Possible Retrogression for Chinese EB-5 Investors: Legitmate Cause for Concern
There has been a recent wave of articles, blog posts, and discussions about the potential for retrogression in awarding visas to Chinese EB-5 investors with approved I-526 petitions. This is a legitimate concern that warrants some discussion, though I believe many of the opinions expressed dramatically exaggerate the effects of what will occur. Retrogression is possible this year - just as it is in every single quota-limited category, every single year. It has not begun yet, per the most recent Visa Bulletin. It may at some point this fiscal year - which ends in September - and most likely towards the end of that period, if at all. If it does occur, its immediate impact will be negligible upon anyone in the marketplace, investor or developer. Further, a thoughtful examination of history will reveal we have every reason to believe USCIS and Congress will act affirmatively to minimize or even eradicate retrogression and its impact. Respectfully, I would urge everyone to be cautious and avoid falling into the panic which has been stirred up recently – the effects of retrogression will be minimal, if they are even felt at all.
For an able explanation of the basics, you may wish to read Ron Klasko's FAQ blog post here: http://discuss.ilw.com/content.php?2767-Article-FAQs-on-EB-5-Quota-Backlog-by-H-Ronald-Klasko. In the briefest form possible, the current immigration laws allocate up to 10,000 visas per year for EB-5 investors from around the globe, though there is a maximum percentage which a single country cannot exceed (based not on just EB-5 numbers, but also factoring in worldwide visa usage). China happens to be the country in danger of hitting its limit in the EB-5 category. It is possible that China will reach its quota for the first time this year before the September end-of-year deadline. However, it is also a possibility that it will not, though this is less likely. Furthermore, there is a third plausible scenario that has not really been discussed anywhere – the Congress will intervene with an immediate and appropriate remedy if confronted with retrogression.
I have not seen many editorial comments on the retrogression topic, so perhaps you will indulge me as I offer a handful in furtherance of the statements above:
First, the original blog post published weeks ago that instigated much of this discussion and consternation was NOT based on any new or novel information, at least so far as I can tell - no source was cited for the statement "the Department of State has issued a preliminary warning that a cut-off date may need to be established for China." To the best of my knowledge and based upon what I consider exhaustive research on this topic, the last time the federal government spoke of this topic as it relates to EB-5 visa allocation was in 2012, when the Department of State indeed issued the warning referenced in the above; that was fifteen months ago. Thus, this is not really "news." I wish that would have been clear in the original blog post. While I am quite certain the author was aware of that, less knowledgeable secondary sources picked up on it like there was a big recent announcement that should be shaking up the market. There was no such announcement and, indeed, the EB-5 category is described as “current” across all countries through the most recent visa bulletin, February 2014.
Readers may understandably wonder why I have not linked to the blog post I am referencing. It is deliberate. I do not wish to appear as though I am picking on any individual or firm – that is not at all my intention. I simply wish to focus people’s attention on the realities and history of the EB-5 industry and marketplace instead of what I perceive as inflammatory rhetoric unsupported by actual substance.
Second, retrogression - if it occurs at all this year - will be minor, perhaps causing a delay of a month or two for, at most, a few hundred people. Given the wide ranges of time everything from petition adjudication to consular processing take generally, a delay of a few months here or there is relatively insignificant (easy for me to say, I know). While certainly everyone wants visas as fast as possible, there are too many other possible sources of delay that render the potential for a small one here insignificant, especially initially. Retrogression, if and when it occurs, will be a snowball effect. The effect will be minor the first year, a bit bigger the next, and bigger yet beyond that. However, there is ample reason to believe that anything close to long-term retrogression will not be the case.
Nonetheless, I appreciate the concerns that apply to even relatively minor delays. The possibility of retrogression is a bit of a wild card for regional centers, project developers, and even migration agencies abroad. Because we have not yet experienced retrogression, it is unclear whether Chinese investors will sour on the EB-5 program if confronted with a wait. If the lack of a queue is an important selling point over other immigrant visas, which it is to a certain extent, will individuals considering EB-5 investments turn their attention to other US visa categories or even other countries? Will any amount of retrogression spook the market, so to speak? I suppose this is possible. However, I think the delays here are likely to be so minor, if they even exist at all, that we will not soon wind up with concrete answers to the questions above.
Third, recall that some of the proposals for comprehensive immigration reform call for a change in the ways these numbers are calculated. The Schumer, Rubio, McCain, et al. legislation originally introduced proposed changing it from 10,000 total visas, which today includes dependents, to 10,000 visas, in which count only principal applicants are counted towards that number. This would more than double the potential number of investments from approximately 4,000 to 10,000. Further, the proposal would remove per-country quotas, which is the other thing giving rise to the potential for retrogression. A long-term solution such as this one would be welcome news for developers and investors alike and represents yet another reason why people with an interest in growing the US economy - which is to say, virtually everyone - should support some form of CIR.
However, even in the absence of CIR, we should remember that the EB-5 program has broad support on both sides of the aisle and I believe Congress would quickly act to remedy the situation in the short-term so as to minimize or even avoid any true impact caused by retrogression. As you may know, Congress has the ability to allocate unused visas across all categories from past years and there are up to several hundred thousand available for so-called “recapture” per USCIS and GAO estimates. I believe Congress would act swiftly to allocate some of these to the current year’s EB-5 numbers if retrogression were to occur.
If the above sounds too good to be true, perhaps it would be useful to step back and look at relatively recent history: recall the fashion in which USCIS handled the periods after the two “sunsets” of the EB-5 program, most recently in late 2012. The Service stated publicly it would and did continue to accept EB-5 petitions until the program was re-allowed, which it was in short order. In the case of retrogression, USCIS would have even wider latitude to not only accept, but continue to adjudicate such petitions. I submit to you that we have every reason to believe that, if truly confronted with retrogression in the EB-5 category, Congress would act quickly to remedy it and, until that time, it would be business as usual at USCIS.
I appreciate the concerns of both investors and developers as they relate to retrogression – certainty is preferable to uncertainty, to be sure. However, this is something we have known was possible for years and there is simply no new information on it that has come to light in recent months or weeks. Just as it was possible last year, it remains possible this year - albeit slightly moreso. While being truly confronted with large-scale retrogression would invariably impact the EB-5 market in many ways, we have every reason to believe that will not be the case in the coming months and years. I again urge caution and ask both potential investors and individuals working within the EB-5 industry to avoid overreaction here – there is just no basis for it, despite what many people now seem to be trying to convince you.
Paul Ruby s an attorney at Lubin, Salvetti & Associates in Herndon, Virginia, a business immigration firm where his practice focuses primarily on EB-5 matters. He also serves as counsel to the Mississippi Development Regional Center (www.eb5inmississippi.com). Previously, he was general counsel to ILW.COM and served as editor of "The EB-5 Book," 1st Ed.
The opinions expressed in this article do not necessarily reflect the opinion of