investment transactions which are reportable by it for any period before or after the effective date, the direct investor shall not be required to file a Form FDI-101 or FDI-102 for such period.

(c) (1) If a direct investor is a member of one or more associated groups, the reports filed by the direct investor shall include, in addition to all other required information, the net transfers of capital made by the direct investor to all group affiliated foreign nationals during the relevant period, and, if any of the group affiliated foreign nationals are incorporated affiliated foreign nationals as defined in § 1000.304, shall also include the direct investor's proportionate share in the reinvested earnings of such incorporated affiliated foreign nationals during such period. A member of an associated group which is a direct investor under § 1000.905(b)(1) but not under § 1000.305 is not subject to the provisions of § 1000.203, and such member shall not report its foreign balances on Forms FDI-101 or FDI-102.

(2) Notwithstanding the foregoing, the members of an associated group may elect, by a document executed by or on behalf of a majority in interest of the members of the group and filed with the Program Reports Division, Office of Foreign Direct Investments, U.S. Department of Commerce, Washington, D.C. 20230, to have one member of the group file reports under § 1000.602 on behalf of all members, each such report to reflect the aggregate direct investment transactions of all members with all group affiliated foreign nationals during the relevant period before or after the effective date. Such election shall be subject to the approval of the Secretary who may grant such approval subject to any terms and conditions that he deems necessary. Once an election is made pursuant to this subparagraph (2), it may not be changed without the permission of the Secretary.

(d) If a direct investor is an affiliated or family group, the reports filed by the direct investor shall aggregate all foreign balances, direct investment transactions and other reportable items attributable to each member of the group. The group's Forms FDI-101 and FDI-102 shall be filed on behalf of the group by one member thereof. Such member shall also file all other reports, certificates and other documents required to be filed by the group under the provisions of this part.

For purposes of this part and General Authorization No. 1 (33 F.R. 818):

(a) The term "borrowing by an affiliated foreign national" means a borrowing by an affiliated foreign national of a direct investor from any person (other than the direct investor or another affiliated foreign national of the direct investor), including, but not by way of limitation, an extension of credit by any such person to the affiliated foreign national in connection with the purchase of property (including securities) by the affiliated foreign national from such person. Repayment by a direct investor of a borrowing by an affiliated foreign national includes repayment of all interest, premiums and other fees and charges, if any, owing to the lender in connection therewith.

(b) The term "borrowing by a direct investor" means a borrowing by the direct investor, repayment of which by the direct investor would constitute a transfer of capital under § 1000.312(a) (7).

(c) The term "guarantee," when used with respect to a borrowing by an affiliated foreign national, includes (1) a written acknowledgement of secondary responsibility (whether or not legally enforceable) to a bank with respect to the borrowing or with respect to the financial condition of the affiliated foreign national; (2) a written guarantee, endorsement, surety agreement, application for letter of credit or standby agreement with respect to the borrowing; (3) a contingent contractual commitment with respect to the borrowing of the type involved in so-called through put agreements, take or pay contracts, keep well agreements, and other similar written agreements; and (4) a mortgage, pledge or hypothecation of property as security for repayment of the borrowing, other than a mortgage, pledge or hypothecation to or with a foreign national which constitutes a transfer of capital under § 1000.312(a) (9). The term "guarantee" includes a guarantee given by one affiliated foreign national of a direct investor with respect to a borrowing by another affiliated foreign national of the direct investor if repayment pursuant to the guarantee would result in a transfer of

capital by the direct investor under § 1000.505.

(d) The term "bank" means a domestic bank or a foreign bank as described in § 1000.317.

§ 1000.1002 Transfers of capital in connection with repayment of borrowings. (a) Subject to the provisions of § 1000.1003, positive direct investment by a direct investor during any year in affiliated foreign nationals in any Scheduled Area is authorized, notwithstanding the provisions of § 1000.201, to the extent such positive direct investment is attributable in whole or in part to those transfers of capital by the direct investor (including transfers of capital under § 1000.505) as are described in subparagraphs (1) through (6) of this paragraph (a):

(1) A transfer of capital, pursuant to a guarantee made prior to June 10, 1968, to repay, a borrowing by such affiliated which transfer is made in repayment of, or to enable an affiliated foreign national foreign national: Provided, That, in the case of a guarantee made on or after January 1, 1968, the direct investor shall have complied with the certification requirements set forth in section 2(a) (1) of General Authorization No. 1.

(2) A transfer of capital in repayment of, or to enable an affiliated foreign national to repay, a borrowing by such affiliated foreign national from a bank made prior to January 1, 1968, or a borrowing by such affiliated foreign national from a bank made on or after January 1, 1968, pursuant to a fixed loan commitment or line of credit established prior to such date or pursuant to any renewal or extension of such a fixed loan commitment or line of credit: Provided, That the liquid assets of the affiliated foreign national are not sufficient to repay such borrowing and that the affiliated foreign national has made every reasonable effort to refinance the borrowing on terms generally available to companies of similar size and financial position; And provided further, That, if, on or after January 1, 1968, the amount of such a fixed loan commitment or line of credit is increased by 10 percent or more, a new fixed loan commitment or line of credit shall be deemed to have been established at the time of such increase in an amount equal to the amount of the increase.

(3) A transfer of capital consisting of the delivery of equity securities of the

direct investor, pursuant to the exercise of conversion or similar rights, to holders of debt obligations issued by the direct investor or by an affiliated foreign national of the direct investor, without regard to the date the borrowing is made: Provided, That, for purposes of § 1000.1003, any such transfer of capital shall be deemed to have been made in the year immediately following the year in which the conversion or similar rights are exercised.

(4) A transfer of capital (other than a transfer referred to in subparagraph (3) of this paragraph) in repayment of a borrowing by the direct investor made prior to June 10, 1968: Provided, That with respect to a borrowing made on or after January 1, 1968, the direct investor shall have complied with the certification requirements set forth in section 2(b) of General Authorization No. 1.

(5) A transfer of capital, pursuant to a guarantee made on or after June 10, 1968, which transfer is made in repayment of, or to enable an affiliated foreign national to repay, a borrowing by such affiliated foreign national: Provided, That the direct investor shall have complied with the certification requirements set forth in paragraph (b) of this section.

(6) A transfer of capital (other than a transfer referred to in subparagraph (3) of this paragraph) in repayment of a borrowing by the direct investor made on or after June 10, 1968: Provided, That the direct investor shall have complied with the certification requirements set forth in paragraph (b) of this section.

(b) The certificate required by subparagraphs (5) and (6) of paragraph (a) of this section shall (after June 9, 1969) be made on Form FDI-106, and shall, except as otherwise provided in paragraph (e) (3) of this section, be delivered to the Secretary not later than 10 days after the date of the borrowing by the direct investor or the date of the guarantee of the borrowing by the affiliated foreign national, as the case may be. It shall be executed by the direct investor or a duly authorized representative of the direct investor, shall state the amount of the borrowing, and the amount of the required principal repayment, shall identify the lender (or the managing underwriter, if the borrowing involves a public offering), and shall certify as follows:

(1) If the direct investor believes, on the basis of all facts and circumstances

existing when the certificate is delivered to the Secretary, that it will not make any transfers of capital in connection with repayment of the borrowing within 7 years after the date of the borrowing (or the date of the guarantee, if the borrowing is by an affiliated foreign national), the certificate shall state such belief and the reasons therefor.

(2) If the direct investor believes, on the basis of all facts and circumstances existing when the certificate is delivered to the Secretary, that it will make transfers of capital in connection with repayment of the borrowing within the aforesaid 7-year period, but also believes, on the basis of such facts and circumstances, that no positive direct investment by the direct investor in any scheduled area during any year will result in whole or in part from such transfers, or that any positive direct investment in any scheduled area which does result from such transfers will be authorized by this part (otherwise than by this section), the certificate shall state such beliefs and the reasons therefor.

(c) In determining whether a transfer of capital in connection with the repayment of a borrowing will be made within 7 years from the date of the borrowing or the guarantee thereof, as the case may be, and whether any such transfer will result in unauthorized positive direct investment during any year:

(1) A direct investor may disregard the possible occurrence of events (such as defaults by the direct investor or the borrowing affiliated foreign national, as the case may be), which are not reasonably likely to occur in view of the facts and circumstances existing when the certificate is delivered to the Secretary;

(2) A direct investor may disregard potential transfers of capital resulting from conversions into equity securities of the direct investor of the debt obligation as to which the certificate is being given and of other convertible debt obligations issued by the direct investor or affiliated foreign nationals of the direct investor: Provided, That potential transfers of capital resulting from conversions of debt obligations issued on or after June 10, 1968, shall not be disregarded if (i) the obligations have an original maturity of less than 7 years or (ii) the obligations are not sold in a public offering and are convertible within 3 years from the date of issuance; and

(3) A direct investor must consider, if a guaranteed borrowing by an affiliated foreign national is involved, whether the borrowing affiliated foreign national is reasonably likely to have sufficient financial resources to repay the borrowing after such affiliated foreign national (and all other affiliated foreign nationals in the same scheduled area) have paid all dividends or remittance which they may be required to pay by virtue of the limitations imposed in this part on positive direct investment.

(d) Notwithstanding the provisions of paragraph (a) of this section, no positive direct investment resulting from repayment of a borrowing shall be authorized by this subpart if repayment is made at the option of the direct investor. For purposes hereof, a repayment shall be deemed to have been made at the option of a direct investor if it was made pursuant to a call or like provision resting control of the time of repayment in the direct investor or an affiliated foreign national or if, at the time of repayment, the direct investor or an affiliated foreign national had the option to renew, extend or continue the borrowing and such option was not exercised.

(e) For purposes of this part and of General Authorization No. 1:

(1) A borrowing by a direct investor or an affiliated foreign national shall be deemed to have been made on the date the proceeds thereof are received by the borrower or, if an extension of credit in connection with the purchase of property is involved, on the date such property is purchased. Notwithstanding the foregoing, (i) if a borrowing involves a public offering of debt obligations, the borrowing shall be deemed to have been made on the date the obligations are issued and (ii) if a borrowing involves the use of an overdraft facility, the borrowing shall be deemed to have been on the date the overdraft is used.

(2) The refinancing by a direct investor of a foreign borrowing or a longterm foreign borrowing in accordance with the provisions of § 1000.324(b) (1), or the refinancing of a borrowing by an affiliated foreign national (by renewal, extension or continuance of such borrowing or by making a subsequent borrowing from the same or another lender), shall not be deemed a repayment of the original borrowing or the making of a new borrowing.

(3) If funds are to be borrowed by a direct investor or an affiliated foreign.

national pursuant to an arrangement with a lender (such as a line of credit or revolving credit arrangement) whereby the funds may be taken down from time to time over a specified period up to a stated maximum aggregate amount (or pursuant to a renewal or extension of such an arrangement), the direct investor may, in lieu of filing a separate certificate as to each take-down which constitutes a borrowing, file a single certificate with respect to all such borrowings, such certificate to be filed on or prior to the date of the first borrowing under the arrangement or under the renewal or extension thereof, as the case may be.

[33 F.R. 11271, Aug. 8, 1968, as amended at 34 F.R. 9070, June 7, 1969; 35 F.R. 9250, June 13, 1970; 36 F.R. 9508, May 26, 1971]

§ 1000.1003 Effect of transfers of capital in repayment of borrowings.

(a) For the purposes of this § 1000.1003, the term "repayment charge" shall mean an amount equivalent to the amount of positive direct investment made by a direct investor pursuant to § 1000.1002. A repayment charge shall be incurred by a direct investor in any year in which positive direct investment is made pursuant to § 1000.1002.

(b) The amount of positive direct investment authorized to be made by a direct investor under Subparts E and M of this part shall be reduced as provided in paragraphs (c) and (d) of this section until reductions equal in the aggregate to the repayment charge shall have been made.

(c) (1) In any year, commencing with the year 1970, in which a repayment charge is incurred, the amount of positive direct investment authorized to be made by the direct investor shall be reduced as follows: Except as hereinafter provided, reduction shall be made first in the amount of positive direct investment authorized under Subpart E of this part in the scheduled area in which the positive direct investment under § 1000.1002 was made, and, to the extent that the repayment charge exceeds the amount of positive direct investment so authorized in such scheduled area, further reduction shall be made in the amount of positive direct investment authorized under Subpart E of this part in Schedules C, B, and A, in that order, and then in the amount of positive direct investment authorized under Subpart M of this part: Provided, That the amount

of the reduction shall not exceed the repayment charge and that such reduction shall not reduce authorized positive direct investment under said subparts in any year to an amount less than zero.

(2) Reductions under subparagraph (1) of this paragraph in the amount of positive direct investment authorized under Subpart E of this part shall be made first in the aggregate amount of positive direct investment authorized under $1000.503, § 1000.504, or § 1000.507 (except as provided in paragraph (d) of this section), whichever is elected by the direct investor for the year, and then in the amount of positive direct investment authorized under § 1000.506.

(3) Reductions under subparagraph (1) of this paragraph in the amount of positive direct investment authorized in Schedule C pursuant to § 1000.504 shall be made first in the amount of authorized positive direct investment under § 1000.504 (a) and (c) or (b), (d)(3), and (f) (3) (i), and then in the amount of authorized reinvested earnings under § 1000.504 (e) and (f) (3) (ii).

(4) Reductions in the amount of authorized positive direct investment under subparagraph (1) of this paragraph for a repayment charge attributable to transfers of capital primarily related to operations in foreign air transportation by direct investors described in § 1000.1302(a) shall be made first in the amount of authorized positive direct investment under Subpart M of this part.

(5) Reductions under subparagraph (1) of this paragraph in the amount of positive direct investment authorized under $1000.507(a) (2) shall be made only to the extent that the repayment charge is the result of:

(i) Transfers of capital described in § 1000.1002 (a) (1), (2), (3), or (5): Provided, That the borrowings referred to in § 1000.1002 (a) (1), (2), (3), and (5), are borrowings of affiliated foreign nationals located in Schedule A; or

(ii) Transfers of capital described in § 1000.1002(a) (3), (4), or (6), to the extent that the proceeds of the borrowings referred to in § 1000.1002(a) (3), (4), and (6) were expanded in or allocated to Schedule A, at the time of repayment, and for which a deduction was made under $1000.203 (d) (2), § 1000.203 (d) (3), § 1000.306 (e), or § 1000.313(d) (1).

(d) If the repayment charge incurred in any year exceeds the amount of authorized positive direct investment reduced under this section, reductions shall

be made in each succeeding year in the same manner and order as set forth in paragraph (c) of this section. A direct investor electing for any year to be governed by § 1000.507 may elect, by so indicating on its Annual Report Form FDI-102F for such year, that the amount of positive direct investment that it is authorized to make in Schedule A under § 1000.507(a) (2) shall not be reduced pursuant to this paragraph (d): Provided, That a direct investor may not so elect with respect to a repayment charge incurred during the year 1968 under § 1000.1003 as in effect for 1968.

[33 F.R. 16444, Nov. 9, 1968, as amended at 35 F.R. 7227, May 7, 1970]

Subpart K-Direct Investment in
Canada

(a) The term "Canadian affiliate" of a direct investor means an affiliated foreign national of the direct investor in Canada.

(b) The term "Non-Canadian Scheduled B affiliate" of a direct investor means an affiliated foreign national of the direct investor in a Schedule B country other than Canada.

(c) The term "Canadian bank" includes any branch or office within Canada of any of the following: Any bank or trust company organized under the banking laws of Canada or any province thereof, or any private bank or banker subject to supervision and examination under the banking laws of Canada or any province thereof.

(d) The term means an individual who is a resident of Canada, a Canadian bank, and a Corporation or other entity (other than a bank) organized under the laws of Canada or any political subdivision thereof. [33 F.R. 8665, June 13, 1968]

"Canadian person"

§ 1000.1102 Authorized positive direct investment in Canada.

Positive direct investment by a direct investor during any year in Canadian affiliates of the direct investor is authorized, without limitation as to amount. [33 F.R. 8665, June 13, 1968]

§ 1000.1103 Net transfers of capital to Schedule B countries.

(a) For purposes of determining the net transfer of capital by a direct investor to all incorporated affiliated for

eign nationals of the direct investor in Schedule B countries during any period (including the years 1965 and 1966) under § 1000.313(a), there shall be included only (1) the aggregate of all transfers of capital made during such period by the direct investor to incorporated Non-Canadian Schedule B affiliates of the direct investor less (2) the aggregate of all transfers of capital made during such period by such incorporated Non-Canadian Schedule B affiliates to the direct investor.

(b) For purposes of determining the net transfer of capital by a direct investor to all unincorporated affiliated foreign nationals of the direct investor in Schedule B countries during any period (including the years 1965 and 1966) under § 1000.313 (b), there shall be included only the direct investor's share of the aggregate net assets of unincorporated Non-Canadian Schedule B affiliates of the direct investor.

(c) The provisions of § 1000.505(b) relating to the extension of short-term trade credits from one affiliated foreign national of a direct investor to another affiliated foreign national of the direct investor shall not be applicable if either the affiliated foreign national extending the credit or the affiliated foreign national receiving the credit is a Canadian affiliate.

[33 FR. 8665, June 13, 1968, as amended at 33 F.R. 11713, Aug. 17, 1968]

§ 1000.1104 Reinvested earningsSchedule B countries.

(a) For purposes of determining a direct investor's share in the total reinvested earnings of all incorporated affiliated foreign nationals of the direct investor in Schedule B countries during any period (including the years 1965 and 1966) under § 1000.306 (a) (2), there shall be included only the direct investor's share in the total reinvested earnings of all incorporated Non-Canadian Schedule B affiliates of the direct investor during such period.

(b) In determining the direct investor's share in the total reinvested earnings of all incorporated Non-Canadian Schedule B affiliates during any period pursuant to § 1000.306(b), all incorporated and unincorporated Canadian affiliates of the direct investor shall be deemed to be in a scheduled area other than Schedule B.

[33 F.R. 8665, June 13, 1968]