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Good news for U.S. employers seeking to hire H-1B workers who qualify under the new advance degree exemption created by the U.S. Congress. On May 7, the Department of Homeland Security (DHS) published an interim rule implementing the H-1B Visa Reform Act of 2004 (HVRA), 70 Fed. Reg. 23775 (May 5, 2005). This provision exempts 20,000 H-1B visas from the annual 65,000 cap by giving U.S. employers the ability to file H-1B petitions on behalf of foreign workers who have earned a master’s or higher degree from a U.S. institution of higher education, as defined under � 101(a) of the Higher Education Act of 1965. The bad news is HVRA significantly increases the filing fees for H-1B petitions. The HVRA, signed into law by President Bush in December 2004, was part of the Omnibus Appropriations Act of Fiscal Year 2005. Pub. L. No. 108-447, 118 Stat. 2809 (adding Immigration and Nationality Act (INA) � 214(g)(5)(C), 8 U.S.C. 1184(g)(5)(C)). HVRA amends the INA � 214(g)(5) by adding an advance degree exemption to the annual H-1B cap. DHS initially predicted that the new advance degree exemption of 20,000 would be exhausted on the first day of its availability, which was on May 12. Fortunately for U.S. employers, this prediction proved to be inaccurate. On May 24, United States Citizenship and Immigration Services (USCIS) issued a press release announcing that they had received only 6,393 H-1B petitions in this exempted category. Further, government officials speaking at the American Immigration Lawyers Association’s annual conference held in Salt Lake City in June announced that approximately 8,300 H-1B petitions have been approved or are in the pipeline that will count against the cap. Most recent cap count for H-1B visas posted on USCIS’ Web site shows 9,850 advance degree exemptions still remaining as of July 28. Even with this hopeful information, however, at this rate, H-1B visas for foreign nationals possessing master’s degrees or higher may still fall short of bridging the H-1B cap-gap between fiscal years 2005 to 2006. More distressing news for U.S. businesses in need of foreign workers with specialized knowledge is that only 9,160 nonexempt H-1B visas remain for all of FY 2006, which does not begin until Oct. 1, 2005. BACKGROUND OF H-1B CAP In 1990, Congress passed the Immigration and Nationality Act of 1990 (IMMACT 90), which established a numeric limit, or “cap,” for each fiscal year on the H-1B nonimmigrant visa classification, Pub. L. No. 101-649, 104 Stat. 4978 (November 29, 1990). Initially, the cap was set at 65,000 H-1B visas per fiscal year. The fiscal year runs form October 1 to September 30. From 1992 to 1996, the H-1B cap was never reached. However, in 1997 the H-1B cap was reached for the first time in mid-August, six weeks prior to the start of the fiscal year. In 1998, the carry-over from FY 1997 combined with an increase in H-1B filings, mainly due to the ground swell of demand from the technology sector, and the cap was reached five months prior to the start of the next fiscal year. Between 1998 and 2000, two laws were passed that increased the number of H-1B visas — from 65,000 to 115,000 for FYs 1999 and 2000, and from 116,000 to 195,000 for the FYs 2001 through 2003. American Competitiveness and Workforce Improvement Act of 1998 (ACWIA), Pub. L. No. 105-277, 112 Stat. 2681; American Competitiveness in the 21st Century Act (AC21), Pub. L. No. 106-313, 114 Stat. 1251. AC21 had a sunset provision, however, that reduced the cap back to 65,000 on Oct.1, 2003, for FY 2004. Only five months into the FY 2004, on Feb. 17, 2004, USCIS announced that the cap had been reached and that it was suspending all H-1B filings subject to the cap for FY 2005 until April 1, 2004. H-1B petitions submitted after this date were adjudicated with a start date of Oct. 1, 2004. The carry-over from FY 2004 impacted the 65,000 cap for FY 2005. Sure enough, USCIS on Oct. 1, 2004, announced that the H-1B cap had been reached for FY 2005 and again suspended all H-1B filings subject to the cap for FY 2006 until April 1, 2005, with a start date of Oct. 1, 2005. On Dec. 8, 2004, President Bush signed into law HVRA to alleviate the burden on U.S. employers’ ability to hire H-1B workers by making available additional H-1B visas for FY 2005. H-1B VISA REFORM ACT OF 2004 Effective May 12, U.S. employers may file an H-1B visa petition on behalf of qualified foreign nationals under the newly created advance degree exemption. Petitioners qualifying under this exemption may also seek to “upgrade” their pending or approved FY 2006 H-1B number to a FY 2005 number with an immediate start date. For FY 2005 H-1B filings only, USCIS has designated a special address at the Vermont Service Center (VSC): USCIS Vermont Service Center, 1A Lemnah Drive, St. Albans, VT 05479-7001. Only H-1B petitions filed at this location will be deemed eligible for a FY 2005 number. USCIS has also announced that it is suspending H-1B e-filings for both FY 2005 and FY 2006 filings. With the passing of HVRA, USCIS has recently revised its forms to collect data in processing H-1B visas, which USCIS intends to use to better forecast when the cap will be reached for the upcoming fiscal years. Therefore, as of May 30, all H-1B submissions must be on new Form I-129. U.S. employers who have already filed for or received a FY 2006 number but are seeking an earlier start date for their H-1B workers may “upgrade” to a FY 2005 number. To upgrade, the petitioner must submit the following: (1) a letter requesting an upgrade; (2) a copy of Form I-797, Notice of Action, Approval Notice for FY 2006 or Form I-797, Notice of Action, Receipt Notice for FY 2006; (3) a copy of the first page of Form I-129, (only if a receipt notice has not been received); and (4) a certified Labor Condition Application from U.S. Department of Labor valid for the period of requested employment. The request for an upgrade to a FY 2005 number must be submitted to the VSC special address listed above. These upgrades are subject to the timing rules and will be treated as having been filed on the date of receipt at VSC. If a FY 2005 number is not available for an upgrade, the petitioner with an unapproved petition will go back in the queue for a FY 2006 number according to the date the petition was initially filed. Thus, the petitioner will not be penalized for requesting an upgrade. Petitioners seeking to upgrade to a FY 2005 number, who filed for a FY 2006 number using the Premium Processing service, whose petitions are still pending, will not need to submit a new Form I-907 nor fee. On the other hand, those who want to both upgrade and expedite the adjudication of the FY 2005 H-1B petition must include a Form I-907 with the corresponding $1,000 fee and file it with VSC at its special address. After publication of the interim rule, USCIS has addressed several operational issues related to the implementation of the HVRA. For example, petitioners seeking an upgrade to FY 2005 number who have filed an H-1B petition for FY 2006 but received a request for evidence (RFE) from the Service Center must send the requested evidence to the Service Center that issued the RFE, posted on AILA Infonet at Doc. No. 05051061 (May 10, 2005). These petitioners, however, must submit their upgrade request with the VSC’s special address. In addition, USCIS affirmed in a post-publication teleconference that petitioners with an approved FY 2006 without an approved change of status will be able to change status by requesting an H-1B upgrade to FY 2005. According to USCIS, a change of status under these circumstances, however, will be approved only if “the beneficiary is in a valid nonimmigrant status as of the requested FY start date.” ADDITIONAL FEES The burden on the U.S. employers’ ability to hire H-1B workers may be temporarily lifted, but it comes with a hefty price. HVRA imposes two additional fees. First, it reinstitutes and modifies the ACWIA fees to $1,500 (for employers with 26 or more U.S. full-time equivalent employees) or $750 (for employers with 25 or less U.S. full-time equivalent employees). Second, it creates a $500 fraud prevention and detection fee, which became effective March 8, 2005. Thus, add the $185 H-1B petition fee and U.S. employers with 26 or more employees must now pay, at a minimum, $2,185 to file an H-1B petition exclusive of legal fees and the $1,000 premium processing fee. As a practical matter, in submitting these fees to USCIS, the fees should not be combined in a single check or money order. Instead, it is recommended that a separate check for each fee be submitted with the checks made out to the “Department of Homeland Security.” Therefore, in some cases, a petitioner may need to submit four separate checks or money orders to USCIS. This is very important because USCIS will reject an H-1B petition if it is submitted without the proper filing fees, which may spell disaster for U.S. employers if the cap is reached in the process. At least for the time being, with the implementation of HVRA, U.S. employers will now be able to hire H-1B workers who possess a master’s degree or higher from a U.S. institution. Although the demand for these H-1B visas has been less than initially anticipated, the 20,000 exempted H-1B visas may not be enough to bridge the cap-gap for FY 2005, and with the most recent cap count numbers published by USCIS, H-1B visas may not be available for FY 2006 even before it begins on October 1, 2005. Consequently, even with the implementation of HVRA and the news of its continued availability for FY 2005, the burden on U.S. employers’ ability to hire foreign professionals with theoretical or technical expertise in a specialized field may still not be entirely lifted. Harry Asatrian, managing partner of Asatrian and Asatrian of Newark, N.J., practices immigration and nationality law with special emphasis on corporate and employment-based immigration matters.

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