Updated May 28, 2020
CFIUS: New Foreign Investment Review Regulations
Overview
Parties involved in these new covered transactions can
On January 13, 2020, the Department of the Treasury
choose between providing voluntarily, a short (not to
issued final regulations to implement key parts of the
exceed five pages) written declaration to receive potential
Foreign Investment Risk Review Modernization Act
expedited consideration or approval by CFIUS, or the
(FIRRMA) (Title XVII, P.L. 115-232), which are intended
traditional longer written notification. A declaration is
to “strengthen and modernize” the national security review
mandatory however, for transactions where a foreign
of foreign direct investment (FDI) transactions by the
government has a “substantial interest,” and for investments
Committee on Foreign Investment in the United States
in some TID businesses involved in critical technologies
(CFIUS) (under P.L. 110-49). CFIUS is an interagency
(see below). The regulations specify the content and filing
body comprising nine Cabinet members and others as
processes for declarations and notices; misstatements or
appointed. The regulations, which largely concern CFIUS’s
omissions are subject to a fine of $250,000 per violation.
expanded review of certain real estate and noncontrolling
investments, became effective on February 13, 2020. These
FIRRMA also authorizes CFIUS to impose filing fees. On
rules were widely anticipated by various stakeholders for
May 1, Treasury issued an interim rule establishing fees for
clarifying key aspects of FIRRMA. Subsequently, a new
certain transactions. The tiered fee structure ranges from $0
rule proposed in May would amend the mandatory filing
to $300,000, depending on the transaction’s value (based on
requirements related to U.S. critical technology companies.
the operations of the U.S. parent company and its foreign
subsidiaries). Fees apply to filings of voluntary notices at
While various provisions of FIRRMA became effective
the time of the filing, but not declarations.
upon enactment in August 2018, the act also required
CFIUS to take certain actions within prescribed deadlines
One concern of some stakeholders has been the potential
for various programs, reporting, and regulations. Treasury
impact of CFIUS’s expanded jurisdiction on smaller U.S.
launched a pilot program in October 2018 effective through
businesses that rely on foreign investment. Treasury
February 12, 2020, regarding certain transactions involving
indicated that it does not expect the new rules to have a
critical technologies. The final regulations implement key
significant economic impact on small entities.
provisions of the program, with some changes.
Real Estate Transactions
The FIRRMA-amended CFIUS process maintains the
CFIUS’s expanded jurisdiction over certain real estate (land
President’s authority to block or suspend proposed or
and structures) transactions includes the purchase or lease
pending foreign “mergers, acquisitions, or takeovers” that
by, or a concession to, a foreign person of certain private or
could result in control of U.S. entities, including through
public real estate located in the United States. Real estate
joint ventures, that threaten to impair national security. The
transactions are defined as those that accord the investor
regulations expand and clarify new authority for CFIUS to
certain fundamental property rights. In particular, the
review certain real estate and other noncontrolling foreign
provision focuses on real estate that is in proximity of
investments on the basis of threats, vulnerabilities, and
certain airports, maritime ports , and other facilities and
consequences to national security. Reviews of
properties of the U.S. Government that are sensitive for
noncontrolling investments are limited to U.S. businesses
national security reasons (military installations include 190
(referred to as “TID businesses” for Technology,
facilities located across 40 States and Guam). CFIUS
Infrastructure, and Data) that (1) produce, design, test,
additionally retains the authority to review any transaction
manufacture, fabricate, or develop one or more critical
that raises national security concerns on the basis of
technologies (27 listed subsectors); or (2) performs certain
proximity to sensitive sites and activities.
functions with respect to critical infrastructure (28 systems
and assets specified); or (3) maintain or collect sensitive
The regulations specify various definitions, such as
personal data of U.S. citizens. One major aim of the
Stipulated airports: As defined by the Federal Aviation
regulations is to “provide clarity to the business and
Administration (FAA), major passenger and cargo
investment communities with respect to the types of U.S.
airports based on volume and “joint use airports” that
businesses that are covered under FIRRMA’s other
serve civilian and military aircraft;
investment authority.” The regulations limit the application
Close proximity: Areas within one mile of a relevant
of the expanded review process to certain categories of
military installation or other facility or property of the
foreign persons, introducing new terms such as “excepted
U.S. Government;
investor” and “excepted foreign state” for noncontrolling
Extended range: Areas between 1 and 100 miles;
transactions. To date, Treasury has identified Australia,
Facilities located within designated counties,
Canada, and the United Kingdom as excepted countries.
according to Appendix A; and
Off-shore ranges: Within 12 nautical miles of the U.S.
https://crsreports.congress.gov
CFIUS: New Foreign Investment Review Regulations
Excepted real estate transactions include (1) certain real
primary product or service. Data categories covered include
estate investors, defined as those with a substantial
certain financial, geolocation, and health data, as well as
connection to certain foreign countries and who have not
genetic testing results. Treasury emphasized that these
violated U.S. laws; (2) housing units; (3) urbanized areas
parameters were drafted to provide as much clarity and
and urban clusters (both defined by the Census Bureau); (4)
specificity as possible to businesses. These specifications
commercial office space (with some exceptions); (5) retail
do not constrain CFIUS’s traditional review of any
trade, accommodation, or food service establishments; (6)
transaction resulting in foreign control of a U.S. business.
lands held by Native Americans and some Alaskan Natives;
and (7) certain lending and contingent equity transactions.
The regulations do not target any particular country for
Requirements for filing a voluntary declaration or written
greater scrutiny by CFIUS—a major topic of congressional
notice are similar to those for other investment transactions.
debate during consideration of FIRRMA. FIRRMA did
The regulations define an excepted foreign investor through
however, mandate criteria that exempts certain categories of
various criteria, including holding the right to 5% or more
foreign investors from CFIUS’s expanded jurisdiction.
of the profit of the investing foreign firm, or the ability to
These criteria include the principal place of business and
exercise control.
incorporation, as well as ties to certain eligible countries.
Treasury identified three countries as “excepted foreign
Noncontrolling Equity Investments
states,” based on their intel sharing and defense industrial
CFIUS’s expanded authority directs it to review investment
base integration mechanisms with the U.S. A separate
transactions whether or not the investment conveys a
determining factor is whether a country is “effectively
controlling equity interest in cases where a foreign person
utilizing a robust process to analyze foreign investments for
has (1) access to information, certain rights, or involvement
national security risks and to facilitate coordination with the
in the decisionmaking of certain U.S. businesses involved
United States.” Any “excepted investors,” however, will not
in critical technologies, critical infrastructure, or sensitive
be exempt from CFIUS’s review of controlling transactions.
personal data (i.e., TID businesses); (2) any change in a
foreign person’s rights, if such change could result in
The process of notifying a transaction to CFIUS remains
foreign control of a U.S. business or a covered investment
largely voluntary. FIRRMA also provided new authority to
in certain U.S. businesses; and (3) any other transaction,
require a declaration, an abbreviated filing, with basic
transfer, agreement, or arrangement, designed or intended
information on the transaction. A declaration is mandatory
to evade or circumvent the CFIUS review process.
for transactions in which a foreign person has a “substantial
interest” of 25% in a U.S. business, and a foreign
In the first category, CFIUS can review noncontrolling
government (other than excepted states) holds a “substantial
investments in TID businesses if a foreign investor gains
interest” of 49% or greater in the foreign person. They also
1. access to any “material non-public technical
had been mandatory for controlling and noncontrolling
information” in the business’ possession;
investments in certain U.S. TID businesses involved in
2. membership or observer rights on the board
critical technologies for 27 specified industries. In May
of directors (or equivalent body); or
2020, however a new rule would replace the industry-based
3. involvement other than through voting of shares, in
requirement, with one based on export control licensing
“substantive decisionmaking” regarding the business. requirements—namely, if the U.S. company requires U.S.
regulatory authorization for the export, re-export, or
The regulations define the terms “material non-public
technical information” and “substantive
transfer of critical technology to certain transaction parties
decision-making,”
as well as foreign persons in the ownership chain. In these
and clarify the circumstances under which CFIUS can
cases, parties may also chose to file a notice instead of a
review an indirect investment through investment funds.
declaration. There are also exemptions to the mandatory
filing; for example, if transactions involve “excepted
FIRRMA regulations elaborate a number of important
investors” (e.g., exclusively nationals of Australia, Canada,
definitions that define and constrain the scope of CFIUS’s
UK), or for investment funds in certain cases.
reviews. The term “critical technologies” reflects the
definition in FIRRMA that covers various items, including
Issues for Congress
“emerging and foundational technologies,” which are to be
The new CFIUS regulations may raise a number of issues
identified through an interagency process and subject to
for Congress, including:
export controls, pursuant to the Export Control Reform Act
of 2018. Regarding “critical infrastructure,” the application
Are the regulations affecting new and existing FDI in
of CFIUS’s new jurisdiction is limited to 28 subsectors
the United States? Would the amended review process
listed in an appendix (such as energy, telecommunications,
potentially delay or expedite approvals?
and transportation), and specific business functions.
What impact are CFIUS’s additional authorities and
regulations regarding reviews of FDI in critical
“Sensitive personal data” that may be exploited to threaten
infrastructure, critical technologies, and emerging
national security includes 10 categories of “identifiable
technologies having on CFIUS activities?
data” held by U.S. businesses that (1) “target or tailor”
For more, see CRS In Focus IF10952, CFIUS Reform
products or services to certain populations (U.S. military or
Under FIRRMA, and CRS In Focus IF11135, Deadlines,
government personnel with national security functions); (2)
Programs, and Regulations Mandated by FIRRMA.
maintain or collect data on more than 1 million individuals;
or (3) have a demonstrated objective to maintain or collect
data on more than 1 million individuals as part of its
https://crsreports.congress.gov
CFIUS: New Foreign Investment Review Regulations
James K. Jackson, Specialist in International Trade and
Finance
Cathleen D. Cimino-Isaacs, Analyst in International Trade
and Finance
IF11334
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permissio n of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11334 · VERSION 7 · UPDATED