International Entrepreneur Rule Gets a Second Chance

(Read more about International Entrepreneur Rule in the earlier article here)

On December 1, 2017, in National Venture Capital Association v. Duke the United States District Court of the District of Columbia ruled the United States Citizenship and Immigration Services (USCIS) violated the Administration Procedure Act’s (APA) notice and comment rulemaking requirements when it decided to delay the international entrepreneurial rule (IER) without giving the public adequate notice or time to comment on its decision to delay the rule.

On January 17, 2017, three days before the end of the Obama administration, the Department of Homeland Security (DHS) published the final IER rule to allow foreign nationals who meet certain entrepreneurial standards to apply for parole, which is temporary admission into the United States to grow new companies. The rule was to set to go into effect on July 17, 2017, 180 days following its publication.

A Change In Administrations

On January 25, 2017, President Trump issued an executive order that required all agencies to reexamine its parole admission policy and ensure it was not being abused. On July 11, 2017, six months after the President’s executive order and six days before the IER became effective, the USCIS announced it would be delaying the IER until March 14, 2018 to review its compliance with the President’s executive order. The USCIS did not engage in the rulemaking process when it delayed the IER.

International Entrepreneur Rule Overview

Prior to the IER, the Secretary of Homeland Security had the authority to grant parole admission into the United States on a case-by-case basis if a foreign national had been subject to a national disaster or the foreign national could provide sufficient evidence that his or her admission into the United States would provide a significant public benefit. However, Congress had never defined a “significant public benefit” and the IER established what criteria the USCIS should use in determining if an entrepreneur would be considered a “significant public benefit.”

Then, according to the National Venture Capital Association decision, meeting the requirements did not automatically grant admission to an applicant; but rather, streamlined the agency’s [DHS] treatment of entrepreneurs. In forming the IER, the DHS had initially undergone the notice and comment proceedings under the APA, made significant changes, and delayed the final implementation of the rule until July 17, 2017, to ensure the USCIS had adequate time to allocate the resources necessary to implement the new rule without sacrificing any of its current services.

However, under President Trump’s executive order IER did not go into effect on July 17, 2017, and a lawsuit followed.

Challenging the Delay

On September 19, 2017, two foreign entrepreneurs and the National Venture Capital Association filed suit arguing the USCIS bypassed the APA mandatory notice and comment requirements when it delayed the IER.

The district court noted that national elections have consequences, but that the APA shapes how federal agencies may react to the results of elections. The APA’s notice and comment requirements are mandatory when an agency makes a rule as well as when an agency “seeks to delay or repeal a valid final rule.” An agency can only bypass the notice and comment requirements if the agency can prove it acted with “good cause.”

The district court found that the USCIS did not have a good cause for delaying the IER for several reasons. First, an agency cannot act with “good cause” if the agency delays implementing its decisions. Here, the USCIS waited six months after the President’s executive order to delay the IER and the DHS was unable to explain why the agency needed six months to reach its decision to delay the rule. The court found the agency’s delay inconsistent with the “good cause” expectation to the notice and comment requirements.

Second, the DHS argued that the IER had to be delayed because if the IER went into effect it would place the DHS in “fiscal peril,” i.e. the IER was too expensive. The district court dismissed this argument noting that the DHS previously admitted the IER’s filing fees would “ensure recovery of the full costs of providing services.”

Third, the DHS argued that allowing the IER to remain in place or going through the lengthy notice and comment proceedings would add confusion to the parole process because companies or individuals may misguidedly rely on it and invest significant capital and resources into a startup on the belief that the entrepreneur could be granted admission to the United States. The court dismissed this argument for two reasons. First, it ignored the foreign nationals or companies that had already relied on the IER before it was delayed, and second, the plaintiff’s argued that they would have applied even knowing their admission in the United States may be revoked early because even a short stay could aid their business.

The district court concluded that the USCIS’s delay of the IER must be vacated and the IER must remain in effect, at least, until the DHS undergoes the proper APA procedures.

Going Forward

In dicta, the district court mentioned that the IER could be repealed at any time so long as the DHS followed the rule and comment procedures under the APA. Therefore, while this decision is a temporary win for the IER it does not guarantee its fate.

Under the Obama administration, the DHS took approximately six months to comply with the notice and comment rulemaking procedures before publishing the final IER; the DHS under the Trump administration could revoke the IER in a similar amount of time. To revoke the IER the DHS would need to propose the change, solicited comments, respond to the comments received, and publish a final rule.

From here, the DHS could either decide to appeal the district court’s decision, the DHS could undergo the notice and comment proceedings and revoke the IER, or the DHS could let the IER remain in effect. Only time will tell, but future updates to regarding the IER will be provided.

With Immigration status under the IER potentially subject to change, speaking with an attorney may help determine if admission under the IER is right for you.