The U.S. Commerce Department’s Bureau of Economic Analysis (“BEA”) oversees a key survey of U.S. direct investment abroad. The survey imposes a reporting requirement on many U.S. asset managers and companies with foreign affiliates, and the first responses are due by the end of May 2015. BEA conducts this BE-10 Benchmark Survey of U.S. Direct Investment Abroad every five years, and U.S. persons within its scope must report information on their operations, as well as their foreign affiliates. On November 20, 2014, BEA published a final rule that requires all entities subject to the reporting requirements to file responses, regardless of whether they are individually contacted by BEA. Given the broad scope of the potential respondent universe, U.S. asset managers and companies should carefully evaluate whether they may be required to file responses, even if they have not previously responded to BEA surveys.

The BE-10 Survey and Reporting Requirements

The BE-10 survey gathers comprehensive information on U.S. businesses and their foreign affiliates in order to evaluate the magnitude and impact of U.S. direct investment abroad. Responses are required from any U.S. person that owned or controlled, directly or indirectly, at least 10% of the voting interest of a foreign business enterprise at any time during the U.S. person’s 2014 fiscal year. There are several types of BE-10 forms, and a company may need to submit multiple forms depending on the number and size of its foreign affiliates.

  • The BE-10A covers the U.S. reporter, and must be completed if, during the reporter’s 2014 fiscal year, the U.S. domestic had total assets, sales or gross operating revenues, or net income over $300 million (positive or negative).
  • The BE-10B must be submitted for each majority-owned foreign affiliate of a U.S. reporter that, during the affiliate’s 2014 fiscal year, had total assets, sales or gross operating revenues, or net income over $80 million (positive or negative).
  • The BE-10C must be submitted for:
    1. each majority-owned foreign affiliate of a U.S. reporter that, during the affiliate’s 2014 fiscal year, had total assets, sales or gross operating revenues, or net income between $25 million and $80 million (positive or negative);
    2. each minority-owned foreign affiliate of a U.S. reporter that, during the affiliate’s 2014 fiscal year, had total assets, sales or gross operating revenues, or net income over $25 million (positive or negative); and 
    3. each foreign affiliate of a U.S. reporter that, during the affiliate’s 2014 fiscal year, had total assets, sales or gross operating revenues, or net income below $25 million (positive or negative), but is a foreign affiliate parent of a company for which the U.S. reporter has submitted a BE-10B or BE-10C response.
  • The BE10-D must be submitted for any foreign affiliate of a U.S. reporter that, during the affiliate’s 2014 fiscal year, had total assets, sales or gross operating revenues, or net income below $25 million (positive or negative). The BE-10D is a schedule where multiple foreign entities may be listed.

While only U.S. persons are technically responsible for submitting reports, they must file forms BE- 10B/C/D on behalf of their foreign affiliates. As a practical matter, BEA recognizes that the U.S. reporter may not always be able to obtain all of the required information for the foreign affiliate, especially if the U.S. company does not in fact control the foreign company. However, the U.S. reporter is required to submit all the information that it has available for the BE-10 survey.

BEA has issued important guidance on determining control of voting interests in limited partnerships (“LP”) and limited liability companies (“LLC”). For purposes of the BE-10 survey, a general partner is considered to control 100% of the voting interests of an LP and a managing member is considered to control 100% of the voting interests of an LLC (unless the LP or LLC agreements specify otherwise). Therefore, if a U.S. person holds only a limited partner interest in a foreign LP or is a non-managing member of a foreign LLC, that relationship would not be considered reportable U.S. direct investment abroad.

Also, for purposes of determining the nationality of U.S. and foreign entities, BEA only looks at the country in which the entity is organized. It does not look to the nationality of the persons that own or control the entity. Therefore, a U.S. general partner must report its interest in a Cayman Islands LP, regardless of the nationality of the limited partners or where that LP conducts business.

In its final rule, in response to a comment that responding to the BE-10 survey would be especially burdensome for U.S. hedge funds, BEA indicated that it may provide specific guidance for hedge funds. Unfortunately, BEA has not yet released any such guidance. U.S. reporters filing fewer than 50 BE-10B/C/D forms must respond by May 29, 2015.

U.S. reporters filing 50 or more BE-10B/C/D forms must respond by June 30, 2015. BEA will consider extension requests received on or before the original due date for the U.S. reporter. The forms and additional information are available on the BEA website.

Conclusion

The scope of the BE-10 survey is quite broad and will likely require responses from many entities that have not previously submitted BEA survey responses. Asset managers in particular should assess whether they meet the reporting requirements in relation to foreign-incorporated funds or portfolio companies. Because the BE-10 forms require compilation of a significant amount of data, companies should begin identifying their foreign affiliates and preparing BE-10 survey responses well in advance of the deadlines.