CFIUS Foreign Investment Reviews & FOCI Mitigation

On November 20, 2018, the European Parliament, the Council and the Commission reached a political agreement on the proposed EU framework for the screening of foreign direct investments (FDIs).

The proposal, which was put forward by the Commission in September 2017, aims to protect key strategic industries and assets in Europe while maintaining the EU’s

Yesterday the US Department of Commerce’s Bureau of Industry and Security (BIS) took its first step towards a potentially significant expansion of US export controls by publishing a Federal Register notice soliciting public comments on how the US government should regulate the export of “emerging technologies.” Under the Export Controls Reform Act of 2018 (ECRA), “emerging and foundational technologies” will be subject to additional export controls and will trigger heightened foreign investment reviews for US companies that produce or develop these technologies.  Commerce has requested public comments on the “criteria for defining and identifying emerging technologies” by December 19, 2018.  Commerce will begin a separate comment process regarding “foundational technologies” at a later date.

Export Controls

BIS regulates the export of “dual-use” and less sensitive military items through the Commerce Control List (CCL) and the Export Administration Regulations (EAR). Section 1758 of the ECRA, enacted in August 2018 as a part of the National Defense Authorization Act for Fiscal Year 2019, requires BIS to establish “appropriate controls” for the export, re-export, or in-country transfer of “emerging and foundational technologies” that “are essential to the national security of the United States” but are not yet subject to US export controls.  While Commerce will have the discretion to set the level of export controls for any identified emerging and foundational technologies, at a minimum it must require a license for the export of these technologies to countries subject to a US arms embargo. (Section 126.1 of the International Traffic in Arms Regulations (ITAR) identifies several countries, including China, currently subject to an arms embargo by the United States.)
Continue Reading Administration Moves Toward Strengthening Export Controls and Investment Restrictions on “Emerging Technologies”

As a first step to implementing the wide-ranging Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) that was enacted in August 2018, the US Department of the Treasury on October 10, 2018 issued an interim rule to launch a “pilot program” to expand the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to review certain “critical technology” transactions.  Treasury also issued temporary regulations that make limited changes to the existing CFIUS regulations, mostly to implement changes that became effective immediately upon passage of FIRRMA.

Pilot Program Interim Rule

A number of the provisions of FIRRMA that expand CFIUS’s jurisdiction do not become effective until Treasury passes implementing regulations or February 2020, whichever comes first.  Treasury is not expected to finalize the relevant implementing regulations for several months.  However, FIRRMA also authorized Treasury to create temporary “pilot programs” to allow for faster implementation of parts of the legislation that did not become effective immediately upon enactment.
Continue Reading Treasury Creates CFIUS Pilot Program and Releases Interim Regulations as Initial Step Toward Implementing FIRRMA Reforms

Following months of hearings and other deliberations, Congress passed, and President Trump signed into law on August 13, 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). FIRRMA is the first update to the Committee on Foreign Investment in the United States (CFIUS) in over a decade and will significantly expand the jurisdiction

Earlier this week, negotiators from the House and Senate reached agreement on what will very likely be the final text of the Foreign Investment Risk Review Modernization Act (FIRRMA), which will be part of the National Defense Authorization Act for Fiscal Year 2019 (NDAA). FIRRMA seeks to overhaul the Committee on Foreign Investment in the

The ambitious CFIUS reform bill introduced in November 2017, the Foreign Investment Risk Review Modernization Act (FIRRMA), has recently received significant congressional attention and appears likely to become law this year, with some revisions from the version introduced last year. On June 18, 2018, the Senate passed its version of FIRRMA as Title XVII of

Very far, under existing US law. The authority already available to the President under the International Emergency Economic Powers Act (IEEPA) is vast, and could be applied to Chinese investments with the (relatively) simple declaration of a national emergency related to such investments.  Reports have already been swirling about a plan by the Trump Administration to use IEEPA to impose tighter restrictions on Chinese investment in sensitive sectors of the US economy, or to implement by executive order parts of the CFIUS reform legislation under consideration by Congress.  But IEEPA could be used far more broadly than that.

Although rumors of new trade and investment restrictions against China have been in circulation for several months, the President’s March 22 order in response to the “Section 301 investigation” on Chinese trade practices has brought those rumors into sharper focus.  In his order, President Trump directed the Secretary of the Treasury to develop options “under any available statutory authority” that could be used “to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.” 
Continue Reading How Far Can the US Take Trade and Investment Restrictions on China?

Key committees in the Senate and House have concluded initial hearings on the bill to reform the Committee on Foreign Investment in the United States (CFIUS), the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA). FIRRMA was introduced in the Senate and House by Senator Cornyn and Representative Pittenger with bipartisan cosponsors on November

During a November 8 press conference announcing the introduction of the Foreign Investment Risk Review Modernization Act (“FIRRMA”) while President Trump met with President Xi Jinping in China, co-sponsor and Senate Majority Whip John Cornyn (R-TX) summed up the impetus for the bipartisan, bicameral bill in five words:

“China is eating our lunch.”

In the decade since Congress last passed reforms governing the Committee on Foreign Investment in the United States (“CFIUS”) and its procedures for conducting national security reviews of inbound foreign investments, Chinese investment in the United States – especially in the technology sector – has exploded.  Although FIRMMA doesn’t mention China by name, many of its provisions appear designed to address aspects of China-related deals that cause heartburn for national security hawks.
Continue Reading Congress Scrutinizes Foreign Investment, Fires Warning Shots at China and Silicon Valley

The Trump administration is making significant changes to longstanding trade policies. Among the flashpoints is the Committee on Foreign Investment in the United States (“CFIUS”), responsible for national security reviews of certain inbound foreign investments.  Since President Trump assumed office, the Committee has taken an increasingly critical eye to many transactions, scuttling an increasing number of deals and recommending that the president take action to block the Lattice Semiconductor/Canyon Bridge deal.

Given this period of significant change in the CFIUS process, the Committee’s annual report has been much anticipated. While the report only offers data through the end of 2015, it nonetheless provides interesting insights on the trends and developments that led up to the present period.

Delayed Publication of the Report

This year’s annual report has been significantly delayed in its release. In years past, the report, which the Committee must submit to Congress on a yearly basis, has been released in February.  This year’s delay likely is due to a significant increase in cases occupying CFIUS’s resources and a significant lack of political appointees at the Department of Treasury and other relevant agencies.  
Continue Reading CFIUS Releases Long-Awaited 2015 Annual Report