US escalates overseas reporting requirements

The US Department of Commerce’s Bureau of Economic Analysis (BEA) has said that private fund advisors and other entities should no longer wait to hear from the US government before filing a BE-13 survey when buying businesses in the US.

In a recent, largely unpublicized notice published on the BEA website, it was announced that any entity that crosses the reporting thresholds will be required to file. Previously, a BE-13 filing had only been required of entities specifically contacted by the BEA.

The report, which was discontinued in 2009 but reinstated last year, applies to any transaction where a foreign direct investment in the US has taken place, an existing US affiliate of a foreign GP establishes a new US legal entity, expands its US operations, or acquires a US business.

The bureau defines foreign direct investment as the ownership or control by one foreign entity of 10 percent or more of the voting securities of a US business. For private funds this could mean a US portfolio company of a non-US fund may be required to file Form BE-13 if the fund acquired 10 percent or more of the company’s voting securities (e.g., a Cayman Islands fund acquiring a US portfolio company). Real estate purchased for other than personal use also requires filing.

The BEA also requires retroactive reporting by January 12, 2015 by any entity that crossed the reporting threshold between January 1, 2014 and November 26, 2014. However, according to a Ropes & Gray client memo, the BEA has confirmed that it is willing grant extensions. Extension requests should be submitted to BE-13@bea.gov, and should include the name of the prospective filer, the date of the reportable transaction, and the date the filer reasonably expects to be able to make the filing.

Consistent failure to report may result in civil and criminal penalties and the BEA may pursue civil penalties up to $25,000 and wilful violations may result in criminal penalties of up to $10,000 and imprisonment for up to one year.