Deadline Approaches for the BE-12 Benchmark Survey for Foreign Direct Investment in the US

The US Department of Commerce’s Bureau of Economic Analysis’s BE-12 Benchmark Survey for Foreign Direct Investment in the United States is due by May 31, 2023, or June 30, 2023 for reports submitted via eFile.

BACKGROUND

Every five years, the US Department of Commerce’s Bureau of Economic Analysis (BEA) conducts the BE-12 Benchmark Survey, its most comprehensive survey of all US business enterprises, including real estate held for nonpersonal use (US Affiliates) in which a foreign person or entity owned or controlled, directly or indirectly, 10% or more of its voting securities as of the end of the 2022 fiscal year. 

Most US subsidiaries of non-US parent companies are wholly owned, and these non-US parent companies usually own 100% of all the outstanding voting securities of its US subsidiaries. However, many non-US parent companies and their wholly owned US subsidiaries are not familiar with the BEA requirements and often neglect making the required filings.

The BEA prepares official US economic statistics to provide timely, accurate, and relevant economic information that helps gauge the performance of the US economy and the role of the United States in the global economy.

The BEA uses the data collected through the BE-12 survey, along with the other BEA filings, to produce statistics on the scale and effects of foreign-owned business activities in the United States. These statistics are used by Congress, the White House, federal agencies, state and local officials, business leaders, policymakers, and researchers. 

Reporting on BEA’s direct investment surveys is mandatory under the International Investment and Trade in Services Survey Act (IITSSA) (P.L. 94–472, 90 Stat. 2059, 22 USC §§ 3101–3108, as amended) regardless of whether a US Affiliate’s foreign ownership is the result of a financing, strategic investment, or its being a wholly owned subsidiary of a non-US parent company.

WHO MUST FILE

Reporting is required of all US Affiliates in which a foreign person (in the broad legal sense, including a company) owns, directly or indirectly, 10% or more of the voting securities of an incorporated US Affiliate or an equivalent interest of an unincorporated US business enterprise.

That is, if a foreign person (i.e., a non-US company or individual) owns, directly or indirectly, 10% or more of the voting securities of a US company, that US company must file a BE-12.

Unlike other BEA filings, a BE-12 must be filed regardless of whether a US Affiliate is contacted by the BEA.

In addition, any US Affiliate contacted by the BEA must file a BE-12 even if a foreign person did not own, directly or indirectly, 10% or more of the voting securities of such US Affiliate as of the end of the 2022 fiscal year.

FORM

For the 2022 fiscal year, there are four forms of the BE-12 that can be filed to meet this reporting requirement: BE-12A, BE-12B, BE-12C, and BE-12 Claim for Not Filing.

The BEA has provided a comprehensive decision tree to help filers determine which form to file.

Confidentiality

While many US Affiliates may be reluctant to share the information required by the BE-12, they can take comfort in the fact that, pursuant to the IITSSA, the information gathered via the BE-12 surveys will be protected by confidentiality and may be used by the BEA solely for analytical or statistical purposes. Further, any such information cannot be presented in any matter that would allow a US Affiliate to be individually identified.

To further ease concerns, the BEA has clarified that the information gathered via the BE-12 surveys also cannot be used for purposes of taxation, investigation, or regulation. To emphasize, the BE-12 filing is a survey for analytical and statistical use only.

Penalties

Failure to report can result in a civil penalty (i.e., a $2,500 to $25,000 penalty), injunctive relief commanding such person to comply, or both. Willfully failing to report can result in a fine (of not more than $10,000) and, if such nonreporting person is an individual, such individual may be imprisoned for not more than one year, or both.

Further, any officer, director, employee, or agent of any corporation who knowingly participates in a failure to report, upon conviction, may be punished by a fine (of not more than $10,000), imprisonment, or both (22 USC § 3105).

While enforcement actions have not been publicly reported, due to the potentially severe penalty of imprisonment, US Affiliates are advised to file and avoid any of the negative penalties that can be associated with a failure to report.