"The Visa Approval Backlog and its Impact on American Small Business"
June 4, 2003
Mr. Chairman, members of the committee, good afternoon and thank you for inviting me to participate in this hearing on how the visa program is affecting the business community. Today I will be speaking on behalf of AMT The Association For Manufacturing Technology. I serve on the association’s Government Relations Committee. AMT’s 360 member companies manufacture production machinery such as machine tools, software, and engineered products and systems.
Pursuant to House Rule XI, clause 2(g)(4), I am obligated to report to you that AMT has received $219,000 in fiscal years 1997-2000 and $84,200 in fiscal year 2002 from the Commerce Department's Market Co-operator Development Program to help pay for a service and training center in China.
My company, Cincinnati Machine, a division of Unova, is a manufacturer of machine tools. As you know, Mr. Chairman, machine tools cut and shape metal to make the parts that go into almost everything that is manufactured, ranging from pumps to automobiles to aircraft. Without machine tools, none of these items can be effectively produced. Exports account for more than one-third of industry sales.
As you also know, Mr. Chairman, the machine tool industry in the United States today is in crisis. Consumption of machine tools in the United States has decreased by approximately 60% over the past five years. There is a direct correlation between the amount of manufacturing done in the U.S. and machine tool consumption here in our home market. As a result, a once strong U.S. machine tool industry has seen many of its best, most innovative companies go out of business in the last four years.
As an aside, Mr. Chairman, I’d like to thank you for your strong leadership along with Congressman Neal of Massachusetts of the House Machine Tool Caucus, which has provided invaluable support and encouragement for our industry during these difficult times.
II. DIFFICULTIES IN OBTAINING VISAS
While less and less manufacturing takes place in the U.S, there is more and more in places such as China (see attached graph). As machine tool companies worldwide must necessarily follow manufacturing work, China has become the leading consumer of machine tools in the world. Simply put, U.S. companies must adapt in order to sell to China if we wish to survive. Many U.S. companies are doing this, but we find that roadblocks to success can often be traced back to our own governmental policies and practices. One of these roadblocks is how visa applications are currently being handled for Chinese business associates.
Specifically, we are finding that visa applications which were taking a matter of days to process prior to 9/11 are now taking six months or longer. Please don’t mistake my desire to get the visa process fixed for legitimate business partners with a lack of concern for national security. No one wants a repeat of the express visa process that supplied many of the 9/11 terrorists with their entry passes into the United States. The desire of the business community is that the process is reformed so that legitimate business people are provided timely visas in order to allow for trade with U.S. companies.
The situation as it exists today certainly does not help promote trade. In fact, it is currently driving potential customers to our European and Japanese competitors. Let me provide specific examples of how the visa process is hurting U.S. companies.
• Moore Nanotechnology Systems, a small manufacturer based in Connecticut, recently sold a $500,000 machine to a university in China. When after five months one of the university’s professors had not received a visa, and no one could get any information regarding the status of the visa, the customer cancelled his contract. This single sale would have accounted for 10% of Moore’s revenue in 2002.
• Cincinnati Machine, my company, sold $5 million worth of equipment to Chengdu Aircraft in China. After a vigorous export license review, we received the export license to be able to ship the machines to Chengdu. In the normal course of satisfying a contract of this nature, a delegation of Chengdu engineers and managers must come to Cincinnati to inspect the equipment prior to it being shipped. Unfortunately, it took six months for the visas to be approved. During this time, I had $5 million of inventory which I was unable to ship and collect the payments on. From the customer’s perspective, he fell behind in commitments to his customer by approximately five months while the machines collected dust in Cincinnati.
• I am currently pursuing a new contract with Chengdu Aircraft for additional equipment so that they can produce the Boeing 757 tail section. Even though they prefer Cincinnati-built equipment, they are considering both European and Japanese suppliers’ equipment because they do not feel they can count on either quick export license approval or timely visa approvals if they provide Cincinnati Machine a purchase order.
• I currently have a $1.5 million piece of equipment on my floor ready to ship to Xian Aircraft in China. It has been four months since the applicable visas were applied for but, as of today, we have no idea as to the status of the applications. It is difficult to determine who, if anyone, is working on it. As with the Chengdu Aircraft case, both Cincinnati Machine and Xian Aircraft are suffering. In negotiations with Xian Aircraft, we asked them to assign personnel who had been to the United States before so that there was an established track record of them coming to the U.S. and going back home within visa guidelines. This approach has not helped.
• As with Chengdu Aircraft, I am pursuing additional business from Xian Aircraft. This potential contract could exceed $6 million, a substantial sum for a company of my size. The Xian purchasing team is certainly using the visa problem as a part of the decision making process. Thus far I have been unable to ship the aforementioned piece of equipment to them, so they are very uncomfortable in providing me with an even larger contract. My German competitor has assured them that they can travel to Germany whenever they wish.
I could list a dozen more examples just from Cincinnati Machine. But this problem is affecting thousands of companies just like Cincinnati. We and many other U.S. companies are fighting for survival. We need this problem fixed, and it must happen quickly. We must find a way to process legitimate visa applications for Chinese customers in a timely manner.
In March of this year, we were encouraged by Secretary Powell’s testimony before the House Appropriations Subcommittee on Foreign Operations. In this appearance, the Secretary acknowledged the ongoing problems with processing legitimate visa applications and pledged to members of the subcommittee “we will fix this.” Unfortunately, we in the business community still await that relief. In fact, the Wall Street Journal reported on May 16th that the State Department plans to conduct face-to-face interviews with almost everyone seeking a visa to enter the United States. While this sounds like a prudent step for certain geographical areas of concern, it will take an already lengthy process for many legitimate applicants from China and make it completely unworkable.
In summary, I want to reiterate that this issue is having very serious consequences on the United States machine tool industry as well as other industries that must bring overseas customers to the U.S. to effectively do business. Jobs are at stake and companies are at stake. Time is of the essence.
I hope and trust that these comments will be helpful in your efforts to shape policy so that we balance legitimate security needs with those of a strong economy. Mr. Chairman, our industry applauds your attention to this matter and hopes to continue to work with you in your efforts to build a stronger America.
I will be pleased to respond to your questions. Thank you.