Financial services providers that are subsidiaries of a non-U.S. parent (or that have received substantial direct investment from abroad) should evaluate whether they are required to file the Benchmark Survey of Foreign Direct Investment in the United States (BE-12). Completing the BE-12 survey is mandatory for any U.S. entities that are in scope, even if the entity has not been contacted by the Department of Commerce’s Bureau of Economic Analysis (BEA).

What is BE-12?

In 2023, the BEA will administer its next BE-12 survey.¹ This mandatory survey is conducted once every five years and measures foreign direct investment in the United States. “Direct investment” refers to direct or indirect ownership of more than 10% of the voting interests (or equivalent thereof) of a U.S.-resident business enterprise by a foreign person.

BE-12 is BEA’s most comprehensive survey regarding financial and operating data of U.S. affiliates of foreign multinational enterprises. With some exceptions (discussed below), reporting is required for all U.S. business enterprises of which a foreign person owns, directly or indirectly, 10% or more of the voting securities (or an equivalent interest of an unincorporated U.S. business).

Who Needs to File BE-12?

BE-12 covers U.S. business enterprises in which a foreign person has direct investment (i.e., where the foreign person owns or controls, directly or indirectly, 10% or more of the U.S. business enterprise’s voting interests, regardless of the value of the investment). A U.S. affiliate must file on a fully consolidated domestic U.S. basis, which starts with the top-tier U.S. entity in an organization and includes all of its U.S. entities, proceeding down each ownership chain whose voting securities are more than 50% owned by the U.S. business enterprise above.

If required to report, a U.S. business enterprise will complete one of three BE-12 forms: BE-12A; BE-12B; or BE-12C. Determining which form is appropriate for an organization will depend on: the total assets, sales or gross operating revenues, or net income of the organization during the fiscal year ending in 2022; and whether the organization is a majority-owned or minority-owned affiliate of a foreign person.²

When Is BE-12 Due?

If required to file BE-12, a reporter must submit the report by June 30, 2023 by eFile³. Generally, the report should reflect information as of the last day of the reporter's fiscal year that ended in 2022.⁴ Firms that file the BE-15 survey on an annual basis will file BE-12 in lieu of BE-15 this year.

What Information does BE-12 Capture?

BE-12 captures data concerning foreign direct investment in U.S.-resident companies, including: information about the foreign parent; information about transactions between the foreign parent and the U.S. reporter; and financial and operational information about the U.S. reporter. A variety of schedules to BE-12 collect data on certain downstream affiliates of the U.S. reporter. BEA forms capture data concerning “direct investments,” including U.S.-resident ownership of 10% or more of a foreign company and vice versa, in addition to most positions and transactions with a company with which the investor is in a direct-investment relationship.

Since the last BE-12 was conducted, BEA has added, deleted, and modified certain items in response to feedback from users of the data it collects and in order to gather more information on foreign direct investment.⁵ However the overall purpose, structure, and eligibility criteria of the form remains unchanged from 2018.

Are Pooled Investment Vehicles Covered by BE-12?

In advance of the last BE-12 filing in 2018, the BEA implemented changes to its surveys that impacted the reporting requirements for certain investments involving “private funds.”⁶ The BEA surveys historically had required reporters to consolidate with their organization limited partnerships for which they served as general partner. As a result, investment advisers to hedge funds and private equity funds often were required to consolidate those funds on their BEA filings. In the case of BE-12, the change exempts reporting on foreign investors’ ownership of U.S. private funds that do not own more than 10% of an “operating company” (defined by the BEA as a business enterprise that is not a private fund or a holding company).

The changes regarding the treatment of private funds in the 2018 BE-12 survey were intended to address certain redundancies in the data reported in BEA surveys and those administered by the U.S. Department of the Treasury in connection with its Treasury International Capital (TIC) reporting system, and holdings that are no longer required to be reported on BE-12 may continue to be reportable on certain TIC forms. As a result, some asset managers that had previously reported on foreign investment in U.S. private funds they sponsored may no longer be required to file BE-12. Sponsors of private equity funds should note, however, that a U.S. private equity fund with a foreign general partner may still be in scope of BE-12 if the private equity fund holds more than 10% of the voting interests of an operating company.

What is BE-12 Data Used For?

The U.S. government uses the economic data collected in this survey in the preparation of its published macroeconomic surveys and to inform its economic and trade policies. This survey is not an instrument of market oversight, but instead is used for informational purposes, and the data collected is published on an aggregated, anonymous basis. BEA uses BE-12 to produce statistics concerning the magnitude and impact of foreign-owned business activities in the United States.

What If a Foreign Person Owns Less than 10% of a U.S. Firm or Investment Fund?

Certain ownership data excluded from BE-12 may be reportable on forms administered under the TIC reporting system. In contrast to the BEA surveys’ focus on direct investment, TIC forms collect information on “portfolio investments” (i.e. where a foreign person owns less than 10% of a U.S. person’s voting interests (or vice versa)). Accordingly, to the extent there is foreign ownership of less than 10% of the voting interests of an organization or a fund under management, that information may be reportable on one or more TIC forms.⁷ Asset managers should consider how BE-12 and other BE surveys relate to one another, as well as how the BE surveys interact with those of other related reporting regimes (including the TIC reporting system). Taking a holistic approach to gathering and reporting data on these various forms can help to mitigate the reporting burden over time.

What if a Firm is Unable to Complete the Form by the Deadline?

The instructions to BE-12 provide a mechanism for submitting reasonable requests for extensions. In order to be considered, such a request must be submitted through the BEA’s electronic filing system and must be received before the June 30, 2023⁸ filing deadline.

Dechert is available to assist with completing the forms and to answer questions regarding the BEA Surveys and TIC requirements.

Footnotes

1. BE-12 Benchmark Survey: Foreign Direct Investment in the United States.
2. BE-12A covers majority-owned U.S. reporting entities with total assets, sales or gross operating revenues, or net income, exceeding $300 million. BE-12B covers: majority-owned U.S. reporting entities with total assets, sales or gross operating revenues, or net income, of between $60 million and $300 million; and all minority-owned U.S. reporting entities with total assets, sales or gross operating revenues, or net income, exceeding $60 million. BE-12C covers U.S. reporting entities whose total assets, sales or gross operating revenues, and net income each are below $60 million.
3. If a reporter opts not to submit its report via eFile, the report is due May 31, 2023, but the BEA has historically granted extensions if necessary.
4. Benchmark Survey: Foreign Direct Investment in the United States.
5. Direct Investment Surveys: BE–12, Benchmark Survey of Foreign Direct Investment in the United States, 87 Fed. Reg. 39411 (Jul. 1, 2022); Direct Investment Surveys: BE–12, Benchmark Survey of Foreign Direct Investment in the United States, 87 Fed. Reg. 58953 (Sept. 29, 2022).
6. “Private fund” refers to the same class of financial entities defined by the Securities and Exchange Commission as private funds on Form PF: “any issuer that would be an investment company as defined in section 3 of the Investment Company Act of 1940 but for section 3(c)(1) or 3(c)(7) of … [that] Act.”
7. For a detailed discussion of the TIC reporting system, please refer to The Investment Lawyer, Foreign Holding and Transactions with Foreign Persons: Reporting Responsibilities for US Investment Managers and Other Financial Institutions (April 2014).
8. As previously noted, if the reporter opts not to file by eFile, the report is due May 31, 2023, and extension requests must be submitted prior to May 31.