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IPS152 Ryan N.
those SPEs likely play a much larger role in U.S. FDI relationships, but it also
discusses resident SPEs.

2. Methodology
BEA collects data on U.S. MNEs, their foreign affiliates, and U.S. affiliates of
foreign MNEs using several surveys. Two of these surveys, the Annual Survey
of U.S. Direct Investment Abroad (USDIA) and the Annual Survey of Foreign
Direct Investment in the United States (FDIUS), collect an array of data items
reflecting the activities of MNEs (AMNE). These include location, employment,
sales, expenditures for fixed capital, and full income statements and balance
sheets for the respondent firms.
While BEA surveys do not collect direct information about the purpose of
an affiliate, USDIA and FDIUS data can be used to identify likely SPEs, both for
SPEs in the United States (using FDIUS data) and foreign SPE affiliates of U.S.
MNEs (using USDIA data). Based on the TFSPE guidelines, BEA identified an
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affiliate as an SPE using the following criteria:
(1) Majority-owned by their parent(s).
(2) Zero to five employees.
(3) Less than $1 million of gross property, plant, and equipment (PPE).
(4) Less than 10 percent of total sales are to customers in the host country
(for companies with sales).
This paper also uses data collected on the surveys to estimate the amount
of pass-through equity moving through each affiliate. Because the USDIA data
include both affiliates held directly by U.S. parents and those held indirectly
through other foreign affiliates, any equity in one affiliate that passes through
to another affiliate is, in effect, reported twice (or more) as it moves down the
ownership chain. Removing this pass-through from intermediate affiliates
creates a different picture of how equity relates to operations and provides a
framework for recording FDI positions according to their ultimate destination
countries.
Each affiliate in a multinational ownership chain can have “inward” and
“outward” direct investment equity positions that correspond to its roles as
both an affiliate of a foreign parent and a parent of foreign affiliates. An
affiliate’s inward equity position is its total equity financing from its parent,
which is included in owner’s equity in BEA AMNE publications.
Correspondingly, an affiliate’s outward equity position is the affiliate’s equity
in its foreign affiliates down the ownership chain, called equity in other foreign
affiliates (hereafter, “equity in subsidiaries”) in BEA published data.

BEA operationalized T FSPE’s “little or no physical presence” and “transact almost entirely with
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nonresidents” criteria with thresholds of less than $1 million of property, plant, and equipment
and 10 percent of sales to local parties. These thresholds were tested for sensitivity and changes
to them did not affect the results.
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