Foreign investments into the United States and U.S. direct investment abroad can trigger certain mandatory regulatory reporting for U.S. businesses. The U.S. Department of Commerce's Bureau of Economic Analysis (BEA) issues four different surveys to obtain data on foreign direct investment (FDI) in the United States as well as three surveys on U.S. direct investment abroad for use in publishing statistical information and economic reports. To obtain the necessary data, BEA requires U.S. persons and businesses, including real estate ventures, to complete these surveys. The threshold requirement for the surveys is a 10 percent or greater ownership, directly or indirectly, of voting interests in a business. Additionally, for certain surveys, U.S. persons and businesses are required to complete and submit the survey even if they are not contacted by BEA. Failure to provide BEA with the requisite information can lead to certain civil and/or criminal penalties, which are discussed in further detail below.
Foreign Direct Investment Surveys
The four FDI surveys are the New Foreign Direct Investment Survey (BE-13), Quarterly Survey (BE-605), Annual Survey (BE-15), and Benchmark Survey (BE-12) (collectively the "BEA FDI surveys"). These surveys have been brought back into focus with the reinstatement of the BE-13 survey. As explained below, completion of two of the four surveys is automatically required of U.S. businesses that meet the regulatory requirements; completion of the remaining two surveys is required only when contacted by BEA. The FDI surveys only apply to businesses, including entities, groups, and associations that exist to make a profit or for economic advantage.
1. New Foreign Direct Investment Survey: BE-13
In September 2014, BEA reinstated the BE-13 reporting requirement, Survey of New Foreign Direct Investment in the United States, after a five-year lapse. Completion of the BE-13 survey by U.S. businesses is required following certain new foreign investments, including when a foreign person first acquires 10 percent or more of the voting interests, investments leading to the acquisition or establishment of U.S. business enterprises by foreign persons, and investments intended to facilitate the expansion of existing U.S. affiliates of foreign companies.
There are six different BE-13 survey forms covering various types of FDI. The U.S. business must determine which to complete based upon the type of investment made. The forms are:
BE-13A: for use when a foreign entity acquired, directly or indirectly, at least 10 percent of the voting interest in the U.S. company;
BE-13B: for use when a foreign entity, directly or through an existing U.S. business, created a new legal entity in the United States;
BE-13C: for use when an existing U.S. affiliate of a foreign parent acquires a U.S. business enterprise or segment that it merges into its operations;
BE-13D: for use when a U.S. subsidiary, branch, office, or affiliate in the United States has expanded its operations to include a new facility;
BE-13E: for use when a U.S. business enterprise previously filed a BE-13B or BE-13D indicating that the established or expanded entity is still under construction; and
BE-13 Claim for Exemption: for use when the transaction is otherwise covered but the investment is $3 million or less, or if BEA contacts the U.S. business but that business does not meet the requirements for filing.
The BE-13 survey is mandatory and must be completed by the U.S. business, regardless of whether it is contacted by BEA, no later than 45 days following the completion of the foreign investment. While January 12, 2015, was the deadline for 2014 BE-13 surveys for FDI made on or before November 26, 2014, BEA has informally stated that it will not penalize entities that have missed the deadline and submit the surveys after that date.
2. Benchmark Survey: BE-12
The Benchmark Survey is the most comprehensive of BEA's FDI surveys and it is done every five years in lieu of the Annual Survey, described below. The BE-12 survey applies to any U.S. entity in which foreign investors hold at least 10 percent of the voting interests at the end of the reporting calendar year where the entity's total revenue, total assets, or net income exceeds $60 million. The applicable forms are the BE-12A, BE-12B, BE-12C, and the BE-12 Claim for Not Filing. The specific form required for this survey is determined by the size of the U.S. business and amount of foreign ownership. The information required by this survey includes identification of foreign parents, major products, and/or services provided by the U.S. business; sales or gross operating revenues; balance sheet information; income and employment information; and financial and operating data for the U.S. business. Parties may file a Claim for Exemption rather than survey responses if their foreign ownership has fallen below 10 percent within the calendar year of BEA's request; if the entity has been fully consolidated or merged into another U.S. business; or if the entity has been liquidated or dissolved.
Like the BE-13 survey, completion of the Benchmark Survey is required regardless of whether an entity is contacted by BEA. This survey was most recently issued in 2012 and will not be issued again until 2017.
Surveys to Be Completed Only if Contacted by BEA
1. Quarterly Survey: BE-605
BEA also conducts a Quarterly Survey to capture data on the relative positions of and transactions between U.S. businesses and their foreign parents and/or foreign affiliates. The Quarterly Survey covers two types of FDI situations: (1) transactions between a U.S. business and its foreign parent and/or foreign affiliates and (2) situations where a U.S. business with 10 percent or more foreign ownership interest is established, acquired, liquidated, sold, or becomes inactive during the reporting period. Unlike the other BEA FDI surveys, there is only one form for the Quarterly Survey, the BE-605. U.S. entities are only required to complete the Quarterly Survey if they are contacted by BEA. Certain exemptions apply, but if a contacted U.S. business qualifies for an exemption from the survey, it must still submit a Claim for Exemption. Contacted entities must file survey responses within 45 days of the close of the fourth calendar or fiscal quarter, or within 30 days of the close of each of the other calendar or fiscal quarters.
2. Annual Survey: BE-15
In addition, BEA conducts an Annual Survey. The Annual Survey is designed to provide data on the yearly financial and operating data of U.S. businesses in which foreign persons own at least 10 percent of the voting interests. Companies are only required to respond to the Annual Survey if contacted by BEA. For those contacted companies, the appropriate form is determined based on the size of the U.S. business. The forms are the BE-15A, BE-15B, BE-15C, and the BE-15 Claim for Exemption. This year, the Annual Survey is due by May 31, 2015, and it is conducted each of the four years between the Benchmark Survey.
There are exemptions, including for those businesses whose foreign voting ownership (or the equivalent) has fallen below 10 percent; where the U.S. business contacted was fully consolidated or merged into another U.S. business; and where total assets, sales or gross operating revenues, or net income are all $40 million or less (positive or negative). However, if contacted by BEA, a U.S. business falling within an exemption must still submit a Claim for Exemption.
U.S. Direct Investment Abroad
To collect economic data on the operations of U.S. parent companies and their foreign affiliates, BEA issues three U.S. direct investment abroad surveys. Unlike the BEA FDI surveys, individuals—not just businesses—have reporting obligations under these U.S. direct investment surveys. The surveys are the Quarterly Survey (BE-577), the Annual Survey (BE-11), and the Benchmark Survey (BE-10). These surveys are similar to the FDI Quarterly, Annual, and Benchmark Surveys.
1. Benchmark Survey: BE-10
The BE-10 survey collects data on the direct investment by U.S. persons and businesses (collectively "U.S. persons") outside the United States. A U.S. person holding at least 10 percent of the voting interest in a foreign business enterprise at any time during that U.S. person's 2014 fiscal year is required to file the appropriate BE-10 form, including if the foreign business began or was terminated, liquidated, acquired, or inactivated during the U.S person's fiscal year 2014. As with the FDI Benchmark Survey, the U.S. Direct Investment Abroad Benchmark Survey is conducted every five years and U.S. persons and businesses are required to file even if not contacted by BEA.
There are various BE-10 forms, the BE-10A, BE-10B, BE-10C, and BE-10D. Generally, the BE-10A form covers the U.S. person and forms BE-10B through 10-D cover the foreign affiliates in which the U.S. person has a direct investment. A survey needs to be completed and filed for each of the U.S. person's foreign affiliates.
BEA is currently collecting data for the Benchmark Survey. Deadlines for submission are May 29, 2015, for a U.S. person filing fewer than 50 surveys and June 30, 2015, for a U.S. person filing 50 or more surveys.
Surveys to Be Completed Only if Contacted by BEA
1. Quarterly Survey: BE-577
The Quarterly Survey, as with other U.S. direct investment surveys, applies to U.S. persons who own, directly or indirectly, at least 10 percent of the voting interest in a foreign business enterprise, which includes any business, including real estate, that is for profit-making or economic-advantage purposes. As with the FDI Quarterly Survey (BE-605), a U.S. person is only required to complete the BE-577 survey if contacted by BEA and there is only the one form, the BE-577. U.S. persons, however, may need to file multiple surveys, as a survey is required for each directly owned foreign affiliate that has total assets, annual sales, or gross operating revenue in excess of $60 million (positive or negative), as well as for each indirectly owned foreign affiliate that has total assets, annual sales, or gross operating revenue in excess of $60 million (positive or negative) and had an intercompany debt balance with the U.S person that exceeded $1 million.
This survey is conducted at the same time as the FDI Quarterly Survey, and due within 30 days of the end of the U.S. person's fiscal quarter and within 45 days of its final quarter. BEA issued its Federal Register Notice for this survey and the FDI Quarterly Survey on March 9, 2015.
2. Annual Survey: BE-11
Comparable to the FDI Annual Survey, the U.S. Direct Investment Abroad Annual Survey is designed to provide data on the yearly financial and operating data of a U.S. person that has a foreign affiliate at the end of the U.S. person's fiscal year. A BE-11 survey is required by a U.S. person that holds at least 10 percent of the voting interests in a foreign affiliate at the end of the U.S. person's fiscal year. As with other direct investment surveys, there are multiple forms (BE-11A, BE-11B, BE-11C, BE-11D, and a Claim for Exemption). Form BE-11A is for the U.S. person and forms BE-11B through 11D cover the foreign affiliates. A separate form needs to be completed for each foreign affiliate unless exempt. The appropriate forms are determined by whether the foreign affiliate is majority or minority-owned and the value of the assets, sales, or net income of the foreign affiliate.
U.S. persons are required to respond to the Annual Survey only if contacted by BEA. As the Benchmark Survey for U.S. Direct Investment Abroad is currently being conducted by BEA, there will be no Annual Survey for U.S. direct investment abroad in 2014.
Form of Report
The BEA surveys are confidential and may be used only for statistical and analytical purposes. They may not be used for taxation, investigation, or regulatory purposes. The relevant regulations regarding these surveys are set forth in 15 C.F.R. Part 801. Each survey should be completed on a consolidated basis, with a single submission for all U.S. businesses sharing common ownership.
BEA may impose civil and/or criminal penalties for failure to complete required surveys. Civil penalties include fines ranging from $2,500 to $32,500 and civil actions such as a restraining order, as well as permanent or temporary injunctions commanding the U.S. business to furnish information or to otherwise comply with BEA. Criminal penalties for willful failure to file required responses include fines up to $10,000 and/or up to one year imprisonment. Penalties may be levied against the entity and/or any officer, director, employee, or agent of any corporation.