One usually does not associate the US Government Accountability Office with “interesting” reports, but last year’s report on E-2 visas was eye-opening. Of particular note are the reasons why E-2 applicants are denied. While the report is limited to examining certain countries, it provides critical insight into the thinking of consular officers and obstacles to obtaining E-2 visas.
As a reminder E-2 visas are limited to nationals of countries with whom the United States has commerce and navigation treaties. The full list of countries can be found on the Department of State’s website, with 80% of all E-2 applicants originating from 9 countries: Japan, Germany, UK, France, Canada, Mexico, South Korea, Italy, and Spain. The majority of E-2 visa applicants are related to large investments (>$10 million) – think of managers and essential employees going from Japan to work in a large car plant in the United States. However, the majority of the actual E-2 businesses in the United States have low investments: 66% of them involved an investment of $200,000 or less (29% for less than $100,000). These businesses run the gamut, from restaurants to various kinds of franchises, from consulting firms to print shops. This relatively small investment amount makes the E-2 visa accessible to many, sharply contrasting with EB-5, which now requires a minimum of $900,000 investment.
But smaller investments provoke stricter scrutiny by consular officers. From 2014 to 2018, about 24% of E-2 investors were denied. While there is no breakdown provided, the percentage of small investment E-2 applicants refused is most certainly significantly higher. The most common reasons for E-2 investor visa denials relate to 1) lack of evidence that the funds are “clean”, i.e., were not obtained through criminal activity; 2) doubts about whether the business in the United States is real, operating, and will be an active commercial enterprise; 3) suspicions about whether the funds have been irrevocably committed to the business; 4) the investment amount is small and a perceived marginality of a business; 5) a lack of investor qualifications to run the business; and 6) consular suspicion of violation of status.
The last three are particularly noteworthy. If a housewife becomes the E-2 investor, there are going to be questions and concerns about whether she is able to run the business, that perhaps the E-2 is being used merely to relocate to the US. If in the course of setting up the business in the US, the investor spends substantial time in the US in B status even after the business is up and running, the consul may view him as having worked unlawfully or violating the 90 day rule. To meet the marginality requirement, it is necessary to show that the business will generate more than enough income to provide a minimal living for the family or will have the future capacity (within 5 years) to make a significant economic contribution.
If an investor fails to satisfy the consular officer on any of the above issues, the consular officer may invoke 214(b) to deny the visa. In cases of fraud (e.g., a fake lease agreement for the US business) or a material misrepresentation (including a violation of the 90 day rule), the consul may invoke Section 212(a)(6)(C)(i) and a lifetime ban from the US.
It was famously said that “by failing to prepare, you are preparing to fail.” As always, it is best to consult with a lawyer prior to starting the E-2 process.