Failure to Complete BEA Survey May Lead to Penalties
The U.S. Department of Commerce Bureau of Economic Analysis (BEA) issues surveys to certain incorporated and unincorporated U.S. businesses and commercial U.S. real estate ventures (U.S. Affiliates) that are—directly or indirectly—at least 10 percent owned by foreign investors. This reporting requirement is satisfied by way of BEA-issued forms found on the BEA website and is designed to identify and measure the prevalence of foreign investment in the United States. Information reported in BEA surveys is confidential and only used by the BEA for analytical and statistical purposes.
A mandatory survey for U.S. Affiliates—irrespective of whether they’re contacted by the BEA—is Form BE-13, Survey of New Foreign Direct Investment in the United States. Aside from serving a statistical function, this survey helps the BEA identify U.S. enterprises it will directly contact to require the filing of quarterly or annual surveys pertaining to foreign investment.
Necessary reported transactions on Form BE-13 include:
- Acquisitions resulting in foreign ownership—directly or indirectly through an existing U.S. Affiliate of the foreign acquiring entity—of at least a 10 percent voting interest in an existing U.S. business enterprise, segment or unit, that will operate as a separate legal unit
- Acquisitions of a U.S. business enterprise or segment by an existing U.S. Affiliate of a foreign parent, then merged into the U.S. Affiliate’s operations
- Acquisitions resulting in foreign ownership—directly or indirectly through an existing U.S. Affiliate—of at least a 10 percent interest in U.S. real estate intended to be held for lease or sale, irrespective of whether the acquisition will involve significant added construction to the real estate
- Establishment of an incorporated or unincorporated U.S. legal entity, including a branch, in which a foreign entity will hold, directly or indirectly through an existing U.S. Affiliate, at least a 10 percent voting interest, even if the new entity doesn't have physical operations
- The expansion of an existing U.S. Affiliate through lease or purchase of a new facility to conduct business, including the construction or lease of a new facility by the U.S. Affiliate or the construction of a facility intended for lease or sale by the U.S. Affiliate
If the total actual or expected cost of the acquisition, establishment or expansion is $3 million or less, the new or existing U.S. Affiliate may file a Form BE-13 Claim for Exemption, which requires less extensive information reporting about the transaction at hand. Form BE-13 reporting—including the filing of a Claim for Exemption—is due no later than 45 days after a reportable event or transaction has occurred.
The BEA also requires U.S. Affiliates to file comprehensive surveys once every five years through Form BE-12, Benchmark Survey of Foreign Direct Investment in the United States, irrespective of whether the U.S. Affiliate is contacted by the BEA. The extent of information required to be disclosed in Form BE-12 is tied to the extent of foreign ownership of the U.S. Affiliate and the U.S. Affiliate’s assets, sales or gross revenue. Generally speaking, the benchmark survey requires, among other things, disclosure of the U.S. Affiliate’s financial data and transactions that occur between the U.S. Affiliate and its foreign parent. The next benchmark filing year will be 2017.
Failure to satisfy BEA reporting requirements may lead to significant civil and criminal penalties, including monetary fines and, in some circumstances, imprisonment. Accordingly, businesses with foreign investors must take proactive measures to comply with the BEA’s mandatory reporting requirements and remain mindful of any communications from the BEA requesting additional reporting.