https://crsreports.congress.gov
Updated May 28, 2020
CFIUS: New Foreign Investment Review Regulations
Overview
On January 13, 2020, the Department of the Treasury
issued final regulations to implement key parts of the
Foreign Investment Risk Review Modernization Act
(FIRRMA) (Title XVII, P.L. 115-232), which are intended
to “strengthen and modernize” the national security review
of foreign direct investment (FDI) transactions by the
Committee on Foreign Investment in the United States
(CFIUS) (under P.L. 110-49). CFIUS is an interagency
body comprising nine Cabinet members and others as
appointed. The regulations, which largely concern CFIUS’s
expanded review of certain real estate and noncontrolling
investments, became effective on February 13, 2020. These
rules were widely anticipated by various stakeholders for
clarifying key aspects of FIRRMA. Subsequently, a new
rule proposed in May would amend the mandatory filing
requirements related to U.S. critical technology companies.
While various provisions of FIRRMA became effective
upon enactment in August 2018, the act also required
CFIUS to take certain actions within prescribed deadlines
for various programs, reporting, and regulations. Treasury
launched a pilot program in October 2018 effective through
February 12, 2020, regarding certain transactions involving
critical technologies. The final regulations implement key
provisions of the program, with some changes.
The FIRRMA-amended CFIUS process maintains the
President’s authority to block or suspend proposed or
pending foreign “mergers, acquisitions, or takeovers” that
could result in control of U.S. entities, including through
joint ventures, that threaten to impair national security. The
regulations expand and clarify new authority for CFIUS to
review certain real estate and other noncontrolling foreign
investments on the basis of threats, vulnerabilities, and
consequences to national security. Reviews of
noncontrolling investments are limited to U.S. businesses
(referred to as “TID businesses” for Technology,
Infrastructure, and Data) that (1) produce, design, test,
manufacture, fabricate, or develop one or more critical
technologies (27 listed subsectors); or (2) performs certain
functions with respect to critical infrastructure (28 systems
and assets specified); or (3) maintain or collect sensitive
personal data of U.S. citizens. One major aim of the
regulations is to “provide clarity to the business and
investment communities with respect to the types of U.S.
businesses that are covered under FIRRMA’s other
investment authority.” The regulations limit the application
of the expanded review process to certain categories of
foreign persons, introducing new terms such as “excepted
investor” and “excepted foreign state” for noncontrolling
transactions. To date, Treasury has identified Australia,
Canada, and the United Kingdom as excepted countries.
Parties involved in these new covered transactions can
choose between providing voluntarily, a short (not to
exceed five pages) written declaration to receive potential
expedited consideration or approval by CFIUS, or the
traditional longer written notification. A declaration is
mandatory however, for transactions where a foreign
government has a “substantial interest,” and for investments
in some TID businesses involved in critical technologies
(see below). The regulations specify the content and filing
processes for declarations and notices; misstatements or
omissions are subject to a fine of $250,000 per violation.
FIRRMA also authorizes CFIUS to impose filing fees. On
May 1, Treasury issued an interim rule establishing fees for
certain transactions. The tiered fee structure ranges from $0
to $300,000, depending on the transaction’s value (based on
the operations of the U.S. parent company and its foreign
subsidiaries). Fees apply to filings of voluntary notices at
the time of the filing, but not declarations.
One concern of some stakeholders has been the potential
impact of CFIUS’s expanded jurisdiction on smaller U.S.
businesses that rely on foreign investment. Treasury
indicated that it does not expect the new rules to have a
significant economic impact on small entities.
Real Estate Transactions
CFIUS’s expanded jurisdiction over certain real estate (land
and structures) transactions includes the purchase or lease
by, or a concession to, a foreign person of certain private or
public real estate located in the United States. Real estate
transactions are defined as those that accord the investor
certain fundamental property rights. In particular, the
provision focuses on real estate that is in proximity of
certain airports, maritime ports, and other facilities and
properties of the U.S. Government that are sensitive for
national security reasons (military installations include 190
facilities located across 40 States and Guam). CFIUS
additionally retains the authority to review any transaction
that raises national security concerns on the basis of
proximity to sensitive sites and activities.
The regulations specify various definitions, such as
Stipulated airports: As defined by the Federal Aviation
Administration (FAA), major passenger and cargo
airports based on volume and “joint use airports” that
serve civilian and military aircraft;
Close proximity: Areas within one mile of a relevant
military installation or other facility or property of the
U.S. Government;
Extended range: Areas between 1 and 100 miles;
Facilities located within designated counties,
according to Appendix A; and
Off-shore ranges: Within 12 nautical miles of the U.S.
