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September 22, 2022

Cross-Border Update

Cross-Border Quarterly Update: Q3— "US Bureau of Economic Analysis and Cross-Border Businesses"

For clients engaged in cross-border business with Canadian entities or individuals—or any foreign investor for that matter—questions often arise regarding what types of regulatory hoops a business must jump through to remain on the right side of United States federal law. Aside from industry-specific regulators such as the US Departments of Agriculture and Transportation, businesses should also be aware of the US Bureau of Economic Analysis (BEA). 

The BEA is an agency within the US Department of Commerce that produces economic accounts and statistics that enable government and business decision-makers, researchers, and the American public to follow and understand the performance of the nations’ economy. To do this, the BEA collects source data through surveys, conducts research and analysis, develops and implements estimation methodologies, and disseminates statistics to the public. The BEA is responsible for estimating a key metric you might be familiar with: GDP.1  

One important way your business might be required to interact with the BEA is through the mandatory Survey of New Foreign Direct Investment in the United States, commonly known as the BE-13 survey. Under the authority of the International Investment and Trade in Services Survey Act, reporting is required of all US business enterprises in which a foreign person (in the broad legal sense, including a company) owns, directly or indirectly, 10 percent or more of the voting securities of an incorporated US business enterprise or an equivalent interest of an unincorporated US business enterprise such as a partnership or LLC. This includes foreign ownership of improved and unimproved real estate except residential real estate held exclusively for personal use. A US business enterprise that is required to report is referred to as a “US affiliate.” A foreign person that owns a 10 percent or more voting interest (or the equivalent) in a US affiliate is referred to as a “foreign parent.” The foreign parent is the first person outside the United States in a foreign chain of ownership.2 

Thankfully, responding to the survey is a fairly light lift and only requires respondents to complete a relatively short form; however, failure to respond to the survey could result in civil monetary penalties ranging from US$4,450 to US$44,539 and up to one year imprisonment for willful failures to respond. 

The BE-13 survey has five forms, and the form that must be filed is determined by certain reporting criteria. 

Form BE-13A 

This form is filed for a US business enterprise when a foreign entity acquires a voting interest (directly or indirectly through an existing US affiliate) in the enterprise, segment, or operating unit and the acquisition meets the following criteria:

  • The total cost of the acquisition is more than US$3 million.
  • At least 10 percent of the voting interest in the acquired enterprise is now owned, directly or indirectly, by the foreign entity. 

Form BE-13B

This form is filed for a US business enterprise when a foreign entity or an existing US affiliate of a foreign entity establishes a new legal entity in the United States and the establishment of the new entity meets the following criteria:

  • The projected total cost to establish the new legal entity is more than US$3 million.
  • At least 10 percent of the voting interest in the newly established business enterprise is now owned, directly or indirectly, by the foreign entity. 
  • Form BE-13D 

This form is filed for an existing US affiliate of a foreign parent when it expands its operations to include a new facility where business is conducted and the projected total cost of the expansion is more than US$3 million. 

Form BE-13E 

This form is filed for a US business enterprise that previously filed Form BE-13B or Form BE-13D and the established or expanded entity is still under construction. This is a cost-reporting survey used by the BEA to keep track of longer-term projects. 

Form BE-13 Claim for Exemption 

This form is filed if a US business enterprise meets any the following criteria:

  • The US business enterprise was contacted by the BEA but does not meet the requirements for filing any of the other forms.
  • The US business enterprise, whether or not it was contacted by the BEA, meets all requirements except the US$3 million reporting threshold for filing one of the other forms.

After the initial filing of a BE-13 Survey form, some entities will be required respond to the Annual Survey of Foreign Direct Investment using Form BE-15. Those entities required to respond annually will be contacted directly by the BEA. Those not contacted by the BEA do not have a responsibility to report. 

This article is intended to provide general information about the reporting requirements of the BE-13 Survey, not specific legal advice. There are additional BEA reporting requirements for some entities based on individual circumstances, including Forms BE-605 and BE-12. 

Additionally, while this information pertains to foreign investment in the United States, there are similar reporting requirements when US entities and individuals make foreign investments outside the United States. Consult with one of the attorneys on Barclay Damon’s Canada-US Cross-Border Team to talk about your specific circumstances and to learn more about potential BEA reporting obligations. 

If you have any questions regarding the content of this blog, please contact Rex McKeon, law clerk (admission to practice in New York State pending), at rmckeon@barclaydamon.com, or another member of the firm’s Canada-US Cross-Border Team. 
 

 1 “Who We Are,” Bureau of Economic Analysis, United States Department of Commerce Bureau of Economic Analysis, accessed September 13, 2022, https://www.bea.gov/about/who-we-are
 2 “A Guide to BEA’s Direct Investment Surveys,” United States Department of Commerce Bureau of Economic Analysis, www.bea.gov/sites/default/files/2018-04/a-guide-to-bea-direct-investment-surveys.pdf.
 

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