The U.S. Department of Commerce Bureau of Economic Analysis (“BEA”) conducts surveys to gather economic statistics related, among other things, to international transactions involving certain covered intellectual property transactions and certain covered professional services with foreign entities. The information gathered from these surveys help BEA’s economists better understand the current contours of international trade.
Pursuant to the International Investment and Trade in Services Act (the “Act”), the BEA conducts, among other things, a once every five years bench mark survey with respect to such transactions and services. A response to the survey by a US company or individual that has engaged in such IP transactions or covered services with a foreign company or person in 2017 is required on Form BE-120. The Form BE-120 is due June 29, 2018 or July 31, 2018 if the BE-120 is e-filed. There is also a procedure to seek an extension of the filing deadline.
Form BE-120 is mandatory for any US company or individual that received a survey from the BEA even if such US entity or individual did not have international trade in any covered services or covered intellectual property transactions in 2017. If a U.S. company does not receive a survey from the BEA, Form BE-120 is mandatory for such U.S. entity if it performs any covered services or conducted covered intellectual property transactions with foreign entities or persons at any time during 2017 of any amount, even if the transaction is with a foreign entity or person that is an affiliate of the U.S. company, such as a foreign parent or subsidiary entity. The amount of information to be included on the Form depends on whether the amount of business meets certain dollar thresholds. The higher informational requirement is for U.S. entities or persons whose combined sales in 2017 to foreign entities or persons of covered services and covered intellectual property transaction exceeded $2 million determined on an accrual basis, or whose combined purchases from foreign entities or persons of covered services and intellectual property transactions in 2017 exceeded $1 million determined on an accrual basis.
Examples of the types of covered IP transactions include sales and purchases of IP rights related to industrial processes and products as well as sales and purchases of trademarks, digital recordings and computer software (including end-user licenses and customization services).
Examples of covered services include cloud computing services, advertising services, engineering services, mining services, surveying, financial, marketing, accounting and auditing services, research and development services, legal services, computer and data processing services, research and development services, telecommunication services, agricultural services, construction services, and artistic-related services. Note that law firms and accounting firms may have to file BE-120 forms with respect to foreign clients.
Transactions excluded from the reporting requirement include the sale and purchase of physical goods, electricity, financial instruments and income derived from financial instruments, employee compensation, penalties and fines, and gifts or grants in the form of goods and cash.
Individuals or companies that fail to submit timely BE-120 forms may be subject to a civil penalty of between $2,500 and $25,000. In cases where non-compliance is willful, then the individual or any officer, director, responsible employee or agent of a company knowingly participating in such refusal may be subjected to criminal penalties, including a fine up to $10,000, and if egregious up to a year in prison.
The Act provides that the information in the Form BE-120 and other BEA reports is to be kept confidential by the BEA and may only be used by the BEA for statistical and analytical purposes. The BEA is prohibited from granting another agency access for tax, investigative, or regulatory purposes. In addition, the information reported on the BE-120 and other BEA reports is not subject to Freedom of Information (FOIA) requests.
Mark D. Wigder is in the process of assisting U.S. companies prepare Form BE-120s and is familiar with the Form BE-120 and applicable regulations. He can get you copies thereof and related information. Should you have any questions or if you need any additional information concerning the foregoing, please contact Mark D. Wigder.