International Investment and Trade in Services Survey Act
1) Scope and Purpose The International Investment and Trade in Services Survey Act (IITSSA) is a disclosure law. It does not restrict or otherwise regulate foreign investments in the U.S. IITSSA empowers the President to collect a comprehensive base of information about direct and portfolio investment by foreign investors in the U.S. and by U.S. investors in foreign countries. The President has delegated the responsibility for collecting such information to the U.S. Department of Commerce’s Bureau of Economic Analysis.
While IITSSA applies to both U.S. investors who invest abroad and foreign investor who invest in the U.S., this chapter focuses only on the latter i.e., on those provisions of IITSSA that impact foreign investor who invest in the U.S. Persons who are subject to IITSSA are required to maintain certain records and to file reports with the Bureau of Economic Analysis.
U.S. Department of Commerce regulations set forth the specific reporting requirements applicable to foreign investors. The various types of reports that are required to be filed are described below. From time to time, the Bureau of Economic Analysis changes the reporting forms. So a foreign investor should check before it files a report to insure that the form it is using is up-to-date.
2) Reports and Exemptions Types of reports – general. The various reports that must be filed can be classified by when they must be filed, i.e., either quarterly, annually or, in the case of the benchmark survey report, every five years.
Quarterly reports. A U.S. business enterprise in which a foreign entity directly and/or indirectly owns 10 percent or more of the voting interest at any time during a quarter is required to file Form BE-605 to report positions and transactions involving its foreign parent(s) or the foreign affiliates of its foreign parent(s). The form must be filed within 30 days after the close of each calendar or fiscal quarter, except that the form for the fourth quarter may be filed 45 days after the close of the quarter.
A U.S. business enterprise may claim an exemption from the quarterly filing requirement if it satisfies one of the following criteria: (1) the values of both (a) total assets, annual sales or gross operating revenues, and (b) annual net income (loss) for the U.S. affiliate were each equal to or less than $60 million (positive or negative) for the most recent financial reporting year; (2) the U.S. affiliate is consolidated, merged into or reorganized into the BE-605 report for another U.S. affiliate; (3) the U.S. affiliate is indirectly owned through another U.S. affiliate and has no direct transactions with the foreign parent(s) or any of the foreign parent(s) affiliates; or (4) the foreign parent no longer has a voting ownership interest of 10 percent or more in the U.S. business enterprise. In the case of the first criterion, the dollar threshold is determined using projected amounts for a full year of operations if the U.S. business enterprise has not been in existence for a full 12 months.
Annual reports. An annual report may have to be filed on one of the Form BE-15 series of reporting forms to show financial and operating data of U.S. affiliates. The specific Form BE-15 that must be filed depends on a number of factors, including whether the U.S. affiliate is majority owned and whether its total assets, sales or gross operating revenues, or net income (loss) exceed certain dollar thresholds. An exemption from the annual filing requirement is available if certain criteria are satisfied. The exemption criteria can generally be found on Form BE-15 (Claim for Exemption).
Benchmark survey reports. The Bureau of Economic Analysis conducts a benchmark survey every five years. In benchmark survey years Form BE-12 is filed in lieu of the annual survey form. The purpose of the benchmark survey is to identify the location, nature, magnitude, and changes in total investment by any parent and each of its affiliates, and in the financial transactions between such entities. For foreign direct investment in the U.S., the benchmark survey years are 1980, 1986, and every fifth year thereafter. A benchmark survey of foreign direct investment in the U.S. was conducted for 2012.
3) Penalties The law provides that whoever fails to report shall be subject to a civil penalty of not less than $2,500 and not more than $25,000, and to injunctive relief commanding such person to comply, or both. These civil penalties are subject to inflationary adjustments. Whoever willfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year, or both. An officer, director, employee or agent of any corporation who knowingly participates in such violations may, upon conviction, be punished by a like fine, imprisonment or both.
4) Confidentiality IITSSA provides that any information collected in the submitted reports is to be kept confidential. Access to the information is available only to officials and employees of the U.S. Department of Commerce who are designated to perform functions under IITSSA. The information collected may be used only for analytical and statistical purposes within the U.S. government. At the President’s direction, information collected pursuant to IITSSA may be furnished to governmental agencies and departments other than the U.S. Department of Commerce, subject to the limitation that such information may be used only for analytical and statistical purposes.
While IITSSA applies to both U.S. investors who invest abroad and foreign investor who invest in the U.S., this chapter focuses only on the latter i.e., on those provisions of IITSSA that impact foreign investor who invest in the U.S. Persons who are subject to IITSSA are required to maintain certain records and to file reports with the Bureau of Economic Analysis.
U.S. Department of Commerce regulations set forth the specific reporting requirements applicable to foreign investors. The various types of reports that are required to be filed are described below. From time to time, the Bureau of Economic Analysis changes the reporting forms. So a foreign investor should check before it files a report to insure that the form it is using is up-to-date.
2) Reports and Exemptions Types of reports – general. The various reports that must be filed can be classified by when they must be filed, i.e., either quarterly, annually or, in the case of the benchmark survey report, every five years.
Quarterly reports. A U.S. business enterprise in which a foreign entity directly and/or indirectly owns 10 percent or more of the voting interest at any time during a quarter is required to file Form BE-605 to report positions and transactions involving its foreign parent(s) or the foreign affiliates of its foreign parent(s). The form must be filed within 30 days after the close of each calendar or fiscal quarter, except that the form for the fourth quarter may be filed 45 days after the close of the quarter.
A U.S. business enterprise may claim an exemption from the quarterly filing requirement if it satisfies one of the following criteria: (1) the values of both (a) total assets, annual sales or gross operating revenues, and (b) annual net income (loss) for the U.S. affiliate were each equal to or less than $60 million (positive or negative) for the most recent financial reporting year; (2) the U.S. affiliate is consolidated, merged into or reorganized into the BE-605 report for another U.S. affiliate; (3) the U.S. affiliate is indirectly owned through another U.S. affiliate and has no direct transactions with the foreign parent(s) or any of the foreign parent(s) affiliates; or (4) the foreign parent no longer has a voting ownership interest of 10 percent or more in the U.S. business enterprise. In the case of the first criterion, the dollar threshold is determined using projected amounts for a full year of operations if the U.S. business enterprise has not been in existence for a full 12 months.
Annual reports. An annual report may have to be filed on one of the Form BE-15 series of reporting forms to show financial and operating data of U.S. affiliates. The specific Form BE-15 that must be filed depends on a number of factors, including whether the U.S. affiliate is majority owned and whether its total assets, sales or gross operating revenues, or net income (loss) exceed certain dollar thresholds. An exemption from the annual filing requirement is available if certain criteria are satisfied. The exemption criteria can generally be found on Form BE-15 (Claim for Exemption).
Benchmark survey reports. The Bureau of Economic Analysis conducts a benchmark survey every five years. In benchmark survey years Form BE-12 is filed in lieu of the annual survey form. The purpose of the benchmark survey is to identify the location, nature, magnitude, and changes in total investment by any parent and each of its affiliates, and in the financial transactions between such entities. For foreign direct investment in the U.S., the benchmark survey years are 1980, 1986, and every fifth year thereafter. A benchmark survey of foreign direct investment in the U.S. was conducted for 2012.
3) Penalties The law provides that whoever fails to report shall be subject to a civil penalty of not less than $2,500 and not more than $25,000, and to injunctive relief commanding such person to comply, or both. These civil penalties are subject to inflationary adjustments. Whoever willfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year, or both. An officer, director, employee or agent of any corporation who knowingly participates in such violations may, upon conviction, be punished by a like fine, imprisonment or both.
4) Confidentiality IITSSA provides that any information collected in the submitted reports is to be kept confidential. Access to the information is available only to officials and employees of the U.S. Department of Commerce who are designated to perform functions under IITSSA. The information collected may be used only for analytical and statistical purposes within the U.S. government. At the President’s direction, information collected pursuant to IITSSA may be furnished to governmental agencies and departments other than the U.S. Department of Commerce, subject to the limitation that such information may be used only for analytical and statistical purposes.