Administration’s Proposal Unlikely to Encourage Foreign Entrepreneurs to Choose the United States

Written by on November 3, 2016 in Entrepreneurship/Innovation with 1 Comment

immigration-impact-foreign-entrepreneurs_11-03-16The U.S. has long been the beneficiary of the new ideas and energy generated by immigrants, yet today’s U.S. immigration system does a poor job of accommodating foreign entrepreneurs who want to turn their ideas into a viable business.

Recognizing the competitive disadvantage to the U.S., the Department of Homeland Security Secretary Jeh Johnson directed USCIS in November 2014, to develop two options to improve the process. First, issue guidance or regulations on how entrepreneurs could demonstrate that their activities qualify for a “national interest waiver” so they could apply for permanent residence. Second, issue regulations to permit entrepreneurs who meet certain financing and job creation requirements to work in the U.S. temporarily under USCIS’ authority to grant “significant public benefit parole.” Parole is a mechanism that Congress authorized to allow USCIS flexibility, on a case-by-case basis, to permit people to temporarily enter the U.S. for either “urgent humanitarian reasons or significant public benefit.” Although people who are paroled are physically inside the U.S., they are treated under the immigration laws as if they are standing just across the border so they do not have the legal status of people who have been inspected and admitted to the U.S. temporarily as nonimmigrants.

Nearly two years later, USCIS issued a proposed rule to accomplish the second option and received more than 700 comments. However, as many of those who commented recognized, including the American Immigration Lawyers Association and the American Immigration Council who jointly filed comments, the proposal is impractical:

  • Most entrepreneurs will not be able to meet the requirements, and
  • Those few who may qualify are unlikely to apply given the inherent uncertainty of parole and the lack of a path to permanent residence.

Major problems with the proposal:

  • Initial parole is limited to 2 years, with possible re-parole for no more than 3 years, if certain investment and job creation thresholds are met. USCIS can revoke at any time without giving the entrepreneur the right to challenge the decision. USCIS also is requiring that the entrepreneur file a new application if there is a “material change” after approval, which appears to include changes that occur routinely when an entrepreneur is trying to develop a business, such as ownership and funding changes.
  • No mechanism to transition from entrepreneur parole to any other status.
  • Foreign students, who could benefit the U.S. if they had the opportunity to obtain financial backing for promising projects (such as those developed as a part of an MBA program) are highly unlikely to be able to engage in the activities necessary to qualify for parole while meeting the requirements for student status. Instead they will continue to be thwarted in their efforts to apply the education they received in the U.S. and will take their ideas and grow their businesses abroad.
  • Minimum initial investment of $345,000 is roughly 2/3 greater than the average amount provided by the leading funder at the earliest stage of funding start-ups.
  • Unreasonable restrictions on the source of the investment, such as including only counting funds invested in the one year period before the entrepreneur files the application and excluding funding from the entrepreneur or family members, when most new businesses are funded from personal savings or family.
  • Requiring the entrepreneur to own 15 percent of the start-up initially and 10% thereafter ignores the reality that entrepreneurs frequently raise additional funds by offering a percentage of their interest in the business.
  • Spouses of entrepreneurs who also receive parole will have to apply separately for employment authorization, which will delay by several months when they could begin working.

USCIS’ restrictive funding requirements and the limitations associated with parole create disincentives for entrepreneurs and their potential investors. Why would an entrepreneur make the effort to build a new business and why would an investor provide the funding when faced with the risk that the entrepreneur would have to abandon the business—in a best case because he or she reached the five year maximum or in a worst case because USCIS revoked the parole, with no way to challenge even an agency mistake. To truly make the United States competitive with other countries that are vying for the economic benefits that entrepreneurs provide, entrepreneurs must, at a minimum, have options to transition from parole to a more stable temporary status or to permanent residence.

Photo by Marco Derksen.

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  • fitnesspro22

    Absolutely correct conclusion. No reasonable person would risk his capital in any business venture with such short term duration. Evidently, this proposed regulation was drafted by some bureaucrats, who never in their lives engaged in business, met a payroll or invested their money in venture capital. Another example of waste by the DHS/USCIS.

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