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INWARD INVESTMENT REPORTING REQUIREMENTS

I.    Principal Federal Reporting Requirements

There are two primary federal statutes governing reporting by foreign investors about investments made in the United States: the International Investment and Trade in Services Survey Act; and the Agricultural Foreign Investment Disclosure Act.

A. The International Investment and Trade in Services Survey Act ("IITSSA")(22 U.S.C. 3101 et seq.), is administered by the Bureau of Economic Analysis (BEA) of the Department of Commerce, see 15 C.F.R. 806. The IITSSA requires reports of all foreign investment in a U.S. business enterprise in which a foreign person owns 10% or more of the voting interest, unless the investment is under $1 million, is under 200 acres, or is real estate intended for personal use. The forms listed below meet most of the reporting requirements. Investment in the form of banking affiliates requires forms distinct from but similar to those of other enterprises (e.g., banking affiliates must fill out a Form BE-605 specifically for banking).

All forms listed below can be found on the World Wide Web, along with directions on filling them out, on the site for the Bureau of Economic Analysis at: http://www.bea.gov/bea/di1.htm

BE-13 Initial Report of Acquisition of U.S. Business by Foreign Entity, must be filled out by a U.S. enterprise when a foreign person establishes or acquires (directly or indirectly) 10 percent or more of the voting stock of that enterprise. Exceptions - residential land used solely for personal use and not for profit; a business enterprise where the total cost of acquisition was less than $3 million and the acquisition involved less than 200 acres of U.S. land; a business enterprise where the total assets of the purchased company were less than $3 million or the company owned less than 200 acres of U.S. land. To claim an exemption, the foreign person must file an Exemption Claim, Form BE-13.

BE-14 Report by U.S. Person who Assists or Intervenes in an Acquisition of a U.S. Business by a Foreign Entity, must be filled out by the U.S. person, including intermediaries, brokers or others, who assists or intervenes in a  sale to or a purchase by a foreign person of a U.S. affiliate, or by a U.S. person entering into a joint venture with a foreign person in order to establish a U.S. business enterprise. The U.S. person must report only the foreign investment that is known, or report any information that would lead the U.S. person to believe the investor is a foreign person.  Exemptions to filling out Form BE-14 mirror those for Form BE-13.

BE-605 Quarterly Report, must be filled out for each U.S. affiliate of a foreign parent where the affiliate exceeds $30 million (positive or negative) in either assets, sales or gross operating revenues, or net income after income taxes. The exemption level for Form BE-605 was increased from $20 million to $30 million effective FY 1998.

BE-15 Annual Report, must be completed by May 31 of the following FY for each consolidated U.S. non-bank affiliate with a foreign parent exceeding $10 million (positive or negative) in either assets, sales or gross operating revenues or net income after income taxes. Affiliates between $10 million but under $50 million can respond with the Short Form, whereas those over $50 million must complete the Long Form. Affiliates qualified for exemption must fill out a BE-15 Supplement, Claim for Exemption form. Banking affiliates are exempt from this survey.

BE-12 Benchmark Survey. In 1987 and every five years thereafter, U.S. affiliates must complete a Benchmark Survey by May 31 if they had at least 10 percent foreign-based beneficial ownership at the end of the prior calendar year. Affiliates with between $1 million and $50 million in total assets, sales or gross operating revenues or net income after income taxes can fill out the short form. Affiliates above the $50 million limit must fill out the long form. Affiliates who wish to claim exemption must fill out an exemption form either 30 days from the date in which they receive the survey, or by May 31, whichever is sooner. Exempted affiliates must still fill out a Form BE-12(X).            

Questions about these forms may be addressed to BEA's International Investment Division; telephone (202) 606-5577 between 8:00 a.m. - 4:30 p.m., EST.

B. The Agricultural Foreign Investment Disclosure Act (7 U.S.C. 3501) ("AFIDA") Administered by the U.S. Department of Agriculture, see Regulations at 7 C.F.R. 781. If agricultural land is acquired by or has title transferred to a foreign individual, AFIDA requires the individual to submit a report (Form FSA-153, Agriculture Investment Disclosure Act Report) to the Secretary of Agriculture within 90 days of the transaction. Exceptions to this requirement include transactions involving: security interests; leaseholds under 10 years; contingent future interests; non-contingent future interests that do not become possessory upon termination of the present possessory estate; easements and rights of way (surface or sub-surface) unrelated to agricultural production; interests solely in mineral rights.

Form FSA-153 can be found on the Department of Agriculture's Website, at: http://www.fsa.usda.gov/wi/programs/factsheets/afida/FSA0153.pdf

Questions about FSA-153 may be addressed to the Farm Service Agency; telephone (202) 720-6833.

II.    The Exon-Florio Provision

The Exon-Florio provision (50 U.S.C. 2170) provides for the review, investigation and possible suspension or blocking of certain mergers, acquisitions and takeovers that could threaten to impair U.S. national security. The Committee on Foreign Investment in the United States ("CFIUS") has been delegated the authority to review and conduct investigations of mergers, acquisitions and takeovers where the transaction could result in foreign control of persons engaged in interstate commerce in the United States. Control refers to the ability to determine, direct or decide matters for the purchased company. Regulations are located at 31 C.F.R. 800 et seq.

CFIUS has 30 days from notification of the transaction to review it and decide whether to proceed with an investigation. If the Committee determines that an investigation should be undertaken, it must be completed within 45 days of this determination. Within 15 days after completion, the President must announce whether there is: (a) credible evidence that the purchaser might take action to impair the national security of the United States, and (b) that other provisions of law will not afford the President with adequate and appropriate authority to protect national security. If both of these criteria are met, the President may take action as the President considers appropriate to suspend or prohibit the transaction.

For a more complete description of the Exon-Florio provision, see the U.S. Department of the Treasury website. The Exon-Florio page is located at: http://www.treas.gov/offices/international-affairs/exon-florio/

 
Contact:   Gay Sills Hoar
                U.S. Department of Treasury
                Office of International Investment
                1500 Pennsylvania Avenue, N.W.,
                Room 4201 NY
                Washington, DC 20220
                Phone: (202) 622-1860

III.    State Reporting Statutes

Many U.S. states have reporting statutes affecting foreign investment. California has statutes on insurance (Cal. Ins. Code §739.10, see also 10 CCR § 2276, §2570.07, et al) and banking (Cal. Fin. Code §1753, regarding licensing authority of state banking commissioner), for example. New York has both reporting and taxation requirements specific to foreign fire insurance corporations (NY CLS Ins. §9104, see also NY ADC T. 11, Ch. IV, Subch. A, Pt. 80, Subpt. 80-1). Illinois has reporting requirements for foreign persons owning agricultural land (Ill. Rev. Stat. 1983, ch. 5, par. 601 et seq, see also 8 Ill. Adm. Code 800 et seq.) Illinois recently eliminated many of the special reporting requirements for foreign insurers (see 19 Ill. Reg. 12248, but see 215 ILCS 5/136(2)). Arkansas likewise has a reporting requirement for foreign interests in agricultural land (A.C.A. §2-3-103, 105). These examples are not intended to be a comprehensive summary of all such reporting statutes for the states listed. Instead, they should serve as indicators where statutes are known to exist. Areas covered in state reporting statutes are principally in agriculture and insurance, but the individual investor should investigate to determine what the local jurisdiction requires.
 

CONTACT INFORMATION:

Arthur Watson

Senior Counsel for International Business and Investment

Office of the Chief Counsel for International Commerce

U.S. Department of Commerce

Website: http://www.ogc.doc.gov/intl_comm_home.html

E-mail: occic@doc.gov
 

Prepared by:

David Aarestad
Legal Intern

December 17, 1998

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