Effective as of September 15, 2014, a new reporting requirement applies to a broad range of direct, and indirect, investments in the U.S. by foreign persons. The U.S. Department of Commerce’s Bureau of Economic Analysis (the “BEA”) has published a final rule1 that reinstates and expands the BE-13 survey of foreign direct investment into the U.S. that was discontinued in 2009 due to budgetary constraints. This mandatory reporting requirement, authorized by the International Investment and Trade in Services Survey Act, now applies2 to reportable transactions regardless of whether the participants have been contacted by the BEA.
The reporting obligation applies to the U.S. business enterprise that is the subject of a reportable transaction. Reportable transactions include transactions in which “(1) A foreign direct investment in the United States relationship is created; (2) 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; (3) A U.S. business enterprise that previously filed a [survey on Form] BE-13B or BE-13D indicating that the established or expanded entity is still under construction.” Foreign direct investment is defined as the ownership or control by one foreign person (foreign parent) of 10 percent or more of the voting securities of an incorporated U.S. business enterprise, or an equivalent interest of an unincorporated U.S. business enterprise, including a branch.
Going forward, the applicable BE-13 survey form will be due no later than 45 days after the acquisition is completed, the new legal entity is established, the expansion is begun, or the cost update is requested. Failure to file the required report could result in injunctive relief, civil penalties, and even criminal penalties for willful violations.
The BE-13 survey will be filed on one of six form types corresponding to particular types of investment transactions. Significantly, the transaction-based form types are each subject to a de minimis requirement that the transaction value be greater than $3 million. However, to claim an exemption from filing on those form types, participants in transactions having a value of $3 million or less are required to complete and file the sixth form type.
Among the new information required to be reported on the BE-13 survey are items relating to (i) equity and debt components of the foreign parent funding; (ii) whether the new U.S. operation will have research and development activities; (iii) whether the new operation is under construction; (iv) employment projections; and (v) actual and projected construction expenditures by type and by year.