Quick Guide to Required BEA Filings for Companies with Foreign Affiliates

U.S. Companies With Foreign Ownership Or Holdings Should Be Aware Of Their Required BEA Filings

U.S. companies with foreign ownership or holdings should be aware of their filing obligations in connection with surveys conducted by the Bureau of Economic Analysis (BEA). U.S. businesses in which a foreign person or entity directly or indirectly owns a ten percent or more voting interest are subject to these BEA filings and reporting requirements as well as certain foreign ownership must also be reported.

What Is the Bureau of Economic Analysis?

Pursuant to the International Investment and Trade in Services Survey Act, the BEA prepares official U.S. economic statistics regarding U.S. direct investment abroad and foreign direct investment in the U.S. These statistics help gauge how the U.S. economy is performing as well as the country’s role in the larger global economy.

To gather information on direct investment, the BEA conducts seven mandatory surveys, which include quarterly, annual, and benchmark surveys of outward and inward direct investment and a survey of new inward direct investment. The BEA must protect the confidentiality of all corporate disclosures. Without the prior written permission of the reporting company, BEA can’t release the data collected on its surveys in a form that would allow the data of an individual reporter to be identified.

A U.S. person who is required to report is referred to as “a U.S. reporter.” Meanwhile, an affiliate outside the United States in which a U.S. person holds a 10 percent or more voting interest (or the equivalent) is referred to as “a foreign affiliate.”

Pursuant to changes that took effect this year, U.S. reporters are not required to report investments in foreign affiliates that are private funds if they meet both of the following requirements: (1) the private fund does not own, directly or indirectly through another business enterprise, an “operating company”—a business enterprise that is not a private fund or a holding company—in which the consolidated U.S. reporter owns at least 10 percent of the voting interest, and (2) if the U.S. reporter owns the private fund indirectly (through one or more other business enterprises), there are no “operating companies” between the consolidated U.S. reporter and the indirectly-owned foreign private fund.

Reports may be filed electronically through BEA’s eFile system on the BEA’s Web site at www.bea.gov/efile. Failing to file mandatory reports with the BEA can result in a civil penalty of up to $25,000. Willful violations can result in criminal charges. In addition, corporate officers, directors, and employees who knowingly participate in such violations may be punished by a like fine, imprisonment or both.

Mandatory BEA Filings

As noted above, there are several BEA surveys. While certain reporting is mandatory, other reporting responsibilities only arise if entities are contacted directly by the BEA. Below is a summary of the key mandatory filings that may impact U.S. businesses:

Survey of New Foreign Direct Investment in the United States (Form BE–13): The survey aims to capture new investment transactions made when (1) a foreign direct investment in the United States relationship is created or (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. The initial report must be filed no later than 45 days after the date that the investment transaction occurs. The version of the form that must be filed is determined by specified reporting criteria:

• Form BE–13A. This form is filed for a U.S. business enterprise when a foreign entity acquires a voting interest (directly or indirectly through an existing U.S. af­filiate) in the enterprise, segment, or operating unit, and the acquisition meets the following criteria: the total cost of the acquisition is more than $3 million; the acquired U.S. business enterprise will operate as a separate legal entity; and at least 10 percent of the voting interest in the acquired enterprise is now owned, directly or indirectly, by the foreign entity.
• Form BE–13B. This form is filed 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 establishment of the new entity meets the following criteria: the projected total cost to establish the new legal entity is more than $3 million; and at least 10 percent of the voting interest in the newly established business enterprise is now owned, directly or indirectly, by the foreign entity.
• Form BE–13C. This form is filed for an existing U.S. affiliate of a foreign parent when the U.S. affiliate acquires a U.S. business enterprise or a segment of the en­terprise that it then merges into its operations, and the total cost to acquire the business enterprise is more than $3 million.
• Form BE–13D. This form is filed 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 more than $3 million.
• Form BE–13E. This form is filed for a U.S. business enterprise that previously filed form BE–13B or form BE–13D, and the established or expanded entity is still under construction.

Benchmark Survey of Foreign Direct Investment in the United States (Form BE–12): The BE–12 survey is BEA’s most comprehensive survey of foreign direct invest­ment in the United States. It is conducted every five years. The next benchmark survey will cover the fiscal year ending in 2017. The version of the form that must be filed is determined by specified reporting criteria:

• Form BE-12A. This form is filed for a majority-owned U.S. affiliate with total assets, sales or gross operating revenues, or net income greater than $300 million (positive or negative). A U.S. affiliate is “majority-owned” if the combined direct and/or indirect voting ownership interests (or the equivalent) of all foreign parents of the U.S. affiliate exceeds 50 percent.
• Form BE-12B. This report is filed for (1) a majority-owned U.S. affiliate with total assets, sales or gross operating revenues, or net income greater than $60 million (positive or negative), but not greater than $300 million (positive or negative), and (2) a minority-owned U.S. affiliate with total assets, sales or gross operating revenues, or net income greater than $60 million (positive or negative). A U.S. affiliate is “minority-owned” if the direct and/or indirect voting ownership interests (or the equivalent) of all foreign parents of the U.S. affiliate is 50 percent or less.
• Form BE-12C. This report is filed for a U.S. affiliate with total assets, sales or gross operating revenues, and net income less than or equal to $60 million (positive or negative). A U.S. affiliate with total assets, sales or gross operating revenues, and net income of $20 million or less (positive or negative) is required to report only selected data items on the BE-12C form.

Benchmark Survey of U.S. Direct Investment Abroad (Form BE–10): The survey is BEA’s most comprehensive assessment of U.S. direct invest­ment abroad. It is conducted every five years (most recently in FY 2014). The U.S. reporter, which is typically the parent company, but may also be a private equity firm fund, must file Form BE-10A. The U.S. reporter must also file Form BE-10B, BE-10C or BE-10D for each foreign affiliate. The applicable form is determined by the value of the affiliate’s total assets, revenue, and net income).

• Form BE–10B. This form is filed by majority-owned foreign affiliates of a U.S. parent that have assets, sales, or net income of more than $80 million (positive or negative).
• Form BE–10C. This form is filed for minority-owned foreign affiliates and by majority-owned foreign affiliates of U.S. parents that have assets, sales, or net in­ come of more than $25 million (positive or negative) but less than $80 million (positive or negative). It is also filed for foreign affiliates that have assets, sales, or net income of $25 million or less (positive or negative) and that are foreign affiliate parents of other foreign affiliates that are filing forms BE–10B or BE–10C.
• Form BE–10D. This form is filed for foreign affiliates that have assets, sales, or net income of less than $25 million (positive or negative) and that are not for­eign affiliate parents of other foreign affiliates that are being reported on form BE–10B or form BE–10C.

Because failing to file mandatory BEA reports can lead to significant financial penalties, it is essential to understand when reporting obligations may arise. To make sure your company is prepared to meet any applicable compliance deadlines, it is wise to consult an experienced attorney.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Jeffrey Cassin, at 201-806-3364.