The Bureau of Economics and Analysis of the U.S. Department of Commerce (BEA) conducts researches and analysis on foreign direct investments in the United States quarterly, annually and every five-year. Foreign investors should be acquainted with its requirements, more specifically, its BE-13 and BE-15 forms.
The BE-13 survey is a form required to be filed with the BEA by any U.S. business enterprise in which a foreign entity acquires 10 percent or more of the voting securities of or when the cost of the transaction is at least $3 million. Five types of BE-13 forms exist, and which form to file will depend on the amount of the foreign investment. Enterprises have 45 days starting from the investment transaction date to file the BE-13.
Note that this form must be filed in particular by foreign companies that establish a wholly-owned subsidiary in the United States. This form also should be part of the closing checklist for all M&A acquisitions and investments (even if minority investments) by foreign companies in the United States.
Note that failure to file this form exposes any U.S. enterprises to a civil penalty (between $2,500 and $35,500) and/or injunctive relief commanding to comply.
The BE-15 is an annual survey the purpose of which is to report annual financial and operating data of US business enterprises in which a foreign person has a direct or indirect voting equity ownership of at least 10 percent. Four types of BE-15 forms exist, and which form to will depend on the amount of the foreign investment. BE-15 filings are to be submitted each year except during the five-year survey year when BE-12 reports apply. The due date for BE-15 forms is May 31 (June 30 for reporting companies using the BEA’s electronic eFile system).
Failure to file this form exposes any U.S. enterprises to a civil penalty (between $4,454 and $44,539) and/or injunction relief commanding to comply.
This year, the BEA is conducting a five-year survey of foreign direct investment in the United States. As a result, all foreign investors must file a BE-12 2017 Benchmark survey on or before June 30, 2018 (for electronic filings). This survey is in replacement of the annual BE-15 form described above. The Benchmark BE-12 survey relates to the 2017 fiscal year. It gives the BEA a deeper understanding of the financial data and operating characteristics that exist between U.S. affiliates and their foreign-based parent groups. There again, four types of BE-12 exist and which form to will depend on the amount of the foreign investment and percentage ownership by the foreign parent.
Failure to report exposes U.S. enterprises to a civil penalty (between $4,527 and $45,268) and/or injunctive relief commanding to comply.
Information regarding the specificities of each form can be find on the BEA’s website. While in practice, many companies have failed to comply with the filing requirements above due to their ignorance of the requirement, the penalties are real and it is only a question of time before we may see the BEA seek more robust enforcement of these penalties.
*Karl Buhler is a Law Clerk in Sheppard Mullin’s New York office.