Direct Investment Surveys: BE-12, Benchmark Survey of Foreign Direct Investment in the United States-2002

AGENCY:

Bureau of Economic Analysis, Commerce.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This notice sets forth a proposed rule to revise the reporting requirements for the BE-12, Benchmark Survey of Foreign Direct Investment in the United States.

The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. The BE-12 survey is a mandatory survey and is conducted once every 5 years by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce, under the International Investment and Trade in Services Survey Act. The proposed benchmark survey will be conducted for 2002. BEA will send the survey to potential respondents in February 2003; responses will be due by May 31, 2003. The last benchmark survey was conducted for 1997. The benchmark survey covers virtually the entire universe of foreign direct investment in the United States in terms of value, and is BEA's most comprehensive survey of such investment in terms of subject matter.

Changes proposed by BEA in the reporting requirements to be implemented in this proposed rule are: Raising the reporting threshold on the BE-12(SF) short form and the BE-12 Bank form from $3 million to $10 million; directing that only nonbank majority-owned U.S. affiliates of foreign companies report on the BE-12(LF) long form; raising the reporting threshold on the BE-12(LF) long form from $100 million to $125 million; and directing bank holding companies to file a fully consolidated report, including all nonbank operations, on the BE-12 Bank form. (Previously, the nonbanking operations were reported on a separate BE-12(LF) long form or BE-12(SF) short form.) These changes will reduce respondent burden, especially for small companies and bank holding companies.

DATES:

Comments on this proposed rule will receive consideration if submitted in writing on or before November 12, 2002.

ADDRESSES:

Direct all written comments to the Office of the Chief, International Investment Division (BE-50), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230. Because of slow mail, and to assure that comments are received in a timely manner, please consider using one of the following delivery methods: (1) Fax to (202) 606-5318, (2) deliver by courier to U.S. Department of Commerce, Bureau of Economic Analysis, BE-49(A), Shipping and Receiving, Section M100, 1441 L Street NW., Washington, DC 20005, or (3) e-mail to David.Belli@bea.gov. Comments received will be available for public inspection in Room 7005, 1441 L Street NW., between 8:30 a.m. and 4:30 p.m., eastern time Monday through Friday.

FOR FURTHER INFORMATION CONTACT:

R. David Belli, Chief, International Investment Division (BE-50), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230; phone 202-606-9800.

SUPPLEMENTARY INFORMATION:

This proposed rule amends 15 CFR 806.17 to set forth the reporting requirements for the BE-12, Benchmark Survey of Foreign Direct Investment in the United States—2002. The Bureau of Economic Analysis (BEA), U.S. Department of Commerce, will conduct the survey under the International Investment and Trade in Services Survey Act (22 U.S.C. 3101-3108), hereinafter, “the Act.” Section 4(b) of the Act requires that:

“* * * With respect to foreign direct investment in the United States, the President shall conduct a benchmark survey covering year 1980, a benchmark survey covering year 1987, and benchmark surveys covering every fifth year thereafter. In conducting surveys [of U.S. direct investment abroad and foreign direct investment in the United States] pursuant to this subsection, the President shall, among other things and to the extent he determines necessary and feasible—

(1) Identify the location, nature, and magnitude of, and changes in the total investment by any parent in each of its affiliates and the financial transactions between any parent and each of its affiliates;

(2) Obtain (A) information on the balance sheet of parents and affiliates and related financial data, (B) income statements, including the gross sales by primary line of business (with as much product line detail as is necessary and feasible) of parents and affiliates in each country in which they have significant operations, and (C) related information regarding trade (including trade in both goods and services) between a parent and each of its affiliates and between each parent or affiliate and any other person;

(3) Collect employment data showing both the number of United States and foreign employees of each parent and affiliate and the levels of compensation, by country, industry, and skill level;

(4) Obtain information on tax payments by parents and affiliates by country; and

(5) Determine, by industry and country, the total dollar amount of research and development expenditures by each parent and affiliate, payments or other compensation for the transfer of technology between parents and their affiliates, and payments or other compensation received by parents or affiliates from the transfer of technology to other persons.”

In Section 3 of Executive Order 11961, the President delegated authority granted under the Act as concerns direct investment to the Secretary of Commerce, who has redelegated it to BEA.

The benchmark survey is a census; it covers virtually the entire universe of foreign direct investment in the United States in terms of value, and is BEA's most comprehensive survey of such investment in terms of subject matter. Foreign direct investment in the United States is defined as the ownership or control, directly or indirectly, by one foreign person (foreign parent) of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise, including a branch.

The purpose of the benchmark survey is to obtain universe data on the financial and operating characteristics of, and on positions and transactions between, U.S. affiliates and their foreign parent groups (which are defined to include all foreign parents and foreign affiliates of foreign parents). The data are needed to measure the size and economic significance of foreign direct investment in the United States, to measure changes in such investment, and to assess its impact on the U.S. economy. Such data are generally found in enterprise-level accounting records of respondent companies. The data are disaggregated by industry of U.S. affiliate, by country and industry of foreign parent or ultimate beneficial owner, and, for selected items, by State.

The data will provide benchmarks for deriving current universe estimates of direct investment from sample data collected in other BEA surveys. In particular, they will serve as benchmarks for the quarterly direct investment estimates included in the U.S. international transactions and national income and product accounts, and for annual estimates of the foreign direct investment position in the United States and of the operations of the U.S. affiliates of foreign companies. Data from the benchmark survey on U.S. affiliates' employee compensation, profits, interest receipts and expenses, depreciation, and income and other taxes are used by BEA to compute U.S. affiliates' gross product or value added. The estimates are used to measure U.S. affiliates' share of U.S. gross domestic product and to evaluate affiliates' profitability and productivity. Data on employment by affiliates are used to link enterprise-level data on foreign-owned companies collected in the benchmark survey to establishment-level data for the same companies collected by the Census Bureau.

It should be noted that, aside from their use in compiling the U.S. national and international economic accounts, the benchmark survey data are primarily intended as general purpose statistics. Based on past experience, areas of particular and lasting analytical and policy interest include trade in goods and services, employment and employee compensation, profitability, regional location, taxes, and technology. These areas, all of which are addressed by the proposed survey, are also ones for which the Act specifically requires data to be collected. Another area of continuing policy interest, particularly at the State and local levels, is the impact of foreign direct investment on individual States. The data in the survey disaggregated by State are intended to address needs in this area.

The forms to be used in the survey are:

1. Form BE-12(LF) (Long Form)—Report for nonbank majority-owned U.S. affiliates (a “majority-owned” U.S. affiliate is one in which the combined direct and indirect ownership interest of all foreign parents of the U.S. affiliate exceeds 50 percent) with assets, sales or gross operating revenues, or net income greater than $125 million (positive or negative);

2. Form BE-12(SF) (Short Form)—Report for nonbank majority-owned U.S. affiliates with assets, sales or gross operating revenues, or net income greater than $10 million, but not greater than $125 million (positive or negative) and nonbank minority-owned U.S. affiliates (owned 50 percent or less) with assets, sales or gross operating revenues, or net income greater than $10 million (positive or negative). U.S. affiliates with total assets, sales or gross operating revenues, and net income between $10 million and $30 million (positive or negative) will be required to report only selected data items on the short form;

3. Form BE-12 Bank—Report for U.S. affiliates that are banks, bank holding companies, or banking and nonbanking operations of bank holding companies; and

4. BE-12(X)—Report for claiming exemption from filing a BE-12(LF) long form, BE-12(SF) short form, or BE-12 Bank form.

BEA maintains a continuing dialog with respondents and data users, including its own internal users through the Bureau's Source Data Improvement and Evaluation Program, to ensure that, as far as possible, the required data serve their intended purposes and are available to the maximum extent possible from existing records, that instructions are clear, and that unreasonable burdens are not imposed. In designing the survey, BEA contacted data users outside the Bureau and survey respondents to obtain their views on the proposed benchmark survey. The proposed draft reflects users' and respondents' comments. In reaching decisions on what questions to include in the survey, BEA considered the Government's need for the data, the burden imposed on respondents, the quality of the likely responses (for example, whether the data are readily available from respondents' books), and BEA's experience in previous benchmark and related annual surveys.

Changes proposed by BEA from the previous benchmark survey include reduction of respondent burden, particularly for small companies, by (1) raising the reporting threshold on the BE-12(SF) short form and the BE-12 BANK form from $3 million to $10 million; (2) directing that only nonbank majority-owned U.S. affiliates of foreign companies be reported on the BE-12(LF) long form; (3) raising the reporting threshold on the BE-12(LF) long form from $100 million to $125 million; and (4) directing bank holding companies (BHC's) to file a fully consolidated report, including all banking and nonbanking operations, on the BE-12 Bank form.

Previously, the banking and non-banking operations of a BHC were required to file separate reports: the nonbank operations of the BHC filed on the BE-12(LF) long form or BE-12(SF) short form, and the BHC itself and its banking operations filed on the BE-12 Bank form.

In addition, BEA proposes to: (1) Add questions to the BE-12 (LF) long form to collect detail on premiums earned and claims paid for U.S. affiliates operating in the insurance industry; collect detail on finished goods purchased for resale for U.S. affiliates operating in the wholesale and retail trade industries; and collect the percentage of total sales or gross operating revenues that represents e-commerce sales (for example, sales transacted over the Internet). (2) Add four items to the short form that are needed to assure the quality of BEA's estimates of U.S. affiliates' gross product—certain realized and unrealized gains and losses; U.S. income taxes; interest received, and interest paid. (3) Add questions to the BE-12 Bank form to collect information on debt flows with the foreign parent for certain nonbanking subsidiaries included in the fully consolidated BE-12 Bank report; sales of services; interest received and paid; and premiums earned and claims payable by insurance companies included in the consolidated report.

To offset the burden imposed by these additional questions, BEA proposes to remove questions on: (1) Whether a foreign government or government-run pension fund has a voting ownership of at least 5 percent, in any foreign parent or any entity in the parent's ownership chain; (2) the balance sheet classification of land and other property, plant, and equipment (BE-12 long form only); (3) acres of mineral rights owned or leased from others (BE-12 long form only); and (4) the gross book value of land owned (BE-12 short form only).

Executive Order 13132

This proposed rule does not contain policies with Federalism implications as that term is defined in E.O.13132.

Executive Order 12866

This proposed rule has been determined to be not significant for purposes of E.O. 12866.

Paperwork Reduction Act

This proposed rule contains a collection of information subject to the Paperwork Reduction Act (PRA) and has been submitted to the Office of Management and Budget for review under the PRA.

Notwithstanding any other provisions of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection-of-information subject to the requirements of the Paperwork Reduction Act unless that collection displays a currently valid Office of Management and Budget Control Number.

The survey, as proposed, is expected to result in the filing of reports from approximately 17,700 respondents. The respondent burden for this collection of information is estimated to vary from 20 minutes to 715 hours per response, with an average of 11.3 hours per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Thus, the total respondent burden of the survey is estimated at about 199,500 hours (17,700 times 11.3 hours average burden).

Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the burden estimate; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Comments should be addressed to: Director, Bureau of Economic Analysis (BE-1), U.S. Department of Commerce, Washington, DC 20230; and to the Office of Management and Budget, O.I.R.A., Paperwork Reduction Project 0608-0042, Washington, DC 20503 (Attention PRA Desk Officer for BEA).

Regulatory Flexibility Act

The Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration, under provisions of the Regulatory Flexibility Act (5 U.S.C. 605(b)) that this proposed rulemaking, if adopted, will not have a significant economic impact on a substantial number of small entities. Few small businesses as defined by the RFA are foreign owned; those that are and have total assets, sales or gross operating revenues, and net income each equal to or less than $10 million are not required to report on the BE-12(SF) short form or BE-12 Bank form. To further reduce reporting burden for smaller companies, the reporting threshold for filing a BE-12(LF) long form has been raised to $125 million, from $100 million in the 1997 survey, and companies with total assets, sales or gross operating revenues and net income (positive or negative) between $10 million and $30 million will be required to report only selected data items on the BE-12(SF) short form.

List of Subjects in 15 CFR Part 806

• International transactions
• Economic statistics
• Foreign investment in the United States
• Penalties
• Reporting and recordkeeping requirements

For the reasons set forth in the preamble, BEA proposes to amend 15 CFR part 806 as follows:

PART 806—DIRECT INVESTMENT SURVEYS

1. The authority citation for 15 CFR part 806 continues to read as follows:

Authority: 5 U.S.C. 301; 22 U.S.C. 3101-3108; and E.O. 11961 (3 CFR, 1977 Comp., p. 86), as amended by E.O. 12013 (3 CFR, 1977 Comp., p. 147), E.O. 12318 (3 CFR, 1981 Comp., p. 173), and E.O. 12518 (3 CFR, 1985 Comp., p. 348).

2. Section 806.17 is revised to read as follows: