BE-577 A-Justification_2020_final

Supporting Statement for the BE-577,

Quarterly Survey of U.S. Direct Investment Abroad—

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.

Data collected on the Quarterly Survey of U.S. Direct Investment Abroad—Transactions of U.S. Reporter with Foreign Affiliate (Form BE-577) are needed to measure the size and economic significance of direct investment abroad, measure changes in such investment, and assess its impact on the U.S. and foreign economies. The survey is mandatory and is conducted under the International Investment and Trade in Services Survey Act (22 U.S.C. 3101‑3108), hereinafter “the Act.” The implementing regulations for the direct investment surveys conducted under the Act may be found in 15 CFR Part 801.

2. Indicate how, by whom, and for what purpose the information is to be used.

The information collected in the survey is used to compile economic statistics on U.S. direct investment abroad and on positions and transactions between U.S. parents and their foreign affiliates by country and industry. 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 essential for the preparation of the U.S. international transactions accounts, the national income and product accounts, the input-output 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 financial and income flows that the U.S. Government requires to evaluate these policies and to assess their effects on the U.S. and foreign economies.

Bilateral investment treaties (BITs) 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 U.S. economy and the economies of foreign countries. The data also help identify areas where U.S. direct investment may be restricted.

The United States is a signatory to regional and multilateral commercial agreements that cover direct investment as well as cross-border trade, and the data from this and related surveys provide information that can be used both during the negotiations and as an aid in monitoring the resulting agreements. For example, investment issues are covered both by the General Agreement on Trade in Services, which is the principal World Trade Organization agreement on trade in services, and by the North American Free Trade Agreement among the United States, Canada, and Mexico.

(c) Other Government uses:

Several agencies, including the 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 BE-577 survey for this purpose. They also use the data to examine the impact of direct investment on developing countries.

d) Non-government uses:

International organizations and private researchers use data from the BE-577 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, Organisation for Economic Co-operation and Development, and World Bank. Numerous private researchers also use the data; use by researchers affiliated with the National Bureau of Economic Research has been among the most extensive.

The Information Quality Guidelines of the Office of Management and Budget (OMB) 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 quality of the data is high before the final statistics are released. The data are collected and reviewed according to documented procedures and best practice standards and on-going review by the appropriate supervisor. The data are validated using a battery of edit checks to detect potential errors and 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 comply with all applicable information quality guidelines, i.e., those of OMB, the Department of Commerce, and BEA.

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 electronic filing through its eFile system for use in reporting on the BE-577 survey forms. The eFile system enables respondents to download the survey form in PDF format, enter the required data, save their inputs, and submit the forms securely to BEA. BEA offers an email subscription service for the BE-577 survey to alert subscribers that eFile is open for the reference period. Subscribers also receive a reminder email one week prior to the survey due date.

In addition, BEA provides links to all its survey forms and reporting instructions on its website (www.bea.gov). These are fillable forms that may be downloaded, printed, and submitted via BEA’s secure messaging system, fax, or mail.

4. Describe efforts to identify duplication.

The BE-577 data on transactions between and positions of U.S. parents and their foreign affiliates are only collected by BEA.

To avoid duplication between Form BE-577 and the Treasury International Capital (TIC) System, the BE-577 instructions direct respondents to exclude (a) positions and transactions in financial derivatives contracts that are reported on or derived from TIC Form D, Report of Holdings of and Transactions in, Financial Derivatives Contracts with Foreign Residents, (b) intercompany debt positions and interest of foreign affiliates that are reported on TIC Forms B—the reports by financial institutions of liabilities to, and claims on, foreign residents by U.S. residents, and (c) investments in certain private funds that are reported on TIC forms.

Some minor duplication may occur between the data reported in the few annual data items reported once a year in Part IV of the quarterly Form BE-577 and 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 a given item. The only case in which duplication of the annual data reported in the BE-11 and BE-577 may occur is when a foreign affiliate is owned 100 percent by a single U.S. parent. However, these data are used to check for consistency between the two surveys and could not be eliminated without compromising the overall quality of the statistics and 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.

U.S. companies that have direct investments abroad tend to be large. To qualify as a small business, the multinational enterprise as a whole must be evaluated when determining if the business meets the size standards set by the Small Business Administration (SBA), i.e. the size determination takes into account the sizes of both the U.S. parents and their foreign operations.  The U.S. businesses that meet the SBA’s small business standards tend to have few foreign affiliates, and most of the foreign affiliates that they do own are small, with less than $60 million in total assets, sales or gross operating revenues, and net income. These reporting thresholds will exempt most small businesses from the survey and they need only file a BE-577 Claim for Exemption to indicate that they do not meet the requirements for filing Form BE-577.

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

The objectives stated in A.2. (above) could not be accomplished if the survey were not conducted or were conducted less frequently than each calendar quarter. 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 for preparing these accounts if the information were collected less frequently.

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

No aspects of the proposed BE-577 data collection require a special justification.

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 prior to submission to OMB appeared on page 33222 (Vol. 84, No. 134) of the July 12, 2019, issue of the Federal Register. BEA received no comments on the proposed changes.

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 much 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. When designing the related BE-10, Benchmark Survey of U.S. Direct Investment Abroad, BEA solicited comments from data users and respondent companies.

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

No payments or gifts to respondents are made.

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

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. Per the Cybersecurity Enhancement Act of 2015, your data are protected from cybersecurity risks through security monitoring of the BEA information systems.”

Section 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 that 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.

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.

BEA expects 20,800 responses quarterly; because reports are filed four times per year, BEA expects 83,200 responses annually. The respondent burden for this collection of information averages one hour 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. Thus, the total annual respondent burden for this survey is estimated at 83,200 hours as shown in the RISC/OIRA Consolidated Information System (ROCIS).

The estimated annualized cost to respondents is about $2,819,648 based on the estimated reporting burden of 83,200 hours and an estimated hourly cost of $33.89. The hourly cost reflects the median wage of accountants and auditors from the May 2018 Occupational Employment Statistics.

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).

Other than respondent cost associated with the estimated burden of 83,200 hours (see A.12. above), the total additional annual cost burden to respondents is expected to be minimal. 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.

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

The project cost to the Federal government for this survey is estimated at $1.6 million annually, which consists of $1.3 million for salaries and related overhead, and $0.3 million for equipment, supplies, forms design, mailing, printing, and computer processing.

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

The estimated annual respondent burden for this collection is 83,200 hours; the estimated respondent burden for the previous collection was 66,880 hours. The increase in the estimated respondent burden is due to the growth in the number of reporting U.S. parents and foreign affiliates since the survey was last cleared, partially offset by an increase in threshold. BEA increased the threshold for indirectly-owned foreign affiliates to report from $1 million in intercompany debt balances to $10 million. We estimate that this increase in threshold will exempt 1,700 foreign affiliates from the reporting requirements of the BE-577 survey. Without this change, burden would have increased to 90,020 hours. Additionally, BEA plans to add two new questions on the currency composition of intercompany debt to the survey. We expect the additional burden from these questions to be minimal and not change the average burden of the survey.

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

Quarterly data are released four times a year, approximately 80 days after the close of the quarter, as part of the U.S. international transactions and international investment position accounts. Annual summations of the quarterly data with more detail by country, industry, and component are released approximately seven months after the end of the year. An analysis of the quarterly data appears in the BEA’s monthly journal, the Survey of Current Business, about 105 days after the end of the quarter. All of the statistics developed from the survey results, as well as the Survey articles, are available on BEA’s website (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.

The BE-577 information collection is consistent with the certification in all aspects.

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