By Matthew T. Galati and Sheila M. Harris
Successful Chinese families have looked across the world for immigration by investment options and have historically dominated most country’s programs, often meeting or exceeding country quotas. The EB-5 industry certainly benefitted from billions of dollars in Chinese capital. Yet, 2014 proved to be a major turning point with the country driving applications to the 10,000-visa limit for the first time in history. Now, four years later, USCIS estimates that retrogression may result in a more than 10-year wait for permanent residency, a nonstarter for many families that will instead take their capital to other countries.
Since people cannot change where they were born, there are no options to avoid retrogression other than marrying someone born outside of Mainland China. However, there are ways to ease the pain of retrogression, such as acquiring nonimmigrant visas and coming to the U.S. to “wait it out.”
Perhaps the best visa for this option is the E-2 nonimmigrant visa, granting status to investors, spouses, and minor children. However, the E-2 treaty is limited to nationals of countries where there is a requisite treaty between the U.S. and the investor’s nationality, for example where one holds a passport. Only one E-2 treaty country allows an investor to quickly acquire citizenship and opens the door to the E-2 treaty: the Caribbean island nation of Grenada. In a matter of months, investors can acquire a Grenadian passport, enter the U.S. in Treaty Investor status, spouses can obtain separate employment, and children can enroll in schools.
INTRODUCTION TO GRENADIAN CBI
Grenada is a biologically and ethnically diverse democratic country with a rich culture and history. Located just north of Venezuela, Grenada has a tropical wet climate, boasting ideal average annual temperatures of 28°C, but is tempered by the trade winds. The island nation is home to St. George’s University, one of the highest-ranked medical schools in the world. For many, it is a great place to live. Yet, it is important to note that Grenada has no residency requirement for investors. Further, nonresident investors do not need to pay Grenadian taxes.
The current Grenadian citizenship-by-investment program came into fruition in 2013. Those interested in obtaining a Grenadian passport have three options for doing so through investment.
The first option is to make a contribution to the country’s “National Transformation Fund” or “NTF.” This option involves a one-time $200,000 (for a family of 4 applicants) or $150,000 (for an individual applicant) payment on approval to a national fund serving to revitalize the nation’s infrastructure and economy. Investors receive no return on this investment .
The second option involves making a real estate investment of at least $350,000 in an approved project. Such projects are pre-approved by the Grenadian government and the investment must be sustained for at least three years following the grant of citizenship. Common projects include hotels and condominiums.
The third option is to make a significant investment, which is a financial investment of an amount prescribed by the Minister, which is of considerable benefit to the Grenadian economy, and will help to create or continue employment opportunities for Grenadian citizens.
This version of CBI is similar to most EB-5 regional center projects, except that there is no “new commercial enterprise loan”, the program requires an equity investment into the project company itself. Moreover, investors are commonly offered fringe benefits to their investments, such as units and preferred access to the projects.
Grenadian immigration involves two or three parties’ involvement. Every application must be submitted to the Grenada Citizenship by Investment Committee (GCBIC) by a local agent. The local agent cannot file a case without enlisting the help of a marketing agent, a person or entity vetted by the government and tasked by license to promote the program. Becoming a marketing agent requires an application process and a personal appearance in Grenada. Alternatively, an entity can become a subagent of an existing marketing agent and still participate in the program. The work of marketing agents can be very lucrative. Commissions on the program are usually above $10,000 for the NTF option and can be as in excess of $70,000 for the real estate option. Many Chinese agents could accordingly explore this option to supplement their bottom line, especially as EB-5 referral fees dry up.
The application process requires investors to produce a source of funds in a manner similar to EB-5 and comparatively less onerous than other programs such as Quebec’s. Applicants must support their applications with a medical certificate and HIV test. The applications are filed with the GCBIC, and then sent to the prime minister’s cabinet for final approval. Government processing fees are approximately $50,000, and investors will have an answer on their applications in about three months.
With one investment, a family can secure citizenship for the principal investor, that person’s (opposite sex) spouse, children under the age of 30, and parents over the age of 55. Upon approval, applicants have the option to receive a Grenadian passport, permanent resident card, or both. There is no requirement to visit Grenada during the process, and local agents may courier passports to any location in the world. There is currently no restriction on any nationality applying. With the Grenadian passport in hand, an investor unlocks the ability to apply for an E-2 visa.
THE E-2 VISA
The E-2 visa is among the most popular in the U.S. immigration system. Sometimes referred to as “EB-5 Lite,” its requirements will be conceptually similar for EB-5 agents. The investor (a person or entity) needs to make a “substantial” investment and the enterprise need not be “marginal.” Put another way, the E-2 is comparatively more discretionary than EB-5’s shorthand of “$500,000 and ten jobs.” However, there are some key differences that will disqualify virtually every conventional EB-5 Regional Center investment as E-2 qualifying. Accordingly, most Chinese EB-5 investors would be making three investments: Grenada’s CBI, E-2 and then EB-5.
First, ownership of the E-2 enterprise must be at least 50 percent held by nationals. For the Chinese-turned-Grenadian investor, this means that the enterprise needs to be at least 50 percent Grenadian-owned. Second, the investor needs to be in a position to “develop and direct” the enterprise. This is in contrast to the (mostly) passive limited partner / non-managing limited liability member structure of regional center investments. As defined in the Foreign Affairs Manual (“FAM”), this is open to interpretation and is somewhat dependent on the enterprise itself (1). For example, a single Chinese restaurant probably could not support 10 investors; it might however support two or three. Notably the level of involvement is comparatively less than the L-1 to EB-1C visa path, which requires full-time employment by the relevant entity.
The most common question asked with regard to the E-2 is: “How much do I need to invest?” The answer is dependent upon the venture to be created. As discussed in the FAM (2), the investment needs to be substantial in the proportionate sense. For start-ups, this means that the investment needs to be enough to cover most or all of the startup expenses. However, an investment for a consulting company, requiring relatively little capital, let’s say $75,000, will be less than an airplane factory, which is probably in the millions. However, the amount required to be invested is based on an inverse sliding scale, meaning, the lower the startup costs, the larger a percentage of the total amount needs to be invested. In purchasing an existing business, substantiality is generally defined as the bona fide purchase price.
There is one option to better quantify this. Some investors might be best served by investing in a franchise, as such investments are generally available in defined terms. For example, investing in a gelateria will have defined minimum investment amounts and clear hiring plans, as well as the ability to leverage a national chain. This enables an investment with relatively less work done by the more entrepreneurial investor, creating a business from scratch. Several U.S. companies operate in this space and cater to investors seeking immigration benefits.
The E-2 has key benefits compared to EB-5. Processing times are much faster, as applicants generally do not need to interact with USCIS. Instead, the E-2 visa application is made at a U.S. consulate. Processing times vary across the world, but generally are a few weeks or months at most. Grenadians receive a nonimmigrant visa valid for five years, allowing entry and exit in two-year terms. The E-2 can be renewed at the end of the visa term.
GRENADIAN E-2 AS A COMPLEMENT TO EB-5
The E-2 visa could work well with a direct (non-regional center) investment. In fact, many EB-5 entrepreneurs from countries with E-2 treaties obtain the nonimmigrant visa first. In this matter, an entrepreneurial client can obtain an E-2, enter the U.S., take control of the business, and then file an I-526 petition. Given long retrogression times, without an appropriate nonimmigrant visa most “direct” Chinese-born investors have few options to actively manage their businesses domestically without potentially running afoul of the requirement to have lawful work authorization.
In an ideal world, an investor will secure an E-2 visa before filing the I-526. Yet, the E-2 may also offer relief to the investor now “stuck” in retrogression, having filed his or her I-526 years ago and now faced with retrogression being worse than anticipated. To be sure, the E-2 does not allow for dual intent in the same manner that an L-1 visa does; investors generally need to attest that they plan to leave the U.S. upon the conclusion of E-2 status. However, this quasi-prohibition on dual intent is not as strong as the F-1 or B-1 visas.
Specifically, the regulations (3) state that an E-2 status or extension “may not be denied solely on the basis of … a filed or approved immigrant visa preference petition.” Further, the FAM (4) allows applicants to evidence intent to consular process and still obtain the E-2:
“An applicant for an E visa need not establish intent to proceed to the United States for a specific temporary period of time, nor does an applicant for an E visa need to have a residence in a foreign country, which the applicant does not intend to abandon. The alien may sell his or her residence and move all household effects to the U.S. The alien’s expression of an unequivocal intent to return when the E status ends is normally sufficient… an applicant might be a beneficiary of an immigrant visa petition filed on his or her behalf. However, the alien might satisfy you that his and/or her intent is to depart the United States upon termination of status, and not stay in the United States to adjust status or otherwise remain in the United States regardless of legality of status.
Accordingly, for those investors that made plans to enter the U.S. in relatively short order following I-526 approval, Grenadian CBI to E-2 status may be a viable – perhaps necessary – option.
(1) 9 FAM 402.9-6(F)
(2) 9 FAM 402.9-6(D)
(3) 8 CFR 214.2(e)(5)
(4) 9 FAM 402.9-4(C)