under subparagraph (1)(i) of this paragraph to have been transferred by the direct investor to an incorporated affiliated foreign national of the direct investor, the transfer shall be treated as a transfer of capital by the direct investor to the incorporated affiliated foreign national (in an amount equal to the full amount or value of the funds or property so transferred): Provided, in each case, That either the affiliated foreign national actually transferring the funds or other property or the affiliated foreign national actually receiving such funds or other property is an affiliate of the direct investor as defined in § 1000.903 (a) and that the transfer, if actually made by or to the direct investor, as the case may be, would have constituted a transfer of capital under § 1000.312.

(3) For purposes of §§ 1000.312 (a) and (b) and 1000.313(a), if funds or other property are transferred (or deemed under paragraph (a) (1) to have been transferred) by an incorporated affiliated foreign national of a direct investor to another incorporated affiliated foreign national of such direct investor, the transfer shall be treated as a transfer of capital by the transferor 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 as a further transfer of capital in an equivalent amount by the direct investor to the transferee affiliated foreign national: Provided, That the affiliated foreign national actually transferring the funds or other property or the affiliated foreign national actually receiving such funds or other property is an affiliate of the direct investor as defined in § 1000.903 (a) and that the transfer, if actually made by the direct investor, would have constituted a transfer of capital under § 1000.312(a): And provided further, That a charter of a vessel by an incorporated affiliated foreign national of such direct investor shall not be subject to this subparagraph.

(4) In calculating the net transfer of capital made by a direct investor during any period to all unincorporated affiliated foreign nationals in a scheduled area under § 1000.313(b), the direct investor shall be deemed not to have any share in a net increase or decrease in the net assets of an unincorporated affiliated foreign national in the scheduled area if the immediate parent of such unincorporated affiliated foreign national is not the direct investor or an

affiliate of the direct investor as defined in § 1000.903 (a).

(5) For purposes of §§ 1000.312(a) and 1000.313(a), if an unincorporated affiliated foreign national of a direct investor has a net decrease in its net assets during any period, the direct investor shall be deemed to have made a transfer of capital to the immediate parent of such unincorporated affiliated foreign national to the extent that the direct investor's share of such net decrease is not attributable to losses incurred by the unincorporated affiliated foreign national during such period: Provided, That such immediate parent is an incorporated affiliated foreign national and is an affiliate of the direct investor as defined in § 1000.903 (a).

(6) For purposes of §§ 1000.312(b) and 1000.313(a), (i) if an unincorporated affiliated foreign national of a direct investor has a net increase in its net assets during any period, the immediate parent of such unincorporated affiliated foreign national shall be deemed to have made a transfer of capital to the direct investor to the extent that the direct investor's share of such net increase is not attributable to earnings of the unincorporated affiliated foreign national during such period, and (ii) if an unincorporated affiliated foreign national of a direct investor incurs a loss during any period but such unincorporated affiliated foreign national has no change or has a net increase in its net assets during such period, or has a net decrease in its net assets during such period but the loss exceeds the net decrease in net assets, the immediate parent of such unincorporated affiliated foreign national shall be deemed to have made a transfer of capital to the direct investor in an amount equal to (a) the direct investor's share of the loss, (b) the direct investor's share of the net increase in net assets plus the direct investor's share of the loss or (c) the amount by which the direct investor's share of the loss exceeds the direct investor's share of the net decrease in net assets, as the case may be: Provided, in each case, That the immediate parent of the unincorporated affiliated foreign national is an incorporated affiliated foreign national and is an affiliate of the direct investor as defined in $1000.903 (a).

(b) Notwithstanding anything to the contrary contained in paragraph (a) of this section, a trade credit extended by

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 is 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

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]

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 § 1000.1003 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) 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 (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).

(d) If, during any year commencing with the year 1970, the incremental earnings allowable authorized to a direct investor exceeds the aggregate of additional positive direct investment made in all scheduled areas pursuant to paragraph (b) or (c) of this section, the direct investor is authorized to make additional positive direct investment, during succeeding years, in the same manner as provided in paragraphs (b) and (c) of this section, in an aggregate amount not exceeding such excess.

[34 F.R. 9069, June 7, 1969, as amended at 35 F.R. 7226, May 7, 1970]

§ 1000.507 Alternative

minimum and

Schedule A supplemental allowable. (a) If for any year commencing with the year 1971 a direct investor elects under § 1000.502(a) (4), positive direct investment for such year is authorized as follows:

(1) In Schedules B and C in an aggregate amount not exceeding $2,000,000; and

(2) In Schedule A in an amount not exceeding $4,000,000.

(b) If during any year commencing with the year 1970 the aggregate amount of positive direct investment authorized to a direct investor in Schedules B and C under paragraph (a)(1) of this section exceeds the aggregate amount of direct investment (whether positive or negative) made by the direct investor during such year in Schedules B and C, the direct investor is authorized to make additional positive direct investment in Schedule A during the same year in an aggregate amount of not more than the amount of such excess.

(c) If a direct investor elects to make positive direct investment during any year commencing with the year 1970 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.

[35 F.R. 7226, May 7, 1970, as amended at 36 F.R. 976, Jan. 21, 1971]

Subpart F-Records and Reports § 1000.601

Records.

Every person subject to the provisions of this part shall keep in the United

States a full and accurate record of each transaction engaged in by it which is subject to the provisions of this part, regardless of whether such transaction is effected pursuant to authorization or otherwise, and of every other transaction between such person and an affiliated foreign national. Such records (including, but not limited to, source materials, journals or other books of original entry, ledgers, financial statements, work papers, regardless of by whom prepared, and minute books) shall be retained for at least 3 years after the date of the filing of any report relating to or containing information concerning such transaction, whether or not the transaction is individually identified. Records relating to transactions with respect to which there is no reporting requirement shall be retained for at least 3 years after the filing of the annual report relating to the year in which such transactions occurred. [35 F.R. 7226, May 7, 1970] § 1000.602

Reports.

(a) Every person is required to furnish under oath, in the form of reports or otherwise, from time to time and at any time as may be required by the Secretary, complete information relative to any transaction with respect to which records are required to be kept under this part or information otherwise reasonably related to direct investment or the purposes of Executive Order 11387 or of this part. The Secretary may require that such reports include the production of any books of account, contracts, letters, or other papers, relevant to direct investment or transactions related thereto in the custody or control of persons required to make such reports. Complete information with respect to transactions related to direct investment may be required either before or after such transactions are completed. The Secretary may, through any person or agency, investigate any such transaction or any violation of the provisions of this part, regardless of whether any report has been required or filed in connection therewith.

(b) In addition to such other reports as may be required under paragraph (a) of this section, the following reports are required to be filed by direct investors with the Office of Foreign Direct Investments, Department of Commerce, Washington, D.C. 20230:

(1) Form FDI-101, Base Period Report. Each direct investor must file this

report on or before the end of the month following the close of the calendar quarter during which it becomes a direct investor, unless the direct investor is exempt from filing as provided in the instructions to this report. If an exemption from filing ceases to apply to a direct investor, such direct investor must file this report on or before the end of the month following the close of the calendar quarter during which the exemption ceases to apply.

(2) Form FDI-102, Cumulative Quarterly Report. Each direct investor must file this report (on Form FDI-102/102F) within 45 days after the close of each quarter of the calendar year, unless such filing is waived by OFDI or the direct investor is exempt from filing as provided in the instructions to this report.

(3) Form FDI-102F, Annual Report. Each direct investor must file this report (on Form FDI-102/102F) for each year on or before April 30 of the succeeding year, unless the direct investor is exempt from filing a Base Period Report on Form FDI-101 as provided in the instructions to such report.

(4) Form FDI-102F/S, Annual Report: Short Form. If a direct investor elects pursuant to § 1000.502(a) (1) or (4) to be governed by the provisions of § 1000.503 or § 1000.507 and satisfies other criteria specified in the instructions to this report, it may file its Annual Report on Form FDI-102F/S in lieu of Form FDI-102F on or before April 30 of the year succeeding the year for which the report is filed.

(5) Form FDI-105, AFN Financial Structure and Related Data. Each direct investor must file this report on or before the date specified in the instructions to this report and published in the FEDERAL REGISTER at the time the form is distributed or made available.

(6) Form FDI-106, Standard Certificate for Repayment of Borrowings Made on or after May 1, 1970. In order for positive direct investment resulting from the repayment of borrowing made by a direct investor or its affiliated foreign national to be authorized under Subpart J of this part, a certificate on Form FDI106 must be filed not later than 10 days after the direct investor makes the borrowing or guarantees the borrowing by its affiliated foreign national.

(7) Form FDI-107, Adjusted 1965-67 Base Period and Prior Years' Annual Earnings Report for DIs Engaging in § 312(c) (1) Transactions. If the filing of

Forms FDI-107 is elected under § 1000.312(c) (1) (i), this report must be filed by the acquiring and divesting direct investors on or before the end of the month following the close of a calendar quarter during which the acquisition occurred. The surviving direct investor is required by § 1000.312(c) (1) (ii) to file this report on or before the end of the month following the close of the calendar quarter during which a combination of direct investors occurred.

(c) Applications for extensions of time in which to file reports shall be made to the Office of Foreign Direct Investments and must be received by the Office prior to the time such reports are due. Applications shall contain a statement of reasons for inability to report on time. An extension of time will be given for good cause shown.

(d) Reports mailed to the Office are deemed filed on the date post-marked on the envelope in which they are mailed. Reports delivered directly to the Office are deemed filed when received as evidenced by the Office's date stamp thereon.

(e) Copies of all necessary forms, and instructions as to their preparation and filing, may be obtained from the Office of Foreign Direct Investments, Department of Commerce, Washington, D.C. 20230, or from any Field Office of the Department.

[34 F.R. 9069, June 7, 1969, as amended at 36 F.R. 9507, May 26, 1971]

Subpart G-Penalties

(a) Attention is directed to 12 U.S.C. 95a, which provides in part:

Whoever willfully violates any of the provisions of this section or of any license, order, rule, or regulation issued thereunder, shall, upon conviction, be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than 10 years, or both; and any officer, director, or agent of any corporation who knowingly participates in such violation may be punished by a like fine, imprisonment, or both. As used in this section the term "person" means an individual, partnership, association, or corporation. This section is applicable to violations of any provision of this part and to violations of the provisions of any license, ruling, regulation, order, direction or instruction issued by or pursuant to the direction or authorization of the Secretary pursuant to this part or otherwise under such section.

(b) Attention is also directed to 18 U.S.C. 1001, which provides:

Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals, or covers up by any trick, scheme, or device a material fact, or makes any false, fictitious, or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined not more than $10,000 or imprisoned not more than 5 years, or both.

[33 F.R. 53, Jan. 3, 1968]

§ 1000.702

Effect upon lenders.

Any person (other than an affiliated foreign national of a direct investor) who lends money or extends credit to such direct investor or to an affiliated foreign national of such direct investor and who does not have actual knowledge, when such loan is made or credit extended (or when a commitment is given to make the loan or extend the credit), that the use of the proceeds thereof, the repayment thereof or any other transaction in connection therewith will involve or constitute a violation by the direct investor of any provision of this part or of any license, ruling, regulation, order, direction or instruction issued by or pursuant to the authorization or direction of the Secretary pursuant to this part or otherwise under § 1000.701, may receive repayment thereof (together with all interest and other fees and charges) and otherwise participate in any other transaction in connection therewith without being subject to the penalties referred to in § 1000.701(a), and such person's rights against the direct investor or affiliated foreign national in connection with such loan or extension of credit shall not in any way be affected or impaired by reason of the provisions of this part.

[33 F.R. 11271, Aug. 8, 1968]

Subpart H-Procedures

§ 1000.801 Applications for specific authorizations and exemptions.

(a) Filing. Transactions subject to the prohibitions contained in this part which are not generally authorized may be effected only under specific authorization. Persons subject to the requirements of this part may be exempted from complying with any requirement thereof only through a specific exemption. Any person may file an application for specific

authorization or for specific exemption. Such applications shall contain all relevant information and shall be filed in triplicate with the Director, Office of Foreign Direct Investments, Department of Commerce, Washington, D.C. 20230. An applicant may furnish additional information or present views concerning the application at any time before a decision has been rendered thereon. The application may include a request that the Director, in his discretion, grant the applicant a conference with the Director or his designee.

(b) Decisions. Written notice of action taken on an application shall be given to the applicant. Whenever an application is denied, such notice shall include a brief statement of the grounds therefor. [33 F.R. 9389, June 27, 1968]

§ 1000.802 Petitions for reconsideration; appeals.

This section sets forth the procedures applicable to (1) petitions to the Director for reconsideration of administrative actions and (2) appeals to the Foreign Direct Investments Appeals Board (the "Board") from administrative actions and decisions on petitions for reconsideration.

(a) General provisions. (1) The term "administrative action" means, with respect to any person, (i) a decision upon an application for a specific authorization or exemption filed by such person, or (ii) any action taken specifically with respect to such person pursuant to the exercise of a discretionary power by the Secretary in accordance with any provision of this part. The term "administrative action" does not include an opinion or ruling interpreting the regulations, or a decision upon a petition for reconsideration or upon an appeal.

(2) Notice of an administrative action or of a decision rendered upon a petition for reconsideration or upon an appeal shall be deemed to have been given on the date when mailed or delivered to the petitioner or appellant: Provided, That notice of an administrative action taken prior to the effective date of this section shall be deemed to have been given on such effective date.

(3) A petition for reconsideration shall be deemed filed on the date received by the Office of Foreign Direct Investments. An appeal shall be deemed filed on the date received by the secretary of the Board.