'It's going to come back and hurt US'

“This could be the beginning of a trade war. It’s going to come back and hurt the US in so many ways, both short term and long term,” warns Sanjay Puri, president of the Washington-based lobby group USINPAC.

But politicians in the US are scrambling for votes from American voters, not from Indian companies.

With the US House of Representatives passing a $600-million border security bill on Tuesday that was virtually identical to the one passed by the Senate last Thursday, the stiff increases in visa filing fees — by $2,000 or $2,250 for H1B and L1 applications — took another step towards becoming law.

The legislation proposes to raise H1B and L1 visa fees for companies that employ more than 50 workers in the US if more than 50 per cent of those employees are H1B or L1 visa holders. The revenue generated from this increase will pay for additional border security measures, including salaries, equipment and technology.

For procedural reasons, the House sent the bill back to the Senate, which will have to pass it again. The Senate is already on its summer recess, and it's not clear whether it will pass the bill when it reconvenes next month or if it will interrupt its recess to pass the bill, as the House did. Once it clears the Senate again, it will have to be signed by President Barack Obama into law.

That seems inevitable, according to immigration lawyer Deborah Notkin, of the New York firm, Barst, Mukamal & Kleiner, and a recent past president of the American Immigration Lawyers Association. "I think it's likely to pass, and I cannot imagine the President vetoing this bill," says Notkin, pointing to the political risk in opposing the bill.

The mid-term Congressional and state-level elections are due in November, and no politician would want to be seen opposing a border security measure at a time when illegal immigration, mostly along its border with Mexico, has emerged as a politically explosive issue in the US. And with the country facing a 9.5 per cent unemployment rate and a weak economic recovery that's already slowing, there's little political risk in supporting a provision that ostensibly punishes employers who are giving work to those who are not US citizens. "That's the danger of these tack-ons," explains Notkin, adding provisions that would never pass as a stand-alone bill are sometimes tacked on to bills hard to oppose.

That would explain the lack of any opposition to the bill either in the House or the Senate, even from members of the India Caucus in both chambers. There's also confusion about some aspects of the bill. Notkin says it's not clear if the 50 per cent upper limit for H1B and L1 hires applies to each category separately or a combination of both. She adds that very few employers would be affected, but believes Indian companies will bear a "big percentage" of the impact. Indian industry has slammed the bill. "It's completely against free trade," says Kiran Pasricha, Deputy Director General of CII, based in Arlington, Virginia. The group is also incensed by Senator Chuck Schumer of New York, one of the bill's authors, singling out Indian companies for blame and referring to Infosys as a "chop shop" during his speech on the Senate floor. "The objection to Indian companies is absolutely shortsighted. They have contributed so much to the US economy and always played by the rule book, and to be called names is completely uncalled for," says Pasricha.

While the visa fee hike has certainly antagonised Indian companies, many of which are actually generating much-needed jobs in the US, it's not even clear if the provision will serve its stated purpose of generating revenue. For one, demand for H1B visas has been falling over the last couple of years. The annual quotas would typically be filled within hours of being opened, but this year's quota, opened in April, is nowhere close to being filled, with fewer than 30,000 regular petitions filed so far as against the annual ceiling of 65,000.

Observers believe the fee increase will backfire. "Companies will pass on their costs to clients or simply take the work offshore," says Puri. That would mean the additional cost of the visa filing would eventually be borne indirectly by the American consumer, or that taxes and other revenue generated by visa holders in the US will decline.

Notkin adds any revenue raised would be a "drop in the bucket" of the budget for border security, and that it would be tough to monitor the use of the funds precisely. She points out there's already a $1,500-fee paid by H1B applicants, which is meant to be used for training US workers, but says, "I'm yet to see a training program where these funds have been used".

While the border security bill, complete with the visa fee hike provision, is well on its way to becoming a law at least until 2014, groups like USINPAC are still trying to lobby against it.

Puri says they have requested meetings with Sen. Schumer, as well as other Democratic leaders like Senate Majority Leader Harry Reid and Sen. Dick Durbin of Illinois. But their efforts are unlikely to generate much sympathy from either the Democrats or Republicans, at least until the elections are over.