Updated February 21, 2020
CFIUS: New Foreign Investment Review Regulations
Overview
expedited consideration or approval by CFIUS, or the
On January 13, 2020, the Department of the Treasury
traditional longer written notification. A declaration is
issued final regulations to implement key parts of the
mandatory however, for transactions where a foreign
Foreign Investment Risk Review Modernization Act
government has a “substantial interest,” and for investments
(FIRRMA) (Title XVII, P.L. 115-232), which are intended
in some TID businesses involved in critical technologies
to “strengthen and modernize” the national security review
(see below). The regulations specify the content and filing
of foreign direct investment (FDI) transactions by the
processes for declarations and notices; misstatements or
Committee on Foreign Investment in the United States
omissions are subject to a fine of $250,000 per violation.
(CFIUS) (under P.L. 110-49). CFIUS is an interagency
FIRRMA also authorizes CFIUS to impose filing fees,
body comprising nine Cabinet members and others as
which are to be covered in future proposed regulations.
appointed. The regulations, which largely concern CFIUS’s
expanded review of certain real estate and noncontrolling
One concern of some stakeholders has been the potential
investments, became effective on February 13, 2020. These
impact of CFIUS’s expanded jurisdiction on smaller U.S.
rules were widely anticipated by various stakeholders for
businesses that rely on foreign investment. Treasury
clarifying key aspects of FIRRMA.
indicated that it does not expect the new rules to have a
“significant economic impact on a substantial number of
While various provisions of FIRRMA became effective
small entities.”
upon enactment in August 2018, the act also required
CFIUS to take certain actions within prescribed deadlines
Real Estate Transactions
for various programs, reporting, and regulations. Treasury
CFIUS’s expanded jurisdiction over certain real estate (land
launched a pilot program in October 2018 effective through
and structures) transactions includes the purchase or lease
February 12, 2020, regarding certain transactions involving
by, or a concession to, a foreign person of certain private or
critical technologies. The final regulations implement key
public real estate located in the United States. Real estate
provisions of the program, with some changes.
transactions are defined as those that accord the investor
certain fundamental property rights. In particular, the
The FIRRMA-amended CFIUS process maintains the
provision focuses on real estate that is in proximity of
President’s authority to block or suspend proposed or
certain airports, maritime ports, and other facilities and
pending foreign “mergers, acquisitions, or takeovers” that
properties of the U.S. Government that are sensitive for
could result in control of U.S. entities, including through
national security reasons (military installations include 190
joint ventures, that threaten to impair national security. The
facilities located across 40 States and Guam). CFIUS
regulations expand and clarify new authority for CFIUS to
additionally retains the authority to review any transaction
review certain real estate and other noncontrolling foreign
that raises national security concerns on the basis of
investments on the basis of threats, vulnerabilities, and
proximity to sensitive sites and activities.
consequences to national security. Reviews of
noncontrolling investments are limited to U.S. businesses
The regulations specify various definitions, such as
(referred to as “TID businesses” for Technology,
Stipulated airports: As defined by the Federal Aviation
Infrastructure, and Data) that (1) produce, design, test,
Administration (FAA), major passenger and cargo
manufacture, fabricate, or develop one or more critical
airports based on volume and “joint use airports” that
technologies (27 listed subsectors); or (2) performs certain
serve civilian and military aircraft;
functions with respect to critical infrastructure (28
Close proximity: Areas within one mile of a relevant
systems and assets specified); or (3) maintain or collect
military installation or other facility or property of the
sensitive personal data of U.S. citizens. One major aim of
U.S. Government;
the regulations is to “provide clarity to the business and
Extended range: Areas between 1 and 100 miles;
investment communities with respect to the types of U.S.
Facilities located within designated counties,
businesses that are covered under FIRRMA’s other
according to Appendix A; and
investment authority.” The regulations limit the application
Off-shore ranges: Within 12 nautical miles of the U.S.
of the expanded review process to certain categories of
foreign persons, introducing new terms such as “excepted
Excepted real estate transactions include: (1) certain real
investor” and “excepted foreign state” for noncontrolling
estate investors, defined as those with a substantial
transactions. To date, Treasury has identified Australia,
connection to certain foreign countries and who have not
Canada, and the United Kingdom as excepted countries.
violated U.S. laws; (2) housing units; (3) urbanized areas
and urban clusters (both defined by the Census Bureau); (4)
Parties involved in these new covered transactions can
commercial office space (with some exceptions); (5) retail
choose between providing voluntarily, a short (not to
trade, accommodation, or food service establishments; (6)
exceed five pages) written declaration to receive potential
lands held by Native Americans and some Alaskan Natives;
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CFIUS: New Foreign Investment Review Regulations
and (7) certain lending and contingent equity transactions.
well as genetic testing results. Treasury emphasized that
Requirements for filing a voluntary declaration or written
these parameters were drafted to provide as much clarity
notice are similar to those for other investment transactions.
and specificity as possible to businesses. These
The regulations define an excepted foreign investor through
specifications do not constrain CFIUS’s traditional review
various criteria, including holding the right to 5% or more
of any transaction resulting in foreign control of a U.S.
of the profit of the investing foreign firm, or the ability to
business.
exercise control.
The regulations do not target any particular country for
Noncontrolling Equity Investments
greater scrutiny by CFIUS—a major topic of congressional
CFIUS’s expanded authority under FIRRMA directs it to
debate during consideration of FIRRMA. FIRRMA did
review investment transactions whether or not the
however, mandate criteria that exempts certain categories of
investment conveys a controlling equity interest in cases
foreign investors from CFIUS’s expanded jurisdiction.
where a foreign person has: (1) access to information,
These criteria include the principal place of business and
certain rights, or involvement in the decisionmaking of
incorporation, as well as ties to certain eligible countries.
certain U.S. businesses involved in critical technologies,
Treasury identified three countries as “excepted foreign
critical infrastructure, or sensitive personal data (i.e., TID
states,” based on their intel sharing and defense industrial
businesses); (2) any change in a foreign person’s rights, if
base integration mechanisms with the United States. A
such change could result in foreign control of a U.S.
separate determining factor is whether a country is
business or a covered investment in certain U.S. businesses;
“effectively utilizing a robust process to analyze foreign
and (3) any other transaction, transfer, agreement, or
investments for national security risks and to facilitate
arrangement, designed or intended to evade or circumvent
coordination with the United States.” Any “excepted
the CFIUS review process.
investors,” however, will not be exempt from CFIUS’s
review of controlling transactions.
In the first category, CFIUS can review noncontrolling
investments if they afford a foreign investor
Under FIRRMA, the process of notifying a transaction to
1. access to any “material non-public technical
CFIUS remains largely voluntary. FIRRMA also provided
information” in the business’ possession;
new authority to require a declaration, an abbreviated filing,
with basic information on the transaction. A declaration is
2. membership or observer rights on the board
mandatory for transactions in which a foreign person has a
of directors (or equivalent body); or
“substantial interest” of 25% in a U.S. business, and a
3. involvement other than through voting of shares, in
foreign government (other than excepted states) holds a
“substantive decisionmaking” regarding the business. “substantial interest” of 49% or greater in the foreign
The regulations further define the terms “material non-
person. They also are mandatory for controlling and
public technical information” and “substantive
noncontrolling investments in certain U.S. TID businesses
decisionmaking.” The regulations also clarify
involved in critical technologies for 27 specified industries.
circumstances under which CFIUS can review an indirect
Treasury indicated, however, that it anticipates issuing a
investment through investment funds. As discussed, this
new rule that would replace the industry-based requirement
new authority is limited to so-called “TID U.S. businesses.”
with one based on export control licensing requirements. In
these cases, parties may also chose to file a notice instead of
FIRRMA regulations elaborate a number of important
a declaration. There are exemptions to the mandatory filing
definitions that define and constrain the scope of CFIUS’s
requirements; for example, if transactions involve
reviews. The term, “critical technologies” reflects the
“excepted investors” (e.g., exclusively nationals of
definition in FIRRMA that covers various items, including
Australia, Canada, UK), or for investment funds in certain
“emerging and foundational technologies,” which are to be
cases. The rule implements FIRRMA’s mandate that
identified through an interagency process and subject to
CFIUS take certain actions in response to a declaration.
export controls, pursuant to the Export Control Reform Act
of 2018. Regarding “critical infrastructure,” the
Issues for Congress
application of CFIUS’s new jurisdiction is limited to 28
The new CFIUS regulations may raise a number of issues
subsectors listed in an appendix (such as energy,
for Congress, including the following:
telecommunications, and transportation), and specific
Are the additional regulations affecting new and existing
business functions.
FDI in the United States? Would the amended review
process potentially delay or expedite approvals?
“Sensitive personal data” that may be exploited to
What impact are CFIUS’s additional authorities and
threaten national security includes 10 categories of
regulations regarding reviews of FDI in critical
“identifiable data” maintained or collected by U.S.
infrastructure, critical technologies, and emerging
businesses that (1) “target or tailor” products or services to
technologies having on CFIUS activities?
certain populations (e.g., U.S. agencies, military, or
government personnel with national security functions); (2)
For more, see CRS In Focus IF10952, CFIUS Reform under
maintain or collect data on more than 1 million individuals;
FIRRMA, and CRS In Focus IF11135, Deadlines,
or (3) have a demonstrated objective to maintain or collect
Programs, and Regulations Mandated by FIRRMA.
data on more than 1 million individuals as part of its
primary product or service. Categories of data covered
Cathleen D. Cimino-Isaacs, Analyst in International Trade
include certain financial, geolocation, and health data, as
and Finance
https://crsreports.congress.gov
CFIUS: New Foreign Investment Review Regulations
IF11334
James K. Jackson, Specialist in International Trade and
Finance
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https://crsreports.congress.gov | IF11334 · VERSION 5 · UPDATED