CFIUS notice filings re: U.S. Foreign Investment
The USA generally has a fairly open legal framework in regard to FDI (“foreign direct investment”), however there is still regulation on a number of specific aspects of foreign investment. For example:
The United States regulates a number monetary instruments when they physically enter the United States, we it regulates the banks which process electronic monetary transfers (those banks are for example required to file reports on large transfers).
The United States maintains prohibitions from entering into financial dealings with specific foreign countries, entities, and persons – these prohibitions appear as various sanction lists, embargoed parties lists, and denied party lists maintained by federal agencies.
The United States may impose requirements to report on foreign ownership – such as to the IRS, Department of Commerce, FCC, etc., in specific circumstances.
Committee on Foreign Investment in the United States (CFIUS)
CFIUS is an interagency committee that has been authorized to review transactions involving foreign investment in the United States. CFIUS does this to determine whether the such transactions will impact the national security of the United States. Traditionally, CFIUS focused on “control interests” that impact a U.S. national security interest, such as for example a PRC owned-company acquiring a major U.S. technology company. In such instances, the foreign ownership, control, or influence (FOCI) that might allow a foreign investor access to classified information (or information subject to export controls) made it more obvious for counsel to recommend a CFIUS filing.
Post-2018 heightened geopolitical tensions have taken U.S.-China relations in new directions, and new legislation has been crafted (FIRRMA) to broaden the previously voluntary reporting provisions (Title 31 part 800 et. seq.). Under FIRRMA there can be civil penalties for non-reporting under CFIUS.
CFIUS Pilot program and interim regulations:
The BIS is swiftly moving forward to clarify the scope of the new terms such as “critical technologies” and “emerging and foundational technologies.”
U.S. companies taking large foreign investments (particularly from China) should made themselves aware of the CFIUS reporting obligations, and contact an attorney to ensure that these reports are filed appropriately.