[Federal Register Volume 62, Number 177 (Friday, September 12, 1997)]
[Rules and Regulations]
[Pages 48149-48155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24260]


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DEPARTMENT OF STATE

Bureau of Consular Affairs

22 CFR Part 41

[Public Notice 2594]


Visas: Documentation of Nonimmigrants Under the Immigration and 
Nationality Act, as Amended; Business and Media Visas; Treaty Trader 
and Treaty Investors

AGENCY: Bureau of Consular Affairs, State Department.

ACTION: Final rule.

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SUMMARY: This rule amends the nonimmigrant visa regulations, by adding 
a definition of the term ``substantial'' to section 41.51 in order to 
implement the provisions of section 204(c) of Pub. L. 101-649. This 
rule adds a new section 101(a)(45) to the Immigration and Nationality 
Act (INA) for purposes of defining this term as used in section 
101(a)(15)(E) of the INA. Furthermore, this rule incorporates into 
regulation the underlying principles of the treaty trader/treaty 
investor visa classification which have been published in the form of 
interpretive note material in Volume 9 of the State Department's 
Foreign Affairs Manual.

EFFECTIVE DATE: November 12, 1997.

FOR FURTHER INFORMATION CONTACT:
Stephen K. Fischel, Director, Legislation, Regulations and Advisory 
Assistance, 202-663-1184.

SUPPLEMENTARY INFORMATION: Public Notice 1468 at 56 FR 43565, September 
3, 1991, proposed adding regulations to title 22, part 41, Code of the 
Federal Regulations. The proposed regulations were required to 
implement the provisions of section 204(c) of the Immigration Act of 
1990, Pub. L. 104-649 which requires the Secretary of State to 
promulgate a regulatory definition of the term ``substantial'' after 
consultation with the appropriate agencies of the United States 
Government. The proposal was discussed in detail in Notice 1468, as 
were the Department's reasons for the regulations. The Department 
received 14 timely comments in responds to the Notice of Proposed 
Rulemaking.

Analysis of Comments

General Comment

    The Department's proposed rule and the Immigration and 
Naturalization Service's proposed rule on the treaty visa 
classification were published within a few days of each other. Although 
the rules were intended to be identical in substance, each agency 
selected different language to articulate its rules. This difference in 
language led readers to reach the unintended conclusion that the rules 
were substantively different if not at odds with each other in a few 
critical ways.
    Many commenters expressed their concern about the apparent 
differences in two ways. First, commenters requested that the agencies 
work together to publish rules that were clearly identical in 
substance. The agencies certainly recognize the need for one set of 
principles to administer the law and have worked together to achieve 
that goal. Furthermore, commenters suggested that, since the Department 
of State has the greatest amount of experience in administering treaty 
trader/investors visa rules, and since INS has been deferring to the 
Department of State's regulations and interpretations, the INS should 
continue to defer to the Department and to apply the Department's 
regulations. Such deference, it was suggested, could involve the 
specific reference, in the Immigration and Naturalization Service 
(Service) regulations, to the Department of State's regulations, or the 
publication of the Department's entire treaty visa

[[Page 48150]]

regulations in Title 8 of Code of Federal Regulations.
    The two agencies agree in principle with these objectives. Although 
the Department and the Service are each publishing their own 
regulations, they are intended to be substantively the same. To further 
uniform application of these rules, the Service will be expressly 
authorized by the INS Operations Instructions to consult with the 
Advisory Opinions Division of the Visa Office of the Department of 
State on treaty visa issues.
    The Advisory Opinions Division renders opinions on legal issues 
relating to visa law on behalf of the Visa Office to United States 
consular officers serving at United States embassies and consulates 
abroad. Opinions rendered by this division on questions of law, as 
opposed to the application of the law to the facts of a particular 
case, are generally binding on consular officers. (See 22 CFR 
41.121(d)). A significant distinction is made between this current 
departmental practice and the projected consultation process with the 
Service. Guidance offered at the request of the Service will be purely 
advisory in nature and will not be binding on the Service in any way. 
The Service will continue to posses exclusive authority and 
responsibility for the adjudication of treaty visa cases submitted to 
them in accordance with applicable law and procedure.
    This consultation process will merely constitute a means of sharing 
the Department's knowledge gained from the experience of adjudicating 
treaty visa cases for many years. The INS will possess the option of 
drawing upon such expertise, but will be under no obligation to consult 
with the Visa Office. The exercise of this option is left to the 
discretion of that agency.
    One commenter had expressed the hope that not only the Service and 
the Department would promulgate the same regulations but that consular 
officers abroad would automatically accept a Service's change of status 
determination in an ``E'' visa case rather than subject the alien to 
readjudication of the visa application.
    Consular officers posses exclusive authority to issue and refuse 
visas (INA 104). Not only must they determine an alien's eligibility 
under INA 212(a) but, in the case of all nonimmigrant visa 
classifications, they must assess whether the alien has met all the 
requirements of that particular nonimmigrant visa classification. Even 
in petition-based nonimmigrant visa classifications the consular 
officer retains the authority, and the responsibility, to review the 
petition to make sure the alien is appropriately and properly 
classified; this is not just because mistakes may happen, but because 
the consular officer may have access to information not available to 
the INS officer. If the review results in a finding that the officer 
knows or reasonably believes that the alien is not entitled to the 
given classification, the petition is returned pursuant to regulation 
to the appropriate office of the Immigration and Naturalization Service 
for appropriate action.
    As treaty visa cases involve no INS approved petitions, the 
consular officer has the responsibility to adjudicate all aspects of 
the visa application. Under this regulation and these administrative 
procedures, the consular officer will continue to have that 
responsibility. It is anticipated, however, that in view of the newly 
adopted procedures more uniform application of these visa regulations 
will be achieved, thus reducing the possibility of disparate results.
    Several commenters expressed disappointment that the Department 
proposed regulations on treaty visas without even mentioning the Board 
of Immigration Appeals decision in the Matters of Walsh and Pollard, 
Int. Dec. #3111 (BIA 1988). Since this case was not cited in the 
preamble to the proposed rule, some commenters inferred that the 
Department did not agree with the holding of the decision.
    The Department finds this decision to be useful on at least two 
points. First, the Board followed the Department's interpretation that 
substantial investment is determined by application of the 
proportionality test, not by application of a set minimum dollar 
figure. Secondly, the Board agreed that the concept of ``develop and 
direct'' applies to the ``principal'' treaty investor, not to each 
employee of the treaty investor.
    This decision unquestionably contributes significantly to the body 
of administrative case law on treaty visas, but it does have a 
shortcoming. The decision has been read to imply that the treaty 
investor visa classification is appropriate for the creation of certain 
``job shop'' arrangements. The principles upon which the decision is 
founded to do support that inference. These regulations, likewise, do 
not endorse that inference.
    As clear recognition of the significance of this case, special 
treatment is accorded this decision in the interpretive note material 
in the Foreign Affairs Manual. It should be noted, however, that the 
``job shop'' inference is also accorded appropriate discussion.

Employee of Treaty Trader or Treaty Investor

    The Department received one comment on the long-standing regulation 
at section 41.51(c), which requires the employer to hold treaty visa 
status or, if not in the United States, to be so classifiable. The 
commenter prefers removing the requirement that the employer hold 
treaty visa status and instead allowing the employer to be lawfully 
classified under any other nonimmigrant status. The purpose of this 
commenter's suggestion is to allow employees to qualify for treaty 
visas regardless of the nonimmigrant classification of the employer.
    Although the Department recognizes the practicality of such a 
suggestion, we believe that the current regulation is to proper 
interpretation of the law. The statutory section addresses the 
conditions whereby the ``principal'' treaty traders and treaty 
investors may qualify for an E visa. No mention is made of employees. 
Employee status is the logical creation of regulation. Persons in that 
status derive that status directly and exclusively from ``principal'' 
treaty traders or treaty investors. Without a qualifying relationship 
to a principal which has been accorded treaty trader or treaty investor 
status, the alien cannot likewise be accorded treaty visa status. This 
derivative relationship is analogous to other relationships more 
explicitly defined in the Act such as the relationship of spouse and 
children to a principal accorded lawful immigration status under the 
INA. One can not derive status from a person who does not possess such 
status.

Nationality

    One commenter expressed the hope that an easier method could be 
found to ``register'' large enterprises to qualify for ``E'' visa 
status. This issue is similar to that raised by two other commenters 
who expressed strenuous dissatisfaction with the proposed rules for 
determining the nationality of an incorporated entity. The problem 
arises in cases involving corporations that sell stocks on exchanges in 
more than one country.
    The standard of practicability was adopted in recognition of this 
problem. This standard contemplates the applicant submitting the best 
evidence available and the consular officer reaching a reasonable 
decision considering the particular circumstances in each case. This is 
not intended to be an onerous paper production exercise.
    The statute speaks of granting special treatment for ``nationals'' 
of treaty

[[Page 48151]]

partners. Nationality of enterprises based on ownership captures the 
essence of the statue and the bilateral relationship. Although 
registration of businesses in a jurisdiction to engage in business 
activities in that jurisdiction has been accorded recognition for 
national treatment in other contexts by other laws and some courts, 
mere registration has not been and is not accepted as the proper 
standard for determining nationality under INA 101(a)(15)(E).
    This issue was addressed in Matter of N---S---, 7 I&N Dec. 426 
(1957). Recognizing the Congress' review of this longstanding rule 
during the formulation of the Immigration and Nationality Act during 
the early 1950's, the decision states at Dec. 428 that, ``there being 
no substantial change in language between the present statute and 
regulations as compared with the preceding statute and regulations on 
the same subject, the rulings and principles previously enunciated and 
which are presumed to have been known to the Congress must be deemed to 
be presently applicable.'' For similar reasons, we believe that the 
regulations as proposed are consistent with Congressional intent.

Trade

    Three commenters suggested that the Department incorporate the 
concept of ``business commitments'' in its definition of existing 
international trade. The proposed rule reiterated the statutorily 
mandated principle that the trade for treaty trader purposes must be in 
existence in order to qualify for such status. The Department agrees, 
however, that the concept of ``business commitments'' as described in 
Matter of Seto, 11 I&N Dec. 290 (1965), should be included within the 
definition of trade. Drawing from a Supreme Court decision and a Court 
of Appeals decision, this decision holds that ``existing trade includes 
successfully negotiated contracts which call'' for the exchange of 
goods within the meaning of INA 101(a)(15)(E)(i). But on the other 
hand, the decision states that transactions which are in the state of 
negotiation do not by themselves constitute trade for this purpose.
    The Department not only agrees with this principle, but it has been 
incorporated into the regulation. Additionally, the appropriate 
guidance will be provided in the Foreign Affairs Manual.

Substantial trade

    An identical comment was submitted in two letters concerning the 
definition of trade. The specific language of the proposed rule 
expressly prohibits a single transaction from qualifying as substantial 
trade. The underlying principle of substantial trade is that a 
continuing flow or exchange of trade items exist. The commenters 
expressed fear that this definitional language would be interpreted to 
exclude the circumstance of a single large transaction exchanged 
annually or periodically over extended periods of time.
    The language of the regulation incorporated the essence of the 
language which has been used in the interpretive notes in the FAM. The 
wording was specifically selected to avoid the establishment of any 
specific time limitations. The thrust of the definition is to 
disqualify a ``one shot'' deal but to consider all other continuing 
exchanges of value. Determinations have been and will continue to be 
made upon case by case analysis. It appears that the meaning of this 
definition is exactly the meaning sought by the commenters. To further 
clarify the regulations, the Department has amended the language 
accordingly.
    A commenter expressed disappointment that the Department did not 
incorporate into the regulations a certain note in the FAM describing 
substantial trade. That note states that for smaller businesses income 
derived from international trade which is sufficient to support the 
treaty trader and his or her family should be considered to be a 
favorable factor when assessing the substantiality of trade in a 
particular case. The Department adheres to this concept. The regulation 
has been amended to include this concept.

Treaty investment

Investment capital

Risk

    Several commenters agreed with our statement in the preamble of the 
proposed regulation that the rule regarding risk did not square with 
business reality. A couple of commenters did offer the suggestion of 
amending the rule by use of the following language: ``loans secured 
exclusively by the assets of the investment enterprise itself, without 
ultimate recourse to the treaty investor, may not be counted toward the 
actual amount of capital investment''.
    The purpose of the risk provision is to place the risk of the 
investment totally and exclusively on the shoulders of the treaty 
investor. As this suggested language would dilute the element of risk 
by including the possibility of using the business as collateral, the 
Department will retain the language as proposed. In addressing the 
issue of ``irrevocable commitment'', several commenters suggested that 
language be added to the regulations that would formally recognize the 
use of mechanisms such as escrow to protect the treaty investor if a 
visa were not issued in a certain case. Such mechanisms have long been 
recognized as proper safeguards by the Department. The Department's 
opinion has been published broadly, including in the Interrogatories in 
Matters of Walsh and Pollard which have been disseminated widely not 
only in the private sector but also within the Foreign Service as 
instructional material. The regulations have been amended to 
accommodate this request.

Substantial capital

    One commenter expressed dislike for the proportionality test but 
failed to offer any suggestions for an alternative test. The commenter 
questioned why the proportionality test was selected in light of the 
Congressional mandate to define ``substantial'' investment, why a 
minimum investment amount was even considered in light of the Matters 
of Walsh and Pollard, Int. Dec. #3111 (BIA 1988), why no economic 
studies were undertaken in this exercise, and why the Immigration and 
Naturalization Service proposed a different formula when the Secretary 
of State was given authority to promulgate the regulatory definition.
    The supplemental information portion of the proposed rule explained 
the entire exercise undertaken to reach a definition, as required by 
the statute. Comprehensive letters were prepared explaining the purpose 
and requirements of the treaty visa classification and soliciting 
comments and suggestions from each agency. The agencies, Department of 
Commerce, Labor, the Treasury, and the Small Business Administration, 
the U.S. Trade Representative, and, of course, the Immigration and 
Naturalization Service, each responded. All but one felt competent to 
provide constructive input into the analysis. The agencies 
overwhelmingly favored continued use of the proportionality test. The 
general conclusion was that this test appears to have worked 
successfully in the past and that no superior test could be devised 
which would capture the essence of this requirement.
    The fact that Congress required that the definition be codified in 
regulatory form does not necessarily suggest, as stated by this 
commenter, that Congress was dissatisfied with the current test. 
Legislative history of this provision and predecessor versions in 
earlier bills

[[Page 48152]]

suggest that Congress sought primarily the establishment of a test to 
be applied uniformly by both agencies. Secondarily, the Congress 
accorded the Secretary of State the responsibility of preparing such 
regulations in light of the extensive experience in adjudicating treaty 
visa applications as well as the obvious jurisdictional tie to the 
treaty function.
    The Congress did require the Secretary of State to consult ``with 
appropriate agencies of Government''. This requirement was carried out 
as described above and in the preamble of the proposed regulation. A 
great cross section of agencies was selected as indeed no independent 
economic study was either required by Congress or undertaken by the 
Department of State. It was anticipated that the agencies that monitor 
the pulse of the economy would provide relevant input into the 
formulation of the test. None of these agencies nor any of the others 
perceived the necessity to undertake an economic study. Based upon such 
responses from interested agencies, the Department was satisfied that 
sufficient avenues had been explored.
    The establishment of a minimum amount of investment had to be 
considered during this review, as the Department bore the 
responsibility of considering all viable alternatives. A set minimum 
dollar figure is always the first test offered as an alternative to the 
proportionality test. While such a test has certain administrative 
advantages, the agencies overwhelmingly rejected it in favor of the 
proportionality test.
    Lastly, the commenter suggested that INS' proposed regulations 
differed from the Department's on this issue of substantial investment. 
That issue has been rendered moot by the Service's decision to 
promulgate regulations consistent with the Department's regulations.
    Three other commenters discussed the proportionality test. Two 
commenters expressed concern over the application of the ``inverted 
sliding scale'' thinking that it differs from the proportionality test 
now in use. The term ``inverted sliding scale'' is merely a descriptive 
characterization of the proportionality test. No substantive change is 
intended by the use of this term. The test is intended to apply as it 
has in the past.
    Concern was expressed over the use of presumptions and that there 
were only three such benchmarks. It was feared that these percentages 
would be used in those designated ranges as bright line tests and not 
as guidelines as intended. In view of the lower cost needed to 
establish certain types of businesses, the commenters felt a need for a 
designation for a $100,000 investment or even lower. Several commenters 
felt that the third benchmark of 30% was too high for exceptionally 
large investment figures. It was opined that the sheer magnitude of 
such investments should be considered to be substantial regardless of 
the percentage.
    In an attempt to avoid the use of the presumptive percentages as 
bright line tests, the three presumptive benchmarks have been removed. 
The regulation merely defines the test, whereas in the FAM note 
material examples will be provided. Any examples given are not intended 
to be binding but are intended to demonstrate to adjudicating officers 
and the public the general range of the proportionality test. The fear 
that the percentages used in such examples will be applied by 
adjudicators as bright line tests cannot be totally abated; however, 
through instructional material in the FAM, advisory opinions, and other 
relevant material, the adjudicating officers will be instructed to use 
these figures as flexible guidelines on a case by case basis.
    The commenter also suggested that some of the descriptive language 
used in the FAM note material and/or language used in the supplemental 
information of the proposed rule should be incorporated into 
regulation. Although some of this descriptive language has been 
incorporated into regulation, the general definitional language has 
been somewhat rewritten to more prominently feature the underlying 
ingredients of ``substantial amount of capital''.
    The language describing the application of the proportionality test 
has been altered for clarity. Although the preamble of the proposed 
regulation stated that the figure representing the actual cost of 
establishing a business must be used in arriving at the investment 
percentage, the proposed rule has been interpreted to permit the use of 
a figure of an amount of investment needed to establish a business of 
that nature, regardless of what the enterprise in question might cost. 
The regulation is amended to more accurately reflect the explanation in 
the preamble.

Marginality

    The comments save one were generally favorable of the Department's 
treatment of marginality. The single negative comment essentially 
stated that the proposed language would bar viable enterprises from 
qualifying for treaty visa status thus shutting off the infusion of 
foreign investment. The commentary wrongly imparted this intent to the 
Department.
    The Department has no desire to bar viable enterprises, but as the 
supplemental information provided with the proposed rule clearly lays 
out, the Department does have as one of its objectives to weed out 
those enterprises that are indeed nonviable. Recognizing that no rule 
is perfect, the Department attempted to craft the regulation to achieve 
its objective. Unfortunately, that commenter offered no alternative to 
the proposal.
    The other comments, however, suggested that the rule be clarified 
so that the capacity to generate income be cast not only in the present 
tense but also in the future. Although the proposed rule was intended 
to address this very concern, more specific language has been added. By 
including the language of ``present and future'' to the capacity to 
generate income and to the capacity to make an economic contribution, 
the question now arises as to when in the future must such capacity be 
realized. Is it realistic to allow an treaty investor to realize this 
capacity 20 years in the future? We think not. A reasonable standard 
should be established.
    When establishing entitlement to treaty investor classification the 
alien bears the burden of satisfying the consular officer that the 
enterprise is a viable commercial entity with the requisite income 
generating capacity. To demonstrate that capacity, a business plan of 
some sort is often presented. This plan projects the amount of income 
contemplated considering the expenses of establishing and/or using the 
enterprise and factoring in the marketability of the service or 
commodity to be provided or sold. The Department accepts the reality 
that many start-up businesses will not generate any profits initially. 
It is, also, the Department's understanding that a five year term is 
considered a standard period of time to gauge profitability of such a 
business. The Department finds it reasonable that from the date the 
principal treaty investor commences operation of normal business 
activities that the business is projected to be generating the 
requisite income or making the requisite economic contribution within a 
five year period. For further clarity, economic contribution replaces 
economic impact to signify that a positive economic impact is 
contemplated.

Develop and direct

    One of the four comments received on this issue referred to the 
typographical error in the September 3, 1991 printing

[[Page 48153]]

of the proposed rule. The word ``marginal'' was intended to read as 
``managerial'' and has been corrected.
    A favorable comment was received which applauded the ability to 
meet the develop and direct requirement not just by ownership but by 
managerial or other corporate or structural means.
    Another comment focused on the fact that the Department's proposed 
regulations required that the treaty investor be in a position to 
develop and direct rather than ``solely'' develop and direct the 
enterprise in which the alien had invested. The distinction made by the 
commenter lies in the possibility of being in a position to control 
without exercising such control.
    The language used by the Department derives from Matter of Lee, 15 
I&N Dec. 187 at 189 (1975). This decision cites the statutory language 
and then provides its interpretation. ``Section 101(a)(15(E)(ii) of the 
Act requires the treaty investor to be coming solely to develop and 
direct the operations of the enterprise in which substantial investment 
has been or is in the process of being made. In order for a treaty 
investor to develop and direct the operations of an enterprise, it must 
be shown he has a controlling interest; otherwise other individuals who 
do have the controlling interest are in a position to dictate how the 
enterprises is to be developed and directed.''
    The observation made by the commenter was presented in the form of 
a question. The query focuses on whether the statutory language 
requires an alien personally to develop and direct an enterprise or 
whether the alien must be in a position to develop and direct an 
enterprise. In the latter case, the alien may not personally develop or 
direct the enterprise but may afford a third party the opportunity to 
do so. Although the Department has consistently interpreted the 
proposed regulation to mean that the treaty investor must demonstrate 
that his or her purpose of entry is to develop and direct the 
enterprise, the language has been amended to comport more directly with 
the statute and to remove any hint of ambiguity.
    The last commenter made two suggestions. The first was to have the 
Department accord ``E'' visa status to large companies involved in 
joint ventures. In the opinion of the commenter no company ``controls'' 
the sizable joint venture, the develop and direct requirement should, 
therefore, be waived. As the develop and direct requirement is 
statutory and the law contains no authority for it to be waived, the 
Department cannot accede to this suggestion. (This does not mean, 
however, that this develop and direct requirement cannot be met by 
other means, such as through the concept of ``negative control''.)
    The same result attaches to the second suggestion. The commenter 
proposed that treaty investors with investments of a minimum of 
$10,000,000 be exempt from the develop and direct requirement if the 
treaty investor otherwise met the ``E'' visa requirements. Although the 
Department understands the motivation behind this suggestion as well, 
the statute does not provide the authority to waive the requirement.

Employee: Executive or Supervisor

    The Department received several comments on this proposed 
regulatory provision. As all the comments were favorable and no changes 
were recommended, the regulation stands as proposed.

Essential employee

    The proposed language drew quite a few comments addressing 
different aspects of the proposal. The first comment took issue with 
the concept that the employer must demonstrate that replacement by a 
U.S. worker is not feasible or that the employer is making reasonable 
and good faith efforts to train U.S. workers. The commenter questioned 
the advisability and the legality of trying to modify our treaty 
obligations by administrative regulations. In light of the change we 
are making to this regulation the comment is rendered moot. On the 
other hand, the statute, regulations, and the treaty contain nothing 
that would prohibit the imposition of such regulatory requirements.
    Three commenters objected to the requirement in proposed 
Sec. 41.51(r)(2) that the alien must in each case affirmatively 
establish that the alien's eventual replacement by a U.S. worker is not 
feasible or that the employer is making reasonable and good faith 
efforts to recruit and/or train U.S. workers to perform the 
responsibilities of the alien's prospective position. Two commenters 
made reference to the interpretive note material in the FAM at 22 CFR 
41.51 N4-3 and found these notes to be instructive. They suggested that 
perhaps this requirement should be imposed only on those aliens 
claiming to posses essential skills who will engage in activities which 
may involve manual duties as explained in Sec. 41.51 N.4-3(b). This 
requirement should not be imposed across the board. These comments 
continued by recommending that the regulatory language be altered to 
expressly provide that aliens with special skills that have not become 
commonplace might remain in the United States indefinitely, and any 
training/recruitment/feasibility requirement should be expressly 
limited to the exceptions listed in the FAM notes.
    The Department accepts and recognizes these suggestions as valid 
and having merit. The intent of the proposed regulation was to put the 
applicant and the applicant's employer on notice that indeed not all 
positions that require specialized skills might be considered 
``essential'' on a continuing basis. It was thought that, through the 
usual application process of assessing ``essentiality'', this 
requirement of feasibility/training would be met. Certainly, aliens 
with skills unique to them or at least not commonplace in the United 
States would by the very nature of the activity establish ipso facto 
that such skills would be essential on a continuing basis and that 
training, etc. would not be feasible. The Department agrees that the 
proposed language appears more burdensome than intended.
    Consequently, the Department has changed section 41.51(r)(2) to 
better capture the essence of the concept that the establishment of 
``essentiality'' is an ongoing process. A key to this adjudication 
exercise is the determination of whether the specialized skills are 
commonplace in the United States. Certainly, some such skills will be 
found not to be commonplace on a continuing basis and other skills will 
be found to become commonplace at some point in time. When that point 
in time is reached, the alien may not qualify as an essential employee. 
The employer will than have to fill the position by other means.
    In order to reflect more clearly this principle, the regulation has 
been amended to remove all references to affirmative responsibilities 
requiring a feasibility assessment or training requirements. The 
guidance in the FM note material cited above has been incorporated into 
the regulation. The operation of this regulation will follow the stated 
objective which comports with the two commenters' suggestions.
    A commenter objected to the use of the term ``unique'' skills as a 
means to determine essential skills. The commenter stated that this was 
too high a standard to impose on aliens to qualify as an essential 
employee. Furthermore, while it is no longer used for L-1 adjudication, 
it should not be used in this context.
    The characterization of a skill as ``unique'' has a long 
association with the E visa classification. This is descriptive of a 
skill which clearly is

[[Page 48154]]

one-of-a-kind and is, thus, not commonplace. It does not and never has 
been intended to constitute a minimum standard for meeting the 
requirement of essential skills. To the contrary, skills of unique 
character would so greatly exceed any minimum standard of 
``essentiality'' that persons blessed with unique skills coming to fill 
positions requiring such unique skills would in the overwhelming number 
of cases be considered to be ``essential''. As ``unique'' continues to 
be a useful descriptive term in the adjudication process, the 
regulations and interpretive guidance in the FAM will continue to use 
it.

Final Rule

    This final rule of Sec. 41.51 would: provide a general definition 
of treaty trader (paragraph (a)); provide a definition of treaty 
investor (paragraph (b)); define an alien employee (paragraph (c)); 
extend treaty classification to the spouse and children of the 
principal alien (paragraph (d)); and authorize ``E'' status to certain 
foreign information media (paragraph (e)). The remaining paragraphs 
constitute definitional provisions.
    This rule is not expected to have a significant impact on a 
substantial number of small entities under the criteria of the 
Regulatory Flexibility Act. The information collection contained in 
this rule has been submitted to the Office of Management and Budget in 
compliance with provisions of the Paperwork Reduction Act of 1980. This 
rule has been reviewed as required by E.O. 12778 and certified to be in 
compliance therewith, and reviewed in light of E.O. 12866 and found to 
be consistent therewith.

List of Subjects in 22 CFR Part 41

    Aliens, Treaty Trader or Investor.
    In view of the legislative mandate of Pub. L. 101-649, Part 41 to 
Title 22 would be amended as follows:

PART 41--[AMENDED]

    1. The authority citation for Part 41 is revised to read:

    Authority: INA 104, 66 Stat. 174, 8 U.S.C. 1104; sec. 109(b)(1), 
91 Stat. 847; sec. 204, 104 Stat. 5019, 8 U.S.C. 1101 note.

    2. Part 41, Subpart F--Business and Media Visas, is amended by 
revising section 41.51 to read as follows:


Sec. 41.51  Treaty trader or treaty investor.

    (a) Treaty trader. An alien is classifiable as a nonimmigrant 
treaty trader (E-1) if the consular officer is satisfied that the alien 
qualifies under the provisions of INA 101(a)(15)(E)(i) and that the 
alien:
    (1) 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 foreign 
state of which the alien is a national, (consideration being given to 
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
    (2) Intends to depart from the United States upon the termination 
of E-1 status.
    (b) Treaty investor. An alien is classifiable as a nonimmigrant 
treaty investor (E-2) if the consular officer is satisfied that the 
alien qualifies under the provisions of INA 101(a)(15)(E)(ii) and that 
the alien:
    (1) Has invested or is actively in the process of investing a 
substantial amount of capital in 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; and
    (2) Is seeking entry solely to develop and direct the enterprise; 
and
    (3) Intends to depart from the United States upon the termination 
of E-2 status.
    (c) Employee of treaty trader or treaty investor. An alien employee 
of a treaty trader may be classified E-1 and an alien employee of a 
treaty investor may be classified 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 services to be 
rendered essential to the efficient operation of the enterprise. The 
employer must be:
    (1) A person having the nationality of the treaty country, who is 
maintaining the status of treaty trader or treaty investor if in the 
United States or if not in the United States would be classifiable as a 
treaty trader or treaty investor; or
    (2) An organization at least 50% owned by persons having the 
nationality of the treaty country who are maintaining nonimmigrant 
treaty trader or treaty investor status if residing in the United 
States or if not residing in the United States who would be 
classifiable as treaty traders or treaty investors.
    (d) Spouse and children of treaty trader or treaty investor. The 
spouse and children of a treaty trader or treaty investor accompanying 
or following to join the principal alien are entitled to 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 INA 
101(a)(15)(E).
    (e) Representative of foreign information media. Representatives of 
foreign information media shall first be considered for possible 
classification as nonimmigrants under the provisions of INA 
101(a)(15)(I), before consideration is given to their possible 
classification as nonimmigrants under the provisions of INA 
101(a)(15)(E) and of this section.
    (f) Treaty country. A treaty country is for purposes of this 
section a foreign state with which a qualifying Treaty of Friendship, 
Commerce, and Navigation or its equivalent exists with the United 
States. A treaty country includes a foreign state that is accorded 
treaty visa privileges under INA 101(a)(15)(E) by specific legislation 
(other than the INA).
    (g) Nationality of the treaty country. The nationality of an 
individual treaty trader or treaty investor is determined by the 
authorities of the foreign state of which the alien claims nationality. 
In the case of an organization, ownership must be traced as best as is 
practicable to the individuals who ultimately own the organization.
    (h) Trade. The term ``trade'' as used in this section means 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. This exchange 
must be traceable and identifiable. Title to the trade item must pass 
from one treaty party to the other.
    (i) Item of trade. Items which qualify for trade within these 
provisions include but are not limited to goods, services, technology, 
monies, international banking, insurance, transportation, tourism, 
communications, and some news gathering activities.
    (j) Substantial trade. Substantial trade for the purposes of this 
section entails the quantum of trade sufficient to ensure a continuous 
flow of trade items between the United States and the treaty country. 
This continuous flow contemplates numerous exchanges over time rather 
than a single transaction, regardless of the monetary value. Although 
the monetary value of the trade item being exchanged is a relevant 
consideration, greater weight is given to more numerous exchanges of 
larger value. In the case of smaller businesses, an income derived from 
the value of numerous transactions which is

[[Page 48155]]

sufficient to support the treaty trader and his or her family 
constitutes a favorable factor in assessing the existence of 
substantial trade.
    (k) Principal trade. Trade shall be considered to be principal 
trade between the United States and the treaty country when over 50% 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.
    (l) Investment. Investment means the treaty investor's placing of 
capital, including funds and other assets, 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 given 
to the particular circumstances of each case. The alien may use any 
legal mechanism available, such as by placing invested funds in escrow 
pending visa issuance, that would not only irrevocably commit funds to 
the enterprise but that might also extend some personal liability 
protection to the treaty investor.
    (m) Bona fide enterprise. The enterprise must be a real and active 
commercial or entrepreneurial undertaking, producing some service or 
commodity for profit and must meet applicable legal requirements for 
doing business in the particular jurisdiction in the United States.
    (n) Substantial amount of capital. A substantial amount of capital 
constitutes that amount that is:
    (1)(i) Substantial in the proportional sense, i.e., 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.
    (2) Whether an amount of capital is substantial in the 
proportionality sense is understood in terms of an inverted sliding 
scale; i.e., the lower the total cost of the enterprise, the higher, 
proportionately, the investment must be to meet these criteria.
    (o) Marginal enterprise. 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 capacity should generally be realizable within five 
years from the date the alien commences normal business activity of the 
enterprise.
    (p) Solely to develop and direct. The business or individual treaty 
investor does or will develop and direct the enterprise by controlling 
the enterprise through ownership of at least 50% of the business, by 
possessing operational control through a managerial position or other 
corporate device, or by other means.
    (q) Executive or supervisory character. The executive or 
supervisory element of the employee's position must be a principal and 
primary function of the position and not an incidental or collateral 
function. Executive and/or supervisory duties grant the employee 
ultimate control and responsibility for the enterprise's overall 
operation or a major component thereof.
    (1) An executive position provides the employee great authority to 
determine policy of and direction for the enterprise.
    (2) A position primarily of supervisory character grants 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.
    (r) 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 enterprise.
    (1) The essential nature of the alien's skills to the employing 
firm is determined by assessing the degree of proven expertise of the 
alien in the area of operations involved, the uniqueness of the 
specific skill or aptitude, the length of experience and/or training 
with the firm, the period of training or other experience necessary to 
perform effectively the projected duties, and the salary the special 
qualifications can command. The question of special skills and 
qualifications must be determined by assessing the circumstances on a 
case-by-case basis.
    (2) Whether the special qualifications are essential will be 
assessed in light of all circumstances at the time of each visa 
application on a case-by-case basis. A skill that is unique at one 
point may become commonplace at a later date. Skills required to start 
up an enterprise may no longer be essential after initial operations 
are complete and are running smoothly. Some skills are essential only 
in the short-term for the training of locally-hired employees. Long-
term essentiality might, however, be established in connection with 
continuous activities in such areas as product improvement, quality 
control, or the provision of a service not generally available in the 
United States.
    (s) Labor disputes. Citizens of Canada or Mexico shall not be 
entitled to classification under this section if the Attorney General 
and the Secretary of Labor have certified that:
    (1) There is in progress a strike or lockout in the course of a 
labor dispute in the occupational classification at the place or 
intended place of employment; and
    (2) The alien has failed to establish that the aliens entry will 
not affect adversely the settlement of the strike or lockout or the 
employment of any person who is involved in the strike or lockout.

    Dated: May 13, 1994.

    Editorial note: This document was received in the Office of the 
Federal Register on September 9, 1997.
Mary A. Ryan,
Assistant Secretary for Consular Affairs.
[FR Doc. 97-24260 Filed 9-11-97; 8:45 am]
BILLING CODE 4710-06-M