Direct Investment Surveys; Change in Reporting Requirements for the Annual Survey of U.S. Direct Investment Abroad (BE-11)

SUMMARY: These proposed rules will amend 15 CFR 806.14 to revise the

reporting requirements for the BE-11, Annual Survey of U.S. Direct

Investment Abroad. The BE-11 is mandatory survey of U.S. direct

investment abroad conducted by the Bureau of Economic Analysis (BEA),

U.S. Department of Commerce. The proposed rules will:

(1) Raise the overall exemption level for the survey, and the

exemption level for reporting individual nonbank foreign affiliates on

Forms BE-11B(LF) and BE-11C, from $15 million to $20 million.

(2) Institute a short form, Form BE-11B(SF), for U.S. companies to

report their majority-owned nonbank foreign affiliates with assets,

sales, and net income in the $20 to $50 million range.

(3) For fiscal year 1997 only, require the largest nonbank foreign

affiliates owned between 10 and 20 percent to be reported on Form BE-

11C, along with affiliates owned between 20 and 50 percent. In all

years, nonbank foreign affiliates owned between 20 and 50 percent by

all U.S. Reporters (U.S. parent companies) of the affiliate combined

must be reported on Form BE-11C if their assets, sales, or net income

exceed $20 million. For fiscal year 1997 only, Form BE-11C must also be

filed for nonbank foreign affiliates owned, directly and/or indirectly,

at least 10 percent by one U.S. Reporter (i.e., U.S. parent company),

but less than 20 percent by all U.S. Reporters of the affiliate

combined, if the affiliate's total assets, sales, or net income exceed

$100 million. Reporting for the largest affiliates owned between 10 and

20 percent is needed in at least one year between benchmark surveys, in

order to maintain reliable estimates of data for the universe of

foreign affiliates (which is defined by law to include all foreign

business enterprises owned 10 percent or more by a U.S. person). A

similar requirement was imposed in the 1987 and 1992 annual surveys,

which fell between earlier benchmark surveys.

Raising the overall exemption level will reduce the number of U.S.

parent companies and foreign affiliates that must be reported in the

survey, and instituting a short form for smaller majority-owned

affiliates will reduce the number of items to be reported for those

affiliates. Thus, the proposed changes will reduce both the reporting

and processing burdens of the survey. (As noted below, however, BEA is

proposing to add several items to the survey forms, which does not

require a rule change; the addition of the items will increase the

reporting burden, partially offsetting the reduction in burden due to

raising the exemption level and instituting the short form).

DATES: Comments on these proposed rules will receive consideration if

submitted in writing on or before September 15, 1995.

ADDRESSES: Comments may be mailed to the Office of the Chief,

International Investment Division (BE-50), Bureau of Economics

Analysis, U.S. Department of Commerce, Washington, DC 20230, or hand

delivered to Shipping and Receiving, Section M-100, 1441 L Street, NW.,

Washington, DC 20005. Comments received will be available for public

inspection in Room 7006, 1441 L Street NW., between 8:30 a.m. and 4:30

p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Betty L. Barker, Chief, International

Investment Division (BE-50), Bureau of Economic Analysis, U.S.

Department of Commerce, Washington, DC 20230; phone (202) 606-9800.

SUPPLEMENTARY INFORMATION: The BE-11, Annual Survey of U.S. Direct

Investment Abroad, is part of BEA's regular data collection program for

U.S. direct investment abroad. The survey is mandatory and is conducted

pursuant to the International Investment and Trade in Services Survey

Act (Pub. L. 94-472, 90 Stat. 2059, 22 U.S.C. 3101-3108, as amended).

The BE-11 survey consists of an instruction booklet, a claim for

not filing the BE-11, and the following report forms:

1. Form BE-11A for reporting by a U.S. Reporter that is not a bank;

2. Form BE-11B(LF) (Long Form) for reporting majority-owned nonbank

foreign affiliates with assets, sales, or net income greater than $50

million (positive or negative);

3. Form BE-11B(SF) (Short Form) for reporting majority-owned

nonbank foreign affiliates with assets, sales, or net income greater

than $20 million, but not greater than $50 million (positive or

negative); and

4. Form BE-11C for reporting minority-owned nonbank foreign

affiliates.

A. Form BE-11A must be filed by each nonbank U.S. person having a

foreign affiliate reportable on Form BE-11B(LF), BE-11B(SF), or BE-11C.

Under these proposed rules, the exemption level for reporting

individual foreign affiliates on Form BE-11B(LF) or (SF) or BE-11C--

and, thus, for determining whether a U.S. person has to file Form BE-

11A--would be raised from $15 million to $20 million. The exemption

level is the level of a foreign affiliate's assets, sales, or net

income below which a Form BE-11B(LF) or (SF) or BE-11C is not required.

Raising the exemption level lowers the number of reports that otherwise

must be filed, thus reducing the reporting and processing burdens. The

proposed exemption level of $20 million is the same as that recently

approved for the related quarterly Form BE-577, Direct Transactions of

U.S. Reporter With Foreign Affiliate. The exemption level for the BE-11

survey was last raised following the 1989 benchmark survey and was

effective with the annual survey covering the year 1990.

In addition to raising the exemption level, these proposed rules

will institute the BE-11B(SF) short form. Majority-owned nonbank

foreign affiliates for which assets, sales, or net income is greater

than $20 million (positive or negative), but for which no one of these

items is greater than $50 million (positive or negative), will be

required to be reported on Form BE-11B(SF). The use of a short form

means that, for about

[[Page 39129]]

3,700 foreign affiliates, U.S. companies will now report significantly

fewer data items than on the last (1993) annual survey.

For fiscal year 1997 only, these proposed rules will require the

largest nonbank foreign affiliates owned between 10 and 20 percent to

be reported on Form BE-11C, along with affiliates owned between 20 and

50 percent. In all years, reporting on Form BE-11C is required if an

affiliate is owned between 20 and 50 percent by all U.S. Reporters

combined and if its assets, sales, or net income exceed $20 million.

Primarily to reduce reporting burden of the survey, affiliates owned

less than 20 percent do not have to be reported. However, U.S. direct

investment abroad is defined by law to include all foreign business

enterprises owned 10 (not 20) percent or more, directly or indirectly,

by a U.S. person. BEA conducts periodic benchmark surveys of U.S.

direct investment abroad (the BE-10), covering all foreign affiliates

owned 10 percent or more. A benchmark survey for the year 1994 is now

being conducted; the next survey will cover the year 1999. In order to

maintain reliable estimates of data for the universe of all foreign

affiliates in nonbenchmark years, reporting for the largest affiliates

owned between 10 and 20 percent is needed for at least one year between

benchmark surveys. Although the U.S. ownership percentages in these

affiliates are low, some of the affiliates are very large and have a

sizable impact on the estimates. Under these proposed rules, reporting

of Form BE-11(C) for nonbank foreign affiliates owned directly and/or

indirectly, at least 10 percent by one U.S. Reporter, but less than 20

percent by all U.S. Reporters of the affiliate combined, and for which

assets, sales, or net income exceed $100 million would be required for

fiscal year 1997 only. A similar one-year requirement was imposed in

the 1987 annual survey (between the 1982 and 1989 benchmark surveys)

and in the 1992 annual survey (between the 1989 and 1994 benchmark

surveys).

These new rules, if approved, will be effective with the survey

covering fiscal year 1995. The 1995 forms will be mailed out in March

1996 and will be due May 31, 1996. The last BE-11 survey covered the

year 1993. (A BE-11 survey is not conducted in a year, such as 1994,

when a BE-10 benchmark survey is conducted.)

BEA is proposing a number of other changes to the report forms

themselves--such as modifications, additions, and deletions. These

changes, however, do not require rule changes and are not reflected in

these proposed rules. The major changes are the addition of five items

on Form BE-11A to facilitate the estimation of U.S. parent companies'

gross product in the United States annually; the addition of three

items on Form BE-11B(LF) to collect affiliates' equity investment in

other foreign affiliates needed to arrive at the correct values for

affiliates' income and owners' equity; and the addition of an item on

Form BE-11B(LF) (which is also included on new Form BE-11B(SF)) to

collect property, plant, and equipment (PP&E) expenditures. Projected

and actual expenditures for PP&E had been collected on the BE-133 B and

C surveys, which were discontinued in June 1993. At that time,

respondents were informed that an item on actual expenditures would be

added to the annual survey. All the items being added are currently

only available on benchmark surveys.

Other changes to the survey include the collection of ``total

sales,'' rather than ``sales of services,'' by transactor on Form BE-

11A; the collection of research and development expenditures on a

performed ``by'' basis (the basis used by the National Science

Foundation), rather than a performed ``for'' basis, on Form BE-11A and

Forms BE-11B (LF) and (SF); the addition of an item on Forms BE-11B

(LF) and (SF) to obtain information on an indirectly-owned foreign

affiliate's foreign parent's identify and ownership interest in its

subsidiary; and the replacement on Form BE-11C of one item, on U.S.

ownership in the affiliate, with two items--one on direct ownership

interest and the other on indirect ownership interest.

The reporting burden for the 1995 BE-11 (OMB Control No. 0608-0053)

survey is estimated at 88,940 hours, 16,360 less than the estimate

currently in the OMB inventory. The reduction in burden is more than

accounted for by raising the exemption level from $15 million to $20

million and by instituting the BE-11B short form, partly offset by

natural growth in the universe and the addition of new items.

A copy of the proposed survey forms may be obtained from: Office of

the Chief, Direct Investment Abroad Branch, International Investment

Division (BE-69(A), Bureau of Economic Analysis, U.S. Department of

Commerce, Washington, DC 20230; phone (202) 606-5566.

Executive Order 12612

These proposed rules do not contain policies with Federalism

implications sufficient to warrant preparation of a Federalism

assessment under E.O. 12612.

Executive Order 12866

These proposed rules have been determined to be not significant for

purposes of E.O. 12866.

Paperwork Reduction Act

These proposed rules contain a collection of information

requirement subject to the Paperwork Reduction Act. A request for

review of the forms has been submitted to the Office of Management and

Budget under section 3504(h) of the Paperwork Reduction Act.

The public reporting burden for a U.S. company for this collection

of information can range from 4 hours for the smallest and least

complex U.S. Reporter that has one affiliate, to approximately 3,000

hours for a large U.S. Reporter that has up to 150 affiliates with a

wide range of activities; the average burden per Reporter is 62 hours.

The estimated burden includes time for reviewing instructions,

searching existing data sources, gathering and maintaining the data

needed, and completing and reviewing the collection of information.

Comments from the public regarding the burden estimate or any other

aspect of this collection of information should be addressed to: Acting

Director, Bureau of Economic Analysis (BE-1), U.S. Department of

Commerce, Washington, DC 20230; and to the Office of Management and

Budget, Washington, DC 20503, Attention: Desk Officer for the

Department of Commerce. (OMB Control No. 0608-0053).

Regulatory Flexibility Act

The Assistant General Counsel for Legislation and Regulation,

Department of Commerce, has certified to the Chief Counsel for

Advocacy, Small Business Administration, under the provisions of the

Regulatory Flexibility Act (5 U.S.C. 605(b)), that these proposed

rules, if adopted, will not have a significant economic impact on a

substantial number of small entities. The exemption level is set in

terms of the size of a U.S. company's foreign affiliates. Only if the

affiliate's assets, sales, or net income exceeds $20 million must it be

reported. Usually, the U.S. parent company (the one required to file

the report) is many times larger.

In addition, by raising the exemption level from $15 million to $20

million, U.S. parent companies will no longer have to report for

affiliates between $15 and $20 million. This change should reduce the

reporting burden on smaller U.S. businesses that own these affiliates.

[[Page 39130]]

Also, to minimize the reporting burden on smaller U.S. businesses,

majority-owned affiliates with assets, sales, and net income in the

range of $20 million to $50 million will be reported on the abbreviated

BE-11B(SF), or short form, rather than the BE-11B(LF), or long form.

List of Subjects in 15 CFR Part 806

Balance of payments, Economic statistics, U.S. investment abroad,

Penalties, Reporting and recordkeeping requirements.

Dated: June 30, 1995.

J. Steven Landefeld,

Acting Director, Bureau of Economic Analysis.

For the reasons set forth in the preamble, BEA proposes to amend 15

CFR part 806 as follows:

PART 806--DIRECT INVESTMENT SURVEYS

1. The authority citation for 15 CFR part 806 continues to read as

follows:

Authority: 5 U.S.C. 301; 22 U.S.C. 3101-3108; and E.O. 11961 (3

CFR, 1977 Comp., p. 86), as amended by E.O. 12013 (3 CFR, 1977

Comp., p. 147), E.O. 12318 (3 CFR, 1981 Comp., p. 173), and E.O.

12518 (3 CFR, 1985 Comp., p. 348).

Sec. 806.14 [Amended]

2. Section 806.14(f)(3) introductory text, (f)(3)(i), (f)(3)(ii),

(f)(3)(iii), (f)(3)(iv) (A) through (C), (f)(3)(v) are revised to read

as follows:

* * * * *

(f) * * *

(3) BE-11--Annual Survey of U.S. Direct Investment Abroad: A

report, consisting of Form BE-11A and Form(s) BE-11B(LF), BE-11B(SF),

and/or BE-11C, is required of each nonbank U.S. Reporter who, at the

end of the Reporter's fiscal year, had a nonbank foreign affiliate

reportable on Form BE-11B(LF), BE-11B(SF), or BE-11C. Forms required

and the criteria for reporting on each are as follows:

(i) Form BE-11A (Report for U.S. Reporter) must be filed by each

nonbank U.S. person having a foreign affiliate reportable on Form BE-

11B(LF), BE-11B(SF), or BE-11C.

(ii) Form BE-11B(LF) or (SF) (Report for Majority-owned Foreign

Affiliate).

(A) A BE-11B(LF) (Long Form) is required to be filed for each

majority-owned nonbank foreign affiliate of a nonbank U.S. Reporter for

which any one of three items--total assets, sales or gross operating

revenues excluding sales taxes, or net income after provision for

foreign income taxes--was greater than $50 million (positive or

negative) at the end of, or for, the affiliate's fiscal year.

(B) A BE-11B(SF) (Short Form) is required to be filed for each

majority-owned nonbank foreign affiliate of a nonbank U.S. Reporter for

which any one of the three items listed in paragraph (f)(3)(ii)(A) of

this section was greater than $20 million (positive or negative), but

for which no one of these items was greater than $50 million (positive

or negative), at the end of, or for, the affiliate's fiscal year.

(iii) Form BE-11C (Report for Minority-owned Foreign Affiliate)

must be filed for each minority-owned nonbank foreign affiliate that is

owned at least 20 percent, but not more than 50 percent, directly and/

or indirectly, by all U.S. Reporters of the affiliate combined, and for

which any one of the three items listed in paragraph (f)(3)(ii)(A) of

this section was greater than $20 million (positive or negative) at the

end of, or for, the affiliate's fiscal year. In addition, for the

report covering fiscal year 1997 only, a Form BE-11C must be filed for

each minority-owned nonbank foreign affiliate that is owned, directly

or indirectly, at least 10 percent by one U.S. Reporter, but less than

20 percent by all U.S. Reporters of the affiliate combined, and for

which any one of the three items listed in paragraph (f)(3)(ii)(A) of

this section was greater than $100 million (positive or negative) at

the end of, or for, the affiliate's fiscal year.

(iv) * * *

(A) None of its exemption level items is above $20 million.

(B) For fiscal year 1997 only, it is less than 20 percent owned,

directly or indirectly, by all U.S. Reporters of the affiliate combined

and none of its exemption level items exceeds $100 million.

(C) For fiscal years other than 1997, it is less than 20 percent

owned, directly or indirectly, by all U.S. Reporters of the affiliate

combined.

(D) * * *

(E) * * *

(v) Notwithstanding the above, a Form BE-11B(LF), BE-11B(SF), or

BE-11C must be filed for a foreign affiliate of the U.S. Reporter that

owns another nonexempt foreign affiliate of that U.S. Reporter, even if

the foreign affiliate parent is otherwise exempt. That is, all

affiliates upward in the chain of ownership must be reported.

* * * * *

[FR Doc. 95-18804 Filed 7-31-95; 8:45 am]

BILLING CODE 3510-DT-M