[Federal Register Volume 62, Number 177 (Friday, September 12, 1997)]
[Rules and Regulations]
[Pages 48138-48149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22314]



[[Page 48137]]

_______________________________________________________________________

Part II

Department of Justice
Immigration and Naturalization Service



8 CFR Part 214

Department of State
Bureau of Consular Affairs



22 CFR Part 41



_______________________________________________________________________



Nonimmigrant Classes; Treaty Aliens; E Classification; Visas; 
Documentation of Nonimmigrants Under the Immigration and Nationality 
Act, as Amended; Business and Media Visas; Treaty Trader and Treaty 
Investors; Final Rules

  Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / 
Rules and Regulations  

[[Page 48138]]



DEPARTMENT OF JUSTICE

Immigration and Naturalization Service

8 CFR Part 214

[INS 1427-93]
RIN 1115-AC51


Nonimmigrant Classes; Treaty Aliens; E Classification

AGENCY: Immigration and Naturalization Service, Justice.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule amends the Immigration and Naturalization Service 
(``the Service'') regulations by codifying existing policy guidelines 
related to the ``E'' nonimmigrant treaty trader and treaty investor 
visa classification. This rule closely tracks a rule being published 
simultaneously by the Department of State (``State'') and is intended 
to ensure consistent adjudication of applications for ``E'' 
nonimmigrant visa classification by the Service and State. It also 
furthers Congress' intent to facilitate trade and investment between 
the United States and countries with whom the United States has 
treaties and agreements.

DATES: This final rule is effective November 12, 1997.

FOR FURTHER INFORMATION CONTACT:
Katharine Auchincloss-Lorr, Senior Adjudications Officer, Immigration 
and Naturalization Service, 425 I Street, NW, Room 7215, Washington, DC 
20536, telephone (202) 514-5014.

SUPPLEMENTARY INFORMATION:

Background.

    The Service and State share responsibility for implementing section 
101(a)(15(E) of the Act. That section of the Act provides authority for 
the ``E'' nonimmigrant treaty trader and treaty investor visa 
classification. On August 30, 1991, the Service published a proposed 
rule and request for comments (due October 15, 1991) by parties 
interested in this subject in the Federal Register. See 56 FR 42952-57. 
On September 3, 1991, State published a proposed rule and request for 
comments (due November 4, 1991) on the same subject matter. State is 
publishing its final rule on ``E'' nonimmigrant visa classification, 22 
CFR 41.51, simultaneously with this rule.
    In response to the proposed rule, the Service received and reviewed 
15 detailed comments, many covering extremely varied issues. In 
addition, the Service reviewed 11 comments to State's proposed rule, 
some identical or similar to those it received. Many of these 
commenters noted that discrepancies in language between the two 
proposed rules might lead to inconsistent adjudication and deviation 
from established law and policy. These comments are well-taken. The 
final rules of the Service and State have been drafted to be as uniform 
in form and substance as possible.
    In this regard, both agencies have harmonized their information and 
documentation requirements for determining eligibility for E 
nonimmigrant visa classification. The Service will in the future issue 
a revised Form I-129, which will incorporate State's Form, the E Visa 
Supplemental application Form, OF-156E, for determining eligibility for 
E nonimmigrnat visa classification. Until that action occurs, this rule 
implements use of the existing Form I-129 with E Supplement by 
nonimmigrants seeking to change to or extend E classification in the 
United States.

General Changes From the Proposed Rule

    The Service has revised the format of its proposed rule to conform 
with State's final rule. In addition, in response to comments, the 
Service has modified the substance and language of its proposed rule 
where appropriate. Substantive differences between the Service's 
proposed rule and this final rule are explained in the discussion of 
the comments.

Jurisdictional Issues

    Some commenters argued that differences in Service and State 
regulatory language and terminology could lead to substantial 
discrepancies in interpretation and inconsistent adjudication, thereby 
inhibiting trade and investment in contravention of the United States' 
treaty obligations. These commenters urged the Service to defer to 
State on treaty alien issues, noting that eligibility for E 
nonimmigrant visa classification is based on treaties negotiated by 
State, raising foreign policy concerns more appropriately addressed by 
that agency. On the other hand, some commenters encouraged State 
consular officers to facilitate the international travel and entry of E 
nonimmigrnat visa holders by accepting automatically a Service-approved 
change of status to E classification.
    Under section 104 of the Act, State has exclusive jurisdiction over 
visa issuance and, therefore, is not bound by Service determinations of 
eligibility for E nonimmigrant classification. As State noted in its 
proposed rule, it may not, under this provision, automatically approve 
an application for an E nonimmigrant visa based on the Service's 
approval of an application for change of nonimmigrant status to, or an 
extension of stay in, E nonimmigrnat classification. Rather, State must 
examine anew the alien's eligibility for E nonimmigrnat visa 
classification, in accordance with current law and procedure, which is 
applicable to other nonimmigrnat classifications, as well. For example, 
an alien admitted into the United States in B-2 (visitor) status, who 
subsequently applies for and is granted a change of nonimmigrant status 
to F-1 (student) status, cannot depart and seek reentry as an F-1 
unless a United States consular officer has determined the alien's 
eligibility for an F-1 visa.
    Conversely, under section 103 of the Act, the service has exclusive 
jurisdiction to adjudicate applications for admission to this country, 
as well as applications for change of nonimmigrant status to, or 
extensions of stay in, E nonimmigrant classification. In this regard, 
it should be noted that, unlike other employment-driven 
classifications, E nonimmigrant visa classification is not conferred by 
means of a petition, but instead by an application. Upon receipt of 
such applications, the Service is required to recheck independently an 
E nonimmigrnat visa-holder's qualifications for admission into the E 
nonimmigrant visa classification. Moreover, consistent with section 103 
of the Act, the Service may, but is not required to, consult with State 
in adjudicating applications for E nonimmigrnat classification made 
following entry to the United States.
    Some commenters also inferred from the language of section 
101(a)(45) of the Act, which delegates to State responsibility for 
establishing what constitutes a ``substantial'' amount of trade or 
capital, that congress intended to recognize State's ``primary'' 
jurisdiction over E nonimmigrant visa status eligibility. As previously 
indicated, the Service does not share such a view of the Act. Section 
101(a)(45) of the Act reflects congress' understanding that, because of 
State's central role in negotiating, executing, and interpreting 
Bilateral Investment Treaties, it is the appropriate agency for 
interpreting this statutory term. Section 101(a)(45) is not intended, 
however, to limit the Service's authority under section 103 of the Act 
to adjudicate and determine requests for E nonimmigrant classification 
in cases within its jurisdiction.

[[Page 48139]]

Table Comparing the Service's and State's Final E Rules

    The following table provides a comparison of State's and the 
Service's final E nonimmigrant treaty trader and investor visa 
classification rules. An asterisk next to a State heading indicates 
that it is different from the Service's heading. State's headings that 
treat the same matter as those of the Service are marked ``SAME.'' An 
asterisk next to a Service heading indicates there is no parallel State 
heading.

------------------------------------------------------------------------
       Service rule-- 8 CFR 214.2(e)          State rule-- 22 CFR 41.51 
------------------------------------------------------------------------
(1) Treaty trader (TT).....................  (a) SAME                   
(2) Treaty investor (TI)...................  (b) SAME                   
(3) Employee of TT or TI...................  (c) SAME                   
(4) Spouse/Children of TT and TI...........  (d) SAME                   
(5) Nonimmigrant intent....................  (e) Representative of      
                                              Foreign Information Media 
                                              *                         
(6) Treaty country (TC)....................  (f) SAME                   
(7) Nationality of the TC..................  (g) SAME                   
(8) Terms and conditions of E status *.....  (h) Trade *                
(9) Trade--definitions.....................  (i) Item of Trade *        
(10) Substantial trade.....................  (j) SAME                   
(11) Principal trade.......................  (k) SAME                   
(12) Investment............................  (l) SAME                   
(13) Bona fide enterprise..................  (m) SAME                   
(14) Substantial amount of capital.........  (n) SAME                   
(15) Marginal enterprise...................  (o) SAME                   
(16) Solely to direct and develop..........  (p) SAME                   
(17) Executive or supervisory character....  (q) SAME                   
(18) Special qualifications................  (r) SAME                   
(19) Period of admission *.................  ...........................
(20) Extensions of stay *..................  ...........................
(21) Change of status *....................  ...........................
(22) Denial of treaty trade or investor      ...........................
 status to citizens of Canada or Mexico in                              
 the case of certain labor disputes *.                                  
------------------------------------------------------------------------

Definitions

    Unlike the proposed rule, this final rule does not contain a 
separate paragraph on definitions. Instead, terms are defined 
throughout the regulations.

Treaty Trader and Treaty Investor, 8 CFR 214.2(e) (1) and (2) 
(Corresponds With 22 CFR 41.51 (a) and (b))

    The proposed rule's definition of ``primary treaty alien'' at 
Sec. 214.2(e)(2)(i), has now been broken into separate definitions of 
``treaty trader'' and ``treaty investor'' in this final rule at 
Sec. 214.2(e) (1) and (2). In response to commenters' concerns, the 
term ``primary,'' used in the proposed rule, has been replaced in the 
final rule by the term ``principal'' for purposes of clarifying the 
treaty alien's relationship to his or her spouse or children.
    In determining whether an applicant is a treaty trader, commenters 
urged the Service to consider conditions in the treaty alien's home 
country which affect the alien's ability to carry on trade in 
accordance with State's proposed rule. The final rule incorporates this 
consideration as a factor in determining what constitutes substantial 
trade, although obviously at some point country conditions, in and of 
themselves, can become restrictive to trade that treaty eligibility 
must be denied. The portion of this paragraph concerning consideration 
of country conditions is adopted from State's definition of treaty 
trader at 22 CFR 41.51(a)(1).

Employee of Treaty Trader and Treaty Investor, 8 CFR 214.2(e)(3) 
(Corresponds With 22 CFR 41.51(c))

    The terms ``manager'' and ``managerial'' used in the proposed rule 
at 8 CFR 214.2(e) (2)(ii) and (6)(ii) are replaced in the final rule by 
``supervisor'' and ``supervisory'' in response to comments indicating 
confusion with the term ``managerial'' as it is used in the context of 
section 101(a)(15)(L) of the Act.
    Although the term ``treaty company'' was defined in the proposed 
rule to describe entities capable of employing an alien in E-1 or E-2 
nonimmigrant visa status, State's regulation contains no such 
definition. In the interests of clarity, this final rule adopts State's 
use of the term ``organization,'' as well as the statutory word 
``enterprise,'' to refer to such entities. This change reflects the 
fact that such an organization or enterprise derives the ability to 
employ aliens in E nonimmigrant visa classification directly and 
exclusively from its treaty trader or treaty investor owner.
    Because employees derive E nonimmigrant visa status solely by 
virtue of their employment for an E-1 or E-2 nonimmigrant visa 
employer, or for an organization or enterprise qualified by reason of 
its ownership, it is the Service's position that an employee cannot be 
classified under section 101(a)(15)(E) of the Act if the employer is 
lawfully classified under another nonimmigrant status at the time E 
nonimmigrant visa classification is requested. For this reason, as 
provided in the proposed regulation, a permanent resident may not be 
the employer of a treaty alien, and the treaty alien status of an 
employee terminates when the E nonimmigrant visa employer becomes a 
permanent resident. It follows that the Service cannot adopt one 
commenter's suggestion that individual owners of an enterprise should 
be able to change to another nonimmigrant category without jeopardizing 
the employee's eligibility for E treaty status.

Spouse and Children of Treaty Trader and Treaty Investor, 8 CFR 
214.2(e)(4) (Corresponds With 22 CFR 41.51(d))

    The definition of spouse and dependent children, in the proposed 
rule at Sec. 214.2(e)(2)(iii), is now contained in this final rule at


Sec. 214.2(e)(4).  Nonimmigrant Intent, 8 CFR 214.2(e)(5)

    Note: This does not corresponds with 22 CFR 41.51(3), 
Representatives of Foreign Information Media

    The concept of dual intent found in the proposed rule at Sec.  
214.2(e)(10) (i)

[[Page 48140]]

and (ii) has been moved to Sec. 214.2(e)(5) and retitled ``Nonimmigrant 
intent.'' This provision reflects the agencies' understanding that, 
under section 101(a)(15) of the Act, aliens in E nonimmigrant visa 
classification need not maintain a foreign residence but must indicate 
a clear intent to depart upon termination of status.
    Although not specifically part of this final rule, the Service 
shares State's position that representatives of foreign information 
media should be considered for classification as nonimmigrants under 
the provisions of section 101(a)(15)(I) of the Act before consideration 
will be given to classifying such persons as nonimmigrants under the 
provisions of section 101(a)(15)(E) of the Act. See 22 CFR 41.51(e).

Treaty Country, 8 CFR 214.2(e)(6) (Corresponds With 22 CFR 41.51(f))

    The definition in the proposed rule at Sec. 214.2(e)(1) has been 
moved to this paragraph.

Treaty Country Nationality, 8 CFR 214.2(e)(7) (Corresponds With 22 CFR 
41.51(g))

    The Service's final rule incorporates the substance of its proposed 
rule. The proposed rule at 8 CFR 214.2(e)(6)(i), in turn, was based on 
State's Notes to its Foreign Affairs Manual (FAM) at 9 FAM 41.51. Some 
commenters urged the Service to consider the following major departures 
from existing policy. As discussed below, the Service is unable to 
adopt these suggestions.
    One commenter indicated that the definition of corporate 
nationality contained in the proposed rule was both unworkable and in 
conflict with the law. The commenter argued that, by basing corporate 
nationality on whether nationals of a particular country own 50 percent 
of a corporation's shares, the proposed definition failed to account 
for difficulties in proving foreign corporate ownership which arise due 
to corporate ownership of shares, transfer of shares, and corporate 
shareholder lists of identity which do not always disclose 
shareholder's nationality. The commenter argued that requiring full 
search and disclosure would encourage dishonesty regarding the true 
owners of a company. Other commenters expressed their belief that a 
corporation's nationality should be determined by location of 
incorporation. In support of this argument, they cited certain 
International Court of Justice rulings, in which large multi-national 
corporations unable to trace nationality were permitted to look to 
their country of incorporation to determine nationality. They expressed 
the opinion that a definition based on control and ownership rather 
than location of incorporation could discriminate against corporations 
of treaty countries controlled by nationals of a third country. For 
these reasons, the commenters argued that a test focusing on the 
corporation's location would provide a more simple and enforceable 
guideline.
    It is the Service's position that, in the great majority of cases, 
nationality based on ownership is the only appropriate way to determine 
the nationality of an organization or enterprise. Section 101(a)(15)(E) 
of the Act focuses on the efforts of individual nonimmigrants, as 
opposed to organizations, to further treaty-sanctioned activity. 
Consequently, simple registration in a jurisdiction to engage in 
business activities, rather than stock ownership, is normally not an 
acceptable standard for determining corporate nationality. Similarly, 
the country of incorporation is, in most cases, irrelevant for purposes 
of determining corporate nationality. On the other hand, because 
ownership, and not corporate location, is critical, the Service agrees 
with commenters who argued that domestically incorporated, but foreign-
owned, corporations can be deemed eligible for E nonimmigrant visa 
classification. Accordingly, the reference to ``foreign'' corporations 
in the proposed rule has been removed.
    The Service recognizes a limited exception to the nationality-by-
ownership rule in the case of large, multi-national corporations that 
are unable to determine ownership by stock ownership. See current 9 FAM 
22 CFR 41.51, N3.2. Under this exception, corporations whose stock is 
sold exclusively in the country of incorporation may be presumed to 
have the nationality of the location of the exchange. Because the 
burden, in all cases, remains on the applicant to demonstrate an 
enterprise's treaty nationality, this presumption must be supported by 
the best evidence available. In determining corporate nationality, the 
Service will consider all the circumstances in each case.
    Several commenters recommended an expanded definition of 
``nationality'' so that individual owners or shareholders in immigrant 
status, or in a nonimmigrant visa classification other than E, could be 
counted toward meeting the 50 percent nationality requirement set forth 
in 8 CFR 214.2(e)(3)(ii). The Service cannot adopt this suggestion. As 
noted earlier, nonimmigrant employees in E classification in an 
organization or enterprise derive their status directly from the 
employing E nonimmigrant's ownership and treaty-based nationality. Such 
classification, therefore, cannot be afforded to these employees if 
less than 50 percent of the owners are persons who are in E 
nonimmigrant visa classification if in the United States (or, if not in 
the United States, would be classifiable as E treaty traders and 
investors).

Terms and Conditions of E Treaty Status, 8 CFR 214.2(e)(8) (There is no 
Corresponding State Rule)

    The Service and State will determine the terms and conditions of E 
treaty status, including any employment activity, at the time 
classification under section 101(a)(15)(E) of the Act is granted. For 
this reason, this paragraph incorporates proposed 8 CFR 214.2(e)(13). 
Among other issues, procedures and responsibilities related to 
transfers of employees among subsidiaries have been clarified in the 
paragraph of the final rule. While the final rule allows an employee in 
E nonimmigrant visa classification, under certain circumstances, to 
move among subsidiaries, the rule does not relieve the employer from 
compliance with all relevant regulations. Thus, in the case of such a 
transfer, the alien's employer is responsible for compliance with the 
employment eligibility verification requirements specified at 8 CFR 
part 274a.
    It has long been the policy of the Service that a treaty trader or 
treaty investor, under certain circumstances, may engage in compensable 
activities which are incidental to the terms and conditions of the 
alien's E nonimmigrant visa classification. Acceptable incidental 
activities are those which are reasonably related to and a necessary 
outgrowth of the treaty employment forming the basis of the alien's E 
nonimmigrant visa classification. For example, it would be reasonable 
to expect that, during an emergency, a manager might be required to 
perform temporarily the duties of those persons he or she supervises as 
an incident to his or her managerial functions. To facilitate a 
determination of what constitutes incidental activity, State has agreed 
to request that consular officers overseas annotate E visas in a manner 
sufficient to inform the Service and the alien of the terms and 
limitations of the authorized employment activity.
    An E nonimmigrant who wishes to change the terms of his or her E 
status, for example, to change employers or work on terms substantively 
different than those for which he or she was accorded entry, must 
obtain prior

[[Page 48141]]

Service approval by filing Form I-129 with the E Supplement in 
accordance with the instructions on, or attached to, that form. In the 
alternative, an E nonimmigrant may obtain a new E visa from State 
reflecting the new employment. Where the alien obtains Service approval 
of the change in status, the treaty alien must obtain a new E visa from 
State reflecting this change in order to return from travel abroad. The 
only exceptions to this new visa requirement are where the alien is 
applying for readmission to engage in the new treaty activity after an 
absence not exceeding 30 days solely in contiguous territory, pursuant 
to 22 CFR 41.112(d), or where an alien seeking admission presents a 
Form I-797, Approval Notice, indicating prior Service approval of the 
change in E treaty employment, together with his or her E visa.
    Prior Service approval is not required if there is no fundamental 
change that affects the underlying terms of the treaty status forming 
the basis of initial E nonimmigrant visa classification. A non-
substantive change may occur when there is a mere change in name of the 
treaty company, where one treaty national owner is replaced by another, 
or in some mergers and acquisitions where there is no effect on the 
alien's employment or relationship to the approved treaty activity. 
What constitutes a non-substantive change necessarily will depend on 
the specific facts of each case. To facilitate admission after such a 
non-substantive change, the Service has provided the options set forth 
at 8 CFR 214.2(e)(8)(iv). To determine if the change is non-
substantive, the Service has provided its customers with a process for 
seeking advice at 8 CFR 214.2(e)(8)(v). Accordingly, an alien may file 
with the Service Center Form I-129, with fee, and a complete 
description of the change, to request a new Form I-797, Approval 
Notice, reflecting the non-substantive change, or appropriate advice.
    As noted previously, the Service plans to publish a revised Form I-
129, with the E Visa Supplemental Application Form. Until the revised 
Form I-129 is approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act, and issued, applicants 
will continue to use the existing Form I-129 and E Supplement. The 
revised form will provide for the derivative spouse and minor children 
of the trader and investor and eliminate the need for separate requests 
when the trader or investor seeks to change the terms and conditions of 
classification, extend status in, or change to E nonimmigrant 
classification. The option of filing the Form I-539, with a copy of the 
principal E visa-holder's Form I-94, will remain available, if the 
family member will be seeking an extension of status at a time other 
than the principal E nonimmigrant.

Trade--Definitions, 8 CFR 214.2(e)(9) (Corresponds With 22 CFR 41.51 
(h) and (i))

    The final rule modifies the proposed definition of trade by 
eliminating the separate definitions of ``goods'' and ``services'' and 
includes them as ``items of trade.'' This modification is not intended 
to be substantive in nature, but is meant to bring the regulation into 
conformity with that of State. The Service intends that the term 
``service'' continue to be interpreted in an expansive fashion. In 
addition, in response to the concerns of commenters, the final rules of 
both the Service and State incorporate language recognizing trade where 
binding contracts ``call for the immediate exchange of items of 
trade.'' In response to comments that the definition of ``trade'' 
failed to include ``news gathering,'' an activity not precluded under 
section 101(a)(15)(E) of the Act but inadvertently omitted from the 
proposed rule, the Service has included this activity in the final 
regulation. As discussed earlier, representatives of foreign 
information media should first, however, be considered for 
classification pursuant to section 101(a)(15)(I) of the Act before 
consideration is given to possible classification under section 
101(a)(15)(E) of the Act.

Substantial Trade, 8 CFR 214.2(e)(10) (Corresponds With 22 CFR 
41.51(j))

    Section 101(a)(15)(E) of the Act requires that, in order to qualify 
for E-1 nonimmigrant visa classification, the underlying business must 
be engaged in ``substantial trade.'' Several commenters felt strongly 
that the proposed requirement of continued and frequent business 
transactions, including business commitments scheduled for a future 
time, was too restrictive and inconsistent with Congressional intent 
and current guidelines. Section 101(a)(45) of the Act requires the 
Service to defer to State's definition of substantial trade. 
Accordingly, the Service incorporates in full State's position, as set 
forth in its final rule and the preamble thereto, with respect to what 
constitutes substantial trade for purposes of the E nonimmigrant visa 
classification.
    It bears emphasizing that E nonimmigrant visa classification cannot 
be granted on the basis of a single transaction, even if that 
transaction is of considerable value. Trade between partners foresees 
long-term benefits and dedicated, ongoing activity, and is contrary to 
the notion of a single transaction (however protracted or complex) and 
the expiration of commercial activity.
    In accordance with current practice, substantial trade may be 
demonstrated by evidence from many sources including, but not limited 
to, bills of lading, customs receipts, letters of credit, insurance 
papers documenting commodities imported, purchase orders, carrier 
inventories, trade brochures, and sales contracts, insurance papers 
documenting commodities imported, purchase orders, carrier inventories, 
trade brochures, and sales contracts.

Principal Trade, 8 CFR 214.2(e)(11) (Corresponds With 22 CFR 41.51(k))

    With respect to what, for purposes of section 101(a)(15)(E) of the 
Act, constitutes trade ``principally between the United States and the 
foreign state'' of which the treaty trader is a national, several 
commenters urged the Service to adopt State's proposed phraseology 
``that over 50% of the volume of international trade of the trader must 
be conducted between the United States and the treaty country of the 
treaty trader's nationality.'' (Emphasis added). See proposed rule 
Sec. 41.51(k), 56 FR 43569 (September 3, 1991). The Service has adopted 
this language at 8 CFR 214.2(e)(11). Thus, for purposes of the 
principal trade requirement, the Service will look only at the volume 
of the enterprise's international, as opposed to total, trade.

Investment, 8 CFR 214.2(e)(12) (Corresponds With 22 CFR 41.51(l))

    Investments are for-profit commercial efforts to generate funds. 
This final regulation is consistent with the proposed rule and State's 
regulation. On the question of risk, commenters questioned the 
requirement that funds dedicated for the investment business be 
irrevocably committed. They suggested that, by failing to protect the 
investor in the event a visa was not issued, the regulation discouraged 
alien investors unwilling to take such risk. investment was irrevocable 
upon visa issuance. The final rule, like State's, explicitly permits 
the use of mechanisms such as escrow to protect the investor if a visa 
is not issued. In addition, the Service will apply FAM guidelines for 
E-2 nonimmigrant visa classification when enterprises are still in the 
pre-operational activity stage.

[[Page 48142]]

    It is clear that investment funds may not have been obtained, 
either directly or indirectly, from activities which are, under United 
States law, criminal in nature. A clear example of this would be funds 
obtained either directly through the trafficking of narcotics, or 
through the laundering or funds received through the sale of such 
controlled substance. On the other hand, it must be emphasized that 
this rule is not meant to penalize certain activities which would be 
recognized as lawful in the United States, but are deemed by a foreign 
jurisdiction to be criminal in nature. For example, a foreign 
jurisdiction may deem it to be illegal to transfer currency abroad, 
while the same activity might be deemed to be perfectly legal in the 
United States. Depending on the specific facts of such a case, an 
examiner may be required to apply United States standards, and not 
those of the foreign jurisdiction. In short, a determination of whether 
funds were obtained by criminal means must always be made on a case-by-
case basis.
    A number of commenters expressed the belief that the proposed 
regulation's failure to count towards the ``substantial investment'' 
requirement loans that are secured with the assets of the investment 
enterprise is inconsistent with modern financing practices. Commenters 
stated that such loans should be counted toward the ``substantial 
investment'' requirement if there is ultimate recourse to the investor 
in the event of failure, and recommended that the final rule contain 
the following language: ``Loans secured exclusively by the assets of 
the investment enterprise itself, without ultimate recourse to the 
investor, may not be counted toward the actual amount of capital 
invested.''
    The final rule reflects the positions of the Service and State that 
assets of the treaty enterprise may not be used as collateral to secure 
loans and, therefore, does not contain this suggested language. The 
purpose of the risk provision is to place the risk of the investment 
exclusively on the shoulders of the investor. Such risk would be 
diluted if the assets of the business itself could be used as 
collateral, since an investor lacking adequate capital to fully repay a 
debt could simply ``walk away'' from a failure. The final rule, 
therefore, adopts State's proposed definition of ``investment'' and 
provides that only investments funded by capital for which the investor 
is personally liable may be counted as investment funds. Loans secured 
by the assets of the investment enterprise, such as mortgage debt or 
commercial loans, may not be used to meet the investment requirement. 
On the other hand, acceptable investment funds include such personal 
assets as a second mortgage on a home, unsecured or unencumbered loans 
or assets, and loans on the alien's personal signature.
    State and the Service will determine the value of the investment 
capital by the same means. The FAM notes continue to provide guidance 
in this regard. See current 9 FAM N7.2-1 and N7.2-2. Accordingly, such 
value may include payments in the form of leases or rents for property 
or equipment in an amount limited to the funds devoted to that item in 
any 1 month. Such value may also include payments for the purchase of 
equipment and inventory on hand, provided that the alien can 
demonstrate that the goods or equipment are being, or will be, put to 
use in the investment enterprise and are for commercial, not personal, 
use.

Bona Fide Enterprise, 8 CFR 214.2(e)(13) (Corresponds With 22 CFR 
41.51(m))

    Under this final rule, to be deemed a ``bona fide enterprise,'' the 
enterprise may not be a paper organization or an idle, speculative 
investment held for potential appreciation in value, such as 
undeveloped land for stocks. Neither can the investment be in a 
nonprofit enterprise or constitute merely an intent to invest at a 
future time.
    Some commenters argued that the effect of proposed 8 CFR 
214.2(e)(5)(i)(A) was to improperly deem research facilities, market 
research facilities and non-profit organization to be idle and 
speculative investments. The commenters argued that such facilities are 
viable, active, profitable, and growing, albeit at a slower pace than 
other industries. They further argued that many multi-million-dollar 
research laboratories add to marketing and product knowledge and 
indirectly generate goods and services. The commenters concluded that 
Congress intended to bring such research, which is vital to larger 
enterprises, within the scope of the statute.
    The Service recognizes the legitimacy of these arguments in the 
final regulation as they relate to for-profit market and research 
facilities. However, nonprofit institutions, such as colleges and 
associations, are, and have been, historically ineligible for E 
nonimmigrant visa status. The Service does not question the value of 
such nonprofit institutions but, because the focus of the E 
nonimmigrant visa classification is on commercial, for-profit 
institutions that trade or invest, nonprofit institutions are not 
included.

Substantial Amount of Capital, 8 CFR 214.2(e)(14) (Corresponds With 22 
CFR 41.51(n))

    Twelve commenters raised objections to the proportionality scale 
set forth in the proposed rule. They were concerned that use of a 
``bright line test etched in stone'' would preclude a case-by-case 
analysis of whether the business was properly capitalized at a level of 
funds appropriate for the particular industry and type of enterprise. 
They further argued for elimination of the proportionality scale with 
respect to small investors since, under the scale, very profitable 
small businesses, particularly those where the investment was below 
$500,000, might fail to meet the high minimum-investment requirements, 
thereby rendering previously qualified investors ineligible for E 
nonimmigrant visa classification.
    Some of these commenters further noted that, under the proposed 
rule, some joint ventures and large scale investors would not qualify 
under the requirement that the investment be at least 75 percent of a 
business valued at under $500,000. They urged the Service to consider 
expanding eligibility for E nonimmigrant visa status to large companies 
involved in sizeable joint ventures and major investments in United 
States business operations
    As previously noted, in enacting section 101(a)(45) of the Act, 
Congress assigned State responsibility for determining, after 
consultation with the Service and other appropriate agencies, what 
constitutes ``substantial'' investment for purposes of E nonimmigrant 
visa classification. For this reason, the Service is bound by State's 
interpretation of ``substantiality'' as set forth in its final rule and 
the preamble thereto. Consistent with section 101(a)(45) of the Act, 
the Service, therefore adopts the guidelines set forth by State in its 
preamble to its final regulation. The Service wishes to emphasize that, 
under this interpretation, no minimum dollar figures can or should be 
established for meeting the substantiality requirement. Instead, the 
regulation requires a flexible, case-by-case assessment and provides a 
very straightforward 3-part test for determining substantiality.
    One commenter commended the Service for exempting large 
corporations from the application of the ``inverted sliding scale,'' 
which is simply another way of describing the proportionality test that 
was described in the proposed rule at 8 CFR 214.2(e)(5)(iii). However, 
large corporations are not exempt from that analysis. Under such a 
determination, the percentage of an

[[Page 48143]]

investment (in relation to total cost) necessary to meet the 
substantiality requirement decreases gradually as the cost of start-up 
or operating the business increases, to a point where the sheer 
magnitude of an investment is considered substantial. Multi-million-
dollar investments by large corporations, therefore, would usually be 
substantial even where the dollar amount invested is a relatively small 
percentage of the total cost of starting up or developing the 
enterprise.
    In determining whether an investment is substantial, the Service 
may consider all financial and other documents of the sort presented to 
investors, banks, lenders, or financial analysts to assess an 
investment. In weighing the probative value of such documents, the 
Service will consider size and commercial value of the business and the 
circumstances of each case. For instance, the originator of a document 
may be relevant to an evaluation of the sufficiency of the proof. An 
audit conducted by a relative may be of less value than one conducted 
by a recognized, independent accounting firm and/or may need to be 
scrutinized for accuracy and to determine if generally accepted 
accounting principles were utilized.

Marginal Enterprise, 8 CFR 214.2(e)(15) (Corresponds With 22 CFR 
41.51(o))

    A number of commenters criticized the marginality test historically 
used by State and the Service because it inhibits small business 
investors, whose investments are the most likely to have been made 
solely to provide a living, from investing in this country. The 
commenters reasoned that, as a result of this policy, the nonimmigrant 
investor visa classification has effectively been limited to wealthy 
aliens with other major sources of income and foreign business 
interests.
    The purpose of the marginality requirement is to weed out 
commercial enterprises, regardless of size, which will fail to become 
viable, that is to grow and become profitable. Of relevance to this 
question is the enterprise's prior commercial track record. Investors 
who allow an investment to subside into marginality have not maintained 
a fundamental condition of the investor's E-2 nonimmigrant visa 
classification. The final rule provides adjudicatory guidelines for 
evaluating what is a marginal enterprise. The determination of whether 
an investment is marginal depends, in all cases, on the specific 
circumstances and facts involved.
    The proposed rule provided that ``a business may generate a minimal 
income and still meet the marginality test if it offers employment 
opportunities for United States workers and if the investor is not and 
will not be primarily self-employed as a skilled or unskilled worker.'' 
See proposed rule at 8 CFR 214.2(e)(5). One commenter argued that the 
question of whether an investor is or is not primarily employed as a 
skilled or unskilled laborer bears no relationship to the question of 
an enterprise's marginality. Instead, the marginality question, it was 
argued, relates merely to whether the investment has an impact on 
potential job-creation or the economy as a whole. The Service agrees 
with this comment. Accordingly, the final rule deletes references to 
skilled and unskilled labor, and provides that the capacity of an 
enterprise to make a significant economic contribution is an 
appropriate consideration in a marginality determination.
    Both State's and the Service's proposed regulations were criticized 
for defining as marginal those enterprises which lack the capacity ``to 
generate more than enough income to provide a minimal living for the 
alien and family,'' since such enterprises may employ American workers 
and may involve a significant investment of capital. Although this 
definition is retained, the final rule precludes a finding of 
marginality where an enterprise demonstrates a present or future 
capacity to make a significant economic contribution, such as providing 
substantial employment.
    Consistent with Congress' focus on the commercial nature of the 
investment, the final rule requires that an applicant demonstrate that 
an investment will generate a positive income within a reasonable 
period of time. The burden is on the alien to demonstrate the 
enterprise's capacity to become a viable commercial entity by 
presenting a business plan showing that the business will provide more 
than a subsistence living for the investor, within 5 years from the 
onset date of normal business activities. This business plan will 
assist the Service in determining whether the alien's intention in 
making the investment is to establish a viable enterprise
    The 5-year business plan enables the Service to gauge progress 
toward tangible goals after the enterprise is in place. It recognizes 
the business reality that often, in situations involving start-up, 
change of ownership/management, or acquisitions, businesses may show 
little actual initial profit, but with proper planning, development, 
and direction, the business should generate more than enough income to 
provide a minimal living for the investor and his or her family. The 
Service must continue to assess whether the investor's enterprise is 
marginal at every E adjudication, even after the initial 5-year period 
is completed.

Solely to Develop and Direct, 8 CFR 214.2(e)(16) (Corresponds With 22 
CFR 41.51(p))

    Two commenters preferred State's language that an alien can meet 
the ``develop and direct'' requirement of section 101(a)(15)(E) of the 
Act by: (a) Controlling the enterprise through ownership of at least 50 
percent, rather than more than 50 percent, of the business; (b) 
possessing operational control through a managerial position or other 
corporate device, or; (c) being in a position to control the enterprise 
by other means. The final rule adopts this reasonable interpretation.
    Some commenters stated that demanding a demonstration of actual 
control would undermine United States treaty obligations to further 
trade and investment by imposing the ``unworkable'' requirement that 
the applicant present copies of stock certificates, rather than 
permitting him or her to submit for review corporate records and stock 
ledgers. These commenters argued that an investor who operates that 
company alone and does all ``routine work'' without other employees 
should be recognized for purposes of meeting the control requirement, 
and that the form of the business organization should not be 
determinative.
    The requirement that an investor's entry be ``solely to develop and 
direct the operations of an enterprise'' is statutory and cannot be 
waived. Accordingly, the final rule permits an alien to demonstrate 
that he or she (or his or her employer, in the case of an essential 
employee) controls or will control the enterprise within a reasonable 
period of time. In cases where the individual is in the process of 
investing, at the time the investment attaches (e.g., the investment 
funds are released from escrow) the individual must be in control of 
the investment. In the final rule, the Service defines control broadly 
to include operational control, ownership, management responsibility, 
or use of other corporate devices for controlling the enterprise. The 
Service recognizes that what constitutes control may vary depending on 
factors such as the structure of the enterprise involved.
    Given the control requirement, the Service cannot adopt the 
suggestion that E nonimmigrant visa classification be accorded 
automatically to large

[[Page 48144]]

companies involved in joint ventures since, often, no company 
``controls'' the venture. E nonimmigrant visa classification for joint-
venture participants is inappropriate unless the applicant can 
demonstrate operational control. Such operational control may be 
demonstrated through ``negative control.'' See current 9 FAM 41.51, 
N11.1. In all cases, the Service will adjudicate applications involving 
joint ventures in a manner consistent with State.
    Finally, it should be noted that, because of the requirement that a 
treaty investor be entering ``solely to develop and direct'' the 
operations of an enterprise, an alien who is seeking admission in order 
to engage primarily in skilled or unskilled labor will be ineligible 
for E nonimmigrant visa classification. Such an investor may, however, 
perform ``hands on'' duties, provided they are purely incidental to his 
or her developing and directing the operations of the enterprise.

Executive and Supervisory Character, 8 CFR 214.2(e)(17) (Corresponds 
With 22 CFR 41.51(q)

    With the exception of the change noted in the discussion of final 8 
CFR 214.2(e)(3), there were no other comments on, or substantive 
changes, to this paragraph.

Special Qualifications, 8 CFR 214.2(e)(18) (Corresponds With 22 CFR 
41.51(r)

    Thirteen commenters expressed an array of opinions on the proposed 
requirements for establishing an employee's essentiality for purposes 
of E nonimmigrant visa classification. Some commenters stated that 
requiring specialized knowledge, unique skills, and a high level of 
expertise or proprietary knowledge of the business operations was 
overly stringent and included outmoded or discredited concepts. These 
commenters noted that the term ``unique,'' previously used with respect 
to the L nonimmigrant visa classification, was subsequently rejected by 
both Congress and the Service.
    It should be emphasized that there is no relationship between the E 
and L nonimmigrant visa classifications. For this reason, the statutory 
term ``specialized knowledge,'' found at section 101(a)(15)(L) of the 
Act, is inappropriate in describing whether an alien employee is 
``essential'' for purposes of E nonimmigrant visa classification. 
Although section 101(a)(15)(E) of the Act is silent on whether 
employees may be admitted in E nonimmigrant visa classification, the 
Service has historically deemed appropriate the admission of non-
executive or supervisory employees having special qualifications which 
make their skills essential, i.e., indispensable to the success of the 
investment. The overriding consideration in the context of E 
nonimmigrant visa classification is an employee's essentiality to the 
enterprise.
    The final rule does not require an essential employee's skills to 
be ``unique'' or ``one of a kind.'' The possession of unique skills, 
however, can usually be considered essential and, therefore, can be a 
positive factor in determining whether the applicant is essential for 
purposes of section 101(a)(15)(E) of the Act.
    Some commenters expressed the opinion that the proposed 
essentiality requirement would hinder the ability of international 
companies to transfer personnel to critical projects in the United 
States. These commenters argued that knowledge of foreign language, 
culture, and country conditions should be considered in determining an 
alien's essentiality. They also argued that requiring prior employment 
or experience with the company abroad (i.e., ``transferred from an 
overseas office'') violated treaty obligations which require only that 
the employee be essential.
    The Service adopts in full State's criteria, as set forth in its 
final rule and the preamble thereto, for determining whether an 
applicant is ``essential.'' There is no bright-line test for 
determining whether an alien is essential to an enterprise. What 
constitutes essentiality must be determined on the basis of the 
particular facts of each case. Accordingly, skills such as knowledge of 
a foreign language and culture, knowledge of conditions in the foreign 
country that are unique to his or her nationality, and previous 
employment with the enterprise in question, must be analyzed for their 
essentiality to the investment enterprise and would not, by themselves, 
meet the essential skills requirement.
    Much comment was received regarding the requirement in the proposed 
rule that a treaty trader or investor seeking an essential employee 
demonstrate that qualified United States workers are unavailable to do 
the job. Some commenters urged that the Service require treaty traders 
or investors to provide statements from relevant public or private 
sources or otherwise adopt a process of assessing United States worker 
availability and obtaining input from labor organizations. Such public 
or private sources may include, among others, chambers of commerce, 
labor organizations, industry trade sources, or state employment 
agencies.
    Other commenters opposed requiring such a labor market test, 
arguing that such a requirement was outside the scope of section 
101(a)(15)E) of the Act, inconsistent with prior policy, and contrary 
to United States treaty obligations. The commenters also argued that a 
labor market test would have no application to cases where treaty 
aliens create jobs. These commenters expressed concern that, in actual 
practice, the Service would condition a finding of essentiality on the 
existence of a labor shortage and/or an employer's commitment to train 
United States workers to fill the position. These commenters noted that 
the employing enterprise is in a better position than the Government to 
determine the essentiality of particular employees.
    The Service agrees that a labor shortage clearance requirement 
would be tantamount to a labor certification process and there is no 
legal authority for such a change. The final rule adopts a more 
flexible process by requiring the adjudicator to consider whether the 
needed skills are ``commonplace'' or readily available. This 
requirement does not constitute a veiled labor certification test. 
Rather, consideration of whether United States workers are available to 
perform the duties in question is relevant to determining how essential 
or indispensable the employee is to the enterprise. Although not 
required, documentation from outside sources may prove helpful in 
establishing the alien's essentiality.
    As State has noted in its final rule at 22 CFR 41.51(r)(2), a skill 
that is unique or essential at one point may become commonplace at a 
later date. Consequently, while an applicant may be able to demonstrate 
in a particular instance that his or her skills are essential for an 
unspecified period of time, the alien is required to demonstrate his or 
her essentiality in any subsequent application for E nonimmigrant visa 
classification.
    The proposed rule required that businesses develop training and 
education programs for United States workers in areas where such United 
States workers lack the requisite skill to fill the position offered. 
The proposed rule further provided that businesses must, in the 
alternative, demonstrate that the transfer of such skills is not 
feasible. These proposals were the subject of 11 comments. Some 
commenters suggested that such training regulations departed from prior 
law and were beyond the scope of the Service's statutory authority. The

[[Page 48145]]

commenters also argued the proposed training requirement was 
economically irresponsible, since many businesses can more easily and 
cost effectively transfer an employee possessing such skills from 
abroad. In addition, they noted that training would not be feasible if 
a skill was needed only temporarily and the need for the skill 
disappeared prior to completion of United States worker training. Some 
commenters suggested that training requirements should be applied only 
to companies which repeatedly request foreign technicians and, that 
even in such cases, the absence of a training program should merely be 
looked at as a negative, but not a determinative, factor in considering 
future applications.
    The Service has decided not to impose a training requirement for E 
nomimmigrant visa classification exept in cases where the purpose of 
the E nonimmigrant visa employee's entry is to train United States 
workers. The question of the trainability of Untied States workers, 
however, goes directly to whether the alien employee is essential to 
the enterprise. If the skills are readily transferable to Untied States 
workers, it is reasonable to conclude that the enterprise could use a 
United States worker instead of the alien and skill function without 
significant disruption.
    It is the position of the Service that an alien's possession of 
otherwise easily transferable skills typically can be deemed essential 
only in certain cases involving a start-up or a new enterprise, or an 
established enterprise which is undergoing expansion. An adjudicating 
officer, therefore, may request traders or investors employing 
essential start-up employees to set up a reasonable time frame within 
which the enterprise must replace such alien workers with locally hired 
United States employees. In this way, the Service can be assured that 
the employer will not artificially prolong the essentiality of 
employees by failing to plan for their replacement by locally hired 
United States employes. The above procedure remains consistent with 
current policy, as expressed in State's FAM notes.
    The Service will monitor industry changes as necessary to determine 
essentiality and ensure that employees have the skills essential to the 
efficient operation of their ongoing investment enterprises. State and 
the Service will continue to work together to ensure that applications 
within given industries receive similar treatment.

Period of Admission, Extensions of Stay, Change of Status, 8 CFR 
214.2(e) (19), (20), and (21) (There Are No Corresponding State 
Regulations)

    The final rule incorporates numerous changes from the proposed 
regulation with regard to period of admission, extensions of stay, and 
change of status.
    The final regulation creates a 2-year period for an initial 
admission and an unlimited number of 2-year extensions of status in E 
nonimmigrant visa classification. This change is intended to alleviate 
the confusion due to the different periods of time authorized for 
initial admissions and extensions under the previous policy.
    Procedures for requesting extensions of stay are clarified at 8 CFR 
214.2(e)(20). The revised Form I-129, when published, will simplify the 
procedures for requesting extensions of stay and, in this way, will 
assist traders and investors in the United States.
    The paragraph on change of status at 8 CFR 214.2(e)(21) is 
consistent with the proposed rule.

Denial of Treaty Trader or Investor Status to Citizens of Canada or 
Mexico in the Case of Certain Labor Disputes, 8 CFR 214.2(e)(22) (There 
is no Corresponding State Regulation)

    This paragraph has been added to clarify that the strike provisions 
of the North American Free Trade Agreement (``NAFTA'') are applicable 
to citizens of Canada and Mexico who seek nonimmigrant treaty trader or 
treaty investor visa status. Since these work stoppage and labor 
dispute provisions have the effect of law, see NAFTA Implementation 
Act, Pub. L. 103-182, December 8, 1993, there is no need for pre-
publication notice and comment. However, the presence of these 
provisions in this regulation promotes awareness of their applicability 
to NAFTA visa holders in E nonimmigrant visa classification.

The Regulatory Flexibility Act

    The Commissioner of the Immigration and Naturalization Service has 
reviewed this regulation in accordance with the Regulatory Flexibility 
Act (5 U.S.C. 605(b)) and, by approving it, certifies that this rule 
will not have a significant economic impact on a substantial number of 
small entities for the following reasons: This rule amends Service 
regulations by codifying existing policy guidelines related to the 
``E'' nonimmigrant treaty trader and treaty investor visa 
classification. The economic impact of this rule, and its affect on 
small entities, will not be significantly different from that of the 
current regulation. This rule clarifies existing policy guidelines and 
ensures consistency with the similar rule of the Department of State, 
and will not, by itself, significantly increase or decrease the number 
of aliens in this classification, or their economic impact on the 
United States.

Executive Order 12866

    This rule is considered by the Department of Justice, Immigration 
and Naturalization Service, to be a ``significant regulatory action'' 
under Executive Order 12866, section 3(f), Regulatory Planning and 
Review. accordingly, this regulation has been reviewed by the Office of 
Management and Budget.

Executive Order 12612

    The regulation herein will not have substantial direct effects on 
the States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 12612, it is determined that this rule does not have sufficient 
federalism implications to warrant the preparation of a Federalism 
Assessment.

Executive Order 12988

    This final rule meets the applicable standards set forth in 
sections 3(a) and 3(b)(2) of Executive Order 12988, ``Civil Justice 
Reform''.

Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by State, local and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year, and it will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

Small Business Regulatory Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Act of 1996. This rule will not 
result in an annual effect on the economy of $100 million or more. In 
addition, this rule will not result in a major increase in costs or 
prices or in significant adverse effects on competition, employment, 
investment, productivity, or innovation. This rule will not have 
significant adverse effects on the ability of United States-based 
companies to compete with foreign-based companies in domestic

[[Page 48146]]

and export markets. Moreover, this rule allows citizens of countries 
with which the United States has treaties and agreements (such as 
NAFTA) to enter this country in E classification to engage in trade and 
investment. Such treaties and agreements permit the smooth and 
efficient entry of traders and investors, in accordance with reasonable 
standards provided by the Service and the Department of State as set 
forth in this regulation, so that United States citizens are accorded 
reciprocal rights to trade and invest in the country of the treaty or 
agreement partner.

Paperwork Reduction Act

    This final rule does not impose any new reporting or recordkeeping 
requirements. The information collection requirements contained in this 
rule have been cleared by the Office of Management and Budget under the 
provisions of the Paperwork Reduction Act. Clearance numbers for these 
collections are contained in 8 CFR 299.5, Display of control numbers.

List of Subjects in 8 CFR Part 214

    Administrative practice and procedure, Aliens, Authority delegation 
(Government agencies), Employment.

    Accordingly, part 214 of chapter I of title 8 of the Code of 
Federal Regulations is amended as follows.

PART 214--NONIMMIGRANT CLASSES

    1. The authority citation for part 214 continues to read as 
follows:

    Authority: 8 U.S.C. 1101, 1103, 1182, 1184, 1186a, 1187, 1221, 
1281, 1282; 8 CFR part 2.

    2. Section 214.2 is amended by revising paragraph (e) to read as 
follows:


Sec. 214.2   Special requirements for admission, extension, and 
maintenance of status.

* * * * *
    (e) Treaty traders and investors--(1) Treaty trader. An alien, if 
otherwise admissible, may be classified as a nonimmigrant treaty trader 
(E-1) under the provisions of section 101(a)(15)(E)(i) of the Act if 
the alien:
    (i) Will be in the United States solely to carry on trade of a 
substantial nature, which is international in scope, either on the 
alien's behalf or as an employee of a foreign person or organization 
engaged in trade principally between the United States and the treaty 
country of which the alien is a national, taking into consideration any 
conditions in the country of which the alien is a national which may 
affect the alien's ability to carry on such substantial trade; and
    (ii) Intends to depart the United States upon the expiration or 
termination of treaty trader (E-1) status.
    (2) Treaty investor. An alien, if otherwise admissible, may be 
classified as a nonimmigrant treaty investor (E-2) under the provision 
of section 101(a)(15)(E)(ii) of the Act if the alien:
    (i) Has invested or is actively in the process of investing a 
substantial amount of capital in a bona fide enterprise in the United 
States, as distinct from a relatively small amount of capital in a 
marginal enterprise solely for the purpose of earning a living;
    (ii) Is seeking entry solely to develop and direct the enterprise; 
and
    (iii) Intends to depart the United States upon the expiration or 
termination of treaty investor (E-2) status.
    (3) Employee of treaty trader or treaty investor. An alien employee 
of a treaty trader, if otherwise admissible, may be classified as E-1, 
and an alien employee of a treaty investor, if otherwise admissible, 
may be classified as E-2 if the employee is in or is coming to the 
United States to engage in duties of an executive or supervisory 
character, or, if employed in a lesser capacity, the employee has 
special qualifications that make the alien's services essential to the 
efficient operation of the enterprise. The employee must have the same 
nationality as the principal alien employer. In addition, the employee 
must intend to depart the United States upon the expiration or 
termination of E-1 or E-2 status. The principal alien employer must be:
    (i) A person in the United States having the nationality of the 
treaty country and maintaining nonimmigrant treaty trader or treaty 
investor status or, if not in the United States, would be classifiable 
as a treaty trader or treaty investor; or
    (ii) An enterprise or organization at least 50 percent owned by 
persons in the United States having the nationality of the treaty 
country and maintaining nonimmigrant treaty trader or treaty investor 
status or who, if not in the United States, would be classifiable as 
treaty traders or treaty investors.
    (4) Spouse and children of treaty trader or treaty investor. The 
spouse and child of a treaty trader or treaty investor accompanying or 
following to join the principal alien, if otherwise admissible, may 
receive the same classification as the principal alien. The nationality 
of a spouse or child of a treaty trader or treaty investor is not 
material to the classification of the spouse or child under the 
provisions of section 101(a)(15)(e) of the Act.
    (5) Nonimmigrant intent. An alien classified under section 
101(a)(15)(E) of the Act shall maintain an intention to depart the 
United States upon the expiration or termination of E-1 or E-2 status. 
However, an application for initial admission, change of status, or 
extension of stay in E classification may not be denied solely on the 
basis of an approved request for permanent labor certification or a 
filed or approved immigrant visa preference petition.
    (6) Treaty country. A treaty country is, for purposes of this 
section, a foreign state with which a qualifying Treaty of Friendship, 
Commerce, or Navigation or its equivalent exists with the United 
States. A treaty country includes a foreign state that is accorded 
treaty visa privileges under section 101(a)(15)(E) of the Act by 
specific legislation.
    (7) Treaty country nationality. The nationality of an individual 
treaty trader or treaty investor is determined by the authorities of 
the foreign state of which the alien is a national. In the case of an 
enterprise or organization, ownership must be traced as best as is 
practicable to the individuals who are ultimately its owners.
    8. Terms and conditions of E treaty status--(i) Limitations on 
employment. The Service determines the terms and conditions of E treaty 
status at the time of admission or approval of a request to change 
nonimmigrant status to E classification. A treaty trader, treaty 
investor, or treaty employee may engage only in employment which is 
consistent with the terms and conditions of his or her status and the 
activity forming the basis for the E treaty status.
    (ii) Subsidiary employment. Treaty employees may perform work for 
the parent treaty organization or enterprise, or any subsidiary of the 
parent organization or enterprise. Performing work for subsidiaries of 
a common parent enterprise or organization will not be deemed to 
constitute a substantive change in the terms and conditions of the 
underlying E treaty employment if, at the time the E treaty status was 
determined, the applicant presented evidence establishing:
    (A) The enterprise or organization, and any subsidiaries thereof, 
where the work will be performed; the requisite parent-subsidiary 
relationship; and that the subsidiary independently qualifies as a 
treaty organization or enterprise under this paragraph;
    (B) In the case of an employee of a treaty trader or treaty 
investor, the work to be performed requires executive, supervisory, or 
essential skills; and
    (C) The work is consistent with the terms and conditions of the 
activity forming the basis of the classification.

[[Page 48147]]

    (iii) Substantive changes. Prior Service approval must be obtained 
where there will be a substantive change in the terms or conditions of 
E status. In such cases, a treaty alien must file a new application on 
Form I-129 and E supplement, in accordance with the instructions on 
that form, requesting extension of stay in the United States. In 
support of an alien's Form I-129 application, the treaty alien must 
submit evidence of continued eligibility for E classification in the 
new capacity. Alternatively, the alien must obtain from a consular 
officer a visa reflecting the new terms and conditions and subsequently 
apply for admission at a port-of-entry. The Service will deem there to 
have been a substantive change necessitating the filing of a new Form 
I-129 application in cases where there has been a fundamental change in 
the employing entity's basic characteristics, such as a merger, 
acquisition, or sale of the division where the alien is employed.
    (iv) Non-substantive changes. Prior approval is not required, and 
there is no need to file a new Form I-129, if there is no substantive, 
or fundamental, change in the terms or conditions of the alien's 
employment which would affect the alien's eligibility for E 
classification. Further, prior approval is not required if corporate 
changes occur which do not affect the previously approved employment 
relationship, or are otherwise non-substantive. To facilitate 
admission, the alien may:
    (A) Present a letter from the treaty-qualifying company through 
which the alien attained E classification explaining the nature of the 
change;
    (B) Request a new Form I-797, Approval Notice, reflecting the non-
substantive change by filing with the appropriate Service Center Form 
I-129, with fee, and a complete description of the change, or;
    (C) Apply directly to State for a new E visa reflecting the change. 
An alien who does not elect one of the three options contained in 
paragraph (e)(8)(iv) (A) through (C) of this section, is not precluded 
from demonstrating to the satisfaction of the immigration officer at 
the port-of-entry in some other manner, his or her admissibility under 
section 101(a)(15)(E) of the Act.
    (v) Advice. To ascertain whether a change is substantive, an alien 
may file with the Service Center Form I-129, with fee, and a complete 
description of the change, to request appropriate advice. In cases 
involving multiple employees, an alien may request that a Service 
Center determine if a merger or other corporate restructuring requires 
the filing of separate applications by filing a single Form I-129, with 
fee, and attaching a list of the related receipt numbers for the 
employees involved and an explanation of the change or changes. Where 
employees are located within multiple jurisdictions, such a request for 
advice must be filed with the Service Center in Lincoln, Nebraska.
    (vi) Approval. If an application to change the terms and conditions 
of E status or employment is approved, the Service shall notify the 
applicant on Form I-797. An extension of stay in nonimmigrant E 
classification may be granted for the validity of the approved 
application. The alien is not authorized to begin the new employment 
until the application is approved. Employment is authorized only for 
the period of time the alien remains in the United States. If the alien 
subsequently departs from the United States, readmission in E 
classification may be authorized where the alien presents his or her 
unexpired E visa together with the Form I-797, Approval Notice, 
indicating Service approval of a change of employer or of a change in 
the substantive terms or conditions of treaty status or employment in E 
classification, or, in accordance with 22 CFR 41.112(d), where the 
alien is applying for readmission after an absence not exceeding 30 
days solely in contiguous territory.
    (vii) An unauthorized change of employment to a new employer will 
constitute a failure to maintain status within the meaning of section 
237(a)(1)(C)(i) of the Act. In all cases where the treaty employee will 
be providing services to a subsidiary under this paragraph, the 
subsidiary is required to comply with the terms of 8 CFR part 274a.
    (9) Trade--definitions. For purposes of this paragraph: Items of 
trade include but are not limited to goods, services, international 
banking, insurance, monies, transportation, communications, data 
processing, advertising, accounting, design and engineering, management 
consulting, tourism, technology and its transfer, and some news-
gathering activities. For purposes of this paragraph, goods are 
tangible commodities or merchandise having extrinsic value. Further, as 
used in this paragraph, services are legitimate economic activities 
which provide other than tangible goods.
    Trade is the existing international exchange of items of trade for 
consideration between the United States and the treaty country. 
Existing trade includes successfully negotiated contracts binding upon 
the parties which call for the immediate exchange of items of trade. 
Domestic trade or the development of domestic markets without 
international exchange does not constitute trade for purposes of 
section 101(a)(15)(E) of the Act. This exchange must be traceable and 
identifiable. Title to the trade item must pass from one treaty party 
to the other.
    (10) Substantial trade. Substantial trade is an amount of trade 
sufficient to ensure a continuous flow of international trade items 
between the United States and the treaty country. This continuous flow 
contemplates numerous transactions over time. Treaty trader status may 
not be established or maintained on the basis of a single transaction, 
regardless of how protracted or monetarily valuable the transaction. 
Although the monetary value of the trade item being exchanged is a 
relevant consideration, greater weight will be given to more numerous 
exchanges of larger value. There is no minimum requirement with respect 
to the monetary value or volume of each individual transaction. In the 
case of smaller businesses, an income derived from the value of 
numerous transactions which is sufficient to support the treaty trader 
and his or her family constitutes a favorable factor in assessing the 
existence of substantial trade.
    (11) Principal trade. Principal trade between the United States and 
the treaty country exists when over 50 percent of the volume of 
international trade of the treaty trader is conducted between the 
United States and the treaty country of the treaty trader's 
nationality.
    (12) Investment. An investment is the treaty investor's placing of 
capital, including funds and other assets (which have not been 
obtained, directly or indirectly, through criminal activity), at risk 
in the commercial sense with the objective of generating a profit. The 
treaty investor must be in possession of and have control over the 
capital invested or being invested. The capital must be subject to 
partial or total loss if investment fortunes reverse. Such investment 
capital must be the investor's unsecured personal business capital or 
capital secured by personal assets. Capital in the process of being 
invested or that has been invested must be irrevocably committed to the 
enterprise. The alien has the burden of establishing such irrevocable 
commitment. The alien may use any legal mechanism available, such as 
the placement of invested funds in escrow pending admission in, or 
approval of, E classification, that would not only irrevocably commit 
funds to the enterprise, but might also extend personal liability 
protection to the treaty investor in the event the application for E 
classification is denied.

[[Page 48148]]

    (13) Bona fide enterprise. The enterprise must be a real, active, 
and operating commercial or entrepreneurial undertaking which produces 
services or goods for profit. The enterprise must meet applicable legal 
requirements for doing business in the particular jurisdiction in the 
United States.
    (14) Substantial amount of capital. A substantial amount of capital 
constitutes an amount which is:
    (i) Substantial in relationship to the total cost of either 
purchasing an established enterprise or creating the type of enterprise 
under consideration;
    (ii) Sufficient to ensure the treaty investor's financial 
commitment to the successful operation of the enterprise; and
    (iii) Of a magnitude to support the likelihood that the treaty 
investor will successfully develop and direct the enterprise. 
Generally, the lower the cost of the enterprise, the higher, 
proportionately, the investment must be to be considered a substantial 
amount of capital.
    (15) Marginal enterprise. For purposes of this section, an 
enterprise may not be marginal. A marginal enterprise is an enterprise 
that does not have the present or future capacity to generate more than 
enough income to provide a minimal living for the treaty investor and 
his or her family. An enterprise that does not have the capacity to 
generate such income, but that has a present or future capacity to make 
a significant economic contribution is not a marginal enterprise. The 
projected future income-generating capacity should generally be 
realizable within 5 years from the date the alien commences the normal 
business activity of the enterprise.
    (16) Solely to develop and direct. An alien seeking classification 
as a treaty investor (or, in the case of an employee of a treaty 
investor, the owner of the treaty enterprise) must demonstrate that he 
or she does or will develop and direct the investment enterprise. Such 
an applicant must establish that he or she controls the enterprise by 
demonstrating ownership of at least 50 percent of the enterprise, by 
possessing operational control through a managerial position or other 
corporate device, or by other means.
    (17) Executive and supervisory character. The applicant's position 
must be principally and primarily, as opposed to incidentally or 
collaterally, executive or supervisory in nature. Executive and 
supervisory duties are those which provide the employee ultimate 
control and responsibility for the enterprise's overall operation or a 
major component thereof. In determining whether the applicant has 
established possession of the requisite control and responsibility, a 
Service officer shall consider, where applicable:
    (i) That an executive position is one which provides the employee 
with great authority to determine the policy of, and the direction for, 
the enterprise;
    (ii) That a position primarily of supervisory character provides 
the employee supervisory responsibility for a significant proportion of 
an enterprise's operations and does not generally involve the direct 
supervision of low-level employees, and;
    (iii) Whether the applicant possesses executive and supervisory 
skills and experience; a salary and position title commensurate with 
executive or supervisory employment; recognition or indicia of the 
position as one of authority and responsibility in the overall 
organizational structure; responsibility for making discretionary 
decisions, setting policies, directing and managing business 
operations, supervising other professional and supervisory personnel; 
and that, if the position requires some routine work usually performed 
by a staff employee, such functions may only be of an incidental 
nature.
    (18) Special qualifications. Special qualifications are those 
skills and/or aptitudes that an employee in a lesser capacity brings to 
a position or role that are essential to the successful or efficient 
operation of the treaty enterprise. In determining whether the skills 
possessed by the alien are essential to the operation of the employing 
treaty enterprise, a Service officer must consider, where applicable:
    (i) The degree of proven expertise of the alien in the area of 
operations involved; whether others possess the applicant's specific 
skill or aptitude; the length of the applicant's experience and/or 
training with the treaty enterprise; the period of training or other 
experience necessary to perform effectively the projected duties; the 
relationship of the skill or knowledge to the enterprise's specific 
processes or applications, and the salary the special qualifications 
can command; that knowledge of a foreign language and culture does not, 
by itself, meet the special qualifications requirement, and;
    (ii) Whether the skills and qualifications are readily available in 
the United States. In all cases, in determining whether the applicant 
possesses special qualifications which are essential to the treaty 
enterprise, a Service officer must take into account all the particular 
facts presented. A skill that is essential at one point in time may 
become commonplace at a later date. Skills that are needed to start up 
an enterprise may no longer be essential after initial operations are 
complete and running smoothly. Some skills are essential only in the 
short-term for the training of locally hired employees. Under certain 
circumstances, an applicant may be able to establish his or her 
essentiality to the treaty enterprise for a longer period of time, such 
as, in connection with activities in the areas of product improvement, 
quality control, or the provision of a service not yet generally 
available in the United States. Where the treaty enterprise's need for 
the applicant's special qualifications, and therefore, the applicant's 
essentiality, is time-limited, Service officers may request that the 
applicant provide evidence of the period for which skills will be 
needed and a reasonable projected date for completion of start-up or 
replacement of the essential skilled workers.
    (19) Period of admission. Periods of admission are as follows:
    (i) A treaty trader or treaty investor may be admitted for an 
initial period of not more than 2 years.
    (ii) The spouse and minor children accompanying or following to 
join a treaty trader or treaty investor shall be admitted for the 
period during which the principal alien is in valid treaty trader or 
investor status. The temporary departure from the United States of the 
principal trader or investor shall not affect the derivative status of 
the dependent spouse and minor unmarried children, provided the 
familial relationship continues to exist and the principal remains 
eligible for admission as an E nonimmigrant to perform the activity.
    (iii) Unless otherwise provided for in this chapter, an alien shall 
not be admitted in E classification for a period of time extending more 
than 6 months beyond the expiration date of the alien's passport.
    (20) Extensions of stay. Requests for extensions of stay may be 
granted in increments of not more than 2 years. A treaty trader or 
treaty investor in valid E status may apply for an extension of stay by 
filing an application for extension of stay on Form I-129 and E 
Supplement, with required accompanying documents, in accordance with 
Sec. 214.1 and the instructions on that form.
    (i) For purposes of eligibility for an extension of stay, the alien 
must prove that he or she:
    (A) Has at all times maintained the terms and conditions of his or 
her E nonimmigrant classification;
    (B) Was physically present in the United States at the time of 
filing the application for extension of stay; and

[[Page 48149]]

    (C) Has not abandoned his or her extension request.
    (ii) With limited exceptions, it is presumed that employees of 
treaty enterprises with special qualifications who are responsible for 
start-up operations should be able to complete their objectives within 
2 years. Absent special circumstances, therefore, such employees will 
not be eligible to obtain an extension of stay.
    (iii) Subject to paragraph (e)(5) of this section and the 
presumption noted in paragraph (e)(22)(ii) of this section, there is no 
specified number of extensions of stay that a treaty trader or treaty 
investor may be granted.
    (21) Change of nonimigrant status. (i) An alien in another valid 
nonimmigrant status may apply for change of status to E classification 
by filing an application for change of status on Form I-129 and E 
Supplement, with required accompanying documents establishing 
eligibility for a change of status and E classification, in accordance 
with 8 CFR part 248 and the instructions on Form I-129 and E 
Supplement.
    (ii) The spouse or minor children of an applicant seeking a change 
of status to that of treaty trader or treaty investor alien shall file 
concurrent applications for change of status to derivative treaty 
classification on the appropriate Service form. Applications for 
derivative treaty status shall:
    (A) Be approved only if the principal treaty alien is granted 
treaty alien status and continues to maintain that status;
    (B) Be approved for the period of admission authorized in paragraph 
(e)(20) of this section.
    (22) Denial of treaty trader or treaty investor status to citizens 
of Canada or Mexico in the case of certain labor disputes. (i) A 
citizen of Canada or Mexico may be denied E treaty trader or treaty 
investor status as described in section 101(a)(15)(E) of the Act and 
section B of Annex 1603 of the NAFTA if:
    (A) The Secretary of Labor certifies to, or otherwise informs, the 
Commissioner that a strike or other labor dispute involving a work 
stoppage of workers is in progress at the place where the alien is or 
intends to be employed; and
    (B) Temporary entry of that alien may adversely affect either:
    (1) The settlement of any labor dispute that is in progress at the 
place or intended place of employment, or
    (2) The employment of any person who is involved in such dispute.
    (ii) If the alien has already commenced employment in the United 
States and is participating in a strike or other labor dispute 
involving a work stoppage of workers, whether or not such strike or 
other labor dispute has been certified by the Department of Labor, the 
alien shall not be deemed to be failing to maintain his or her status 
solely on account of past, present, or future participation in a strike 
or other labor dispute involving a work stoppage of workers, but is 
subject to the following terms and conditions:
    (A) The alien shall remain subject to all applicable provisions of 
the Act and regulations applicable to all other E nomimmigrants; and
    (B) The status and authorized period of stay of such an alien is 
not modified or extended in any way by virtue of his or her 
participation in a strike or other labor dispute involving a work 
stoppage of workers.
    (iii) Although participation by an E nonimmigrant alien in a strike 
or other labor dispute involving a work stoppage of workers will not 
constitute a ground for deportation, any alien who violates his or her 
status or who remains in the United States after his or her authorized 
period of stay has expired will be subject to deportation.
* * * * *
    Dated: March 17, 1997.
Doris Meissner,
Commissioner, Immigration and Naturalization Service.
[FR Doc. 97-22314 Filed 9-11-97; 8:45 am]
BILLING CODE 4410-10-M