0608.0004.SuppStmt.120908 doc

Supporting Statement

U.S. Department of Commerce

Bureau of Economic Analysis

Direct Transactions of U.S. Reporter with Foreign Affiliate

OMB Control Number 0608-0004

A. Justification

1. Explain the circumstances that make the collection of information necessary.

This submission is to request renewal of the Office of Management and Budget (OMB) approval for this information collection.

The BE-577, Direct Transactions of U.S. Reporter with Foreign Affiliate, is a mandatory survey and is conducted under the International Investment and Trade in Services Survey Act (P.L. 94-472, 22 U.S.C. 3101-3108, as amended by P.L. 98-573 and P.L. 101-533), hereinafter "the Act." The survey collects data on transactions and positions between U.S.-owned foreign enterprises and their U.S. parents. 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.

Section 4(a) of the Act requires that the President shall, to the extent he deems necessary and feasible, conduct a regular data collection program to secure current information on international financial flows and other information related to international investment and trade in services. This includes (but not limited to) such information as 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 the responsibility for performing functions under the Act as concerns direct investment to the Secretary of Commerce, who has redelegated it to the Bureau of Economic Analysis (BEA).

The implementing regulations for the direct investment surveys conducted under the Act may be found in 15 CFR Part 806.

2. Explain how, by whom, how frequently, and for what purpose the information will be used. If the information collected will be disseminated to the public or used to support information that will be disseminated to the public, then explain how the collection complies with all applicable Information Quality Guidelines.

The quarterly survey of U.S. direct investment abroad collects data on transactions and positions between U.S. parent companies and their foreign affiliates. The BE-577 is a sample survey that covers all foreign affiliates above a size-exemption level. The sample data are used to derive universe estimates in nonbenchmark years by extrapolating forward similar data reported in the BE-10, Benchmark Survey of U.S. Direct Investment Abroad, which is taken every five years. The data are disaggregated by country and industry of the foreign affiliate. The data from the BE-577 survey complement data from BEA’s BE-11, Annual Survey of U.S. Direct Investment Abroad. A full understanding of U.S. direct investment abroad requires an understanding of both the transactions and positions between parents and affiliates (covered in the BE-577) and the overall operations of parents and affiliates (covered in the BE-11). Some specific uses of the data to be collected are discussed in greater detail below.

(a) Compile and improve the U.S. economic accounts:

Data from the BE-577 survey are needed to compile U.S. international transactions, input-output, and national income and product accounts and the international investment position of the United States.

b) Support U.S. Government policy on direct investment:

The data are used by several U.S. Government agencies, including the Office of the U.S. Trade Representative, the International Trade Administration of the Commerce Department, the Departments of Treasury and State, the Council of Economic Advisers, and the Federal Reserve Board to support U.S. international economic policy.

The quarterly survey provides detailed information, by country and industry, on direct investment capital and income flows that the U.S. Government requires to evaluate these policies and to assess their effects on U.S. and foreign economies.

Bilateral investment treaties (BIT's) are negotiated with interested countries to facilitate and protect U.S. investment interests. During BIT negotiations, data from this and related surveys provide important information on the level and impact of direct investment on the economies of U.S. and foreign countries. The data also help identify areas where U.S. direct investment is restricted.

(c) Other Government uses:

Several agencies, including Agency for International Development and the U.S. and Foreign Commercial Service (Commerce), facilitate U.S. private investment, mainly in developing countries, by providing information and assistance to investors. They use data from the direct investment surveys for this purpose. They also use the data to examine the impact of direct investment on developing countries.

The data from the quarterly survey are also needed by the Federal Reserve Board and Treasury Department in the conduct of U.S. international monetary policy. Such policy must be based on an informed analysis of current information on the transactions of U.S. parent companies and their foreign affiliates.

(d) Non-Government uses:

International organizations and private researchers also use data from the quarterly survey in assessing the impact of U.S. direct investment abroad on the U.S. and foreign economies. International organizations that regularly make use of BEA data on U.S. direct investment abroad include the United Nations, International Monetary Fund, Organization for Economic Co-operation and Development, and World Bank. Numerous private researchers use the data; use by researchers affiliated with the National Bureau of Economic Research has been among the most extensive.

The Section 515 Information Quality Guidelines apply to this information. The information is collected according to documented procedures in a manner that reflects standard practices accepted by the relevant economic/statistical communities. BEA conducts a thorough review of the survey input data using sound statistical techniques to ensure the data quality before the final estimates are released. The data are collected and reviewed according to documented procedures including the use of check lists, procedures manuals and on-going review by the appropriate supervisor or team leader. The quality of the data are validated using a battery of computerized edit checks to detect potential errors and to otherwise ensure that the data are accurate, reliable, and relevant for the estimates being made. Data are routinely revised as more complete source data become available. The collection and use of this information complies with all applicable information quality guidelines, i.e., OMB, Department of Commerce, and those of the Bureau of Economic Analysis.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological techniques or other forms of information technology.

BEA offers an electronic filing option that makes use of fillable PDF forms, its eFile system, for use in reporting the BE-577 quarterly survey forms as an alternative to paper forms. The eFile system enables a U.S. Reporter to download the survey forms in PDF format for each reportable business enterprise, enter the required data, and submit the forms securely to BEA. BEA has offered electronic filing to respondents when conducting recent quarterly surveys; approximately 40 percent of the respondents take advantage of electronic filing.

In addition, BEA places all its survey forms and reporting instructions on its Web site (www.bea.gov), which provides an alternative and, for some, more convenient, way to access information about BEA’s surveys.

The data from the quarterly surveys are published and analyzed in BEA’s monthly journal, the Survey of Current Business. All of the data tabulated from the BE-577 survey that are released to the public and analyses of the data, published in the Survey, are placed on BEA’s Web site.

4. Describe efforts to identify duplication.

The BE-577 survey, as proposed, collects data on transactions and positions between U.S. parent companies and their foreign affiliates. Similar data are not collected by other agencies and identified as being between parents and affiliates.

To avoid duplication between the BE-577 and the Treasury International Capital (TIC)

Form D, Report of Holdings of, and Transactions in, Financial Derivatives Contracts with Foreign Residents, the BE-577 instructions direct respondents to exclude positions and transactions in financial derivatives contracts that are reported on or derived from TIC Form D.

Some minor duplication may occur between the few annual data items reported once a year in Part V, Sections A and B, of the quarterly Form BE-577 and the data reported in BEA’s BE-11, Annual Survey of U.S. Direct Investment Abroad. Data collected in the BE-11 survey reflect the interest of all owners of the affiliate, whereas data collected in the BE-577 cover only the U.S. parent’s share of the given item. The only case in which duplication of the annual data reported in the BE-11 and BE-577 may occur is when the affiliate is owned 100 percent by a single U.S. parent. However, such duplication is minor, and it could not be eliminated without compromising the integrated structure of the form.

5. If the collection of information involves small businesses or other small entities, describe the methods used to minimize burden.

Although the survey does not collect data on the size of the U.S. parent companies, data collected on related BEA surveys indicate that about 100 of the estimated 1,600 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 (SBA). 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.

6. Describe the consequences to the Federal program or policy activities if the collection is not conducted or is conducted less frequently.

The U.S. international transactions and national income and product accounts are published quarterly. The data collected in this survey are important components of these accounts. BEA would be unable to provide the data needed in preparing these accounts if the data were collected less frequently.

7. Explain any special circumstances that require the collection to be conducted in a manner inconsistent with OMB guidelines.

Not Applicable.

8. Provide a copy of the PRA Federal Register notice that solicited public comments on the information collection prior to this submission. Summarize the public comments received in response to that notice and describe the actions taken by the agency in response to those comments. Describe the efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.

The public notice soliciting comments on the information collection was published in the Federal Register on August 13, 2008. BEA received no comments in response to the notice.

Because there are no changes to the data being collected, specific consultations outside the agency were not held. However, as noted in Question 2, a primary purpose of the BE-577 survey is to provide sample data that are used to extrapolate forward similar data reported in the BE-10 Benchmark Survey of U.S. Direct Investment Abroad in order to derive universe estimates for nonbenchmark years. When BEA designs its BE-10 benchmark survey forms, it conducts consultations with a broad group of Government and non-Government data users and potential respondent companies. The next benchmark survey will cover the year 2009. BEA will again hold extensive consultations outside the agency.

Finally, BEA maintains a continuing dialogue with respondents and with data users, including its own internal users through the Bureau’s Source Data Improvement and Evaluation Program, to ensure that, as far as possible, the required data serve their intended purposes and are available from existing records, that instructions are clear, and that unreasonable burdens are not imposed.

9. Explain any decisions to provide payments or gifts to respondents, other than remuneration of contractors or grantees.

No payments or gifts are provided to respondents.

10. Describe any assurance of confidentiality provided to respondents and the basis for assurance in statute, regulation, or agency policy.

Sec. 5(c) of the Act (22 U.S.C. 3104) provides that the information collected may be used only for analytical and statistical purposes and access to the information shall be available only to officials and employees (including consultants and contractors and their employees) of agencies designated by the President to perform functions under the Act. The President may authorize the exchange of information between agencies or officials designated to perform functions under the Act, but only for analytical and statistical purposes. No official or employee (including consultants and contractors and their employees) shall publish or make available any information collected under the Act in such a manner that the person to whom the information relates can be specifically identified. Reports and copies of reports prepared pursuant to the Act are confidential, and their submission or disclosure shall not be compelled by any person without the prior written permission of the person filing the report and the customer of such person, where the information supplied is identifiable as being derived from the records of such customer.

BEA provides respondents with assurance that it will keep the reported data confidential. The following statement is taken directly from the reporting instructions for the survey. “Confidentiality – The Act provides that your report is CONFIDENTIAL and may be used only for analytical or statistical purposes. Without your prior written permission, the information

filed in your report CANNOT be presented in a manner that allows it to be individually identified. Your report CANNOT be used for purposes of taxation, investigation, or regulation. Copies retained in your files are immune from legal process.”

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.

No questions of a sensitive nature are asked.

12. Provide an estimate in hours of the burden of the collection of information.

An estimated 1,600 U.S. parent companies will file data for about 15,500 foreign affiliates. For purposes of calculating the number of respondents and burden per respondent, the “respondent” is deemed to be the foreign affiliate, since a given U.S. Reporter may file more than one form in a given reporting period, depending on the number of foreign affiliates it has. BEA expects 15,500 responses quarterly; because reports are filed 4 times per year BEA expects 62,000 responses annually. The respondent burden for this collection of information is estimated to vary from 0.5 hours to 3.5 hours per response, with an average of 1 hour per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining data needed, and completing and reviewing the collection of information. Thus the total annual respondent burden of the survey is estimated at 62,000 hours.

The estimated annual cost to respondents is $2,480,000 based on the estimated reporting burden of 62,000 hours and an estimated hourly burden cost of $40.

13. Provide an estimate of the total annual cost burden to the respondents or record-keepers resulting from the collection (excluding the value of the burden hours in #12 above).

The total additional annual cost burden to respondents is expected to be negligible. Total capital and start-up costs are insignificant, because new technology or capital equipment would not be needed by respondents in order to prepare their responses to the survey.

As a consequence, the total cost of operating and maintaining the technology and capital equipment will also be insignificant. Purchases of services to complete the information collection are also expected to be insignificant.

14. Provide estimates of annualized cost to the Federal Government.

The project cost to the Federal Government for this survey is estimated at $1,350,000 annually, which consists of $900,000 for salaries and related overhead, and $450,000 for equipment, supplies, forms design, mailing, printing, and computer processing.

15. Explain the reasons for any program changes or adjustments.

The annual respondent burden (adjustment) has increased from 54,000 hours to 62,000 hours as a result of growth in the number of U.S. parent companies and foreign affiliates since the previous submission.

16. For collections whose results will be published, outline the plans for tabulation and publication.

The preprinted survey forms are mailed to respondents each quarter. Reports are due 30 days after the close of the calendar or fiscal quarter, except for the fourth quarter when reports are due within 45 days. Quarterly data are released four times a year as part of the U.S. international transactions accounts approximately 65 days after the close of the quarter.

Annual summations of the quarterly data are released approximately 6 months after the end of the year. An analysis of the quarterly data appears in the BEA’s monthly magazine, the Survey of Current Business, about 90 days after the end of the quarter.

All of the data tabulated from the BE-577 survey that are released to the public and analyses of the data, published in the Survey, are placed on BEA’s Web site (www.bea.gov).

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons why display would be inappropriate.

The OMB expiration date will be displayed on the forms.

18. Explain each exception to the certification statement identified in Item 19 of the

OMB-I.

Not Applicable.

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