Direct Investment Surveys: BE-577, Direct Transactions of U.S. Reporter With Foreign Affiliate

AGENCY:

Bureau of Economic Analysis, Commerce.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This document sets forth proposed rules to amend the reporting requirements for the quarterly BE-577, Direct Transactions of U.S. Reporter With Foreign Affiliate.

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-577 survey is a mandatory survey and is conducted quarterly by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce, under the International Investment and Trade in Services Survey Act. BEA will send BE-577 survey forms to potential respondents each quarter; responses will be due within 30 days after the close of each fiscal quarter, except for the final quarter of the fiscal year, when reports should be filed within 45 days. The survey is a cut-off sample survey that obtains data on transactions and positions between U.S.-owned foreign business enterprises and their U.S. parents.

The change proposed by BEA in the reporting requirements to be implemented in these proposed rules is to reduce respondent burden, particularly for small companies, by increasing the exemption level for the survey—the level below which reports are not required—from $20 million to $30 million in total assets, sales or gross operating revenues, or net income (positive or negative) of the U.S.-owned foreign business enterprise. Raising the exemption level lowers the number of reports that otherwise would have to be filed, thus reducing respondent burden. BEA is also proposing changes in the content of survey that, on balance, do not affect respondent burden.

DATES:

Comments on these proposed rules will receive consideration if submitted in writing on or before November 20, 2000.

ADDRESSES:

Mail comments to the Office of the Chief, International Investment Division (BE-50), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230, or hand deliver comments to room M-100, 1441 L Street, NW, Washington, DC 20005. Comments will be available for public inspection in Room 7005, 1441 L Street, NW, between 8:30 a.m. and 4:30 p.m., 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:

These proposed rules amend 15 CFR Part 806.14 to set forth reporting requirements for the BE-577, Direct Transactions of U.S. Reporter With Foreign Affiliate. 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(a) of the Act requires that with respect to United States direct investment abroad, the President shall, to the extent he deems necessary, and feasible—

(1) Conduct a regular data collection program to secure current information on international capital flows and other information related to international investment and trade in services, including (but not limited to) such information as may be necessary for computing and analyzing the United States balance of payments, the employment and taxes of United States parents and affiliates, and the international investment and trade in services position of the United States; and

(2) Conduct such studies and surveys as may be necessary to prepare reports in a timely manner on specific aspects of international investment and trade in services which may have significant implications for the economic welfare and national security of the United States.

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 quarterly survey of U.S. direct investment abroad collects data on transactions and positions between U.S.-owned foreign business enterprises and their U.S. parents. The BE-577 is a cut-off sample survey that covers all foreign affiliates above a size-exemption level. The sample data are used to derive universe estimates in nonbenchmark years by extrapolating forward similar data reported in the BE-10, Benchmark Survey of U.S. Direct Investment Abroad, which is taken every five years. The data are used in the preparation of the U.S international transactions accounts, the input-output accounts, and the national income and product accounts. The data are needed to measure the size and economic significance of U.S. direct investment abroad, measure changes in such investment, and assess its impact on the U.S. and foreign economies. The data are disaggregated by country and industry of foreign affiliate.

BEA maintains a continuing dialogue with respondents and with 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 from existing records, that instructions are clear, and that unreasonable burdens are not imposed. 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 (e.g., whether the data are readily available on respondents' books), and BEA's experience in previous quarterly surveys. Because BEA's proposed changes to the BE-577 are minimal and to a large extent mirror those introduced in connection with the 1999 BE-10 benchmark survey, additional consultations outside the agency, beyond those held last year in conjunction with the benchmark survey design, were not conducted.

BEA is proposing to increase the exemption level for reporting on the BE-577 quarterly survey from $20 million to $30 million. The exemption level is the level of a foreign affiliate's assets, sales, or net income at or below which a Form BE-577 is not required. Thus, if a foreign business is owned 10 percent or more by the U.S. parent, but its total assets, sale or gross operating revenues, and net income all are $30 million (positive or negative) or less, the U.S. parent will not have to report it. The exemption level for the BE-577 survey was last raised following the 1994 benchmark survey and was effective with the quarterly survey covering the second quarter of 1995. The proposed changes would be effective commencing with the reports for the first quarter of 2001.

BEA is proposing a few changes to the report forms themselves. BEA proposes to extend the use of the North American Industry Classification System (NAICS) to the BE-577 survey. NAICS is already being used on all BEA surveys of foreign direct investment in the United States and BEA used NAICS to collect industry information on the 1999 BE-10 benchmark survey of U.S. direct investment abroad. BEA also proposes to modify the detail on affiliated services by type of service by dropping the category for communication services in the by-type breakdown and adding the presumably larger management and consulting and research and development categories. BEA is also proposing improvements in the clarity of the instructions. The changes in format and content of the survey, on balance, do not affect respondent burden.

A copy of the proposed form may be obtained from: Office of the Chief, Direct Investment Abroad Branch, International Investment Division (BE-69(A)), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230; phone (202) 606-5566.

Executive Order 12866

These proposed rules are not significant for purposes of E.O. 12866.

Executive Order 13132

These proposed rules do not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under E.O. 13132.

Paperwork Reduction Act

These proposed rules contain a collection of information requirement subject to the Paperwork Reduction Act (PRA) and have 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 about 12,500 foreign affiliate reports by an estimated 1,500 U.S. parent companies. A parent company must file one form per affiliate. The respondent burden for this collection of information is estimated to vary from 0.5 hour to 4 hours per response, with an average of 1.25 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. Because reports are filed 4 times per year, 50,000 responses annually are expected. Thus the total annual respondent burden of the survey is estimated at 62,500 hours (12,500 respondents times 4 times 1.25 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 0608-0004, 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 the 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, if any, small U.S. businesses are subject to the reporting requirements of this survey. Although the BE-577 survey does not itself collect data on the size of the U.S. companies that must respond, data collected on related BEA surveys indicate that the U.S. companies that have direct investment abroad tend to be quite large. The exemption level for the BE-577 survey is set in terms of the size of a U.S. company's foreign affiliates (foreign companies owned 10 percent or more by the U.S. company); if a foreign affiliate has assets, sales, or net income greater than the exemption level, it must be reported. Usually, the U.S. parent company that is required to file the report is many times larger than its largest foreign affiliate.

Small U.S. businesses tend to have few, if any, foreign affiliates and the foreign affiliates that they do own are small. With the proposed increase in the exemption level for the BE-577 survey from $20 million to $30 million (stated in terms of the foreign affiliate's assets, sales, and net income), even fewer small U.S. businesses will be required to file reports for their foreign affiliates. The estimated annual cost of a U.S. business reporting for five or fewer foreign affiliates is estimated to be less than $1,000. Therefore, based on the forgoing, this proposed rule, if adopted, will not have a significant economic impact on a substantial number of small entities.

List of Subjects in 15 CFR Part 806

• Balance of payments
• Economic statistics
• US investment abroad
• 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).