Treaty Trader/Treaty Investor (E-1 and E-2 Visas)
E visas are issued to executives, supervisors and essential employees of companies which conduct trade between Japan and United States or invest in the U.S. E visas are among the most popular visas for Japanese businesses and have been for the past 50 years.
The rights and qualifications for E-1 and E-2 visas are identical, except that E-1 visa eligibility is based upon a company's trade between the U.S. and a qualifying country, and E-2 visa eligibility is based upon a company's investment in the United States .
1) Company Nationality: The company's nationality must belong to a country with the proper treaty or its equivalent with the United States . Japan qualifies, as do over forty other countries. A company's nationality is considered to be Japanese when 50% or more of the company is owned by Japanese nationals, regardless of place of incorporation. If the owner is another Japanese corporation, the 50% test is again applied to the owner to determine nationality. If the owner is an individual, he is considered a Japanese national only if he is both a citizen of Japan and not a permanent resident of the United States .
2) Employee's Nationality: The visa applicant must have the same nationality as the company. Thus, for Japanese companies, only their employees who are Japanese citizens can apply for E visas.
3) Executive, Supervisor or Essential Employee: The employee must be an executive, supervisor, or have skills essential to the efficient operation of the business.
An executive is an employee who has ultimate control and responsibility for the firm's overall operation, or whose primary responsibilities are commonly viewed as executive, such as setting and implementing corporate policy.
A supervisor manages other employees. Not all junior-level managers qualify; to meet the level of supervisor, an American Consul will consider several factors, including salary, the skill levels of the employees he or she will supervise, and the applicant's previous supervisory experience. For larger companies with a substantial number of employees, a title such as “Vice President” or “Manager” is also helpful.
An essential employee is a worker whose services are “essential to the efficient operation of the enterprise.” This standard is deliberately vague, and the burden is on the company to show why the employee is essential and how long his or her skills will be needed.
Ordinary skilled workers may be granted E visas as essential employees if they are needed to start the business in the U.S. or to train U.S. workers. Such workers are normally granted E visas for only one year and are expected to be replaced by U.S. workers within that year.
b. Special Trade Requirements for E-1s
1) Definition of Trade: To qualify as a treaty-trader (E-1) petitioner, the company must be engaged in trade that involves the exchange, purchase, or sale of goods, services, or technology. Goods are tangible commodities or merchandise having intrinsic value. Services are economic activities whose outputs are other than tangible goods, including, but not limited to: banking, insurance, transportation, communications, data processing, advertising, accounting, design and engineering, management consulting, tourism, and technology transfer.
The purpose of these treaties is to develop international commercial trade between the U.S. and qualifying foreign countries; therefore, development of the domestic market without international exchange does not constitute trade in the E-1 visa context. Thus, a company engaging in purely domestic trade will not qualify under this classification. The traceable exchange in goods or services must be between the United States and the treaty country. (However, purely domestic trade would be permissible in the E-2 visa category so long as the investment criteria have been met.)
2) Substantial Trade : The trade conducted by the company must be substantial. The U.S. Department of State has not set a dollar amount on this criterion. Rather, both the State Department and the USCIS continue to consider a continuous flow of trade involving numerous transactions, as opposed to few transactions of large value, as “substantial”. The monetary value of transactions will be considered but will not be a significant factor in the determination. Thus, even small firms with numerous transactions may qualify.
3) Trade Principally Between the U.S. & the Treaty Country: Over 50% of the company's total trade (including domestic trade) must be between the United States and the treaty country. If the U.S. organization has been incorporated, making it a legally distinct company, only the trade of the U.S. company is measured. Otherwise, the total trade of the foreign parent company is considered, with the company qualifying for E-1 visas only if more than 50% this trade is with the U.S. Obviously, Japanese companies that do not meet this requirement can incorporate a U.S. subsidiary to handle the company's trade between Japan and the U.S. ; this subsidiary would then qualify for E-1 visas. Surprisingly, the trade items do not have to originate in the treaty country; however, they must physically pass between the U.S. and the treaty country. Moreover, title to these trade items must pass between the U.S. and the treaty country.
c. Special Investment Requirements for E-2s
1) Already Invested or In the Process of Investing : The Investor must have already invested or be in the process of investing in the company. Investing in this context means placing money or other assets at risk in hopes of generating more money. The funds to be invested cannot be loans secured by assets of the commercial enterprise itself. The funds, however, may include unsecured loans. The investment may also include goods and equipment transferred to the U.S. for the company's operations. If the company is in the process of investing, it must show that the required funds are in the investor's control and possession, that such funds have been committed to investment, and that business operations are about to start. The regulations require that the funds be irrevocably committed to the enterprise.
A short-term B-1 visa may be more appropriate if this requirement cannot be met, since very few American Consuls are willing to issue E-2 visas until the actual investment or a substantial portion of that investment has been made. The investor may not run the enterprise on a day-to-day basis on a B-1 but may be engaged in its initial establishment.
2) Substantial Investment: The investment must be substantial. No rigid dollar amount has been set, and what is considered substantial depends upon the type of business involved.
3) Active Investment: The investment must be an active entrepreneurial undertaking that requires active management and/or the production of goods or services. Passive investments do not qualify. For example, an investment in a building management business would qualify because active management is needed, whereas an investment in undeveloped land or a million dollar condominium apartment would not qualify. Uncommitted funds in a bank account would also not qualify as an active investment, unless other evidence of business activities exists to demonstrate that the funds are to be used in the routine operations of the business.
The spouse and children of principal E visa holders may be issued dependent visas. There is no distinction in the E visa stamp or status designation for dependents (such as there is with H-1B visa holders, whose dependents are issued H-4 visas). A dependent of an E-1 non-immigrant is issued an E-1 visa and a dependent of an E-2 non-immigrant is issued an E-2 visa. Dependents of an E-1 or E-2 principal who are of non-treaty nationality are also entitled to an E-1/E-2 visa with the same validity period as the principal E alien.
e. Dependents Eligible for Work Authorization
Spouses of E-1 and E-2 visa holders can obtain work authorization by filing an I-765 Application for Employment Authorization with a USCIS service center with a copy of the applicant's I-94, proof of the principal's status (I-94), a copy of the marriage certificate, the filing fee, a government-issued photo ID, and ADIT-style photos.
Japanese business travelers and their dependents generally receive visa stamps that are valid for 5 years and multiple entries, and are generally issued I-94 departure records for 2 years at each entry. The 2-year period of stay may be extended by leaving and re-entering the U.S. , or by applying for an extension. The exception is for ordinary skilled workers coming to start a new business in the United States or to train U.S. workers, who are usually limited to one year. As long as all the E requirements continue to be met, unlimited renewals of the visa stamps are permitted and can be obtained either at a U.S. consular post abroad or by mail from the Visa Office at the Department of State in Washington , D.C.
Each time an E visa holder enters the United States , he or she will receive an I-94 card, which normally authorizes a stay of 2 years.
The L-1 visa category allows international companies to transfer foreign employees temporarily to the United States . This category has been particularly useful for Japanese companies seeking to transfer intra-company employees. We will examine the requirements for qualifying for L status, including the difference between the L-1A and L-1B categories, the option of obtaining “Blanket” L classification, and the special requirements involved in using the L classification for start-up companies.
Generally, the L visa category is utilized by U.S. companies seeking the services of a foreign national who has been employed abroad for at least one year of the previous 3 years by the U.S. company's parent, branch, affiliate, or subsidiary. The foreign national employee must be coming to the United State to be employed in a managerial, executive, or specialized knowledge capacity. The work experience required in the foreign entity to initially qualify for L-1 status must be full-time. Part-time experience with the qualifying entity in Japan, no matter how long the employment period, will not satisfy the one-year prior employment requirement for L-1 status.
a. Regular L-1 Criteria
1) L-1A Criteria
The criteria the USCIS uses to determine employee qualifications for L-1A visa status as an executive or manager are listed below. The USCIS defines a manager as an employee who:
- Manages the organization, department, subdivision, function or compotent;
- Supervises and controls the work of other supervisory, professional, or managerial employees;
- Has the authority to hire or fire employees, or to recommend such personnel actions; and
- Exercises discretionary authority over day-to day operations;
The USCIS defines a n executive as an employee who:
- Directs the management of the organization or a major component or essential function of the organization;
- Establishes goals and policies;
- Exercises wife latitude in discretionary decision making; and
- Receives only general supervision or direction from higher-level executives.
Special Note on Function Managers
In 1990 the USCIS regulations expanded the definition of L-1A managers to include “function managers”. In order to qualify as a function manager (i.e., a manager without subordinates) the applicant must manage a major function of the organization. The sole requirement for qualification is that the function managed be important to the successful achievement of the company's goals. Such a manager must also have complete discretion over or be in charge of the function managed. In other worlds, the manager must have the ability to make decisions independently.
While the L-1A regulations in theory recognize a manager without supervisory responsibilities, in actual practice the USCIS views this type of manager with considerable suspicion and often returns the L-1A petition with extensive questions. In some cases such petitions will be denied outright. Therefore, it may be prudent in such cases to file the initial petition under the L-1B category, which only requires that the applicant have “specialized knowledge”. The only advantage the L-1A visa has over the L-1B is that it allows a 7-year stay in the U.S. as opposed to 5 years for L-1Bs. Should the function manager require a stay of more than 5 years, the L-1B can be upgraded to L-1A at a later time, or an application for change of visa status to E can be made.
2) L-1B Specialized Knowledge Criteria
For employees who will not function in a managerial or executive capacity, the petitioner will be required to establish that the intra-company transferee will be employed in a position requiring specialized knowledge. An employee with specialized knowledge:
- Has unique qualifications to contribute to the employer's knowledge of foreign operating conditions; or
- Has knowledge that can only be gained through extensive prior experience with the employer; or
- Has advanced knowledge of the company's products, services, research, equipment, processes, procedures, techniques, or management; or
- Has special knowledge that is not readily available in the U.S. labor market; or
- Has knowledge that is proprietary to the employer.
In addition to the above criteria, the transferee must be assuming a position in the U.S. company that requires the use and application of this specialized knowledge.
b. Blanket L Program
Large Multinational Companies
For companies that transfer a significant number of employees from abroad, an option that reduces the processing time for L visa applicants is the “Blanket” L program. This program allows overseas employees to apply without the need to file an individual petition with the USCIS. Petitioners in L-1 blanket procedures must meet the following requirements:
- The petitioner and each of its qualifying entities are engaged in commercial trade or services;
- The petitioner has a U.S. office that has been doing business for at least one year;
- The petitioner has at least 3 domestic and foreign branches, subsidiaries, or affiliates; and
- The petitioner has either: (a) U.S. company sales of $25 million or more, (b) 1,000 or more U.S. employees, or (c) obtained at least 10 L petition approvals within the previous 12 months.
The Blanket L petitioning company must list all qualifying organizations abroad and in the United States that have the necessary corporate relationship to the petitioner.
As with regular L-1As and L-1Bs, the Blanket L transferee must be assuming an executive, managerial or specialized knowledge professional position. However, unlike regular L-1Bs, he or she must hold a university degree in a major related to the position to be assumed.
In addition, transferees under a Blanket L petition need only have been employed with the overseas entity for 6 months, as opposed to one year for L-1As or L-1Bs.
c. New Business L-1
The L visa category is also available to a start-up company established in the United States by an overseas entity. For purposes of eligibility for L classification, a start-up company is one that has been established and doing business in the United States for less than one year . As with any other L petition, a start-up must show the qualifying relationship, such as subsidiary or affiliate, to the overseas entity, and the qualifications of the proposed transferee for L-1A or L-1B classification. In addition to complying with all of the requirements set forth above for L-1A or L-1B visa status, the petitioner must show:
- That sufficient physical premises for the new office have been secured (usually in the form of an office lease); and
- That the start-up company will be operational within one year of the petition's approval (this requirement is generally satisfied by presenting a business plan as part of the employer's letter submitted with the I-129 petition).
d. Transfers within the Organization's Affiliates in the U.S.
If there is a need for the L-1 employee to transfer to another related company in the United States , a new petition will have to be filed in advance by the new employer.
A Blanket L petition allows a foreign national to be reassigned to any organization listed in the approved petition without the need to notify the USCIS, if the job duties remain essentially the same.
L-1 visas are normally issued initially for 3 years. Executives and managers who are granted L-1A status can request extensions for a maximum stay in the U.S. of up to 7 years; those with L-1B “specialized knowledge” visas are limited to 5 years.
New businesses (defined in this context as businesses established within the past year) applying for L status are initially issued L-1 visas for only one year.
Extensions of stay beyond the initial 3-year period are available in 2-year increments. L-1A managers and executives may receive 2 extensions for a total of 7 years in L status, and L-1B specialized knowledge employees may receive one extension for a total stay of 5 years. If an employee was initially admitted in L-1B status and is promoted to a managerial or executive position, he or she may be eligible for a change of status to L-1A and for a second extension under L-1A status. However, such category changes must be made 6 months prior to the expiration of the fifth and final year allowable under L-1B status.
Extensions of L visas are relatively routine; however, in the case of extending a “new business” L visa the USCIS requires a strong evidence demonstrating that the business is operational, active, and has hired new employees. T he company must show, through financial transactions, number of new employees hired, and other relevant records, that it has expanded its activities since the initial visa was issued.
Dependents (spouse and children under 21) of a L-1 visa holder are entitled to L-2 visas. Children on L -1 visas may attend school, but must change status to a student (F-1) visa if they reach 21 years of age or if the principal alien parent returns to Japan .
g. Dependents Eligible for Work Authorization
Spouses in L-2 status are eligible to apply for work authorization.
Specialty Occupation (H-1B) Visas
a. Definition and Requirements of Specialty Occupation
H-1B visas are granted to personnel who have completed at least a bachelor's degree or its equivalent, and who will be working in an occupation related to their degree. This category is ideal for Japanese corporations, since most of their hires are required to hold bachelor's or higher degrees.
A specialty occu-pation is one that requires theoretical and practical application of a body of highly specialized knowledge, and it must be complex enough that a bache-lor's degree in the field or equivalent em-ployment experience is normally the minimum requirement for that occupation. Even if a bachelor's degree is not normally required for a given occupation, an employer can sometimes demonstrate that the duties of the particular position offered are so complex that a bachelor's degree is needed.
Occupations such as accounting, engineering, finance, market research, mathematics, physical and social sciences, medicine and health education, business specialties, law, theology and the arts are among those fields considered to be specialty occupations.
b. Employee Requirements
The employee is required to hold a United States bachelor's or higher degree related to the specialty occupation to be assumed.
1) College or University Degree: The requirement of a college or university degree ordinarily defines the specialty occupation; the most common means of qualifying for H-1B classification is through evidence of a bachelor's or higher degree. The type and level of degree required will depend on the specialty occupation.
2) Foreign Degree: The USCIS will accept a foreign university degree if it has been evaluated as equal to a U.S. degree. Foreign degrees should be evaluated by a competent, independent credentials evaluator to certify their U.S. degree equivalence.
c. Equivalency to a Bachelor's Degree
The statute permits a beneficiary to qualify for the specialty occupation based on experience and/or a combination of education and experience that equates to a baccalaureate degree. This requires demonstrating that the person's expertise has been gained through “progressively responsible positions relating to the specialty.” Documentation of experience is normally satisfied by letters from former employers.
More specifically, the USCIS H-1B regulations permit the application of the “three-for-one” rule, by which three years of specialized training and/or work experience can be substituted for each year of college-level education that the beneficiary lacks.
Specialized training and/or work experience may wholly substitute for a bachelor's degree. Thus, in certain circumstances, 12 years of progressive experience in a profession may be considered the equivalent of bachelor's degree, even if the applicant has no formal education.
d. Employer's Responsibility
The employer is required to pay the prevailing wage according to the Labor Condition Application. If the employer dismisses the employee, the employer must pay the (reasonable) costs of transportation to the employee's home country.
Under most circumstances, an alien is permitted to be physically present in the United States in H-1B status for up to 6 years. Initial admissions may be for a maximum of 3 years, with extensions of up to 3 years. S ignificant periods of absence from the U.S. on business may be deducted from the 6-year limitation. An alien is eligible for a new 6-year period of stay in H-1B status after being physically outside of the United States for at least one year.
f. Exemption from 6 Year Limitation for H-1Bs
As stated above, an H-1B is normally admitted to the U.S. for a maximum period of 6 years. There are, however, two exceptions to this rule:
- An H-1B holder who has filed an immigrant petition may extend his or her H-1B visa status beyond 6 years. The extension will be granted in increments of one year until completion of the immigrant visa process. This extension exemption is only available if 365 days have elapsed from the filing of the labor certification or the I-140 petition.
- Those H-1B holders who remain in the U.S. for less than 6 months in each year are exempt from any time limits and may be so employed under H-1B status indefinitely.
g. H-1B Portability
Current USCIS regulations permit H-1Bs to move from one employer to another fairly easily. Prior to October of 2000, if an employer wished to hire an H-1B employee from another company, they would be required to wait 2 to 3 months for approval of a new H-1B petition. Now the H-1B employee may be hired as soon as the new or sequential H-1B petition is filed. The specific provision allowing such portability states that:
(1) the alien must have been lawfully admitted into the United States; (2) an employer must have filed a non-frivolous petition for new employment before the date of expiration of the period of stay authorized; and (3) the alien must not have accepted unauthorized employment subsequent to his/her admission and before the filing of the new petition.
2) I-9 Filings for Portable Employees
For I-9 purposes, the employer simply places the filing receipt notice from USCIS in the employee's file. If a receipt is not readily forthcoming, a mailing receipt will suffice. It should be emphasized that this portability is only for persons who already have or had H-1B status on the U.S.
3) Effect of Termination on Portability
A very confusing situation can occur if an H-1B holder to be hired is not currently employed by his or her original H-1B sponsor.
No matter how long the H-1B employee has been unemployed, as long as the initial H-1B petition has not expired the H-1B is portable ? meaning that an employer may legally hire such an employee upon the filing of a new or sequential H-1B petition.
Whether the H-1B employee's work authorization under H-1B status is extendable is a separate question. Several years ago the USCIS suggested allowing a 30 to 60-day grace period between the termination of previous H-1B employment and the filing of a new or sequential H-1B. Unfortunately, this proposal was never implemented. Therefore, the H-1B employee has to rely on current regulations, in which the decision to extend status is left to the discretion of the USCIS.
Assuming the sequential H-1B petition is granted but the extension is not, the subject H-1B will be required to leave the country and reenter with the new H-1B approval (I-797) and the unexpired H-1B via stamp from the first employer. Should the H-1B employee not have an H-1B visa stamp, or if the stamp has expired, he or she would simply apply for revalidation at an American consular post abroad. The H-1B employee would not be penalized for accepting unauthorized employment, as he has the right to work while his sequential H-1B petition is pending.
In this cases, if the H-1B petition for the new employer is granted but the alien's work permission is not, the company would not be in violation of any employment laws while the sequential H-1B petition was pending adjudication, because the H-1B holder had the right to portability as a matter of law.
Dependents (spouse and children under age 21) of the H-1B visa holder are entitled to H-4 visas. Children on H-4 visas may attend school, but must change to a student (F-1) visa if they reach 21 years of age or if the principal alien parent returns to Japan .
i. Dependent Work Authorization
Unlike E and L dependants, H dependents may not be employed in the U.S.