INTERAGENCY REVIEW OF CURRENT FEDERAL GOVERNMENT REPORTING REQUIREMENTS WITH RESPECT TO FOREIGN INVESTMENT IN THE UNITED STATES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01495R000600170044-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 12
• Document Creation Date: December 19, 2016
• Document Release Date: October 17, 2005
• Sequence Number: 44
• Publication Date: November 7, 1974
• Content Type: MF

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14 November 1974
OFFICE OF THE DD/I
NOTE TO THE DIRECTOR
You received an information copy of a
memo addressed to the heads of 8 departments
and 11 regulatory agencies from OMB and
CIEP concerning the Foreign Investment Study
Act (attached). The purpose of the memo is
to get these departments and agencies to
prepare detailed statements on their existing
reporting regulations and procedures regardin
information on:
-Foreign investment in the US
-Identity, of investors
-Foreign investments in sectors of the
economy which are prohibited or
restricted by. law.
I recommend that we take no active role
in this project and that we not submit a state-
ment on our collection activities because:
-The instructions are clearly intended
to apply to agencies to which foreign
investors are required to file reports
by law or administrative regulation.
-The project is focused on the domestic
aspects of foreign investments.
-CIA is not an addressee of the memo.
cc: DDO
OLC
OER
DDCI
/s/ Ed
Ed Proctor
D/DCI/NIO
Comptroller
CGAS
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Nov 7 1974
MEMORANDUM FOR
THE
SECRETARY
OF
STATE
THE
SECRETARY
OF
TREASURY
THE
SECRETARY
OF
DEFENSE
THE
SECRETARY
OF
AGRICULTURE
THE
SECRETARY
OF
COMMERCE
THE
SECRETARY
OF
LABOR
THE
SECRETARY
OF
INTERIOR
THE
SECRETARY
OF
TRANSPORTATION
.THE
ADMINISTRATOR, ENVIRONMENTAL PROTECTION
AGENCY
THE
ADMINISTRATOR, FEDERAL ENERGY ADMINISTRATION
THE
CHAIRMAN,
ATOMIC ENERGY COMMISSION
THE
CHAIRMAN,
CIVIL AERONAUTICS BOARD
THE
CHAIRMAN,
FEDERAL
COMMUNICATIONS COMMISSION
THE
CHAIRMAN,
FEDERAL
MARITIME COMMISSION
THE
CHAIRMAN,
FEDERAL
POWER COMMISSION
THE
CHAIRMAN,
FEDERAL
RESERVE BOARD
THE
CHAIRMAN,
FEDERAL
TRADE COMMISSION
THE
CHAIRMAN,
INTERSTATE COMMERCE COMMISSION
.THE
CHAIRMAN,
SECURITIES AND EXCHANGE COt11MISSION
.FROM: Roy L. Ash, DIRECTOR, OFFICE OF MANAGEMENT & BUDGET
W. D. Eberle, EXECUTIVE DIRECTOR, CIEP
SUBJ: Interagency Review of Current Federal Government
Reporting Requirements with Respect to Foreign
Investment in the United States
yXecilPt4~ ~,~ ~r~
v ~ zacr~
On October 28, the President signed The Foreign Investment
Study Act of 1974, which directs the Departments of Commerce
and Treasury to conduct a comprehensive study of foreign
investment in the United States. An interim report will be
issued in one year and the final report is due in 18 months.
There is, however, a widespread immediate concern in the
Congress regarding foreign investment in the United States
and the adequacy of Federal data-collection activities in
this area. Reflecting this concern, Senator Metzenbaum has
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introduced S. 3955, which would establish a reporting system
requiring foreigners to disclose publicly a greater amount of
information about their investments in the U.S. than is
presently provided. Hearings on the bill were held in the
Senate in September and are contemplated on a similar bill
(H.R. 1727,0) in the House after the recess.
The Federal Government already collects a significant amount
of data on foreign investment, which if improved and made
public in a manner designed to protect justifiable confidentiality
interests would go a long way toward satisfying Congressional
and public desires for better information on foreign investment.
Therefore, the Administration is opposing the imposition of any
additional reporting requirements on foreign investment in
the United States until a thorough study has been made of the
adequacy of existing capabilities.
Because of the urgency of Congressional and public interest
in this area, we have decided to undertake on an accelerated
basis a review of Federal Government foreign-investment data-
collection activities, which constitutes a portion of the
overall review required by the Foreign Investment Study Act of
1974. This accelerated review will be coordinated by the
existing CIEP Interagency Task'Force on Foreign Investment in
the United States, which will work closely with personnel from
Commerce and Treasury assigned to complete the overall foreign
investment study. We plan to complete a report in February 1975
that will include findings and recommendations for any necessary
improvements.
The initial step will be to survey our existing reporting
requirements and disclosure policies. Accordingly, we are
hereby requesting that each Government agenc t at now co - 1 e c t s
information dealing with (1) foreign investment in the ni ed-
States (2) the identity of investors domestic an oreign
in companies under their regulatory jurisdiction, or rreign
investment in sectors of the U.S. economy in which such invest-
ment is restricted or prohibited by statute, to furnis a
comprehensive, detailed statement of its exs g
regulations and procedures. Annex I (attached) outlines the
specific information that should be included in this report.
We are aware that in early 1973 the GAO prepared a report on
the reporting requirements of seven regulatory agencies for
Senator Metcalf entitled "Reporting Requirements and Dissemination
of Information on Corporate Ownership and. Structure." To avoid
duplication of effort, those agencies that contributed information
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for that report should build on their respective submissions
updating as necessary and noting the extent to which foreign
investors (Government, as well as private) are (or could be)
specifically identified.
Because-of-the probability of iiousehearings on this subject
shortly after the__recess, these reports should be submitted
b November 22 to Gene Clapp of the CIEP staff. We would
appreciate it if each agency wou immediately designate a
staff contact._to facilitate__communications_ in connection with
the study. Any questions on this request can be directed to
Mr. Clapp (456-6597) or to Mr. John Huhs (395-3720), OMB.
Attachment
Information copies:
f
THE ATTORNEY GENERAL (' / !
THE
~.nti.~ru?.AN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR
NATIONAL SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR
ECONOMIC AFFAIRS
THE DIRECTOR, CENTRAL INTELLIGENCE AGENCY
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ANNEX I
Outline of Information Which Should be Included in Report
on Reporting and Disclosure Requirements
re Foreign Investments in the United States
A. Description of Existing Data-Collection Activities.
1. Describe each and every data-collection or dissemination
activity pursued by the agency regarding information on investors
and investment. Describe specific purpose for which the infor-
mation is collected. Describe any special agency procedures or
efforts specifically designed to identify foreign investments
in the United States or foreign investors. Describe the extent
to which the agency is able from the information collected
(a) to distinguish between domestic and foreign investments or
investors; (b) to determine the nationality of foreign investors;
and (c) to prepare a list of foreign investments or investors.
2. Cite the precise legal basis for each activity and. supply
copies of all relevant statutes and reporting.forms. Be sure to
include:
a. All laws, rules, regulations, or other procedures
that require reporting of information as to the identity, location,
and/or nature (i.e., beneficial vs. record owner) of (1) share-
holders (or partners) of U.S. corporations (or firms); (2) the
holders of short- and long-term debt of U.S. corporations; and
(3) holders of real estate.
b. Any laws, rules, regulations, or other procedures
that establish special reporting requirements (in addition to
the general requirements in a above) for (1) foreign investors
in general and/or (2) foreign governments or government-controlled
institutions.
3. Describe the enforcement powers (e.g., penalties,
subpoena, or injunctive powers) to ensure compliance with each
data-collection activity.
4. Describe the extent of voluntary compliance under the
laws, rules, regulations, and procedures cited in 2 above and
the extent to which enforcement powers are used. Cite examples
of cases in which abuse or neglect of reporting requirements may
have occurred and/or where existing enforcement powers have been
used to ensure compliance.
5. Describe the confidentiality requirements and other
restrictions on the use of information collected under each
data-collection activity. Cite relevant statutes and/or
administrative regulations.
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6. Describe the extent to which information collected
under each data-collection activity is made available to the
public; include sample copies of the reports or.other publications
in which the data collected is made public.
B. Desirable Im rovements in Data-Collection Activities.
1. Identify specific additional information on foreign
investment and/or investors that the agency needs. Identify
gaps in the scope or coverage of reporting for existing data-
collection activities (e.g., extent of exceptions or exemptions),
and describe any new activities that should be undertaken.
Describe the uses to which the additional information will be put.
2. Identify any superflous existing data-collection activities
and explain why they are superflous. For example, some data
requirements may no longer contribute to the agency's needs to
accomplish its mission.
3. Describe any factors that make.it difficult or impossible
to determine the true identity of the foreign beneficial owner
who ultimately receives the dividends and/or exercises the voting
rights (especially in cases where foreign nominees are used).
4. Describe and explain any desirable changes in laws, rums,
regulations, or other procedures (including enforcement powers)
that would help correct any data-collection deficiencies identified
under 1, 2, and 3 above, or that would be necessary, in your view,
to improve the program of your agency relating to the collection
and disclosure of information dealing with foreign investment in
the United States. Include:
a. Changes which could be made administratively in
existing regulations or reporting forms.
b. Additional legislative authority (either by amendment
to existing laws or totally new legislation).
C. Compliance with Existing Laws Restricting Foreign Investment
in the United States.
1. List the laws restricting or otherwise limiting foreign
investment in the United States administered by your agency (see
Annex II for a checklist).
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2. Describe the procedures used by your agency to ensure
compliance with these laws.
3. Identify and explain any legislative or administrative
changes that are necessary to ensure compliance.
D. Explanatory Note.
As we noted in our transmittal memorandum, this Annex is
designed to elicit information on existing regulations that
apply to foreign investors. We will use this information as
a basis for identifying any deficiencies in these regulations
and for attempting to devise possible means to correct them.
Our principal concern in this review will be to determine:
1. The extent to which existing reporting requirements yield
adequate information on foreign investment in general and more
particularly as to (a) the true identity of the ultimate bene-
ficial owner of foreign-owned shares of U.S. corporations and
(b) foreign ownership of real estate; and
2. What means we might propose (e-.g., revision of existing
statutes and/or regulations or enactment of new ones), to
strengthen our capability to obtain and disclose such information.
In our preliminary investigations, we have already identified
some aspects of our existing reporting requirements that we
think deserve attention. They are:
1. Lack of data re investment in real estate.
2. The difficulty in determining the identity of the foreign
party (or parties) who ultimately receive dividends and/or
exercise the voting rights in cases where securities are held
by a nominee or in a street name, and
3. Confidentiality requirements which limit public disclosure
of data collected by Government.
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 ANNEX II
?
3F;oC RDP O ~ of led Entero004e4 - 3
s
n~n on Foreign controlled enterprises operating in the United States,
whether in branch or subsidiary form, may not:*
(a) engage in operations involving the utilization or production
of atomic energy (42 USC 2133(d))
(b) o?m'vessels which transport merchandise or passengers
between U.S. ports, or which tow U.S. vessels carrying such
merchandise or passengers between U.S. ports.. (46 USC 802, 833, 8?8)
There are exceptions to this general rule, one of which permits
a foreign controlled U.S. manufacturing or mining company to
engage in shipping activities related to its principal business.
(46 USC 883-1)
(c) acquire rights of way for oil pipe-lines, or
leases or interests therein for mining coal, oil or certain
other minerals, on federal lands other than the outer continental
shelf, if the foreign investor's hone country does not permit
such mineral leasing to U.S. controlled enterprises (30 USC
181, 185; 43 CFR 3300.1)
(d) engage in radio or television broadcasting, unless-
the Federal Co.,..unications Cc.:^ission finds the grant of a license
to be in the public interest (47 USC 310) (The FCC has granted
licenses for broadcasting activities ancillary to another
business of a foreign controlled enterprise.)
(e) acquire a-controlling interest in a telegraph company
(47 USC 222(d))
(f) acquire control of a company engaged in any phase of
aeronautics, unless approval is granted by. the Civil Aeronautics
Board (49 USC 1301(1),(13); 78A(4); (1378(f))
t
(g) be issued permits for intra-United States air co~:r;,erce
or navigation (49 USC 1371, 1401(b), 1502)
(h) obtain special government loans for the financing or
refinancing of the cost of purchasing, constructing or operating
co,n-arcial fishing vessels or gear (16 USC 742(c)(7)
(i) sell obsolete vessels to the Secretary of Commerce in
exchange for credit towards new vessels (46 USC 1.160(b))
(j) receive a preferred ship mortgage (46 USC 922)
??In.certain cases foreign enterprises can acquire a minority
interest in corporations engaging in the activities noted
but ApprSv48 F_b+ri 996969 obSM TlARBP,30 149tRO@@6RI ff 4
(l . Sec. I I )
 c (k) purr' se vessels converted by the c err?nent for
Y S~ Fo~arsjLg10TjjM/E'a -O AADPBOWd495 96Q91NW-3
S u ory saes price (50 USC App. 1737, 1745).
(1) obtain.special government emergency loans for"
agricultural purposes after a natural disaster (7 USC 1961) or
government loans to individual farmers or ranchers to purchase'
and operate family farms (7 USC 1922, 1941)
(m) establish an Edge Act corporationto engage in
international or foreign banking (12 USC 619)*
(n) purchase Overseas Private Investnent Corporation
insurance or guarantees (22 USC 2198(c))
(o) obtain construction-differential or operating-
differential subsidies for vessel construction or operation
(46 USC 1151 ff ., 1171 ff., 802)
(p) acquire or charter, without the approval of the
Secretary of Co:^nerce, U.S. flag vessels, vessels owned by a
U.S. citizen, or shipyard facilities'(46 USC 835)
(q) acquire the controlling interest in corporations
owning the vessels or facilities described in (p) above
(46 USC 835)
(r) obtain war-risk insurance for aircraft (49 USC 1531,
1401)
In addition to its limitations on stock ownership by
foreign enterprises, the Edge Act requires that all the directors
of the corporation be United States citizens.
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 In certain cases a foreign controlled enterprise operating
in the United States must meet certain requirements relating to
management in order to engage in particular activities. the
foreign investor, however, can continue to own all the equity
in the enterprise, because the laws in question do not contain limi-
tations relating to stock o:rnership. Unless these management
requirements are met, foreign controlled enterprises may not:
(a) organize a national bank (all the directors must be
United States citizens) (12 USC 72)
(f) obtain licenses to operate as custo
h
b
ms-
ouse
rokers
(19 USC 1641) (At least two of the officers must be U.S. citizens.)
* To the extent that these activities involve the coast-wise
trade, certain limitations on stock ownership would have to be met.
fCf. Sec. I)
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(b) engage in dredging or salvaging operations in U.S.
? waters. (To register a vessel to engage in these activities,
the President or chief executive officer of a doestic corporation,
and the chairman of its board, must be U.S. citizens, and foreign.
citizens ser"in,, as directors cannot be more than a mincrity of
the number necessary to constitute a quorum). (46 USC 316, 11)*
(c) fish in the territorial waters of the United States,
land fish caught on the high seas, and, except for corporations
of countries -w' h traditional fishing rights), fish in the
United States fishing Zone. (See (b) above for the management
requirements.) (16 USC 1081, 1091; 46 USC 231)*
I I Apsgl rx~m~tA~lgr~i cCt~#~R~Pt~$~A~~~~Q4es
(d) transport certain commodities procured by or financed
for export by the United States government or an instrumentality'
thereof. (See (b) above for the management requirements.)
There are certain statutory exceptions to this rule.; (15 USC 616(a);
46 USC 1241)
(e) obtain certain types of vessel insurance. (See (b)
above for the management requirements.) (46 USC 1281 ff.)
 C
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III. Restrictions Applicable to Foreign Branches or Individuals
In certain cases the form of business organization chosen
by a foreign controlled enterprise will determine whether it will
be treated differently from an enterprise controlled by United
States citizens. If a foreign controlled enterprise chooses to
operate through a sole proprietorship or a branch office, rather
than a corporation organized under the laws of one of the states,
it may not:
(a) obtain licenses to construct dams, reservoirs, power
houses, and transmission lines (16 USC 797(e)) ?
(b) obtain licenses to develop and utilize geothermal
steam and associated resources on federal lands (30 USC 1001 ff.).
(c) obtain certain rights of way, mining ric;hts,.leases, or
other rights on federal lands (See generally 43 CFR Subchapters
A&D)
These restrictions ons would not apply if the foreign controlled
enterprise operated through a dor.,estic subsidiary.
In addition to restrictions previously noted, foreign
citizens may not:
(a) act as officers and serve in certain other positions on
certain ?:,~-~cels (Cf. 46 USC 221)
(b) function as operators in radio or television stations
(47 USC 303(1)) !
(c) practise before the Tax Court or the Court of Claims
(Tax Court Rules; 2; Court of Claims rules, 201)
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