On November 24, 2014, the Department of Commerce’s Bureau of Economic Analysis (BEA) reinstated mandatory Form BE-13 (Survey of New Foreign Direct Investment in the United States), which collects new foreign direct investment (FDI) survey data on the acquisition, establishment, or expansion of U.S. businesses by foreign investors. FDI is defined as a foreign person’s ownership or control, directly or indirectly, of a 10% or greater voting interest in a U.S. business, which includes U.S. legal entities, branch offices, and real estate (improved or unimproved), except for residential real estate held exclusively for personal use and not-for-profit-making purposes. The obligation to submit the required Form BE-13 filing applies to the U.S. business in which the investment is made (the U.S. affiliate), not to the foreign investor, and the filing also must include information on certain of the U.S. affiliate’s subsidiaries. Moreover, the filing requirement applies irrespective of whether BEA has contacted the parties about the transaction.
The BE-13 survey, which was discontinued in 2009 due to budget constraints, expands on the prior reporting obligations by requiring data not only on the acquisition or establishment of U.S. businesses by foreign persons (as the previous Form BE-13 required), but also on the expansion of existing U.S. affiliates. The information included in BE-13 filings is confidential and may be used by BEA only for analytical or statistical purposes. Key elements of the new BE-13 reporting requirements are set forth below.
As of November 24, 2014, the U.S. affiliate must file Form BE-13 within 45 days of the effective date of the reportable transaction. The Form BE-13 filing requirement also applies retroactively to any transaction completed in 2014. For transactions completed on or before November 24, 2014, the filing is due by January 12, 2015. BEA will consider reasonable requests for extension of the filing deadline if such requests are made prior to the due date.
The U.S. affiliate, not the foreign investor, is subject to the BE-13 reporting requirements. Depending on the type of transaction, the U.S. affiliate is required to use one of six forms:
- Form BE-13A – report for a U.S. business enterprise when a foreign entity acquires a voting interest (directly, or indirectly through an existing U.S. affiliate) in that enterprise, segment, or operating unit, and (i) the total cost of acquisition is greater than $3 million; (ii) the U.S. business enterprise will operate as a separate legal entity; and (iii) by this acquisition, at least 10 percent of the voting interest in the acquired entity is now held (directly or indirectly) by the foreign entity.
- Form BE-13B – report for a U.S. business enterprise when a foreign entity, or an existing U.S. affiliate of a foreign entity, establishes a new legal entity in the United States and (i) the projected total cost to establish the new legal entity is greater than $3 million and (ii) the foreign entity owns 10 percent or more of the new business enterprise’s voting interest (directly or indirectly).
- Form BE-13C – report for an existing U.S. affiliate of a foreign parent that acquires a U.S. business enterprise or segment that it then merges into its operations and the total cost to acquire the business enterprise is greater than $3 million.
- Form BE-13D – report for an existing U.S affiliate of a foreign parent when it expands its operations to include a new facility where business is conducted and the projected total cost of the expansion is greater than $3 million.
- Form BE-13E – report for a U.S. business enterprise that previously filed a BE-13B or BE-13D indicating that the established or expanded entity is still under construction. This form will not be available until 2015.
- Form BE-13 Claim for Exemption – report for a U.S. business enterprise that (i) was contacted by BEA but does not meet the requirements for filing forms BE-13A, BE-13B, BE-13C, or BE-13D or (ii) whether or not contacted by BEA, met all requirements for filing on Forms BE-13A, BE-13B, BE-13C, or BE-13D except for the $3 million reporting threshold.
Transactions of $3 Million or Less Still Require a Filing
U.S. businesses involved in transactions that meet the reporting criteria for Forms BE-13A, BE-13B, BE-13C, or BE-13D but that fall at or below the $3 million threshold are still required to file Form BE-13 Claim for Exemption. Therefore, all U.S. companies involved in transactions with a foreign investor – whether an acquisition, establishment, or expansion of a U.S. business – should carefully consider their filing obligations, no matter the size of the transaction.
Any U.S. affiliate submitting a Form BE-13 must file on a “consolidated domestic basis,” meaning that the form must incorporate information on the U.S. affiliate, as well as any U.S. business in which the U.S. affiliate owns more than 50% of the voting interest.
Penalties for Noncompliance
Possible sanctions for failure to file Form BE-13 include civil penalties and injunctive relief requiring compliance. Willful failure to report could lead to criminal fines, imprisonment, or both.
Additional Investment Surveys
BEA conducts a benchmark FDI survey every five years, with the next survey set to be conducted in 2017. For this survey, U.S. affiliates must complete Form BE-12 irrespective of whether BEA contacts them. BEA may also request that a U.S. business complete Form BE-605, a quarterly survey of information on transactions between a U.S. business and its foreign parent(s) and foreign affiliates of the foreign parent(s), or Form BE-15, an annual survey for financial and operating data of U.S. affiliates. However, if BEA does not contact a U.S. business about completing Form BE-605 or Form BE-15, the business is not required to complete the survey form.