Was Your EB-5 Case Just Sunk by the House Intelligence Committee Report on Huawei and ZTE?

The U.S. House of Representatives’ Intelligence Committee just published a report branding China’s telecom giants Huawei and ZTE as security threats. Here’s why this may signal trouble for your EB-5 case:

1. The two companies failed to disclose role of the Chinese Communist Party (CCP) cells within their businesses, according to the Committee.[1]

2. There have been numerous visa-related misrepresentations by Huawei, according to allegations referred by the Committee to the Department of Homeland Security for possible investigation.[2]

How long will it be before federal immigration agencies conflate those two issues and ramp up scrutiny into whether investors seeking EB-5 visas are failing to come clean about their CCP membership?

Some 70% of EB-5 investors are from China, and it’s not uncommon that they are among the CCP’s 83 million members.[3]

But the Immigration and Nationality Act makes ineligible for permanent residence any person who “is or has been a member of or affiliated with”[4] the CCP, with the exceptions discussed below. EB-5 immigration counsel need to provide diligent representation on this issue.

This article reviews what the Intelligence Committee report says about CCP cells at China’s telecoms; discusses the ground of inadmissibility for CCP membership, its exceptions, and waiver; and finally, draws some lessons for providing EB-5 representation.

What the Committee Report Says
about CCP Cells at Huawei and ZTE

According to the Committee’s October 8 report, neither tech company came clean about the precise role its CCP cell, which is relevant since they seek to sell critical telecom infrastructure in the U.S.

The Committee was concerned that the Party is a “shadow source of power”[5] that influences the telecoms’ decisions, operations, and strategy “either formally through personnel choices, or in more subtle ways.”[6]

Party cells are supposed to be formed in any enterprise (including foreign companies), rural area, government department, school, research institute, neighborhood, or social organization where there are at least three Party members.[7]

Huawei disclosed “almost no information” to the Committee on the topic,[8] except that it does have a CCP cell.[9] It wouldn’t say who the cell members are, what they do, or how they are chosen.[10]

ZTE was only slightly more forthcoming. All it provided to the Committee was a list of 19 members of its CCP cell, who include members of the company’s board of directors and major shareholders.[11] Interestingly, “ZTE has requested and the Committee has agreed to keep the names of these individuals out of the public domain … for fear that the company or the individuals might face retaliation” from the CCP.[12]

Inadmissibility Due to CCP Membership;
Exceptions and Waivers

The Immigration and Nationality Act still makes some people ineligible for permanent residence on ideological grounds. Namely, any person who “is or has been a member of or affiliated with”[13] the CCP is ineligible, with certain exceptions.

A person who is not a CCP member may still be inadmissible on the basis that he or she is “affiliated with” such an organization. The term “affiliated with” is defined by statute to include, among other things, “giving … money or any other thing of value” to such an organization.[14]

Membership in other organizations affiliated with the CCP, such as China’s other political parties or mass organizations (e.g., Communist Youth League, All-China Federation of Industry and Commerce, All-China Federation of Trade Unions, All-China Women’s Federation, etc.) may render a person inadmissible as well.

There are three exceptions to ineligibility.

First, a person is admissible if the membership or affiliation terminated at least five years before the date of application.[15] Notably, inactivity can lead to termination of membership. A Party member who fails to take part in regular Party activities, pay membership dues or do work assigned by the Party for six successive months without good reason is regarded as having given up membership.[16]

Second, a person is admissible if membership or affiliation is involuntary, including “for purposes of obtaining employment, food rations, or other essentials of living and whether necessary for such purposes.”[17] In China, it may be difficult to prove that CCP membership is “necessary” to obtain the essentials of life because alternatives to CCP membership are clearly better today than they were in the 1970s. In particular, private entrepreneurship becomes an increasingly viable alternative to party membership. In China, a non-CCP member can still succeed in business, can still be sure of security of person, can still benefit from the country’s economic growth, and so on.

Third, a person is admissible if his or her membership is “not meaningful,” meaning that he or she lacks “commitment to the political and ideological convictions of communism.”[18] This is a judicially-created rule, and it is difficult to neatly synthesize the cases. The leading case is Rowoldt v. Perfetto,[19] which involved a man who for about a year paid dues to the U.S. Communist Party, attended meetings, petitioned the government related to unemployment laws and the government budget, worked at a Party bookstore, and stated that his purpose in joining the party was to get jobs, food, clothes, and shelter for the people. He denied opposing democratic principles. He denied any commitment to violence and denied that violence was discussed at any meetings he attended. His Party membership ended only when he was arrested on the basis that it made him deportable. The Court held that he qualified for the non-meaningful association exception because his understanding of party’s principles as “unilluminating” and the “dominating impulse” of his affiliation with the party was “wholly devoid” of any “political implications.”

For some, CCP membership isn’t ideologically meaningful. Harvard Professor MacFarquhar quips that the CCP is “a sort of Rotary Club of 70 million people who joined in because it’s good for their careers.”[20] The Party is a mutually advantageous social network that distributes favors and privileges (guanxi) to its members.[21] Mere membership in the party also signals elite status to potential government or private employers. It’s “shorthand for being an excellent person.”[22] Since the 1980s when reform policies brought great improvements in the standard of living, traditional Communist ideology has been overturned by contrary slogans such as Deng Xiaoping’s saying that “to get rich is glorious.” The CCP continues to pay lip service to Marxist-Leninist ideology, but ideology has become a post hoc rationalization device. Deng said, “It doesn’t matter if a cat is black or white so long as it catches the mouse.” Today, for many, Party membership is a way to hedge one’s bets: “with one hand they write up a party membership application, and with the other they write the cheque to send their child overseas to study.”[23]

Finally, in addition to these exceptions to ineligibility, there is also a waiver available in the case of the parent, spouse, son, daughter, brother, or sister of a U.S. citizen; or the spouse, son, or daughter of a lawful permanent resident. The applicant must be seeking admission for humanitarian purposes, to assure family unit, or for other reasons serving the public interest. The applicant must not be a threat to U.S. security and must merit a positive discretionary finding.[24]

Procedurally speaking, for immigrant visa applicants at U.S. consulates abroad, this issue is raised by questions in the application form (Form DS-230 or DS-260). Similarly, for an applicant within the U.S. for adjustment of status, the issue is raised in Form I-485. The applicant should be prepared for related questions during the interview and for potential requests for additional evidence.

Immigrant visa applicants also need to be prepared for possible delays while the consular officer seeks a security advisory opinion from the U.S. Department of State in Washington, DC.[25]

Lessons for EB-5 Representation

Whether or not the Intelligence Committee’s report can be chalked up to presidential electioneering or trade protectionism, there are some important lessons for attorneys providing EB- 5 representation to CCP members:

1. Huawei and ZTE invited Congress to investigate their business practices, and it backfired.[26] Similarly, by applying for an immigrant visa, your client is inviting an inquiry into his or her party membership and political ideology. Screen for this issue at the beginning of the representation and plan your strategy.

2. The Intelligence Committee viewed the telecoms’ refusal to disclose information about CCP cells as obstructionist. A visa applicant will naturally be reticent to provide meaningful answers to questions like, “why did you join?” and “what was your role in the Party?” Immigration officers may well view thise hesitation as obstructionist. Immigration counsel needs to prepare the applicant to testify credibly and to meet the burden of proof that he or she falls within an exception to inadmissimibility or qualifies for a waiver.

3. It’s quite possible that the spotlight on Huawei and ZTE’s Party cells will cause State and Homeland Security to ramp up scrutiny as to whether immigrant visa applicants, especially EB-5 investors, are failing to come clean about their CCP membership. Manage your client’s expectations about the process accordingly.

Gary Chodorow is a lawyer in Beijing. His practice focuses on U.S. and China immigration and nationality law. He blogs at www.lawandborder.com

  

Endnotes

[1] U.S. House of Representatives Permanent Select Committee on Intelligence, Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE, at v, Oct. 8, 2012, http://intelligence.house.gov/sites/intelligence.house.gov/files/documents/Huawei-ZTE%20Investigative%20Report%20(FINAL).pdf.

[2] Id. at 35. The specific allegations were that employees misrepresented the purposes of their U.S. travel, saying that it was for tourism or conferences when it was actually to work in the U.S.

[3] Jamil Anderlini, et al., Welcome to the Party!, FT Magazine (Sept. 28, 2012), http://www.ft.com/intl/cms/s/2/83780b3c-0830-11e2-a2d8-00144feabdc0.html.

[4] INA § 212(a)(3)(D).

[5] Committee Report at 23.

[6] Id. at 11-12.

[7] CCP Const., art. 29.

[8] Committee Report at 13.

[9] Id. at 23.

[10] Id..

[11] Committee Report at 40.

[12] Id.

[13] INA § 212(a)(3)(D).

[14] INA § 101(e)(2).

[15] INA § 212(a)(3)(D)(iii).

[16] CCP Const., art. 9

[17] INA § 212(a)(3)(D)(ii).

[18] 9 FAM 40.34 N5.1.

[19] 355 U.S. 115 (1957).

[20] David L. Shambaugh, China’s Communist Party: Atrophy and Adaptation 25 (2008), quoting “Debate #1: Is Communist Party Rule Sustainable in China? Remarks by Roderick MacFarquhar, Harvard University,” in Reframing China Policy: The Carnegie Debates, Library of Congress, October 5, 2006, http://www.carnegieendowment.org/events/?fa=eventDetail&id=854.

[21] Richard McGregor, The Party: The Secret World of China’s Communist Rulers chap. 1, location 768 (1st ed. HarperCollins 2010). See also Jamil Anderlini, et al., Welcome to the Party!, FT Magazine (Sept. 28, 2012), http://www.ft.com/intl/cms/s/2/83780b3c-0830-11e2-a2d8-00144feabdc0.html (“The party is the largest patronage organization in human history…. In urban China, every significant position of authority, not only in the government but in state-owned enterprises, schools, hospitals, think-tanks, the media, you name it, is filled by a decision of the part and for a significant number of those positions, membership is a requirement,” says Kenneth Lieberthal of the Brookings Institution.).

[22] Jamil Anderlini, supra.

[23] Id.

[24] INA § 212(a)(3)(D)(iv).

[25] 9 FAM 40.34 N3.3-1, N4.3, N4.4.

[26] Kathrin Hille, Huawei’s Emergence from Shadows Backfires Financial Times (Oct. 8, 2012), http://www.ft.com/intl/cms/s/0/50ad88c2-112b-11e2-a637-00144feabdc0.html.

5 Replies to “Was Your EB-5 Case Just Sunk by the House Intelligence Committee Report on Huawei and ZTE?”

  1. The recent developments regarding Huawei & ZTE certainly won’t help the EB5 process – but I don’t think it will have any lasting impact. The party members that would pose a threat are the officials within the party, the true believers. Most of our investors were most likely members for convenience as suggested above. With cessation of dues and the passage of time the problem begins to dissipate. The key would seem to be full and honest disclosure. What got the telecoms in trouble was, of course, the presence of party influence but what made it go from bad to worse was a lack of candor.

  2. John, you make a good point. The legislative intent behind the statute excluding CCP members is certainly to screen out those who pose the greatest security threat to the U.S. But I’m not as optimistic that the Huawei/ZTE committee report isn’t a bad omen for EB-5 visa applicants.

    The statute is a crude implement–it doesn’t mention the judicially created “non-meaningful” membership exemption which many applicants rely on. Discerning patterns in the related judicial opinions is not unlike divining meaning from tea leaves in a cup. Moreover, for immigrant visa applicants, the consular officer is not bound by the case law with the exception of the sparse Supreme Court cases, and there is no administrative or judicial appeal of the consular officer’s decision. So, if the agencies interpret the Huawei/ZTE committee report and other signals from Capital Hill to mean that it’s time to get tough on the CCP, the agencies have sufficient authority to interpret the “non-meaningful” membership exception to inadmissibility very narrowly.

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