Israel Feels Pinch of Trump Tech Visa Policy

Rejection rate for key H-1B track is soaring but new E2 option could come to the rescue for many

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A signage displayed outside Facebook Inc. headquarters in Menlo Park, California, U.S.
A signage displayed outside Facebook Inc. headquarters in Menlo Park, California, U.S.Credit: AFP

For years the giants of Silicon Valley, Google and Facebook weren’t used to being turned down by U.S. immigration authorities when they sought to bring in foreign workers using the H-1B visa track. Their rejection rates were between nil and 1%.

But under the Trump administration and its “Buy American and Hire American” executive order signed in April 2017, that has changed. For Israeli techies and companies, with their deep links to the U.S. high-tech industry, that may have profound implications.

A recent study by the National Foundation for American Policy, a nonpartisan public policy research organization focusing on trade and immigration, found that the rejection rate for H-1B visas has risen to 33% this year. Turndowns for H-1B visa extensions have reached 14%.

The H-1B visa is a Silicon Valley favorite used to bring in foreign residents with special skills and is also used by foreign students studying in the U.S. to get their first jobs after graduation. Many Israelis make use of it.

Other evidence of the extent to which Trump’s immigration policies, which extend to a wider hostility to all kinds of immigration, are in figures from the U.S. National Association of Colleges and Employers: It found that in 2019 just 23.4% of employers surveyed said they planned to hire international students, down from a high of 34.2% in 2015.

Cindy Azoulay, a partner in the Ramat Gan law office of Kan-Tor & Acco and head of its U.S. immigration practice, said the problem has been exacerbated by the vagueness and uncertainty of the new rules. Israeli companies planning to send staff to the U.S. and multinationals relocating their israeli employees to the U.S. are having trouble making long-term staffing plans, she warned.

Israel’s Economy and Industry Ministry estimates that about 1,200 Israeli tech companies, most of them startups, have some kind of presence in the U.S.

However, Stuart Anderson, the National Foundation for American Policy’s executive director, told Bloomberg that the Trump policy goal of creating more jobs for Americans by cracking down on visas would backfire.

“Companies can move people to other countries, and they also can move more work to other countries, which in the long run is not going to be good for U.S. workers,” he said.

As home to some 320 multinational research and development centers already and a tech workforce with a global reputation, Israel could benefit from U.S. companies sending more of the R&D work abroad. However, it may face the obstacles of high costs and the huge distance from the U.S. Anderson said Canada was likely to be the biggest beneficiary.

Meanwhile, for Israeli companies operating in the U.S. a new track opened in May with the U.S. E2 visa, noted Azoulay. Known as the “investors” visa, it isn’t limited to investors in the way the high-tech industry understands it, for instance to angels and venture capital funds, Rather it is for entrepreneurs and their employees,

The E2 doesn’t require holders to have an academic degree or show they have worked for the host company for a minimum period of time. There is no quota per company for how many are issued. E2 visas are only issued to nationals of a few countries that, like Israel, have parallel programs for Americans.

However, there is a catch: The company applying for E2 visas must be 50% Israeli-owned. For the youngest startups, that’s usually not a problem because they have raised their capital locally. More mature companies usually turned to foreign backers.

“A company can lose its Israeliness not only because an American fund invests but a Chinese or European fund does,” said Tsvi Kan-Tor of the Kan-Tor & Acco office. “So a situation is created where it’s no longer qualified for a visa under E2 and needs to rely on H-1B and meets up with Trump’s strongest policies.”

Even an Israeli VC fund as an investor is not sure-fire defense, since many Israeli VCs are backed by American capital. Whether the nationality of the partners or the capital is the deciding factor isn’t clear right now, and a ruling may hinge on the powers of the company’s attorney.