On May 21, the U.S. Treasury Department, as chair of the Committee on Foreign Investment in the United States (“CFIUS”), issued a proposed rule that more directly links mandatory filing obligations with export control restrictions administered by other federal agencies, including the Bureau of Industry and Security (“BIS”) and the Directorate of Defense Trade Controls (“DDTC”). The rule is open for comment until June 22.
Pursuant to amendments implementing the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which expanded CFIUS jurisdiction in several respects, certain types of transactions are subject to mandatory declarations with CFIUS. Currently, one type of transaction that requires a mandatory filing is one in which: 1) the target company produces, designs, tests, manufactures, fabricates, or develops a “critical technology.” A “critical technology” is an item that is included on one of the U.S. export control lists, including the Commerce Control List (“CCL”), included within the Export Administration Regulations (“EAR”); and 2) the target company uses the critical in a sensitive industry, identified in Appendix B to the CFIUS regulations (31 C.F.R. Part 800). This two-prong test is slightly more strict than the export control regulations themselves because an item included in the CCL is not generally restricted for export to all destinations. For example, transactions with NATO allies are generally subject to more permissive restrictions than are transactions with other countries. The current CFIUS mandatory declaration framework does not account for this distinction.
Continue Reading CFIUS Issues Proposed Rule to Amend Mandatory Declaration Requirements