United States: Department Of Commerce Mandatory Foreign Direct Investment Survey BE-13: Information Collection Related To Direct Or Indirect Foreign Investment In The United States

On November 26, 2014, the Department of Commerce, Bureau of Economic Analysis ("BEA" or "the Bureau") published a notice on the BEA website reinstating BE-13 Form: "Survey of New Foreign Direct Investment in the United States," after a false start in August 2014. This foreign direct investment ("FDI") data collection requirement includes some of the same information sought in other regulatory approval processes, such as the Committee on Foreign Investment in the United States ("CFIUS") and the Directorate of Defense Trade Controls ("DDTC") International Traffic in Arms ("ITAR") acquisition and license transfer processes. See 31 CFR Part 800 and 22 CFR § 122.4, respectively.

The filing requirement applies to all forms of FDI (i.e., acquisitions, investments, expansions, etc.) where the transaction involves either a foreign entity or the U.S. affiliate of a foreign entity. If the transaction does not meet certain thresholds, parties must still file a claim for exemption from filing the complete report.

BEA published a proposed rule on May 28, 2014, and after receiving no comments, issued the final rule on August 14, 2014, reinstating the filing requirement originally suspended in 2009. OMB, however, had not approved the data collection effort and BEA delayed implementation of the filing requirements, ahead of the rule's effective date on September 15, 2014, pending OMB reapproval of the BE-13 forms. Following OMB action, BE-13 data collection requirements were reinstated on November 26, 2014, effective retroactive to transactions closed from January 1, 2014, forward. See 15 CFR § 801.7. Any foreign direct investment in a U.S. business completed in 2014 must report the transaction, as described below, to BEA on or before Monday, January 12, 2015, or within 45 days of the date the transaction closes.

BEA has established six forms—five FDI collection forms and one exemption request form. Several key points merit specific attention:

Filing is mandatory, whether the transaction meets the thresholds set by the regulations or the transaction is exempt, and must be made by the U.S. entity or U.S. affiliate of the foreign party. Exemptions to the filing requirements are not self-executing but must be submitted and accepted by BEA prior to becoming effective. Situations where the exemption form would be filed in lieu of one of the five FDI reports include that the purchase is for property that is for personal use only or the transaction meets the definitions of "covered activity" but is below a narrowly defined $3 million threshold.

The BEA FDI forms apply to the following types of investments that meet or exceed a $3 million threshold:

  • An acquisition (Form BE-13A) or merger (Form BE-13C) results in a foreign person owning or controlling, whether directly or indirectly, 10 percent or more of the voting securities (or other voting interests) of a U.S. business (or the equivalent for unincorporated businesses); 
  • An existing U.S. affiliate of a foreign parent acquires another U.S. business(Form BE-13A), establishes a new legal entity (Form BE-13B), or expands its U.S. operations (Form BE-13D); or
  • A previously reported establishment or expansion of any U.S. business operations is still under construction (Form BE-13E). In these cases, this report must be filed on an annual basis until construction is complete. (As of the publication date, BEA-13E had not been published. The BEA website indicates this form will be available in January 2015. Parties needing to file this form by January 12, 2015, must contact BEA for instructions and/or request an extension of time to file.)

If the transaction does not qualify as one of the transactions described above, the U.S. affiliate (or U.S. party to the transaction) must still submit an exemption request to BEA. The request must explain that it meets the exemption requirements and is therefore not required to file any of the mandatory reports. Transactions that otherwise satisfy the filing requirements, but do not meet the $3 million threshold, must file a BE-13 Claim for Exemption form, whether BEA contacts the parties or not.

The filing requirements are triggered by the closing date of the transaction ("triggering event"), and reports are due within 45 calendar days after the transaction is "completed." Triggering events include, but are not limited to, when the parties complete an acquisition, when a new entity is established, or when an expansion effort has begun. This post-transaction reporting varies from the ITAR 60-day pre-closing filings and the CFIUS notices submitted prior to closing. The due dates for any report, therefore, would not be calculated from the date the parties agree to move forward with a transaction—i.e., the date a term sheet, intent to purchase agreement, or stock purchase agreement is executed.

Although the regulations and the forms reference a $3 million threshold for filing the reports, the Department has indicated that the reports apply to all transactions, regardless of value, as reflected in the requirement to file the "BE-13: Claim for Exemption."

For triggering events that occurred prior to the November 26, 2014, parties have 45 calendar days from that date to submit their FDI or exemption reports to BEA—i.e., reports would be due to BEA by January 12, 2015.

Reports may be submitted by mail, fax, or electronically through BEA's electronic filing portal at www.bea.gov/efile.

Failure to complete the reports in a timely manner and on the appropriate form is subject to criminal (up to $10,000 per violation and/or imprisonment of not more than one year) and civil penalties (between $2,500 and $32,500 for each violation), plus injunctive relief ordering the party to comply.

A more detailed discussion of the filing requirements and implications of the BE-13 will be provided in a forthcoming supplement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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