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U.S. Companies with Foreign Affiliates Face Looming Reporting Deadlines

U.S. companies with material ownership interests in foreign affiliates (including their own subsidiaries) are facing an upcoming May 29, 2015 deadline to file a cumbersome survey with the U.S. Department of Commerce Department’s Bureau of Economic Analysis (BEA).
To collect economic data on the operations of U.S. parent companies and their foreign affiliates, BEA issues three U.S. surveys relating to direct investment abroad: the Quarterly Survey (BE-577), the Annual Survey (BE-11) and the Benchmark Survey (BE-10). The BEA reporting requirements apply broadly to all forms of business entities, as well as individuals, estates, governments and other organizations (collectively, “U.S. persons”). The Benchmark Survey is required every five years and was last required for the period ending in 2009. The reporting requirement for the Benchmark Survey generally applies to U.S. persons who held more than 10 percent of the voting interest, directly or indirectly, in a foreign business enterprise during their 2014 fiscal year. Companies and other U.S. persons must make an individual filing and also a separate filing for each foreign affiliate. The deadline to file the BE-10 survey with BEA is May 29, 2015 or, for U.S. persons required to file more than 50 forms, June 30, 2015. Unlike the Annual Survey, completion of the Benchmark Survey is required whether or not BEA initiates contact and requests that a report be filed. 
Recent BEA rule changes added additional questions to the Benchmark Survey. As a result of such changes, BEA estimates that an average time commitment of 144 hours per response will be required from each filer (up from 121 hours for the 2009 response) to complete the Benchmark Survey, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. New questions added to this year’s Benchmark Survey include questions for U.S. persons regarding imports to the U.S., the intended use of such goods and status of the shipper, as well as questions regarding exports to specific regions of the world, banking activities and other matters. New questions have also been added to the foreign affiliate forms relating to research and development, and in the case of majority-owned affiliates, specific geographical sales information, royalties and license fees, and other financial information.
There are various Benchmark Survey forms, including Form BE-10A, BE-10B, BE-10C and BE-10D. Generally, Form BE-10A deals with the U.S. person and Forms BE-10B through 10-D relate to the foreign affiliates in which the U.S. person has a direct investment. Fortunately, the reporting burden is reduced for foreign affiliates that do not exceed benchmarks established by BEA. These benchmarks are based on total assets, sales or gross operating revenues excluding sales taxes and net income (or loss) after provision for foreign income taxes. The lowest reporting burden exists for foreign affiliates in which no such attributes are equal to $25 million or more. Intermediate reporting requirements exist for foreign affiliates at the $80 million and $300 million thresholds, and separate requirements exist for majority or minority owned affiliates. Filers should consult the instructions to Instructions.pdf (updated in December 2014) to determine which forms need to be filed. The BEA website contains up-to-date forms, as well as electronic filing options. The BEA does not authorize use of older versions of its forms.
Criminal penalties for willful failure to file required responses include fines up to $10,000 and up to one year imprisonment. Penalties may be levied against the entity and any officer, director, employee or agent of any business. Civil penalties include fines and civil actions such as a restraining order, as well as permanent or temporary injunctions commanding the U.S. business to furnish information or to otherwise comply with BEA requirements.
BEA also recently revised the reporting requirements for foreign direct investment in the U.S. 
Margaret Rosenfeld leads Smith Anderson’s International Law practice and co-leads the Life Sciences practice. Her practice includes public company reporting, corporate governance, public offerings and private placements of securities, corporate investigations (internal and government), mergers and acquisitions, and intellectual property protection and licensing as well as general corporation representation. Margaret is the only female attorney in North Carolina to be ranked within the category of Corporate/M&A law by Chambers USA: Americas Leading Business Lawyers. In December 2013, Margaret was appointed the Honorary German Consul for Eastern North Carolina by the U.S. State Department and the Federal Republic of Germany, which involves representing the interests of German companies in North Carolina and North Carolina companies in Germany as well as assist U.S. and German citizens in some legal and consular issues related to Germany.
Jeff Truitt practices in areas including mergers and acquisitions, commercial and finance transactions, and government contracts. He has significant experience in the drafting and negotiation of manufacturing and supply agreements, vendor agreements, licensing arrangements, and other contracts that support the day to day operations of companies. He also routinely represents early stage and growth companies in all phases of start-up, financing and exits, with particular emphasis on the sale of closely held businesses.
Jeff has experience working with clients in a broad range of industries, including software, packaging, pharmaceuticals, biotechnology, manufacturing, distribution, clean tech, utilities and professional services. Jeff also has significant non-profit experience arising from his involvement with Stop Hunger Now, Inc., an international relief and developmental assistance organization.