United States: Deadline To File BE-10 Benchmark Surveys Approaches

The Bureau of Economic Analysis (BEA), US Department of Commerce conducts a BE-10 benchmark survey of US Direct Investment Abroad every five years. All US persons with a foreign affiliate, with certain exceptions for private funds that are foreign affiliates, at the end of the 2019 fiscal year are required to file the survey in May or June of 2020 (with the deadline determined by the number of forms that need to be filed). We briefly discuss the BE-10 survey filing requirement along with some of the changes to this year's survey below.

WHAT IS THE PURPOSE OF THE SURVEY?

BEA collects information on US direct investment overseas, foreign direct investment in the United States, and international trade in services. BEA uses this information to compile a number of different economic and statistical reports that help gauge the performance of the US economy and the role of the United States in the global economy. Information submitted to BEA is confidential and is to be used for such economic and statistical reporting purposes only.

WHO IS REQUIRED TO FILE?

Any US person¹ that had a foreign affiliate at the end of the person's 2019 fiscal year is required to file a BE-10 report with the BEA, Department of Commerce. Under the regulations, a US person has a foreign affiliate if the person has "direct or indirect ownership or control of at least 10% of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise, including a branch."² Even if a US person had no foreign affiliates during its 2019 fiscal year, it may still need to file a "BE-10 Claim for Not Filing" if it is contacted by BEA.

New Exemption for Investment in Private Funds

There is a new exemption available in fiscal year 2019 for investments in certain private funds. Pursuant to the final rule that amended the regulations, investments in private funds that meet the definition of a foreign affiliate, but display characteristics of portfolio investment need not file a BE-10 report.³ To be exempt, the investment in a foreign affiliate must meet the following conditions:

• The foreign affiliate is a private fund;
• The private fund foreign affiliate does not own, directly or indirectly through another business enterprise, an "operating company" in which the consolidated US reporter owns at least 10% of the voting interest; and
• If the US reporter owns the private fund indirectly (through one or more other business enterprises), there must be no "operating companies" between the consolidated US reporter and the indirectly-owned foreign private fund.⁴

For purposes of the exemption, an operating company is a business enterprise that is not a private fund or a holding company.⁵ If an investment meets the requirement of the private fund exemption, then the US investor need not file a BE-10 report for that foreign investment. Instead, such investment should be reported through the Treasury International Capital reporting system maintained by the US Department of the Treasury.⁶

WHAT FORMS MUST BE FILED?

There are five types of BE-10 Forms as described below.

Form BE-10A. This form must be completed by all US reporters and covers the fully consolidated US domestic business enterprise.

Form BE-10B. This form must be filed for each majority-owned foreign affiliate⁷ for which any of the following exceeds $80 million (either positive or negative) at the end of or for the fiscal year covered by the survey: (1) total assets (without netting liabilities), (2) sales or gross operating revenues, excluding sales taxes, or (3) net income after foreign income taxes.

Form BE-10C. This form is required for each majority-owned foreign affiliate for which any of the following exceeds $25 million, but none of which exceeds $80 million (either positive or negative) at the end of or for the fiscal year covered by the survey: (1) total assets (without netting liabilities), (2) sales or gross operating revenues, excluding sales taxes, or (3) net income after foreign income taxes. In addition, this form is required for each minority-owned foreign affiliate⁸ for which any of the following exceeds $25 million (either positive or negative) at the end of or for the fiscal year covered by the survey: (1) total assets (without netting liabilities), (2) sales or gross operating revenues, excluding sales taxes, or (3) net income after foreign income taxes.

Form BE-10D. This form is required for each majority-owned and minority foreign affiliate for which none of the following items exceeds $25 million (positive or negative) at the end of or for the fiscal year covered by the survey: (1) total assets (without netting liabilities), (2) sales or gross operating revenues, excluding sales taxes, or (3) net income after foreign income taxes.

Form BE-10 Claim for Not Filing. This form is used by (1) persons that are not subject to the reporting requirements, but have been contacted by BEA about their reporting status, and (2) US reporters that have been contacted by BEA concerning their reporting status for foreign affiliates that are no longer subject to the reporting requirements of the BE-10 survey.

The 2019 BE-10 Forms are not yet available. BEA has indicated that the 2019 BE-10 Forms would become available between mid-February and March.

WHAT ARE THE CHANGES FROM THE PREVIOUS BE-10 REPORT?

In addition to the newly added exemption for investments in certain private funds, BEA made some other changes to this year's BE-10 survey.

First, this year's BE-10 surveys will ask for certain information that was previously not required. For example, this year's Form BE-10A and BE-10B will ask for information relating to sales, employment, costs, and expenses of a US parent and the sales of certain foreign affiliates, as they relate to following services that are prevalent in the digital economy: (1) cloud computing; (2) digital intermediation services; and (3) advertising. Relatedly, both forms will ask for the percentage of sales of services delivered remotely, sales of services ordered digitally, and sales of goods ordered digitally. Form BE-10B will further ask information on the value of R&D performed by the US parent for the foreign affiliate under a collaborative R&D agreement, including cost-sharing agreements.

Second, BEA has decided to delete or consolidate some of the items in this year's BE-10 Survey. For example, BEA will no longer require information on contract manufacturing services, the trade in goods by world region, and the sales by world region, which BEA determined has been burdensome for companies and not widely used by data users.

WHEN IS THE BE-10 REPORT DUE?

The deadline to file the BE-10 report depends on how many Form(s) BE-10B, BE-C, and/or BE-10D one is required to file. For those filing fewer than 50 Forms, the deadline for the fully completed and certified BE-10 report is May 29, 2020. For those filing 50 or more Forms, the deadline is June 30, 2020.

WHAT HAPPENS IF YOU DO NOT FILE?

Failure to file a BE-10 Report with BEA can lead to civil penalties of between $4,735 and $48,192, and criminal penalties (for willful violations) of up to $10,000 and, if an individual, up to one year in prison.⁹

Footnotes