Direct Investment Surveys: BE-12, Benchmark Survey of Foreign Direct Investment in the United States1997

DEPARTMENT OF COMMERCE

Bureau of Economic Analysis

15 CFR Part 806

[Docket No. 970918231-7231-01]

RIN 0691-AA29

Direct Investment Surveys: BE-12, Benchmark Survey of Foreign

Direct Investment in the United States--1997

AGENCY: Bureau of Economic Analysis, Commerce.

ACTION: Final rule.

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SUMMARY: These final rules revise 15 CFR 806.17 to set forth reporting

requirements for the BE-12, Benchmark Survey of Foreign Direct

Investment in the United States--1997, and to delete the rules now in

15 CFR 806.17, which were for the last benchmark survey covering 1992.

The BE-12 benchmark survey is conducted by the Bureau of Economic

Analysis (BEA), U.S. Department of Commerce, under Section 3103(b) of

the International Investment and Trade in Services Survey Act, which

requires that a benchmark survey of foreign direct investment in the

United States be conducted every five years. The last benchmark survey

was conducted for 1992. The benchmark survey will obtain universe data

on the financial and operating characteristics of, and on positions and

transactions between, U.S. affiliates and their foreign parents. The

data from the quinquennial survey will provide benchmarks for deriving

current universe estimates of foreign direct investment from sample

data collected in other BEA surveys in nonbenchmark years. The data are

needed to measure the economic significance of foreign direct

investment in the United States, measure changes in such investment,

assess its impact on the U.S. economy, and based upon this assessment,

make informed policy decisions regarding foreign direct investment in

the United States. They are also required for compiling the U.S.

international transactions, input-output, and national income and

product accounts, and for preparing estimates of the international

investment position of the United States.

Key changes from the previous benchmark survey include reducing

respondent burden, particularly for small companies, by: increasing the

exemption level for reporting on the survey to $3 million (measured by

the company's total assets, sales, or net income) from $1 million in

the 1992 survey; increasing the exemption level at which reporting on

the long form version of the survey is required from $50 million to

$100 million; and requiring reporting companies with assets, sales, or

net income between $3 million and $30 million to report only selected

data items on the short form version. In addition, the survey bases

industry coding of reporting companies on the new North American

Industry Classification System (NAICS) in place of the previous system

which was based on the U.S. Standard Industrial Classification system;

it collects new information on affiliated services transactions by type

of service; and it modifies the detail collected on the

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composition of external financing of the reporting enterprise, on

exports and imports of goods by product, and on the operations of

foreign-owned businesses in individual States.

Forms for the 1997 benchmark survey are scheduled to be mailed out

at the end of February 1998. Completed reports will be due to BEA on

May 31, 1998.

EFFECTIVE DATE: These rules will be effective February 23, 1998.

FOR FURTHER INFORMATION CONTACT: R. David Belli, Chief, International

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

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

SUPPLEMENTARY INFORMATION: In the October 8, 1997 Federal Register,

Volume 62, No 195, pages 52515-52518, the Bureau of Economic Analysis

published a notice of proposed rulemaking to revise 15 CFR 806.17 to

set forth reporting requirements for the BE-12, Benchmark Survey of

Foreign Direct Investment in the United States--1997. No comments on

the proposed rule were received. Thus, this final rule is the same as

the proposed rule.

The benchmark survey is to be conducted by the Bureau of Economic

Analysis, U.S. Department of Commerce, under the International

Investment and Trade in Services Survey Act (Pub. L. 94-472, 90 Stat.

2059, 22 U.S.C. 3101-3108, as amended by P.L. 98-573 and P.L. 101-533),

hereinafter, ``the Act.'' Section 3103(b) of the Act, as amended,

requires that ``With respect to foreign direct investment in the United

States, the President shall conduct a benchmark survey covering year

1980, a benchmark survey covering year 1987, and benchmark surveys

covering every fifth year thereafter * * *.'' In conducting surveys

pursuant to this subsection, the President shall, among other things

and to the extent he determines necessary and feasible--

(1) Identify the location, nature, and magnitude of, and changes in

the total investment by any parent in each of its affiliates and the

financial transactions between any parent and each of its affiliates;

(2) Obtain (A) information on the balance sheet of parents and

affiliates and related financial data, (B) income statements, including

the gross sales by primary line of business (with as much product line

detail as necessary and feasible) of parents and affiliates in each

country in which they have significant operations, and (C) related

information regarding trade, including trade in both goods and

services, between a parent and each of its affiliates and between each

parent or affiliate and any other person;

(3) Collect employment data showing both the number of United

States and foreign employees of each parent and affiliate and the

levels of compensation, by country, industry, and skill level;

(4) Obtain information on tax payments by parents and affiliates by

country; and

(5) Determine, by industry and country, the total dollar amount of

research and development expenditures by each parent and affiliate,

payments or other compensation for the transfer of technology between

parents and their affiliates, and payments or other compensation

received by parents or affiliates from the transfer of technology to

other persons.

Reporting in the survey is mandatory. The responsibility for

conducting benchmark surveys of foreign direct investment in the United

States has been delegated to the Secretary of Commerce, who has

redelegated it to BEA.

The benchmark surveys are BEA's censuses, intended to cover the

universe of foreign direct investment in the United States in value

terms. Foreign direct investment in the United States is defined as the

ownership or control, directly or indirectly, by one foreign person of

10 percent or more of the voting securities of an incorporated U.S.

business enterprise or an equivalent interest in an unincorporated U.S.

business enterprise, including a branch.

The purpose of the benchmark survey is to obtain data on the

amount, types, and financial and operating characteristics of foreign

direct investment in the United States.

The data from the survey will be used to measure the economic

significance of such investment and to analyze its effects on the U.S.

economy. They will also be used in formulating, and assessing the

impact of, U.S. policy on foreign direct investment.

They will provide benchmarks for deriving current universe

estimates of direct investment from sample data collected in other BEA

surveys. In particular, they will serve as benchmarks for the quarterly

direct investment estimates included in the U.S. international

transactions, input-output, and natural income and product accounts,

and for preparing estimates of the international investment position of

the United States.

The benchmark surveys are also the most comprehensive of BEA's

surveys in terms of subject matter in order that they obtain the

detailed information on foreign direct investment needed for policy

purposes. As specified in the Act, policy areas of particular interest

that should be addressed by the survey include, among other things,

trade in both goods and services, employment and employee compensation,

taxes, and technology.

The survey consists of an instruction booklet, a claim for not

filing the BE-12, and the following report forms:

1. Form BE-12(LF) (Long Form) for reporting by nonbank U.S.

affiliates with assets, sales, or net income of more than $100 million;

2. Form BE-12(SF) (Short Form) for reporting by nonbank U.S.

affiliates with assets, sales, or net income of more than $3 million,

but not more than $100 million;

3. Form BE-12 Bank for reporting by U.S. affiliates that are banks

with assets, sales, or net income of more than $3 million.

Although the survey is intended to cover the universe of foreign

direct investment in the United States, in order to minimize the

reporting burden, U.S. affiliates with assets, sales, and net income

each equal to or less than $3 million are exempt from reporting on

Forms BE-12(LF), BE-12(SF), and BE-12 Bank, but are required to file,

on Form BE-12(X), a claim for exemption from filing in the benchmark

survey.

Key changes from the previous benchmark survey include reducing

respondent burden, particularly for small companies, by: increasing the

exemption level for reporting on the survey to $3 million (measured by

the company's total assets, sales, or net income) from $1 million in

the 1992 survey; increasing the exemption level at which reporting on

Form BE-12(LF) (Long Form) is required from $50 million to $100

million; and requiring reporting companies with assets, sales, or net

income between $3 million and $30 million to report only selected data

items on Form BE-12(SF) (Short Form). In addition, industry coding of

reporting companies will be based on the new North American Industry

Classification System (NAICS) in place of the system which is based on

the U.S. Standard Industrial Classification system; new information

will be collected on affiliated services transactions by type of

service; and the detail collected on the composition of external

financing of the reporting enterprise will be modified, along with

exports and imports of goods by product, and the operations of foreign-

owned businesses in individual States.

Executive Order 12612

These rules do not contain policies with Federalism implications

sufficient

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to warrant preparation of a Federalism assessment under E.O. 12612.

Executive Order 12866

These rules have been determined to be not significant for purposes

of E.O. 12866.

Paperwork Reduction Act

The collection of information required in these final rules has

been approved by OMB (OMB No. 0608-0042).

Notwithstanding any other provisions of the law, no person is

required to respond to, nor shall any person be subject to a penalty

for failure to comply with, a collection-of-information subject to the

requirements of the Paperwork Reduction Act unless that collection

displays a currently valid Office of Management and Budget Control

Number; such a Control Number (0608-0042) has been displayed.

Public reporting burden for this collection of information is

estimated to vary from 1 to 715 hours per response, with an average of

22 hours per response, including time for reviewing instructions,

searching existing data sources, gathering and maintaining the data

needed, and completing and reviewing the collection of information.

Send comments regarding this burden estimate or any other aspect of

this collection of information, including suggestions for reducing this

burden to: Director, Bureau of Economic Analysis (BE-1), U.S.

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

Management and Budget, O.I.R.A., Paperwork Reduction Project 0608-0042,

Washington, DC 20503.

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 provisions of the

Regulatory Flexibility Act (5 U.S.C. 605(b)), that these rules will not

have a significant economic impact on a substantial number of small

entities. Most small businesses are not foreign owned, and many that

are will not be required to report in the benchmark survey because

their assets, sales, and net income are each equal to or less than the

$3 million exemption level below which reporting is not required. Also,

under these rules, companies with assets, sales, or net income above $3

million, but not above $100 million, will report on the abbreviated BE-

12 short form, rather than on the BE-12 long form. In addition,

companies with assets, sales, or net income between $3 million and $30

million will report only selected data items on the BE-12 short form.

These provisions are intended to significantly reduce the reporting

burden on smaller companies.

List of Subjects in 15 CFR Part 806

Balance of payments, Economic statistics, Foreign investments in

the United States, Reporting and recordkeeping requirements.

Dated: December 22, 1997.

J. Steven Landefeld,

Director, Bureau of Economic Analysis.

For the reasons set forth in the preamble, BEA amends 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).

2. Section 806.17 is revised to read as follows:

Sec. 806.17 Rules and regulations for BE-12, Benchmark Survey of

Foreign Direct Investment in the United States--1997.

A BE-12, Benchmark Survey of Foreign Direct Investment in the

United States will be conducted covering 1997. All legal authorities,

provisions, definitions, and requirements contained in Secs. 806.1

through 806.13 and Sec. 806.15 (a) through (g) are applicable to this

survey. Specific additional rules and regulations for the BE-12 survey

are given in this section.

(a) Response required. A response is required from persons subject

to the reporting requirements of the BE-12, Benchmark Survey of Foreign

Direct Investment in the United States--1997, contained in this

section, whether or not they are contacted by BEA. Also, a person, or

their agent, contacted by BEA concerning their being subject to

reporting, either by sending them a report form or by written inquiry,

must respond in writing pursuant to Sec. 806.4. This may be

accomplished by completing and returning either Form BE-12(X) within 30

days of its receipt if Form BE-12(LF), Form BE-12(SF), or Form BE-12

Bank do not apply, or by completing and returning Form BE-12(LF), Form

BE-12(SF), or Form BE-12 Bank, whichever is applicable, by May 31,

1998.

(b) Who must report. A BE-12 report is required for each U.S.

affiliate, i.e., for each U.S. business enterprise in which a foreign

person owned or controlled, directly or indirectly, 10 percent or more

of the voting securities if an incorporated U.S. business enterprise,

or an equivalent interest if an unincorporated U.S. business

enterprise, at the end of the business enterprise's 1997 fiscal year. A

report is required even though the foreign person's ownership interest

in the U.S. business enterprise may have been established or acquired

during the reporting period. Beneficial, not record, ownership is the

basis of the reporting criteria.

(c) Forms to be filed. (1) Form BE-12(LF)--Benchmark Survey of

Foreign Direct Investment in the United States--1997 (Long Form) must

be completed and filed by May 31, 1998, by each U.S. business

enterprise that was a U.S. affiliate of a foreign person at the end of

its 1997 fiscal year, if:

(i) It is not a bank, and

(ii) On a fully consolidated, or, in the case of real estate

investment, an aggregated basis, one or more of the following three

items for the U.S. affiliate (not just the foreign parent's share)

exceeded $100 million (positive or negative) at the end of, or for, its

1997 fiscal year:

(A) Total assets (do not net out liabilities);

(B) Sales or gross operating revenues, excluding sales taxes; or

(C) Net income after provision for U.S. income taxes.

(2) Form BE-12(SF)--Benchmark Survey of Foreign Direct Investment

in the United States--1997 (Short Form) must be completed and filed by

May 31, 1998, by each U.S. business enterprise that was a U.S.

affiliate of a foreign person at the end of its 1997 fiscal year; if:

(i) It is not a bank, and

(ii) On a fully consolidated, or, in the case of real estate

investments, an aggregated basis, one or more of the following three

items for the U.S. affiliate (not just the foreign parent's share)

exceeded $3 million, but no one item exceeded $100 million (positive or

negative) at the end of, or for, its 1997 fiscal year:

(A) Total assets (do not net out liabilities);

(B) Sales or gross operating revenues, excluding sales taxes; or

(C) Net income after provision for U.S. income taxes.

(3) Form BE-12 Bank--Benchmark Survey of Foreign Direct Investment

in the United States--1997 BANK must be completed and filed by May 31,

1998, by each U.S. business enterprise that was a U.S. affiliate of a

foreign person at the end of its 1997 fiscal year, if:

(i) The U.S. affiliate is in ``banking'', which, for purposes of

the BE-12

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survey, covers business enterprises engaged in deposit banking or

closely related functions, including commercial banks, Edge Act

corporations engaged in international or foreign banking, U.S. branches

and agencies of foreign banks whether or not they accept domestic

deposits, savings and loans, savings banks, and bank holding companies,

i.e., holding companies for which over 50 percent of their total income

is from banks which they hold, and

(ii) On a fully consolidated basis, one or more of the following

three items for the U.S. affiliate (not the foreign parent's share)

exceeded $3 million (positive or negative) at the end of, or for, its

1997 fiscal year:

(A) Total assets (do not net out liabilities);

(B) Sales or gross operating revenues, excluding sales taxes; or

(C) Net income after provision for U.S. income taxes.

(4) Form BE-12(X)--Benchmark Survey of Foreign Direct Investment in

the United States--1997, Claim for Exemption from Filing BE-12(LF), BE-

12(SF), and BE-12 Bank must be completed and filed within 30 days of

the date it was received, or by May 31, 1998, whichever is sooner, by:

(i) Each U.S. business enterprise that was a U.S. affiliate of a

foreign person at the end of its 1997 fiscal year (whether or not the

U.S. affiliate, or its agent, is contacted by BEA concerning its being

subject to reporting in the 1997 benchmark survey), but is exempt from

filing Form BE-12(LF), Form BE-12(SF), and Form BE-12 Bank; and

(ii) Each U.S. business enterprise, or its agent, that is

contacted, in writing, by BEA concerning its being subject to reporting

in the 1997 benchmark survey but that is not otherwise required to file

the Form BE-12(LF), Form BE-12(SF), or Form BE-12 Bank.

(d) Aggregation of real estate investments. All real estate

investments of a foreign person must be aggregated for the purpose of

applying the reporting criteria. A single report form must be filed to

report the aggregate holdings, unless written permission has been

received from BEA to do otherwise. Those holdings not aggregated must

be reported separately.

(e) Exemption. (1) A U.S. affiliate as consolidated, or aggregated

in the case of real estate investments, is not required to file a Form

BE-12(LF), BE-12(SF), or Form BE-12 Bank if each of the following three

items for the U.S. affiliate (not just the foreign parent's share) did

not exceed $3 million (positive or negative) at the end of, or for, its

1997 fiscal year:

(i) Total assets ( do not net out liabilities);

(ii) Sales or gross operating revenues, excluding sales taxes; and

(iii) Net income after provision for U.S. income taxes.

(2) If a U.S. business enterprise was a U.S. affiliate at the end

of its 1997 fiscal year but is exempt from filing a completed Form BE-

12(LF), BE-12(SF), or Form BE-12 Bank, it must nevertheless file a

completed and certified Form BE-12(X).

(f) Due date. A fully completed and certified Form BE-12(LF), Form

BE-12(SF), or BE-12 Bank is due to be filed with BEA not later than May

31, 1998. A fully completed and certified Form BE-12(X) is due to be

filed with BEA within 30 days of the date it was received, or by May

31, 1998, whichever is sooner.

[FR Doc. 98-1541 Filed 1-22-98; 8:45 am]

BILLING CODE 3510-06-M