Does USCIS have the discretion to apply CIMT when in reality someone does not have the CIMT ban by legal definition, as it was placed by the consulate or USCIS?
No, legal definitions are not subject to discretion. If the crime is not a CIMT, then they cannot determine that it is.
The above is intended only as general information, and does not constitute legal advice. You must speak with an attorney to discuss your individual case.
Your question is unclear.
US CIS must follow the decisions of the Board of Immigration Appeals and Federal Courts. But, they have the authority to 'interpret' a conviction as a CIMT if it is a matter of first impression.
As for the Consular Officers, they have much more discretion.
Consult with an attorney.
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No. they are bound by law and legal interpretations of the agency and the courts. You should be bound by common sense. This is why you should have a consultation with a good immigration attorney in AZ.
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I am going to take a wild guess here that you have applied for an I-601A waiver. If that is the case (and I hope it is not) USCIS has taken the position---currently--that ANY criminal conduct or conviction gives them "reason to believe" you are inadmissible to the U.S. (In fact, they are even using some non-criminal conduct, like a civil traffic violation, to prevent you from going forward.) That means, even conduct or convictions that are very clearly not CIMTs or otherwise grounds of inadmissibility are going to prevent you from proceeding on the I-601A.
IF you are in this position, please contact an experienced immigration attorney who can properly assist you with this. It is my understanding that USCIS is working on a better policy, and hopefully that policy will be forthcoming soon.
This answer is general in nature, and not intended as legal advice. You are advised to contact a qualified immigration attorney who can analyze the specific facts of your case, and who can give you accurate legal advice.