Direct investment. Investment in which a resident of one country obtains a lasting interest in, and a degree of influence over the management of, a business enterprise in another country. U.S. direct investment abroad (USDIA) is defined as the ownership or control, directly or indirectly, by one U.S. resident of 10 percent or more of the voting securities of an incorporated foreign business enterprise or the equivalent interest in an unincorporated foreign business enterprise.
Foreign affiliate. A foreign business enterprise in which a single U.S. investor (a U.S. parent) owns at least 10 percent of the voting securities or the equivalent.
Direct investment capital flows. Funds that U.S. parent companies provide to their foreign affiliates net of funds that foreign affiliates provide to their U.S. parents. Includes the funds that U.S. direct investors pay to unaffiliated foreign parties when affiliates are acquired and the funds that U.S. investors receive from them when affiliates are sold. Capital outflows arise from transactions that increase U.S. assets or decrease U.S. liabilities. Capital inflows arise from transactions that decrease U.S. assets or increase U.S. liabilities.
Direct investment capital flows consist of equity capital, intercompany debt, and reinvested earnings. Equity capital flows are the net of equity capital increases and decreases. Equity capital increases consist of payments by U.S. parents to unaffiliated foreign parties for the purchase of capital stock or other equity interests when they acquire an existing foreign business, payments made to acquire additional ownership interests in their foreign affiliates, and capital contributions to their foreign affiliates. Equity capital decreases are the funds U.S. parents receive when they reduce their equity interest in their foreign affiliates. Intercompany debt flows result from changes in net outstanding loans between U.S. parents and their foreign affiliates, including loans by parents to affiliates and loans by affiliates to parents. Reinvested earnings are the U.S. parents’ claim on the current period undistributed earnings of their foreign affiliates.U.S. direct investment position abroad. The value of U.S. direct investors’ equity in, and net outstanding loans to, their foreign affiliates. The position may be viewed as the U.S. direct investors’ net financial claims on their foreign affiliates, whether in the form of equity (including reinvested earnings) or debt.
Direct investment income is the return on the U.S. direct investment position abroad. It consists of earnings (that is, the U.S. parents’ shares in the net income of their foreign affiliates) and the net interest received by the U.S. parents on outstanding loans and trade accounts between the U.S. parents and their foreign affiliates.
Royalties and license fees represent receipts and payments between U.S. parents and their foreign affiliates for the use or sale of intangible property or rights (including patents, trademarks, and copyrights).
Other private services represent receipts and payments between U.S. parents and their foreign affiliates for services provided to one another. They consist of service charges, including management fees and allocated expenses, rentals for tangible property, and film and television tape rentals.