Here is the easiest reading. It is from November 2005 bulletin. They specifically stated that the 7% limit was going to apply.
http://travel.state.gov/visa/frvi/bulletin/bulletin_2712.html
D. EMPLOYMENT PREFERENCE VISA AVAILABILITY
The backlog reduction efforts of both Citizenship and Immigration Services and the Department of Labor continue to result in very heavy demand for Employment-based numbers. The amount of cases currently being processed is sufficient to use all available numbers in many categories. The level of demand in the Employment categories is expected to be far in excess of the annual limits, and once established, cut-off date movements are likely to be slow.
WHAT CAUSES THE ESTABLISHMENT OF CUT-OFF DATES?
The Visa Office subdivides the annual preference and foreign state limitations specified in the Immigration and Nationality Act (INA) into twelve monthly allotments. The totals of documentarily qualified applicants that have been reported to VO are compared each month with the numbers available for the next regular allotment and numbers are allocated to reported applicants in order of their priority dates, the oldest dates first.
If there are sufficient numbers in a particular category to satisfy all reported documentarily qualified demand, the category is considered “Current.” For example, if the Employment Third preference monthly target is 5,000 and there are only 3,000 applicants, the category is considered “Current”.
Whenever the total of documentarily qualified applicants in a category exceeds the supply of numbers available for allotment for the particular month, the category is considered to be “oversubscribed” and a visa availability cut-off date is established. The cut-off date is the priority date of the first documentarily qualified applicant who could not be accommodated for a visa number. For example, if the Employment Third preference monthly target is 5,000 and there are 15,000 applicants, a cut-off date would be established so that only 5,000 numbers would be used, and the cut-off date would be the priority date of the 5,001st applicant.
WILL THERE BE CUT-OFF DATES FOR ANY ADDITIONAL FOREIGN STATES IN THE FIRST AND SECOND PREFERENCE CATEGORIES?
It may be necessary to establish a cut-off date for the “All Chargeability Areas” Second preference category at some point during the second half of the fiscal year. It is too early to estimate whether future demand will warrant such action. As of October 1st, cut-off dates for the First and Second preferences for China and India were established due to heavy demand; cut-off date movement is expected to be limited until a demand pattern has been determined.
WHY ARE THERE CUT-OFF DATES THIS YEAR AS OPPOSED TO PREVIOUS YEARS, WHEN THE CATEGORIES WERE CURRENT?
While the Employment categories had been “Current” for almost four years, several important factors affected the decision to implement cut-offs for FY-2006.
Prior to July 2001, demand for Employment numbers was such that cut-off dates were in effect for many categories, and that is the case once again for FY-2006.
The reasons the Employment categories had become current were:
The American Competitiveness in the Twenty-First Century Act (AC21) recaptured a “pool” of 131,000 Employment numbers unused in fiscal years 1999 and 2000, and allowed those recaptured numbers to be used by the oversubscribed countries, and
The substantial decline in demand for numbers for adjustment of status cases prevented the annual limits from being reached for several years.
In FY-2006, we are faced with continuing heavy demand due to the DHS and DOL backlog reduction efforts, along with an Employment limit which is approximately 40% lower than that of FY-2005. The lower annual Employment limit is a result of the virtual elimination of the “pool” of recaptured AC21 numbers, returning us to the pre-July 2001 situation.
WHAT ABOUT SCHEDULE A NUMBERS?
The 50,000 Schedule A numbers will provide relief to many Employment preference applicants, since any Schedule A applicant whose priority date is beyond the relevant Employment preference cut-off date can be processed and charged against the 50,000 limit. It is expected that Schedule A numbers will be available on a “Current” basis throughout all of FY-2006.
HOW IS THE EMPLOYMENT-BASED PER-COUNTRY LIMIT CALCULATED?
Section 201 of the INA sets an annual minimum Family-sponsored preference limit of 226,000, while the worldwide annual level for Employment-based preference immigrants is at least 140,000. Section 202 sets the per-country limit for preference immigrants at 7% of the total annual Family-sponsored and Employment-based preference limits, i.e. a minimum of 25,620.
The annual per-country limitation of 7% is a cap, meaning visa issuances to any single country may not exceed this figure. This limitation is not a quota to which any particular country is entitled, however. The per-country limitation serves to avoid monopolization of virtually all the visa numbers by applicants from only a few countries.
The AC21 removed the per-country limit in any calendar quarter in which overall applicant demand for Employment-based visa numbers is less than the total of such numbers available.
In recent years, the application of the rules outlined in AC21 has allowed countries such as China – mainland born, India, and the Philippines to utilize large amounts of employment numbers which would have otherwise gone unused.
During FY-2006, due to anticipated heavy demand, the AC21 provisions are not expected to apply, and the amount of Employment numbers available to any single country will be subject to the 7% cap. It is anticipated that the addition of unused FY-2005 Family numbers and the remaining AC21 numbers to the 140,000 annual minimum will result in an FY-2006 annual Employment limit of 152,000.
This will mean an Employment per-country limit for FY-2006 of approximately 10,650.
To illustrate the effect of the reduced per-county limitation during FY-2006 on the oversubscribed countries, it should be noted that during FY-2005 India used approximately 47,175 Employment numbers.