CFIUS pilot adds layer of export control

The Committee on Foreign Investment in the United States is expanding reviews of foreign acquisitions involving sensitive U.S. technologies and intellectual property.    The Committee on Foreign Investment in the United States (CFIUS) has initiated a pilot program that will expand its reviews of foreign acquisitions involving sensitive U.S. technologies and intellectual property.
   This regulatory expansion was part of the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA), which was signed into law by President Donald Trump in August.
   FIRRMA authorizes CFIUS, which is chaired by the Treasury Department and comprises representatives from a dozen Cabinet-level agencies and departments, to conduct pilot programs to implement provisions in the legislation that did not take effect immediately upon enactment. Full implementation of FIRRMA will occur by February 2020.
   Before FIRRMA, CFIUS’s authority to review foreign investments in U.S. technologies for national security purposes was more limited. 
   “Together, the pace of technological change in certain critical technology industries, the significant growth in foreign investment in certain industries relevant to national security and the current inability of CFIUS to examine certain non-controlling transactions creates urgent and compelling circumstances for the pilot program,” Treasury said in a Federal Register notice published Thursday.
   The pilot program, which starts Nov. 10, will expand CFIUS’s authority to review “other investments” made by foreign persons that do not constitute an acquisition of control over a U.S. business. 
   The pilot program covers any U.S. business that “produces, designs, tests, manufactures, fabricates or develops a critical technology” that is used by the U.S. business or one of the 27 industries covered by the pilot program. This entails all critical technologies, as defined by FIRRMA, including emerging and foundational technologies controlled under the 2018 Export Control Reform Act, included as part of FIRRMA. Air carrier investments will not be covered the pilot program.
   Treasury said mandatory declarations will be established for those foreign investment reviews that fall under the CFIUS pilot program. These declarations must be filed at least 45 days before a transaction’s expected completion date. CFIUS will then have 30 days to take action. Parties that fail to file this information with CFIUS risk paying civil penalties up to the value of the transaction.