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"The Visa Approval Backlog and its Impact on American Small Business"

June 4, 2003

Prepared Remarks of Mr. William J. McHale, Vice President of Sales, Kanawha Scales and Systems, Inc.

Mr. Chairman, Members of the Committee:

Thank you for inviting me to testify at this important hearing.

I am Bill McHale, Vice President of Sales for Kanawha Scales & Systems, Inc., headquartered in Poca, West Virginia. We are a small to medium size business. We employ approximately 200 employees at 12 offices with locations in West Virginia, Pennsylvania, Ohio, Kentucky, Alabama, and Michigan. Our core business is the distribution and sales of specialized weighing and control systems. A big part of our business is in the area of designing and building of customized systems and controls for clients throughout the U.S. and Internationally. Our flagship product is our high-speed train loadout systems, which we supply worldwide. Our company has been involved in the export market since 1986 with much of our efforts focused in China.

I am appearing before the House Committee to express my concern over the growing difficulties our foreign employees, existing clients, and prospective future customers face when trying to obtain travel visas to the U.S for the purpose of business discussions, design liaison meetings, employee training, plant and equipment inspections. U.S. Companies face many difficulties in trying to do business overseas and being competitive on a Global Scale. Adding the issue of an increasingly difficult process of potential prospects obtaining visas to the United States will only further undermine U.S. Company’s efforts to succeed in International Markets

We already face competing on an un-level playing field against many of our international competitors. The problems we face are well known and include the current strength of the US dollar, WTO-inconsistent subsidies and other practices of foreign governments, and rampant intellectual property rights violations, including counterfeiting.

Unfortunately, we must now add to this list …Foreign Clients and potential customers difficulties in obtaining travel visa to the U.S for:

o Plant and Site Visits

o Equipment inspections prior to order being shipped

o Design Liaison Meetings

o Training of Customer Personnel on equipment and technology sold

o Training of our own foreign engineers permanently located in a foreign country to provide in local support of the technology and products we sell.

Each of these issues not only makes it difficult for our company to support our customers, but markedly increases the risk of contract default. Every contract we negotiate has a clause that requires design teams from clients to travel to the U.S. for the purpose of design and drawing reviews. Every contract also has a clause that mandates inspection of all equipment at our manufacturing facility by client personnel prior to shipping.

Mr. Chairman, when actions or procedural delays raised by the U.S. government prevent our company from being able to respond to support requests within the required period of time as dictated by the terms our contracts because of the lack of trained personnel in-country, the very contracts we have fought so hard to win are placed in jeopardy

We are also greatly concerned that post-9/11 visa procedures continue to be implemented without due consideration of the resources that such new practices require.

In China, prior to 9/11, the Foreign Affairs Department of Government owned companies would submit entire delegations for visa approval as a group. Individuals and privately owned companies were required to submit to an interview process. Embassy personnel in Beijing were scheduling over 1,000 appointments per day for visa interviews. With the staff available, those interviews lasted exactly thirty seconds or less. However, It is our understanding that every single individual who wishes to come to the U.S for business purposes must now submit to a personal interview before an Embassy Consular prior to being granted a visa. Yet, while the US government has instituted these new requirements for visa processing, there is absolutely no evidence that the US government has provided additional resources for its posts to use in conducting these interviews and processing those applications, which are being returned to Washington for a "security advisory opinion".

Our company and many more like us, plus the associations of which we are members, stand ready to work with the Administration and the Congress to ensure that our visa system receives the necessary resources so that US business, and the jobs we provide, do not fall victim to a broken system.

Let me be more specific. We have tried to bring one of our foreign engineers over on two different occasions for technical training to support equipment being sold in China. Both times, he was rejected for a visa because he was viewed by the Embassy Consular as being an “immigration threat”. After the first rejection, we did a lot of research into the evaluation process and what was being considered.

On the recommendation of the local representative from the U.S. Dept of Commerce in Charleston, we contacted a Representative of the Commercial Office in Beijing to get his advice on what we needed to do in order for our employee to be granted a visa the next time around. The Commercial Office Representative made it very clear that he could not guarantee or influence the result, but would do everything he could including meeting with our employee prior to his interview to prep him on how to handle himself during the interview. The Representative indicated that granting of visas was strictly the function of the State Department Representative in the Embassy and nobody could influence them. My concern is that no amount of preparation or due diligence is going to impact the outcome of a thirty second interview.

On the second attempt by our engineer to obtain a visa, we made sure that a letter was sent by our Company outlining the need for the trip, the goals that we hoped to accomplish during our foreign employee’s visit here; the length of time he would be here and a description of what his job role was with assurances that he would be returning to China. In addition, this employ took documents with him to the interview showing his ties to mainland China (checking and savings accounts; home ownership; family responsibilities, etc). The Consular doing the interview did not even look at the documentation. In both cases the overview was over in thirty seconds. There is no way that this consular could have made an evaluation, let alone preview the supporting documents brought into the interview by our employee and make a determination that this individual was an “immigration threat”. Our employee was directed to another office and notified that his application was rejected. The reason given in both case was “immigration tendency”.

On the last two contracts our Company signed in China in April of this year, our customers insisted on inserting language into the contract that our company would get personally involved in the visa process to assist their personnel in the application and interview process of obtaining visas. In reality, there is nothing we can do to help with this.

Another fellow West Virginia Company has had similar experiences to us. Preiser Scientific of Saint Albans, WV makes lab equipment for use in Coal Quality Labs. The have experienced the same problems we have in the inability of getting visas granted for their business agent in China to travel to the U.S. in order to receive technical training so that he could adequately represent Preiser Scientifics products in China. They have also tried on three separate occasions to have the Supervisor of the Coal Quality Lab for one of China’s largest Coal Company’s, ATB (AntiBiao) come over for customer training on the lab equipment they sell. They had entered into a Contract with ATB for the supply of this equipment and one of the contract stipulations was that Preiser Scientific provide training in the use of the equipment to the Director of ATB’s Lab Operations.

This person’s application was rejected on all three different occasions. On all three attempts, she never even made it to the interview process. She was rejected at the window. ATB has blamed Preiser Scientific for their Director of the Coal Quality Lab’s inability to obtain a visa to come to the U.S. for training. As a result, Preiser Scientific’s business with ATB has dropped off to almost nothing because of problems in obtaining a visa for their Director of Coal Quality to come over for the contractually required training.

In talking with Steve Spence of the West Virginia Development Office, the State of West Virginia has experienced numerous problems in obtaining visas for bringing potential clients wishing to invest money and open manufacturing facilities in West Virginia. The WV Development Office has offices in Germany and Japan, and are actively recruiting firms to West Virginia as prospective investors in the state. There have been numerous problems obtaining visas for key contacts in the company to come to the US, even once a decision has been made to locate here. These people need to visit for a multitude of reasons...seeing potential sites, meeting with development authorities, deciding on housing, and finalize the details of their agreements. Due to confidentiality, the State could not release the company names, however, they have indicated that this is a recurring problem with many European and Japanese visitors.

We are particularly concerned at the moment about visa processing delays because we have delegations from two different customers scheduled to travel to the U.S in mid to late July for the purpose of conducting design reviews. If visas are not granted, we will be forced to send a large group of engineers and staff over to China to satisfy the design review criteria of our contracts. Not only will this impact the profitability of the jobs, it will impact our ability to meet production and engineering deadlines by taking that many people out of the engineering and production loop to attend the three to four weeks that the design reviews will take for the two jobs.

Let me offer you some additional perspectives on Kanawha Scales' international business, so that you and the Committee can see why these issues matter so much to our company and our workers:

o Over the years, our export business has accounted for 12-21% of our

Total revenue. In fact this year, due to the flatness of the economy in WV, our export business will account for over 25% of our total gross revenue

o The export business we do (particularly in China) helped justify a 9,000 foot expansion to our sales and engineering offices

o It supports or helps support 8-12 jobs at our company. If it hadn’t been for the business we’ve booked year to-date in China, we would have faced with the prospect of laying people off for the first time in the fifty history of our company

o Since 1991, we have done close to 22 Million Dollars in Business in China

o This year alone, we have booked close to $4 Million in new business through May 1st.The expertise and technical capabilities we have developed on doing business in China has carried over and has enhanced our capabilities for domestic projects in the U.S.

Going beyond our own company's concerns, I would like to offer some broader information that helps to explain why the issuance of visas for small firms’ overseas clients is such a big issue. Consider the following facts.

• 82% of U.S. Exporters to China are small and medium size business.

• 97% of all exporters world wide are small businesses employing fewer than 500 people

• China ranks as 14th largest export market for WV Companies

• China is the number one producer of coal in the world with an annual production of 1.3 million tones of coal. So as not to cause undue alarm what the impact of this could be to the world economy and more importantly to jobs in the U.S, China total exports of coal accounts for less than 5% of their total production, so this is not a threat to U.S. jobs. On the contrary, with China outsourcing much of their technology and equipment needs, this has created or sustained many jobs among U.S. companies such as our selves. If we don’t furnish that technology or equipment some other country will gladly fill that void we leave.

In closing, I feel that procedures need to be put in place that don’t penalize U.S. Company’s ability to get visas granted to foreign employees for training purposes; for existing clients and future business prospects. The deck is already heavily stacked against U.S. Companies trying to do business overseas. We don’t need to compound that by making it even more difficult for our foreign customers to do business with us.

I don’t mean to diminish the importance of screening potential visitors to the U.S in light of the terrorist activities throughout the world. However, a thirty second interview is not going to accomplish that either. The current process is broken and very badly needs to be fixed.

Thank you for the opportunity to share our companies' and our employees' concerns with you today. It is heartening to see that the Small Business Committee of the House of Representatives has taken an interest in this serious and so far undiminished problem.