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AAO Overturns an L-1A Denial Based on Lack of a “Qualifying Relationship” Between Two Companies

The L-1A nonimmigrant visa facilitates the movement of intra-company transferees into the U.S. to fulfill work assignments at the managerial or executive level. It enables an international company with a parent, subsidiary, branch or affiliate in the U.S. to temporarily shift a foreign employee to a U.S. location. On October 4, 2012, the Administrative Appeals Office (AAO) of the USCIS overturned the California Service Center’s denial of an L-1A petition based on the lack of a qualifying relationship between the foreign and U.S. companies.

In this case, the L-1A petitioner was a U.S. company selling prepaid calling cards in Latino communities throughout the United States. In October 2010, a Mexican calling card company acquired a 51% interest in the U.S. company by paying $51 to its owner. The foreign company stood to increase its revenues by joining the two distribution networks into one. The purchase price was agreed upon by both parties because the U.S. company, while achieving substantial sales, had over $250,000 of debt. In addition to the $51 payment, the foreign company provided $200,000 to help the U.S. company satisfy its creditors.

The U.S. company filed an L-1A petition to bring an employee of the Mexican company to the U.S. as a General Manager. The director of the California Service Center (CSC) denied the petition, stating that the petitioner had failed to establish a parent-subsidiary relationship as required by the L-1A regulations. According to the CSC, the evidence did not establish that the Mexican company had, in fact, paid for its majority interest in the U.S. company. Following the denial, the case was appealed to the AAO.

According to the L-1 regulations, a petitioner for an L-1 employee must establish that there is a “qualifying relationship” with the foreign company where the employee currently works. The qualifying relationship includes a parent-subsidiary relationship, and such a relationship exists when one company owns more than one half of another company and controls the other company. However, the CSC took issue with the manner in which the U.S. company was acquired. It decided that that the $51 purchase price was too low to justify a valid parent-subsidiary relationship. The funds used to satisfy the U.S. company’s creditors were disregarded because they were not transferred directly to the company.

On appeal, the AAO concluded that these concerns were misplaced. In its view, the petitioner had provided a sufficiently detailed and reasonable explanation of the low purchase price paid by its Mexican parent. Because the AAO saw no reason to doubt the validity of the transaction, it overturned the CSC’s denial and approved the petition.

Today, many L-1A petitioners are receiving a request for evidence (RFE) from the USCIS, and an increasing number of having their cases denied. According to the USCIS, 51% of L-1A petitions filed in 2011 generated RFEs, up from 37% in 2010. Approximately 14% of L-1A petitions were denied in 2011, similar to the 13% seen in 2010.

While these statistics are somewhat discouraging for U.S. employers, they also suggest that when an L-1 petition is supported by solid evidence, most RFEs can be overcome to secure USCIS’ approval for the case. In this specific case, despite a somewhat challenging fact pattern and an initial denial, the L-1 category proved to be a viable option for the foreign employer to transfer employees to the United States.

Immigration Law Associates has been assisting U.S. businesses in obtaining employment-based immigrant and nonimmigrant visas for over 20 years. We offer unmatched expertise and an up-to-the-minute understanding of the latest adjudication trends. If you are considering adding a foreign national to your staff in L-1 or any other status, we would be delighted to advise you.


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