As anticipated following the August enactment of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), the Department of the Treasury has issued new regulations implementing changes to the Committee on Foreign Investment in the United States (CFIUS).

CFIUS Amendments

The first, an interim rule issued October 11, 2018 (83 FR 51316), primarily makes technical amendments to the CFIUS Part 800 regulations.  These changes include:

  • Extending CFIUS review period from 30 to 45 days,
  • Revising various definitions to be consistent with FIRRMA,
  • Providing examples of covered transactions,
  • Implementing electronic submissions,
  • Allowing parties to stipulate that a transaction is a covered transaction, and
  • Revising language regarding violations and remedies.

This rule was effective immediately and comments may be submitted through November 10, 2018.  Please see the Federal Register Notice for more information on how to comment.

Pilot Program

The second notice, also issued on October 11, 2018 (83 FR 51322) implements a “pilot program” expanding CFIUS review and mandatory declarations to a specific list of covered industries when dealing with “critical technologies.”

Under the new rule, “critical technologies” include:

  • Defense articles or defense services included on the United States Munitions List (USML) controlled by the Department of State,
  • Commerce Control List (CCL) items controlled pursuant to multilateral regimes, for regional stability, or surreptitious listening by the Department of Commerce,
  • Nuclear equipment and technology controlled by the Department of Energy,
  • Nuclear facilities, equipment, and material controlled by the Nuclear Regulatory Commission, and
  • Select agents and toxins controlled by the Department of Agriculture or the Department of Health and Human Services.

Companies in or developing products for the industries listed in the new Annex A to Part 801 are covered by the pilot program as follows, including North American Industry Classification System (NAICS) codes:

Industry NAICS Code
Aircraft Manufacturing 336411
Aircraft Engine and Engine Parts Manufacturing 336412
Alumina Refining and Primary Aluminum Production 331313
Ball and Roller Bearing Manufacturing 332991
Computer Storage Device Manufacturing 334112
Electronic Computer Manufacturing 334111
Guided Missile and Space Vehicle Manufacturing 336414
Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing 336415
Military Armored Vehicle, Tank, and Tank Component Manufacturing 336992
Nuclear Electric Power Generation 221113
Optical Instrument and Lens Manufacturing 333314
Other Basic Inorganic Chemical Manufacturing 325180
Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing 336419
Petrochemical Manufacturing 325110
Powder Metallurgy Part Manufacturing 332117
Power, Distribution, and Specialty Transformer Manufacturing 335311
Primary Battery Manufacturing 335912
Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing 334220
Research and Development in Nanotechnology 541713
Research and Development in Biotechnology (except Nanobiotechnology) 541714
Secondary Smelting and Alloying of Aluminum 331314
Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing 334511
Semiconductor and Related Device Manufacturing 334413
Semiconductor Machinery Manufacturing 333242
Storage Battery Manufacturing 335911
Telephone Apparatus Manufacturing 334210
Turbine and Turbine Generator Set Units Manufacturing 333611

Transactions in these areas are covered by the pilot program when the investment would give a foreign investor:

  • Access to material nonpublic technical information;
  • Membership, observer, or nomination rights on the board of directors; or
  • Involvement in substantive decision-making regarding critical technology.

This rule will take effect on November 10, 2018 and comments may be submitted through that date.  Please see the Federal Register Notice for more information on how to comment.

The Department of the Treasury has also published a press release and fact sheet that summarize these changes.

The pilot program is scheduled to end no later than March 5, 2020, once replaced by a full expansion of CFIUS review.

(None of the information is intended to be authoritative official or professional legal advice. Consult your own legal counsel or compliance specialists before taking actions based upon this blog or other unofficial sources.)