On January 10, 2014 the Department of State provided a tentative projection for EB-5 retrogression which may occur in or after July 2014 for applicants from mainland China, as such applicants account for more than 80% of the 10,000 EB-5 visa usages. This article discusses what causes retrogression, how the retrogressed visas are processed, why retrogression seems only to affect mainland China EB-5 cases and the consequences of projected retrogression for China in the EB-5 industry, which contrary to some recent scare-mongering opinions, will make little difference to the EB-5 industry.

What is Retrogression?
INA §201 limits the employment-based preference immigrants each fiscal year
[1] for all categories, not just for EB-5 applicants.   In order to apply for, or to adjust status to that of legal permanent resident, an immigrant visa must be available to the applicant at the time of filing the legal permanent resident application.  The DOS (Department of State) publishes visa availability each month. If there are sufficient numbers in a particular category to satisfy all reported documentarily qualified demand, the category is considered “Current.“

Whenever the total of qualified applicants in a category exceeds the supply of numbers available for allotment for the particular month, the category is considered to be “oversubscribed” and this particular visa category retrogresses. When visa retrogression occurs, a visa availability cut-off date is established. The cut-off date is the priority date of the first documentarily qualified applicant who could not be accommodated for a visa number. Thus, visa “retrogression” occurs to those applicants whose priority date is on or later than the cut-off dates. If an applicant’s priority date is before the cut-off date, he or she can apply for an immigrant visa. Retrogression typically occurs toward the end of the fiscal year as visa issuance approaches the annual category, or per-country limitations. When the new fiscal year begins on October 1, a new supply of visas is made available and usually, but not always, returns the dates to where they were before retrogression.

How is the Per-Country Limit Calculated?
Section §201 of the INA sets the worldwide annual level for immigrant EB cases, while INA §202 sets the per-country limit at 7% of the total annual Employment-based preference limits. Thus only 9,940 (140,000 x 7% = 9,940) EB-5 visas are available in any Fiscal Year, unless there are unused visas from the family-based categories that would be reallocated to the employment-based categories.[2]

The annual per-country limitation of 7% is a cap, meaning visa issuances to any single country may not exceed this figure. This limitation is not a quota to which any particular country is entitled, however. The per-country limitation serves to avoid monopolization[3] of virtually all the visa numbers by applicants from only a few countries.  The per-country limit does not indicate, however, that a country is entitled to the maximum number of visas each year, rather it cannot receive more than that number. Most countries do not reach this level of visa issuance. What happens if the per-country quota ceiling is reached for the EB-5 visa? The 7% country quota applies. That means out of the approximately 10,000[4] EB-5 visas, China will have 700 visas allocated (10,000 x 7% = 700).

Retrogression only for China?
China accounts for more than 80% of EB-5 investors. Since there is a limit on the number of immigrant visas issued each year and it appears that more investors from China will continue to apply the EB-5 visa quota ceiling will be reached and visa retrogression will occur. However, if  applicants from other countries do not use up the per-country limit visas, Chinese applicants will be able to receive much more than 700 visas in a Fiscal Year.
At this time, the EB-5 category has approximately 10,000 visas per fiscal year, not 10,000 spots for I-526 petitions. Usually each EB-5 investor brings a spouse and any unmarried children under 21 years old. Thus, each EB-5 investor requests more than one EB-5 visas to be issued. Assuming each EB-5 investor has one child, approximately 3,000 families can apply for the EB-5 visas per year.

It should be noted that the EB-5 visa retrogression only have an adverse impact on the Chinese investors from mainland China. Investors from Hong Kong, Macau and Taiwan (China) and from other countries will not be affected.

How USCIS Process Retrogression Visa Cases?
If retrogression in the EB-5 category occurs, Chinese nationals who have an approved I-526 will no longer be able to apply for the consulate interview and (adjustment of status if the applicants are in the US) immediately. The investors will have to wait longer to enter the US or to obtain conditional permanent residency. As with other EB-cases that face retrogression issues, applicants in the US on certain non-immigrant visas, such as H-1, may continue to receive extensions.

In Fiscal Year 2013, 8,564 EB-5 visas were used; a 12% increase from 7,640 visas in Fiscal Year 2012. USCIS indicated that there will be 6,500 I-526 petitions pending for Fiscal Year 2014. If assuming only half of those pending petitions are approved and assuming each investor only has one child, each EB-5 investor would request 3 visas issued for the investor himself or herself, the spouse and the child, the visa numbers for Fiscal Year 2014 can only fulfill the demand of the half of the pending EB-5 investors.

If, at the time of adjudication, an applicant’s priority date is no longer current, due to retrogression, his or her case must be held in abeyance until a visa once again becomes available.  In EB-5 cases, where the adjudication of Form I-485 will not require an in-person interview at a USCIS office, the case will be subsequently held at the USCIS Service Center where the application was initially filed.  If an EB-5 investor and his or her derivatives have been interviewed at a USCIS office and a visa is not available, then USCIS may hold the case at Texas Service Center (“TSC”) until a visa becomes available.

Consequences of EB-5 Visa Retrogression for the Investor
EB-5 visa retrogression will have adverse impact on investors with children nearing 21 years old. It should be noted that the Child Status Protection Act (CSPA) only applies to children during the I-526 adjudication period. Once the petition is approved, the child’s age is no longer frozen. If retrogression occurs, the child may be “aged out” and can no longer accompany the immigrant investor.

With regard to the job creation requirement, in the Direct EB-5 context, the investor is the manager of the business. Visa retrogression may delay the investor’s entry in the US for years. As an alternative, the investor may consider obtaining a nonimmigrant visa to enter the US first to start up the business or to employ a local US person to start up and manage the company until the visa number becomes available and the investor is given permission to enter the US.