Question
January 25, 2005
B. Michael Verne
PremergerNotification Office
Federal TradeCommission
Room H-314
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580
Dear Mike:
Ourclient is contemplating purchasing the voting securities of a foreign issuerthat conducts operations both inside and outside the United States. The gross amount of the issuer's salesinto the United States, plus its sales from a plant in the United States to customers outside the United States, plus intracompany transfers from aplant in the United States to an affiliate located outside the United States, exceeds $50 million.
Iunderstand that the Premerger Office has long taken the position that for purposesof 16 C.F.R. 802.50 and 51, sales in or into the United States include all sales and intracompanytransfers that originate from the United States,including exports. In our conversations yesterday, I pointed out that in 1976the Commission issued proposed rules that included 802.35, an exemptiontitled, "Insufficient involvement in United Statescommerce." That proposed rule would have exempted acquisitions ofsecurities of an issuer where the issuer's "sales in, imports to orexports from the United States" were lessthan an aggregate annual average of $10 million over the past three years. 41Fed. Reg. 55,488, 55,493 (Dec. 20, 1976). In 1977 therules were revised to include three exemptions related to foreign commerce; 802.50, acquisitions of foreign assets or of voting securities of aforeign issuer by United States persons; 802.51, acquisitions by foreign persons; and 802.52, acquisitions by orfrom foreign governmental corporations.
The1977 proposed rules eliminated the phrase, "exports from the United States" and instead use "sales in orinto the United States". See 802.50, 802.51,42 Fed. Reg. 39,040, 39,053 (August 1, 1977).
Indeed, the Commission explained that,
Forpurposes of testing whether any foreign assets or foreign issuer, or anyforeign purchaser or seller, is responsible for generating significant sales inU.S. commerce, all three of these revisedrules look to sales made in or into the United States,but not to export sales made outside the United States.
42 Fed. Reg.39,045 (August 1, 1977) (emphasis added).
Basedon this analysis, you advised me that for purposes of determining the amount ofthe foreign issuer's sales in or into the United States pursuant to 16 C.F.R. 802.51(a)(1), sales from the foreign issuer's U.S. plant to customersoutside the United States, as well as intracompany transfers from the foreignissuer's U.S. plant to an affiliate located outside the United States, may beexcluded.
Pleasecontact me at your earliest convenience if your understanding of ourconversations varies from mine.