Options for Foreign Companies Doing Business in the U.S. (E-2 Treaty Investor)

Published on    27 June 2014     Hits: 928

Concluding the three-part series on foreign companies' immigration options in doing business in the United States, I will introduce and discuss the E-2 Treaty Investor visa category. In comparison with other options, if eligible, I find this visa category a preferable choice for foreign companies that wish to transfer their home-grown employees and/or hire non-U.S. Citizens to conduct business in the U.S. Then, who can and should use this option and why is this preferable to others?   Who Can Use the E-2 Treaty Investor Visa Status? As the visa name indicates, the basic premise of the E-2 treaty investor visa is the existence of a treaty of commerce and navigation between the United States and the foreign state in which the ownership of the company lies. As well, the visa applicant himself or herself must share the same nationality as the company.  
Next, the investment must be active, substantial, and non-marginal. The capital assets must be put at risk in a real and active commercial or entrepreneurial undertaking, producing some service or commodity, in the hope of generating a return. Therefore, a shell company, passive investment as in residential real estate or securities, or uncommitted funds as savings in a bank account do not qualify as they do not require the intent to direct or develop a commercial enterprise. As for substantial investment, contrary to a common belief, there is absolutely no specified minimum. Instead, substantiality is determined by its proportionality to the total value of the business, the likelihood that the business will be successful, and the foreseeable economic impact the investment will make. In simpler terms, the business must generate and support U.S. employment.
The Most Common and Grave Mistakes Investors and companies must remember that the E category was created to benefit the American economy and American workers by allowing foreign investment. Too often, the investing companies, especially small and medium-sized enterprises, forget about the immigration aspect of doing business in a foreign county and conduct the business as if they were in their own country.
That is, too many new companies focus on business development at the initial stage, do not follow up with sufficiently additional investment to ensure its success, and are slow to hire local workers to save on expenses. These are contrary to the legislative intent behind these visa categories and a sure way of getting into trouble when the company needs to extend its executive's visa status and/or bring a new employee from the parent company.  
In order to ensure successful and smooth investment and business experience in the U.S. the foreign company must have sufficient financial means to make substantial investment and to infuse additional capital as necessary. Also, the U.S. enterprise must make a positive economic impact on the local area by expanding direct and indirect job opportunities.  
Finally, if the company qualifies for E-2 or is already registered as E-2, the company must ensure that it continues to maintain such a status by keeping the majority of the company's ownership in the hands of the same nationals. Thus, in case the ownership structure changes by going public in the U.S. or inviting investors of different nationalities, the company and the employees will both fall out of the E-2 status. The Preferable Choice Despite the above warning, I find the E-2 visa status the preferable choice for foreign investors and employee transfers because of its comparatively realistic approach to business and relative ease to extend and maintain status. First, the E-2 entity does not have to trade with the foreign parent nor be in the same business as the foreign parent, which makes E-2 an ideal option for a diversified company.
Also, there is no need for the foreign parent company to continue to exist and maintain the same relationship as in L-1. The U.S. entity can eventually absorb the foreign parent or exist separately.   Second, there is no limitation on maximum allowed stay, and every time, the visa is issued, it is valid for 5 years, which is one of the longest among nonimmigrant visas. This helps the company executives and employees to focus on the business better without having to worry about running out of the maximum allowed stay or having to renew the visa too frequently.  
Third, E-2 visas can be applied and renewed directly at the U.S. Consulate without first having to obtain an approval from the U.S. Citizenship and Immigration Services (USCIS) in advance. This also helps to avoid considerable expenses and anxieties related to the petition process at the USCIS level.  
Next, there are no specialized degree requirements for the employees of an E-2 treaty company. This works well for some of the high executives who might have only general degrees or employees with specialized training and/or experience but without a specialized bachelor's degree. In this way, E visa categories reflect the business realities better than some other visa options.   Also, the E-2 employer does not have to guarantee a prevailing wage or meet the restrictive DOL requirements as in the case of H-1B; which will be explained in my upcoming article.  
Additionally, the E-2 employees do not have to work for the foreign parent company for the preceding 1 year, or one out of the past three years, or for any time period to qualify for an E-2 visa. They simply have to have the same nationality as the owner(s) of the E-2 entity. Finally, E-2 visa applicant's spouse and children can accompany or follow to join the E-2 treaty investor. The dependent children will have derivative status until they reach 21 years of age and can attend public school. The dependent spouse can obtain employment authorization from the USCIS based on their derivative status and work. Not having to find a separate sponsor or to be tied to a specific employer makes it a lot easier for the spouse to continue his/her career. Employees under the E Status Lastly, I wish to briefly explain the requirements for employees to qualify for E-1 or E-2 status and the legal boundary of the E-1 or E-2 status of the employees and their family members.  
Two classes of employees may be accorded E-1 or E-2 status: Treaty nationals serving in a managerial capacity and treaty nationals who serve in technical capacities requiring special training and qualifications. In effect, these employees must be essential for the company's operation because U.S. workers do not have the necessary skills to fill the positions. It is also expected, whenever possible, that the company will train U.S. workers to fill these positions. This is a sensitive area for USCIS as is the issue of top-heavy management with no one to manage.   Once in the U.S. under the E status, E-1 or E-2 employees themselves are clearly prohibited from engaging in employment for a third party. These employees must work for their E employer.
The employees may also work on behalf of related companies of the employer, i.e., the parent treaty organization, any subsidiary, branches, or affiliate of the parent organization if such intent or possibility was disclosed at the time of application. Conclusion I hope this series of articles provides sufficient basic background information for readers who are searching for the right option for their future business goals. Again, each company and individual situation is different. Finally, one must remember that maintaining status is as important as choosing an ideal option and obtaining such a status.
Judy J. Chang, Esq. J Global Law Group.(C)Copyright All Rights Reserved.

Mario Guevara-Martinez