Are you a U.S. person or enterprise with 10% or more ownership or controlling interest in voting securities of a non-U.S. entity? If so, you likely owe a report to the Department of Commerce by May 29, 2015. The Department of Commerce’s Bureau of Economic Analysis (BEA) has collected data about U.S. bound foreign investors and U.S. owned foreign investments for many years. It was recently reinstituted, however, as a mandatory requirement for reporting on such investments every five years.
The form to submit for outbound investments is called a BE-10. The latest five year report is due by May 29, 2015, if you’re reporting fewer than 50 such foreign affiliate investments, and June 30, 2015, when you exceed 50. If needed, you can ask for an extension, which the BEA will likely grant. Each U.S. reporter has to file a BE-10A, and then another BE-10 B, C or D, as applicable, for its foreign affiliate. The form you use depends on the level of investment, measured in assets, sales and net income of the foreign enterprise. Details about the forms and instructions can be found here.
We have worked with the BEA to assist our clients with these kinds of filings for many years. The BEA staff are extremely helpful at answering many of the questions not answered in the regulations, forms or instructions. Just make sure you’ve done your best to read and understand the forms and instructions first. They can be reached at (202) 606-5566. And, of course, feel free to contact us if we can be of assistance.
Does this really matter? Yes it does! Although the BEA doesn’t have sufficient resources to pursue delinquent reports, persistent failures to file could eventually end up triggering pretty serious criminal and civil penalties. Criminal penalties for willful failures can be up to $10,000 and imprisonment for up to one year. Civil penalties can include up to $25,000 in fines and injunctive relief.
The last few weeks have been busy for developments on the Asian Infrastructure Investment Bank (“AIIB”), a project spearheaded by the People’s Republic of China (PRC), that is expected to provide loans for infrastructure development in Asia. The PRC has accused the International Monetary Fund and the World Bank, both common institutional investors in developing countries and based in Washington, D.C., of being overly exposed to Western influences and attaching too many conditions to the loans they issue. With an active AIIB, we would expect to see new opportunities created in underdeveloped areas that have, until now, had limited access to credit for ambitious projects. In recent news:
- Japan has declined to join the AIIB as a founding member, and is the first major economic player in the region to do so: http://www.nytimes.com/2015/04/01/world/asia/japan-says-no-to-asian-infrastructure-investment-bank.html
- Taiwan’s application to join the AIIB as a founding member was rejected when the PRC objected to the name designation under which Taiwan submitted its membership: http://sinosphere.blogs.nytimes.com/2015/04/13/because-of-name-dispute-taiwan-wont-join-china-led-investment-bank-as-founding-member/?_r=0
- Despite American opposition to the AIIB, the United Kingdom, along with France, Italy, and Germany, has applied for founding membership to the AIIB: http://www.ibtimes.com/china-welcomes-iran-uae-asian-infrastructure-investment-bank-founding-members-now-1872553
The effects of these membership choices remain to be seen, but many of the prospective founding members will be candidates for management positions within the AIIB. Such positions could have significant impacts on which infrastructure projects are funded first and on what terms.
The International Practice Group of Garvey Schubert Barer is a cross-disciplinary group of attorneys practicing in areas ranging from business transactions, immigration, maritime, government regulatory work, transportation and logistics, and estate planning. The group members include bilingual and multicultural attorneys who are well-versed in handling these subject matters in a cross-border context. The firm’s attorneys have been actively practicing in the international arena since the early 1970s.