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CHAPTER X-OFFICE OF FOREIGN DIRECT INVEST
MENTS, DEPARTMENT OF COMMERCE
Part 1000 Foreign direct investment regulations. 1020 Investigative procedures. 1025 Settlement procedures. 1030 Procedures and rules of practice for formal administrative proceedings. 1035 Rules of practice for appeals in proceedings originating under Part 1030. 1040 Compliance procedures: reports, advisory opinions, and enforcement. 1050 Miscellaneous rules.
PART 1000-FOREIGN DIRECT
INVESTMENT REGULATIONS Subpart A-Relation of This Part to Other Laws
and Regulations Sec. 1000.101 Relation of this part to other laws
Subpart B-Prohibitions 1000.201 Prohibited direct investment in
afiliated foreign nationals. 1000.202 [Reserved] 1000.203 Liquid foreign balances. 1000.204 Evasion.
Subpart C-General Definitions 1000.301 Foreign country. 1000.302 Foreign national. 1000.303 [Reserved] 1000.304 Afiliated foreign national. 1000.305 Direct investor. 1000.306 Positive and negative direct Invest
ment. 1000.307 Person; corporation. 1000.308 Transfer. 1000.309 Property; property interest. 1000.310 Interest. 1000.311 (Reserved] 1000.312 Transfers of capital. 1000.313 Net transfer of capital. 1000.314 Authorization and exemption. 1000.315 General authorization and exemp
tion. 1000.316 Specific authorization and exemp
tion. 1000.317 Domestic bank; foreign bank.
Sec. 1030.318 United States. 1000.319 Schedule A, B, C, countries. 1000.320 Effective date. 1000.321 Year; period. 1000.322 Person within the United States. 1000.323 International finance subsidiary. 1000.324 Long-term foreign borrowing.
Subpart D-Interpretations 1000.401 Reference to amended sections. 1000.402 Effect of amendment of sections of
this part or of other orders, etc. 1000.403 (Reserved] 1000.404 Distribution, apportionment Ог
allocation of earnings. Subpart Authorizations or Exemptions 1000.501 Exclusion from authorization or
exemption. 1000.502 Elections with respect to
$$ 1000.503, 1000.504, and 1000.
507. 1000.503 Positive direct investment not ex
ceeding $2,000,000; minimum
allowable. 1000.504 Authorized positive direct invest
ment in scheduled areas; sched
ular allowables. 1000.505 Transfers between affiliated for
eign nationals. 1000.506 Additional authorized positive di
rect investment in any one or more scheduled areas; incre
mental earnings allowable. 1000.507 Alternative minimum and Schedule
A supplemental allowable.
Subpart Records and Reports Sec. 1000.601 Records. 1000.602 Reports.
Subpart G-Penalties 1000.701 Penalties. 1000.702 Effect upon lenders.
Subpart H- Procedures 1000.801 Applications for specific authori
zations and exemptions. 1000.802 Petitions for reconsideration;
appeals. 1000.803 Proof of authority to file certain
documents. 1000.804 Amendment, modification, or
revocation. 1000.805 Rules governing availability of
information. 1000.806 Delegations. Subpart Direct and Indirect interests; Affili
ated, Associated and Family Groups; Owner
ship of Direct Investors; Rules for Reporting 1000.901 Direct interests. 1000.902 Indirect interests. 1000.903 Affiliated groups. 1000.904 Family groups. 1000.905 Associated groups. 1000.906 Ownership of direct investors. 1000.907 Reporting.
Subpart 1-Repayment of Borrowings 1000.1001 Definitions. 1000.1002 Transfers of capital in connection
with repayment of borrowings. 1000.1003 Effect of transfers of capital in
repayment of borrowing. Subpart KDirect Investment in Canada 1000.1101 Definitions. 1000.1102 Authorized positive direct invest
ment in Canada. 1000.1103 Net transfer of capital to Sched
ule B countries. 1000.1104 Reinvested earnings Schedule B
countries. 1000.1105 Foreign balances. 1000.1106 Long-term foreign borrowing. 1000.1107 Canadian program. Subpart M-Affiliated Foreign Nationals of Air
Carriers Engaged in Foreign Air Transportation 1000.1301 Exclusions. 1000.1302 Foreign air transport allowable. 1000.1303 Adjustment to incremental earn
ings allowable. Subpart N-Overseas Finance Subsidiaries 1000.1401 Definitions. 1000.1402 Qualification. 1000.1403 Transfers of overseas proceeds;
foreign balances. 1000.1404 Repayment of overseas borrowing
and proceeds borrowing. 1000.1405 Authorized repayments.
AUTHORITY: The provision of this Part 1000 issued under sec. 5, 40 Stat. 415, as amended 12 U.S.C. 95a; E.O. 11387, Jan. 1, 1968, 33 F.R. 47.
NOTE: For interpretive analysis and statements in reference to Part 1000, see the List of Sections Affected. Subpart A-Relation of This Part to
Other Laws and Regulations $ 1000.101 Relation of this part to other
laws and regulations. (a) This part is independent of 31 CFR, Chapter V. The prohibitions contained in this part are in addition to the prohibitions contained in said Chapter V. No license contained in or issued pursuant to said Chapter V shall be deemed to authorize any transaction prohibited by this part, nor shall any license or authorization issued pursuant to any other provision of law be deemed to authorize any transaction so prohibited.
(b) No authorization or exemption contained in or issued pursuant to this part shall be deemed to authorize any transaction to the extent that it is prohibited by reason of the provisions of any law or statute other than 12 U.S.C. 95a, as amended, or any proclamation, order, or regulation other than ose contained in or issued pursuant to Executive Order 11387 or this part.
(c) No authorization or exemption contained in or issued pursuant to this part shall be deemed to authorize any transaction to the extent that it is prohibited by reason of the provisions of any part of Title 31 CFR. (33 F.R. 49, Jan. 3, 1968)
Subpart B-Prohibitions § 1000.201 Prohibited direct investment
in affiliated foreign nationals, (a) Except as provided in this part, and as otherwise permitted by the Secretary of Commerce (hereinafter referred to as the Secretary) by means of rulings, instructions, authorizations, waivers, exemptions or otherwise, positive direct investment by a direct investor in affiliated foreign nationals of such direct investor in Schedule A, B, or C countries is prohibited during any year (as defined in $ 1000.321) commencing with the effective date.
(b) (1) All transactions prohibited by section 1 of Executive Order 11387 which are not prohibited by this part are hereby authorized.
(2) To the extent delineated from time to time by the Board of Governors of the Federal Reserve System nothing in this part shall apply to any bank or other financial institution certified by the Board as being subject to the Federal Reserve Foreign Credit Restraint Program, or to any program instituted by the Board under section 2 of Executive Order 11387.
(c) Nothing contained in this part shall be construed to limit the right of a person within the United States to make a bona fide transfer of capital or earnings in the ordinary course of business to a foreign national in respect of an interest in such person held by such foreign national.
(d) In addition to all other powers reserved to the Secretary in this part, the Secretary may in his discretion, as to any direct investor, amend or revoke the authorizations set forth in this part by reducing the amount of positive direct investment, positive net transfers of capital and reinvestment of earnings authorized in any scheduled area during a year, by limiting the application of such authorizations and exemptions and of g 1000.201 from "during any year" to periods shorter than a year, and by otherwise imposing such conditions as the Secretary shall deem appropriate to carry out the purposes of this part. In exercising his discretion with respect to any direct investor, the Secretary may consider, among other factors, the following:
(1) Whether the positive direct investment, positive net transfers of capital or reinvestment of earnings by such direct investor in any scheduled area during any quarter is, or may reasonably be estimated to be, materially in excess of 25 percent of the amount thereof generally authorized to such direct investor during the year;
(2) Whether the transactions resulting in such excess during such quarter are in accordance with the customary business practices of the direct investor; and
(3) Whether the direct investor has complied with the provisions of Subpart F of this part.
33 F.R. 8659, June 13, 1968, as amended at 33 F.R. 11070, Aug. 17, 1968; 34 F.R. 9067, June 7, 1969)
8 1000.202 [Reserved]
(a) For purposes of this section:
(1) The term “foreign balances" means money on deposit in a foreign bank (as defined in $ 1000.317), including certificates of deposit and fixed interest deposits of such a bank, negotiable instruments, nonnegotiable instruments acquired after June 30, 1968 and commercial paper of an unaffiliated foreign national (other than negotiable instruments, nonnegotiable instruments or commercial paper arising from the export by the direct investor of goods or services from the United States to foreign nationals) and securities issued or guaranteed by a foreign country.
(2) The term “liquid foreign balances" means foreign balances (as defined in subparagraph (1) of this paragraph) other than (i) those negotiable instruments, nonnegotiable instruments, commercial paper and securities which are acquired on or before June 30, 1968, and which are not redeemable at the option of the direct investor and are not transferable and readily marketable; (ii) bank deposits, negotiable instruments, nonnegotiable instruments, commercial paper and securities with a period of more than 1 year remaining to maturity when acquired by the direct investor and which are not redeemable in full at the option of the direct investor within a period of 1 year after such acquisition; (ii) foreign balances which are subject to restrictions of a foreign country on liquidation and transfer; and (iv) foreign balances which have been pledged or hypothecated in connection with borrowings by a direct investor or its affiliated foreign nationals.
(4) Foreign balances shall be deemed to be held by a direct investor if title to such balances is held (i) by any person (including an affiliated foreign national of the direct investor) principally formed or availed of for the purpose of holding title to such balances; or (ii) by any person (including an affiliated foreign national of the direct investor), if such balances are returnable to the direct investor on its demand without material conditions and if the holding of such balances is unrelated to the business needs of such person.
(5) Negotiable instruments, non-negotiable instruments, commercial paper
and securities constituting foreign bal- scheduled area, an amount equal to all ances shall be valued at their respective or a part of such expended proceeds as fair market values or, if evidence of are allocated pursuant to this subparafair market value is not readily avail- graph. Proceeds shall be allocated in a able, at the cost to the direct investor. different scheduled area pursuant to this
(b) Each direct investor shall main- subparagraph if (i) an entry is made in tain books and records that identify sep- the books and records maintained by the arately all proceeds of long-term foreign direct investor under paragraph (b) of borrowing received with respect to each this section and $ 1000.601; (ii) the allong-term foreign borrowing made by location and the deduction from positive the direct investor ard the uses to which direct investment in a different schedsuch proceeds have been put.
uled area are reported on the next an(c) Each direct investor is hereby re- nual report of the direct investor (Form quired to limit the amount of liquid for- FDI-102F) filed for the year for which eign balances held at the end of any the deduction is made; and (iii) the promonth (other than those that are Cana- ceeds with respect to which such deducdian foreign balances, as defined in tion is made, as of the end of the year $ 1000.1105(a), or are available proceeds, for which the deduction is made and as defined in § 1000.324 (d) to the greater thereafter, are not held, directly or inof (1) the average end-of-month directly, in the form of foreign balances amounts of such balances held by such or in the form of securities (including direct investor during 1965 and 1966 debt obligations, equity interests and any (whether or not a direct investor at that other type of investment contract) of time) or (2) $100,000.
foreign nationals or in the form of any (d) (1) A direct investor which holds other foreign property: Provided, That available proceeds, as defined in § 1000.- such proceeds may remain expended in 324(d), in excess of $100,000 in the form an asħliated foreign national or again be of foreign balances or in the form of se- expended at any time in making transcurities (including debt obligations, fers of capital to affiliated foreign naequity interests and any other type of in
tionals, but if so again expended, $1000.vestment contract) of foreign nationals 313(d) (1) shall not apply. The direct or in the form of any other foreign prop
investor shall be deemed at the time of erty as of the end of any year commenc
such deduction from positive direct ining with the year 1971 shall be prohibited
vestment in a different scheduled area to from making a positive net transfer of
have made a transfer of capital equal to capital to any scheduled area for such the amount of such deduction to the year, but only to the extent such positive
scheduled area in which the deduction net transfer of capital results in positive
froin net transfer of capital under direct investment in such scheduled area $ 1000.313(d) (1) was previously made. for such year that is not authorized by
The direct investor may thereafter con$ 1000.1002: Provided, That this subpara- tinue to change the scheduled area in graph shall not apply to a direct investor
which a deduction from positive direct which elects to be governed for such year
investment is made, up to the amount by $ 1000.503 or $ 1000.507: And provided
of proceeds of long-term foreign borrowfurther, That for purposes of this sub
ing expended in making the original paragraph, allocations to positive direct
transfer of capital for which a deduction investment under $ 1000.306(e) or sub- under $ 1000.313(d) (1) was made: Proparagraph (2) of this paragraph and re
vided, That each time such change ocallocations under subparagraph (3) of
curs, the direct investor shall be deemed this paragraph shall be deemed to reduce
to have made a transfer of capital to the any positive net transfer of capital to a immediately previous scheduled area in scheduled area and thereafter to reduce
the amount of the deduction from posiany reinvested earnings in such sched
tive direct investment in the subsequent uled area.
scheduled area. (2) A direct investor which, during
(3) A direct investor which, during 1968 or any succeeding year, expends
1968 or any succeeding year, allocates proceeds of long-term foreign borrowing
proceeds of long-term foreign borrowing and makes a deduction from net transfer
and deducts the amount of such proceeds of capital to a scheduled area under
from positive direct investment in a § 1000.313(d) (1), may thereafter deduct, scheduled area under $ 1000.306(e), may, during 1969 or any succeeding year, from during 1969 or any succeeding year, repositive direct investment in a different allocate all or part of such proceeds of long-term foreign borrowing to positive police forces or other authority of a direct investment in another scheduled foreign country. area. The direct investor which makes a
(33 F.R. 50, Jan. 3, 1968, as amended at 35 reallocation under this subparagraph F.R. 7225, May 7, 1970) (3) shall be deemed at the time of such
§ 1000.302 Foreign national. reallocation to have made a transfer of capital equal to the amount so reallo
(a) The term “foreign national” cated to the scheduled area in which the means a foreign country (as defined in proceeds of long-term foreign borrowing
§ 1000.301) and any person which is not were allocated immediately prior thereto.
a person within the United States (as The direct investor may thereafter con
defined in $ 1000.322), including a cortinue to reallocate to different scheduled poration or partnership organized under areas, up to the amount of proceeds of the laws of a foreign country (as defined long-term foreign borrowing previously
in $ 1000.304(a) (1) (i)), a business venallocated: Provided, That each time such
ture conducted within a foreign country reallocation occurs, the direct investor
(as defined in $ 1000.304(a) (1) (ii) and shall be deemed to have made a transfer
(iii)), and a foreign bank (as defined in of capital equal to the amount so reallo
§ 1000.317(b)). cated to the scheduled area to which the (b) Notwithstanding the provisions of proceeds of long-term foreign borrowing
paragraph (a) of this section, the Secwere allocated or reallocated or imme- retary retains full power to determine diately prior to such reallocation.
that any person is a foreign national. 133 F.R. 8660, June 13, 1968, as amended at [33 F.R. 11708, Aug. 17, 1968, as amended at 33 F.R. 11271, Aug. 8, 1968; 34 F.R. 12175,
35 F.R. 7225, May 7, 1970] July 23, 1969; 35 F.R. 7225, May 7, 1970; 36
$ 1000.303 [Reserved] F.R. 975, Jan. 21, 1971)
§ 1000.304 Evasion. § 1000.204
Affiliated foreign national.
(a) Except as provided in paragraphs Anything in this part to the contrary
(b) (4) (c), and (d) of this section, the notwithstanding, any transaction for the
term “affiliated foreign national” of a purpose of, or which has the effect of,
person within the United States includes evading or avoiding any of the provisions
each of the following in which such set forth in this part may be disregarded
person owns, directiy or indirectly, a 10in whole or in part for purposes of meas- percent interest: uring compliance with the provisions of (1) A corporation or partnership orthis part.
ganized under the laws of a foreign [33 F.R. 50, Jan. 3, 1968)
country (including all business ventures
conducted by employees or partners of Subpart C-General Definitions
such corporation or partnership on be§ 1000.301 Foreign country.
half of such corporation or partnership The term “foreign country” includes,
within any foreign countries assigned to
the same scheduled area as the country but not by way of limitation:
of organization); (a) The state and the government of
(2) A business venture conducted any foreign country as well as any politi
within a foreign country on behalf of cal subdivision, agency, or instrumen
such person within the United States by tality thereof or any territory, depend- such person or by employees or partners ency, colony, protectorate, mandate, of such person; and dominion, possession or place subject to (3) A business venture conducted on the jurisdiction thereof.
behalf of a corporation or partnership (b) Any other government (including organized under the laws of a foreign any political subdivision, agency, or in- country by employees or partners of such strumentality thereof) to the extent and corporation or partnership if the business only to the extent that such government
venture is conducted within a foreign exercises or claims to exercise control,
country which is not assigned to the authority, jurisdiction or sovereignty
same scheduled area as the country of over territory which constitutes such for
organization. eign country.
For purposes of determining whether a (c) [Reserved]
business venture conducted on behalf of (d) Any territory which is controlled a foreign corporation or partnership is a or occupied by the military, naval or separate affiliated foreign national, Can