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F ederal R eserve bank of DALLAS, TE X A S Dallas 75222 Circular No. 68-14 January 18, 1968 To all Banks, Nonbank Financial Institutions and Other Firm s Addressed in the Eleventh Federal Reserve D istrict: Under authority of Executive Order No. 11387 published in the Federal R egister on January 3, 1968, the Department of Commerce has issued regulations relating to foreign direct investm ents by persons in the United States. These regulations commence on the next page. Two additional documents are also reproduced on the following pages which deal with the foreign direct investm ent program ; these a re: (a) U.S. Department of Commerce Order 184-A, dated January 1, 1968, which establishes the Office of Foreign Direct Investm ents to carry out the provisions of the Executive Order; and (b) Instructions for Specific Authorizations or Exem ptions Pursuant to Section 1000.801 of Foreign Direct Investm ent Regulations, issued by said Office of Foreign Direct Investments. For your further information and guidance, we are also enclosing copies of documents relating to banks and financial institutions certified by the Board of Governors as being subject to the Federal Reserve foreign restraint program and a copy of the letter transm itted to the Secretary of Commerce detailing such certification. Banks and financial institutions that are reporting properly under the requirements of the Federal Reserve foreign credit restraint program are exempt from the regulations recently issued by the Secretary of Commerce; however, we believe that you will wish to be informed of both programs in order to answer questions of customers and others. Yours very truly, Watrous H. Irons President Enclosures This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) RULES A N D REGULATIONS Sec. 1000.403 Transactions between principal and agent. 1000.404 Distribution, apportionment or allocation of earnings. direct Investor are prohibited on or aftei the effective date, if any such transaction involves a direct or indirect transfer of capital to or within any foreign country directly or indirectly to or for the account Chapter X— Office of Foreign Direct Subpart E—Authorizations or Exemptions of or for the benefit of any affiliated Investments, Department of Com 1000.501 Effect of subsequent authorization foreign national of such direct investor: (1) Any transfer of credit; or exemption. merce 1000.502 Exclusion from authorization or (2) Any payment between, by, PART 1OOO— FOREIGN DIRECT exemption. through, or to any banking institution 1000.503 Direct investment not exceeding or banking institutions wheresoever INVESTMENT REGULATIONS $100,000. located; 1000.504 Transfers of capital. Foreign Direct Investment by (3) Any transaction in foreign ex 1000.505 Transfer of capital between foreign Persons in United States change; countries. (4) Any direct or indirect acquisition The regulations set out below Imple Subpart F— Record* and Reports of, or any holding, transfer of or dealing m ent Executive Order 11387, January 1, in, or any exercise of any right, power 1968, governing foreign direct invest 1000.601 Records. or privilege with respect to any property ments. Since a foreign affairs function 1000.602 Reports. located in a foreign country. of the United States is involved, the re Subpart G— Penalties (b) All transactions prohibited by sec quirements of 5 U.S.C. 553 are not appli 1000.701 Penalties. tion 1 of Executive Order 11387 which cable. In any event, because of the Subpart H— Procedures are not prohibited by this part are hereby urgency of the present situation relating to the international balance of payments 1000.801 Applications for specific authoriza authorized; provided, however, that any person failing to make timely compliance tions and exemptions. and the desirability of immediate action by the Government of the United States, 1000.802 Amendment, modification, or revo with the reporting requirements of Sub cation. part F of this part is ineligible there it is hereby found that notice and public gpvemlng availability of after to avail itself of this general au procedures prior to the promulgation of 1000.803 Rules Inform ation. thorization. these regulations are impracticable and 1000.801 Delegations. (c) To the extent that may be deline contrary to the public interest. For the A u t h o r it y : The provision of this Part 1000 ated from time to time by the Board of sam e reasons, it is found that these under sec. 5 of the Act of October 6, Governors of the Federal Reserve Sys regulations m ust be made effective imme Issued 1917, 40 Stat. 415, as amended, 12 U.S.C. 95a; tem, nothing in this part shall apply to diately. The reporting and record-keep E .0 .11387, Jan. 1,1968, 33 F.R. 47. any bank or other financial Institution ing requirements provided therein have been approved by the Bureau of the Subpart A— Relation of This Part to certified by the Board as being subject to the Federal Reserve Foreign Credit Budget in accordance with the Federal Other Laws and Regulations Restraint Programs, or to any program Reports Act of 1942, as amended. § 1 0 0 0 .1 0 1 R elation o f this part to other instituted by the Board under Section 2 Subpart A— Relation of This Part to OHier Laws laws and regu lations. of Executive Order 11387. and Regulations (a) This part is independent of Title § 1 0 0 0 .2 0 2 R epatriation o f direct in 6ec. 1000.101 Relation of this part to other laws 3 1 CFR, Chapter V. The prohibitions con vestm en t earn in gs. and regulations. tained in this part are in addition to the (a) Except as specifically authorized prohibitions contained in said Chapter Subpart B Prohibitions V. No license contained in or issued pur by the Secretary by means of regulations, 1000.201 Transfers of capital to affiliated suant to said Chapter V shall be deemed rulings, instructions, authorizations, li foreign nationals Involving for to authorize any transaction prohibited censes, exemptions, waivers, or otherwise, eign direct investment. each direct investor is hereby required 1000.202 Repatriation of direct investment by this part, nor shall any license or to transfer, not less often than once a authorization issued pursuant to any earnings. 1000.203 Liquid foreign balances of direct other provision of law be deemed to year, from Schedule A countries, or na Investors. authorize any transaction so prohibited. tionals thereof, to an account owned by 1000.204 Evasion. (b) No authorization or exemption such direct investor denominated in U.S. contained in or issued pursuant to this dollars at a domestic bank, an amount Subpart C— General Definitions part shall be deemed to authorize any representing earnings from affiliated 1000.301 Foreign country. transaction to the extent that it is pro foreign nationals in such countries which 1000.302 Foreign national. is not less than the greater o f : 1000.303 Nationals of more than one foreign hibited by reason of the provisions of any (1) The same percentage of total law or statute other than 12 U.S.C. 95a, country. as amended, or any proclamation, order, earnings during each year of affiliated 1000.304 Direot investor. or regulation other than those contained foreign nationals in all Schedule A coun 1000.305 Affiliated foreign national. 1000.306 Direct Investment. In or issued pursuant to Executive Order tries attributable to such direct investor's interest therein as the percentage of 1000.307 Person. 11387 or this part. 1000.308 Transfer. (c) No authorization or exemption such total earnings so attributable which 1000.309 Property; property Interest. contained in or issued pursuant to this was repatriated to the United States dur 1000.310 Interest. part shall be deemed to authorize any ing the years 1964, 1965, and 1966, in 1000.311 Banking Institution. transaction to the extent that it is pro clusive; or 1000.312 Transfer of capital. (2) That portion of total earnings hibited by reason of the provisions of 1000.313 Reinvested earnings. during each year of affiliated foreign na 1000.314 Authorization and exemption. any part of Title 31 CFR. tionals in all Schedule A countries a t 1000.315 General authorization and exemp tributable to such direct investor’s in tion. Subpart B— Prohibitions terest therein that exceeds the amount 1000.316 Specific authorization and exemp § 1 0 0 0 .2 0 1 T ransfers o f capital to affil of such earnings, reinvestment of which tion. iated fo r eig n n ationals in volvin g fo r may occur within the limits of direct 1000.317 Domestic bank. e ig n direct investm ents. 1000.318 United States. investment authorized in such countries 1000.319 Schedule A, B, C, countries. (a) Except as specifically authorized for that year in accordance with 1000320 Effective date. by the Secretary of Commerce (herein § 1000.504(a)(1). 1000.321 Tear. after referred to as the Secretary) by (b) Except as specifically authorized 1000.322 Within the United States. means of regulations, rulings, Instruc by the Secretary by means of regulations, Subpart IV—Interpretations tions, authorizations, licenses, waivers, or rulings, instructions, authorizations, li exemptions or otherwise, all of the fol censes, exemptions, waivers, or otherwise, 1000.401 Reference to amended sections. 1000.403 Effect of amendment of sections of lowing transactions directly or indirectly each direct investor is hereby required to this part or of other orders, etc. by or on behalf of or for the benefit of a transfer not less often than once a year Title 15— COMMERCE AND FOREIGN TRADE RULES A N D REGULATIONS from Schedule B countries, or nationals § 1 0 0 0 .2 0 3 Liquid fo r eig n balan ces o f d irect investors. thereof, to an account owned by such direct investor denominated in U.S. dol (a) Except as specifically authorized lars at a domestic bank, an amount rep by the Secretary by means of regulations, resenting earnings from affiliated foreign rulings, instructions, authorizations, li nationals in such countries which is not censes, exemptions, waivers or otherwise, less than the greater of: each direct investor is hereby required, (1) The same percentage of total on or before June 30, 1968, to reduce the earnings during each year of affiliated amount of all bank deposits and other foreign nationals in all Schedule B coun short-term financial assets held by or for tries attributable to such direct investor’s the account or for the benefit of such di interest therein as the percentage of such rect investor in all foreign countries total earnings so attributable which was designated in each of Schedules A, B, and repatriated to the United States during C by persons other than affiliated foreign the years 1964, 1965, and 1966, inclusive; nationals to an amount not in excess of or the average end-of-m onth amounts of (2) That portion of total earnings the same so held by or for the account during each year of affiliated foreign of or for the benefit of such direct inves nationals in all Schedule A countries tor during 1965 and 1966 inclusive; to attributable to such direct investor’s transfer on or before such date funds interest therein that exceeds the amount resulting from such reductions to an of such earnings, reinvestment of which account owned by such direct investor may occur within the limits of direct denominated in U.S. dollars at a do investment authorized in such countries mestic bank; and, thereafter, to transfer for that year in accordance with funds to an account owned by such direct investor denominated in U.S. dollars at a § 1000.504(a) (2). (c) Except as specifically authorizeddomestic bank in amounts sufficient to by the Secretary by means of regulations, limit the amount of such deposits and rulings, instructions, authorizations, li assets at the end of any month to such censes, exemptions, waivers, or otherwise, reduced amount of such bank deposits each direct investor is hereby required to and other short-term financial assets. (b) For the purposes of this section the transfer not less often than once a year from Schedule C countries, or nationals term “short-term financial assets” in thereof, to an account owned by such cludes, but not by way of lim itation: Ne direct investor denominated in U.S. dol gotiable and readily transferable com lars at a domestic bank an amount mercial and financial instruments, in representing earnings from affiliated cluding obligations of foreign govern foreign nationals in such countries which ments. is not less than the greater of: § 1 0 0 0 .2 0 4 Evasion. (1) The same percentage of total earn Anything in this part to the contrary ings during each year of affiliated for notwithstanding, any transaction for the eign nationals in all Schedule C countries purpose of, or which has the effect of, attributable to such direct investor’s evading or avoiding any of the provisions interest therein as the percentage of such forth in this part may be disregarded total earnings so attributable which was set in whole or in part for purposes of meas repatriated to the United States during uring compliance with the provisions of the years 1964, 1965, and 1966, inclusive; this part. or Subpart C— General Definitions (2) That portion of total earnings during each year of affiliated foreign na § 1 0 0 0 .3 0 1 F oreign country. tionals in all Schedule C countries at The term “foreign country” includes, tributable to such direct investor’s inter est therein that exceeds 35 percent of the but not by way of limitation: (a) The state and the government of average of direct investment by the di rect investor in all Schedule C countries any foreign country as well as any politi during the years 1965 and 1966 inclusive, cal subdivision, agency, or instrumen all in conformity with § 1000.504(a) (3). tality thereof or any territory, depen (d) In making computations under dency, colony, protectorate, mandate, dominion, possession or place subject to this section, earnings shall, where ap the jurisdiction thereof. propriate, be computed and/or prorated (b) Any other government (including and other proper adjustments made in any political subdivision, agency, or in accordance with accounting principles strumentality thereof) to the extent and generally accepted in the United States only to the extent that such government and consistently applied; Provided, That exercises or claims to exercise control, authority, jurisdiction or sovereignty the Secretary shall have the right in his over territory which constitutes such for discretion to disapprove any such ac eign country. counting principles determined by him (c) Any person to the extent that such to be inconsistent with the purpose of person is, or to the extent that there is this part and to prescribe such principles reasonable cause to believe that such per as he may deem appropriate to carry son is, acting or purporting to act di rectly or indirectly for the benefit or on out the purposes of this part. behalf of any of the foregoing. (e) Repatriation of earnings under (d) Any territory which is controlled this section is not required where the re or occupied by the military, naval or investment of the entire amount of such police forces or other authority of a foreign country. earnings is authorized by § 1000.503. § 1 0 0 0 .3 0 2 F o reig n n ational. The terms “foreign national” and “na tional” of a foreign country shall In clude: (a) A subject or citizen of, or any per son domiciled or resident In, a foreign country. (b) Any partnership, association, cor poration, trust, estate, or other organiza tion outside the United States organized under the laws of, or which has its prin cipal place of business in, a foreign coun try, or any partnership, association, cor poration, trust, estate, or other organiza tion outside the United States which is controlled by, or a substantial part of the stock, shares, bonds, debentures, notes, drafts, or other securities or obligations of which, is owned or controlled by, di rectly or indirectly, a foreign country or one or more foreign nationals thereof. (c) Any subsidiary, branch, division, or other subpart outside the United States, regardless of the place or or ganization, of a person within the United States shall be considered a foreign na tional if the same is engaged in trade or business in a foreign country. (d) Any person to the extent that such person is acting or purporting to act directly or indirectly for the benefit or on behalf of any national of a foreign country. (e) Any other person which there is reasonable cause to believe is a “foreign national” as defined in this section. The Secretary retains full power to determine that any person is or shall be deemed to be a “foreign national” within the mean ing of this section, and to specify the foreign country of which such person is or shall be deemed to be a national. § 1 0 0 0 .3 0 3 N ationals o f m ore than o n e fo r e ig n country. (a) Any person who by virtue of any provision in this part is a national of more than one foreign country shall be deemed to be a national of each of such foreign countries. (b) In any case in which a person is a national of two or more foreign coun tries, an authorization or exemption with respect to nationals of one of such for eign countries shall not be deemed to apply to such person unless an authori zation or exemption of equal or greater scope Is outstanding with respect to such person as a national of each other for eign country. § 1 0 0 0 .3 0 4 D irect investor. The term “direct investor” means any person within the United States who directly or indirectly owns or acquires: (a) Ten percent or more of the total combined voting power of any foreign national; or (b) The right or power to receive, con trol, or otherwise enjoy 10 percent or morfe of the earnings, receipts, Income or profits of any foreign national; or (c) The right or power to receive, con trol or otherwise direct the disposition of 10 percent or more of the assets of any foreign national upon the liquidation, termination, or winding up thereof. RULES AND REGULATIONS § 1 0 0 0 .3 0 5 Affiliated foreign national. The term “affiliated foreign national" means any foreign national in which a person within the United States is a direct investor. be regarded as a separate “banking institution”. the purpose of this definition or for the purpose of any or all sections of this part. § 1 0 0 0 .3 1 2 § 1 0 0 0 .3 1 8 T ransfer o f capital. The term “transfer of capital” shall mean a transfer of capital, directly or indirectly, by or on behalf of, or for the § 1 0 0 0 .3 0 6 D irect investm ent. The term “direct investment” means: benefit of, a direct investor directly or (a) The act of making a transfer ofindirectly to or on behalf of. or for the of an affiliated foreign national capital or the capital so transferred; and benefit including but not by way of lim itation: <b) The share of a direct investor in A net contribution to the capital reinvested earnings of an affiliated for of (a) an affiliated foreign national; eign national or the accrual thereof. (b) The acquisition of an interest in, § 1 0 0 0 .3 0 7 Person. or an increase in net interest in, an affil The term “person” means an individ iated foreign national; (c) The acquisition of an obligation ual, partnership, association, trust, estate, corporation, or other organiza of an affiliated foreign national, regard tion. For purposes of § 1000.304 and less of the maturity date of the obliga wherever appropriate in the context, a tion, to the extent the principal amount person within the United States shall of all such obligations exceeds that of mean and include all members of an obligations of the direct investor ac affiliated or associated group within the quired by such foreign national; (d) A net increase in loans or ad United States. vances upon open account to an affiliated § 1 0 0 0 .3 0 8 Transfer. foreign national; (e) Any transfer to any other person, The term “transfer" means any ac tual or purported act or transaction, wheresoever located, in satisfaction of whether or not evidenced by writing, and an obligation of a direct investor in whether or not done or performed with curred as a result of (1) a guarantee of in the United States, the purpose, intent, an obligation of an affiliated foreign or effect of which Is to create, surrender, national or (2) the assumption of a lia release, transfer, or alter, directly or bility of an affiliated foreign national. indirectly, any right, remedy, power, § 1 0 0 0 .3 1 3 R einvested earnings. privilege, or interest with respect to any The term “reinvested earnings” shall property and without limitation upon the foregoing shall include the making, mean the earnings of an affiliated foreign execution, or delivery of any assignment, national available at any time for dis power, conveyance, check, declaration, tribution and not so distributed. deed, deed of trust, power-of attorney, § 1 0 0 0 .3 1 4 Authorization and e x em p tion. power of appointment, bill of sale, mort gage. receipt, agreement, contract, certif Except as otherwise specified, the terms icate, gift, sale, affidavit, or statement; "authorization” and "exemption" shall the appointment of any agent, trustee, mean, respectively, any authorization or or other fiduciary; the creation or trans exemption contained in or issued pursu fer of any lien; the acquisition of any ant to this part. interest of any nature whatsoever by reason of a judgment or decree of any § 1 0 0 0 .3 1 5 General authorization and exem p tion . foreign country; the fulfillment of any condition, or the exercise of any power The terms “general authorization” and of appointment, power of attorney, or "general exemption” mean those author other power. izations and exemptions, the terms of § 1 0 0 0 .3 0 9 P roperty; property interest. which are set forth in this part. The terms “property” and “property interest” include any property, real, per sonal, or mixed, tangible or intangible, or interest or interests therein, present, future or contingent. § 1 0 0 0 .3 1 0 Interest. The term “interest” when used with respect to property shall mean an inter est of any nature whatsoever, direct or indirect. § 1 0 0 0 .3 1 1 ltan k in g institution. The term “banking institution” shall Include any person engaged primarily or incidentally in the business of bank ing, or granting or transferring credits, or of purchasing or selling foreign ex change or procuring purchasers and seller thereof, as principal or agent, or any person holding credits for others as a direct or incidental part of his business, or any broker; and, each principal, agent, home office, branch, or corre spondent of any person so engaged shall § 1 0 0 0 .3 1 6 Specific exem p tio n . authorization and The terms “specific authorization” and “specific exemption” mean those author izations and exemptions issued pursuant to this part but not set forth in this part. § 1 0 0 0 .3 1 7 D om estic bank. The term “domestic bank” shall mean any branch or office within the United States of any of the following which is not a foreign national: Any bank or trust company incorporated under the bank ing laws of the United States or of any State, territory, insular possession, the Commonwealth of Puerto Rico, or dis trict of the United States, or any private bank or banker subject to supervision and examination under the banking laws of the United States or of any State, ter ritory, insular possession, the Common wealth of Puerto Rico, or district of the United States. The Secretary may also authorize any other banking institution to be treated as a “domestic bank” for U nited States. The term “United States” means the United States and all areas under the jurisdiction or authority thereof. § 1 0 0 0 .3 1 9 Schedule A, B, C, countries. (a) Schedule A countries are all foreign countries designated as less developed countries in the Executive order, as from time to time in force, issued under section 4916 of the Internal Revenue Code. <b) Schedule B countries are such other foreign countries as the Secretary may determine to be developed countries in which a high level of capital inflow is essential for the maintenance of eco nomic growth and financial stability, and where those requirements cannot be ade quately met from non-U.S. sources. The following countries are hereby deter mined to fall in this category: Abu Dhabi, Australia, The Bahamas, Bah rain, Bermuda, Canada, Hong Kong, Iran, Iraq, Ireland, Japan, Kuwait, Kuwait-Saudi Arabia Neutral Zone, Libya, New Zealand, Qatar, Saudi Arabia, and the United Kingdom. (c) Schedule C countries are all for eign countries not included as Schedule A or B countries. (d) The Secretary may in his discre tion, from time to time, transfer any foreign country from any one of the Schedules to another. § 1 0 0 0 .3 2 0 Effective date. The term “effective date” means 12:00 noon eastern standard time of January 1,1968. § 10 0 0 .3 2 1 Year. Unless otherwise specified, the term “year” or “portion of a year” means a calendar year or a portion thereof. § 1 0 0 0 .3 2 2 W ithin the U nited States. (a) As applied to any person the term “within the United States”, includes: (1) A person, wheresoever located, who is a resident of the United States; (2) A person actually within the United States; and (3) A corporation organized under the laws of the United States or of any State, territory, possession, District of Colum bia, or the Commonwealth of Puerto Rico. (b) A subsidiary, branch, division or other subpart of a foreign national which constitutes a permanent estab lishment within the United States shall be considered a person within the United States for purposes of this part except that nothing herein contained shall limit a bona fide transfer of capital in the ordinary and customary course of busi ness by such subsidiary, branch, division or other subpart to and for the benefit of its parent organization. Subpart D— Interpretations § 1 0 0 0 .1 0 1 R eferen ce tions. to am ended sec Reference to any section of this part or to any regulation, ruling, order, in struction, direction, authorization, li cense or exemption issued pursuant to RULES A ND REGULATIONS this part shall be deemed to refer to the same as currently amended unless other wise so specified. tion shall be binding upon all persons receiving actual notice or constructive notice thereof. § 1 0 0 0 .4 0 2 E ffect o f am en d m en t o f sec tions o f this part or o f other orders, etc. § 1 0 0 0 .5 0 3 D irect investm ent n o t e x ceed in g $ 1 0 0 ,0 0 0 . Any amendment, modification, or revocation of any section of this part or of any order, regulation, ruling, instruc tion, 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 com menced in any civil or criminal case, prior to such amendment, modification, or revocation, and all penalties, for feitures, and liabilities under any such section, order, regulation, ruling, in struction, authorization, license, or exemption shall continue in effect and may be enforced as if such amendment, modification, or revocation had not been made. § 1 0 0 0 .4 0 3 Transactions betw een p rin cip al and agent. A transaction between any person within the United States and any princi pal, agent, home office, branch, subsid iary, affiliate, division, subpart, or cor respondent outside the United States 6f such person is a transaction prohibited by § 1000.201 to the same extent as if the parties to the transaction had no such relationship. § 1 0 0 0 .4 0 4 D istribution, ap p ortionm ent or allocation o f earn in gs. In any case of two or more organiza tions, trades or businesses owned or con trolled 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. Subpart E— Authorizations or Exemptions § 1 0 0 0 .5 0 1 E ffect o f su bseq uent author ization or exem p tio n . No authorization or exemption con tained 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 transaction effected prior to the issuance thereof, unless such au thorization or other exemption specifi cally so provides. § 1 0 0 0 .5 0 2 E xclu sion tion or exem p tion . fro m authoriza The Secretary reserves the right to exclude from the operation of any au thorization or exemption or from the privileges therein conferred, or to re strict the applicability thereof with re spect to particular persons, transactions or property or classes thereof. Such ac During any year direct investment by any direct investor in all foreign coun tries, not amounting in the aggregate to more than $100,000, are hereby authorized. § 1 0 0 0 .5 0 4 Transfers o f capital. (a) Subject to the provisions of para graphs (b) and (c) of this section, the following provisions of this section shall apply to aggregate direct investment in excess of $100,000 in any year without regard to the provisions of § 1000.503. (1) Transfers of capital during any year to any Schedule A country or na tional thereof are authorized provided that such transfers do not result in di rect investment during that year exceed ing 110 percent of the average of direct investment by the direct investor in all Schedule A countries, or nationals thereof, during the years 1965 and 1966 inclusive. (2) Transfers of capital during any year to any Schedule B country or na tional thereof are authorized provided that such transfers do not result in direct investment during such year exceeding 65 percent of the average of direct in vestment by the direct investor in all Schedule B countries, or nationals there of, during the years 1965 and 1966 inclusive. (3) Except as authorized in this part, a moratorium exists on transfers of capi tal during any year to any Schedule C country or national thereof. Reinvest ment during any year of a direct inves tor’s share of earnings in Schedule C countries is authorized provided that the aggregate of such reinvested earnings in Schedule C countries, in conformity with the provisions of § 1000.202, does not result in direct investment in that year exceeding 35 percent of the average of direct investment by the direct inves tor in all Schedule C countries or n a tionals thereof during the years 1965 and 1966 inclusive. (b) In determining whether a trans fer of capital during any year is author ized by this section, both the amount of direct investment during that year and the average amount of direct investment during the years 1965 and 1966 inclusive, shall be calculated by deducting such portion of net borrowings by the direct investor from foreign nationals other than affiliated foreign nationals as is or was expended in such direct investment: Provided, however, That amounts so bor rowed evidenced by short term instru ments with an original maturity of less than 12 months which are readily mar ketable in the ordinary course of business shall not be so deducted. (c) The Secretary reserves the right at any time to exclude any direct investor from any or all of the privileges of this section. § 1 0 0 0 .5 0 5 T ran sfer o f capital betw een fo r eig n countries. Nothing contained in this part shall prohibit a transfer of capital between foreign nationals outside the United States who are nationals of the same foreign country or of two or more foreign countries in the same Schedule contained in § 1000.319. A transfer of capital be tween foreign nationals outside the United States who are nationals of coun tries listed in different Schedules is here by authorized except that if the trans feror or transferee foreign national is an affiliated foreign national acting by, or on behalf of or for the benefit of a direct investor: (a) A transfer from a national of a Schedule C or Schedule B country to a national of a Schedule A country, or from a national of a Schedule C country to a national of a Schedule B country is authorized only to the extent that the amount of the transfer, taken together with other authorized transfers of such direct investor, does not exceed in any year the limits authorized with respect to such direct investor in 5 1000.504 of this part; and (b) A transfer from a national of a Schedule A or B country to a national of a Schedule C country, or from a na tional of a Schedule A country to a na tional of a Schedule B country Is not authorized. Subpart F— Records and Reports § 1 0 0 0 .6 0 1 R ecords. 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 transac tion between such person and an affili ated foreign national. Such records shall be available for examination for at least 2 years after the date of the transactions to which they relate. § 1 0 0 0 .6 0 2 R eports. (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 rec ords are required to be kept under this part. The Secretary may require that such reports include the production of any books of account, contract, letters, or other papers, connected with any such transaction or property, in the custody or control of the persons required to make such reports. Complete information with respect to transactions may be required either before or after such transactions are completed. The Secretary may, through any person or agency, Investigate any such transaction or property or any violation of the provisions of this part, regardless of whether any report has been required or filed in connection therewith. RULES A N D REGULATIONS (b) The following reports are required Subpart H— Procedures to be filed by direct investors with the Office of Foreign Direct Investments, De § 1 0 0 0 .8 0 1 A p plications fo r sp ecific au thorizations and exem p tion s. partment of Commerce, Washington, Transactions subject to the prohibi D.C. 20230; (1) Form CDFDI—101, Based Period tions contained in this part which are Report. This report is to be filed by not authorized by general authorization March 15, 1968, or on the date its first may be effected only under specific quarterly report is due, whichever is authorization. Persons subject to the requirements of this part may be earlier. (2) Form CDFDI— 102, Quarterly Re exempted from complying with any par port. This report must be filed within 45 ticular requirement imposed by this part days from the close of each quarter of only through a specific exemption. (a) General procedure. Applications a year. for specific authorizations to engage in Subpart G— Penalties any transaction prohibited, or for spe cific exemptions to be exempted or to § 1 0 0 0 .7 0 1 P en alties. deviate from any particular requirement (a) Attention is directed to 12 U.S.C. imposed, by or pursuant to this part, are to be filed in duplicate with the 95a, which provides in part: Director, Office of Foreign Direct Invest Whoever willfully violates any of the pro ments, Department of Commerce, Wash visions of this section or of any license, order, ington, D.C. 20230. Any person affected rule, or regulation issued thereunder, shall, by the provisions contained in this part upon conviction, be fined not more than $10,000, or, if a natural person, may be im may file such an application. (b) Information to be supplied. Appli prisoned for not more than 10 years, or both; and any officer, director, or agent of any cants must supply all relevant informa corporation who Knowingly participates in tion. Such documents as may be relevant such violation may be punished by a like shall be attached to each application as fine, imprisonment, or both. As used in this a part thereof, except that documents section the term "person” means an individ previously filed with the Director, may, ual, partnership, association, or corporation. where appropriate, be incorporated by This section is applicable to violations reference. Applicants may be required to of any provision of this part and to vio furnish such further information as may lations of the provisions of any license, be requested by the Director. An appli ruling, regulation, order, direction or in cant or other party in interest may fur struction issued by or pursuant to the nish additional information or present direction or authorization of the Secre views concerning the application at any tary pursuant to this part or otherwise time before a decision has been rendered. Arrangements for oral presentation under such section. (b) Attention is also directed to 18 should be made with the Direotor. (c) Decision. Prompt notice of action U.S.C. 1001, which provides: taken on an application shall be com Whoever, In any matter within the Jurisdic municated to the applicant. Whenever an tion of any department or agency of the application is denied, such notice shall United States knowingly and willfully falsi be accompanied by a simple statement fies, conceals, or covers up by any trick, of the grounds therefor. The decision scheme, or device a material fact, or makes on the application shall constitute final any false, fictitious, or fraudulent statements agency action. or representations, or makes or uses any false (d) Effect of denial. The denial of an writing or document knowing the same to contain any false, fictitious or fraudulent application does not preclude the matter statement or entry, shall be fined not more from being reopened at the request of than $10,000 or Imprisoned not more than the applicant, or the filing of a new 6 years, or both. application. (e) Terms and conditions of specific licenses and exemptions. Any specific license or exemption is issued subject to all the terms, conditions and special requirements contained therein. § 1 0 0 0 .8 0 2 A m end m en t, or revocation. m odification, The provisions of this part and any rulings, licenses, exemptions, authoriza tions, instructions, orders, or forms issued thereunder may be amended, mod ified, or revoked at any time. In general, the public interest requires that such amendments, modifications, or revoca tions be made without prior notice. § 1 0 0 0 .8 0 3 R u les govern in g availability o f in form ation . (a) The information, records, and other material of the Office of Foreign Direct Investments required by 5 U.S.C. 552 to be made available to the public shall be made available in accordance with the provisions of Department Order 64 of the Secretary of Commerce (32 F H . 9643 of July 4,1967). (b) Forms CDFDI— 101 and 102 and any other forms used in connection with the Foreign Direct Investment Regula tions may be obtained in person from or by writing to the Director, Office of For eign Direct Investments, Department of Commerce, Washington, D.C. 20230. § 1 0 0 0 .8 0 4 D eleg a tio n s. Any function, duly or authority under these regulations m ay be performed or exercised by the Secretary or by any person, agency or instrumentality desig nated by him (directly or indirectly by one or more redelegations of authority) and the term “Secretary” as used In these regulations shall Include any such designated person, agency, or instru mentality, as applicable. Signed at Washington, D.C., this 1st day of January 1968. A. B . T rowbridge, S ecretary of Commerce. [F.R. Doc. 68-114; Filed, Jan. 1, 1968; 6:44 pjn.] NOTICES DEPARTMENT OF COMMERCE Office of the Secretary [Department Order 184-A] ESTABLISHMENT OF OFFICE OF FOR EIGN DIRECT INVESTMENTS S e c t io n 1. Purpose. The purpose of this order is to establish the Office of Foreign Direct Investments, delegate au thority to its Director, and describe the general functions of the Office. S ec . 2. General—.01 The Office of Foreign Direct Investments (hereinafter called the “Office”) is hereby established as a primary operating unit of the De partment of Commerce pursuant to the authority vested in the Secretary of Commerce by Executive Order 11387, dated January l, 1968, and otherwise by law. .02 The Office shall be headed by a Director (hereinafter called the “Direc tor”) who shall report and be responsible to the Secretary of Commerce (herein after called the “Secretary”) . The Direc tor shall be assisted by a Deputy Director who shall perform the functions of the Director during the latter’s absence, and by such staff as the Director may require to perform the functions and authorities and discharge the responsibilities set forth herein. S ec . 3. Delegation of authority — .01 Pursuant to the authority vested in the Secretary by Executive Order 11387 and otherwise by law, and subject to such policies, limitations and directions as the Secretary may prescribe, the Director is hereby delegated the functions, authori ties, and responsibilities given to the Secretary under said Executive order governing certain capital transfers abroad, and under such other Executive orders, laws, regulations, and actions relating thereto as the Secretary shall determine are applicable. .02 The Director may redelegate, as may be necessary in their performance, any functions, authorities, or responsi bilities conferred upon him by this order to any other agency, instrumentality, or official of the United States, subject to such conditions and limitations as the Secretary may deem desirable. Sec. 4. General functions— .01 The Director shall, with respect to the func tions, authorities, and responsibilities delegated to him by this order: a. Provide advice and assistance to the Secretary in such matters. b. Carry out the provisions of Execu tive Order 11387, prescribe definitions for any terms used therein, make general or specific exemptions, exceptions, or waiv ers to the prohibitions thereof, issue such rules and regulations, orders, rulings, licenses, and instructions, and take such other actions, as he determines to be necessary or appropriate to carry out the purposes of said Executive order. c. Consult and collaborate as neces sary and appropriate with other officers and units of the Department, officials of other Federal agencies, Including the Secretaries of State and Treasury and the Board of Governors of the Federal Reserve System, and representatives of foreign governments. d. Administer the regulations issued by the Secretary, and as they may be amended, under Title 15, Code of Fed eral Regulations, Chapter X, Part 1000. e. Take such necessary actions as may be necessary to obtain effective compli ance with the policies, programs and regulatory system established under this order, to obtain reports and other in formation, and to conduct investigations to carry them out. f. Provide a basis for policy formula tion of the Department with respect to direct investment abroad and related matters. g. Utilize the facilities and services of other units of the Department of Com merce, of other Federal or State agencies, and of any of the Federal Reserve Banks, which are available and appropriate. h. Take such other actions as may be necessary and desirable. S e c . 5. Effect on other orders. To the extent that this order affects any other orders or regulations of the Department, they are accordingly modified. S e c . 6. Effective date. This order shall become effective January 2, 1968. A. B . T r o w b r id g e , Secretary of Commerce. [F.R. Doc. 68-113; Filed, Jan. 1, 1968; 6:43 p.m.] U. S. DEPARTMENT OF COMMERCE OFFICE OF FOREIGN DIRECT INVESTMENTS WASHINGTON, D. C. 20230 Instructions for Specific Authorizations or Exem ptions Pursuant to Section 1000.801 of Foreign Direct Investm ent Regulations Section 1000.801 of the Foreign Direct Investment Regulations provides procedures whereby applica tions may be made for specific authorizations to engage in otherwise prohibited transactions which are not within the general authorizations set forth in the regulations. Such section also provides for applica tions for specific exemptions from provisions of the regulations. All requests for specific authorizations or exemptions should be made in duplicate to the Director, Office of Foreign Direct Investments, U. S. Department of Commerce, Washington, D. C. 20230. While the content of these applications will vary depending upon the particular specific authorization or exemp tion sought, the application should contain information which would permit the Director to make an informed evaluation of the need for the specific authorization or exemption and its consistency with the overall policy and objective of the program. W ith respect to their submission for specific authorizations for foreign direct investments, the following information should be included : —Brief description of project, program or transaction to which requested authorization relates. —Amount of foreign direct investment which is sought to be covered by authorization. —Source and form of the capital for which transfer is sought. —Proposed use of the capital for which transfer is sought. —Reasons why capital is not available from foreign sources. —Statement and data showing why the general authorization provisions of the regulations do not permit the proposed capital transfer to be effected. —Relationship of specific application to your overall foreign direct investment position and program. —Estimated amount of, and time period in which specific proposed capital transfer will result in cash or other returns to the United States. —Pertinent business or economic considerations. —Pertinent legal commitments or considerations. —Description of related transactions involving foreign direct investment for which specific authorization application is pending or contemplated. —Identification of any other transaction by associated or affiliated persons involving foreign direct investment for which specific authorization is pending or contemplated. —Proposed time schedules for effecting the transfers for which specific authorization is sought. W ith respect to applications for specific exemptions from any requirement of the regulation, applicants should state why the specific exemption is appropriate. Include in such application for such exemption any of the foregoing items of information which are relevant to a disposition of the requested exemption. Any accounting data submitted should be consistent, as far as possible, with the accounting principles applicable to reports required to be submitted under the regulation. Any substantial inconsistencies should be explained. Any submission should be confined to essential information. If supplemental or explanatory informa tion is necessary, it will be requested by the Director. The application should include the name, address, and telephone number of the person (s) to whom inquiry may be addressed by the Office of Foreign Direct Investments. FEDERAL RESERVE SYSTEM Banks and Financial Institutions: Capital Transfer Abroad By Executive Order 11387 (January 1, 1968), the President prohibited persons owning 10 per cent or more of a foreign business venture from engaging in transfers of capital abroad except as authorized by the Secretary of Commerce, and also authorized the Secretary to require such persons to repatriate to the United States their earnings from such foreign business ventures and their short term financial assets abroad, including bank deposits* However, the President ordered the Secretary of Commerce to exempt from said requirements, to the extent delineated by the Board of Governors of the Federal Reserve System, banks and financial institutions certi fied by the Board as being subject to the Federal Reserve foreign credit restraint program. On January 2, 1968, the Board transmitted to the Secretary of Commerce the attached letter, which certified that banks and financial institutions of the kinds described therein are subject to said program, the terms of which are stated in the revised Guide lines issued by the Board of Governors January 1, 1968. The Board delineated for exemption all banks and financial institutions within the enumerated categories, with the exception of any bank or fi nancial institution that is subject to the reporting provisions of the Guidelines and fails to report in substantial compliance with those reporting provisions. 2- In accordance with the President's Order, the "Foreign Direct Investment Regulations" of the Secretary of Commerce, pub lished in the Federal Register of January 3, 1968, exempted banks and financial institutions "to the extent that may be delineated from time to time by the Board of Governors"# Accordingly, all banks and financial Institutions Included in the Board's list are now exempt from said regulations of the Secretary of Commerce, subject to the specified exception. Dated at Washington, D* C* the 4th day of January 1968. By order of the Board of Governors* (signed) Robert C« Holland Robert C* Holland, Secretary* Attachment B O A R D OF G O V E R N O R S OFTHE FEDERAL RESERVE 5Y5TEM WASHINGTON, D.C. 2055! OFFICE OF THE CH AIRM AN January 2, 1968. The Honorable Alexander B. Trowbridge, Secretary of Commerce, Washington, D. C. 20230 Dear Mr. Secretary: In accordance with the provisions of section 1(c) of Executive Order 11,387, dated January 1, 1968, the Board of Governors of the Federal Reserve System certifies that the following banks and financial institutions are subject to the foreign credit restraint programs referred to in said section 1 (c): 1. Banks that accept deposits that the depositor has a legal right to withdraw on demand, 2. Savings banks, both stock and mutual, 3. Trust companies, and trust departments of banks. 4. Casualty, fire, marine, and life insurance companies, both stock and mutual, 5. Management investment companies (both open-end and closed-end), as defined in sections 4 and 5 of the Investment Company Act of 1940, 6 . Organizations engaged principally in extending credit through consumer, commercial, or industrial loans; financing of sales or lease transactions; leasing of personal property; or purchasing of accounts receivable or similar claims. 7. Organizations engaged principally in underwriting or dealing in securities or acting as broker in securities transactions. 8 . Employee retirement and pension funds and similar employee-benefit funds. The Honorable Alexander B. Trowbridge Page Two 9. Foundations, trusts, institutions, and other non-profit organizations principally devoted to the advancement of art, education, health, philanthropy, recreation, religion, research, or similar areas of activity directed at con tributing to the general welfare. 10. Corporations organized under section 25(a) of the Federal Reserve Act (so-called "Edge Act corporations”) and cor porations having an agreement or undertaking with the Board of Governors under section 25 of said Act (so-called "Agree ment corporations"). 11. United States branches of foreign banks and financial institutions of the kinds described in the foregoing enumeration. In accordance with the provisions of said section 1(c), the Board of Governors delineates for exemption from the provisions of section 1 of said Executive Order all banks and financial institutions of the categories enumerated above, with the exception of any bank or financial institution that is subject to the reporting provisions of said programs but is not reporting (or covered by reports filed by another or others on its behalf) in substantial compliance with said reporting provisions. The foregoing certification and delineation are subject to modification or termination with respect to any category or individual bank or financial institution, in the event that (a) the foreign credit restraint programs referred to in section 1(c) of said Executive Order are so modified that such category or individual bank or financial institution is no longer subject to said programs or (b) the Board of Governors determines that modification or termination of said deline ation is necessary or appropriate in the public interest. Any such modification or termination will be communicated by the Board to the Secretary of Commerce. S in c e r e ly y o u r s , Wm. McC. Martin, Jr.
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