needed 3) DOS waiting times are Volatile.

To benefit from the Indian EB-5 market, please call (212)545-0818 or email webmaster@ilw.com or click here.

Immigration Daily 12/27/2018:
Comment: EB-5 Industry Misunderstands Retrogression
There is $3 Billion India EB-5 Opportunity

  • India generated close to $500 million in EB5 investments in 2018, and it is on track to generate $1 Billion in 2019 and $2 Billion in 2020. Indian EB-5 is a $3 Billion opportunity in the coming two years. USCIS published data on pending I-526 petitions showing that for the month of September 2018, India has already reached the number one position with 284 petitions compared to 165 from China and 137 from Vietnam.

Those Who Misunderstand Retrogression Will Miss the Opportunity

  • Most of the EB-5 industry misunderstands how retrogression works. As a result, some in the EB-5 industry believe that the roaring number one EB-5 market in India will end as soon as retrogression hits sometime middle of 2019. They also incorrectly believe that as soon as retrogression in Indian EB-5 market begins, all waiting Indians will stand in line behind the Chinese who are standing in a 15+ year long line. Nothing could be farther from the truth.
  • Misunderstanding of how retrogression works is rampant in the EB-5 industry—Those who misunderstand retrogression will miss out on the $3 billion opportunity in Indian EB-5 market.

How Does Retrogression Work: Different Gates & Different Lines

  • Each employment and family category has a total per year world limit, and an additional per country limit. There are separate gates for separate countries for each category of visa: People for each country who have applied for a given visa category are standing in separate lines by the date of their application.
  • To figure out retrogression, First Step: first each country is allotted its per country quota. Second step: If as a result of the first step the entire per year for the world is not exhausted, remaining visa numbers are allotted to the oldest applications regardless of the country.
  • Analogy: Think of there being separate gates for each country and those born in that country line up at the gate for their country. The length of the line for each country is different for each visa category. For example, the line at the gate for Chinese EB5 applicants is very long, and the line for British EB5 applicants is very short. When the per country quota is allocated, the countries with long lines budge a little but those with short lines gallop forward. The lines at the gates for each country for a given visa category move differently.
  • Further, as long as retrogression time for a country is shorter than the processing time for the application, it has no impact at all on the time it takes to get immigration benefits.
  • Lastly, the impact of a waiting time for a visa category is viewed differently by applicants of different countries because they compare the waiting time for that category with waiting times for other categories.

Example 1: EB-5 Waiting Times for India & China

  • For EB-5 it is 10,000 visas/year and approximately 700 visas/country. Chinese EB-5 applicants are standing at a DIFFERENT gate in a DIFFERENT line than Indian EB-5 applicants.
  • To figure out retrogression, First Step: first each country is allotted its per country quota. For example, for EB-5, only China, India and Vietnam have more than 700 applications pending. Then first 700 oldest of Chinese applications, 700 oldest of Indian applications and 700 oldest of Vietnamese applications are allotted the visa numbers. Then applicants from all other countries are allotted their visa numbers. If as a result of the first step the entire per year for the world is not exhausted, remaining visa numbers are allotted to the oldest applications regardless of the country. For example, if 6,000 visas are allotted in the First Step for EB-5, 10,000-6,000=4,000 visas remain to be allotted. They are allotted to the oldest EB-5 applications waiting regardless of the country—which in this case would be the oldest Chinese EB-5 applications.
  • Result: Indians will not be in the line behind the Chinese—as with all categories, each country has its own line. For example, by using 700 visas will move the priority dates of the tens of thousands of Chinese waiting in line by barely few months, but the same 700 visa numbers will make the Indian priority dates gallop forward by more than a year. Therefore hundreds of Indians will move ahead of the Chinese who have been waiting longer than those Indians.
  • Further, as long as retrogression time for a country is shorter than the processing time for the application, it has no impact at all on the time it takes to get immigration benefits. As long as the retrogressed time for India is less than 2 years, it will make no material difference to applicants if their processing time is average of 2 years. We expect the flow of Indian EB-5 capital to remain unaffected by retrogression until there are 12 consecutive months of retrogressed times higher than processing times--which has been the case for capital flows from China and Vietnam when the countries retrogressed.
  • Lastly, the waiting times for the EB-2 and EB-3 categories for Indian—the primary alternatives to EB-5—are 25 years and 75 years respectively looking forward. So even when EB-5 waiting times for India rise eventually to 5, 10 or 15 years EB-5 will continue to remain an extremely attractive option—unlike for the Chinese for whom the EB-2 and EB-3 times are much shorter.

Example 2: EB-3 Waiting Times for Philippines and India

  • You can more clearly see the principle of “Separate Gates and Separate Lines for Each Country” by looking at other employment and categories which have been hitting their per country quotas for over a decade.
  • The priority dates for EB-3 are as follows as per December 2018 visa bulletin: India is Jan 2010, China is Dec 2015, Philippines is August 2017. So, the wait times are India 8 years; China 3 years and Philippines 1.5 years. This is because the number of Indians standing in the Indian EB-3 line is very large as compared to the number of Philippines nationals standing in the Philippines EB-3 line. This is true even though both Philippines and India have been in retrogressed territory for many years. Philippines nationals applying for EB-3 do NOT stand in line behind the Indians who have been waiting for years—each country has its own separate gate and a separate line.

Conclusion:

  • India is a $3 Billon opportunity over the next two years. India is 50+% of the entire world EB-5 market and growing at 100% per year. For all the reasons listed, retrogression will not affect capital flows of EB-5 capital out of India in that time frame. Do not miss out on the $3 Billion Indian EB-5 opportunity.

For more information, please call (212)545-0818 or email webmaster@ilw.com or click here.

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