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FIRMMA takes shape with proposed rules

New law strengthens U.S. government’s national security oversight of foreign investments in American companies that manufacture “critical” technologies and infrastructure, as well as own airport and seaport properties.

The U.S. Treasury Department proposes rules to further implement the 2018 Foreign Investment Risk Review Modernization Act (FIRMMA). Photo credit: Shutterstock

The Treasury Department proposed regulations on Sept. 17 that will expand U.S. government national security reviews of foreign investments in American-made technologies and properties.

On Aug. 13, 2018, the Foreign Investment Risk Review Modernization Act (FIRMMA) was signed into law by President Donald Trump to address concerns arising from certain foreign “non-controlling” investments and real-estate transactions that previously fell outside the jurisdiction of the Committee on Foreign Investment in the U.S. (CFIUS).

Under FIRMMA, a U.S. company that “produces, designs, tests, manufactures, fabricates or develops one or more critical technologies” may undergo heightened scrutiny by CFIUS.

Most critical technologies are already subject to existing U.S. and international export-control regimes, in addition to so-called “emerging” and “foundational” technologies that are controlled through the 2018 Export Control Reform Act (ECRA).


The ECRA requires the Commerce Department’s Bureau of Industry and Security (BIS) to establish appropriate controls on exports, re-exports and in-country transfers of both emerging and foundational technologies to prevent foreign weapons manufacturing, intelligence gathering and terrorist activities that are detrimental to U.S. national security.

Examples of emerging technologies, which were identified by BIS, include synthetic biology, computer vision, artificial intelligence cloud technologies, stacked memory on chips, quantum computing, mobile electric power, micro-drone and micro-robotic systems, “smart dust” and propulsion technologies.

Foundational technologies, which pose national security concerns but may not be adequately controlled for export purposes, will be considered by the Commerce Department soon.

The proposed FIRMMA regulations also enhance oversight of proposed foreign investments in U.S. companies involved with “critical infrastructure,” including energy, utilities, telecommunications and transportation, as well as those U.S. companies that collect “sensitive personal data” for health care, finance and geolocation purposes.


In addition, FIRMMA authorizes CFIUS to review the foreign purchase and lease of real estate that is located within U.S. airports and seaports, as well as in proximity to U.S. military installations.

Comments related to the proposed FIRMMA rules are due to the Treasury Department by Oct. 17. FIRMMA requires that final regulations become effective by Feb. 13, 2020.

Treasury Secretary Steven Mnuchin said in a statement that the proposed FIRMMA regulations are not intended to dampen foreign investments in U.S. companies but to “provide clarity and certainty to investors regarding CFIUS’s enhanced authorities to address national security risks that arise from certain foreign investments, and continue modernizing the CFIUS process.”

CFIUS is chaired by the treasury secretary, and its members include Justice, Homeland Security, Commerce, Defense, State and Energy Department secretaries, as well as the heads of the offices of the U.S. Trade Representative and Science and Technology Policy.

U.S. companies with foreign investment proposals may voluntarily request CFIUS reviews. During the review period, the committee analyzes the transaction to identify and address potential national security risks. The reviews must be completed within 45 days.

However, CFIUS has the authority to recommend that the president blocks transactions. Since the committee’s start in 1975, only five investments have been blocked.

In 2006, Dubai Port World’s proposed acquisition of six U.S. port operations was scuttled over terrorism concerns.

In recent years, more attention has been placed on national-security concerns involving Chinese investments in U.S. technology and infrastructure companies. Under advice from CFIUS, President Barack Obama in 2016 stopped Chinese-owned American firm Ralls Corp. from acquiring the assets of a wind farm close to a U.S. military installation, and in 2017 and 2018, respectively, President Trump blocked the Chinese investments in Lattice Semiconductor Corp. and Qualcomm.


Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.