The American challenge for Indian IT industry continued over the weekend. American challenges are nothing new for the Indian IT industry. For the last 5 years, Indian IT industry has been facing up to challenges like the slowdown in BFSI segment, weakness in telecom & hydrocarbon verticals, negative growth in tech spending, shift to digital etc. What has changed in the last couple of months is that the challenges are more on the regulatory front. For example, the Trump administration has already promised to make the H1-B visa requirements more stringent and also put limits on the number of green card issuances per year. In addition, the Trump administration has also proposed a Border Tax on US companies looking to outsource production or services to other countries. It is in this background that the recent announcement by the Trump administration to impose a temporary suspension on “Premium Processing of H1-B” visas needs to be looked at.
So, what exactly are Premium H1-B Visas?
The “US Citizenship and Immigration Services” (USCIS) has clearly defined the criteria for H1-B visas. For example to be eligible for an H1-B visa, the applicant must first have an employee-employer relationship with a US-based employer. Additionally, the applicant must possess some specialized knowledge or skill that is not available locally. The applicant will also have to be paid the actual or prevailing wage for a similar role in the US. The US has an annual cap for the number of H1-B visas to be issued and that has been currently be pegged at 85,000/- visas per year (Oct-Sep).
The normal time process for H1-B visas ranges from 3-6 months depending on the evidence and documentation provided. However, employers have been provided a special window which is referred to as the “Premium Processing Service”. By paying an additional fee of $1225 per application, the entire H1-B visa can be processed in 15 days. To avail Premium Processing, the applicant will have to file Form I-907 along with the H1-B visa petition. Once the requisite additional fee of $1225 is paid, these Form I-907 visas are processed on a priority basis within 15 days. It is this use of Form I-907 for premium processing that is banned by the USCIS effective April 03rd 2017. Of course, it will be technically a temporary ban for a period of 6 months only, but subject to review.
Does this mean that there will be no priority processing for US Visas?
According to the USCIS, the premium processing was putting tremendous pressure on the existing workload at the USCIS. As a result, normal visa approval times and the visa renewal times were getting inordinately delayed. However, the USCIS has not entirely closed the window for priority processing of visa applications. What has been banned is Premium Processing where there were no stringent criteria for opting for priority processing. Post this ban on premium processing the USCIS has kept the “Expedite Window” open but that will be only for very deserving cases. As per the “Expedite” criteria, such applications to expedite the visa issuance will only be considered on emergency grounds, humanitarian grounds or where the US as a nation stands to benefit substantially. Most of the Indian IT companies were extensively using this facility to get visas within 15 days to send their people abroad. Obviously, most Indian corporates looking to doing business in the US will not qualify under the expedite criteria. That means they will have to wait out the complete 6 months period for getting their visas applications approved. However, this suspension is only temporary, at least for now!
What will be the impact on Indian IT industry?
While the NASSCOM does not expect any long term impact, analysts are sceptical. Even independent IT observers like Gartner are of the view that short term business commitments by Indian IT companies to their US clients could get negatively impacted by this suspension on Premium Processing. For most IT companies the cost of $1225 was quite affordable to get their H1-B visa applications processed in 15 days. More than 50% of the requests for Premium Processing of H1-B visas came from Indian companies who were looking to reduce their turnaround time for addressing pressing client requirements. That flexibility will not be available to Indian IT companies any longer and that could impact the readiness of Indian IT companies to commit to their clients in the US. If the suspension is only for a temporary period of 6 months till the backlog is cleared then that is something most Indian IT companies will be able to live with. However, if this suspension was to continue for longer then it could be a big challenge for Indian IT companies as it will substantially reduce their flexibility with respect to their dealings with their clients.
There obviously seems to be a method which Donald Trump has been employing to give precedence to Americans in the US job market. The ban on Premium Processing of H1-B visas may be temporary but the message for IT companies seems to be crystal clear. They need to look beyond their traditional outsourcing model with America as the fulcrum market. That model needs to change sooner rather than later!
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