The Mandatory Form BE-13 Filing for Foreign Direct Investments in U.S. Companies and Real Estate is Back

January 2, 2015 Craig Tzvi Gherman

Foreign investors in certain U.S. businesses[1] must, once again, report their investments pursuant to a Form BE-13 filing (Survey of New Foreign Direct Investment in the United States). Below, we provide the main factors that will determine who needs to file the BE-13 and which form is required, as well as other important points in connection with the BE-13 filing. The BE-13 filing requirement comes as a result of its recent reinstatement by the U.S. Department of Commerce’s Bureau of Economic Analysis (the “BEA”). Please note that the initial filing deadline is January 12, 2015 (as described below).

What’s the purpose of the BE-13 filing?

The BEA uses the BE-13 filings to collect information on the acquisition or establishment of U.S. business enterprises by foreign investors, as well as the expansions by existing U.S. affiliates of foreign investors.

Who must file the BE-13?

The foreign investor’s U.S. affiliate (the U.S. business in which the investment is made), not the foreign investor itself, is subject to the BE-13 reporting requirements. Note that even if the BEA does not contact the foreign investor, the BE-13 filing is required.

What is considered an “investment” that requires a BE-13 filing?

The rule defines “foreign direct investment in the United States” as the direct or indirect ownership or control by a foreign person (foreign parent) of 10 percent or more of the voting securities of an incorporated U.S. business enterprise, or an equivalent interest of an unincorporated U.S. business enterprise, including a branch. The filing is intended to cover a variety of business transactions with respect to such investment, such as the establishment, acquisition, or expansion of a U.S. business.

When would an investment have to have been made to be subject to the BE-13 filing requirement?

The Form BE-13 filing requirement applies to any applicable investment consummated on or after January 1, 2014.

By when must the BE-13 filing be made?

If an investment was consummated on or before November 24, 2014, the filing is due by January 12, 2015 (although extensions are possible based on reasonable requests made prior to the due date). For all other investments, the BE-13 must be filed no later than 45 days after the effective date/completion of the reportable transaction (i.e., the establishment of a new entity, the closing of an acquisition, or, with respect to an expansion, the beginning of the expansion).

What form should be used for the BE-13 filing?

There are six versions of the form that the U.S. affiliate can file. The form required will be determined by the transaction type:

  • Form BE-13A – report for a U.S. business enterprise when a foreign entity acquires a voting interest (directly, or indirectly through an existing U.S. affiliate) in that enterprise, segment, or operating unit, and (i) the total cost of acquisition is greater than $3 million; (ii) the U.S. business enterprise will operate as a separate legal entity; and (iii) by this acquisition, at least 10 percent of the voting interest in the acquired entity is now held (directly or indirectly) by the foreign entity.
  • Form BE-13B – report for a U.S. business enterprise when a foreign entity, or an existing U.S. affiliate of a foreign entity, establishes a new legal entity in the United States and (i) the projected total cost to establish the new legal entity is greater than $3 million and (ii) the foreign entity owns 10 percent or more of the new business enterprise’s voting interest (directly or indirectly).
  • Form BE-13C – report for an existing U.S. affiliate of a foreign parent that acquires a U.S. business enterprise or segment that it then merges into its operations and the total cost to acquire the business enterprise is greater than $3 million.
  • Form BE-13D – report for an existing U.S 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 greater than $3 million.
  • Form BE-13E – report for a U.S. business enterprise that previously filed a BE-13B or BE-13D indicating that the established or expanded entity is still under construction. Note that this form will first become available in 2015.
  • Form BE-13 Claim for Exemption – report for a U.S. business enterprise that (i) was contacted by BEA but does not meet the requirements for filing forms BE-13A, BE-13B, BE-13C, or BE-13D or (ii) whether or not contacted by BEA, met all requirements for filing on Forms BE-13A, BE-13B, BE-13C, or BE-13D except for the $3 million reporting threshold.

Which entities of the investor must be included in the report?

The Form BE-13 is filed on a “consolidated domestic basis,” which includes information on the U.S. affiliate, and any U.S. business in which the U.S. affiliate owns more than 50% of the voting interest.

How is the filing made?

The U.S. affiliate of the foreign investor can file the appropriate Form BE-13 in a number of ways – post mail, fax, or electronically via BEA’s electronic filing portal at www.bea.gov/efile. The BEA website (www.bea.gov/fdi) also provides a number of filing resources, including forms, filing instructions, FAQs and even video tutorials.

What are the penalties for failing to properly file the BE-13?

Failure to properly file the BE-13 (whether missing the deadline, using the wrong form or providing incomplete or inaccurate information) can result in civil and/or criminal penalties, ranging from $2,500 or more than $32,500 per violation, as well as injunctive relief compelling compliance on the civil side, and imprisonment of up to one year and/or a fine of not more than $10,000 per violation on the criminal side (if it is found that such failure was willful).

If you have any questions or need assistance with the filing of your Form BE-13, please contact Craig Tzvi Gherman at cgherman@swalegal.com or 646 328 0788.

[1] “Businesses,” for purposes of the BE-13 filing, include U.S. legal entities, branch offices, and real estate (improved or unimproved), with limited exceptions for certain residential properties.

Craig is head of the Start-Ups practice and a partner in the Corporate, Securities and Private Equity practices at SWA. His diverse practice focuses on public and private company stock and asset based acquisitions and sales, mergers, capital raises, joint ventures and corporate governance, as well as commercial and other business transactions.

Craig Tzvi can be reached at 646 328 0788 or cgherman@swalegal.com

This SWA publication is intended for informational purposes and should not be regarded as legal advice. For more information about the issues included in this publication, please contact Craig Tzvi Gherman. The invitation to contact is not to be construed as a solicitation for legal work. Any new attorney/client relationship will be confirmed in writing.