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1 1 (January 14, 2020)

handle is hein.crs/govbfzv0001 and id is 1 raw text is: FF.ri E.$~ & Updated January 14, 2020 CFIUS: New Foreign Investment Review Regulations On January 13, 2020, the Department of the Treasury issued final regulations after public notice and comment to implement key parts of the Foreign Investment Risk Review Modernization Act (FIRRMA) (Title XVII, P.L. 115-232), which strengthens and modernizes 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 draft regulations initiate provisions that would affect how certain real estate and noncontrolling investments will be scrutinized. These regulations were widely anticipated by various stakeholders for clarifying key aspects of FIRRMA. 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. The proposed regulations are to be implemented by February 13, 2020. Treasury also launched a pilot program in October 2018 related to transactions involving critical technology the proposed regulations would not change the program. 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 proposed 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; or (2) own, operate, manufacture, supply, or service critical infrastructure (28 subsectors specified); or (3) maintain or collect sensitive personal data. One major aim of the proposed 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 would 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. Parties involved in these new covered transactions can choose between providing voluntarily, a short (not to exceed five pages) written declaration to receive expedited consideration or potential approval by CFIUS, or the traditional longer written notification. A declaration is mandatory however, where a foreign government has a substantial interest (see below). The proposed 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 fees and to create a mandatory filing process: those areas would be covered in future proposed regulations. One concern of some stakeholders has been the potential impact of CFTUS's expanded jurisdiction on smaller U.S. businesses that rely on foreign investment. Treasury indicated that it could not project the economic impact of reviewing certain real estate transactions, but it estimated that the change was not expected to have a significant economic impact on a substantial number of small entities. Similarly, regarding noncontrolling equity investments, Treasury concluded that less than 1% of U.S. small businesses likely would be subject to a review. 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. Excepted real estate transactions include (1) certain real estate investors, defined as those with a substantial connection to certain foreign countries and who have not violated U.S. laws; (2) housing units; (3) urbanized areas and urban clusters (both defined by the Census Bureau); (4) commercial office space (with some exceptions); (5) retail K~:> p\w -- , gmmw' goo mppm qq\ a , q 'S I 11LULANJILiN,

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