DHS Experiments with Chinese EB-5 Applications — What Happens Next?

By David North on February 3, 2020

The Department of Homeland Security has done something both useful and interesting with some of the applications for the EB-5 (immigrant investor) program — it is setting some of them aside and neither approving them nor denying them. This is potentially a huge precedent, as I will explain later.

The immediate objective appears to be to diversify the EB-5 program, and to move more quickly on applications from people from the rest of the world, while not acting on those filed by people from nations where there are backlogs in these visas, notably China, but also India and Vietnam. The Chinese backlog runs for many years; the others are shorter.

A Law360 article quoted Acting USCIS Commissioner Mark Koumans as saying "This new approach increases fairness, allowing qualified EB-5 petitioners from traditionally under-represented countries to have their petitions approved in a more timely fashion to receive consideration for a visa."

As background it should be noted that applications filed by investors (the I-526) are filed early in the EB-5 process, and the related issuance of family-sized batches of visas leading to green cards are handled later; in the case of the Chinese, many years later. The first are managed by DHS, the second by the State Department.

There is a 10,000 cap on the number of EB-5 visas, but no ceiling on the number of applications that can be approved. Within the 10,000 there are separate country-of-origin caps as well. No nation under the immigration law is allowed to have more than 7 percent of available visas in any category (plus any leftover visas after worldwide demand is exhausted for the year) if demand for green cards in that country outstrips supply. So routinely there are only 700 EB-5 visas available for people from a single nation.

Instead of sensibly limiting the number of approved applications to meet the number of visas available, the government has been approving applications without reference to how long it will take for a visa to become available. That this is inherently foolish, and creates monstrous backlogs in this and in many other immigration categories, is not mentioned in the DHS press release.

What is commendable in this new decision is that the government seems to be taking at least a half-way step toward balancing the issuance of approvals with visa availability.

I should note immediately that the government has not said much about this move and will not hold a briefing on it until March 13, and, as a result, some of my speculation may be off-base.

Short-Term Questions, within the EB-5 Program. The first question is: How long will this policy be in place? If it lasts just a few months it may not mean much; if it lasts until visa numbers are available for all approved applicants from China, India and Vietnam, it could take years but would, by definition, eliminate the visa backlogs.

The second up-front question is: Will someone with an un-acted-upon EB-5 petition file a court case saying that they have been discriminated against on the grounds of their country of origin? A federal judge might, faced with such a suit, restore the status quo.

I am not a lawyer, but would not want to bring such a case on the grounds that the pitch, particularly for a Chinese plaintiff, would be subject to this reply from the government: "you say you are being discriminated against on the grounds of country of origin — tell me what percentage of the EB-5 visas have been going to your countrymen in recent years."

The reply would have to be that in the period 2012-2018 about 80 percent of these visas went to people from China, making it difficult to argue the case.

The third early-on question is: To what extent will this new ruling, together with the recent increase in the minimum investment from $500,000 to $900,000, impact the flow of new EB-5 applications from the three nations?

Maybe, as one regional center manager speculated with me, "the China market will come to a halt."

Longer-Term EB-5 Questions. Most immigrant petitions are tied to timeless or nearly timeless matters. If an employment visa is sought and is based on the applicant's PhD in mechanical engineering, for example, the degree it is just as good in year one as it is in year 10. Similarly, as long as the marriage that is the basis of an immigration petition stays in place, the passage of time does not diminish the credential.

But what about the more time-vulnerable EB-5 petitions, which are based on investments in specific projects? What happens if the not-acted-upon application features a project that goes ahead without the alien's funds? Or if the project fails? How do those events impact a petition that was valid in year one but perhaps not in year five? Time will tell.

Will the change in application management lead to a reduction in EB-5 admissions overall? I doubt it, as the backlogs will take a long time to dissipate.

A Precedent for Other Backlogged Programs? I do not get the impression that DHS has created this new policy with a view toward eliminating the visa backlogs, but I may be wrong on this. The new ruling, however, could well be regarded as a precedent that could be used in other immigration categories, where the backlogs are not measured in the tens of thousands, but — when all the categories are put together — in the millions.

According to the most recent State Department data, as of November 1, 2019, there were 3,494,252 intending immigrants on the various family preference waiting lists, and 125,988 on the employment-based list (which includes the EB-5 cases).

The existence of these lists means that we, as a nation, are getting a much older set of migrants than we would were we to have a different system. Currently, for example, the worst of these cases can be found in the family third preference (married sons and daughters of U.S. citizens), where those admitted from Mexico must have an effective filing date of March 22, 1996. Assuming that the aliens were, say, 22 years old when they filed for these visas, they will be about 46 years of age on average when they arrive.

If we can cease handling new family third preference applications from Mexico in the same way we are setting aside EB-5 cases from China, why not apply the same rule to those family third preference petitions, and thereby start to get out from under that waiting list?