Visa Delays to Continue for Business

Small companies will suffer the most as big firms skirt visa restrictions by relocating operations abroad.

By Andrew C. Schneider, Associate Editor, The Kiplinger Letter

November 29, 2004

Efforts by Congress and the State Department to speed the visa process for foreign businessmen are going to have only limited impact. Most U.S. firms will continue to face hurdles as they attempt to gain entry for foreign customers and employees. The cost to companies from the resulting delays and lost sales is likely to total in the billions of dollars each year.

The hardest-hit companies are in the small and midsize categories, especially in the technology and manufacturing sectors. William A. Reinsch, president of the National Foreign Trade Council, notes that multinationals hampered by visa problems can go around them by shifting research or production abroad. "The small guys don't have any choices," he says.

Visa difficulties are also cutting into potential exports by discouraging foreign firms from participating in U.S.-based trade shows. The Consumer Electronics Association, which sponsors the International Consumer Electronics Show, conducted a survey of international members who missed the 2004 trade show in Las Vegas this past January. Of those who responded, 59% indicated that they had encountered problems in the visa application process, and 18% cited these difficulties as the main reason they weren't able to attend.

The more severe such problems become for trade shows, the more likely event organizers will be to hold their shows outside the U.S., with a subsequent loss of revenue for U.S. travel and tourism. Many firms have already gone this route when it comes to organizing meetings with their international staff.

Despite great advances in global communications technology, many aspects of international trade still rely on face-to-face contact. But in the post-9/11 world, foreigners seeking business visas to enter the U.S. can wait weeks simply to get an interview with an American consular officer. Often, the end of that wait brings further frustration, with the application denied and little or no explanation provided.

Such problems are more than just an inconvenience. For example, foreign customers purchasing machinery from U.S. firms may not be able to enter the U.S. to inspect it and train in its use. Customers may become reluctant to buy again under these conditions.

According to a recent study by The Santangelo Group, a consulting firm in Washington, D.C., the cumulative cost of delays and denials in processing business visas between July 2002 and March 2004 was $30.7 billion in lost revenues for U.S. companies. Visa applicants from China have the largest number of difficulties, which highlights the seriousness of the problem, given that China is our fastest-growing export market. Other countries whose nationals are having major visa problems include India, Russia and South Korea.

The refusal rate for B-1 visas—temporary visit visas for business purposes—has held at around 25% for the past several years. What's harder to measure, though, is how many foreigners are no longer applying for B-1s because they fear that the wait will be too long or their chances of getting a visa are too small. In the years prior to Sept. 11, about 33 million foreigners entered the U.S. each year, most of them on temporary visas. Since Sept. 11, that total has dropped to about 27 million.

"It's a huge issue for manufacturers, and there's a real concern that we are losing business opportunities because customers can't come here," says Bill Primosch, senior director for international business policy at the National Association of Manufacturers. Primosch says this is driving more overseas customers to switch their business to competitors in Europe and Japan, where such barriers don't apply.

Post-9/11 security precautions are part of the reason for the visa delays and denials, exacerbated by a shortage of consular officers to process visa requests. But other factors are involved. One of the most serious concerns is the fear that foreign nationals may enter the country to acquire restricted dual-use technologies with both civilian and military applications.

That's one of the reasons that Chinese nationals frequently run into trouble. As citizens of a so-called Tier 3 country, to which certain dual-use technologies are severely limited for security reasons, Chinese applicants must clear what is known as the Technology Alert List. Applicants can find themselves flagged and denied entry because they have particular kinds of technical expertise, even in fields as general as automation. "The irony of this," says Reinsch, "is that it is going to promote more technology transfer," because companies that can afford to do so will circumvent the barriers by building research facilities in China itself.

Rep. Donald Manzullo (R-IL), chairman of the House Small Business Committee, has spearheaded an effort to bring about a reciprocal visa agreement with the Chinese. The agreement expedites visa processing for Chinese nationals who can produce a bona fide invitation from a legitimate U.S. company. This has reduced the length of some delays since summer, but businesses are still complaining about the extensive waits. And Beijing has yet to revise its own regulations to provide similar VIP treatment for U.S. businesspeople seeking to visit China.

The State Department, under a program called the Non-Immigrant Travel Initiative, wants to streamline visa processing at consulates by heeding suggestions from consular officers and from the private sector. The agency is also trying to improve transparency in the application process by posting on its Web site the average wait time for a visa appointment at each of its consulates.

The department's moves have won qualified praise from the business community. A group of 13 leading business organizations—including the U.S. Chamber of Commerce and the National Association of Manufacturers—sent a joint letter to Secretary of State Colin Powell on Nov. 16, saying they welcomed the department's efforts. But they reported that most of the problems their members had experienced with visa delays persisted and that the number of visa applications being rejected appears to be on the rise.

On the positive side, an omnibus spending bill agreed upon by House and Senate negotiators will increase the number of H-1B visas available for fiscal year 2005. H-1B visas allow employers to hire foreigners with advanced degrees from American universities for highly skilled work. Under current law, the government can issue only 65,000 H-1B visas per fiscal year. But this fiscal year, the demand was strong enough to reach the cap on Oct. 1, the very first day. The spending bill's provision will raise it by 20,000. The new limit will be effective 90 days after President Bush signs the bill.