DHS Proposes Raising Barriers to Foreign Entrepreneurship in the U.S.

Lisa Zimmer
By Lisa Zimmer, Summer Research Fellow
July 16, 2018

The Department of Homeland Security (DHS) recently proposed a rule to eliminate its international entrepreneur (IE) program. In a public comment to DHS, we suggested that this regulatory action would likely harm U.S. economic growth by raising barriers to foreign entrepreneurship. Among its arguments for ending the program, DHS states that this policy approach is consistent with the Trump administration’s policy priorities detailed in Executive Order 13767 (EO 13767), “Border Security and Immigration Enforcement Improvements.” However, eliminating the IE program is inconsistent with the president’s statements favoring a shift towards merit-based immigration and contradicts DHS’s mandate to ensure that its efforts to secure the homeland do not unnecessarily harm the U.S. economy.

What is the IE program?

The Immigration and Nationality Act grants DHS the “discretionary authority to parole individuals into the United States, on a case-by-case basis, for urgent humanitarian reasons or significant public benefit.” In January 2017, DHS published a rule establishing the IE program to “enhance entrepreneurship, innovation, and job creation in the United States.” DHS created strict criteria for eligibility to ensure that the IE program contributes to economic growth. To be eligible for this program, applicants must have recently created a startup that “demonstrates potential for rapid business growth and job creation” while receiving at least $250,000 from qualified U.S. investors. For applicants who meet the above criteria, they, alongside their spouses and dependent children, will be “paroled” into the U.S. for an initial period of 2.5 years to build their new business. Individuals can be considered for re-parole for an additional 2.5 years if their business “generated substantial and rapidly increasing revenue” and created at least five U.S. jobs.

The IE Program does not hamper DHS’s Mission

Among DHS’s arguments for terminating its IE program is the suggestion that this action would allow the agency to better use its “limited resources” to focus on its current priorities in accordance with EO 13767. However, data on the agency’s budget and staff—both of which have steadily increased since the agency’s creation—indicate that its resources are not that limited. According to Susan Dudley and Melinda Warren’s “Regulators’ Budget,” the president’s FY 2019 Budget would grant DHS a 4.8 percent budget increase and a 3.8 percent staff increase for 2019. Additionally, DHS estimated in its 2017 final rule that the up-front fees paid by applicants would sufficiently cover agency costs related to the IE program.

Alternative Visa Programs are not Suitable Substitutes

DHS’s 2018 proposal argues that other visas are a more acceptable way for foreign entrepreneurs to start their businesses in the U.S and that the IE program is “not a proper vehicle” for immigration. However, the IE program is unique, and other visas do not cater to the same entrepreneurs and investors.

The proposal suggests the EB-5 and the E-2 visas are alternatives to the IE program. However, both of these visas have vastly different requirements than the IE program. Under the EB-5 visa, foreign entrepreneurs must invest $1 million, or $500,000 in a targeted employment area, to their businesses. Similarly, E-2 visa applicants must also invest their own funds into their startup. These requirements alienate thousands of foreign entrepreneurs who rely on investors to build their business. Additionally, foreign entrepreneurs from Brazil, China, India, Israel, or Russia are unable to obtain an E-2 visa because their countries do not hold an E-2 treaty with the U.S.

While the IE program does not provide a clear pathway to citizenship, it still provides foreign entrepreneurs the opportunity to start their business in the U.S. if they don’t meet the requirements for the other entrepreneur visas.

Increasing Merit-based Immigration

The President has repeatedly called for merit-based systems to attract outstanding foreigners with unique skills to contribute to the U.S. economy.

“Switching away from this current system of lower-skilled immigration, and instead adopting a merit-based system, we will have so many more benefits. It will save countless dollars, raise workers' wages, and help struggling families — including immigrant families—enter the middle class. And they will do it quickly, and they will be very, very happy, indeed.”

President Trump often states that other countries “are not sending their best,” but the criteria for approval via the IE program suggests that these entrepreneurs are, in fact, among the best. The goal of the IE program is to attract high-skilled workers and only parole individuals who will provide a “significant public benefit.”

In 2017, DHS argued that its IE program would encourage foreign entrepreneurs to create and develop start-up entities with high growth potential in the United States, which were “expected to facilitate research and development in the country, create jobs for U.S. workers, and otherwise benefit the U.S. economy through increased business activity, innovation, and dynamism.”

As DHS previously stated, the IE program is designed to benefit the U.S. economy, expand the job market for Americans, and encourage research and innovation in several industries. It is precisely the kind of merit-based program that the president says he prefers.

DHS Should Keep its IE Program

The objections DHS presents in this proposed rule directly contradict its original assessment of the IE program. In the 2017 final rule, DHS “expected [the IE program] to generate important net benefits to the U.S. economy.” These startups would directly create jobs for U.S. citizens while increasing innovation and technology. A study conducted by the National Foundation for American Policy shows that more than half of America’s “unicorn startup companies” are co-founded by immigrants. These billion dollar companies provide thousands of Americans with jobs and innovated some of the 21st century’s best technology.

The IE program has potential to bring some of the world’s next best innovators to America. While DHS now claims that this program is no longer aligned with the agency’s objectives, the opposite seems to be true. Eliminating the program contradicts DHS’s statutory mandate to “ensure that the overall economic security of the United States is not diminished by efforts, activities, and programs aimed at securing the homeland,” and removes a potentially important vehicle for achieving both merit-based immigration and entrepreneurial activity in the U.S.

Read the full Public Interest Comment.