06-1877. 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 proposed rule amends regulations of the Bureau of Economic Analysis, Department of Commerce (BEA) to set forth the reporting requirements for the quarterly BE-577, Direct Transactions of U.S. Reporter With Foreign Affiliate. The BE-577 survey is conducted quarterly and is a sample survey that obtains data on transactions and positions between U.S.-owned foreign business enterprises and their U.S. parents.

To address the current needs of data users while at the same time keeping the respondent burden as low as possible, BEA proposes modification of items on the survey form and in the reporting criteria. Changes are proposed to bring the BE-577 forms and related instructions into conformity with the 2004 BE-10, Benchmark Survey of U.S. Direct Investment Abroad, and to exclude data that have recently begun to be collected on other Government surveys.

DATES:

Comments on these proposed rules will receive consideration if submitted on or before 5 p.m. May 1, 2006.

ADDRESSES:

You may submit comments, identified by RIN 0691-AA57, and referencing the agency name (Bureau of Economic Analysis), by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. For agency, select “Commerce Department—all.”
• E-mail: [e-mail].
• Fax: Office of the Chief, International Investment Division, [phone].
• Mail: Office of the Chief, International Investment Division, U.S. Department of Commerce, Bureau of Economic Analysis, BE-50, Washington, DC 20230.
• Hand Delivery/Courier: Office of the Chief, International Investment Division, U.S. Department of Commerce, Bureau of Economic Analysis, BE-50, Shipping and Receiving, Section M100, 1441 L Street, NW., Washington, DC 20005.

Public Inspection: Comments may be inspected at BEA's offices, 1441 L Street, NW., Room 7006, between 8:30 a.m. and 5 p.m., Eastern Time Monday through Friday.

FOR FURTHER INFORMATION CONTACT:

Obie G. Whichard, Chief, International Investment Division (BE-50), Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC 20230; phone [phone].

SUPPLEMENTARY INFORMATION:

This proposed rule would amend 15 CFR part 806.14 to set forth the reporting requirements for the 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.

Description of Changes

The BE-577 survey is a mandatory survey and is conducted quarterly by BEA under the International Investment and Trade in Services Survey Act (22 U.S.C. 3101-3108). 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 will be due within 45 days.

To reduce respondent burden, BEA proposes to increase the exemption level for reporting from $30 million to $40 million. The exemption level is stated in terms of the foreign affiliate's assets, sales, and net income. BEA expects this change to result in a decrease of approximately 1,800 affiliates reported on the BE-577 from the total of about 15,500 now required to be reported. The decrease in the number of reportable affiliates due to raising the exemption level will offset the increase in reportable affiliates due to natural growth since the exemption level was last increased (from $20 to $30 million) in 2000.

In addition, BEA is proposing a few changes to the survey form and instructions. BEA proposes to:

1. Revise the survey form and instructions to bring them into conformity with the most recent BE-10 benchmark survey instructions for reporting capital gains and losses.

2. Collect information on payments to and receipts from foreign affiliates for interest, royalties and license fees and other private services gross of any taxes withheld, to align reporting of these items with current international statistical standards for balance of payments accounts. Previously, this information was collected net of taxes withheld.

3. Modify the survey instructions to indicate that positions and transactions in financial derivatives contracts that are reported on or derived from the Treasury Department's recently instituted International Capital Form D, Report of Holdings of, and Transactions in, Financial Derivatives Contracts with Foreign Residents should be excluded from BE-577 reports.

4. Remove the requirement for reporting certain affiliated insurance transactions that have been problematic to collect on the BE-577. BEA plans to move the reporting requirement for these transactions to specialized services surveys that BEA conducts in the near future.

Survey Background

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.” Title 22 United States Code, Section 3103(a)(1) of the Act requires that with respect to United States direct investment abroad, the President shall conduct a data collection program to obtain current information on international capital flows and other information related to international investment and trade in services including information that 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.

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 is a sample survey that covers all foreign affiliates above a size-exemption level. The survey collects data on transactions and positions between U.S.-owned foreign business enterprises and their U.S. parents. The sample data are used to derive quarterly universe estimates from 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, input-output accounts, and 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.

Executive Order 12866

This proposed rule has been determined to be not significant for purposes of E. O. 12866.

Executive order 13132

This proposed rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under E.O. 13132.

Paperwork Reduction Act

This proposed rule contains a collection-of-information requirement subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act. The requirement has been submitted to OMB for approval as a revision to a collection currently approved under OMB control number 0608-0004.

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 OMB control number.

The survey, as proposed, is expected to result in the filing of about 13,500 foreign affiliate reports by an estimated 1,500 U.S. parent companies. A parent company must file one form per affiliate. BEA proposes to change the survey in two ways—first, to collect information on payments to and receipts from foreign affiliates for interest, royalties and license fees and other private services gross rather than, as in the past, net of any taxes withheld, and second, to remove the requirement for reporting certain affiliated insurance transactions that have been problematic to collect on the BE-577. (BEA plans to move the reporting requirement for these transactions to specialized services surveys that BEA conducts in the near future.) 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, 54,000 responses annually are expected. Thus, the total annual respondent burden of the survey is estimated at 67,500 hours (13,500 respondents times 4 times 1.25 hours average burden). This estimate is the same as the burden hours currently carried for this collection in the OMB inventory.

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, fax: [phone]; and the Office of Management and Budget, O.I.R.A., Paperwork Reduction Project 0608-0004, Attention PRA Desk Officer for BEA, via the Internet at [e-mail], or by fax at 202-395-7245.

Regulatory Flexibility Act

The Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration (SBA), 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. 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 about 100 of the estimated 1,500 U.S. parent companies that must respond to the BE-577 survey are small businesses according to the standards established by the Small Business Administration. 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.

The 100 U.S. businesses that meet the SBA small business standards tend to have few 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 $30 million to $40 million (stated in terms of the foreign affiliate's assets, sales, and net income), small U.S. businesses will be required to file fewer reports for their foreign affiliates than would be required in the absence of this increase. The estimated annual cost to a U.S. business reporting for five or fewer foreign affiliates is estimated to be less than $1,000.

List of Subjects in 15 CFR Part 806

• International transactions
• Economic statistics
• US investment abroad
• Penalties
• Reporting and recordkeeping requirements

Dated: February 21, 2006.

J. Steven Landefeld,

Director, Bureau of Economic Analysis.

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 is revised 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. 12318 (3 CFR, 1981 Comp., p. 173) and E.O. 12518 (3 CFR, 1985 Comp., p. 348).

§ 806.14

[Amended]

2. Section 806.14 (e) is amended by deleting “$30,000,000” and inserting “$40,000,000” in its place.