The EB-5 program has seen a surge of applicants in the last 5 years, with the vast majority from China. In Second place is Vietnam that will now reach its annual quota limit next month. But right behind is Korea, one of the early leaders in EB-5. The Korean market is both knowledgeable and supplicated in its understanding of the benefits of this investor program. Dwarfed by the Chinese market of the last 5 years, the Korean EB-5 market has recently experienced a “reawakening” primarily because its economy has grown. Uncertainty created by numerous short extensions has only added to this increased demand. As a result, the recent surge creates the likelihood of a Korean Final Action Date, or cut-off date.
Changes to the EB-5 program in the next few months are likely, either because of new legislation or the implementation of new regulations first proposed in January 2017. Either way, it is likely to be more expensive to apply for EB-5 and more difficult to invest in top tier real estate projects as restrictions on Targeted Employment Areas become more likely.
Also, U.S. immigration policy has shifted towards restrictionist policies, making other visa options even more difficult. EB-5 applications continue to enjoy a relatively high approval rate. In fiscal year 2017, USCIS approved over 92% of all I-526 petitions and 98% of all I-829 petitions—much higher than many other categories.
Of the 140,000 employment-based visas that are authorized each fiscal year, 7.1%, or 9,940 are allocated to the EB-5 program. In addition, no more than 7% of all visas may be issued to nationals of a single foreign state. If demand from one country exceeds its per-country quota, a backlog will be created, delaying issuance of the green card. While no-one likes to be stuck in waiting lines, this can have serious consequences for applicants with older children, who may age-out and not be eligible to immigrate with their parents.
Therefore, it has become critical to plan ahead and understand the rules regarding the Child Status Protection Act (CSPA).
If the EB-5 conditional immigrant visa process is not completed prior to the investor’s children turning 21 years of age, there is a chance these children will “age-out” and not be ineligible for a green card. The CSPA permits certain derivatives to retain the classification of “child,” even after reaching age 21 years, but it does not account for all the time it can take for a visa to become available, if there are backlogs or a waiting line, thereby limiting its effectiveness.
Often, demand for EB-5 visas grows when a country’s economy grows and when political instability increases. Of course, one of the biggest “drivers” is the opportunity to educate one’s children at top U.S. universities The Korean economy has been experiencing significant growth. As a result, the demand for EB-5 visas in Korea is surging.
In the first quarter of Fiscal Year 2018 (from October 1, 2017 to December 31, 2017), DOS issued 118 immigrant visas to EB-5 investors and their derivative beneficiaries, up from just 30 the year before. This massive 293% growth rate is not an accident. Equally concerning is that Korea used 58 visas in December 2017 alone, the latest data we have available. If Korea uses 58 EB-5 visas per month, that volume is sufficient to use up its entire annual quota. In addition, there are 278 Korean applicants currently waiting for their final interviews—approximately 40% of the annual quota. These two factors would result in Korean EB-5 category being oversubscribed and subject to a backlog. Since it can take two years from filing to interview, this massive surge indicates that we most likely have a significant issue.
On average, it takes about two years from filing before the actual number of visas used is counted by the Department of State. Therefore, the numbers we can see presently merely represent the “tip of an iceberg”. The most recent data available shows Koreans filed 156 I-526 petitions in Fiscal Year 2016. However, based on the typical family size of EB-5 applicants, each I-526 petition results in approximately 2.5 visas used, meaning we can expect these petitions to use 390 visas, or 55% of the per country limit in Fiscal Year 2018.However if the first quarter of fiscal year 2017 is compared to the first quarter of fiscal year 2018, we see a surge of almost 300%. This surge, if consistent means we will hit the annual quotas for Korea either in later FY 2019, or early FY 2020.
The imposition of a waiting line for Koreans would have serious consequences, although it will not be as bad as the Chinese waiting line, which is currently at almost 5 years but, which may get to be twice as long.
When established, the Korean Final Action Date will initially be the same as the Chinese Final Action Date but when October 1, is reached it will “recover” and be better than the Chinese Final Action Date, which is presently lingering in July 2014. When a country uses up its entire quota of visas, any remaining visas not used by other countries can be allocated to applicants from the backlogged country. However, these visas are allocated based on the applicants’ priority dates or I-526 filing date. Because there are so many backlogged Chinese applicants with 2014 and 2015 priority dates, any Korean applicants who files now will have thousands of Chinese applicants ahead of them. Essentially, Koreans will be able to use their 696 allocated each year, and then Korean applicants will be stuck behind Chinese applicants with earlier priority dates.
If there were any lessons from the massive Chinese EB-5 backlog, it is this – if you want to apply for EB-5, don’t delay and file as soon as possible, not only to avoid a possible increase in the minimum investment amount, but also to avoid being stuck in a waiting line. This is particularly important for applicants with children about to turn 21 years old. Given the filing volume and visa usage, a 20-year-old child may already not be safe, and as this gets worse, possibly even a 19-year-old could age out. DOS has been generous in trying to warn investors but even with the Vietnamese, initially it was expected they would reach their quotas until later 2018, then it was April 2018, and now we are expecting to see a Vietnamese Final Action Date in next month in March 2018. Korean applicants who wait to file may find themselves stuck in a waiting line by the time their I-526 is approved two years after filing. That may be an extra year, or it may be an extra two years.
The imposition of a waiting line for Koreans would have serious consequences, although it will not be as bad as the Chinese waiting line, which is currently at almost 5 years but, which may get to be twice as long.
When established, the Korean Final Action Date will initially be the same as the Chinese Final Action Date but when October 1, is reached it will “recover” and be better than the Chinese Final Action Date, which is presently lingering in July 2014. When a country uses up its entire quota of visas, any remaining visas not used by other countries can be allocated to applicants from the backlogged country. However, these visas are allocated based on the applicants’ priority dates or I-526 filing date. Because there are so many backlogged Chinese applicants with 2014 and 2015 priority dates, any Korean applicants who files now will have thousands of Chinese applicants ahead of them. Essentially, Koreans will be able to use their 696 allocated each year, and then Korean applicants will be stuck behind Chinese applicants with earlier priority dates.
If there were any lessons from the massive Chinese EB-5 backlog, it is this – if you want to apply for EB-5, don’t delay and file as soon as possible, not only to avoid a possible increase in the minimum investment amount, but also to avoid being stuck in a waiting line. This is particularly important for applicants with children about to turn 21 years old. Given the filing volume and visa usage, a 20-year-old child may already not be safe, and as this gets worse, possibly even a 19-year-old could age out. DOS has been generous in trying to warn investors but even with the Vietnamese, initially it was expected they would reach their quotas until later 2018, then it was April 2018, and now we are expecting to see a Vietnamese Final Action Date in next month in March 2018. Korean applicants who wait to file may find themselves stuck in a waiting line by the time their I-526 is approved two years after filing. That may be an extra year, or it may be an extra two years.
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