Mandatory 2022 Reporting Obligations For Cross-Border Business Structures Or Cross-Border Transactions
August 16, 2022
Authored by: Robert M. Schechter, JD and Maria Dermatis
The United States Department of Commerce’s Bureau of Economic Analysis has published notice of proposed rulemaking in the Federal Register in connection with its issuance of 2022 BE-12 and BE-120 Benchmark Surveys. Responses to these Benchmark Surveys are due with or without receipt of notice and are specifically required from (i) U.S. businesses that are 10% or more foreign owned (directly or indirectly), and (ii) U.S. parties (whether or not they are foreign owned) that transact with foreign parties for the sale or purchase of services or intellectual property rights.
As a result of the low foreign ownership threshold and the sheer volume of services transactions (as well as IP transactions) between U.S. and foreign parties in today’s global marketplace increasingly facilitated by the ease of online activity, these mandatory reporting obligations cast an extremely broad net triggering compliance requirements for a large portion of the U.S. business community. Reports are due after the close of 2022 and U.S. businesses and parties that fail to meet their compliance obligations may be subject to civil and criminal penalties pursuant to 22 U.S.C. § 3105.
The comment periods on the proposed rules close in August 2022 for the BE-120 and BE-12; August 15 and August 30, respectively.
Whether you are a U.S. company in the life sciences, technology, media, consumer goods, industrial, commercial or building products and parts, equipment or other business sectors, a 10% or greater foreign ownership (direct or indirect) in a U.S. business triggers a BE-12 reporting obligation. For the BE-12, it is the foreign ownership structure that triggers the compliance obligation. Even more expansive, these businesses as well as other U.S. parties (whether or not they are foreign owned) that enter into transactions for the sale or purchase of services or IP related rights with foreign parties are subject to the BE-120 reporting obligations. The BE-120 requires reporting on an expansive list of services, including, for example, professional, advertising, financial, architectural, construction, engineering, computer, telecommunications, education, market research, surveying, maintenance, health, contract manufacturing and other services.
Parties with BE-12 reporting obligations should also be aware that they are subject to BE-13 reporting compliance on a rolling basis that is triggered by certain establishments, acquisitions and expansions of U.S. businesses that have 10% or more foreign ownership.
Porzio Compliance Services’ regulatory compliance team is dedicated to simplifying the BEA’s complex requirements and streamlining the filing process. Our goal is to significantly decrease our clients’ reporting burden and ensure compliance.