On September 15, 2020, the Committee on Foreign Investment in the United States (CFIUS), the inter-agency U.S. government body responsible for reviewing certain forms of inbound investment for national security risks, published a final rule, effective October 15, making important changes to the rules defining “critical technology” transactions subject to mandatory filing requirements.
CFIUS has traditionally allowed, but not required, parties to “covered transactions” to submit a filing to CFIUS to seek approval of their transaction. However, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) authorized CFIUS to mandate filings for certain types of transactions. Transactions subject to mandatory filings under FIRRMA fall into two categories: certain investments involving “critical technology” and certain investments involving foreign governments. (See our prior International Law Advisory on FIRRMA’s implementing regulations here).
The final rule changes the circumstances in which a “critical technology” investment will trigger a mandatory filing requirement. The rule ends the use of North American Industry Classification System (NAICS) codes to identify specific industries subject to mandatory “critical technology” filings, in favor of a filing requirement based on U.S. export controls. A mandatory “critical technology” filing requirement is triggered under the final rule when a “U.S. regulatory authorization” would be required for the export, reexport, or transfer (in country) of the U.S. target company’s goods or technologies to the foreign investor or certain other foreign persons involved in the transaction. The final rule also makes modest clarifications to the second category of transactions involving foreign government interests. (See our prior blog post on the proposed version of the rule here).