GENERAL INFORMATION

The Bureau of Economic Analysis (BEA) reinstated certain reporting requirements for foreign direct investments in the U.S. that had been abolished in 2009, for lack of funding. Under the reinstated requirements, U.S. affiliates of foreign persons have to file a Form BE-13 for certain activities undertaken in the U.S. “US affiliates” are all U.S. business entities in which a foreign company or foreign individual owns directly or indirectly at least ten percent of the voting interest (or the equivalent of such voting interest).

Form BE-13 has to be filed within 45 days after the reportable event. The reporting requirement is reinstated retroactively as of January 1, 2014. Any reportable event that took place prior to November 26, 2014, will have to be reported by January 12, 2015.

Failure to file a required report in a timely manner results in civil penalties of at least $2,500 and not more than $32,500 (the amounts are subject to inflationary adjustments). Anybody who willfully fails to make a report shall be fined up to $10,000, and, if an individual, may be imprisoned for up to one year. Officers, directors, employees or agents of a corporation who knowingly participate in such violations may be punished by such fine, imprisonment or both.

All of the information provided to the BEA is treated confidential and may be used only for analytical or statistical purposes.

DETAILS ON FORMS TO FILE

Which of the various Forms BE-13 a U.S. affiliate has to file depends on the structure of the investment and the value/cost of such investment.

  1. Form BE-13A: Report for Acquisition of a U.S. Business Enterprise that Remains a Separate Entity

The acquired U.S. business entity has to file a Form BE-13A if

  1. the total cost of the acquisition is greater than $3 million;
  2. the acquired U.S. entity will operate as a separate legal entity; and
  3. the (direct or indirect) foreign ownership in the U.S. entity amounts to at least 10 percent of the voting interest in such entity.
  1. Form BE-13B: Report for Establishment of a New Business Enterprise

The newly established U.S. business entity has to file a Form BE-13B if

  1. the projected total cost to establish the new legal entity exceeds $3 million; and
  2. the (direct or indirect) foreign ownership in the U.S. entity amounts to at least 10 percent of the voting interest in such entity.

“Total cost” shall include (i) actual expenditures from past years and expected expenditures for current and future years, and (ii) cost of equity interests.

  1. Form BE-13C: Report for Acquisition of a U.S. Entity that is Merged with an Existing U.S. Affiliate of a Foreign Entity

The existing U.S. affiliate of the foreign parent has to file a Form BE-13C if

  1. the existing U.S. affiliate acquires another U.S. business enterprise that it then merges into its operations; and
  2. the total cost to acquire the other enterprise exceeds $3 million.
  1. Form BE-13D: Report for the Expansion of an Existing U.S. Affiliate

The existing U.S. affiliate of the foreign parent has to file a Form BE-13D if

  1. it expands its operations to include a new facility where business is conducted; and
  2. the projected total cost of the expansion exceeds $3 million.

 

  1. Form BE-13: Claim for Exemption

Any U.S. entity has to file this report if it met all of the requirements of either of the aforesaid forms, with the exception of the $3 million threshold.

CONCLUSION

The civil and criminal fines imposed for failure to comply with the reporting requirements make it imperative for any U.S. affiliate of a foreign person to familiarize itself with the filing requirements for Forms BE-13. Attention has to be paid to details, for example: The construction or lease of a new facility by an existing U.S. affiliate requires the filing of a Form BE-13D (if the projected total cost of the expansion exceeds $3 million) or Form BE-13 / Claim for Exemption (if the projected total cost are less than $3 million). However, an expansion of an existing facility that does not involve a separate facility where business is conducted will not require any Form BE-13 filing.