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< Back to current issue of Immigration Daily < Back to current issue of Immigrant's Weekly

From The Beginning: Agile Immigration Advocacy For New Businesses: Part 2 of 3

by Susan K. Wehrer and Angelo A. Paparelli

V. The Fourth Day – Longer-Term Nonimmigrant Visa Strategies

Once the new venture is sufficiently off the ground, the next step is finding an appropriate nonimmigrant visa classification for the founder or other prospective key employees.

A. E-1/E-2 Issues

A foreign national seeking to start a new business in the United States may qualify for E-1 or E-2 status if he or she is a national of a country that has entered into a treaty of Friendship, Commerce and Navigation or bilateral investment treaty[x]with the United States, and otherwise meets the requirements for the classification.[xi]

The prospective "treaty national" business owner may not need to meet all of the requirements as a prerequisite for entering the United States to conduct activities related to the formation of the business. A foreign national who is interested in making an investment in the United States that would permit the grant of status as an E-2 investor is eligible to enter the United States in B-1 status to conduct preliminary business activities.[xii] The individual may not actively participate in the management of the business until the prospective investor is granted E-2 status. This may be an attractive option for a foreign national who is currently outside the United States. The alien should be cautioned, however, to engage only in activities that are consistent with B-1 status rather than actively running the new enterprise.

To qualify for E-2 status, sufficient legwork must be completed to be near "the start of actual business operations, not simply in the stage of signing contracts (which may be broken) or scouting for suitable locations and property. Mere intent to invest, or possession of uncommitted funds in a bank account, or even prospective investment arrangements entailing no present commitment, will not suffice."[xiii] Specifically, to qualify as an "investment," the foreign national must demonstrate possession and control of the relevant funds[xiv], that the funds are placed at risk in the commercial sense[xv], and that the funds are irrevocably committed.[xvi] Fortunately, the Department of State (DOS) has indicated that irrevocable commitment of funds would include "the purchase or sale of a business which qualifies for E-2 status in every respect [except that it is] conditioned upon the issuance of the visa."

In some cases, a qualifying employer may seek an E-1 or E-2 visa for an employee who will be involved in starting up a new business or activity in the United States. The regulations governing the E classification provide that an employee who "has special qualifications that make his or her service essential to the efficient operation of the enterprise" may be eligible for an E visa.[xvii] The visa applicant bears the burden of demonstrating the need for the skills as well as the length of time the skills will be required.[xviii] The E regulations governing extensions of stay further state that "it is presumed that employees of treaty enterprises with special qualifications who are responsible for start-up operations should be able to complete their objectives within 2 years. Absent special circumstances, therefore, such employees will not be eligible to obtain an extension of stay."[xix]Therefore, employers seeking the full two years of initial admission or seeking an extension of stay for such employees should be prepared to demonstrate the special circumstances warranting approval of such a stay in detail to the consular officer or INS officer reviewing the E visa application/ extension petition.

B. H-1B Issues

An H-1B visa may be an option for a company founder or key employee of a new venture.[xx] Although the number of H-1B visas that may be issued is governed by statute, current demand appears to be such that the classification will likely be an available option throughout this fiscal year (ending September 30, 2002).[xxi]A significant drawback of this classification, however, is that it is the most highly regulated, with oversight by both the INS and the U.S. Department of Labor (DOL). For example, unlike other categories, the new company must pay the H-1B worker at least the prevailing wage for the relevant geographic area and must bear the burden of ensuring that appropriate documentation is maintained in a public access file.[xxii] In some cases, the prevailing wage for the position in question may be higher than a new company is willing or able to pay. Additionally, the requirements of the H-1B classification are difficult to satisfy if the company does not have an officer, director, or managerial employee other than the foreign national, who can ensure that appropriate postings are made and can sign the petition on behalf of the company.[xxiii]

Company founders and key employees often have a significant ownership interest in the new venture. Although there is no specific prohibition against an ownership interest in the INS and DOL H-1B regulations, an employment relationship is required whereby the employer has the power to "hire, pay, fire, supervise, or otherwise control the work of such employee."[xxiv] Immigration counsel should ensure that an H-1B beneficiary’s ownership interest in the company is disclosed in the petition documents to avoid any potential claim of fraud or misrepresentation.[xxv]

If the H-1B petition will be for a foreign national who is serving in a management position with the company, such as President, be prepared for a more difficult case than the usual Software Engineer with a relevant bachelor’s degree. The INS previously has taken the position that management is not necessarily a profession.[xxvi] Therefore, practitioners will want to look at the alien’s educational background and identify specific education (other than general business knowledge) required for the position. For example, if the foreign national has a master of business administration degree with an emphasis in marketing and the position of president can be shown to involve extensive marketing activities, this should be emphasized in the petition.

C. L-1 Issues

L-1 intracompany transferee status may also be an option for foreign nationals seeking to start a business in the United States. The alien will need to be able to demonstrate one year of full-time employment abroad (in the three years preceding the application for admission in L-1 status) with a parent, branch, affiliate or subsidiary of the U.S. organization.[xxvii] This may be difficult for some aliens, but may be a viable option for others who have an established or been employed in an active business abroad or who are willing to wait a year or more before filing a petition while they establish and are employed in a foreign business operation.

It is a common misconception among foreign nationals seeking L-1 classification that once they arrive in the United States, the foreign operation upon which the qualifying L-1 relationship was based may be closed or may "wind down" operation. The regulations require that the qualifying organization, both in the United States and abroad, must be "doing business . . . as an employer in the United States and in at least one other country . . . for the duration of the alien’s stay in the United States as an intracompany transferee."[xxviii] Thus, counsel should instruct clients to ensure that the qualifying organizations continue operating and employing personnel for the duration of the foreign national’s stay in the United States.

The regulations governing the L-1 classification set forth additional evidentiary requirements when the beneficiary is coming to the United States to open or be employed in a "new office" in the United States."[xxix] Specifically for executives and managers, the petition will need to include evidence that sufficient physical premises have been secured, that the beneficiary’s position in the organization abroad was executive or managerial and that the proposed employment is executive or managerial, and that within one year of petition approval, the U.S. operation will support the position (i.e., that the position will meet the definition of managerial or executive).[xxx]For aliens who will be employed in the United States in a specialized knowledge capacity in a new office, the petition must include evidence that sufficient physical premises have been secured, and that the petitioning organization "has the financial ability to remunerate the beneficiary and commence doing business in the United States."[xxxi]

Petitions for foreign nationals to be employed in a new U.S. office can only be approved for a maximum of one year.[xxxii] To obtain an extension, the petitioner will need to provide evidence that the U.S. and foreign entities continue to be qualifying organizations; that the U.S. entity is doing business[xxxiii]; a description of the staffing of the U.S. entity, including wage information for other employees (if the employee is a manager or executive); and evidence of the company’s financial status.[xxxiv] In practice, it may be difficult for a company to meet these evidentiary requirements after only one year of operation.

When asserting that prospective employees qualify as managers, counsel should note that the Immigration and Nationality Act (INA) does not require that managerial employees manage other employees.[xxxv] In reality, however, it may be difficult to convince the INS that a manager who supervises no employees and perhaps is the sole employee of the organization is eligible for L-1A status.[xxxvi] Therefore, in such cases, counsel may want to consider whether the prospective L-1A beneficiary will be managing relationships with outside contractors and, in extension cases, may want to submit copies of contracts signed by the employee as evidence that he or she makes policy decisions and otherwise manages the organization.

If the prospective L-1A manager will be managing a small number of people, counsel should note that the regulations state that a "first-line supervisor is not considered to be acting in a managerial capacity merely by virtue of the supervisor’s supervisory duties unless the employees supervised are professional."[xxxvii] The L-1A manager would not likely be considered a first-line supervisor, however, if he or she managed at least two levels of employees. Therefore, counsel may want to clarify with the company whether the subordinate employees could properly be characterized as falling into more than one level within the company hierarchy.

A prospective L-1A manager may also qualify as a function manager if he or she would be managing an "essential function within the organization."[xxxviii] Officers at one Regional Service Center have informally opined that management of a product line or management of the business development or public relations function for an organization may qualify a foreign national as a function manager. In the same informal discussion, several INS officers recommended that the attorney, in his or her covering letter, specifically identify the factual basis and rationale for L-1A eligibility (i.e., "We believe that Mr. Doe qualifies as an L-1A function manager because . . . .") in an effort to assist the adjudicators.

With regard to foreign nationals who may be eligible for L-1 status, but have an ownership interest in the new venture, the L-1 regulations contain a provision for owners or major stockholders indicating that petitions for such individuals must ostensibly contain "evidence that the beneficiary’s services are to be used for a temporary period and evidence that the beneficiary will be transferred to an assignment abroad upon the completion of the temporary services in the United States."[xxxix] Note, however, that the L-1 regulations were implemented and related cases were decided before H-1B and L-1 nonimmigrants were removed from the intending immigrant presumption by 205(b)(1) of the Immigration Act of 1990.[xxxl]Therefore, the regulation and related case law appear to be honored more in the breach than the observance.

The L-1 classification may be an attractive option for foreign nationals who qualify as executive or managerial employees and who wish to become permanent residents of the United States. The requirements for immigrant visa classification in the EB1-3 multinational executive/manager classification essentially mirror those for the L-1A classification, making this approach for obtaining a green card extremely attractive for those who qualify.[xli]

D. TN Issues

The TN classification may be an option for Canadian or Mexican citizens who fit within one of the professions enumerated in the North American Free Trade Agreement (NAFTA).[xlii] This category may be particularly attractive if a company would like to hire a qualifying Canadian national and would like him or her to commence employment quickly by making application for TN admission at an authorized U.S. port of entry.[xliii] Unfortunately, the TN classification may not be a viable option for individuals with a significant ownership interest in a U.S. company. The regulations governing the TN classification state that an individual may not enter the United States in TN status for the purpose of "establish[ing] a business or practice in the United States in which the professional will be, in substance, self-employed. A professional will be deemed to be self-employed if he or she will be rendering services to a corporation or entity of which the professional is the sole or controlling shareholder or owner"[xliv] Given that the immigration regulations in other contexts typically contemplate at least 50 percent ownership as the primary measure of control of an entity, this may serve as a useful guide in determining what level of ownership interest is likely to be acceptable to the INS.[xlv]

VI. The Fifth Day – Green Card Options

If permanent residence is the ultimate objective for the company founder, an ownership interest may adversely affect the ability of the company to obtain approval of a labor certification on the owner’s behalf. In order to be eligible for approval of labor certification, the DOL requires that a bona fide job opportunity exist (i.e., that the employer would be willing to hire an available and qualified U.S. worker).[xlvi]The Board of Alien Labor Certification Appeals (BALCA) has held that whether a job is clearly open to qualified U.S. applicants depends on the totality of the circumstances and listed nine factors, of which one is whether the alien possesses an ownership interest and another is whether the alien was a company founder, to be considered when determining the totality of the circumstances.[xlvii] An ownership interest in the company does not establish lack of a bona fide job opportunity per se, unless the investment is so great that employment of the alien is tantamount to self-employment.[xlviii]In several cases, BALCA has applied the "totality of the circumstances" test to determine whether a bona fide job opportunity exists.[xlix]

Fortunately, for some aliens, labor certification may not be the only option. If an individual has been employed by an organization abroad that could potentially qualify the alien for an immigrant visa as an EB1-3 multinational executive/ manager, this would be an option exempt from labor certification.[l] Similarly, if the foreign national is highly acclaimed in his or her field, the alien may be eligible for a first preference immigrant visa such as an extraordinary ability alien,[li] or outstanding researcher,[lii] or if the individual’s services qualify, he or she may be eligible for a national interest waiver.[liii]

Next week: Part 3 -- Selected Issues


[x] INA 101(a)(15)(E); 8 USC 1101(a)(15)(E).

[xi] 8 CFR 214.2(e)(1) defines treaty trader as follows: "An alien, if otherwise admissible, may be classified as a nonimmigrant treaty trader (E-1) under the provisions of section 101(a)(15)(E)(i) of the Act if the alien:

(i) Will be in the United States solely to carry on trade of a substantial nature, which is international in scope, either on the alien’s behalf or as an employee of a foreign person or organization engaged in trade principally between the United States and the treaty country of which the alien is a national, taking into consideration any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade; and

(ii) Intends to depart the United States upon the expiration or termination of treaty trader (E-1) status."

8 CFR 214.2(e)(2) defines treaty investor as follows: "An alien, if otherwise admissible, may be classified as a nonimmigrant treaty investor (E-2) under the provision of section 101(a)(15)(E)(ii) if the alien:

(i) Has invested or is actively in the process of investing a substantial amount of capital in a bona fide enterprise in the United States, as distinct from a relatively small amount of capital in a marginal enterprise solely for the purpose of earning a living;

(ii) Is seeking entry solely to develop and direct the enterprise; and

(iii) Intends to depart the United States upon the expiration or termination of treaty trader (E-2) status."

For a further discussion of the E visa classification, see H. Chang, "Revised Strategies in E Visa Processing," 2 Immigration & Nationality Law Handbook 109 (2001-02 ed.).

[xii] 9 U.S. Department of State Foreign Affairs Manual (FAM) 41.31 N6.7; INS Operations Instructions 214.2(b)(11).

[xiii] 9 FAM 41.51 N8.1-3b.

[xiv] 9 FAM 41.51 N8.1-1.

[xv] 9 FAM 41.51 N8.1-2

[xvi] 9 FAM 41.51 N8.1-3.

[xvii] 8 CFR 214.2(e)(3).

[xviii] 9 FAM 41.51 N14.3-1.

[xix] 8 CFR 214.2(e)(20)(ii).

[xx] The H-1B classification applies to aliens who are coming temporarily to the United States to perform services in a specialty occupation. 8 CFR 214.2(h)(1)(ii)(B)(1).

[xxi] 1st Quarter FY 2002 H-1B Processing, posted on AILA InfoNet, Doc. No. 02030633 (Mar. 6, 2002). "The [INS] reported that during the first quarter of the current fiscal year, from October 1, 2001, to December 31, 2001, approximately 28,000 H-1B petitions had been approved against the 195,000 limit for FY 2002."

[xxii] 20 CFR 655.731; 20 CFR 655.760.

[xxiii] 20 CFR 655.734; 20 CFR 655.760.

[xxiv] 8 CFR 214.2 (h)(1)(ii). "United States employer means a person, firm, corporation, contractor, or other association, or organization in the United States, which:

(1) Engages a person to work within the United States:

(2) Has an employer-employee relationships with respect to employees under this part, as indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee; and

(3) Has an Internal Revenue Service Tax identification number." Id.

The DOL regulations similarly define an employer as "a person, firm, corporation, contractor, or other association or organization in the United States which has an employment relationship with H-1B nonimmigrants and/or U.S. worker(s). The person, firm, contractor, or other association or organization in the United States which files a petition on behalf of an H-1B nonimmigrant is deemed to be the employer of that H-1B nonimmigrant." 20 C.F.R. 655.715.

[xxv] INA 274C; 8 USC 1324c (statutory provision addressing document fraud). See also Matter of M---, 8 I&N Dec. 24, Int. Dec. (BIA) 952, 1958 WL 9869 (BIA) (Sept. 5, 1958) (Alien who is the sole owner of a bona fide corporation may qualify as beneficiary of a first preference petition filed by the same corporation. Petitioner’s failure to disclose that beneficiary was a sole owner of the company did not amount to a "deliberate effort . . . to conceal" the ownership interest and, therefore, the visa petition approval was not procured through fraud or misrepresentation. The attorney general affirmed the decision but disapproved the rationale. ); compare Matter of Silver Dragon Chinese Restaurant, 19 I&N Dec. 401, Int. Dec. 3017 (Aug. 13, 1986) (occupational preference petition may be filed on behalf of a prospective employee who is a shareholder in the corporation; however, the ownership interest is a material fact in determining whether job offered was open to all qualified applicants).

[xxvi] Matter of Caron International, 19 I. & N. Dec. 791 (Assoc. Comm’r Exam 1988) (position of vice president of manufacturing for a major textile firm, with responsibility for 725 employees found not to be a "profession."); contra Hong Kong T.V. Video Program, Inc. v. Ilchert, 685 F. Supp. 712, 2 Immig. Rptr. A2-63 (N.D. Cal. 1988) (position of president and chief executive officer of foreign language video cassette importer and distributor employing over 70 workers found to be a "profession."). For a further discussion of the "professional" designation and the definition of "specialty occupation," see M. Lawler, Professionals: A Matter of Degree, Cases and Materials (AILA 3rd ed.).

[xxvii]8 CFR 214.2(l)(1)(ii). "Intracompany transferee means an alien who, within three years preceding the time of his or her application for admission into the United States, has been employed abroad continuously for one year by a firm or corporation or other legal entity or parent, branch, affiliate, or subsidiary thereof, and who seeks to enter the United States temporarily in order to render his or her services to a branch of the same employer or a parent, affiliate or subsidiary thereof in a capacity that is managerial, executive, or involves specialized knowledge." For a further discussion of the L-1 classification, see J. Soloman, "Intracompany Transferees (L Nonimmigrants)," 2 Immigration and Nationality Law Handbook 8 (2001-02 ed.).

[xxvii]i 8 CFR 214.2(l)(1)(ii)(G)(2). "Doing business" is defined as "the regular, systematic, and continuous provision of goods and/or services by a qualifying organization and does not include the mere presence of an agent or office of the qualifying organization in the United States and abroad." 8 CFR 214.2(l)(1)(ii)(H).

[xxix] 8 CFR 214.2(l)(3)(v).

[[xxx] Id.

[xxxi] 8 CFR 214.2(l)(3)(vi).

[xxxii] 8 CFR 214.2(l)(7)(i)(A)(3).

[xxxiii] "[D]oing business" is defined under INS regulations as "the regular, systematic, and continuous provision of goods and/or services by a qualifying organization and does not include the mere presence of an agent or office of the qualifying organization in the United States and abroad." 8 CFR 214.2(l)(1)(ii)(H).

[xxxiv] 8 CFR 214.2(l)(14)(ii).

[xxxv] INA 101(a)(44)(A)(iii); 8 USC 1101(a)(44)(A)(iii). See Matter of Irish Dairy Board, Inc., A28-845-421 (AAU Nov. 16, 1989) ("[T]he sole employee of a firm may be classified as an executive in certain circumstances provided his primary function is to plan, organize, direct and control and organization’s major functions through other employees. No discussion of the size or staffing level of the organization is included in the definition of the term ‘executive’." Note that this decision was based on the pre-Immigration Act of 1990 definition of "executive," which was analogous to the current definition of "manager.")

[xxxvi] Some INS officers appear to believe that the size of the company is relevant in determining whether an individual qualifies for L-1A status.

[xxxvii] 8 CFR 214.2(l)(1)(ii)(B).

[xxxviii] INA 101(a)(44)(A)(iii).

[xxxix]8 CFR 214.2(l)(3)(vii). Similarly, the Board of Immigration Appeals has held that a situation in which the L-1 beneficiary is an owner/operator requires a higher degree of proof that the utilization of the beneficiary’s services in the U.S. will be temporary. Matter of Isovic, 18 I&N Dec. 361 (Comm. 1982).

[xl] Codified at INA 214(b), 8 USC 1184(b).

[xli] 8 CFR 204.5(j).

[xlii] 8 CFR 214.6.

[xliii] Canadian nationals may apply for admission to the United States in TN status at any Class A port of entry. 8 CFR 214.6(e). Note that Mexican nationals are not granted the same speedy option. They must file a Form I-129 petition, including a labor condition application certified by the DOL, with the Nebraska Service Center in order to request TN classification. See 8 CFR 214.6(d).

[xliv] 8 CFR 214.6(b).

[xlv] 8 CFR 214.2(e)(16) states that "An alien seeking classification as a treaty investor must demonstrate that he or she does or will develop and direct the investment enterprise. Such an applicant must establish that he or she controls the enterprise by demonstrating ownership of at least 50 percent of the enterprise, by possessing operational control through a managerial position or other corporate device, or by other means." 8 CFR 214.2(l)(1)(ii)(K) defines a subsidiary as a legal entity of which a parent owns, directly or indirectly, more than half or half of the entity and controls the entity; or owns, directly or indirectly, 50 percent of a 50-50 joint venture and has equal control and veto power over the entity; or owns, directly or indirectly, less than half of the entity, but in fact controls the entity.

[xlvi] 20 CFR 656.20(c)(8).

[xlvii]Matter of Modular Container Systems, 89-INA-228 (BALCA July 16, 1991). Specifically, the Board looks at whether the alien:

1) Is in the position to control or influence hiring decisions regarding the job for which labor certification is sought;

2) Is related to the corporate directors, officers or employees;

3) Was an incorporator, or founder of the company;

4) Has an ownership interest in the company’

5) Is involved in the management of the company;

6) Is on the board of directors;

7) Is one of a small number of employees;

8) Has qualifications for the job that are identical to specialized or unusual job duties and requirements stated in the application; and

9) Is so inseparable from the sponsoring employer because of the alien’s pervasive presence and personal attributes that the employer would be unlikely to continue in operation without the alien. Id. at 235.

[xlviii] Id. at 235.

[xlix] Matter of Goodway Company, 91-INA-49 (BALCA June 4, 1992) (Labor certification was denied because the alien had a 10 percent interest in the company’s stock, was one of five shareholders in the parent’s closely held company, and his 10 percent interest was equal to that of three [3?] other investors. In addition, the alien was a director, secretary, and CFO of the company); Matter of Foodmix, Inc., 90-INA-521 (BALCA June 4, 1992) (Labor certification was denied because the alien was the employer’s incorporator, president, one-third shareholder, and incumbent import/export manager. The corporate secretary’s authority to dismiss the alien was conferred after the filing of the labor certification); Matter of Morex, Inc., 91-INA-206 (BALCA Oct. 27, 1992) (A bona fide job opportunity did not exist where the alien held 25% of the employer’s stock, was a director and corporate secretary, and the alien’s three brothers held the other positions on the board of directors and the remaining shares of stock); Matter of Human Performance Measurement, Inc., 89-INA-269 (BALCA Oct. 25, 1991) (A bona fide job opportunity exists notwithstanding the alien’s relationship with the employer where the alien owned just 4 percent of the company’s stock, along with 30 other shareholders, the alien had no family relationship with key company personnel; evidence demonstrated that other employees were more influential within the company).

[l] 8 CFR 204.5(j). Note that the prospective U.S. employer must have been doing business for at least one year at the time the multinational executive/ manager petition is filed. 8 CFR 204.5(j)(3)(i)(D).

[li] 8 CFR 204.5(h).

[lii] 8 CFR 204.5(i).

[liii] INA 203(b)(2)(B)(i); 8 USC 1153(b)(2)(B)(i). For a further discussion of national interest waivers, see C. Weber and R. Wada, "National Interest Waivers 2002 – A Practice Update," 7 Bender’s Immigration Bulletin 361 (Apr. 1, 2002). See also A. Paparelli and G. Pigeaud, "Read My Lips: No New National Interest Waivers!," 11th Annual (1998) California Chapters Handbook (AILA).


About The Author

The authors thank Yoshiko I. Robertson, associate at Paparelli & Partners LLP, and Gary Endelman of BP America Inc. for their insightful editorial comments.

Susan K. Wehrer, is an associate in the law firm of Paparelli & Partners LLP. She is admitted to practice law in the State of California. Ms. Wehrer practices in all areas of employment-based immigration law. Before joining the Firm, she practiced labor and employment law, held the position of Editor of The Labor Letters Inc., a labor and employment law newsletter, and served as Adjunct Professor of Labor Relations at Woodbury University. Ms. Wehrer has co-authored several articles of immigration-related issues.

Angelo A. Paparelli, is certified as a Specialist in Immigration and Nationality Law by the State Bar of California, Board of Legal Specialization, and has been practicing business-sponsored immigration law for over 20 years. He is the managing partner of Paparelli & Partners LLP, http://www.entertheusa.com/, a firm in Irvine, California that practices exclusively immigration and nationality law.


The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.


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