IPO Report from San Jose (processing times, business plan advice, site visits, visa wait)
July 26, 2017 17 Comments
A small Employment Visa Engagement hosted at the US Patent and Trademark Office in San Jose on July 19 scored an impressive delegation from the Investor Program Office. I had a chance to meet and hear from IPO Deputy Chief Julia Harrison, IPO Senior Advisor for Economics Jan Lyons, and IPO’s FDNS Division Chief Kurt Vicha. They seemed more relaxed than usual at stakeholder meetings, and shared a lot of useful information. I haven’t seen USCIS post any notes yet (UPDATE: the USCIS website now provides Julia Harrison’s talking points from the engagement). I have summarized major points in this post. (And FYI here is my folder with a rough unauthorized recording and snapshots of slides.)
Processing Times
Julia Harrison noted that program integrity was a focus for FY2017, with the launch of the site visit and audit and I-829 interview programs, and she made the welcome announcement that FY2018 will specially focus on reducing processing times.
A few initiatives that IPO hopes will improve processing times:
- Improve the Quality of Submissions: Mr. Lyons made the point that your processing time depends not only on your place in the queue, but also the quality of submissions before you in that queue. IPO has been hampered by quality problems, particularly in petitions filed in sunset date-surges. For example, in September and October 2015, IPO received 2.5 years-worth of I-924 filings, many of them apparently filed in haste and tough to review. No wonder processing times reports show IPO taking forever to work through I-924 filed in those months, not to mention I-526. Ms. Harrison noted two new resources designed to help make future filings easier to review.
- In the March 2017 stakeholder meeting, IPO provided “Top 10 Tips for Submitting EB-5 Related Forms” – advice that should improve submissions and eventually reduce processing times, if followed (Also keep in mind the Form Filing Tips and EB-5 Filing Tips on the USCIS website.)
- Ms. Harrison announced the new “Suggested Order of Documentation” pages linked to the EB-5 Resources page. This standardized order of exhibits is not required, but is designed make EB-5 forms easier and faster for IPO to review.
- Increase Capacity: IPO hopes to increase capacity by cross-training its economists and adjudicators so that a single staff person can handle a petition from start to finish. Previously, economists and adjudicators have each handled a distinct part of each petition.
- Other: The site inspection program that kicked off this year should facilitate I-829 processing by pre-emptively answering questions that might arise about actual use of investment and job creation.
I appreciated hearing Ms. Harrison say that IPO is “absolutely committed” to reducing processing times, but wish that she had mentioned some drastic measures. Education and operational efficiencies are welcome, but more will be needed to significantly improve processing times in view of a backlog that’s about 30,000 petitions long. Ms. Harrison did not mention new hiring, but I sincerely hope that’s also part of the plan.
Ms. Harrison pointed out that IPO does not have authority to offer premium processing (this would need to come from Congress), and also repeated, as has been said before, that IPO does not favor premium processing, anticipating that it would be unworkable because fees would probably not limit demand in the EB-5 context.
Advice for EB-5 Submissions and Business Plans
Jan Lyons spoke at length, introducing the EB-5 program from a business perspective and discussing adjudication issues. We forget the implications of having a veteran of investment banking and municipal finance at the helm at IPO, directing the team that reviews business plans and economic studies. When I started with EB-5 in 2009, one immigration attorney asked me to remove the financial projections from a business plan because “they’d just confuse the adjudicator.” Now we have an audience at IPO that knows how to read numbers, and struggles with the un-businesslike character of many EB-5 submissions. A cash flow statement is worth a thousand words to a finance person. Mr. Lyons shocked us with an estimate that only about 35% of business plans submitted to his office even contain a pro forma. If you’re an attorney who reviews petitions, help change this! Different types of financial information are appropriate to different types of projects, and in EB-5 the appropriate level of financial detail can vary depending on implications for the economic impact report, but a business plan without numbers cannot be called a business plan. Creating profit is the core rationale for any commercial enterprise (not to mention an EB-5 requirement per regulations and Matter of Izummi), and a plan without financials literally has no bottom line. A plan that’s only qualitative, not quantitative, gives a picture of the business that is incomplete, difficult to assess, and not credible. A business plan should have financials, and the financials should match and help explain the story that’s told in words. A pro forma doesn’t help if it lists revenue sources that the project description never mentioned, shows payroll expense insufficient to cover employees promised in the staffing section, indicates growth on a schedule different from what was anticipated in the schedule section, and assumes prices inconsistent with the market analysis. That will certainly confuse adjudicators, even and especially ones with 20+ years in investment banking. The industry needs to step up its game. (My service website describes the standards I use when writing and reviewing EB-5 plans.)
Key takeaways from the presentation by Mr. Lyons:
- Invest in the business plan. Mr. Lyons noted that a majority of problems he sees in EB-5 submissions are not in the economic impact analysis (where simple ability to multiply is a major KSA) but in the business plans, which are often disorganized, incomplete, and full of conjectural information without backup. “We adjudicate on a preponderance of the evidence, not a preponderance of wishful thinking.”
- A business plan should include financial information. Mr. Lyons made the point that forward-looking financial statements (pro formas) are significant evidence in a business plan, and also facilitate efficient review of the plan. Pro formas have an expositive value that complements the written narrative of a project. IPO economists can plod through the hundreds of pages submitted with business plans and reach a conclusion without pro formas, most of the time. But those cases could be analyzed much faster with the inclusion of three simple financial tables: a sources and uses of funds; a cash flow statement; and an income statement. There are no specific requirements that the financial information be presented as pro forma statements, but pro formas are the most common type of financial information and are generally the most complete and the least expensive method of conveying a complete financial picture. While lack of such statements does not automatically result in an RFE or denial, it does make the plan relatively difficult to understand and assess. In reviewing pro proforms, IPO economists are not judging the quality of the investment. IPO economists are instructed that IPO is not a rating agency nor is it within its purview to make judgements relating to the suitability of investments for individual investors. However, financial information is relevant to EB-5 requirements that IPO must consider, including business plan credibility and the requirement that EB-5 investment be placed at risk with the chance of gain.
- Do not interpret a Request for Evidence as an assault. Mr. Lyons emphasized that an RFE is not an attack on your intelligence or integrity, and not an indication that the requester is stupid. The requester simply does not have as much information about or familiarity with the petition as you do, and is asking for information.
- When preparing I-924, keep in mind that “In an initial application, what we’re really looking for in a regional center is evidence that they know what they’re doing.” Demonstrate grasp of EB-5 requirements and show the credible experience of the applicants.
- Limited geographic area is a legal rather than an economic requirement. In assessing geography requests, IPO is guided by Congressional intent that regional centers are literally “regional centers,” designed to create concentrated pools of investment to stimulate employment growth and economic activity within a defined and limited geographic area.
Site Visits and Audits:
Julia Harrison once again reviewed the difference between site visits and regional center audits, and added commentary on the purpose of each. Site visits are unannounced inspections of job-creating enterprises that look at the JCE site and assess the progress of development and job creation. Audits examine regional centers to see where money is going and whether the regional center has proper oversight and controls in place.
Kurt Vicha explained how the EB-5 site visit process has worked so far, and how sites are selected. In 2016, FDNS selected the one state with the most projects in each of four regions, and conducted site visits to job-creating enterprises (JCEs) in those states (for a total of 50 site visits). In 2017, FDNS selected JCEs for site visits based on a “window of opportunity” defined as about one year after I-526 approvals for that JCE, but before I-829 adjudication. Interestingly, there are about 225 JCEs within that window in 2017, and FDNS is on track to complete site visits at all of them. Inspectors are charged to observe and talk to people on-site about what’s happening at the JCE address, and then write an informational report. This report is then assessed in DC in context of petition filings, with opportunity for regional centers/project companies to respond to any questions. Mr. Vicha noted a common complaint that some questions specific to stand-alone filings have been asked at regional center JCEs (such as about the role of EB-5 investors in the business), and he promises that training will address this issue for next year. FDNS inspectors were hired at a high grade and receive extensive training.
Harrison and Vicha both suggested that site visits particularly emphasize schedule, and assessing whether the business or project has accomplished the activities anticipated in the schedule originally submitted to USCIS. Note to self: remind my clients to be extra conservative in estimating development schedule and hiring schedule dates! Better to estimate late in the business plan and give inspectors a happy surprise than to estimate on the early side and be accused of fraud if subsequent inspection shows unreached milestones.
As for audits, only one has been completed so far.
Visa Numbers and Wait Time
Charlie Oppenheim from Department of State was present, as genial and oracular as ever, and attempted once again to explain the allocation of visa numbers and the many contingencies and moving parts. He didn’t give any new figures related to the EB-5 visa queue, but mentioned that he estimated the wait time to conditional residence for a China-born investor filing now at about 9.9 years (my attempt to calculate had come up with 9.3 years). Those estimates don’t account for future demand, people dropping out, or action from Congress. Mr. Oppenheim said that Congress has not yet asked for his assessment of the proposal to only count investors toward the EB-5 visa quota (rather than investors plus family members as is the current practice), and opined that such a change would indeed require legislative action.
EB-5 Updates 
We are the immigration service provider and i read your blog which is looks very informative thanks for sharing it.
Thank you for your kind words.
Hard to believe there are business plan writers out there — let alone 65% of them! — who don’t include a pro forma. It is literally the foundation of every single business plan I’ve ever written for 7 years.
On another note, does that mean that USCIS NOIDs or denies well over 65% of applications now? Because I have seen plenty of business plans WITH detailed pro formas receive NOIDs, so you’d assume every one without a pro forma would receive a NOID and be denied if not fixed.
I know, right? Who is writing these things? The preponderance of the evidence standard doesn’t allow IPO to simply say No Pro Forma No Approval, but as an adjudicator I’d be tempted to hand out a lot of RFEs and NOIDs. Of course what Mr. Lyons has in mind when he says “pro forma” may include standards beyond what petitioners have in mind when they believe they’re giving appropriate financial information.
Economists want number to add up perfectly, Adjudicators weigh ALL evidence together per the preponderance standard of evidence, so, economists make for poor adjudicators (at least until they are “broken-in” or “broken-down” by their time at USCIS).
I have heard complaints that IPO economists sometimes seem to be reading EB-5 plans from the perspective of investors, and issuing RFEs based on the question “is this a good investment” rather than “does this satisfy applicable requirements”
Ironically, most EB-5 “investors” are unsophisticated persons who know nothing except that they want a visa.
Great info. Thank you. It’s particularly worrying to read that schedule is the priority. My project completion is about 2 years later than on the original documents.
A couple points that may be comforting:
— IPO emphasized that no judgments would be based solely on the site visit, but the project company would have a chance to respond and provide explanations
— IPO indicated that they don’t start site visits until about a year after I-526 approval. Long processing times mean that your project may have plenty of time to make good progress before the visit, even with two-year delay.
Thanks for the clarification. Surely if they said it would be opened in December 2015, and now it was due for December 2017 that would be an issue?
My impression is that if the inspector shows up and finds it open, then the opening date is not so important. If the inspector finds it not open yet (and especially if there’s nothing at all to see), then the hard work of explanation will begin.
Suzanne, when you calculate the wait time for China-born investors to 9.3 years, did you exclude 700 visas for China from 10000 EB-5 visas annually that were used up back in 1992 for Chinese Student and Scholars? So in reality, there are only 9300 visas available for EB-5 investors annually.
At the event, Charlie Oppenheim wrote the equation with 9,940 as the annual limit and 695 as the limit for China-born investors (and 7,275 as the effective limit, assuming demand of about 2,000 from all other countries). I don’t know about the student and scholar issue. It’s all so complicated! I revised my calculation today with a new visa/petitions ratio (2.8 rather than 3.0, based on historical data) and that alone took a year off my China-time estimate.
(2) the law limits any one country to 7% of the numbers by right. China’s 7% allocation is already essentially used up by the Chinese Student Protection Act of 1992, which required that visa numbers allocated to Chinese nationals under that law be taken out of future allocations for China EB-5 at 700 per year, so mainland Chinese essentially get only whatever numbers are not used up by people born elsewhere.
Zoe, yes each country is only allotted 700 visas, but in practice NVC allows unused EB-5 visas from other countries to roll over to China, and has given about 8,000 (give or take) visas to Chinese nationals each year (since demand from all other countries put together was about 2,000 or less).
As wrote in IIUSA’s report , the I-526 fillings for countury excluding China was 2453 /2327 cases anually in FY2015 and FY2016，that mean there are around 6000 peoples(3.36 person per family) for countury excluding China, so the visa for Chinese anually will be only around 4000-5000 annually, not 7500 visas annually as in your article.
Based on above ,the wait time for Chinese will be around 20 years, not 9.3 years as you wrote, hope you could check and adjust this data.thank you.
Data for FY2016:
Click to access A-New-Lens-What-the-Lastest-Data-Tells-Us-about-Raising-EB-5-Captial-in-an-Increasingly-Challenging-Marketplace.pdf
Data for FY14-17：
Click to access Seven-Trends-in-EB-5-Investor-Markets.pdf
Here is my calculation in Chinese social media for your reference:
https://mp.weixin.qq.com/s?__biz=MzIzNTk0MDUzNw==&tempkey=OTIzX1JxdXFsb1d0S09qS0hQYnhhQmV1SzV2VDloZGwyeFlyeDlpcVdzSlI0bWc2TjZIc05wQWV2SVVTQkxmVGtTWTgyZ0FTRDhVZS1HNWxZOW52MktmQW81bkJNTFBpVFhmYXFJTkpEYllXbG92amNBRW1SQmVXRnFmUVRVY25XaFBYamphVUpMS2NaUElHRUJTYjB3QlNEY0drZ0ljUk9ka2tHVE1WTXd%2Bfg%3D%3D&chksm=68de3e865fa9b790f4db3955adfaf0d68255e0e557b95fb55475dfc6af5ae7c7ee4743fd9a74#rd
https://mp.weixin.qq.com/s?__biz=MzIzNTk0MDUzNw==&mid=2247483722&idx=1&sn=3eec389070ea48f0c1d54023b97f4327&chksm=e8de3e9cdfa9b78a69dc8fa9488c45b6f7836e3b44f46228b6e236cea5db14b43dcc34028251&scene=21#wechat_redirect
https://mp.weixin.qq.com/s?__biz=MzIzNTk0MDUzNw==&mid=2247483712&idx=1&sn=76583b537509e1fe53a9dbd571fb917c&chksm=e8de3e96dfa9b780645e8b375ba299b61b9f0db538e0a0ed36be305eb8ade48e4f73f7afb5d9&scene=21#wechat_redirect
I purchased the original dataset of I-526 receipts and approvals by country from IIUSA, and thought about how that data should affect my backlog calculation. So far, the only change I made to my spreadsheet is to change the percent estimate of Chinese investors in the pending I-526 petition count from 85% to 81%. But that only makes a slight change to the total. See my calculations here: https://www.dropbox.com/s/gjgkr1kjtcj8tf2/BacklogCalc.xlsx?dl=0
Please email your spreadsheet to me at suzanne@lucidtext.com, as I don’t quite understand your calculations yet. One variable that you might revise is the number of visas per I-526 petition. You use 3.36 visas per EB-5 investor. I use 2.8, which is the average EB-5 investors per visa from 2005-2015 according to data from the DHS Yearbook of Immigration Statistics (https://www.dhs.gov/immigration-statistics/yearbook).
A limitation of my model is that it only addresses this limited question: how long would it take for all current/past investors to get a visa? I’m calculating that if EB-5 investments stopped today, it would take about 8.3 years for all current investors to make their way through the system (or 9+ years for China-born investors, since other country investors get to go first). A more realistic estimate would also factor in the effect of potential future non-China investors on past China investors, but I’m not sure how to quantify and model that. If I did, it would require forecasting demand trends and estimating the annual rate at which USCIS would adjudicate petitions, gradually adding China and non-China investors over a period of years to the visa queue.