On August 14, 2014, the U.S. Commerce Department’s Bureau of Economic Analysis (“BEA”) published a final rule which will reinstate a foreign direct investment survey that was discontinued in 2009 due to budgetary restraints. The rule will become effective on September 15, 2014, and will impose new reporting requirements on U.S. businesses involved in foreign direct investment and create a revised BE- 13 survey form (“BE-13 Survey”).
Unlike other surveys administered by BEA relating to foreign investment, the BE-13 Survey is mandatory for all U.S. businesses subject to the reporting requirements, regardless of whether they have been specifically contacted by BEA. We have summarized below the most salient changes of which U.S. companies, including U.S. affiliates of a foreign parent, should be aware.
History of the BE-13 Survey
The BE-13 Survey was created by BEA in 1977 under the authority of the International Investment and Trade in Services Survey Act1 to collect and analyze data relating to the impact of foreign investment on the United States economy, including how it contributes to unemployment.2 The BE-13 Survey was discontinued in 2009 due to budgetary constraints.3 The final rule reinstates the BE-13 Survey and imposes new reporting requirements in order to better assess the results of the Commerce Department’s investment promotion efforts, including the “Build It Here, Sell It Everywhere” initiative.
The New BE-13 Survey and Reporting Requirements
The revised BE-13 Survey will collect data on (1) the “acquisition or establishment of U.S. business enterprises by foreign investors” (information that was covered in the previous BE-13 Survey), and (2) “the expansion of existing U.S. affiliates of foreign companies to establish new production facilities” (a topic that is new to the BE-13 Survey).4 The data will be used to measure the amount of new foreign direct investment in the United States5 and its impact on the U.S. economy.
A BE-13 Survey report will be required of “any U.S. company in which: (i) a foreign direct investment in the United States relationship is created, (ii) an existing U.S. affiliate of a foreign parent establishes a new U.S. legal entity, expands its U.S. operations, or acquires a U.S. business enterprise, or (iii) 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.”6
Responses to the BE-13 Survey will be filed on one of six newly-established BE-13 Survey forms, each of which is designed for a particular type of investment transaction. BEA established separate forms in order to ease respondents’ burden by tailoring questions to various types of investment transactions. See Appendix A for a listing of the new BE-13 Survey sub-forms that were created by the final rule.
In the final rule, BEA has imposed more stringent reporting requirements than have typically been utilized for other BEA surveys on foreign investment. Specifically, other BEA surveys on foreign investment only require a response if a person is specifically contacted by BEA. However, the final rule places the compliance burden on U.S. companies, since a response to the BE-13 Survey is mandatory for all persons subject to the reporting requirements, regardless of whether they are contacted by BEA. A survey response on the appropriate BE-13 Survey form is due within 45 days of the completion of the acquisition, establishment of a new legal entity, the commencement of the expansion, or the cost update is requested. BEA expects that approximately 1,350 responses will be filed by U.S. companies to the new BE-13 Survey each year.
Failure to furnish information required by the BE-13 Survey could result in significant civil penalties up to $25,000 and/or injunctive relief commanding the U.S. company to comply, as well as criminal penalties for willful violations up to $10,000 and/or imprisonment for up to one year.
It is important to note that the BE-13 Survey must be completed by the U.S. company receiving foreign investment, not by the foreign investor. We recommend that U.S. companies involved in any foreign direct investment activity familiarize themselves with the new BE-13 Survey reporting requirements and assess whether any current or future activities will require a response to the BE-13 Survey. Once a company has established that it is subject to the reporting requirements, it will be necessary to determine which form should be submitted to BEA and ensure that reports are filed in a timely manner. We also suggest that U.S. companies include the BE-13 Survey reporting requirements in appropriate corporate compliance policies so that these requirements can be easily identified in the case of future foreign investment.
As it is mandatory to submit a response regardless of whether a company has been contacted by BEA, the onus is on U.S. companies to ensure that they are abiding by the requirements of the final rule.
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- 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:
- The total cost of the acquisition is greater than $3 million;
- The U.S. business enterprise will operate as a separate legal entity; and
- 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:
- The projected total cost to establish the new legal entity is greater than $3 million; and
- 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 when it acquires a U.S. business enterprise or segment that it then merges into its operation 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 collect updated cost information and will be collected annually until construction is complete.
- Form BE-13 Claim for Not Filing—Report for a U.S. business enterprise that:
- Was contacted by BEA but does not meet the requirements for filing forms BE-13A, BE- 13B, BE-13C, or BE-13D; or
- Whether or not contacted by BEA, met all requirements for filing on Forms BE-13A, BE- 13B, BE-13C, or BE-13D except the $3 million reporting threshold.