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provisions of $ 1000.507 without obtaining prior permission of the Secretary. (34 F.R. 9067, June 7, 1969, as amended at 35 F.R. 7226, May 7, 1970) & 1000.503 Positive direct investment

not exceeding $2,000,000; minimum

allowable. (a) If for any year commencing with the year 1971 a direct investor elects under $ 1000.502(a) (1), positive direct investment is authorized for such year in all scheduled areas in an aggregate amount not exceeding $2,000,000.

(b) [Reserved]

(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. 134 F.R. 9067, June 7, 1969, as amended at 35 F.R. 7226, May 7, 1970; 36 F.R. 975, Jan. 21, 1971] § 1000.504 Authorized positive direct

investment in scheduled areas; sched

ular allowables. (a) Historical allowables. If for any year commencing with the year 1969 a direct investor elects under $ 1000.502(a) (2), positive direct investment for such year is authorized as follows:

(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 asiliates 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 year in Schedule A, or if no positive diearnings in Schedule C during the imme- rect investment is so authorized to the diately preceding year is in excess of direct investor in Schedule A during such positive direct investment authorized in year but the direct investment by the diSchedule C under said paragraph (a) (3) rect investor in Schedule A during such during the current year or the amount of year is negative, the direct investor is positive direct investment authorized in authorized to make additional positive Schedule A under para ph (a) (1) of direct investment in Schedule A during this section: Provided, That the amount succeeding years in an aggregate amount of positive direct investment authorized of not more than the amount of such in Schedule A under said paragraph (a) excess, or the amount of such negative (1) shall be reduced by the amount of direct investment, as the case may be. such increase;

(2) If, during any year commencing (2) The amount of positive direct in- with the year 1969, the amount of posivestment authorized in Schedule C un- tive direct investment authorized to a der paragraph (a) (3) of this section shall direct investor in Schedule B under parabe increased by the lesser of either the graphs (a) (2) and (c) of this section or amount by which 40 percent of annual paragraph (b) (2) of this section exceeds earnings in Schedule C during the imme- the amount of direct investment diately preceding year is in excess of posi- (whether positive or negative) made by tive direct investment authorized in the direct investor during such year in Schedule C under paragraph (a) (3) of Schedule B, or if no positive direct inthis section and subparagraph (1) of vestment is so authorized to the direct this paragraph during the current year investor in Schedule B during such year or the amount of positive direct invest- but the direct investment by the direct ment authorized in Schedule B under investor in Schedule B during such year paragraph (a) (2) of this section: Pro- is negative, the direct investor is auvided, That the amount of positive direct thorized to make additional positive di'investment authorized in Schedule B rect investment in Schedule A during under said paragraph (a) (2) shall be such year, and, to the extent additional reduced by the amount of such increase; positive direct investment in Schedule A and

is not made during such year the direct (3) The amount of positive direct in- investor is authorized to make additional vestment authorized in Schedule B under positive direct investment in Schedules paragraph (a) (2) of this section shall be

A and B during succeeding years: Proincreased by the lesser of either the vided, That the aggregate amount of amount by which 40 percent of annual additional positive direct investment auearnings in Schedule B during the im- thorized by this subparagraph shall not mediately preceding year is in excess of be more than the amount of such excess, positive direct investment authorized in or the amount of such negative direct Schedule B under said paragraph (a) (2) investment, as the case may be. during the current year or the amount (3) If, during any year commencing of positive direct investment authorized with the year 1969, the amount of posiin Schedule A under paragraph (a) (1) tive direct investment authorized to a of this section (calculated after the re- direct investor in Schedule C under paraduction provided in subparagraph (1) of graphs (a) (3) and (c) of this section this paragraph): Provided, That the or paragraph (b)(3) of this section examount of positive direct investment au- ceeds the amount of direct investment thorized in Schedule A under paragraph (whether positive or negative) made by (a)(1) of this section shall be reduced by the direct investor during such year in the amount of such increase.

Schedule C, or if no positive direct in(d) Carryforward ollowables and use vestment is so authorized to the direct of schedular allowables in other sched- investor in Schedule C during such year uled areas. (1) If, during any year com- but the direct investment by the direct mencing with the year 1969, the amount investor in Schedule C during such year of positive direct investment authorized is negative, the direct investor is authorto a direct investor in Schedule A under

ized to make additional positive direct paragraphs (a) (1) and (c) of this sec- investment in Schedule A or B during tion or paragraph (b) (1) of this section

such year, and, to the extent additional exceeds the amount of direct invest- positive direct investment in Schedules ment (whether positive or negative) A or B is not made during such year, made by the direct investor during such the direct investor is authorized to make additional positive direct investment tional reinvested earnings so authorized Schedules A, B, or C during succeeding to be made under said former $ 1000.504 years: Provided, That the aggregate of (c) (1) and (2). additional positive direct investment (ii) A direct investor authorized unauthorized by this subparagraph shall der former $ 1000.504(c)(3), as in effect not be more than the amount of such on December 31, 1968, to reinvest earnexcess, or the amount of such negative ings of incorporated affiliated foreign direct investment, as the case may be. nationals in Schedule C during 1969 shall

(e) Schedule C total losses; reinvest- be authorized to reinvest earnings of inment allowable. If the incorporated afil- corporated affliated foreign nationals in iated foreign nationals of a direct Schedule C during 1969 or succeeding investor in Schedule C have total losses years in an aggregate amount not to exduring any year commencing with the ceed the amount of earnings so authoryear 1969 (calculated as provided in ized to be reinvested during 1969 under $ 1000.306(c)), such losses shall, for pur- said former § 1000.504 (C) (3). poses of this section, be disregarded in [34 F.R. 9067, June 7, 1969, as amended at calculating the direct investment 35 F.R. 7226, May 7, 1970; 36 F.R. 975, Jan. 21, (whether positive or negative) made by 1971] the direct investor in Schedule C for such

& 1000.505 Transfers between affiliated year: Provided, That the direct investor

foreign nationals. shall be authorized to reinvest additional earnings of incorporated affiliated for

(a) (1) For purposes of the succeeding eign nationals in Schedule C during suc

provisions of this $ 1000.505, (i) if funds ceeding years in an aggregate amount of

or other property are transferred by an not more than the direct investor's share

unincorporated affiliated foreign naof such total losses.

tional of a direct investor to the direct (f) Carryforward allowables from

investor or to another affiliated foreign 1968. (1) A direct investor authorized

national of the direct investor, the funds under former § 1000.504(b) (1), as in

or property shall, if the transferee is not effect on December 31, 1968, to make the immediate parent of the transferor positive direct investment in Schedule

affiliated foreign national, be treated as A during 1969 is authorized to make

having been transferred by such immepositive direct investment in Schedule

diate parent and (ii) if funds or other A during 1969 and succeeding years in

property are transferred to an unincoran aggregate amount not to exceed the porated affiliated foreign national of a amount of positive direct investment so

direct investor by the direct investor or authorized to be made during 1969 under

by another affiliated foreign national of said former $ 1000.504(b) (1).

the direct investor, the funds or property (2) A direct investor authorized under

shall, if the transferor is not the immeformer $ 1000.504(b) (2), as in effect on

diate parent of the transferee affiliated December 31, 1968, to make positive di

foreign national, be treated as having rect investment in Schedule B during been transferred to such immediate par1969 is authorized to make positive direct

ent: Provided, in each case, That the iminvestment in Schedules A or B during

mediate parent is the direct investor or 1969 and succeeding years in an aggre

an incorporated affiliated foreign nagate amount not to exceed the amount

tional of the direct investor and that such of positive direct investment so author- immediate parent is not the immediate ized to be made during 1969 under said

parent of both the transferor and transformer $ 1000.504(b) (2).

feree affiliated foreign national. (3) (i) A direct investor authorized (2) For purposes of $ $ 1000.312 and to make positive direct investment, to

1000.313(a), (i) if funds or other propmake a positive net transfer of capital, erty are deemed under subparagraph or to reinvest additional earnings of in- (1) (ii) of this paragraph to have been corporated affiliated foreign nationals transferred by an incorporated affiliated under former § 1000.504(c) (1) and (2), foreign national of a direct investor to as in effect on December 31, 1968, is the direct investor, the transfer shall be authorized to make positive direct in- treated as a transfer of capital by the vestment in Schedules A, B, or C during incorporated affiliated foreign national 1969 and succeeding years in an aggre- to the direct investor (in an amount gate amount not to exceed the aggregate equal to the full amount or value of the amount of positive direct investment, funds or property so transferred) and positive net transfer of capital, and addi- (ii) if funds or other property are deemed under subparagraph (1) (i) of this para- affiliate of the direct investor as defined graph to have been transferred by the in $ 1000.903(a). direct investor to an incorporated affili- (5) For purposes of $$ 1000.312(a) ated foreign national of the direct in- and 1000.313(a), if an unincorporated vestor, the transfer shall be treated as a affiliated foreign national of a direct transfer of capital by the direct investor investor has a net decrease in its net to the incorporated affiliated foreign na- assets during any period, the direct intional (in an amount equal to the full vestor shall be deemed to have made a amount or value of the funds or property transfer of capital to the immediate so transferred): Provided, in each case, parent of such unincorporated affiliated That either the affiliated foreign na- foreign national to the extent that the tional actually transferring the funds or direct investor's share of such net deother property or the affiliated foreign crease is not attributable to losses innational actually receiving such funds or curred by the unincorporated affiliated other property is an affiliate of the direct foreign national during such period: investor as defined in § 1000.903(a) and Provided, That such immediate parent that the transfer, if actually made by or is an incorporated affiliated foreign nato the direct investor, as the case may tional and is an affiliate of the direct inbe, would have constituted a transfer of vestor as defined in § 1000.903(a). capital under $ 1000.312.

(6) For purposes of $ $ 1000.312(b) (3) For purposes of $ $ 1000.312 (a) and 1000.313(a), (i) if an unincorpoand (b) and 1000.313(a), if funds or rated affiliated foreign national of a diother property are transferred (or rect investor has a net increase in its deemed under paragraph (a) (1) to have net assets during any period, the immebeen transferred by an incorporated diate parent of such unincorporated afaffiliated foreign national of a direct in- filiated foreign national shall be deemed vestor to another incorporated affiliated to have made a transfer of capital to the foreign national of such direct investor, direct investor to the extent that the the transfer shall be treated as a transfer direct investor's share of such net inof capital by the transferor affiliated for

crease is not attributable to earnings of eign national to the direct investor (in an the unincorporated affiliated foreign naamount equal to the full amount or value tional during such period, and (ii) if an of the funds or property so transferred)

unincorporated affiliated foreign naand as a further transfer of capital in an tional of a direct investor incurs a loss equivalent amount by the direct investor

during any period but such unincorpoto the transferee affiliated foreign na- rated affiliated foreign national has no tional: Provided, That the affiliated for- change or has a net increase in its net eign national actually transferring th's assets during such period, or has a net funds or other property or the affiliated decrease in its net assets during such foreign national actually receiving such period but the loss exceeds the net defunds or other property is an affiliate

crease in net assets, the immediate parof the direct investor as defined in

ent of such unincorporated affiliated § 1000.903(a) and that the transfer, if foreign national shall be deemed to have actually made by the direct investor, made a transfer of capital to the direct would have constituted a transfer of investor in an amount equal to (a) the capital under $ 1000.312(a): And pro- direct investor's share of the loss, (b) vided further, That a charter of a vessel the direct investor's share of the net by an incorporated affiliated foreign na

increase in net assets plus the direct tional of such direct investor shall not be investor's share of the loss or (c) the subject to this subparagraph.

amount by which the direct investor's (4) In calculating the net transfer of share of the loss exceeds the direct incapital made by a direct investor during vestor's share of the net decrease in net any period to all unincorporated affil- assets, as the case may be: Provided, in iated foreign nationals in a scheduled each case, That the immediate parent of area under $ 1000.313(b), the direct in- the unincorporated affiliated foreign navestor shall be deemed not to have any tional is an incorporated affiliated forshare in a net increase or decrease in eign national and is an affiliate of the net assets of an unincorporated affil- the direct investor as defined in iated foreign national in the scheduled $ 1000.903(a). area if the immediate parent of such (b) Notwithstanding anything to the unincorporated affiliated foreign na- contrary contained in paragraph (a) of tional is not the direct investor or an this section, a trade credit extended by

the

one affiliated foreign national of a direct Investor to another affiliated foreign national of such direct investor in the ordinary course of business pursuant to arm's-length terms shall not be deemed a transfer of capital by the direct investor to the affiliated foreign national receiving the credit nor a transfer of capital by the affiliated foreign national extending the credit to the direct investor if the obligation is in fact paid within 12 months after extension of the credit, in which event payment of the obligation shall not be deemed a transfer of capital by the direct investor to the affiliated foreign national receiving payment nor a transfer of capital by the affiliated foreign national making payment to the direct investor. If the affiliated foreign national extending or receiving the credit fs an unincorporated affiliated foreign national of the direct investor and the obligation is in fact paid within 12 months, any change in the net assets of the unincorporated affiliated foreign national attributable to the transaction shall not be taken into account under g 1000.313(b) in calculating the net transfer of capital made by the direct investor to all unincorporated affiliated foreign nationals in the scheduled area in which such unincorporated affiliated foreign national is located.

(c) For purposes hereof, the immediate parent of a partnership referred to in § 1000.304(a) (1) (i) is the direct investor or affiliated foreign national which is the partner, the immediate parent of a business venture referred to in $ 1000.304(a) (1) (ii) is the direct investor, and the immediate parent of a business venture referred to in § 1000.304 (a) (1) (iii) is the corporation or partnership on whose behalf the business venture is conducted. (33 F.R. 11710, Aug. 17, 1968, as amended at 34 F.R. 12884, Aug. 8, 1969; 36 F.R. 976, Jan. 21, 1971] § 1000.506 Additional authorized posi

tive direct investment in any one or more scheduled areas; incremental

earnings allowable. (a) For the purposes of this section:

(1) The term “aggregate annual earnings" means the algebraic sum of a direct investor's annual earnings in all scheduled areas as defined in § 1000.504(b) (4).

(2) The term “base period aggregate annual earnings” means an amount equal to 50 percent of the sum of the aggregate annual earnings for the years

1966 and 1967: Provided, That the base period aggregate annual earnings shall in no event be less than zero.

(3) The term "incremental earnings” means, with respect to each year beginning with the year 1970, the amount, if any, by which the aggregate annual earnings for such year exceed the base period aggregate annual earnings.

(4) The term "incremental earnings allowable" means, with respect to each year beginning with the year 1970 in which there are incremental earnings, the amount by which 40 percent of the incremental earnings for such year exceeds the greatest of the following (computed without regard to the reduction provisions of f 1000.100. or any authorization, exemption, ruling, compliance settlement or order, and without regard to any election made under $ 1000.502(a)): (i) The amount of positive direct investment authorized to be made by the direct investor during such year in all scheduled areas under $ 1000.503, or (ii) amount of positive direct investment, if any, authorized to be made by the direct investor during such year in all scheduled areas under $ 1000.504(a) (1), (2), and (3), or (iii) the amount of positive direct investment, if any, authorized to be made by the direct investor during such year in all scheduled areas under $ 1000.504 (b) (1), (2), and (3).

(b) For any year, commencing with the year 1970, a direct investor that elects under $ 1000.502(a) (1) may make additional positive direct investment in excess of that authorized by $ 1000.503 in all scheduled areas in an aggregate amount not exceeding the direct investor's incremental earnings allowable for such year.

(c) For any year, commencing with the year 1970, a direct investor that elects under $ 1000.502(a) (2) or (3) or (4) may make additional positive direct investment in excess of that authorized by $ 1000.504 or $ 1000.507 in any scheduled area in an amount not exceeding the direct investor's incremental earnings allowable for such year: Provided, That the aggregate of positive direct investment made pursuant to this paragraph in all scheduled areas shall not exceed the incremental earnings allowable. A direct investor that elects § 1000.504 shall compute additional positive direct investment made in Schedule C for such year pursuant to this section in accordance with $ 1000.504(e).

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