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Companies outside the U.S. contemplating purchases of U.S. business (and potential U.S. acquisition targets) are continuing to parse the Department of the Treasury’s two proposed regulations continuing implementation of the Foreign Investment Risk Review Modernization Act (“FIRRMA”).  The proposed rules change the Committee’s jurisdiction and certain procedures related to the national security reviews undertaken by the Committee on Foreign Investment in the United States (“CFIUS”).  These proposed regulations provide additional clarity regarding how CFIUS intends to implement the FIRRMA amendments.  When implemented, these regulations will formally expand CFIUS jurisdiction – but will also formalize current CFIUS practice in most respects.  Implementation is scheduled to occur on or before February 13, 2020.[1]

Jurisdiction over non-controlling investments

Traditionally, CFIUS exercised jurisdiction over investments that result in the “control” of a non-U.S. person over a U.S. business.  After FIRRMA implementation, CFIUS will have jurisdiction over certain investments that do not result in control by a non-U.S. person.  Specifically, CFIUS will have jurisdiction over non-controlling investments if the investment is in a specific company type, and if it affords the investor specific, enumerated rights.

The draft regulations identify several company types that satisfy the first part of the test.  The first type is a business that produces or otherwise deals in certain “critical technologies.”  A separate statute[2] authorizes the Department of Commerce to identify these critical technologies.  Although the Department of Commerce did identify examples of these technologies in a 2018 rulemaking, that process is not yet complete.
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On May 2, the Trump Administration ceased the suspension of Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act (“Helms-Burton Act”), effectively authorizing U.S. nationals to bring claims regarding property expropriated by the Cuban government after the communist revolution.  Although in force since 1996, previous administrations had waived Title III.  Enforcement of Title

Yesterday, the Office of Foreign Assets Control (“OFAC”) listed Petroleos de Venezuela, S.A. (“PdVSA”) as a Specially Designated National (“SDN”) pursuant to its authority under Executive Order 13850. As a result of the designation, all property and interests in PdVSA property subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with the entity and its 50-percent owned subsidiaries.

Concurrent with the designation, OFAC amended one existing and issued eight new General Licenses (“GLs”).  These GLs authorize activities that would otherwise be prohibited by Executive Order 13850 or other Venezuela-related sanctions, and fall into one of several categories: 1) authorizations regarding maintenance and wind down activities related to contracts with PdVSA or certain of its subsidiaries existing prior to January 28, 2019 (GL 11, GL12).  The most significant authorization allows parties to wind down pre-existing contracts with PdVSA until February 27, 2019; 2) authorizations regarding certain PdVSA subsidiaries, including PDV Holding, Inc. (“PDVH”), CITGO Holding, Inc. (“CITGO”), and Nynas AB (GL 7, GL 13). These GLs include an authorization for the export of certain U.S. items and services until July 27, 2019; 3) the purchase in Venezuela of gas from PdVSA and its subsidiaries for certain uses (GL 10); 4) authorization for certain Venezuela-based operations involving PdVSA (GL 8); and 5) transactions related to certain bonds and debts (GL 3A, GL 9), among others.

The GLs generally have difference scopes, apply to different entities, and have different validity periods. The key aspects of each of the GLs are described below.


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Earlier this week, the Bureau of Industry and Security (“BIS”) published a request for public comment regarding a proposed expansion of export controls under the Export Administration Regulations (“EAR”) for certain spraying or fogging systems, which are controlled under Export Control Classification Number (“ECCN”) 2B352.i.  Currently, the ECCN controls only spraying or fogging equipment that is specially designed or modified for use on certain aircraft that also meet certain technical specifications related to droplet size and flow rate.[1]

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After months of negotiation, Congress recently passed, and the president is expected to sign, the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”).[1]  FIRRMA updates the national security review of inbound investments undertaken by the Committee on Foreign Investments in the United States (“CFIUS” or “the Committee”), an interagency body located within the

As part of the ongoing Export Control Reform initiative, the Directorate of Defense Trade Controls (“DDTC”) and Bureau of Industry and Security (“BIS”) has issued proposed rules that would move certain items currently controlled on the International Traffic in Arms Regulations (“ITAR”) to the Export Administration Regulations (“EAR”).  The proposed rules would move some items

According to Bloomberg, the Trump administration is considering using the International Emergency Economic Powers Act (IEEPA) to block Chinese investments in industries or technologies “deemed important” to the U.S.  (This statute has been used primarily to authorize economic sanctions and embargoes administered by the Office of Foreign Assets Control).  To utilize IEEPA, the President

In the near future, trade between the U.S. and India will likely be simplified.  Late last week, the Wassenaar Arrangement admitted India as a member (India’s membership will be formalized shortly), and the Australia Group is expected to admit India in the coming months.  Both organizations are Multilateral Export Control Regimes that inform U.S. export

A bipartisan group of co-sponsors in both the House and the Senate recently introduced the Foreign Investment Risk Review Modernization Act (“FIRRMA”).  These substantively identical bills demonstrate that Congress is now considering increasing the scrutiny of foreign investment in the U.S., particularly from China.

The Committee on Foreign Investment in the United States (“CFIUS”) is the interagency body is responsible for reviewing incoming foreign investments for national security risks, so long as they are “covered transactions.”  FIRRMA would broaden the scope of “covered transactions” to include, among other things: the purchase or lease by a foreign person of real estate located near U.S. military or national security interests; non-passive investments in critical technologies or critical infrastructure; and the contribution of U.S. critical technology to a foreign person, including through joint ventures, among others.  The bills would also update certain terms and definitions, including “critical technology,” which can include emerging technologies that are not necessarily controlled for export.  Notably, FIRRMA would not extend CFIUS jurisdiction to “greenfield” investments, which the regulations carve out from CFIUS review. 
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On Thursday November 9th,  the Office of Foreign Assets Control (“OFAC”) published new regulations in the Federal Register executing June’s National Security Presidential Memorandum (“NSPM”) regarding U.S. sanctions against Cuba.  (See our previous post on the NSPM here).  The State Department and Bureau of Industry and Security (“BIS”) also published complementary rules giving effect to the changes in the Cuba sanctions.  The rules became effective with their publication in the Federal Register.

The primary purpose of the rule changes is to prevent commerce between the U.S. and Cuba from benefiting the Cuban military.  The State Department’s regulation includes a new Cuba Restricted List, which lists parties deemed to be under control of or acting on behalf of the Cuban military, intelligence, or security services personnel. 
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