(a) (1) "Foreign borrowing" means a borrowing made by a direct investor on or after May 1, 1970 from any foreign national (other than an affiliated foreign national and except as provided in § 1000.1106), including, but not by way of limitation, an extension of credit by any such foreign national to the direct investor in connection with the purchase of property (including securities) by the direct investor from such foreign national: Provided, That (i) the borrowing is from a foreign bank; or (ii) the borrowing is from or is guaranteed by a foreign country or any agency thereof; or (iii) at the time of the borrowing, the debt obligations resulting therefrom would, if purchased by nationals or residents of the United States, be subject to the Interest Equalization Tax (Internal Revenue Code, Chapter 41, sec. tions 4911-4931); or (iv) the lender agrees in writing that, for a period of 3 years from the original date of the borrowing or until final maturity, whichever first occurs, it will not sell or otherwise transfer the debt obligation resulting from the borrowing to a resident or national of the United States (other than a foreign bank described in § 1000.317(b) (2)) or a Canadian person (as defined in § 1000.1101(d)) or to any person who the lender has reason to believe will sell or otherwise transfer the debt obligation to any such U.S. resident or national or Canadian person. (2) In the case of borrowings made on or after May 1, 1970, "long-term foreign borrowing" means a foreign borrowing (as defined in subparagraph (1) of this paragraph) to the extent that such foreign borrowing is not repaid within 12 months after the original date of the borrowing: Provided, That solely for purposes of this subparagraph, a borrowing that is repaid in whole or in part pur suant to provisions in a debt instrument for acceleration upon default or that is repaid by reason of the conversion of convertible debt instruments shall be deemed to have been repaid in accordance with the maturities otherwise provided in such instruments. (3) In the case of borrowings made prior to May 1, 1970, "long-term foreign borrowing" shall be as defined by paragraphs (a) and (e) of this section as in effect on April 30, 1970. (b) (1) The refinancing in whole or in part of a foreign borrowing or a longterm foreign borrowing (by renewal, extension, or continuance of such borrowing or by making a foreign borrowing from the same or another lender) shall not, to that extent, be deemed a repayment of the borrowing or the making of a new borrowing. (2) The delivery of equity securities of a direct investor to holders of debt instruments issued by the direct investor in connection with a long-term foreign borrowing, pursuant to the exercise of conversion or similar rights, shall be deemed a repayment of the borrowing to the extent of the principal amount of indebtedness surrendered by such holders in exchange for such equity securities. (c) "Proceeds of long-term foreign borrowing" means (1) the gross amount or value (before deducting any discounts, commissions or fees) of funds or other property received by a direct investor from the first purchaser or holder in exchange for the debt obligation issued or created in connection with the borrowing, and reported by the direct investor on its next and all succeeding periodic reports filed with the Office (whether quarterly on Form FDI-102 or annual on Form FDI-102F) for periods during which such borrowing is outstanding, less (2) repayments of principal of such borrowing. (d) "Available proceeds" means proceeds of long-term foreign borrowing (as defined in paragraph (c) of this section) less (1) amounts which have been expended in transfers of capital to affiliated foreign nationals other than Canadian affiliates as defined in § 1000.1101 (a) and deducted under § 1000.313(d) (1), and (2) amounts allocated to positive direct investment made in a or Any amendment, modification, revocation of any section of this part or of any order, regulation, ruling, instruction, authorization, license, or exemption issued by or under the direction of the Secretary pursuant to 12 U.S.C. 95a, as amended, shall not unless otherwise specifically provided be deemed to affect any act done or omitted to be done, or any suit or proceeding had or commenced in any civil or criminal case, prior to such amendment, modification, or revocation, and all penalties, forfeitures, and liabilities under any such section, order, regulation, ruling, instruction, authorization, license, exemption shall continue in effect and may be enforced as if such amendment, modification, or revocation had not been made. [33 F.R. 52, Jan. 3, 1968] § 1000.403 [Reserved] or § 1000.404 Distribution, apportionment or allocation of earnings. In any case of two or more organizations, trades or businesses owned or controlled directly or indirectly by the same interests, the Secretary may distribute, apportion or allocate earnings or any component of earnings, if he determines that such distribution, apportionment, or allocation is necessary or appropriate clearly or properly to reflect earnings attributable to a direct investor's interest in affiliated foreign nationals or other wise to carry out the purposes of this part. [33 F.R. 52, Jan 3, 1968] Subpart E-Authorizations or § 1000.501 Exclusion from authorization or exemption. (a) No authorization or exemption contained in this part, or issued by or under the direction of the Secretary pursuant to this part, shall be deemed to authorize or validate any direct investment made prior to the issuance thereof, unless such authorization or other exemption specifically so provides. (b) The Secretary reserves the right to exclude transactions or property or classes thereof from the operation of any authorization or exemption or from the privileges therein conferred, or to restrict the applicability thereof with respect to particular persons. Such action shall be binding upon all persons receiving actual notice or constructive notice thereof. [34 F.R. 9067, June 7, 1969] § 1000.502 to Elections with respect §§ 1000.503 and 1000.504, and 1000.507. (a) A direct investor shall elect for each year, commencing with the year 1970, to be governed by the provisions of (1) Section 1000.503, or (2) Section 1000.504 (a) and (c), or (4) Section 1000.507. (b) The election made pursuant to this paragraph shall be binding and effective as to all (and not less than all) scheduled areas and as to the year for which the election is made, and shall be made on Form FDI-102F timely filed by the direct investor pursuant to § 1000.602(b) (3) for the year for which the election is made. (c) A direct investor that elects to be governed by the provisions of § 1000.507 for any year may not in the immediately following year elect to be governed by the provisions of section 1000.503 without obtaining prior permission of the Secretary. (d) A direct investor that elects to be governed by the provisions of § 1000.503 for any year, commencing with the year 1970, may not in the immediately following year elect to be governed by the (c) If a direct investor elects to make positive direct investment during any year commencing with the year 1969 as authorized under this section, no positive direct investment shall be authorized in such year under § 1000.504 and any positive direct investment which would otherwise have been authorized in such year under § 1000.504 (d), (e), or (f) or § 1000.1302 shall, notwithstanding those provisions, not be authorized in such year or succeeding years. (d) Positive direct investment made during the year 1968 which was authorized by § 1000.503 as in effect for such year shall reduce the amount of positive direct investment authorized to be made in succeeding years under § 1000.504(f). Such reduction shall first be made in the scheduled area in which such positive direct investment was made, and to the extent that the amount of positive direct investment made in such scheduled area exceeds the amount of positive direct investment authorized to be made in such scheduled area under § 1000.504(f), further reductions shall be made in the amount of positive direct investment authorized under § 1000.504 (f) in Schedules C, B, and A, in that order, until such reductions shall equal in the aggregate the total amount of positive direct investment made or the total amount of positive direct investment authorized under § 1000.504(f), whichever is less. [34 F.R. 9067, June 7, 1969, as amended at 35 F.R. 7226, May 7, 1970; 36 F.R. 975, Jan. 21, 1971] (1) In Schedule A, in an amount not exceeding 110 percent of the average of direct investment by the direct investor in Schedule A during the years 1965 and 1966; (2) In Schedule B, in an amount not exceeding 65 percent of the average of direct investment by the direct investor in Schedule B during the years 1965 and 1966; (3) In Schedule C, in an amount not exceeding 35 percent of the average of direct investment by the direct investor in Schedule C during the years 1965 and 1966. (b) Earnings allowable. If for any year commencing with the year 1971 a direct investor elects under § 1000.502(a) (3), positive direct investment for such year is authorized as follows: (1) In Schedule A, in an amount not exceeding 40 percent of the annual earnings of the direct investor in Schedule A during the immediately preceding year. (2) In Schedule B, in an amount not exceeding 40 percent of the annual earnings of the direct investor in Schedule B during the immediately preceding year; (3) In Schedule C, in an amount not exceeding 40 percent of the annual earnings of the direct investor in Schedule C during the immediately preceding year. (4) The term "annual earnings" means the algebraic sum of a direct investor's share of total earnings or total losses during a year of all the direct investor's incorporated affiliated foreign nationals in a scheduled area (excluding Canadian affiliates as defined in § 1000.1101 (a) from Schedule B) determined in accordance with the provisions of § 1000.306 (c) and the direct investor's share of net earnings or losses during such year of all the direct investor's unincorporated affiliated foreign nationals in such scheduled area (excluding Canadian affiliates as defined in § 1000.1101(a) from Schedule B) determined in accordance with accounting principles generally accepted in the United States consistently applied: Provided, That annual earnings of less than zero shall for purposes of this section be treated as zero. (c) Adjustment to historical allowable. If for any year commencing with the year 1971 a direct investor elects under § 1000.502(a) (2), (1) The amount of positive direct investment authorized in Schedule C under paragraph (a) (3) of this section shall be increased by the lesser of either the amount by which 40 percent of annual earnings in Schedule C during the immediately preceding year is in excess of positive direct investment authorized in Schedule C under said paragraph (a) (3) during the current year or the amount of positive direct investment authorized in Schedule A under paragraph (a) (1) of this section: Provided, That the amount of positive direct investment authorized in Schedule A under said paragraph (a) (1) shall be reduced by the amount of such increase; (2) The amount of positive direct investment authorized in Schedule C under paragraph (a) (3) of this section shall be increased by the lesser of either the amount by which 40 percent of annual earnings in Schedule C during the immediately preceding year is in excess of positive direct investment authorized in Schedule C under paragraph (a)(3) of this section and subparagraph (1) of this paragraph during the current year or the amount of positive direct investment authorized in Schedule B under paragraph (a) (2) of this section: Provided, That the amount of positive direct investment authorized in Schedule B under said paragraph (a) (2) shall be reduced by the amount of such increase; and (3) The amount of positive direct investment authorized in Schedule B under paragraph (a) (2) of this section shall be increased by the lesser of either the amount by which 40 percent of annual earnings in Schedule B during the immediately preceding year is in excess of positive direct investment authorized in Schedule B under said paragraph (a) (2) during the current year or the amount of positive direct investment authorized in Schedule A under paragraph (a) (1) of this section (calculated after the reduction provided in subparagraph (1) of this paragraph): Provided, That the amount of positive direct investment authorized in Schedule A under paragraph (a)(1) of this section shall be reduced by the amount of such increase. (d) Carryforward allowables and use of schedular allowables in other scheduled areas. (1) If, during any year commencing with the year 1969, the amount of positive direct investment authorized to a direct investor in Schedule A under paragraphs (a) (1) and (c) of this section or paragraph (b)(1) of this section exceeds the amount of direct investment (whether positive or negative) made by the direct investor during such year in Schedule A, or if no positive direct investment is so authorized to the direct investor in Schedule A during such year but the direct investment by the direct investor in Schedule A during such year is negative, the direct investor is authorized to make additional positive direct investment in Schedule A during succeeding years in an aggregate amount of not more than the amount of such excess, or the amount of such negative direct investment, as the case may be. (2) If, during any year commencing with the year 1969, the amount of positive direct investment authorized to a direct investor in Schedule B under paragraphs (a) (2) and (c) of this section or paragraph (b) (2) of this section exceeds the amount of direct investment (whether positive or negative) made by the direct investor during such year in Schedule B, or if no positive direct investment is so authorized to the direct investor in Schedule B during such year but the direct investment by the direct investor in Schedule B during such year is negative, the direct investor is authorized to make additional positive direct investment in Schedule A during such year. and, to the extent additional positive direct investment in Schedule A is not made during such year the direct investor is authorized to make additional positive direct investment in Schedules A and B during succeeding years: Provided, That the aggregate amount of additional positive direct investment authorized by this subparagraph shall not be more than the amount of such excess, or the amount of such negative direct investment, as the case may be. (3) If, during any year commencing with the year 1969, the amount of positive direct investment authorized to a direct investor in Schedule C under paragraphs (a) (3) and (c) of this section or paragraph (b) (3) of this section exceeds the amount of direct investment (whether positive or negative) made by the direct investor during such year in Schedule C, or if no positive direct investment is so authorized to the direct investor in Schedule C during such year but the direct investment by the direct investor in Schedule C during such year is negative, the direct investor is authorized to make additional positive direct investment in Schedule A or B during such year, and, to the extent additional positive direct investment in Schedules A or B is not made during such year, the direct investor is authorized to make additional positive direct investment Schedules A, B, or C during succeeding years: Provided, That the aggregate of additional positive direct investment authorized by this subparagraph shall not be more than the amount of such excess, or the amount of such negative direct investment, as the case may be. (e) Schedule C total losses; reinvestment allowable. If the incorporated affiliated foreign nationals of a direct investor in Schedule C have total losses during any year commencing with the year 1969 (calculated as provided in § 1000.306 (c)), such losses shall, for purposes of this section, be disregarded in calculating the direct investment (whether positive or negative) made by the direct investor in Schedule C for such year: Provided, That the direct investor shall be authorized to reinvest additional earnings of incorporated affiliated foreign nationals in Schedule C during succeeding years in an aggregate amount of not more than the direct investor's share of such total losses. allowables from (f) Carryforward 1968. (1) A direct investor authorized under former § 1000.504(b)(1), as in effect on December 31, 1968, to make positive direct investment in Schedule A during 1969 is authorized to make positive direct investment in Schedule A during 1969 and succeeding years in an aggregate amount not to exceed the amount of positive direct investment so authorized to be made during 1969 under said former § 1000.504(b) (1). (2) A direct investor authorized under former § 1000.504(b) (2), as in effect on December 31, 1968, to make positive direct investment in Schedule B during 1969 is authorized to make positive direct investment in Schedules A or B during 1969 and succeeding years in an aggregate amount not to exceed the amount of positive direct investment so authorized to be made during 1969 under said former § 1000.504(b) (2). (3)(i) A direct investor authorized to make positive direct investment, to make a positive net transfer of capital, or to reinvest additional earnings of incorporated affiliated foreign nationals under former § 1000.504 (c) (1) and (2), as in effect on December 31, 1968, is authorized to make positive direct investment in Schedules A, B, or C during 1969 and succeeding years in an aggregate amount not to exceed the aggregate amount of positive direct investment, positive net transfer of capital, and addi tional reinvested earnings so authorized to be made under said former § 1000.504 (c) (1) and (2). (ii) A direct investor authorized under former § 1000.504 (c) (3), as in effect on December 31, 1968, to reinvest earnings of incorporated affiliated foreign nationals in Schedule C during 1969 shall be authorized to reinvest earnings of incorporated affiliated foreign nationals in Schedule C during 1969 or succeeding years in an aggregate amount not to exceed the amount of earnings so authorized to be reinvested during 1969 under said former § 1000.504(c) (3). [34 F.R. 9067, June 7, 1969, as amended at 35 F.R. 7226, May 7, 1970; 36 F.R. 975, Jan. 21, 1971] § 1000.505 Transfers between affiliated foreign nationals. (a) (1) For purposes of the succeeding provisions of this § 1000.505, (i) if funds or other property are transferred by an unincorporated affiliated foreign national of a direct investor to the direct investor or to another affiliated foreign national of the direct investor, the funds or property shall, if the transferee is not the immediate parent of the transferor affiliated foreign national, be treated as having been transferred by such immediate parent and (ii) if funds or other property are transferred to an unincorporated affiliated foreign national of a direct investor by the direct investor or by another affiliated foreign national of the direct investor, the funds or property shall, if the transferor is not the immediate parent of the transferee affiliated foreign national, be treated as having been transferred to such immediate parent: Provided, in each case, That the immediate parent is the direct investor or an incorporated affiliated foreign national of the direct investor and that such immediate parent is not the immediate parent of both the transferor and transferee affiliated foreign national. (2) For purposes of §§ 1000.312 and 1000.313(a), (i) if funds or other property are deemed under subparagraph (1) (ii) of this paragraph to have been transferred by an incorporated affiliated foreign national of a direct investor to the direct investor, the transfer shall be treated as a transfer of capital by the incorporated affiliated foreign national to the direct investor (in an amount equal to the full amount or value of the funds or property so transferred) and (ii) if funds or other property are deemed |