An Introduction to the E-2 Treaty Investor Visa: Marginality, Substantiality, Essentiality & Other Key Tests

The E-2 Treaty Investor visa allows an individual to invest in a U.S. business and then enter the U.S. to develop and direct the business. The E-2 visa holder must demonstrate a minimum of 50% ownership of the enterprise or “operational control through a managerial position or other corporate device.” Similar to the EB-5 investment requirements, the E-2 requires the investor’s funds to be “at risk” or subject to loss if the investment is not successful.

Essentiality of E-2 Employee

The E-2 visa also emphasizes that an applicant should have “special qualifications” or “skills which make the employee’s services essential to the efficient operation of the business.” The application must demonstrate that the individual not only that possesses the necessary special qualifications, but also establishes the length of time those skills may be needed for the successful and efficient operation of the U.S. enterprise. This essentiality of the potential E-2 employee may be measured by:

  • The degree of proven expertise in the employee’s area of operations
  • Whether others possess the employee’s specific skills
  • The salary that the special qualifications can command
  • Whether the skills and qualifications are readily available in the United States.

Impact of U.S. Workers

While the E-2 visa does not require a labor certification from the Department of Labor, USCIS does take into consideration the availability of U.S. workers when determining the degree of specialization and essentiality of the employee to the business. For example, an individual bringing a new technology to the U.S. may have specialized skills directly relating to the manufacturing, sales, and distribution of that technology, qualifying him or her for an E-2 visa. Additional evidence to support this narrative could be requested from U.S. labor organizations, industry trade groups, local or state chambers of commerce or other organizations with access to data on labor availability. It is important to note that there is no regulatory requirement that an essential employee have previously worked with the E-2 treaty enterprise. The only instance that previous employment has an affect on the application, is if the claim is being made that the necessary skills can only be obtained through that particular employment.

Short Term vs. Long Term Essentiality

When crafting the narrative of your E-2 visa application, we will consider your intended involvement in the ongoing operations of the U.S. entity. There may only be a need for the E-2 employee to come to the U.S. for a short period of time to direct the start-up operations or to train and supervise employees with specialized functions. For a short term need, the application might demonstrate that an employee is essential based on his or her knowledge with overseas operations or technologies. Evidence should demonstrate that these short-term employees are initially involved in the effort to train U.S. workers within a year or two as their own replacements.

The E-2 visa can be granted at a maximum initial stay of two years, but is renewable in various time increments depending on the nature of the underlying treaty with the country of the visa holder. Since there is no maximum limit to the number of extensions that can be granted, many business owners utilize the E-2 for a longer-term stay to continue to direct the enterprise. As long as the application demonstrates the individual has special qualifications that require his or her continuous presence in business activities, such as product development or providing a service not commonly available from U.S. workers, there is no requirement for training a U.S. worker replacement.

Case Study: Matter of Walsh and Pollard

In the 1980s, General Motors needed automotive engineers to design a new fleet of vehicles. After first attempting to meet their labor needs within the U.S., the company realized an additional need for engineers and turned to overseas for help. A British contractor made an investment as part of a strategy to open a U.S. office and then funnel designers for GM’s temporary labor needs using E-2 visas and establishing the designers’ essential skills. After the visas were approved, the then-INS (Immigration and Naturalization Service, now part of USCIS or United States Citizenship and Immigration Services) denied the engineers when they attempted to enter the U.S. The case made it to the Board of Immigration Appeals (BIA), which ruled on two key aspects of the E-2 visa:

  1. A small investment does not preclude the issuance of an E-2 visa as long as it is sufficient to “establish a viable enterprise of the nature contemplated” and
  2. The applicants whom were “highly trained, specially qualified, and essential to the corporation’s efficient operation” were qualified for the E-2 visa despite the fact they were not involved in “developing and directing the qualifying investment.”

The BIA determined that the automotive engineers had essential skills necessary to the long-term success of the enterprise and that the employees were not replacing U.S. workers in the near future, due to the extensive training that would be required to match the designers’ level of specialized skills.

Substantiality of the Business

The Foreign Affairs Manual points out some key aspects of the case when determining whether the business might meet the substantiality test, stating that “sometimes an investment of only a small amount of money might meet the requirement.” There is no standard investment amount, but the investment must meet the following:

(1)  Substantial in a proportional sense, as determined through the application of the proportionality test outlined below;

(2)  Sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise; and

(3)  Of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise.

Proportionality of the Business

               The substantiality of the business is partly determined by using the proportionality test by weighing the amount of funds invested against the total cost of the business. The Foreign Affairs Manual describes the appropriate investment as an inverted sliding sale, with lower cost business requiring a higher percentage of the investment and a higher cost business requiring a lower percentage of qualifying investment. The manual also defines the cost of an established business as its purchase price and the cost of a new business is the sum of costs required to establish an operational business. When applying for the E-2 visa, this figure includes the investments already made and the estimates for the additional assets needed to run the business.

Marginality of the Business

The EB-5 visa clearly outlines the required job creation for visa attainment, but the E-2 visa applicant must prove that the investment is not in a “marginal” enterprise, i.e. the business must have the present or future capacity to generate income above that for the treaty investor and his or her family. This capacity to make a “significant economic contribution” should be “realizable within five years from the date the alien commences normal business activity of the enterprise,” according to the Foreign Affairs Manual.

Contributions of E-2 Visa Holders

As with any nonimmigrant or immigrant visa, the fundamental premise of the E-2 visa is that individuals who are granted these visas will provide value to the United States. For investment-type visas, often this value is quantified by the number of jobs created or the monetary contribution to the U.S. economy. While there are no specific numeric requirements for job creation or continued investment levels, an E-2 renewal application that demonstrates these accomplishments is more likely to establish the essentiality of not only the employee to the enterprise, but of the enterprise to the continued economic health and growth of the United States economy.

Request a copy of the E-2 qualifying countries by emailing us at info@challalaw.com.