[Federal Register Volume 85, Number 12 (Friday, January 17, 2020)]
[Rules and Regulations]
[Pages 3112-3156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00188]
[[Page 3111]]
Vol. 85
Friday,
No. 12
January 17, 2020
Part II
Department of the Treasury
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Office of Investment Security
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31 CFR Parts 800 and 801
Provisions Pertaining to Certain Investments in the United States by
Foreign Persons; Final Rule
Federal Register / Vol. 85 , No. 12 / Friday, January 17, 2020 /
Rules and Regulations
[[Page 3112]]
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DEPARTMENT OF THE TREASURY
Office of Investment Security
31 CFR Parts 800 and 801
RIN 1505-AC64
Provisions Pertaining to Certain Investments in the United States
by Foreign Persons
AGENCY: Office of Investment Security, Department of the Treasury.
ACTION: Final rule; and interim rule with request for comments.
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SUMMARY: The final rule revises regulations that implement certain
provisions of section 721 of the Defense Production Act of 1950, as
amended by the Foreign Investment Risk Review Modernization Act of 2018
(FIRRMA). The interim rule also adds a new definition for the term
``principal place of business'' and the Department of the Treasury is
seeking comments on this definition. While this rule retains many
features of the prior regulations, the rule makes a number of
substantive changes, primarily to implement FIRRMA.
DATES:
Effective date: The final rule is effective on February 13, 2020.
The interim rule regarding Sec. 800.239 is effective on February 13,
2020.
Applicability date: See Sec. 800.104.
Comment date: The Department of the Treasury (Treasury Department)
is seeking written comments from the public on the definition of
``principal place of business'' found at Sec. 800.239, which must be
received by February 18, 2020.
ADDRESSES: Written comments on Sec. 800.239 may be submitted through
one of two methods:
Electronic Submission: Comments may be submitted
electronically through the Federal government eRulemaking portal at
https://www.regulations.gov. Electronic submission of comments allows
the commenter maximum time to prepare and submit a comment, ensures
timely receipt, and enables the Treasury Department to make the
comments available to the public.
Mail: Send to U.S. Department of the Treasury, Attention:
Laura Black, Director of Investment Security Policy and International
Relations, 1500 Pennsylvania Avenue NW, Washington, DC 20220.
Please submit comments only and include your name and company name
(if any), and cite ``Provisions Pertaining to Certain Investments in
the United States by Foreign Persons'' in all correspondence. In
general, the Treasury Department will post all comments to https://www.regulations.gov without change, including any business or personal
information provided, such as names, addresses, email addresses, or
telephone numbers. All comments received, including attachments and
other supporting material, will be part of the public record and
subject to public disclosure. You should only submit information that
you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT: Laura Black, Director of Investment
Security Policy and International Relations; Meena R. Sharma, Deputy
Director of Investment Security Policy and International Relations;
David Shogren, Senior Policy Advisor; or Alexander Sevald, Senior
Policy Advisor, at U.S. Department of the Treasury, 1500 Pennsylvania
Avenue NW, Washington, DC 20220; telephone: (202) 622-3425; email:
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
A. The Statute and Proposed Rules
On August 13, 2018, the Foreign Investment Risk Review
Modernization Act of 2018 (FIRRMA), Subtitle A of Title XVII of Public
Law 115-232, 132 Stat. 2173, became law. FIRRMA amended and updated
section 721 (section 721) of the Defense Production Act of 1950 (DPA),
which delineates the authorities and jurisdiction of the Committee on
Foreign Investment in the United States (CFIUS or the Committee).
FIRRMA maintains the Committee's jurisdiction over any transaction
which could result in foreign control of any U.S. business, and it
broadens the authorities of the President and CFIUS under section 721
to review and to take action to address any national security concerns
arising from certain non-controlling investments and real estate
transactions. Additionally, FIRRMA modernizes CFIUS's processes to
better enable timely and effective reviews of transactions falling
under its jurisdiction. In FIRRMA, Congress acknowledged the important
role of foreign investment in the U.S. economy and reaffirmed the
United States' open investment policy, consistent with the protection
of national security. See section 1702(b) of FIRRMA.
FIRRMA requires the issuance of regulations implementing its
provisions. In Executive Order 13456, 73 FR 4677 (January 23, 2008),
the President directs the Secretary of the Treasury to issue
regulations implementing section 721. On October 11, 2018, the Treasury
Department published its first rulemaking under FIRRMA in the form of
an interim rule, which amended the regulations in part 800 to
implement, and make updates consistent with, certain provisions of
FIRRMA that became immediately effective (October 2018 Interim Rule).
See 83 FR 51316 (October 11, 2018). The October 2018 Interim Rule took
effect on November 10, 2018.
The Treasury Department published a second interim rule on October
11, 2018, pursuant to section 1727(c) of FIRRMA, setting forth the
scope of, and procedures for, a pilot program to review certain
transactions involving foreign persons and critical technologies (Pilot
Program Interim Rule). See 83 FR 51322 (October 11, 2018). The Pilot
Program Interim Rule, which took effect on November 10, 2018,
implemented jurisdiction over, and established mandatory declarations
for, certain transactions involving investments by foreign persons in
certain U.S. businesses that produce, design, test, manufacture,
fabricate, or develop one or more critical technologies.
On September 24, 2019, the Treasury Department published two
proposed rules to implement provisions of FIRRMA. See 84 FR 50174
(September 24, 2019); 84 FR 50214 (September 24, 2019). (The Office of
the Federal Register made versions available for public inspection on
September 17, 2019.) Public comments on the proposed rules were due by
October 17, 2019.
The proposed rule at 84 FR 50174 proposed amendments to CFIUS
regulations codified at part 800 of title 31 of the Code of Federal
Regulations (CFR). These provisions specifically relate to CFIUS's
authorities and the process and procedures to review: (1) A merger,
acquisition, or takeover by or with a foreign person that could result
in foreign control of a U.S. business; (2) a non-controlling ``other
investment'' that affords a foreign person specified access to
information in the possession of, rights in, or involvement in the
substantive decisionmaking of certain U.S. businesses related to
critical technologies, critical infrastructure, or sensitive personal
data; (3) any change in a foreign person's rights if such change could
result in foreign control of a U.S. business or an ``other investment''
in certain U.S. businesses; or (4) any other transaction, transfer,
agreement, or arrangement, the structure of which is designed or
intended to evade or circumvent the application of section 721. Further
explanation of FIRRMA and the proposed provisions can be found in the
proposed rule at 84
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FR 50147; changes to the proposed rule are explained in further detail
below.
The proposed rule at 84 FR 50214, which proposed regulations to
implement the provisions of FIRRMA related to CFIUS's new jurisdiction
to review certain types of transactions involving real estate in the
United States, is being finalized in a separate and concurrent
rulemaking. That rule adds a part 802 to chapter VIII of title 31 of
the CFR to implement FIRRMA's expansion of CFIUS's jurisdiction over
transactions involving the purchase or lease by, or concession to, a
foreign person of certain real estate in the United States.
FIRRMA also authorizes the Committee to assess and collect fees
with respect to covered transactions for which a written notice is
filed. The Treasury Department will publish a separate proposed rule
implementing the Committee's fee authority at a later date.
B. Structure of FIRRMA Rulemaking and This Rule
Consistent with CFIUS processes generally, this rule reflects
extensive consultation with CFIUS member agencies, as well as other
relevant U.S. Government agencies. Given the specificity of certain
provisions of the rule, the Treasury Department anticipates that it
will periodically review, and when necessary, amend the regulations to
address changes in technology, data use, and the national security
landscape more generally.
This action finalizes the revisions to part 800. The rule retains
many features of the provisions of part 800 prior to their revision by
the October 2018 Interim Rule and this rule. See 73 FR 70702 (November
21, 2008) (Prior Regulations), while implementing the changes that
FIRRMA made to CFIUS's jurisdiction and process. In amending part 800
to incorporate CFIUS's new jurisdiction over certain non-controlling
``other investments'' (which this rule describes as ``covered
investments''), certain conforming revisions were made to existing
provisions. For example, the coverage section in subpart C of the rule
regarding ``covered control transactions'' is based on the ``covered
transactions'' section in the Prior Regulations and provides examples
illustrating transactions that are covered control transactions and
those that are not. There is also now a covered investment section
within the coverage section in subpart C that provides examples
illustrating transactions that are covered under the new jurisdiction.
The rule seeks to provide clarity to the business and investment
communities with respect to the types of U.S. businesses that are
covered under FIRRMA's ``other investment'' authority.
The rule also incorporates the changes made to part 800 in the
October 2018 Interim Rule published in October 2018, 83 FR 51316
(October 11, 2018), and updates certain other provisions, generally as
a result of written submissions received during this rule's public
comment period and the public comment period of the Pilot Program
Interim Rule, such as amending the definitions of ``excepted investor''
and ``sensitive personal data,'' clarifying the application of the
``incremental acquisition rule,'' refining several examples, and making
adjustments to the information requirements for declarations and
notices. In response to public comments, this action also implements an
interim rule with respect to the definition of ``principal place of
business'' at Sec. 800.239, and the Treasury Department is seeking
public comment on this definition.
In the proposed rule, the Treasury Department noted that it was
considering whether to retain the mandatory filing requirement under
the Pilot Program Interim Rule. The rule incorporates many of the
provisions of the Pilot Program Interim Rule, including the mandatory
filing requirements for covered transactions involving critical
technologies. However, the Treasury Department anticipates issuing a
notice of proposed rulemaking that would revise the mandatory
declaration requirement regarding critical technology at Sec.
800.401(c) from one based upon North American Industry Classification
System (NAICS) codes to one based upon export control licensing
requirements.
As noted in the Pilot Program Interim Rule, the pilot program was
temporary and was required by FIRRMA to end no later than March 5,
2020. This rule modifies the applicability of the pilot program so that
it applies only to transactions for which specified actions were taken
prior to the effective date of this rule. Because the Committee retains
jurisdiction over pilot program covered transactions that were subject
to the Pilot Program Interim Rule during the period of its
effectiveness, the regulations at part 801 will remain in chapter VIII
of title 31 of the CFR for reference. Accordingly, this rule revises
the applicability rule in part 801, at Sec. 801.103, to specify that
part 801 applies only to pilot program covered transactions (as defined
in part 801) for which specified actions occurred between November 10,
2018, and February 12, 2020.
II. Overview of Comments on the Proposed Rule and the Pilot Program
Interim Rule
During the public comment period, the Treasury Department received
a number of written submissions on the proposed rule reflecting a wide
range of views. All comments received by the end of the comment period
are available on the public rulemaking docket at https://www.regulations.gov. Additionally, the Treasury Department hosted a
public teleconference call to discuss the proposed rule on September
27, 2019, and a summary is available on the Committee's section of the
Treasury Department website.
Following the publication of the Pilot Program Interim Rule in
October 2018, the Treasury Department also received a number of written
comments on that rule, which are similarly available on the public
rulemaking docket and are addressed herein.
The Treasury Department considered each comment submitted. Some of
the comments were general in nature, for example, supporting the
Treasury Department's efforts and approach with respect to aspects of
the proposed rule. Other commenters noted the potential impact of the
proposed rule and the Pilot Program Interim Rule on foreign investment
in the United States. The Treasury Department recognizes the vital
importance of foreign investment to the U.S. economy. The Treasury
Department drafted the proposed rule and Pilot Program Interim Rule,
and made revisions in finalizing the rule, to protect U.S. national
security from the risk posed by certain foreign investment while at the
same time maintaining the open foreign investment policy of the United
States. The Treasury Department has determined that the specificity
provided in the rule--with respect to, for example, identification of
covered investment critical infrastructure in the appendix and specific
categories of sensitive personal data--provides clarity to the business
and investment communities with respect to the types of transactions
that are covered by the Committee's new authority under FIRRMA. The
Treasury Department will evaluate implementation of the rule and will
provide, as appropriate, additional information to assist the public.
Some comments requested clarification of specific provisions. Where
appropriate, the Treasury Department provided additional clarification
in the text of the rule and included more illustrative examples. Some
commenters, however, requested greater specificity than is feasible in
regulations of general applicability, or
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revisions that conflict with the Committee's statutory authority under
FIRRMA. The section-by-section analysis below includes responses to
comments. Further edits were made to the rule for consistency and
clarity.
In addition to comments on the substance of the rule, two
commenters requested an extension of the public comment period for the
proposed rule. The Treasury Department did not extend the public
comment period in light of the fixed effective date established by
FIRRMA. The Treasury Department anticipates that it will periodically
review, and as necessary, make changes to the regulations (and any
appendices), consistent with applicable law and, when appropriate, will
provide the public an opportunity to comment.
III. Discussion of the Rule
a. Relationship With Part 802
Before addressing individual sections of the rule raised in the
comments or otherwise revised from the proposed rule, it is important
to address the relationship between this rule and the new rule for part
802 of this chapter, which as noted is being issued concurrently with
this rule.
The new part 802 clarifies that a ``covered transaction,'' as
defined by this part 800, that also includes the purchase, lease, or
concession of ``covered real estate,'' as that term is defined in part
802, is not a ``covered real estate transaction,'' as defined in part
802. If a party intends to notify CFIUS of a transaction as subject to
this part 800, the transaction should not be notified under part 802.
The concurrent rulemaking for part 802 discusses the relationship
between the two rules in greater detail.
b. Interim Rule: Section 800.238--Principal Place of Business
This rule includes a definition of ``principal place of business''
as an interim rule. The interim rule is effective as of February 13,
2020, and the Treasury Department is seeking public comment on the new
definition through February 18, 2020. The substance of the new
definition is discussed below in conjunction with comments received to
Sec. 800.220 (definition of ``foreign entity'').
c. Summary of Comments and Changes From the Proposed Rule
1. Subpart A--General
Section 800.104--Applicability Rule
The rule makes clarifying edits to Sec. 800.104 by inserting the
date the regulations become effective (February 13, 2020), as well as
clarifying that the Pilot Program Interim Rule will, going forward,
apply only to transactions for which specified actions were taken on or
after the effective date of the Pilot Program Interim Rule and prior to
the effective date of this rule. This rulemaking includes conforming
amendments to part 801 at Sec. 801.104 to specify which transactions
remain subject to part 801. As discussed further below, certain aspects
of the mandatory declaration provisions of the Pilot Program Interim
Rule have been incorporated into part 800 through this rule.
Section 800.105--Rules of Construction and Interpretation
The rule adds a new section to clarify that the examples included
in the regulations are provided for informational purposes and should
not be construed to alter the meaning of the text of the regulations in
this part, as well as to clarify that, as used throughout the
regulations, the term ``including'' means ``including without
limitation.''
2. Subpart B--Definitions
The proposed rule made several changes to the definitions in the
Prior Regulations and added several new definitions that are broadly
applicable to both covered control transactions and covered
investments.
Before addressing individual definitions, the Treasury Department
notes that one commenter remarked that the regulations do not define
``national security.'' The rule makes no change to subpart B in
response to this comment. In evaluating any transaction, CFIUS's
analysis is guided by the law, including the applicable legislation.
FIRRMA states that it is the sense of Congress that the Committee
``should continue to review transactions for the purpose of protecting
national security and should not consider issues of national interest
absent a national security nexus.'' See Section 1702(b)(9) of FIRRMA.
Section 721(f) of the DPA provides an illustrative list of factors for
consideration by the Committee and the President in determining whether
a covered transaction poses a national security risk. Additionally, the
Treasury Department previously published Guidance Concerning the
National Security Review Conducted by CFIUS, 73 FR 74567 (December 8,
2008), which is still in effect.
Section 800.206--Completion Date
The proposed rule included a definition for ``completion date'' to
clarify that, in the event that a covered transaction will be
effectuated through multiple or staged closings, the completion date is
the earliest date on which any transfer of interest or change in rights
that constitutes a covered transaction occurs.
Commenters expressed concern that parties may be required to submit
a declaration 30 days before completing the acquisition of a contingent
equity interest, but that, under Sec. 800.308 (i.e., the timing rule
for a contingent equity interest), the Committee could conclude that
there is no covered transaction until the interest is converted.
Commenters suggested that the definition of ``completion date'' be
further refined to explicitly exclude transfers of contingent equity
interests that are not subject to CFIUS jurisdiction consistent with
Sec. 800.308.
The rule makes no change to Sec. 800.206 in response to these
comments. The acquisition of a contingent equity interest alone,
without the acquisition of control or the access, rights, or
involvement specified in Sec. 800.211(b), is not a covered
transaction. Where a party later acquires control or the access,
rights, or involvement specified in Sec. 800.211(b) in connection with
the earlier acquisition of a contingent equity interest, the submission
of a mandatory declaration, if applicable, is required 30 days before
the acquisition of such control or the access, rights, or involvement
specified in Sec. 800.211(b). The timing rule under Sec. 800.308
specifies when a party will be considered to have acquired control or
the access, rights, or involvement specified in Sec. 800.211(b) (i.e.,
upon actual conversion of the contingent equity interest, or upon
initial acquisition of the contingent equity interest if certain
factors are present).
Section 800.208--Control
Although the proposed rule did not significantly modify the
definition of ``control'' from the Prior Regulations, commenters
suggested that the threshold for control is too low, thereby
discouraging foreign investment in U.S. companies. Commenters also
requested additional clarifications, such as whether the rights
described in Sec. 800.307(a)(4) should be added to Sec. 800.208.
Finally, commenters suggested incorporating the excepted investor
concept into the definition of ``control.''
The rule makes no change to Sec. 800.208 in response to these
comments. As noted in the preamble to the proposed rule, FIRRMA
maintains the Committee's jurisdiction over any transaction which could
result in foreign control of any U.S. business, and
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provides no legislative direction to substantively narrow the existing
definition of ``control.'' In addition, given the many changes to the
regulations required by FIRRMA, the Treasury Department determined that
substantive amendments to the well-established control standard would
not advance the goal of transactional certainty at this time. The
Treasury Department also notes that additional information regarding
control transactions is available in responses to certain frequently
asked questions that may be found at the Committee's section of the
Treasury Department website.
Furthermore, as noted in the preamble to the proposed rule, the
excepted investor concept addresses FIRRMA's requirement that the
Committee limit the application of FIRRMA's expanded jurisdiction over
covered investments to certain categories of foreign persons. The
Treasury Department followed this legislative direction by limiting the
excepted investor concept to covered investments, and not extending it
to control transactions, thereby maintaining the same jurisdiction over
control transactions as in the Prior Regulations.
Regarding the limited partner rights described in Sec.
800.307(a)(4), each of the rights is already substantively covered in
Sec. 800.208(a). While the rule makes no specific revisions to Sec.
800.208 with respect to limited partners, the rule does provide
additional clarification for investment funds in other provisions,
including in the definitions of ``principal place of business'' and
``substantial interest,'' and in Sec. 800.401.
Finally, the rule makes a technical correction to Sec.
800.208(c)(4) to clarify that anti-dilution protections are more
accurately characterized as a right instead of a power.
Section 800.211--Covered Investment
The proposed rule used the term ``covered investment'' to capture
an investment by a foreign person in certain types of U.S. businesses
that affords the foreign person certain access to information in the
possession of, rights in, or involvement in the substantive
decisionmaking of such U.S. businesses but that does not afford the
foreign person control over the U.S. business. One commenter requested
clarification regarding the applicability of the access, rights, or
involvement described in Sec. 800.211(b) in situations in which the
U.S. business that produces, designs, tests, manufactures, fabricates,
or develops the critical technology is a subsidiary of the U.S.
business in which the foreign person invests. The rule adds an example
showing the application of Sec. 800.211(b) in situations where the
investment affords a foreign person membership or observer rights on
the board of directors or equivalent governing body of a U.S. business
that operates as a TID U.S. business through a subsidiary.
Other commenters requested additional clarification regarding the
meaning of ``access to material nonpublic technical information,''
including the timing of access and whether theoretical or potential
access should be included. The rule makes no change to Sec. 800.211 in
response to these comments. CFIUS's new jurisdiction under FIRRMA is
established once a foreign investor in a TID U.S. business has been
afforded access to material nonpublic technical information, regardless
of whether or when the investor exercises the right of access.
Section 800.212--Covered Investment Critical Infrastructure
To distinguish the subset of critical infrastructure that is
relevant for the Committee's jurisdiction over covered investments from
critical infrastructure more broadly, the proposed rule created a new
term, ``covered investment critical infrastructure.'' This definition
references a list of specific systems and assets in appendix A of the
rule. As noted in the preamble to the proposed rule, the subset of
critical infrastructure identified in appendix A does not alter the
definition of ``critical infrastructure'' as used in any other
regulatory regime or context. Different commenters suggested either
narrowing this subset or expanding it, for example to include railcars
and communication equipment. The rule makes no change to Sec. 800.212
or appendix A in response to these comments. Appendix A reflects
extensive consultation with subject matter experts at CFIUS member
agencies, as well as other relevant U.S. Government agencies, who, in
developing appendix A, considered, among other factors, whether other
U.S. Government authorities provided adequate protections for national
security. The Treasury Department will evaluate implementation of the
rule, and when necessary, revise the regulations (and any appendices)
to address changes in the national security landscape.
Section 800.213--Covered Transaction
The proposed rule defined ``covered transactions'' to include
covered control transactions, covered investments, changes in a foreign
person's rights with respect to a U.S. business that could result in
foreign control of a U.S. business or a covered investment in certain
U.S. businesses, and transactions structured to evade or circumvent
CFIUS review. Commenters sought additional information about what types
of changes in rights trigger CFIUS's jurisdiction over a covered
transaction, including in the context of a foreign investor in a U.S.
business exercising the right to purchase additional interest to
prevent the dilution of its pro rata interest. Commenters also
suggested that transactions falling below a minimum threshold for the
investment amount or the annual revenue of the U.S. business should be
exempted from the definition of ``covered transaction.''
The rule makes no change to Sec. 800.213 in response to these
comments. With respect to a change in rights that results in a
``covered transaction,'' the rule provides examples in Sec.
800.213(e)(1) and (2), respectively (note that these and certain other
examples were moved to Sec. 800.213 from subpart C for clarity).
Additionally, the examples in Sec. 800.304(f)(2) and (5) address the
acquisition of additional equity interest. With respect to implementing
a minimum threshold for a covered transaction, the Treasury Department
has determined that a categorical exemption for transactions below a
minimum threshold is unwarranted. The Committee evaluates each
transaction based upon the particular facts and circumstances,
including the size of the investment and other factors.
Section 800.215--Critical Technologies
The proposed rule defined ``critical technologies'' as set forth in
FIRRMA. Commenters recommended narrowing the definition and noted that
the Department of Commerce, at the time of the proposed rule, had yet
to define emerging and foundational technologies under section 1758 of
the Export Control Reform Act of 2018 (ECRA). The rule makes no change
to Sec. 800.215 in response to these comments. FIRRMA defines
``critical technologies,'' and FIRRMA does not give the Treasury
Department discretion to change this statutory definition through these
regulations. Accordingly, the rule does not independently define
emerging and foundational technologies. Rather, it incorporates by
cross-reference the emerging and foundational technologies that the
Department of Commerce identifies pursuant to a separate rulemaking, as
required by ECRA.
Section 800.218--Excepted Foreign State
The proposed rule defined ``excepted foreign state'' to refer to a
group of eligible foreign states for purposes of
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implementing FIRRMA's requirement that the Committee limit the
application of FIRRMA's expanded jurisdiction over covered investments
to certain categories of foreign persons. The Treasury Department
received several comments on this definition, including requests that
the Committee publish the criteria by which a foreign state is
identified as an eligible foreign state. Other commenters suggested
that the Committee identify certain countries or certain defined lists
of countries as excepted foreign states. Some commenters recommended
against the excepted foreign state and excepted investor provisions and
argued that the provisions treat allies of the United States
differently from other countries.
The rule makes no change to Sec. 800.218 in response to these
comments. As noted above, FIRRMA directs that implementing regulations
must limit the application of ``other investment'' jurisdiction to
certain categories of foreign persons, and the Treasury Department
therefore cannot eliminate the concepts of excepted foreign state and
excepted investor entirely without adopting an alternative limitation.
With respect to the eligible foreign states, the Committee has
initially selected Australia, Canada, and the United Kingdom of Great
Britain and Northern Ireland. The Committee identified these countries
due to aspects of their robust intelligence-sharing and defense
industrial base integration mechanisms with the United States.
Additionally, as noted in the preamble to the proposed rule, the
concept and definition of ``excepted foreign states'' are new and an
expansive application carries potentially significant implications for
the national security of the United States. Consequently, the Committee
is initially identifying a limited number of eligible foreign states
and may expand the list in the future.
The rule revises Sec. 800.218 to clarify that the definition of
``excepted foreign state'' operates as a two-criteria conjunctive test,
with delayed effectiveness for the second criterion. Thus, as of
February 13, 2020, each of the three foreign states that the Committee
identifies as an eligible foreign state will be an excepted foreign
state, without regard to the second criterion (i.e., favorable
determination under Sec. 800.1001). In order for each of these
countries to remain an excepted foreign state after the end of the two-
year delayed effectiveness period (i.e., February 13, 2022), the
Committee must make a determination under Sec. 800.1001. This two-year
period is intended to provide these initial eligible foreign states
time to ensure that their national security-based foreign investment
review processes and bilateral cooperation with the United States on
national security-based investment reviews meet the requirement under
Sec. 800.1001. This two-year period also provides the Committee time
to develop processes and procedures for making determinations under
Sec. 800.1001, which could be applied to a broader group of countries
in the future. In selecting the initial eligible foreign states, the
Committee takes no position on whether the foreign states currently
meet the determination factors discussed below at Sec. 800.1001.
Finally, the rule removes language regarding internal Committee
processes (for which a conforming change was also made in Sec.
800.1001), and revises note 1 to Sec. 800.218 to clarify the
publication mechanics for identifying the foreign states that have met
each of the two separate criteria of the definition of ``excepted
foreign state.''
Section 800.219--Excepted Investor
The proposed rule set forth a definition of ``excepted investor,''
taking into account increasingly complex ownership structures and
accounting for such structures in the application of the Committee's
jurisdiction. Commenters suggested relaxing the criteria to allow more
entities to qualify as excepted investors, including the criteria
related to the nationality of board members and observers, the
percentage ownership limit for an individual investor in an excepted
investor, and the minimum excepted ownership. In response to these
comments, the rule modifies the definition of ``excepted investor.''
First, the board member nationality criterion is revised to allow up to
25 percent representation by foreign nationals of foreign states that
are not excepted foreign states. Second, the percentage ownership limit
for an individual investor in an excepted investor is revised from five
to 10 percent. Third, the definition of ``minimum excepted ownership''
under Sec. 800.233 is revised as discussed below.
One commenter suggested that the Committee narrow the types of
felonies that disqualify an investor from excepted investor status to
those relating to national security. The rule makes no change to Sec.
800.219 in response to this comment. Because excepted investor status
limits the Committee's jurisdiction, the regulations appropriately
preserve jurisdiction over transactions by foreign investors that have
been convicted of, or entered into a deferred prosecution agreement or
non-prosecution agreement with the Department of Justice with respect
to, any felony, in the five years prior to the completion date of the
transaction.
Some commenters requested that the Committee consider the specific
commenters themselves to be excepted investors or sought additional
information regarding the process to qualify as an excepted investor,
including how an excepted investor can prove that status, or whether an
excepted investor would receive a form or certificate from the
Committee establishing that status. The rule makes no change to Sec.
800.219 in response to these comments. There is no separate process for
the Committee to provide a determination for a prospective investor on
whether it qualifies as an excepted investor. As with other
jurisdictional determinations, parties themselves should assess whether
they qualify as excepted investors.
Commenters suggested that the Committee adopt a category similar to
excepted investor, which some termed ``trusted investor,'' that would
allow certain investors who are not connected to an excepted foreign
state to receive the benefits of excepted investor status. Commenters
further suggested various criteria for this ``trusted investor''
concept, including the individual investor's previous interactions with
the Committee, the investor's record of compliance with mitigation
agreements, and whether the investor is subject to an agreement to
mitigate foreign ownership, control, or influence (FOCI) pursuant to
the National Industrial Security Program regulations.
The rule makes no change to Sec. 800.219 in response to these
comments. Consistent with FIRRMA, the ``excepted investor'' definition
focuses on the investor's connection to an excepted foreign state,
which provides the greatest clarity to the business and investment
communities while protecting national security interests. Such a
definition also furthers the Committee's efforts to encourage partner
countries to implement robust processes to review foreign investment in
their countries and increase cooperation with the United States.
Notably, the ``excepted investor'' definition eliminates Committee
jurisdiction for specified transactions by certain investors.
Therefore, some criteria suggested by commenters as part of the
``trusted investor'' concept are less suitable for determining
jurisdiction and more suitable for other aspects of the rule, such as
determining which parties must make mandatory filings under Sec.
800.401. For example, the rule now provides an exception to mandatory
filings for foreign
[[Page 3117]]
investments via FOCI-mitigated entities under Sec. 800.401, as
discussed below.
One commenter cautioned that the public may equate excepted
investor status with trust and may misconstrue that an investor who
does not qualify as an excepted investor is not trusted and could
present greater national security concerns. In this regard, it is
important to note that not qualifying as an excepted investor should
not be interpreted as an individualized assessment that the particular
foreign person poses a threat to national security.
Commenters expressed an inaccurate view of the minimum excepted
ownership criterion's application up the ownership chain of the foreign
person. All of the conditions under Sec. 800.219(a)(3), including the
minimum excepted ownership conditions, apply to each ``parent'' (as
defined at Sec. 800.235) of the foreign person.
Finally, the rule revises Sec. 800.219(b) to specify when the
ownership interests of separate foreign persons will be aggregated for
the purposes of Sec. 800.219(a)(3)(iv). The rule also modifies Sec.
800.219(d) to include the criteria in Sec. 800.219(c)(1)(i) through
(iii) in order to retain jurisdiction over certain transactions where
the foreign investor is deemed not to be an excepted investor
subsequent to the transaction due to action by the President under
section 721, or enforcement by the Committee of violations under this
part, parts 801 or 802, or section 721.
Section 800.220--Foreign Entity/New Section 800.239--Principal Place of
Business
The proposed rule did not change the definition of ``foreign
entity'' from the Prior Regulations. Commenters requested further
clarification regarding CFIUS's jurisdiction over transactions by
investment funds, and recommended revising the definition of ``foreign
entity'' to focus on control by foreign persons, rather than the amount
of equity held by foreign persons. Other commenters urged the Committee
to provide additional clarity by defining ``principal place of
business.'' The rule makes no change to Sec. 800.220, but does include
a new definition of ``principal place of business'' as an interim rule
at Sec. 800.239 in response to these comments.
The proposed rule used the term ``principal place of business'' but
did not define it. Commenters recommended that the regulations include
a definition, and one suggested the ``nerve center'' test used by U.S.
courts to evaluate federal diversity jurisdiction. Under the new
definition at Sec. 800.239, a party's ``principal place of business''
is defined as ``the primary location where an entity's management
directs, controls, or coordinates the entity's activities, or, in the
case of an investment fund, where the fund's activities and investments
are primarily directed, controlled, or coordinated by or on behalf of
the general partner, managing member, or equivalent,'' subject to the
qualification in Sec. 800.239(b). For those entities whose nerve
center is in the United States, the purpose of the qualification in
Sec. 800.239(b) is to nevertheless ensure consistent treatment of an
entity's principal place of business in accordance with its own
assertions to government entities, provided the facts have not changed
since those assertions. The Treasury Department believes that this
definition achieves substantially the same result as potential
revisions to the definition of ``foreign entity'' suggested by
commenters to address investment funds managed and controlled by U.S.
persons in the United States.
Because the definition of ``principal place of business'' in Sec.
800.239 is new, it is being made effective by this rule on an interim
basis and may be amended based on comments received. As an interim
rule, Sec. 800.239 will become effective on the same date as the other
provisions in this rule (i.e., February 13, 2020) to provide clarity
and certainty for transaction parties. The Treasury Department invites
comments on this interim rule, in particular with respect to whether
Sec. 800.239 adequately addresses concerns raised by commenters
seeking greater clarity concerning investment funds managed and
controlled by U.S. persons.
Section 800.224--Foreign Person
The proposed rule used the definition of ``foreign person'' from
the Prior Regulations. The rule adds a new subsection (b) to clarify
that an entity which is controlled by a ``foreign person'' is itself a
``foreign person.''
Section 800.225--Identifiable Data
The proposed rule defined the term ``identifiable data'' to mean
data that can be used to distinguish or trace an individual's identity,
including through the use of any personal identifier. The definition
noted that, for the avoidance of doubt, aggregated data or anonymized
data is ``identifiable data'' if any party to the transaction has, or
as a result of the transaction will have, the ability to disaggregate
or de-anonymize the data, or if the data is otherwise capable of being
used to distinguish or trace an individual's identity. Commenters
addressed data aggregation and anonymization in the context of this
definition. Some commenters suggested that the Treasury Department was
incorrectly considering the ability of the foreign acquirer to
disaggregate or de-anonymize data; they suggested that the focus of the
Committee's inquiry should be on whether the U.S. business being
acquired or invested in could disaggregate or de-anonymize the data.
Similar comments were received regarding encryption and de-encryption
capabilities. The rule makes no change in response to these comments. A
foreign acquirer that would receive access to data that has been
encrypted or anonymized, and for which the foreign acquirer has the
ability to re-identify, is a relevant factor in the Committee's risk
assessment. Any militating effect afforded by de-identification would
be lost if the foreign acquirer is able to re-identify the data.
Section 800.232--Material Nonpublic Technical Information
The proposed rule provided a definition of ``material nonpublic
technical information'' consistent with the definition in FIRRMA.
Commenters asked for clarification about the scope of the definition of
material nonpublic technical information, such as whether it is limited
to information necessary to reverse engineer a technology or product,
whether it includes information typically afforded to minority
investors such as technical milestones, and what is meant by ``not
available in the public domain.''
The rule adds an illustrative example regarding technical
milestones in response to the comments. No other changes were made.
What constitutes ``material nonpublic technical information'' will
depend on particular facts and circumstances. ``Material nonpublic
technical information may include,'' but is not limited to, information
necessary to reverse engineer a component of a company's product.
Conversely, information that is readily accessible to people with no
connections to the TID U.S. business is likely in the public domain and
therefore not material nonpublic technical information. However, any
such a determination requires a fact-specific evaluation of the
information that may be provided.
Section 800.233--Minimum Excepted Ownership
The proposed rule defined ``minimum excepted ownership'' along with
other terms which operate together to exclude from CFIUS's jurisdiction
covered
[[Page 3118]]
investments by certain foreign persons who meet certain criteria
establishing sufficiently close ties to certain foreign states.
Commenters suggested that the percentage threshold of minimum excepted
ownership should be lowered; that privately held and publicly traded
entities be treated the same; and that for investment funds, the
minimum excepted ownership requirement should apply only to the general
partner. Commenters also requested clarifications to address situations
where the interests in an entity are not voting interests and to help
entities determine whether Sec. 800.233(a) or Sec. 800.233(b) is
applicable.
In response to these comments, the rule amends Sec. 800.233 by
reducing the minimum excepted ownership percentage in Sec. 800.233(b)
from 90 to 80 percent. The rule does not adopt the suggestion to treat
privately held and publicly traded entities the same. The different
treatment reflects the difference in governance realities between
publicly traded companies (typically one share, one vote) and privately
held companies (which can vary widely and may provide minority
shareholders outsized rights relative to their ownership stake). The
rule also does not adopt the suggestion to apply the minimum excepted
ownership criteria only to the general partner in a fund setting.
Investment fund structures can vary significantly, and limited partners
may have significant rights vis-[agrave]-vis their investment
interests.
With regard to non-voting interests, note that the regulations
already accommodate different structures by also considering rights to
profits or rights to assets in the event of dissolution, a formulation
that has existed in the definition of ``parent'' since the Prior
Regulations. Finally, to qualify for the lower threshold in Sec.
800.233(a), which is in turn used in the application of the criteria in
Sec. 800.219(a)(3)(v), the majority of an entity's outstanding shares
must be traded on one or more exchanges in the United States or in an
excepted foreign state.
Section 800.235--Parent
The proposed rule did not change the definition of ``parent'' from
the Prior Regulations. One commenter, however, asked if the regulations
should clarify whether a general partner of a partnership (or
equivalent) is a ``parent'' of that partnership. The rule adds a
provision at Sec. 800.235(a)(2) that explicitly includes a general
partner, managing member, or equivalent of an entity within the
definition of ``parent.'' The rule also makes some minor technical
edits and adds an example illustrating an entity with more than one
parent.
Section 800.236--Party to a Transaction
The proposed rule provided, at Sec. 800.236(a)(1), that a party to
a transaction includes a target U.S. business whose ownership interest
is being transferred between third parties. One commenter sought
additional clarification about which party or parties to a covered
transaction are required to submit a mandatory declaration under Sec.
800.401. The rule makes no change to the text of Sec. 800.236 in
response to this comment. The obligation to file a mandatory
declaration is on the parties to such transaction. Finally, there
appears to be confusion by some commenters about which entity is a
party to a transaction in a fund context. Note that Sec. 800.236
provides a definition of ``party to a transaction,'' which includes the
person acquiring an ownership interest. In a fund context, this is
typically the fund itself (and not the general partner), though, as
noted in Sec. 800.401(j)(3), there are circumstances in which a
limited partner may have a mandatory filing obligation based on its
indirect investment while the fund itself does not.
Section 800.241--Sensitive Personal Data
The proposed rule set forth a detailed definition of ``sensitive
personal data.'' Commenters suggested that the scope of ``sensitive
personal data,'' as defined in the proposed rule, may exceed what is
necessary to protect national security. Commenters also noted that
unnecessarily burdensome regulation negatively impacts technological
advancements, such as artificial intelligence. The Treasury Department
is cognizant of the potential impacts of the CFIUS process on foreign
investment and has endeavored to be specific and circumspect in
delineating the Committee's new authorities over covered investments
where appropriate and consistent with national security.
One commenter suggested further narrowing the definition by
focusing the ``target or tailor'' prong on contractors or employees of
national security agencies that support the national security
functions, rather than all employees of such agencies. The rule makes
no change in response to this comment. Certain U.S. Government
employees may not have direct national security functions, but may
nevertheless support critical missions of the agency and present equal
sensitivity with respect to sensitive personal data as colleagues that
do have direct national security functions. In many cases, it would be
difficult for parties to ascertain the specific functions that U.S.
Government employees may have within their respective agency.
Commenters also suggested that CFIUS exempt from the definition
data held by companies that meet certain internationally-recognized
standards for the protection of data, such as those set out by the
National Institute of Standards and Technology (NIST) or International
Organization for Standardization. However, these standards are
voluntary in nature, and currently no enforcement mechanism exists to
require that businesses comply with them. The Treasury Department is
not the appropriate entity to monitor compliance with voluntary
standards such as these, and the rule makes no change in response to
this comment.
Commenters suggested that the ``demonstrated business objective''
concept is vague and would deter investment in start-up businesses. In
response to this comment, an example has been added to the rule, at
Sec. 800.241(c)(5), to illustrate a case where a ``demonstrated
business objective'' exists under Sec. 800.241(a)(1)(i)(C).
In response to a comment requesting clarity, the rule specifies
that Sec. 800.241(a)(1)(ii)(A) applies only to financial data that
could be used to determine an individual's financial distress or
hardship.
Commenters also discussed the threshold for the number of
individuals on whom a business collects and maintains data. Some
suggested increasing the threshold for capturing sensitive personal
data from one million individuals to, for example, five million U.S.
citizens. These commenters argued that the lower threshold in the
proposed rule might capture too many businesses that do not pose
national security risks. Other commenters stated that these provisions
could hinder the growth of social networking companies or financial
technology start-ups. One commenter asked whether, for a company with a
defined business plan to maintain or collect data on over one million
people, the rule requires that the business plan describe with
particularity an objective to maintain or collect such data, or merely
the objective to have one million users, whose data is incidentally
collected or maintained.
The rule does not make any changes to the threshold of one million
individuals. Section 800.241(a)(1)(i)(B) and (C) accounts for the
possibility that a U.S. business holds sensitive personal data on
sensitive individuals despite not
[[Page 3119]]
targeting or tailoring their products or services to sensitive
populations. In accordance with FIRRMA, the rule requires that a U.S.
business collect or maintain ``sensitive personal data'' on U.S.
citizens. See Sec. 800.248(c). The threshold, however, refers to
individuals, rather than U.S. citizens, because it is unfeasible in
most cases for a U.S. business to confirm the citizenship status of
individuals of whom it has maintained or collected sensitive personal
data. The threshold of one million individuals will ensure that large
data collectors, which in many industries account for the vast majority
of data being collected, will be included. Conversely, the threshold
will minimize additional regulatory burden for many small businesses
and companies that incidentally collect or maintain data on a small
number of individuals.
The rule makes clarifying edits to Sec. 800.241(a)(1)(i) and adds
examples in Sec. 800.241(c)(1)-(5) to further illustrate the rule's
application. Examples 1-3 in Sec. 800.241(c) address the timing
element of the one million individual threshold, showing that if the
U.S. business collects or maintains the applicable data on over one
million people at any time over the preceding twelve months, the
requirement in Sec. 800.241(a)(1)(i)(A) is met. Example 4 clarifies
that the parties should consider the number of individuals for whom
sensitive personal data is maintained or collected in the aggregate
across the enumerated categories. Example 5, as noted above,
illustrates the scope of the ``demonstrated business objective''
provision.
Commenters also addressed the proposed rule's treatment of genetic
data. Some suggested that the scope of genetic information as proposed
was too broad, and that it should be narrowed in a way that remains
consistent with national security. Others suggested narrowing the
definition to focus on, for example, identifiable data or information
about a person's full genome, to better tailor the definition to
national security concerns. Other commenters recommended modifying the
definition to exclude anonymized data obtained from drug discovery or
clinical trials, or aggregated data from large heterogeneous
populations.
In response to these comments, the rule recalibrates this provision
on genetic testing data and does so in two ways: First, by focusing the
definition on ``genetic tests'' as that term is defined in the Genetic
Information Non-Discrimination Act of 2008 (GINA); and second, by
limiting the coverage of the rule to identifiable data. To account for
datasets commonly used in research, the rule also carves out genetic
testing data derived from databases maintained by the U.S. Government
and routinely provided to private parties for the purposes of research.
Section 800.244--Substantial Interest
The proposed rule established a voting interest threshold for the
definition of ``substantial interest.'' Commenters requested additional
clarification on its application, including with respect to limited
partners of investment funds, asked whether this provision applies to
only a single foreign government, and inquired about the mechanics of
Sec. 800.244 regarding the voting interests of parents.
The rule revises Sec. 800.244 in response to these comments. It
clarifies, in Sec. 800.244(a), that substantial interest applies to a
single foreign government, which is consistent with the definition of
``foreign government'' at Sec. 800.222, which, in turn, includes both
national and subnational governments, including their respective
departments, agencies, and instrumentalities. In Sec. 800.244(a), the
rule also excludes governments of excepted foreign states in order to
better synchronize the application of the two mandatory filing
requirements under Sec. 800.401.
Additionally, the rule revises Sec. 800.244(b) to define
``substantial interest,'' in certain circumstances, as a foreign
government's interests in the general partner (or equivalent) only,
disregarding its limited partner interests. This provides clarity to
parties in the investment fund context and focuses the substantial
interest analysis on the entity that typically is responsible for the
day-to-day decisionmaking regarding the investment fund. Finally, the
rule adds illustrative examples.
Section 800.248--TID U.S. Business
The proposed rule defined the types of businesses with certain
involvement in critical technology, critical infrastructure, and
sensitive personal data in which an investment may constitute a covered
investment. Commenters requested clarification regarding the
application of this rule to a U.S. business that indirectly maintains
or collects sensitive personal data. In response to these comments, the
rule adds examples addressing scenarios in which a U.S. business is
maintaining or collecting sensitive personal data indirectly via an
intermediary.
Additionally, the rule adds illustrative examples with respect to
critical technology, informed by the Committee's experience with
respect to the pilot program on certain transactions involving foreign
persons and critical technologies. One example illustrates that the
mere verification of the fit and form of a relevant critical technology
is not ``testing'' under Sec. 800.248(a). Another example illustrates
that a U.S. business that ceases performing one of the actions listed
in Sec. 800.248(a) but retains the ability to perform the relevant
action with regard to a critical technology, is a TID U.S. business.
Finally, with respect to TID U.S. businesses described in Sec.
800.252(a) (i.e., those related to critical technology) it is important
for parties to be aware that the rule establishes the Committee's
jurisdiction over covered investments in any U.S. business that
``produces, designs, tests, manufactures, fabricates, or develops'' one
or more critical technologies. However, as discussed below in
connection with Sec. 800.401, the rule requires mandatory declarations
for transactions involving only a subset of these TID U.S. businesses.
Section 800.251--United States
The rule revises the definition of ``United States'' for
consistency with the definition in FIRRMA.
Section 800.252--U.S. Business
The proposed rule revised the definition of ``U.S. business'' from
the Prior Regulations by excluding the phrase ``but only to the extent
of its activities in interstate commerce in the United States.''
Commenters requested that the Committee restore the prior definition of
``U.S. business'' or provide clarity with respect to the Committee's
intended interpretation of that term. The rule makes no change to the
proposed definition. The proposed definition tracks the language of
FIRRMA and is not intended to suggest that the extent of a business's
activities in interstate commerce in the United States is irrelevant to
the Committee's analysis of national security risk.
The rule also makes amendments to example 2 of Sec. 800.252(b) to
illustrate that a business may export and license technology and
provide services into the United States, yet not qualify as a U.S.
business for purposes of the rule.
Section 800.254--Voting Interest
The proposed rule did not change the definition of ``voting
interest'' from the Prior Regulations. Commenters sought additional
clarification about the scope of the voting interest involved,
including whether it includes consent, veto, or other special rights,
or how parties should calculate voting interest in situations where
there are different
[[Page 3120]]
levels of voting interest types (e.g., preferred stock). Commenters
also suggested the term be limited to voting interests in major
decisions.
The rule makes no change to Sec. 800.254 in response to these
comments. The definition of ``voting interest'' is long-established,
and, as many commenters noted, any revisions will have wide-ranging
effects throughout the regulations because voting interest is
incorporated into other defined terms, such as parent. Where
appropriate, the Treasury Department provided clarification through
revisions to other sections of the regulations, for instance, with
respect to the definition of ``substantial interest'' in Sec. 800.244,
discussed above.
3. Subpart C--Coverage
Subpart C of the proposed rule included provisions that described
with particularity transactions that are, or are not, ``covered control
transactions'' or ``covered investments.'' These provisions contain
several examples illustrating different scenarios, and commenters
requested additional examples, including particular examples
illustrating the rule's treatment of export agreements or technology
transfers.
In response to these comments, the rule revises and supplements the
examples in Sec. 800.305 through Sec. 800.307, as further discussed
below. The rule also makes technical revisions to Sec. 800.301 through
Sec. 800.304, and Sec. 800.308. Note that technology transfers are
separately addressed by export control regulations promulgated by the
Department of Commerce and the Department of State. The Treasury
Department refers the public to the Export Administration Regulations,
at 15 CFR parts 730-774, and the International Traffic in Arms
Regulations, at 22 CFR parts 120-130.
Section 800.305--Incremental Acquisitions
The proposed rule provided affirmative assurance that certain
transactions subsequent to a covered control transaction for which the
Committee concluded all action under section 721 on the basis of a
notice are not covered transactions. Commenters requested a number of
clarifications, including regarding whether an incremental investment
or acquisition of additional rights in a U.S. business by a foreign
person that already controls that business would constitute a covered
transaction. Other commenters asked whether the Committee will
communicate to parties whether the Committee found jurisdiction over a
particular investment as a covered control transaction or a covered
investment, or how the incremental acquisition rule applies to related
but not wholly owned entities.
Revisions were made in response to some of the comments. The rule
expands the incremental acquisition rule to apply to transactions made
subsequent to a covered control transaction submitted to the Committee
via declaration, and for which the Committee concludes action based
upon that declaration. The rule also makes technical edits and adds an
example regarding related entities. Additionally, note that the
Committee, in response to a notice, currently informs parties whether
an investment is a covered control transaction or a covered investment.
Section 800.306--Lending Transactions
The proposed rule expanded the Prior Regulations' provision on
``lending transactions'' to address covered investments. A commenter
noted that the mandatory declaration requirement may present challenges
in the context of lending transactions and recommended that the
Treasury Department not subject lenders to the mandatory declaration
requirement for transactions involving a default on a loan, or, in the
alternative, the parties in such a situation be required to file as
soon as practicable.
The rule makes no change in response to this comment. Lenders
typically do not automatically acquire title to assets in the event of
a default on a loan. In these cases, the lender must first perform an
affirmative act, such as transferring ownership interests using a stock
power, thus allowing the lender to comply with the mandatory
declaration provision in Sec. 800.401, if applicable, before
performing such act. Moreover, even in the event of a default on a
loan, lenders typically use commercially reasonable efforts to cure the
event of default with the borrower, and only resort to taking title of
assets as a last resort. These efforts typically last longer than the
30-day advance notification time requirement for mandatory declarations
under Sec. 800.401. If, however, parties to a transaction subject to
the mandatory declaration requirement are unable to timely file a
submission due to circumstances of a default, the Committee will
consider the circumstances in assessing any potential civil monetary
penalty determination.
The rule does, however, revise Sec. 800.306, including its
examples, to further clarify and illustrate its application to covered
investments.
Section 800.307--Specific Clarification for Investment Funds
The proposed rule implemented FIRRMA's provisions relating to
investment funds. Commenters to the investment fund provisions
supported the limitation on the application of CFIUS's review authority
over certain investment funds. Other commenters requested clarification
on the scope of CFIUS's jurisdiction with respect to investment funds.
For example, a commenter asked if CFIUS's jurisdiction extends to an
investment fund organized outside of the United States but which has
U.S. general and limited partners. The rule makes no change in response
to these comments in Sec. 800.307 because the Treasury Department
cannot provide confirmation of commenters' legal interpretations,
clarifications, or examples based on hypothetical scenarios that are
highly fact-specific. Note that, as discussed further below, additional
examples have been added in Sec. 800.401 addressing investment funds
in the context of mandatory declarations.
Another commenter suggested including additional examples
illustrating certain rights that would not provide a limited partner
with the ability to control the fund, or in the alternative, narrowing
the statutorily enumerated examples of rights that would constitute
control. The Committee's authority in this respect is limited by the
provision in FIRRMA relating to investment funds, and the rule makes no
change in response to this comment.
One commenter noted that the Committee's section of the Treasury
Department website describing the pilot program (which features
responses to frequently asked questions) clarifies that failure to meet
all of the criteria in Sec. 801.304(a) does not necessarily mean that
an indirect investment by the foreign person in a TID U.S. business
through an investment fund is a covered transaction. Consistent with
Sec. 801.304, Sec. 800.307(a) is not intended to create a presumption
that any investment by a foreign person in a TID U.S. business through
an investment fund is a covered transaction if the criteria in Sec.
800.307(a) are not met; the particular facts and circumstances of the
investment would need to be considered.
A commenter suggested that the definition is intended as a barrier
to investment by foreign-government owned investment funds, because
foreign-government owned or controlled funds cannot seek exemption to
the mandatory declaration requirements,
[[Page 3121]]
while some investment funds that are not state-owned or controlled may
seek this waiver. The investment fund clarification addresses scenarios
involving foreign limited partners in investment funds that are managed
exclusively by another party. A foreign-government owned or controlled
investment fund is inconsistent with such scenarios, which typically
involve passive limited partners. The rule makes no change in response
to this comment.
Finally, the rule revises the lead-in of Sec. 800.307(a) and
criteria in Sec. 800.307(a)(2) regarding a general partner of an
entity, in both instances to conform with the language of FIRRMA.
Section 800.308--Timing Rule for a Contingent Equity Interest
The Treasury Department received comments regarding the interaction
of the timing rule in Sec. 800.308 with mandatory filings required
under Sec. 800.401, including suggestions to revise the definition of
``completion date'' in Sec. 800.206, discussed above. The rule makes
no change in response to these comments. In cases where the conversion
of a contingent equity interest may result in a covered transaction
that requires the submission of a filing under Sec. 800.401, parties
are advised to carefully consider whether Sec. 800.308 is applicable
to avoid potential penalties.
4. Subpart D--Declarations
The proposed rule set out an abbreviated filing process through the
submission of a declaration, as directed by FIRRMA. Commenters stated
that the declaration process impacts foreign direct investment by
putting foreign firms at a competitive disadvantage vis-[agrave]-vis
U.S. investors, especially in the context of competitive auctions.
Commenters also proposed that CFIUS commit to notify parties of
specific national security concerns, if any, in a transaction to enable
the parties to promptly address such concerns.
Commenters also requested that the Treasury Department create an
expedited review process for evaluating declarations (or notices)
submitted by parties with whom the Committee is already familiar
through having reviewed and cleared prior transactions involving the
same foreign person. One commenter suggested the Committee provide
``comfort letters'' to certain investors who have been reviewed by the
Committee previously and found not to pose a national security threat.
Finally, commenters requested that CFIUS make available a list of
factors it considers when reviewing declarations that, if addressed by
the parties, would lead to the Committee concluding all action on the
transaction in 30 days.
The rule makes no change to the process and procedures for
declarations in response to these comments. The Treasury Department is
aware of the importance of timing to transaction parties and notes that
the declaration process itself is an expedited review. The Committee
must evaluate each transaction based upon the particular facts and
circumstances, including the identity of the parties involved. As a
result, the DPA provided for a specific review period to enable CFIUS
agencies to carry out their national security responsibilities, and it
would not be in the interest of national security for the Committee to
further accelerate the assessment period. Similarly, it is not
appropriate for the Committee to prescribe in regulations a list of
factors that will expedite the Committee's assessment of a declaration,
given the fact-specific nature of each assessment conducted by the
Committee.
Section 800.401--Mandatory Declarations
The proposed rule included a mandatory declaration requirement for
transactions involving a ``substantial interest'' by a foreign
government. Comments related to the mandatory filing requirement under
Sec. 800.401(b) are addressed in the discussion of the definition of
``substantial interest'' under Sec. 800.244, above. The Pilot Program
Interim Rule set forth a mandatory declaration requirement for covered
transactions involving certain critical technology TID U.S. businesses.
The Treasury Department received comments on the Pilot Program Interim
Rule, both in response to the October 2018 publication of the Pilot
Program Interim Rule and in response to the September 2019 publication
of the proposed rule for part 800.
Commenters noted the complexity involved in assessing which
investments require mandatory filings under the Pilot Program Interim
Rule, including with respect to assessing whether a certain U.S.
business's connection to certain industries identified by NAICS codes
meets the requirements of Sec. 801.213 in the Pilot Program Interim
Rule. Some commenters suggested that the Committee not continue to
exercise its authority under FIRRMA to require mandatory declarations
for transactions involving certain U.S. businesses with activities
relating to critical technologies. Other commenters recommended that
the regulations require mandatory declarations only for transactions
involving a defined subset of critical technologies (e.g., only
emerging and foundational technologies), or remove the mandatory filing
requirement for certain other critical technologies that do not raise
national security concerns (e.g., non-sensitive encryption software) or
certain sectors (e.g., biotechnology) in order to encourage foreign
investment in those sectors.
Commenters also suggested that certain categories of investors,
such as excepted investors or FOCI-mitigated entities, be exempted from
the mandatory declaration requirement for control transactions or, as
applicable, covered investments, or that the Committee waive mandatory
filings for transactions involving the acquisition of certain rights--
such as a board seat--in a U.S. business so as not to impact foreign
investment.
The rule integrates the mandatory declaration requirement from the
Pilot Program Interim Rule, which is based upon whether a transaction
involves certain U.S. businesses with a nexus to specified industries
identified by NAICS codes. However, the Treasury Department anticipates
issuing a separate notice of proposed rulemaking that would replace
this requirement with a mandatory declaration requirement based upon
export control licensing requirements. Additionally, in response to
public comments, the rule exempts certain transactions from the
critical technology mandatory declaration requirement. These exemptions
relate to excepted investors, FOCI-mitigated entities, certain
encryption technology, and investment funds managed exclusively by, and
ultimately controlled by, U.S. nationals. The Treasury Department
anticipates that these exemptions would continue to apply even if the
scope of the mandatory declaration requirement is modified as described
above.
Commenters also requested the inclusion of a mechanism to the
mandatory declaration requirements, through which the Committee would
grant waivers to individual foreign investors (which some commenters
described as ``trusted investors'') after evaluating such investors
pursuant to various criteria. Some commenters suggested that this
mechanism only apply to parties that have filed a notice that was
cleared by the Committee, noting that the Committee will have already
examined the investor and any national security concerns it presents
through its review of the notice. The rule makes no change in response
to these comments. The Treasury Department will continue to consider
instituting a potential waiver
[[Page 3122]]
mechanism in the future. Once the Committee has more data on mandatory
declarations under this rule, it can better assess the potential for a
waiver program and mechanisms for implementation and administration.
Finally, one commenter requested clarification about the
commencement of the 30-day advance notification requirement for
mandatory declarations. As stated in Sec. 800.401(g), this 30-day
period begins when a declaration or notice, as applicable, is
submitted, and not upon acceptance by the Staff Chairperson. Under
Sec. 800.401(i), in the event the Committee rejects or permits a
withdrawal of the declaration (or notice), the 30-day period resets
from the date of resubmission, absent written approval of the Staff
Chairperson. The rule also includes an exception from mandatory
declarations for air carriers to conform to FIRRMA.
Section 800.403--Procedures for Declarations
The proposed rule set forth the procedures for declarations.
Commenters requested that CFIUS begin assessments of declarations, or
provide feedback on a declaration, within five days of receiving it.
The rule makes no change in response to these comments. The Committee
makes every effort to provide feedback to the parties and initiate
review of a transaction as quickly as possible. Consistent with FIRRMA,
the rule does prescribe that the Committee respond within a set
timeframe to voluntary notices that include certain stipulations.
Section 800.404--Contents of Declarations
The proposed rule set forth the information requirements for a
declaration, consistent with FIRRMA's requirement that CFIUS establish
declarations as ``abbreviated notices that would not generally exceed
five pages in length.'' As part of a declaration, parties may
voluntarily stipulate that the transaction is a covered transaction
and, if so, whether the transaction is a foreign-government controlled
transaction.
One commenter objected to the provision in Sec. 800.404(e) that
parties stipulate in a declaration that a transaction is a covered
investment, covered transaction, or a foreign government-controlled
transaction. Note that, under Sec. 800.404(e), stipulations are not
required from parties submitting declarations, but are available as an
option and may help expedite the Committee's review. Making a
stipulation does not affect judicial review of CFIUS's final decision
regarding a transaction. Rather, parties that make a stipulation may
not challenge a decision as to whether the transaction is a covered
investment, covered transaction, or foreign government-controlled
transaction, where that decision is based on the stipulation.
While no change was made to the declaration content requirement as
a result of this comment, the rule makes modifications in this section
to require additional information, including to allow the Committee to
more efficiently assess whether a transaction is a covered transaction.
For example, for declarations involving the acquisition of a U.S.
business that produces, designs, tests, manufactures, fabricates, or
develops one or more critical technologies, parties must describe the
item(s) and the applicable export control classification/category.
Section 800.407--Committee Actions
The rule clarifies that the Committee may request that parties file
a written notice under subpart E if it has reason to believe that the
transaction may raise national security considerations.
5. Subpart E--Notices
The proposed rule set out the process for filing notices.
Section 800.501--Procedures For Notices
One commenter suggested that the Committee be prohibited from
reviewing a transaction after a certain time period following its
completion. The rule makes no change in response to this comment.
Parties that wish to obtain safe harbor from the Committee with respect
to previously completed transactions can undertake to do so by filing a
voluntary notice or submitting a declaration.
Section 800.502--Contents of Voluntary Notices
One commenter suggested that asking parties for a cyber-security
plan is insufficient to determine whether the party's information
technology systems are adequately protected. The commenter recommended
that the Committee rely on cyber-security standards promulgated by
other federal agencies, such as the Department of Homeland Security, or
NIST within the Department of Commerce. Alternatively, the commenter
recommended using an algorithm to assess a filing party's cyber-
security vulnerabilities and suggested requiring parties to meet
certain cyber security standards. The rule makes no change in response
to these comments. A company's cyber-security plan is relevant
information for the Committee to consider. Adherence by a party to
government or industry standards could be a relevant factor in the
Committee's risk assessment, but is not necessary to prescribe in
regulations. Revisions were made to Sec. 800.502, which are similar to
the revisions discussed above under Sec. 800.404, as well as other
clarifying edits.
6. Subpart G--Finality of Action
Section 721 maintains that a covered transaction that has been
notified to CFIUS and on which CFIUS has concluded action under section
721 after determining that there are no unresolved national security
concerns, qualifies for safe harbor from further action by the
Committee. A commenter noted the rule lacked a safe harbor provision
and requested additional guidance on how to structure a transaction to
ensure it is not altered or overturned by the Committee.
In accordance with section 721, the rule provides a safe harbor to
parties, under Sec. 800.701, and through the incremental acquisition
rule discussed above. Neither section 721 nor this rule prescribes
transaction structures, allowing parties to structure transactions in
the most appropriate manner based on the facts and circumstances of the
particular transaction. As described above, section 721(f) of the DPA
provides an illustrative list of factors for consideration by the
Committee and the President in determining whether a covered
transaction poses a national security risk. Additionally, the Treasury
Department's previously published Guidance Concerning the National
Security Review Conducted by CFIUS, 73 FR 74567 (December 8, 2008), is
still in effect.
7. Subpart I--Penalties and Damages
Commenters requested that the Treasury Department promulgate
guidelines on when it will assess civil monetary penalties. The
Treasury Department is considering whether it can make additional
information available to assist the public in understanding the
Committee's enforcement priorities. A number of clarifying and
technical edits were made to this subpart. Additionally, the rule
revises Sec. 800.901(f) to allow tolling of the Committee's deadline
to respond to a petition, upon written agreement with the party, to
facilitate further negotiations, including for settlement of the
potential civil monetary penalty.
[[Page 3123]]
8. Subpart J--Foreign National Security Investment Review Regimes
Section 800.1001--Determinations
The proposed rule provided for Committee determinations regarding a
foreign state's process to review foreign investment for national
security in its own country and its cooperation with the United States
with respect to review of foreign investment. Commenters recommended
that the Committee, in making these determinations, recognize that
differing systems can achieve the same outcomes, and avoid insisting
that foreign states adopt procedures that mirror those of CFIUS.
The rule makes no change to Sec. 800.1001 in response to these
comments. The Treasury Department will in the near term publish on the
Committee's section of its website the factors the Committee will take
into consideration when making determinations, which focus on the
substance of a foreign state's process and cooperation with the United
States to address national security risks arising from foreign
investment, and do not prescribe a specific form. Finally, such
determinations are relevant only to the status of a foreign state as an
excepted foreign state under the rule. They do not imply any broader
U.S. Government approval of a foreign state's investment review regime,
including aspects of a foreign state's investment review regime that
may incorporate factors beyond national security.
9. Other Comments
The Treasury Department also received comments on topics not
specifically addressed in the proposed rule. Commenters noted that the
proposed rule did not address independent monitors for mitigation
agreements, and recommended that the Committee provide additional
clarification, including on monitor qualifications or whether monitors
may provide additional services without violating the conflict of
interest provision in FIRRMA. The rule makes no change in response to
these comments. The Treasury Department takes seriously the importance
of ensuring the integrity and qualifications of monitors, including
avoidance of conflicts of interest. The Committee has extensive
experience with the use of monitors for mitigation agreements and has
found that appropriate safeguards can be incorporated into the
mitigation agreement itself, which is dependent on facts and
circumstances of each transaction.
IV. Rulemaking Requirements
Executive Order 12866
These regulations are not subject to the general requirements of
Executive Order 12866, which governs review of regulations by the
Office of Information and Regulatory Affairs (OIRA) in the Office of
Management and Budget (OMB), because they relate to a foreign affairs
function of the United States, pursuant to section 3(d)(2) of that
order. In addition, these regulations are not subject to review under
section 6(b) of Executive Order 12866 pursuant to section 7(c) of the
April 11, 2018 Memorandum of Agreement between the Treasury Department
and OMB, which states that CFIUS regulations are not subject to OMB's
standard centralized review process under Executive Order 12866.
Justification for Interim Rule
The proposed rule, and the proposed rule at 84 FR 50214, included
provisions that use the term ``principal place of business.'' The
Treasury Department received comments on these provisions, including
recommendations to add a definition for the term.
In response to these comments, a definition for ``principal place
of business'' has been included. The Treasury Department believes it
would benefit the public and the Committee to receive comments from the
public on this definition before it is made final. This rule therefore
contains an interim rule that implements a definition for the term
``principal place of business'' that will become effective with the
rest of the rule, and the Treasury Department is providing the public
30 days to comment on the new definition of ``principal place of
business.''
It is in the public interest to make the ``principal place of
business'' definition effective on the same date as the rule.
Commenters requested greater clarity concerning which parties are
subject to the mandatory declaration requirements and to CFIUS
jurisdiction more generally. The new definition directly addresses
those requests and provides greater transactional certainty. If the
definition were not effective with this rule, some parties that, under
the new definition, may not need to submit a declaration (or choose to
file a notice in lieu of a mandatory declaration) with the Committee
would nonetheless have to (or choose to) do so. By clarifying that
certain parties need not submit declarations and that certain
transactions are not subject to CFIUS jurisdiction, the addition of the
definition of ``principal place of business'' reduces the regulatory
burden on the public, allowing some parties to forego the expense,
time, and uncertainty involved in submitting a declaration or filing a
notice with the Committee. Because of the added clarity and potential
reduction in regulatory burden the definition provides to the public,
having it become effective immediately is in the public's interest.
Nonetheless, the Treasury Department is requesting comments to that
definition and will consider them before finalizing the interim rule.
Paperwork Reduction Act
The collections of information contained in this rule were
submitted to OMB for review along with the proposed rule, in accordance
with the Paperwork Reduction Act of 1995 (PRA, 44 U.S.C. 3507(d)). No
comments were received to the PRA estimates. However, and as noted
above, the Treasury Department has modified some of the information
requests associated with notices and on the declarations form. These
changes represent clarifications that the Treasury Department
identified in its review of the information requirements, as well as
changes necessary to implement certain provisions that were modified
from the proposed rule. The additional information requested is not
substantially different from the information that was proposed to be
collected, and the Treasury Department's estimates of burden hours for
completing declarations and notices do not differ from those estimated
at the proposed rule stage. These collections have been submitted to
OMB under control number 1505-0121.
Under the PRA, an agency may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless it
displays a valid control number assigned by OMB.
Regulatory Flexibility Act
Regardless of whether the provisions of the Regulatory Flexibility
Act (RFA, 5 U.S.C. 601 et seq.), apply to this rulemaking, for reasons
noted in the preamble to the proposed rule, the Treasury Department
prepared for public comment an Initial Regulatory Flexibility Analysis
and determined through that analysis that the proposed rule would most
likely not affect a substantial number of small entities. The Treasury
Department specifically requested comments on the proposed rule's
effect on small entities; no such public comments were received. The
Secretary of the Treasury hereby certifies that the rule will not have
a significant economic impact on a
[[Page 3124]]
substantial number of small entities based on the following.
The rule expands the jurisdiction of the Committee to include
additional types of transactions not previously subject to CFIUS
review. Additionally, the Committee will retain its existing
jurisdiction over any transaction through which any foreign person
could acquire control of any U.S. business. Accordingly, the rule may
impact any U.S. business, including a small U.S. business that engages
in a covered transaction.
There is no single source for information on the number of small
U.S. businesses that receive foreign investment (direct or indirect),
including those involved with critical technologies, critical
infrastructure, or sensitive personal data, such that they would be
directly impacted by this rule. However, the Bureau of Economic
Analysis (BEA) within the Department of Commerce collects, on an annual
basis, data on new foreign direct investment in the United States
through its Survey of New Foreign Direct Investment in the United
States (Form BE-13). While these data are self-reported, and include
only direct investments in U.S. businesses in which the foreign person
acquires at least 10 percent of the voting shares (and consequently, do
not capture investments below 10 percent, which may nevertheless be
covered transactions), they nonetheless provide relevant information on
a category of U.S. businesses that receive foreign investment, some of
which may be covered by the proposed rule.
According to the BEA, in 2018, the most current year for which data
is available, foreign persons obtained at least a 10 percent voting
share in 832 U.S. businesses. See U.S. Bureau of Economic Analysis,
``Number of Investments Initiated in 2018, Distribution of Planned
Total Expenditures, Size by Type of Investment,'' https://apps.bea.gov/international/xls/Table15-14-15-16-17-18.xls (last visited January 6,
2020). The BEA only reports the general size of the investment
transaction, not the type of the U.S. business involved, nor whether
the U.S. business is considered a ``small business'' by the Small
Business Administration (SBA), which defines small businesses based on
annual revenue or number of employees. The smallest foreign investment
transactions that the BEA reports are those with a dollar value below
$50 million. While not all U.S. businesses receiving a foreign
investment of less than $50 million are considered ``small'' for the
purposes of the RFA, many might be, and the number of U.S. businesses
receiving foreign investments of less than $50 million can serve as a
proxy for the number of transactions involving small U.S. businesses
that might be subject to CFIUS's jurisdiction.
Of the above mentioned 832 U.S. businesses receiving foreign
investment in 2018, 576 were involved in transactions valued at less
than $50 million. Although this figure is under inclusive because it
does not capture all transactions that could potentially fall under the
rule, it also is over inclusive because it is not limited to any
particular type of U.S. business. We believe the figure of 576 is the
best estimate based on the available data of the number of small U.S.
businesses that may be impacted by this rule.
According to the SBA, there are 30.2 million small businesses
(defined as ``firms employing fewer than 500 employees'') in the United
States as of 2018. https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf (last visited January 6, 2020). If
approximately 600 small U.S. businesses will be potentially impacted by
this rule, then the rule may potentially impact less than one percent
of all small U.S. businesses. Accordingly, the Department of the
Treasury does not believe the rule will impact a ``substantial number
of small entities.''
Nonetheless, the rule includes provisions that would reduce the
costs to all businesses, including small businesses. For example, the
availability of a shorter declaration for covered transactions may
result in smaller cost to entities than having to prepare a lengthier
notice. Additionally, having a fillable form for declarations may
reduce some of the cost for parties.
Congressional Review Act
This rule has been submitted to OIRA, which has determined that the
rule is a ``major'' rule under the Congressional Review Act. However,
the Treasury Department has determined there is good cause under 5
U.S.C. 808(2) to publish the rule notwithstanding the timing
requirements for major rules under 5 U.S.C. 801(a)(3) because delaying
the effectiveness of this rule beyond 30 days is impracticable,
unnecessary, and contrary to the public interest. Under FIRRMA, the
provisions expanding jurisdiction and establishing declarations, among
others, will become effective on February 13, 2020, regardless of
whether this rule is published and effective. See Section 1727(b)(1)(A)
of FIRRMA. Without the processes, procedures and definitions provided
by the rule as directed by FIRRMA, market participants will face
substantial hardship, delay, and expense in complying with the
requirements of FIRRMA. Accordingly, the Treasury Department finds good
cause that notice and public procedure under 5 U.S.C. 801(a)(3) are
impracticable, unnecessary, and contrary to the public interest. This
rule will become effective on February 13, 2020, notwithstanding 5
U.S.C. 801(a)(3).
List of Subjects
31 CFR Part 800
Foreign investments in the United States, Investigations,
Investments, Investment companies, National defense, Reporting and
recordkeeping requirements.
31 CFR Part 801
Foreign investments in the United States, Investigations,
Investments, Investment companies, National defense, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, the Treasury Department
amends parts 800 and 801 of title 31 of the Code of Federal Regulations
as follows:
0
1. Revise part 800 to read as follows:
PART 800--REGULATIONS PERTAINING TO CERTAIN INVESTMENTS IN THE
UNITED STATES BY FOREIGN PERSONS
Subpart A--General
Sec.
800.101 Scope.
800.102 Risk-based analysis.
800.103 Effect on other law.
800.104 Applicability rule.
800.105 Rules of construction and interpretation.
Subpart B--Definitions
800.201 Aggregated data.
800.202 Anonymized data.
800.203 Business day.
800.204 Certification.
800.205 Committee; Chairperson of the Committee; Staff Chairperson.
800.206 Completion date.
800.207 Contingent equity interest.
800.208 Control.
800.209 Conversion.
800.210 Covered control transaction.
800.211 Covered investment.
800.212 Covered investment critical infrastructure.
800.213 Covered transaction.
800.214 Critical infrastructure.
800.215 Critical technologies.
800.216 Encrypted data.
800.217 Entity.
800.218 Excepted foreign state.
800.219 Excepted investor.
800.220 Foreign entity.
[[Page 3125]]
800.221 Foreign government.
800.222 Foreign government-controlled transaction.
800.223 Foreign national.
800.224 Foreign person.
800.225 Hold.
800.226 Identifiable data.
800.227 Investment.
800.228 Investment fund.
800.229 Involvement.
800.230 Lead agency.
800.231 Manufacture.
800.232 Material nonpublic technical information.
800.233 Minimum excepted ownership.
800.234 Own.
800.235 Parent.
800.236 Party to a transaction.
800.237 Person.
800.238 Personal identifier.
800.239 Principal place of business.
800.240 Section 721.
800.241 Sensitive personal data.
800.242 Service.
800.243 Solely for the purpose of passive investment.
800.244 Substantial interest.
800.245 Substantive decisionmaking.
800.246 Supply.
800.247 Targets or tailors.
800.248 TID U.S. business.
800.249 Transaction.
800.250 Unaffiliated TID U.S. business.
800.251 United States.
800.252 U.S. business.
800.253 U.S. national.
800.254 Voting interest.
Subpart C--Coverage
800.301 Transactions that are covered control transactions.
800.302 Transactions that are not covered control transactions.
800.303 Transactions that are covered investments.
800.304 Transactions that are not covered investments.
800.305 Incremental acquisitions.
800.306 Lending transactions.
800.307 Specific clarification for investment funds.
800.308 Timing rule for a contingent equity interest.
Subpart D--Declarations
800.401 Mandatory declarations.
800.402 Voluntary declarations.
800.403 Procedures for declarations.
800.404 Contents of declarations.
800.405 Beginning of 30-day assessment period.
800.406 Rejection, disposition, or withdrawal of declarations.
800.407 Committee actions.
Subpart E--Notices
800.501 Procedures for notices.
800.502 Contents of voluntary notices.
800.503 Beginning of 45-day review period.
800.504 Deferral, rejection, or disposition of certain voluntary
notices.
800.505 Determination of whether to undertake an investigation.
800.506 Determination not to undertake an investigation.
800.507 Commencement of investigation.
800.508 Completion or termination of investigation and report to the
President.
800.509 Withdrawal of notices.
Subpart F--Committee Procedures
800.601 General.
800.602 Role of the Secretary of Labor.
800.603 Materiality.
800.604 Tolling of deadlines during lapse in appropriations.
Subpart G--Finality of Action
800.701 Finality of actions under section 721.
Subpart H--Provision and Handling of Information
800.801 Obligation of parties to provide information.
800.802 Confidentiality.
Subpart I--Penalties and Damages
800.901 Penalties and damages.
800.902 Effect of lack of compliance.
Subpart J--Foreign National Security Investment Review Regimes
800.1001 Determinations.
800.1002 Effect of determinations.
Appendix A to Part 800--Covered Investment Critical Infrastructure and
Functions Related to Covered Investment Critical Infrastructure
Appendix B to Part 800--Industries
Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.
Subpart A--General
Sec. 800.101 Scope.
(a) Section 721 of title VII of the Defense Production Act of 1950,
as amended (50 U.S.C. 4565), authorizes the Committee on Foreign
Investment in the United States to review any covered transaction, as
defined in Sec. 800.213 of this part, and to mitigate any risk to the
national security of the United States that arises as a result of such
transactions. Section 721 also authorizes the President to suspend or
prohibit any covered transaction when, in the President's judgment,
there is credible evidence that leads the President to believe that the
foreign person engaging in a covered transaction might take action that
threatens to impair the national security of the United States, and
when provisions of law other than section 721 and the International
Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) do not, in the
judgment of the President, provide adequate and appropriate authority
for the President to protect the national security of the United States
in the matter before the President.
(b) This part implements regulations pertaining to covered
transactions. Regulations pertaining to ``covered real estate
transactions'' are addressed in part 802 of this chapter.
Sec. 800.102 Risk-based analysis.
Any determination of the Committee with respect to a covered
transaction to suspend, refer to the President, or to negotiate, enter
into or impose, or enforce any agreement or condition under section 721
shall be based on a risk-based analysis, conducted by the Committee, of
the effects on the national security of the United States of the
covered transaction. Any such risk-based analysis shall include
credible evidence demonstrating the risk and an assessment of the
threat, vulnerabilities, and consequences to national security related
to the transaction. For purposes of this part, any such analysis of
risk shall include and be informed by consideration of the following
elements:
(a) The threat, which is a function of the intent and capability of
a foreign person to take action to impair the national security of the
United States;
(b) The vulnerabilities, which are the extent to which the nature
of the U.S. business presents susceptibility to impairment of national
security; and
(c) The consequences to national security, which are the potential
effects on national security that could reasonably result from the
exploitation of the vulnerabilities by the threat actor.
Sec. 800.103 Effect on other law.
Nothing in this part shall be construed as altering or affecting
any other authority, process, regulation, investigation, enforcement
measure, or review provided by or established under any other provision
of federal law, including the International Emergency Economic Powers
Act, or any other authority of the President or the Congress under the
Constitution of the United States.
Sec. 800.104 Applicability rule.
(a) Except as provided in paragraphs (b) and (c) of this section
and otherwise in this part, the regulations in this part apply from
February 13, 2020.
(b) Subject to paragraph (c) of this section, for any transaction
for which the following has occurred before February 13, 2020, the
corresponding provisions of the regulations in this part that were in
effect on February 12, 2020, will apply:
(1) The completion date;
(2) The parties to the transaction have executed a binding written
agreement, or other binding document, establishing the material terms
of the transaction;
(3) A party has made a public offer to shareholders to buy shares
of a U.S. business; or
(4) A shareholder has solicited proxies in connection with an
election of the board of directors of a U.S.
[[Page 3126]]
business or an owner or holder of a contingent equity interest has
requested the conversion of the contingent equity interest.
(c) For any transaction to which part 801 of this title was
applicable from November 10, 2018, through February 12, 2020, the
regulations in part 801 in effect during that time will continue to
apply.
Note 1 to Sec. 800.104: See subpart I (Penalties and Damages)
of this part for specific applicability rules pertaining to that
subpart.
Sec. 800.105 Rules of construction and interpretation.
(a) The examples included in this part are provided for
informational purposes and should not be construed to alter the meaning
of the text of the regulations in this part.
(b) As used in this part, the term ``including'' means ``including
but not limited to.''
Subpart B--Definitions
Sec. 800.201 Aggregated data.
The term aggregated data means data that have been combined or
collected together in summary or other form such that the data cannot
be identified with any individual.
Sec. 800.202 Anonymized data.
The term anonymized data means data from which all personal
identifiers have been completely removed.
Sec. 800.203 Business day.
The term business day means Monday through Friday, except the legal
public holidays specified in 5 U.S.C. 6103, any day declared to be a
holiday by federal statute or executive order, or any day with respect
to which the U.S. Office of Personnel Management has announced that
Federal agencies in the Washington, DC, area are closed. For purposes
of calculating any deadline imposed by this part triggered by the
submission of a party to a transaction under Sec. 800.401(g)(2) or
Sec. 800.501(i), any submissions received after 5 p.m. Eastern Time
are deemed to be submitted on the next business day.
Note 1 to Sec. 800.203: See Sec. 800.604 regarding the tolling
of deadlines during a lapse in appropriations.
Sec. 800.204 Certification.
(a) The term certification means a written statement signed by the
chief executive officer or other duly authorized designee of a party
filing a notice, declaration, or information, certifying under the
penalties provided in the False Statements Accountability Act of 1996,
as amended (18 U.S.C. 1001) that the notice, declaration, or
information filed:
(1) Fully complies with the requirements of section 721, the
regulations in this part, and any agreement or condition entered into
with the Committee or any member of the Committee, and
(2) Is accurate and complete in all material respects, as it
relates to:
(i) The transaction; and
(ii) The party providing the certification, including its parents,
subsidiaries, and any other related entities described in the notice,
declaration, or information.
(b) For purposes of this section, a duly authorized designee is:
(1) In the case of a partnership, any general partner thereof;
(2) In the case of a corporation, any officer or director thereof;
(3) In the case of any entity lacking partners, officers, and
directors, any individual within the organization exercising executive
functions similar to those of a general partner of a partnership or an
officer or director of a corporation; and
(4) In the case of an individual, such individual or his or her
legal representative.
(c) In each case described in paragraphs (b)(1) through (4) of this
section, such designee must possess actual authority to make the
certification on behalf of the party filing a notice, declaration, or
information.
Note 1 to Sec. 800.204: A sample certification may be found at
the Committee's section of the Department of the Treasury website.
Sec. 800.205 Committee; Chairperson of the Committee; Staff
Chairperson.
The term Committee means the Committee on Foreign Investment in the
United States. The Chairperson of the Committee is the Secretary of the
Treasury. The Staff Chairperson of the Committee is the Department of
the Treasury official so designated by the Secretary of the Treasury or
by the Secretary's designee.
Sec. 800.206 Completion date.
The term completion date means, with respect to a transaction, the
earliest date upon which any ownership interest, including a contingent
equity interest, is conveyed, assigned, delivered, or otherwise
transferred to a person, or a change in rights that could result in a
covered control transaction or covered investment occurs.
Note 1 to Sec. 800.206: See Sec. 800.308 regarding the timing
rule for a contingent equity interest.
Sec. 800.207 Contingent equity interest.
The term contingent equity interest means a financial instrument
that currently does not constitute an equity interest but is
convertible into, or provides the right to acquire, an equity interest
upon the occurrence of a contingency or defined event.
Sec. 800.208 Control.
(a) The term control means the power, direct or indirect, whether
or not exercised, through the ownership of a majority or a dominant
minority of the total outstanding voting interest in an entity, board
representation, proxy voting, a special share, contractual
arrangements, formal or informal arrangements to act in concert, or
other means, to determine, direct, or decide important matters
affecting an entity; in particular, but without limitation, to
determine, direct, take, reach, or cause decisions regarding the
following matters, or any other similarly important matters affecting
an entity:
(1) The sale, lease, mortgage, pledge, or other transfer of any of
the tangible or intangible principal assets of the entity, whether or
not in the ordinary course of business;
(2) The reorganization, merger, or dissolution of the entity;
(3) The closing, relocation, or substantial alteration of the
production, operational, or research and development facilities of the
entity;
(4) Major expenditures or investments, issuances of equity or debt,
or dividend payments by the entity, or approval of the operating budget
of the entity;
(5) The selection of new business lines or ventures that the entity
will pursue;
(6) The entry into, termination, or non-fulfillment by the entity
of significant contracts;
(7) The policies or procedures of the entity governing the
treatment of non-public technical, financial, or other proprietary
information of the entity;
(8) The appointment or dismissal of officers or senior managers or,
in the case of a partnership, the general partner;
(9) The appointment or dismissal of employees with access to
critical technology or other sensitive technology or classified U.S.
Government information; or
(10) The amendment of the Articles of Incorporation, constituent
agreement, or other organizational documents of the entity with respect
to the matters described in paragraphs (a)(1) through (9) of this
section.
(b) In examining questions of control in situations where more than
one
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foreign person has an ownership interest in an entity, consideration
will be given to factors such as whether the foreign persons are
related or have formal or informal arrangements to act in concert,
whether they are agencies or instrumentalities of the national or
subnational governments of a single foreign state, and whether a given
foreign person and another person that has an ownership interest in the
entity are both controlled by any of the national or subnational
governments of a single foreign state.
(c) The following minority shareholder protections shall not in
themselves be deemed to confer control over an entity:
(1) The power to prevent the sale or pledge of all or substantially
all of the assets of an entity or a voluntary filing for bankruptcy or
liquidation;
(2) The power to prevent an entity from entering into contracts
with majority investors or their affiliates;
(3) The power to prevent an entity from guaranteeing the
obligations of majority investors or their affiliates;
(4) The right to purchase an additional interest in an entity to
prevent the dilution of an investor's pro rata interest in that entity
in the event that the entity issues additional instruments conveying
interests in the entity;
(5) The power to prevent the change of existing legal rights or
preferences of the particular class of stock held by minority
investors, as provided in the relevant corporate documents governing
such shares; and
(6) The power to prevent the amendment of the Articles of
Incorporation, constituent agreement, or other organizational documents
of an entity with respect to the matters described in paragraphs (c)(1)
through (5) of this section.
(d) The Committee will consider, on a case-by-case basis, whether
minority shareholder protections other than those listed in paragraph
(c) of this section do not confer control over an entity.
(e) Examples:
(1) Example 1. Corporation A is a U.S. business. A U.S. investor
owns 50 percent of the voting interest in Corporation A, and the
remaining voting interest is owned in equal shares by five unrelated
foreign investors. The foreign investors jointly financed their
investment in Corporation A and vote as a single block on matters
affecting Corporation A. The foreign investors have an informal
arrangement to act in concert with regard to Corporation A, and, as
a result, the foreign investors control Corporation A.
(2) Example 2. Same facts as the example in paragraph (e)(1) of
this section with regard to the composition of Corporation A's
shareholders. The foreign investors in Corporation A have no
contractual or other commitments to act in concert, and have no
informal arrangements to do so. Assuming no other relevant facts,
the foreign investors do not control Corporation A.
(3) Example 3. Corporation A, a foreign person, is a private
equity fund that routinely acquires equity interests in companies
and manages them for a period of time. Corporation B is a U.S.
business. In addition to its acquisition of seven percent of
Corporation B's voting shares, Corporation A acquires the right to
terminate significant contracts of Corporation B. Corporation A
controls Corporation B.
(4) Example 4. Corporation A, a foreign person, acquires a nine
percent interest in the shares of Corporation B, a U.S. business. As
part of the transaction, Corporation A also acquires certain veto
rights that determine important matters affecting Corporation B,
including the right to veto the dismissal of senior executives of
Corporation B. Corporation A controls Corporation B.
(5) Example 5. Corporation A, a foreign person, acquires a 13
percent interest in the shares of Corporation B, a U.S. business,
and the right to appoint one member of Corporation B's seven-member
board of directors. Corporation A receives minority shareholder
protections listed in paragraph (c) of this section but receives no
other positive or negative rights with respect to Corporation B.
Assuming no other relevant facts, Corporation A does not control
Corporation B.
(6) Example 6. Corporation A, a foreign person, acquires a 20
percent interest in the shares of Corporation B, a U.S. business.
Corporation A has negotiated an irrevocable passivity agreement that
completely precludes it from controlling Corporation B. Corporation
A does, however, receive the right to prevent Corporation B from
entering into contracts with majority investors or their affiliates
and to prevent Corporation B from guaranteeing the obligations of
majority investors or their affiliates. Assuming no other relevant
facts, Corporation A does not control Corporation B.
(7) Example 7. Limited Partnership A comprises two limited
partners, each of which holds 49 percent of the interest in the
partnership, and a general partner, which holds two percent of the
interest. The general partner has sole authority to determine,
direct, and decide all important matters affecting the partnership
and a fund operated by the partnership. The general partner alone
controls Limited Partnership A and the fund.
(8) Example 8. Same facts as the example in paragraph (e)(7) of
this section, except that each of the limited partners has the
authority to veto major investments proposed by the general partner
and to choose the fund's representatives on the boards of the fund's
portfolio companies. The general partner and the limited partners
each have control over Limited Partnership A and the fund.
Note 1 to Sec. 800.208: See Sec. 800.302(b) regarding the
Committee's treatment of transactions in which a foreign person
holds or acquires 10 percent or less of the outstanding voting
interest in a U.S. business solely for the purpose of passive
investment. See Sec. 800.303 regarding the Committee's treatment of
transactions that do not result in control over a U.S. business by a
foreign person, but may be covered investments. See Sec. 800.305
regarding the Committee's treatment of a subsequent transaction
involving a foreign person that previously acquired control of the
U.S. business.
Sec. 800.209 Conversion.
The term conversion means the exercise of a right inherent in the
ownership or holding of a particular financial instrument to exchange
any such instrument for an equity interest.
Sec. 800.210 Covered control transaction.
The term covered control transaction means any transaction that is
proposed or pending after August 23, 1988, by or with any foreign
person that could result in foreign control of any U.S. business,
including such a transaction carried out through a joint venture.
Sec. 800.211 Covered investment.
The term covered investment means an investment, direct or
indirect, by a foreign person other than an excepted investor, in an
unaffiliated TID U.S. business that is proposed or pending on or after
February 13, 2020, and that:
(a) Is not a covered control transaction; and
(b) Affords the foreign person:
(1) Access to any material nonpublic technical information in the
possession of the TID U.S. business;
(2) Membership or observer rights on, or the right to nominate an
individual to a position on, the board of directors or equivalent
governing body of the TID U.S. business; or
(3) Any involvement, other than through voting of shares, in
substantive decisionmaking of the TID U.S. business regarding:
(i) The use, development, acquisition, safekeeping, or release of
sensitive personal data of U.S. citizens maintained or collected by the
TID U.S. business;
(ii) The use, development, acquisition, or release of critical
technologies; or
(iii) The management, operation, manufacture, or supply of covered
investment critical infrastructure.
(c) Notwithstanding paragraphs (a) and (b) of this section, no
investment involving an air carrier, as defined in 49 U.S.C.
40102(a)(2), that holds a certificate issued under 49 U.S.C. 41102
shall be a covered investment.
(d) Example: Corporation A, a foreign person that is not an
excepted investor, makes a non-controlling investment in Corporation B,
a U.S. business, that affords Corporation A the right to nominate one
of the directors on Corporation B's board of directors.
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Corporation B, through its wholly-owned subsidiary Corporation X,
designs and manufactures a critical technology. Corporation A's
investment in Corporation B is a covered investment.
Sec. 800.212 Covered investment critical infrastructure.
The term covered investment critical infrastructure means, in the
context of a particular covered investment, the systems and assets,
whether physical or virtual, set forth in column 1 of appendix A to
this part.
Sec. 800.213 Covered transaction.
The term covered transaction means any of the following:
(a) A covered control transaction;
(b) A covered investment;
(c) A change in the rights that a foreign person has with respect
to a U.S. business in which the foreign person has an investment, if
that change could result in a covered control transaction or a covered
investment; or
(d) Any other transaction, transfer, agreement, or arrangement, the
structure of which is designed or intended to evade or circumvent the
application of section 721.
(e) Examples:
(1) Example 1. Corporation A, a foreign person, acquires a 10
percent non-controlling equity interest in Corporation X, a U.S.
business. Corporation X subsequently provides Corporation A the
right to appoint the Chief Executive Officer and the Chief Technical
Officer of Corporation X. Corporation A does not acquire any
additional equity interest in Corporation X. Assuming no other
relevant facts, the change in rights is a covered transaction.
(2) Example 2. Corporation A, a foreign person that is not an
excepted investor, acquires a 10 percent non-controlling equity
interest in Corporation X, an unaffiliated TID U.S. business, but
Corporation A is not afforded any of the access, rights, or
involvement specified in Sec. 800.211(b) at the time of its
investment. Corporation X later expands its board of directors and
provides Corporation X with the right to appoint a director.
Assuming no other relevant facts, the change in rights is a covered
transaction.
(3) Example 3. Corporation A is organized under the laws of a
foreign state and is wholly owned and controlled by a foreign
national. With a view towards circumventing section 721, Corporation
A transfers money to a U.S. citizen, who, pursuant to informal
arrangements with Corporation A and on its behalf, purchases all the
shares in Corporation X, a U.S. business. The transaction is a
covered transaction.
(4) Example 4. Corporation A is organized under the laws of a
foreign state, is wholly owned and controlled by a foreign national,
and is not an excepted investor. With a view towards circumventing
section 721, Corporation A transfers money to a U.S. citizen, who,
pursuant to informal arrangements with Corporation A and on its
behalf, makes a non-controlling minority equity investment in
Corporation X, an unaffiliated TID U.S. business that maintains and
collects sensitive personal data of U.S. citizens. In connection
with the investment, the U.S. citizen is afforded the right to be
involved in substantive decisionmaking regarding the release of
sensitive personal data of U.S. citizens maintained by Corporation
X. The transaction is a covered transaction.
Note 1 to Sec. 800.213: Any transaction described in (a)
through (d) of this section that arises pursuant to a bankruptcy
proceeding or other form of default on debt is a covered
transaction. See also Sec. 800.306 for the treatment of certain
lending transactions.
Sec. 800.214 Critical infrastructure.
The term critical infrastructure means, in the context of a
particular covered control transaction, systems and assets, whether
physical or virtual, so vital to the United States that the incapacity
or destruction of such systems or assets would have a debilitating
impact on national security.
Sec. 800.215 Critical technologies.
The term critical technologies means the following:
(a) Defense articles or defense services included on the United
States Munitions List (USML) set forth in the International Traffic in
Arms Regulations (ITAR) (22 CFR parts 120-130);
(b) Items included on the Commerce Control List (CCL) set forth in
Supplement No. 1 to part 774 of the Export Administration Regulations
(EAR) (15 CFR parts 730-774), and controlled--
(1) Pursuant to multilateral regimes, including for reasons
relating to national security, chemical and biological weapons
proliferation, nuclear nonproliferation, or missile technology; or
(2) For reasons relating to regional stability or surreptitious
listening;
(c) Specially designed and prepared nuclear equipment, parts and
components, materials, software, and technology covered by 10 CFR part
810 (relating to assistance to foreign atomic energy activities);
(d) Nuclear facilities, equipment, and material covered by 10 CFR
part 110 (relating to export and import of nuclear equipment and
material);
(e) Select agents and toxins covered by 7 CFR part 331, 9 CFR part
121, or 42 CFR part 73; and
(f) Emerging and foundational technologies controlled under section
1758 of the Export Control Reform Act of 2018 (50 U.S.C. 4817).
Sec. 800.216 Encrypted data.
The term encrypted data means data to which National Institute of
Standards and Technology (NIST)-allowed cryptographic techniques, as
identified in the most current NIST special publication 800-175B, or
superseding publication, have been applied.
Sec. 800.217 Entity.
The term entity means any branch, partnership, group or sub-group,
association, estate, trust, corporation or division of a corporation,
or organization (whether or not organized under the laws of any State
or foreign state); assets (whether or not organized as a separate legal
entity) operated by any one of the foregoing as a business undertaking
in a particular location or for particular products or services; and
any government (including a foreign national or subnational government,
the U.S. Government, a subnational government within the United States,
and any of their respective departments, agencies, or
instrumentalities). (See examples in Sec. 800.301(g)(5) through (14)
and Sec. 800.302(g)(5) through (10).)
Sec. 800.218 Excepted foreign state.
The term excepted foreign state means, until February 13, 2022, a
foreign state that meets the criteria in paragraph (a) of this section,
and, beginning on February 13, 2022, a foreign state that meets both
the criteria in paragraphs (a) and (b) of this section:
(a) Is identified by the Committee as an eligible foreign state,
and
(b) Is a foreign state for which the Committee has made a
determination under Sec. 800.1001(a).
Note 1 to Sec. 800.218: The name of each foreign state
identified by the Committee as an eligible foreign state will be
available at the Committee's section of the Department of the
Treasury website. See Sec. 800.1001(c) regarding the publication of
a notice in the Federal Register of a determination under Sec.
800.1001(a). The list of excepted foreign states will also be
available at the Committee's section of the Department of the
Treasury website.
Sec. 800.219 Excepted investor.
(a) The term excepted investor means a foreign person who is, as of
the completion date of the transaction and subject to paragraphs (c)
and (d) of this section:
(1) A foreign national who is a national of one or more excepted
foreign states and is not also a national of any foreign state that is
not an excepted foreign state;
(2) A foreign government of an excepted foreign state; or
[[Page 3129]]
(3) A foreign entity that meets each of the following conditions
with respect to itself and each of its parents (if any):
(i) Such entity is organized under the laws of an excepted foreign
state or in the United States;
(ii) Such entity has its principal place of business in an excepted
foreign state or in the United States;
(iii) Seventy-five percent or more of the members and 75 percent or
more of the observers of the board of directors or equivalent governing
body of such entity are:
(A) U.S. nationals; or
(B) Nationals of one or more excepted foreign states who are not
also nationals of any foreign state that is not an excepted foreign
state;
(iv) Any foreign person that individually, and each foreign person
that is part of a group of foreign persons that in the aggregate, holds
10 percent or more of the outstanding voting interest of such entity;
holds the right to 10 percent or more of the profits of such entity;
holds the right in the event of dissolution to 10 percent or more of
the assets of such entity; or otherwise could exercise control over
such entity, is:
(A) A foreign national who is a national of one or more excepted
foreign states and is not also a national of any foreign state that is
not an excepted foreign state;
(B) A foreign government of an excepted foreign state; or
(C) A foreign entity that is organized under the laws of an
excepted foreign state and has its principal place of business in an
excepted foreign state or in the United States; and
(v) The minimum excepted ownership of such entity is held,
individually or in the aggregate, by one or more persons each of whom
is:
(A) Not a foreign person;
(B) A foreign national who is a national of one or more excepted
foreign states and is not also a national of any foreign state that is
not an excepted foreign state;
(C) A foreign government of an excepted foreign state; or
(D) A foreign entity that is organized under the laws of an
excepted foreign state and has its principal place of business in an
excepted foreign state or in the United States.
(b) For purposes of paragraph (a)(3)(iv) of this section, foreign
persons who are related, have formal or informal arrangements to act in
concert, or are agencies or instrumentalities of, or controlled by, the
national or subnational governments of a single foreign state are
considered part of a group of foreign persons and their individual
ownerships are aggregated.
(c) Notwithstanding paragraph (a) of this section, a foreign person
is not an excepted investor with respect to a transaction if:
(1) In the five years prior to the completion date of the
transaction the foreign person, any of its parents, or any entity of
which it is a parent:
(i) Has received written notice from the Committee that it has
submitted a material misstatement or omission in a notice or
declaration or made a false certification under this part or part 801
or 802 of this title;
(ii) Has received written notice from the Committee that it has
violated a material provision of a mitigation agreement entered into
with, material condition imposed by, or an order issued by, the
Committee or a lead agency under section 721(l);
(iii) Has been subject to action by the President under section
721(d);
(iv) Has:
(A) Received a written Finding of Violation or Penalty Notice
imposing a civil monetary penalty from the Department of the Treasury,
Office of Foreign Assets Control (OFAC); or
(B) Entered into a settlement agreement with OFAC with respect to
apparent violations of U.S. sanctions laws administered by OFAC,
including the International Emergency Economic Powers Act, the Trading
With the Enemy Act, the Foreign Narcotics Kingpin Designation Act, each
as amended, or of any executive order, regulation, order, directive, or
license issued pursuant thereto;
(v) Has received a written notice of debarment from the Department
of State, Directorate of Defense Trade Controls, as described in 22 CFR
parts 127 and 128;
(vi) Has been a respondent or party in a final order, including a
settlement order, issued by the Department of Commerce, Bureau of
Industry and Security (BIS) regarding violations of U.S. export control
laws administered by BIS, including the Export Control Reform Act of
2018 (50 U.S.C. 4801 et seq.), the EAR, or of any executive order,
regulation, order, directive, or license issued pursuant thereto;
(vii) Has received a final decision from the Department of Energy,
National Nuclear Security Administration imposing a civil penalty with
respect to a violation of section 57b. of the Atomic Energy Act of
1954, as implemented under 10 CFR part 810; or
(viii) Has been convicted of, or has entered into a deferred
prosecution agreement or non-prosecution agreement with the Department
of Justice with respect to, any felony in any jurisdiction within the
United States; or
(2) The foreign person, any of its parents, or any entity of which
it is a parent is, on the date on which the parties to the transaction
first execute a binding written agreement, or other binding document,
establishing the material terms of the transaction, listed on either
the BIS Unverified List or Entity List in 15 CFR part 744.
(d) Irrespective of whether the foreign person satisfies the
criteria in paragraph (a)(1) or (2), (a)(3)(i) through (iii), or
(c)(1)(i) through (iii) of this section as of the completion date, if
at any time during the three-year period following the completion date,
the foreign person no longer meets all the criteria set forth in
paragraph (a)(1) or (2), (a)(3)(i) through (iii), or (c)(1)(i) through
(iii) of this section, the foreign person is not an excepted investor
with respect to the transaction from the completion date onward. This
paragraph does not apply when an excepted investor no longer meets any
of the criteria solely due to a rescission of a determination under
Sec. 800.1001(b) or if the relevant foreign state otherwise ceases to
be an excepted foreign state.
(e) A foreign person may waive its status as an excepted investor
with respect to a transaction at any time by submitting a declaration
under Sec. 800.403 or filing a notice under Sec. 800.501 regarding
the transaction in which it explicitly waives such status. In such
case, the foreign person will be deemed not to be an excepted investor
with respect to the transaction and the relevant provisions of subpart
D or E will apply.
Note 1 to Sec. 800.219: See Sec. 800.501(c)(2) regarding an
agency notice where a foreign person is not an excepted investor
solely due to Sec. 800.219(d).
Sec. 800.220 Foreign entity.
(a) The term foreign entity means any branch, partnership, group or
sub-group, association, estate, trust, corporation or division of a
corporation, or organization organized under the laws of a foreign
state if either its principal place of business is outside the United
States or its equity securities are primarily traded on one or more
foreign exchanges.
(b) Notwithstanding paragraph (a) of this section, any branch,
partnership, group or sub-group, association, estate, trust,
corporation or division of a corporation, or organization that can
demonstrate that a majority of the equity interest in such entity is
ultimately owned by U.S. nationals is not a foreign entity.
[[Page 3130]]
Sec. 800.221 Foreign government.
The term foreign government means any government or body exercising
governmental functions, other than the U.S. Government or a subnational
government of the United States. The term includes, but is not limited
to, national and subnational governments, including their respective
departments, agencies, and instrumentalities.
Sec. 800.222 Foreign government-controlled transaction.
The term foreign government-controlled transaction means any
covered control transaction that could result in control of a U.S.
business by a foreign government or a person controlled by or acting on
behalf of a foreign government.
Sec. 800.223 Foreign national.
The term foreign national means any individual other than a U.S.
national.
Sec. 800.224 Foreign person.
(a) The term foreign person means:
(1) Any foreign national, foreign government, or foreign entity; or
(2) Any entity over which control is exercised or exercisable by a
foreign national, foreign government, or foreign entity.
(b) Any entity over which control is exercised or exercisable by a
foreign person is a foreign person.
(c) Examples:
(1) Example 1. Corporation A is organized under the laws of a
foreign state and is engaged in business only outside the United
States. All of its shares are held by Corporation X, which solely
controls Corporation A. Corporation X is organized in the United
States and is wholly owned and controlled by U.S. nationals.
Assuming no other relevant facts, Corporation A, although organized
and operating only outside the United States, is not a foreign
entity due to Sec. 800.220(b) and is not a foreign person.
(2) Example 2. Same facts as the first sentence of the example
in paragraph (c)(1) of this section. The government of the foreign
state under whose laws Corporation A is organized exercises control
over Corporation A because a law establishing Corporation A gives
the foreign state the right to appoint Corporation A's board
members. Corporation A is a foreign person.
(3) Example 3. Corporation A is organized in the United States,
is engaged in interstate commerce in the United States, and is
controlled by Corporation X. Corporation X is organized under the
laws of a foreign state, its principal place of business is located
outside the United States, and 50 percent of its shares are held by
foreign nationals and 50 percent of its shares are held by U.S.
nationals. Both Corporation A and Corporation X are foreign persons.
Corporation A is also a U.S. business.
(4) Example 4. Corporation A is organized under the laws of a
foreign state and is owned and controlled by a foreign national. A
branch of Corporation A engages in interstate commerce in the United
States. Corporation A (including its branch) is a foreign person.
The branch is also a U.S. business.
(5) Example 5. Corporation A is organized under the laws of a
foreign state and its principal place of business is located outside
the United States. Forty-five percent of the equity interest in
Corporation A is owned in equal shares by numerous unrelated foreign
investors, none of whom has control. The foreign investors have no
formal or informal arrangement with any other holder of equity
interest in Corporation A to act in concert regarding Corporation A.
Corporation A can demonstrate that the remainder of the equity
interest in Corporation A is ultimately held by U.S. nationals.
Assuming no other relevant facts, Corporation A is not a foreign
entity or foreign person.
(6) Example 6. Same facts as the example in paragraph (c)(5) of
this section, except that one of the foreign investors, a foreign
national, controls Corporation A. Assuming no other relevant facts,
Corporation A is not a foreign entity due to Sec. 800.220(b), but
it is a foreign person under paragraph (a)(2) of this section
because it is controlled by a foreign national.
Sec. 800.225 Hold.
The terms hold(s) and holding mean legal or beneficial ownership,
whether direct or indirect, whether through fiduciaries, agents, or
other means.
Sec. 800.226 Identifiable data.
The term identifiable data means data that can be used to
distinguish or trace an individual's identity, including through the
use of any personal identifier. Aggregated data or anonymized data is
identifiable data if any party to the transaction has, or as a result
of the transaction will have, the ability to disaggregate or de-
anonymize the data, or if the data is otherwise capable of being used
to distinguish or trace an individual's identity. Identifiable data
does not include encrypted data, unless the U.S. business that
maintains or collects the encrypted data has the means to de-encrypt
the data so as to distinguish or trace an individual's identity.
Sec. 800.227 Investment.
The term investment means the acquisition of equity interest,
including contingent equity interest.
Sec. 800.228 Investment fund.
The term investment fund means any entity that is an ``investment
company,'' as defined in section 3(a) of the Investment Company Act of
1940 (15 U.S.C. 80a-1 et seq.), or would be an ``investment company''
but for one or more of the exemptions provided in section 3(b) or 3(c)
thereunder.
Sec. 800.229 Involvement.
The term involvement means the right or ability to participate,
whether or not exercised, including by doing any of the following:
(a) Providing input into a final decision;
(b) Consulting with or providing advice to a decisionmaker;
(c) Exercising special approval or veto rights;
(d) Participating on a committee with decisionmaking authority; or
(e) Advising on the appointment officers or selecting employees who
are engaged in substantive decisionmaking.
Sec. 800.230 Lead agency.
The term lead agency means the Department of the Treasury and any
other agency designated by the Chairperson of the Committee to have
primary responsibility, on behalf of the Committee, for the specific
activity for which the Chairperson designates it as a lead agency,
including all or a portion of an assessment, a review, an
investigation, or the negotiation or monitoring of a mitigation
agreement or condition.
Sec. 800.231 Manufacture.
Solely for the purposes of column 2 of appendix A to this part, the
term manufacture means to produce or reproduce, whether physically or
virtually.
Sec. 800.232 Material nonpublic technical information.
(a) The term material nonpublic technical information means
information that:
(1) Provides knowledge, know-how, or understanding, in each case
not available in the public domain, of the design, location, or
operation of covered investment critical infrastructure, including
vulnerability information such as that related to physical security or
cybersecurity; or
(2) Is not available in the public domain and is necessary to
design, fabricate, develop, test, produce, or manufacture a critical
technology, including processes, techniques, or methods.
(b) The term material nonpublic technical information does not
include financial information regarding the performance of an entity.
(c) Examples:
(1) Example 1. Corporation A, a foreign person that is not an
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B. Corporation B is a
U.S. business that services an industrial control system utilized by
an interstate oil pipeline that has the capacity to transport
600,000 barrels per day of crude oil
[[Page 3131]]
(ICS B). ICS B is covered investment critical infrastructure as set
forth in column 1 of appendix A to this part. The source code for
ICS B is not available in the public domain. Pursuant to the terms
of the investment, Corporation A will have access to the source code
for ICS B. The proposed investment therefore affords Corporation A
access to material nonpublic technical information in the possession
of Corporation B regarding the design and operation of covered
investment critical infrastructure.
(2) Example 2. Fund A, a foreign person that is not an excepted
investor, proposes to acquire a five percent, non-controlling equity
interest in Corporation B. Corporation B is an unaffiliated TID U.S.
business that develops a critical technology (Technology Z).
Pursuant to the terms of the investment, Corporation B will notify
Fund A when it achieves the developmental milestone of completing a
demonstration prototype of Technology Z. The notification will only
set out the milestone achieved and will not include technical
details. Assuming no other facts, the proposed investment does not
afford Fund A access to material nonpublic technical information in
the possession of Corporation B necessary to design, fabricate,
develop, test, produce, or manufacture a critical technology.
Sec. 800.233 Minimum excepted ownership.
The term minimum excepted ownership means:
(a) With respect to an entity whose equity securities are primarily
traded on an exchange in an excepted foreign state or the United
States, a majority of its voting interest, the right to a majority of
its profits, and the right in the event of dissolution to a majority of
its assets; and
(b) With respect to an entity whose equity securities are not
primarily traded on an exchange in an excepted foreign state or the
United States, 80 percent or more of its voting interest, the right to
80 percent or more of its profits, and the right in the event of
dissolution to 80 percent or more of its assets.
Sec. 800.234 Own.
Solely for the purposes of column 2 of appendix A to this part, the
term own means to directly possess the applicable covered investment
critical infrastructure.
Sec. 800.235 Parent.
(a) The term parent means, with respect to an entity:
(1) A person who or which directly or indirectly:
(i) Holds or will hold at least 50 percent of the outstanding
voting interest in the entity; or
(ii) Holds or will hold the right to at least 50 percent of the
profits of the entity, or has or will have the right in the event of
dissolution to at least 50 percent of the assets of the entity; or
(2) The general partner, managing member, or equivalent of the
entity.
(b) Any entity that meets the conditions of paragraph (a)(1) or (2)
of this section with respect to another entity (i.e., the intermediate
parent) is also a parent of any other entity of which the intermediate
parent is a parent.
(c) Examples:
(1) Example 1. Corporation P holds 50 percent of the voting
interest in Corporations R and S; Corporation R holds 40 percent of
the voting interest in Corporation X; and Corporation S holds 50
percent of the voting interest in Corporation Y, which in turn holds
50 percent of the voting interest in Corporation Z. Corporation P is
a parent of Corporations R, S, Y, and Z, but not of Corporation X.
Corporation S is a parent of Corporation Y and Z, and Corporation Y
is a parent of Corporation Z.
(2) Example 2. Corporation A holds warrants which when exercised
will entitle it to vote 50 percent of the outstanding shares of
Corporation B. Corporation A is a parent of Corporation B.
(3) Example 3. Investor A holds 60 percent of the outstanding
voting interest in Corporation B. Investor C holds the right to 80
percent of the profits of Corporation B. Each of Investor A and
Investor C is a parent of Corporation B.
Sec. 800.236 Party to a transaction.
(a) The term party to a transaction means:
(1) In the case of an acquisition of an ownership interest in an
entity, the person acquiring the ownership interest, the person from
whom such ownership interest is acquired, and the entity whose
ownership interest is being acquired, without regard to any person
providing brokerage or underwriting services for the transaction;
(2) In the case of a merger, the surviving entity, and the entity
or entities that are merged with or into that entity in the
transaction;
(3) In the case of a consolidation, the entities being
consolidated, and the new consolidated entity;
(4) In the case of a proxy solicitation, the person soliciting
proxies, and the person who issued the voting interest;
(5) In the case of the acquisition or conversion of contingent
equity interests, the issuer and the person holding the contingent
equity interests;
(6) In the case of a change in rights that a person has with
respect to an entity in which that person has an investment, the person
whose rights change as a result of the transaction and the entity to
which those rights apply;
(7) In the case of any other transaction, transfer, agreement, or
arrangement, the structure of which is designed or intended to evade or
circumvent the application of section 721, any person that participates
in such transaction, transfer, agreement, or arrangement;
(8) In the case of any other type of transaction, any person who is
in a role comparable to that of a person described in paragraphs (a)(1)
through (7) of this section; and
(9) In all cases, each party that submitted a declaration or notice
to the Committee regarding a transaction.
(b) For purposes of section 721(l), the term party to a transaction
includes any affiliate of any party described in paragraph (a) of this
section that the Committee, or a lead agency acting on behalf of the
Committee, determines is relevant to mitigating a risk to the national
security of the United States.
Sec. 800.237 Person.
The term person means any individual or entity.
Sec. 800.238 Personal identifier.
The term personal identifier means name, physical address, email
address, social security number, phone number, or other information
that identifies a specific individual.
Sec. 800.239 Principal place of business.
(a) The term principal place of business means, subject to
paragraph (b) of this section, the primary location where an entity's
management directs, controls, or coordinates the entity's activities,
or, in the case of an investment fund, where the fund's activities and
investments are primarily directed, controlled, or coordinated by or on
behalf of the general partner, managing member, or equivalent.
(b) If the location determined under paragraph (a) of this section
is in the United States and the entity has represented to the U.S.
Government or a subnational government of the United States or any
foreign government, in the most recent submission or filing to such
government (other than a submission or filing to the Committee) in
which the entity has identified its principal place of business,
principal office and place of business, address of principal executive
offices, address of headquarters, or equivalent, that any of the
foregoing is outside the United States, then the location identified in
such submission or filing is deemed for purposes of this definition to
be the entity's principal place of business unless the entity can
demonstrate that such location has changed to the United States since
such submission or filing.
Sec. 800.240 Section 721.
The term section 721 means section 721 of title VII of the Defense
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Production Act of 1950, as amended (50 U.S.C. 4565).
Sec. 800.241 Sensitive personal data.
(a) The term sensitive personal data means, except as provided in
paragraph (b) of this section:
(1) Identifiable data that is:
(i) Maintained or collected by a U.S. business that:
(A) Targets or tailors products or services to any U.S. executive
branch agency or military department with intelligence, national
security, or homeland security responsibilities, or to personnel and
contractors thereof;
(B) Has maintained or collected any identifiable data within one or
more categories described in paragraph (a)(1)(ii) of this section on
greater than one million individuals at any point over the twelve (12)
months preceding the earliest of the completion date, the date of any
of the events described in Sec. 800.104(b)(2) through (4) (as
applicable), or the date of filing of a written notice or submission of
a declaration, unless the U.S. business can demonstrate that at the
time of the completion date of the transaction it had or will have
neither the capability to maintain nor the capability to collect any
identifiable data within one or more categories described in paragraph
(a)(1)(ii) of this section on greater than one million individuals; or
(C) Has a demonstrated business objective to maintain or collect
any identifiable data within one or more categories described in
paragraph (a)(1)(ii) of this section on greater than one million
individuals and such data is an integrated part of the U.S. business's
primary products or services; and
(ii) Within any of the following categories:
(A) Financial data that could be used to analyze or determine an
individual's financial distress or hardship;
(B) The set of data in a consumer report, as defined under 15
U.S.C. 1681a, unless such data is obtained from a consumer reporting
agency for one or more purposes identified in 15 U.S.C. 1681b(a) and
such data is not substantially similar to the full contents of a
consumer file as defined under 15 U.S.C. 1681a;
(C) The set of data in an application for health insurance, long-
term care insurance, professional liability insurance, mortgage
insurance, or life insurance;
(D) Data relating to the physical, mental, or psychological health
condition of an individual;
(E) Non-public electronic communications, including email,
messaging, or chat communications, between or among users of a U.S.
business's products or services if a primary purpose of such product or
service is to facilitate third-party user communications;
(F) Geolocation data collected using positioning systems, cell
phone towers, or WiFi access points such as via a mobile application,
vehicle GPS, other onboard mapping tool, or wearable electronic device;
(G) Biometric enrollment data including facial, voice, retina/iris,
and palm/fingerprint templates;
(H) Data stored and processed for generating a state or federal
government identification card;
(I) Data concerning U.S. Government personnel security clearance
status; or
(J) The set of data in an application for a U.S. Government
personnel security clearance or an application for employment in a
position of public trust; and
(2) The results of an individual's genetic tests, including any
related genetic sequencing data, whenever such results constitute
identifiable data. Such results shall not include data derived from
databases maintained by the U.S. Government and routinely provided to
private parties for purposes of research. For purposes of this
paragraph, ``genetic test'' shall have the meaning provided in 42
U.S.C. 300gg-91(d)(17).
(b) The term sensitive personal data shall not include, regardless
of the applicability of the criteria described in paragraph (a) of this
section:
(1) Data maintained or collected by a U.S. business concerning the
employees of that U.S. business, unless the data pertains to employees
of U.S. Government contractors who hold U.S. Government personnel
security clearances; or
(2) Data that is a matter of public record, such as court records
or other government records that are generally available to the public.
(c) Examples:
(1) Example 1. Corporation A, a U.S. business, periodically
collects geolocation data as described in paragraph (a)(1)(ii)(F) of
this section on its customers for marketing and customer experience
purposes. Corporation A maintains the geolocation data for a short
period, then purges the data from its systems. When Corporation A
and a foreign person notify the Committee of a transaction,
Corporation A maintains the geolocation data of only 200,000
individuals. However, in the 12 months prior to filing the
notification to the Committee, Corporation A has collected the
geolocation data of greater than one million individuals. Because
Corporation A collected the geolocation data of greater than one
million individuals in the 12 months prior to the filing date of the
notice, it meets the criteria in paragraph (a)(1)(i)(B) of this
section.
(2) Example 2. Corporation A, a U.S. business, collects data
relating to physical health conditions as described in paragraph
(a)(1)(ii)(D) from new customers, which numbered fewer than one
million over the 12 months prior to executing a definitive binding
agreement to be acquired by a foreign person. Under its data
retention policy, Corporation A maintains the health data for a long
period of time. Accordingly, Corporation A maintains the health data
from new customers (those from whom the data was collected in the
previous 12 months) and older customers (those from whom the data
was collected in prior years). In total, Corporation A maintains the
health data of three million individuals. Because Corporation A
maintains health data of greater than one million individuals, it
meets the criteria in paragraph (a)(1)(i)(B) of this section.
(3) Example 3. Same facts as the example in paragraph (c)(2) of
this section, except that, under its data retention policy, the
number of individuals for whom Corporation A maintains the health
data fluctuates. Over the 12 months prior to executing a definitive
binding agreement to be acquired by a foreign person, Corporation A
usually maintained the health data of 900,000 individuals. However,
at one point during the prior 12 months, it maintained the health
data of 1,100,000 individuals. Corporation A currently maintains the
health data of fewer than one million individuals. Because
Corporation A maintained the health data of greater than one million
individuals during the 12 months prior to executing a definitive
binding agreement to be acquired by a foreign person, it meets the
criteria in paragraph (a)(1)(i)(B) of this section.
(4) Example 4. Corporation A, a U.S. business, maintains data
under multiple categories in paragraph (a)(1)(ii) of this section on
over one million individuals. Specifically, Corporation A maintains
financial data described by paragraph (a)(1)(ii)(A) of this section
on 400,000 individuals, and health data described by paragraph
(a)(1)(ii)(D) of this section on another 700,000 individuals.
Because Corporation A maintains the data described in the categories
in paragraph (a)(1)(ii) on greater than one million individuals,
despite not maintaining or collecting data of greater than one
million individuals in any one category, it meets the criteria in
paragraph (a)(1)(i)(B) of this section.
(5) Example 5. Corporation A, a U.S. business, is a start-up
mobile mapping venture that has maintained or collected geolocation
data described by paragraph (a)(1)(ii)(F) of this section on
substantially fewer than one million individual subscribers over the
12 months prior to completing a transaction with a foreign person.
The geolocation data is an integrated part of Corporation A's
primary product, mobile mapping services. Corporation A, in
connection with attempting to secure an additional round of
financing, has prepared and distributed to potential investors pitch
materials that include Corporation A's projection that, within the
next two years, it will have greater than one million active
individual subscribers. Corporation A also
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has made plans to substantially increase its workforce and enhance
its IT infrastructure in anticipation of obtaining the additional
subscribers. Corporation A meets the criteria of paragraph
(a)(1)(i)(C) of this section of having a demonstrated business
objective to maintain or collect data described in paragraphs
(a)(1)(ii)(A) through (J) of this section on greater than one
million individuals.
Sec. 800.242 Service.
Solely for the purposes of column 2 of appendix A to this part, the
term service means to repair, maintain, refurbish, replace, overhaul,
or update.
Sec. 800.243 Solely for the purpose of passive investment.
(a) Ownership interests are held or acquired solely for the purpose
of passive investment if the person holding or acquiring such interests
does not plan or intend to exercise control and--
(1) Is not afforded any rights that if exercised would constitute
control;
(2) Does not acquire any access, rights, or involvement specified
Sec. 800.211(b);
(3) Does not possess or develop any purpose other than passive
investment; and
(4) Does not take any action inconsistent with holding or acquiring
such interests solely for the purpose of passive investment. (See Sec.
800.302(b).)
(b) Example: Corporation A, a foreign person, acquires a voting
interest in Corporation B, a U.S. business. In addition to the voting
interest, Corporation A negotiates the right to appoint a member of
Corporation B's board of directors. The acquisition by Corporation A of
a voting interest in Corporation B is not solely for the purpose of
passive investment.
Sec. 800.244 Substantial interest.
(a) The term substantial interest means, in the context of an
acquisition of an interest in a U.S. business by a foreign person, a
voting interest, direct or indirect, of 25 percent or more, and, in the
context of a foreign person in which the national or subnational
governments of a single foreign state have an interest, subject to
paragraph (b) of this section, a voting interest, direct or indirect,
of 49 percent or more.
(b) In the case of entity with a general partner, managing member,
or equivalent, the national or subnational governments of a single
foreign state will be considered to have a substantial interest in such
entity only if they hold 49 percent or more of the interest in the
general partner, managing member, or equivalent of the entity.
(c) For purposes of determining the percentage of voting interest
held indirectly by one entity in another entity, any voting interest of
a parent will be deemed to be a 100 percent voting interest in any
entity of which it is a parent.
(d) Examples:
(1) Example 1. Corporation A, a foreign person, plans to acquire
a 30 percent voting interest in Corporation X, an unaffiliated TID
U.S. business. Corporation B holds 51 percent of the voting interest
in, and is a parent of, Corporation A. A foreign government holds 75
percent of the voting interest in Corporation B, and private, non-
government controlled individuals hold the remaining 25 percent.
Under paragraph (c) of this section, Corporation B is deemed to have
100 percent of the voting interest in Corporation A because it is
Corporation A's parent, and therefore the foreign government's
indirect voting interest in Corporation A is imputed to be 75
percent. Corporation A is acquiring a substantial interest in
Corporation X, and a foreign government has a substantial interest
in Corporation A.
(2) Example 2. Same facts as the example in paragraph (d)(1) of
this section, except that Corporation B holds only 49 percent of the
voting interest in Corporation A and is not Corporation A's parent.
Because Corporation B is not a parent of Corporation A, paragraph
(c) of this section is not applicable. The foreign government's
indirect voting interest in Corporation A for purposes of this
section is only 36.75 percent. Corporation A is acquiring a
substantial interest in Corporation X; however, the foreign
government does not have a substantial interest in Corporation A.
Sec. 800.245 Substantive decisionmaking.
(a) The term substantive decisionmaking means the process through
which decisions regarding significant matters affecting an entity are
undertaken, including, as applicable:
(1) Pricing, sales, and specific contracts, including the license,
sale, or transfer of sensitive personal data to any third party,
including pursuant to a customer, vendor, or joint venture agreement;
(2) Supply arrangements;
(3) Corporate strategy and business development;
(4) Research and development, including location and budget
allocation;
(5) Manufacturing locations;
(6) Access to critical technologies, covered investment critical
infrastructure, material nonpublic technical information, or sensitive
personal data, including pursuant to a customer, vendor, or joint
venture agreement;
(7) Physical and cyber security protocols, including the storage
and protection of critical technologies, covered investment critical
infrastructure, or sensitive personal data;
(8) Practices, policies, and procedures governing the collection,
use, or storage of sensitive personal data, including:
(i) The establishment or maintenance of, or changes to, the
architecture of information technology systems and networks used in
collecting or maintaining sensitive personal data; or
(ii) Privacy policies and agreements for individuals from whom
sensitive personal data is collected setting forth parameters regarding
whether and how sensitive personal data may be collected, maintained,
accessed, or disseminated; or
(9) Strategic partnerships.
(b) The term substantive decisionmaking does not include strictly
administrative decisions.
(c) Examples:
(1) Example 1. Corporation A, a foreign person that is not an
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B. Corporation B is an
unaffiliated TID U.S. business that operates a container terminal at
a strategic seaport within the National Port Readiness Network
(Terminal B). Pursuant to the terms of the investment, Corporation A
will have approval rights over which customers may utilize Terminal
B. The proposed investment therefore affords Corporation A
involvement in substantive decisionmaking of Corporation B regarding
the management, operation, manufacture, or supply of covered
investment critical infrastructure.
(2) Example 2. Same facts as the example in paragraph (c)(1) of
this section, except that instead of customer approval rights,
Corporation A has the right to decide whether to claim certain tax
credits with respect to Terminal B on its own income tax filing,
which prevents Corporation B from claiming such credits. Assuming no
other relevant facts, the proposed investment does not afford
Corporation A involvement in substantive decisionmaking of
Corporation B regarding the management, operation, manufacture, or
supply of covered investment critical infrastructure.
Sec. 800.246 Supply.
Solely for the purposes of column 2 of appendix A to this part, the
term supply means to provide third-party physical or cyber security.
Sec. 800.247 Targets or tailors.
(a) The term targets or tailors means customizing products or
services for use by a person or group of persons or actively marketing
to or soliciting a person or group of persons.
(b) Examples:
(1) Example 1. Corporation A, a U.S. business, operates
facilities throughout the United States that offer healthcare-
related products and services. Some of Corporation A's facilities
are located within metropolitan
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areas that also include U.S. military facilities. Assuming no other
relevant facts, Corporation A does not target or tailor its products
or services for purposes of Sec. 800.241(a)(1)(i)(A).
(2) Example 2. Same facts as the example in paragraph (b)(1) of
this section, except that Corporation A operates a facility on the
premises of a U.S. military facility. Corporation A targets or
tailors its products or services for purposes of Sec.
800.241(a)(1)(i)(A).
(3) Example 3. Corporation A, a U.S. business, offers a discount
to all customers that are employed in the public sector broadly,
including active duty U.S. military personnel. Assuming no other
relevant facts, Corporation A does not target or tailor its products
or services for purposes of Sec. 800.241(a)(1)(i)(A).
(4) Example 4. Same facts as the example in paragraph (b)(3) of
this section, except that Corporation A offers a discount solely to
uniformed U.S. military personnel and distributes marketing
materials that promote the particular usefulness of Corporation A's
products to military personnel. Corporation A targets or tailors its
products or services for purposes of Sec. 800.241(a)(1)(i)(A).
Sec. 800.248 TID U.S. business.
The term TID U.S. business means any U.S. business that:
(a) Produces, designs, tests, manufactures, fabricates, or develops
one or more critical technologies;
(b) Performs the functions as set forth in column 2 of appendix A
to this part with respect to covered investment critical
infrastructure; or
(c) Maintains or collects, directly or indirectly, sensitive
personal data of U.S. citizens.
(d) Examples:
(1) Example 1. Corporation A, a U.S. business, operates a
munitions plant in the United States that produces a variety of
military grade explosives. Some of the explosives manufactured by
Corporation A are listed on the USML. Corporation A manufactures
critical technologies and is therefore a TID U.S. business.
(2) Example 2. Corporation A, a U.S. business, produces an item
(Item A) by purchasing various components from third-party suppliers
and integrating them into Item A. One of these components (Component
X) is a critical technology, but Item A is not a critical
technology. Before integrating Component X into Item A, Corporation
A merely verifies the fit and form of Component X solely as part of
Item A. Assuming no other relevant facts, Corporation A does not
test critical technologies and is therefore not a TID U.S. business.
(3) Example 3. Corporation A is a U.S. business that owns
intellectual property rights and equipment for manufacturing a
critical technology and maintains the know-how to manufacture that
critical technology. It has been six months since Corporation A
manufactured the critical technology. Because Corporation A retains
the ability to manufacture the critical technology, Corporation A is
a TID U.S. business.
(4) Example 4. Facility A is a crude oil storage facility with
the capacity to hold 50 million barrels of crude oil. Corporation A
is a U.S. business that operates Facility A. Corporation B is a U.S.
business that provides third-party physical security to Facility A
by guarding the gate to Facility A and patrolling the fence
surrounding Facility A. Corporation C produces the fencing used by
Facility A. Corporation D produces the commercially available off-
the-shelf cyber security software utilized in Facility A.
Corporation E provides third-party cyber security to Facility A by
running Facility A's cyber security defenses. Facility A is covered
investment critical infrastructure as set forth in column 1 of
appendix A to this part. Corporation A, Corporation B, and
Corporation E each perform one of the functions as set forth in
column 2 of appendix A to this part with respect to Facility A, and
each is therefore a TID U.S. business. Assuming no other relevant
facts, neither Corporation C nor Corporation D performs one of the
functions as set forth in column 2 of appendix A to this part with
respect to Facility A, and neither is therefore a TID U.S. business.
(5) Example 5. Pipeline A is an interstate natural gas pipeline
with an outside diameter of 36 inches. Corporation A is a U.S.
business that owns Pipeline A. Corporation B is a U.S. business that
manufactures the pipe segments with an outside diameter of 36 inches
that are used in Pipeline A. Pipeline A is covered investment
critical infrastructure as set forth in column 1 of appendix A to
this part. Corporation A performs one of the functions as set forth
in column 2 of appendix A to this part with respect to Pipeline A
and is therefore a TID U.S. business. Assuming no other relevant
facts, Corporation B does not perform one of the functions as set
forth in column 2 of appendix A to this part with respect to
Pipeline A and is therefore not a TID U.S. business.
(6) Example 6. IXP A is an internet exchange point that supports
public peering. Corporation A is a U.S. business that operates IXP
A. Corporation B is a U.S. business that maintains the physical
premises of IXP A. IXP A is covered investment critical
infrastructure as set forth in column 1 of appendix A to this part.
Corporation A performs one of the functions as set forth in column 2
of appendix A to this part with respect to IXP A and is therefore a
TID U.S. business. Assuming no other relevant facts, Corporation B
does not perform one of the functions as set forth in column 2 of
appendix A to this part with respect to IXP A and is therefore not a
TID U.S. business.
(7) Example 7. SCADA System A is a supervisory control and data
acquisition system utilized by a public water system, as defined in
section 1401(4) of the Safe Drinking Water Act, as amended (42
U.S.C. 300f(4)(A)), that regularly serves 15,000 individuals.
Corporation A is a U.S. business that produces SCADA System A by
building the hardware and integrating all the software. Corporation
B is a U.S. business that produces commercially available off-the-
shelf software that is sold to Corporation A and used as a component
in SCADA System A. SCADA System A is covered investment critical
infrastructure as set forth in column 1 of appendix A to this part.
Corporation A, as the manufacturer of SCADA System A, performs one
of the functions as set forth in column 2 of appendix A to this part
with respect to SCADA System A and is therefore a TID U.S. business.
Assuming no other relevant facts, Corporation B does not perform one
of the functions as set forth in column 2 of appendix A to this part
with respect to SCADA System A and is therefore not a TID U.S.
business.
(8) Example 8. Same facts as the example in paragraph (d)(7) of
this section. Corporation B later releases a patch that updates the
commercially available off-the-shelf software that is a component of
SCADA System A. As the software is only a component of SCADA System
A, the software itself is not covered investment critical
infrastructure as set forth in column 1 of appendix A to this part.
Assuming no other relevant facts, Corporation B does not perform one
of the functions as set forth in column 2 of appendix A to this part
with respect to SCADA System A and is therefore not a TID U.S.
business.
(9) Example 9. Alloy A is a steel alloy containing two percent
manganese. Corporation A is a U.S. business that manufactures Alloy
A in Facility A by melting the constituent metals. Facility A is in
the United States. Corporation B is a U.S. business that purchases
Alloy A from Corporation A and resells it to a prime contractor of
the Department of Defense. Facility A is covered investment critical
infrastructure as set forth in column 1 of appendix A to this part.
Corporation A performs one of the functions as set forth in column 2
of appendix A to this part with respect to Alloy A and is therefore
a TID U.S. business. Assuming no other relevant facts, Corporation B
does not perform one of the functions as set forth in column 2 of
appendix A to this part with respect to Alloy A and is therefore not
a TID U.S. business.
(10) Example 10. Corporation A, a U.S. business, is a credit
reporting agency and maintains consumer reports meeting the
description under Sec. 800.241(a)(1)(ii)(B) on greater than one
million individuals, including U.S. citizens. Corporation A
maintains sensitive personal data and is therefore a TID U.S.
business.
(11) Example 11. Same facts as the example in paragraph (d)(10)
of this section, except that Corporation A maintains the sensitive
personal data through its wholly-owned subsidiary, Corporation X.
Corporation A is a TID U.S. business because it indirectly maintains
sensitive personal data. Corporation X is also a TID U.S. business
because it directly maintains sensitive personal data.
(12) Example 12. Corporation A, a U.S. business, manufactures
and sells specialty medical devices to patients with various health
conditions. Corporation A solicits certain patient medical
information on its five million customers, including U.S. citizens,
which is sensitive personal data under Sec. 800.241(a)(1)(ii)(D),
for R&D,
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marketing, and quality assurance purposes. However, Corporation A
does not directly maintain or collect this information, but instead
outsources this function to a third party, Corporation X, which
collects the data according to Corporation A's instructions and
maintains the data on Corporation X's corporate servers for
Corporation A to access. Corporation A is a TID U.S. business
because it indirectly maintains and collects sensitive personal
data, and Corporation X is a TID U.S. business because it directly
maintains and collects sensitive personal data.
Sec. 800.249 Transaction.
The term transaction means any of the following, whether proposed
or completed:
(a) A merger, acquisition, or takeover, including:
(1) The acquisition of an ownership interest in an entity;
(2) The acquisition of proxies from holders of a voting interest in
an entity;
(3) A merger or consolidation;
(4) The formation of a joint venture; or
(5) A long-term lease or concession arrangement under which a
lessee (or equivalent) makes substantially all business decisions
concerning the operation of a leased entity (or equivalent), as if it
were the owner;
(b) An investment; or
(c) The conversion of a contingent equity interest.
(d) Example: Corporation A, a foreign person, signs a concession
agreement to operate the toll road business of Corporation B, a U.S.
business, for 99 years. Corporation B, however, is required under the
agreement to perform safety and security functions with respect to the
business and to monitor compliance by Corporation A with the operating
requirements of the agreement on an ongoing basis. Corporation B may
terminate the agreement or impose other penalties for breach of these
operating requirements. Assuming no other relevant facts, this is not a
transaction.
Note 1 to Sec. 800.249: See Sec. 800.308 regarding factors the
Committee will consider in determining whether to include the
access, rights, or involvement to be acquired by a foreign person
upon the conversion of contingent equity interests as part of the
Committee's analysis of whether a transaction that involves such
interests is a covered transaction.
Sec. 800.250 Unaffiliated TID U.S. business.
The term unaffiliated TID U.S. business means, with respect to a
foreign person, a TID U.S. business in which that foreign person does
not directly hold more than 50 percent of the outstanding voting
interest or have the right to appoint more than half of the members of
the board of directors or equivalent governing body.
Sec. 800.251 United States.
The term United States or U.S. means the United States of America,
the States of the United States, the District of Columbia, and any
commonwealth, territory, dependency, or possession of the United
States, or any subdivision of the foregoing, and includes the
territorial sea of the United States. For purposes of these regulations
and their examples in this part, an entity organized under the laws of
the United States of America, one of the States, the District of
Columbia, or a commonwealth, territory, dependency, or possession of
the United States is an entity organized ``in the United States.''
Sec. 800.252 U.S. business.
(a) The term U.S. business means any entity, irrespective of the
nationality of the persons that control it, engaged in interstate
commerce in the United States.
(b) Examples:
(1) Example 1. Corporation A is organized under the laws of a
foreign state and is wholly owned and controlled by a foreign
national. It engages in interstate commerce in the United States
through a branch or subsidiary. Its branch or subsidiary is a U.S.
business. Corporation A and its branch or subsidiary are each also a
foreign person.
(2) Example 2. Corporation A is organized under the laws of a
foreign state and is wholly owned and controlled by a foreign
national. Corporation A does not have a branch office, subsidiary,
or fixed place of business in the United States. It exports and
licenses technology to an unrelated company in the United States. It
also provides remote technical support services to customers that
are in the United States, but does not have any assets or personnel
located in the United States. Assuming no other relevant facts,
Corporation A is not a U.S. business.
(3) Example 3. Corporation A, a company organized under the laws
of a foreign state, is wholly owned and controlled by Corporation X.
Corporation X is organized in the United States and is wholly owned
and controlled by U.S. nationals. Corporation A does not have a
branch office, subsidiary, or fixed place of business in the United
States. It exports goods to Corporation X and to unrelated companies
in the United States. Assuming no other relevant facts, Corporation
A is not a U.S. business.
Sec. 800.253 U.S. national.
The term U.S. national means an individual who is a U.S. citizen or
an individual who, although not a U.S. citizen, owes permanent
allegiance to the United States.
Sec. 800.254 Voting interest.
The term voting interest means any interest in an entity that
entitles the owner or holder of that interest to vote for the election
of directors of the entity (or, with respect to unincorporated
entities, individuals exercising similar functions) or to vote on other
matters affecting the entity.
Subpart C--Coverage
Sec. 800.301 Transactions that are covered control transactions.
Transactions that are covered control transactions include:
(a) A transaction which, irrespective of the actual arrangements
for control provided for in the terms of the transaction, results or
could result in control of a U.S. business by a foreign person. (See
the examples in paragraphs (e)(1), (2), and (3) of this section.)
(b) A transaction in which a foreign person conveys its control of
a U.S. business to another foreign person. (See the example in
paragraph (e)(4) of this section.)
(c) A transaction that results or could result in control by a
foreign person of any part of an entity or of assets, if such part of
an entity or assets constitutes a U.S. business. (See Sec. 800.302(c)
and the examples in paragraphs (e)(5) through (14) of this section.)
(d) A joint venture in which the parties enter into a contractual
or other similar arrangement, including an agreement on the
establishment of a new entity, but only if one or more of the parties
contributes a U.S. business and a foreign person could control that
U.S. business by means of the joint venture. (See the examples in
paragraphs (e)(15) through (17) of this section.)
(e) Examples:
(1) Example 1. Corporation A, a foreign person, proposes to
purchase all of the shares of Corporation X, which is a U.S.
business. As the sole owner, Corporation A will have the right to
elect directors and appoint other primary officers of Corporation X,
and those directors will have the right to make decisions about the
closing and relocation of particular production facilities and the
termination of significant contracts. The directors also will have
the right to propose to Corporation A, the sole shareholder, the
dissolution of Corporation X and the sale of its principal assets.
The proposed transaction is a covered control transaction.
(2) Example 2. Same facts as the example (e)(1) of this section,
except that Corporation A plans to retain the existing directors of
Corporation X, all of whom are U.S. nationals. Although Corporation
A may choose not to exercise its power to elect new directors for
Corporation X, Corporation A nevertheless will have that exercisable
power. The proposed transaction is a covered control transaction.
(3) Example 3. Corporation A, a foreign person, proposes to
purchase 50 percent of
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the voting shares in Corporation X, a U.S. business, from
Corporation B, also a U.S. business. The governance documents of
Corporation X provide that important decisions require the
affirmative vote of more than half of the votes cast. Corporation B
would retain the other 50 percent of the shares in Corporation X,
and Corporation A and Corporation B would contractually agree that
Corporation A would not exercise its voting and other rights for 10
years. The proposed transaction is a covered control transaction.
(4) Example 4. Corporation X is a U.S. business, but is wholly
owned and controlled by Corporation Y, a foreign person. Corporation
Z, also a foreign person, but not related to Corporation Y, seeks to
acquire Corporation X from Corporation Y. The proposed transaction
is a covered control transaction because it could result in control
of Corporation X, a U.S. business, by another foreign person,
Corporation Z.
(5) Example 5. Corporation X, a foreign person, has a branch
office located in the United States. Corporation A, a foreign
person, proposes to buy that branch office. The proposed transaction
is a covered control transaction.
(6) Example 6. Corporation A, a foreign person, buys a branch
office located entirely outside the United States of Corporation Y,
which is incorporated in the United States. Assuming no other
relevant facts, the branch office of Corporation Y is not a U.S.
business, and the transaction is not a covered control transaction.
(7) Example 7. Corporation A, a foreign person, makes a start-
up, or ``greenfield,'' investment in the United States. That
investment involves activities such as the foreign person separately
arranging for the financing of and the construction of a plant to
make a new product, buying supplies and inputs, hiring personnel,
and purchasing the necessary technology. The investment involves
incorporating a newly formed subsidiary of the foreign person.
Assuming no other relevant facts, Corporation A will not have
acquired a U.S. business, and its greenfield investment is not a
covered control transaction. However, this transaction may be
subject to the provisions of part 802 of this title, which addresses
certain transactions concerning real estate.
(8) Example 8. Corporation A, a foreign person, intends to make
an early-stage investment in a start-up company in the United
States. Prior to the investment by the foreign person, the start-up
has engaged in interstate commerce, including incorporating,
establishing a domain name, hiring personnel, developing business
plans, seeking financing, and renting office space, without the
involvement of the foreign person. As a result of the investment,
Corporation A could control the U.S. business. Corporation A is
acquiring a U.S. business and the proposed transaction is a covered
control transaction.
(9) Example 9. Corporation A, a foreign person, purchases
substantially all of the assets of Corporation B. Corporation B,
which is incorporated in the United States, was in the business of
producing industrial equipment, but stopped producing and selling
such equipment one week before Corporation A purchased substantially
all of its assets. At the time of the transaction, Corporation B
continued to have employees on its payroll, maintained know-how in
producing the industrial equipment it previously produced, and
maintained relationships with its prior customers, all of which were
transferred to Corporation A. Corporation A has acquired a U.S.
business and the acquisition is a covered control transaction.
(10) Example 10. Corporation X, a foreign person, seeks to
acquire from Corporation A, a U.S. business, an empty warehouse
facility located in the United States. The acquisition would be
limited to the physical facility, and would not include customer
lists, intellectual property, or other proprietary information, or
other intangible assets or the transfer of personnel. Assuming no
other relevant facts, the facility is not an entity and therefore
not a U.S. business, and the proposed acquisition of the facility is
not a covered control transaction. However, this transaction may be
subject to the provisions of part 802 of this chapter, which
addresses certain transactions concerning real estate.
(11) Example 11. Same facts as the example in paragraph (e)(10)
of this section, except that, in addition to the proposed
acquisition of Corporation A's warehouse facility, Corporation X
would acquire the personnel, customer list, equipment, and inventory
management software used to operate the facility. Under these facts,
Corporation X is acquiring a U.S. business, and the proposed
acquisition is a covered control transaction.
(12) Example 12. Corporation A, a foreign person, seeks to
acquire from Corporation X, a U.S. business, certain tangible and
intangible assets that Corporation X operates as a business in the
United States. Corporation A intends to use the assets to establish
a business undertaking in a foreign country. Under these facts,
Corporation X is acquiring a U.S. business, and the proposed
acquisition is a covered control transaction.
(13) Example 13. Corporation A, a foreign person, seeks to
acquire from Corporation X, a U.S. business, proprietary software
developed by Corporation X. The acquisition would be limited to the
software and would not include customer lists, marketing material,
or other proprietary information; any other tangible or intangible
assets; or the transfer of personnel. Assuming no other relevant
facts, the software does not constitute an entity and is therefore
not a U.S. business, and the proposed acquisition of the software is
not a covered control transaction.
(14) Example 14. Same facts as the example in paragraph (e)(13)
of this section, except that, in addition to the proposed
acquisition of Corporation X's proprietary software, Corporation A
would acquire Corporation X's customer lists, advertising and
promotional material, branding, trademarks, domain names, and
internet presence. Under these facts, Corporation A is acquiring a
U.S. business, and the proposed acquisition is a covered control
transaction.
(15) Example 15. Corporation A, a foreign person, and
Corporation X, a U.S. business, form a separate corporation, JV
Corporation, to which Corporation A contributes only cash and
Corporation X contributes a U.S. business. Each owns 50 percent of
the shares of JV Corporation and, under the Articles of
Incorporation of JV Corporation, both Corporation A and Corporation
X have veto power over matters affecting JV Corporation identified
under Sec. 800.208, giving them both control over JV Corporation.
The place of incorporation of JV Corporation is not relevant to the
determination of whether the transaction is a covered control
transaction. The formation of JV Corporation is a covered control
transaction.
(16) Example 16. Corporation A, a foreign person, and
Corporation X, a U.S. business, form a separate corporation, JV
Corporation, to which Corporation A contributes funding and
managerial and technical personnel, while Corporation X contributes
certain land and equipment that do not in this example constitute a
U.S. business. Corporations A and X each have a 50 percent interest
in the joint venture. Assuming no other relevant facts, the
formation of JV Corporation is not a covered control transaction.
However, this transaction may be subject to the provisions of part
802 of this title, which addresses certain transactions concerning
real estate.
(17) Example 17. Same facts as the example in paragraph (e)(16)
of this section, except that, in addition to contributing certain
land and equipment, Corporation X also contributes intellectual
property, other proprietary information, and other intangible
assets, that together with the land and equipment constitute a U.S.
business, to JV Corporation. Under these facts, Corporation X has
contributed a U.S. business, and the formation of JV Corporation is
a covered control transaction.
Sec. 800.302 Transactions that are not covered control transactions.
Transactions that are not covered control transactions include:
(a) A stock split or pro rata stock dividend that does not involve
a change in control. See the example in paragraph (f)(1) of this
section.
(b) A transaction that results in a foreign person holding 10
percent or less of the outstanding voting interest in a U.S. business
(regardless of the dollar value of the interest so acquired), but only
if the transaction is solely for the purpose of passive investment.
(See Sec. 800.243 and the examples in paragraphs (f)(2) through (4) of
this section.)
(c) An acquisition of any part of an entity or of assets, if such
part of an entity or assets do not constitute a U.S. business. (See
Sec. 800.301(c) and the examples in paragraphs (f)(5) through (10) of
this section.)
(d) An acquisition of securities by a person acting as a securities
underwriter, in the ordinary course of business and in the process of
underwriting.
(e) An acquisition pursuant to a condition in a contract of
insurance
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relating to fidelity, surety, or casualty obligations if the contract
was made by an insurer in the ordinary course of business.
(f) Examples:
(1) Example 1. Corporation A, a foreign person, holds 10,000
shares of Corporation B, a U.S. business, constituting 10 percent of
the stock of Corporation B. Corporation B pays a 2-for-1 stock
dividend. As a result of this stock split, Corporation A holds
20,000 shares of Corporation B, still constituting 10 percent of the
stock of Corporation B. Assuming no other relevant facts, the
acquisition of additional shares is not a covered control
transaction.
(2) Example 2. In an open market purchase solely for the purpose
of passive investment, Corporation A, a foreign person, acquires
seven percent of the voting securities of Corporation X, which is a
U.S. business. Assuming no other relevant facts, the acquisition of
the securities is not a covered control transaction.
(3) Example 3. Corporation A, a foreign person, acquires nine
percent of the voting shares of Corporation X, a U.S. business.
Corporation A also negotiates contractual rights that give it the
power to control important matters of Corporation X. The acquisition
by Corporation A of the voting shares of Corporation X is not solely
for the purpose of passive investment and is a covered control
transaction.
(4) Example 4. Corporation A, a foreign person, acquires five
percent of the voting shares in Corporation B, a U.S. business. In
addition to the securities, Corporation A obtains the right to
appoint one out of eleven seats on Corporation B's board of
directors. The acquisition by Corporation A of Corporation B's
securities is not solely for the purpose of passive investment.
Whether the transaction is a covered control transaction would
depend on whether Corporation A obtains control of Corporation B as
a result of the transaction. See Sec. 800.303 for transactions that
are covered investments.
(5) Example 5. Corporation A, a foreign person, acquires, from
separate U.S. nationals products held in inventory, land, and
machinery for export. Assuming no other relevant facts, Corporation
A has not acquired a U.S. business, and this acquisition is not a
covered control transaction.
(6) Example 6. Corporation X, a U.S. business, produces armored
personnel carriers in the United States. Corporation A, a foreign
person, seeks to acquire the annual production of those carriers
from Corporation X under a long-term contract. Assuming no other
relevant facts, this transaction is not a covered control
transaction.
(7) Example 7. Same facts as the example in paragraph (f)(6) of
this section, except that Corporation X, a U.S. business, has
developed important technology in connection with the production of
armored personnel carriers. Corporation A seeks to negotiate an
agreement under which it would be licensed to manufacture using that
technology. Assuming no other relevant facts, neither the proposed
acquisition of technology pursuant to that license agreement, nor
the actual acquisition, is a covered control transaction.
(8) Example 8. Same facts as the example in paragraph (f)(6) of
this section, except that Corporation A enters into a contractual
arrangement to acquire the entire armored personnel carrier business
operations of Corporation X, including production facilities,
customer lists, technology, and staff, which together constitute a
U.S. business. This transaction is a covered control transaction.
(9) Example 9. Same facts as the example in paragraph (f)(6) of
this section, except that Corporation X suspended all activities of
its armored personnel carrier business a year ago and currently is
in bankruptcy proceedings. Existing equipment provided by
Corporation X is being serviced by another company, which purchased
the service contracts from Corporation X. The business's production
facilities are idle but still in working condition, some of its key
former employees have agreed to return if the business is
resuscitated, and its technology and customer and vendor lists are
still current. Corporation X's personnel carrier business
constitutes a U.S. business, and its purchase by Corporation A is a
covered control transaction.
(10) Example 10. Same facts as the example in paragraph (f)(6)
of this section, except that Corporation A and Corporation X
establish a joint venture that will be controlled by Corporation A
to manufacture armored personnel carriers outside the United States,
and Corporation X contributes assets constituting a U.S. business,
including intellectual property and other intangible assets required
to manufacture the armored personnel carriers, to the joint venture.
Corporation X has contributed a U.S. business to the joint venture,
and the establishment of the joint venture is a covered control
transaction.
(11) Example 11. Corporation A, a foreign person, holds a 10
percent ownership interest in Corporation X, a U.S. business.
Corporation A and Corporation X enter into a contractual arrangement
pursuant to which Corporation A gains the right to purchase an
additional interest in Corporation X to prevent the dilution of
Corporation A's pro rata interest in Corporation X in the event that
Corporation X issues additional instruments conveying interests in
Corporation X. Corporation A does not acquire any additional rights
or ownership interest in Corporation X pursuant to the contractual
arrangement. Assuming no other relevant facts, the transaction is
not a covered control transaction.
Sec. 800.303 Transactions that are covered investments.
Transactions that are covered investments include:
(a) A transaction that meets the requirements of Sec. 800.211
irrespective of the percentage of voting interest acquired. (See the
examples in paragraphs (d)(1) through (3) of this section.)
(b) A transaction that meets the requirements of Sec. 800.211,
irrespective of the fact that the Committee concluded all action under
section 721 for a previous covered investment by the same foreign
person in the same TID U.S. business, where such transaction involves
the acquisition of access, rights, or involvement specified in Sec.
800.211 in addition to those notified to the Committee in the
transaction for which the Committee previously concluded action. (See
the example in paragraph (d)(4) of this section.)
(c) A transaction that meets the requirements of Sec. 800.211,
irrespective of the fact that the critical technology produced,
designed, tested, manufactured, fabricated, or developed by the TID
U.S. business became controlled under section 1758 of the Export
Control Reform Act of 2018 after February 13, 2020, unless any of the
criteria set forth in Sec. 800.104(b) are satisfied with respect to
the transaction prior to the critical technology becoming controlled.
(See the example in paragraph (d)(5) of this section.)
(d) Examples:
(1) Example 1. Corporation A, a foreign person that is not an
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B, an entity in which
Corporation A has no voting interests or any rights. Corporation B
is a U.S. business that manufactures a critical technology.
Corporation B is therefore an unaffiliated TID U.S. business.
Pursuant to the terms of the investment, a designee of Corporation A
will have the right to observe the meetings of the board of
directors of Corporation B. The proposed transaction is a covered
investment.
(2) Example 2. Same facts as the example in paragraph (d)(1) of
this section, except that, pursuant to the terms of the investment,
instead of observer rights, Corporation A has consultation rights
with respect to Corporation B's licensing of a critical technology
to third parties. Corporation A is therefore involved in substantive
decisionmaking with respect to Corporation B, and the proposed
transaction is a covered investment.
(3) Example 3. Corporation A is a foreign person that is an
excepted investor. Corporation B, a foreign person that is not an
excepted investor, owns a three percent, non-controlling equity
interest in Corporation A. Corporation A proposes to acquire a four
percent, non-controlling equity interest in Corporation C, an
unaffiliated TID U.S. business. Pursuant to the terms of the
investment in Corporation C and Corporation A's governance
documents, Corporation A and Corporation B will each have access to
material nonpublic technical information in Corporation C's
possession. The transaction is a covered investment because
Corporation B is making an investment that will result in access to
material nonpublic technical information under Sec. 800.211(b).
(4) Example 4. The Committee concludes all action under section
721 with respect to a covered investment by Corporation A, a foreign
person that is not an excepted investor, in which Corporation A
acquires a
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four percent, non-controlling equity interest with access to
material non-public information in Corporation B, an unaffiliated
TID U.S. business. One year later, Corporation A proposes to acquire
an additional five percent equity interest in Corporation B,
resulting in Corporation A holding a nine percent, non-controlling
equity interest in Corporation B. Pursuant to the terms of the
additional investment, Corporation A will receive the right to
appoint a member to the board of directors of Corporation B. The
proposed transaction is a covered investment because the transaction
involves both an acquisition of an equity interest in an
unaffiliated TID U.S. business and a new right under Sec. 800.211.
(5) Example 5. Corporation A, a foreign person that is not an
excepted investor, has executed a binding written agreement
establishing the material terms of a proposed non-controlling
investment in Corporation B, an unaffiliated TID U.S. business. The
proposed investment will afford Corporation A access to material
nonpublic technical information in the possession of Corporation B.
The only controlled technology produced, designed, tested,
manufactured, fabricated, or developed by Corporation B became
controlled under section 1758 of the Export Control Reform Act of
2018 after February 13, 2020, but prior to the date upon which the
binding written agreement establishing the material terms of the
investment was executed. The proposed transaction is a covered
investment.
Sec. 800.304 Transactions that are not covered investments.
Transactions that are not covered investments include:
(a) An investment by a foreign person in an unaffiliated TID U.S.
business that does not afford the foreign person any of the access,
rights, or involvement specified in Sec. 800.211(b). (See the examples
in paragraphs (f)(1) and (2) of this section.)
(b) An investment by a foreign person who is an excepted investor
in an unaffiliated TID U.S. business. (See the example in paragraph
(f)(3) of this section.)
(c) A transaction that results or could result in control by a
foreign person of an unaffiliated TID U.S. business. (See the example
in paragraph (f)(4) of this section.)
(d) A stock split or pro rata stock dividend that does not afford
the foreign person any of the access, rights, or involvement specified
in Sec. 800.211(b). (See the example in paragraph (f)(5) of this
section.)
(e) An acquisition of securities by a person acting as a securities
underwriter, in the ordinary course of business and in the process of
underwriting.
(f) Examples:
(1) Example 1. In an open market purchase solely for the purpose
of passive investment, Corporation A, a foreign person that is not
an excepted investor, acquires seven percent of the voting
securities of Corporation X, an unaffiliated TID U.S. business.
Assuming no other relevant facts, the acquisition of the securities
is not a covered investment.
(2) Example 2. The Committee concluded all action under section
721 with respect to a covered investment in which Corporation A, a
foreign person that is not an excepted investor, acquired a four
percent, non-controlling equity interest with board observer rights
in Corporation B, an unaffiliated TID U.S. business. One year later,
Corporation A proposes to acquire an additional five percent equity
interest in Corporation B, which would result in Corporation A
holding a nine percent, non-controlling equity interest in
Corporation B. The proposed investment does not afford Corporation A
any additional access, rights, or involvement with respect to
Corporation B, including the access, rights, or involvement
specified in Sec. 800.211(b). Assuming no other relevant facts, the
proposed transaction is not a covered investment.
(3) Example 3. Corporation A, a foreign person who is an
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B, an unaffiliated TID
U.S. business. Pursuant to the terms of the investment, a designee
of Corporation A will have the right to observe the meetings of the
board of directors of Corporation B. Assuming no other relevant
facts, the proposed transaction is not a covered investment.
(4) Example 4. Corporation A, a foreign person who is an
excepted investor, proposes to purchase all of the shares of
Corporation B, an unaffiliated TID U.S. business. As the sole owner,
Corporation A will have the right to elect directors and appoint
other primary officers of Corporation B. Assuming no other relevant
facts, the proposed transaction is not a covered investment. It is,
however, a covered control transaction. Whether Corporation A is an
excepted investor and whether Corporation B is an unaffiliated TID
U.S. business are not relevant to the determination of whether the
transaction is a covered control transaction. (See Sec. 800.301.)
(5) Example 5. Corporation A, a foreign person that is not an
excepted investor, holds 10,000 shares and board observer rights in
Corporation B, an unaffiliated TID U.S. business, constituting 10
percent of the stock of Corporation B. Corporation B pays a 2-for-1
stock dividend. As a result of this stock split, Corporation A holds
20,000 shares of Corporation B, still constituting 10 percent of the
stock of Corporation B. The investment does not afford Corporation A
any additional access, rights, or involvement with respect to
Corporation B, including those specified in Sec. 800.211(b).
Assuming no other relevant facts, the acquisition of additional
shares is not a covered investment.
Sec. 800.305 Incremental acquisitions.
(a) Any transaction in which a foreign person acquires an
additional interest in, or for which a change in rights of the foreign
person occurs with respect to, a U.S. business over which the same
foreign person, or any entity that it wholly owns directly or
indirectly, previously acquired direct control as a result of a covered
control transaction for which the Committee concluded all action under
section 721 shall be deemed not to be a covered transaction. If,
however, a foreign person that did not acquire control of the U.S.
business in the prior transaction is a party to the later transaction,
the later transaction may be a covered transaction.
(b) Examples:
(1) Example 1. Corporation A, a foreign person, directly
acquires a 40 percent voting interest and important rights with
respect to Corporation B, a U.S. business. The documentation
pertaining to the transaction gives no indication that Corporation
A's interest in Corporation B may increase at a later date.
Corporation A and Corporation B file a voluntary notice of the
transaction with the Committee. Following its review of the
transaction, the Committee informs the parties that the notified
transaction is a covered control transaction, and concludes action
under section 721. Three years later, Corporation A acquires the
remainder of the voting interest in Corporation B. Assuming no other
relevant facts, because the Committee concluded all action with
respect to Corporation A's earlier direct acquisition of control in
the same U.S. business, and because no other foreign person is a
party to this subsequent transaction, this subsequent transaction is
not a covered transaction.
(2) Example 2. Corporation A, a foreign person that is not an
excepted investor, makes a covered investment in Corporation B, an
unaffiliated U.S. TID business, pursuant to which Corporation A
acquires a five percent non-controlling equity interest in
Corporation B that affords it access to material nonpublic technical
information of Corporation B. Following its review of the
transaction, the Committee informs the parties that the notified
transaction is a covered investment, and concludes action under
section 721. Two years later, Corporation A, in a subsequent
investment, acquires an additional five percent non-controlling
equity interest in Corporation B, which affords Corporation A the
right to appoint one board member of Corporation A. The subsequent
investment is a covered investment.
(3) Example 3. Same facts as the example in paragraph (b)(1) of
this section, except that instead of Corporation A acquiring the
remainder of the voting interest in Corporation B three years after
the initial acquisition, the remaining 60 percent voting interest is
acquired by Corporation X. Corporation X is wholly owned by
Corporation Y. Corporation Y also owns 100 percent of Corporation A.
The subsequent transaction may be a covered transaction because,
while Corporation A and Corporation X are both under common
ownership of Corporation Y, Corporation A (the direct acquirer in
the initial transaction) does not wholly own Corporation X.
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Sec. 800.306 Lending transactions.
(a) The extension of a loan or a similar financing arrangement by a
foreign person to a U.S. business, regardless of whether accompanied by
the creation in favor of the foreign person of a secured interest over
securities or other assets of the U.S. business, shall not, by itself,
constitute a covered transaction.
(1) The Committee will accept notices or declarations concerning a
loan or a similar financing arrangement that does not, by itself,
constitute a covered transaction only at the time that, because of
imminent or actual default or other condition, there is a significant
possibility that the foreign person may obtain control of a U.S.
business, or acquire equity interest and access, rights, or involvement
specified in Sec. 800.211(b) over a TID U.S. business, as a result of
the default or other condition.
(2) Where the Committee accepts a notice or declaration concerning
a loan or a similar financing arrangement under paragraph (a)(1) of
this section, and a party to the transaction is a foreign person that
makes loans in the ordinary course of business, the Committee will take
into account whether the foreign person has made any arrangements to
transfer management decisions, or day-to-day control over the U.S.
business to U.S. nationals or, as applicable, excepted investors for
purposes of determining whether such loan or financing arrangement
constitutes a covered transaction.
(b) Notwithstanding paragraph (a) of this section, a loan or a
similar financing arrangement through which a foreign person acquires
an interest in profits of a U.S. business, the right to appoint members
of the board of directors of the U.S. business, or other comparable
financial or governance rights characteristic of an equity investment
but not of a typical loan may constitute a covered transaction.
(c) An acquisition of voting interest in or assets of a U.S.
business by a foreign person upon default or other condition involving
a loan or a similar financing arrangement does not constitute a covered
transaction, provided that the loan was made by a syndicate of banks in
a loan participation where the foreign lender (or lenders) in the
syndicate:
(1) Needs the majority consent of the U.S. participants in the
syndicate to take action, and cannot on its own initiate any action
vis-[agrave]-vis the debtor; or
(2) Does not have a lead role in the syndicate, and is subject to a
provision in the loan or financing documents limiting its ability to:
(i) Control the debtor such that control for purposes of Sec.
800.208 could not be acquired; and
(ii) Exercise any access, rights, or involvement specified in Sec.
800.211(b).
(d) Examples:
(1) Example 1. Corporation A, which is a U.S. business, borrows
funds from Corporation B, a bank organized under the laws of a
foreign state and controlled by foreign persons. As a condition of
the loan, Corporation A agrees not to sell or pledge its principal
assets to any person. Assuming no other relevant facts, this lending
arrangement does not alone constitute a covered transaction.
(2) Example 2. Same facts as the example in paragraph (d)(1) of
this section, except that Corporation A defaults on its loan from
Corporation B and seeks bankruptcy protection. Corporation A has no
funds with which to satisfy Corporation B's claim, which is greater
than the value of Corporation A's principal assets. Corporation B's
secured claim constitutes the only secured claim against Corporation
A's principal assets, creating a high probability that Corporation B
will receive title to Corporation A's principal assets, which
constitute a U.S. business. Assuming no other relevant facts, the
Committee would accept a notice of the impending bankruptcy court
adjudication transferring control of Corporation A's principal
assets to Corporation B, which would constitute a covered control
transaction.
(3) Example 3. Corporation A, a foreign bank, makes a loan to
Corporation B, a U.S. business. The loan documentation provides
Corporation A the right to appoint a majority of the board of
directors of Corporation B and the right to be paid dividends by
Corporation B. These rights are characteristic of an equity interest
but not of a typical loan. Also, as a result of the transaction,
under the terms of the loan documentation, Corporation A has the
power to determine, direct, or decide important matters affecting
Corporation B. This loan is a covered control transaction.
(4) Example 4. Corporation A, a foreign bank that is not an
excepted investor, makes a loan to Corporation B, an unaffiliated
TID U.S. business. The loan documentation provides Corporation A the
right to appoint one out of fifteen seats on Corporation B's board
of directors and the right to be paid dividends by Corporation B.
These rights are characteristic of an equity interest but not of a
typical loan. However, assuming no other relevant facts under the
terms of the loan documentation, Corporation A does not have the
power to determine, direct, or decide important matters affecting
Corporation B. This loan is a covered investment.
Sec. 800.307 Specific clarification for investment funds.
(a) Notwithstanding Sec. 800.303, an indirect investment by a
foreign person in a TID U.S. business through an investment fund that
affords the foreign person (or a designee of the foreign person)
membership as a limited partner or equivalent on an advisory board or a
committee of the fund shall not be considered a covered investment if:
(1) The fund is managed exclusively by a general partner, a
managing member, or an equivalent;
(2) The general partner, managing member, or equivalent of the fund
is not a foreign person;
(3) The advisory board or committee does not have the ability to
approve, disapprove, or otherwise control:
(i) Investment decisions of the investment fund; or
(ii) Decisions made by the general partner, managing member, or
equivalent related to entities in which the investment fund is
invested;
(4) The foreign person does not otherwise have the ability to
control the investment fund, including the authority:
(i) To approve, disapprove, or otherwise control investment
decisions of the investment fund;
(ii) To approve, disapprove, or otherwise control decisions made by
the general partner, managing member, or equivalent related to entities
in which the investment fund is invested; or
(iii) To unilaterally dismiss, prevent the dismissal of, select, or
determine the compensation of the general partner, managing member, or
equivalent;
(5) The foreign person does not have access to material nonpublic
technical information as a result of its participation on the advisory
board or committee; and
(6) The investment does not afford the foreign person any of the
access, rights, or involvement specified in Sec. 800.211(b).
(b) For the purposes of paragraphs (a)(3) and (4) of this section,
and except as provided in paragraph (c) of this section, a waiver of a
potential conflict of interest, a waiver of an allocation limitation,
or a similar activity, applicable to a transaction pursuant to the
terms of an agreement governing an investment fund shall not be
considered to constitute control of investment decisions of the
investment fund or decisions relating to entities in which the
investment fund is invested.
(c) In extraordinary circumstances, the Committee may consider the
waiver of a potential conflict of interest, the waiver of an allocation
limitation, or a similar activity, applicable to a transaction pursuant
to the terms of an agreement governing an investment fund, to
constitute control of investment decisions of the investment fund or
decisions relating to entities in which the investment fund is
invested.
(d) Example: Limited Partner A, a foreign person, is a limited
partner in an investment fund that invests in
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Corporation B, an unaffiliated TID U.S. business. The investment fund
is managed exclusively by a general partner, who is not a foreign
person. The investment affords Limited Partner A membership on an
advisory board of the investment fund. The advisory board provides
industry expertise, but it does not control investment decisions of the
fund or decisions made by the general partner related to entities in
which the fund is invested. Limited Partner A does not otherwise have
the ability to control the fund. Limited Partner A's investment in
Corporation B does not afford it access to any material nonpublic
technical information in the possession of Corporation B, the right to
be a member or observer, or to nominate a member or observer, to the
board of Corporation B, nor any involvement in the substantive
decisionmaking of Corporation B. Assuming no other facts, the indirect
investment by Limited Partner A is not a covered investment.
Sec. 800.308 Timing rule for a contingent equity interest.
(a) For purposes of determining whether to include the rights that
a holder of a contingent equity interest will acquire upon conversion
of, or exercise of a right provided by, that interest in the
Committee's analysis of whether a notified transaction is a covered
transaction, the Committee will consider factors that include:
(1) The imminence of conversion or satisfaction of contingent
conditions;
(2) Whether conversion or satisfaction of contingent conditions
depends on factors within the control of the acquiring party; and
(3) Whether the amount of interest and the rights that would be
acquired upon conversion or satisfaction of contingent conditions can
be reasonably determined at the time of acquisition.
(b) When the Committee, applying paragraph (a) of this section,
determines that the rights that the holder will acquire upon conversion
or satisfaction of contingent condition will not be included in the
Committee's analysis of whether a notified or submitted transaction is
a covered transaction, the Committee will disregard the contingent
equity interest for purposes of that transaction except to the extent
that they convey immediate rights to the holder with respect to the
entity that issued the interest.
(c) Examples:
(1) Example 1. Corporation A, a foreign person, notifies the
Committee that it intends to buy common stock and debentures of
Corporation X, a U.S. business. By their terms, the debentures are
convertible into common stock only upon the occurrence of an event
the timing of which is not in the control of Corporation A, and the
number of common shares that would be acquired upon conversion
cannot now be determined. Assuming no other relevant facts, the
Committee will disregard the debentures in the course of its covered
transaction analysis at the time that Corporation A acquires the
debentures. In the event that it determines that the acquisition of
the common stock is not a covered transaction, the Committee will so
inform the parties. Once the conversion of the instruments becomes
imminent, it may be appropriate for the Committee to consider the
rights that would result from the conversion and whether the
conversion is a covered transaction. The conversion of those
debentures into common stock could be a covered transaction,
depending on what percentage of Corporation X's voting securities
Corporation A would receive and what powers those securities would
confer on Corporation A.
(2) Example 2. Same facts as the example in paragraph (c)(1) of
this section, except that the debentures at issue are convertible at
the sole discretion of Corporation A after six months, and if
converted, would represent a 50 percent interest in Corporation X.
The Committee may consider the rights that would result from the
conversion as part of its analysis.
Subpart D--Declarations
Sec. 800.401 Mandatory declarations.
(a) Except as provided in paragraph (d), (e), or (f) of this
section, the parties to a transaction described in paragraph (b) or (c)
of this section shall submit to the Committee a declaration with
information regarding the transaction in accordance with Sec. 800.403.
(b) A covered transaction that results in the acquisition of a
substantial interest in a TID U.S. business by a foreign person in
which the national or subnational governments of a single foreign state
(other than an excepted foreign state) have a substantial interest.
(c) A covered transaction that is a covered investment in, or that
could result in foreign control of, a TID U.S. business that produces,
designs, tests, manufactures, fabricates, or develops one or more
critical technologies:
(1) Utilized in connection with the TID U.S. business's activity in
one or more industries identified in appendix B to this part by
reference to the North American Industry Classification System (NAICS);
or
(2) Designed by the TID U.S. business specifically for use in one
or more industries identified in appendix B to this part by reference
to the NAICS, regardless of whether the critical technology also has
application for other industries. (See the example in paragraph (j)(1)
of this section.)
(d) The submission of a declaration shall not be required under
paragraph (b) of this section with respect to:
(1) A covered transaction by an investment fund if:
(i) The fund is managed exclusively by a general partner, a
managing member, or an equivalent;
(ii) The general partner, managing member, or equivalent is not a
foreign person; and
(iii) The investment fund satisfies, with respect to any foreign
person with membership as a limited partner on an advisory board or a
committee of the fund, the criteria specified in Sec. 800.307(a)(3)
and (4) (See the examples in paragraphs (j)(2) and (3) of this
section); or
(2) A covered control transaction involving an air carrier, as
defined in 49 U.S.C. 40102(a)(2), that holds a certificate issued under
49 U.S.C. 41102.
(e) The submission of a declaration shall not be required under
paragraph (c) of this section with respect to:
(1) A covered control transaction by an excepted investor;
(2) A covered transaction in which the foreign person's indirect
investment in the TID U.S. business is held solely and directly via an
entity that as of the completion date is:
(i) Subject to a security control agreement, special security
agreement, voting trust agreement, or proxy agreement approved by a
cognizant security agency to offset foreign ownership, control, or
influence pursuant to the National Industrial Security Program
regulations (32 CFR part 2004); and
(ii) Operating under a valid facility security clearance pursuant
to the National Industrial Security Program regulations (32 CFR part
2004);
(3) A covered transaction by an investment fund if:
(i) The fund is managed exclusively by a general partner, a
managing member, or an equivalent;
(ii) The general partner, managing member, or equivalent is:
(A) Ultimately controlled exclusively by U.S. nationals; or
(B) Not a foreign person; and
(iii) The investment fund satisfies, with respect to any foreign
person with membership as a limited partner on an advisory board or a
committee of the fund, the criteria specified in Sec. 800.307(a)(3)
and (4) (See the examples in paragraphs (j)(2) and (3) of this
section);
(4) An investment that is a covered investment solely due to the
application of Sec. 800.219(d); or
(5) A covered control transaction involving an air carrier, as
defined in 49 U.S.C. 40102(a)(2), that holds a certificate issued under
49 U.S.C. 41102.
(6) A covered transaction that is a covered investment in, or that
could
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result in foreign control of, a U.S. business that is a TID U.S.
business solely because such TID U.S. business produces, designs,
tests, manufactures, fabricates, or develops one or more critical
technologies that is-eligible for export, reexport, or transfer (in
country) pursuant to License Exception ENC of the EAR (15 CFR 740.17);
(f) Notwithstanding paragraph (a) of this section, parties to a
covered transaction may elect to submit a written notice under subpart
E of this part regarding the transaction instead of a declaration.
(g) Parties shall submit to the Committee the declaration required
under paragraph (a) of this section, or a written notice under
paragraph (f) of this section, no later than:
(1) February 13, 2020, or promptly thereafter, if the completion
date of the transaction is between February 13, 2020 and March 14,
2020; or
(2) Thirty days before the completion date of the transaction, if
the completion date of the transaction is after March 14, 2020.
(h) Notwithstanding paragraph (g) of this section, the parties to a
covered transaction may complete a transaction subject to a mandatory
declaration or notice under this section at any time after having been
informed in writing by the Committee that the Committee has concluded
all action under section 721 or that the Committee is not able to
complete action under Sec. 800.407(a)(2).
(i) In the event that the Committee rejects or permits a withdrawal
of a declaration or notice required under this section, the parties
shall not complete the transaction earlier than 30 days after the date
of the resubmission, except with the written approval of the Staff
Chairperson.
(j) Examples:
(1) Example 1. Corporation A, a foreign person that is not an
excepted investor and in which no foreign government has a
substantial interest, proposes to acquire a four percent, non-
controlling equity interest in Corporation B, an unaffiliated TID
U.S. business that manufactures a critical technology. Under the
terms of the investment, a designee of Corporation A will have the
right to observe the meetings of the board of directors of
Corporation B. Corporation B manufactures the critical technology
for commercial off-the-shelf use by businesses in various
industries, including some identified in appendix B to this part.
Assuming no other relevant facts, the proposed transaction is a
covered investment, but is not subject to a mandatory declaration or
notice under Sec. 800.401 because Corporation B does not produce,
design, test, manufacture, fabricate, or develop the critical
technology specifically for use in one or more industries identified
in appendix B to this part.
(2) Example 2. Investment Fund A, a foreign person that is not
an excepted investor, acquires a 10 percent equity interest in
Corporation A, an unaffiliated TID U.S. business, and the right to
appoint one member of Corporation A's board of directors.
Corporation A is manufacturing critical technologies utilized in
Corporation A's activity in one or more industries identified in
appendix B to this part. Investment Fund A satisfies the
requirements under paragraph (e)(3) of this section. Investment Fund
A's investment in Corporation A is a covered investment, but the
transaction is not subject to the mandatory declaration requirement.
(3) Example 3. Same facts as the example in paragraph (j)(2) of
this section, except that in connection with Investment Fund A's
transaction, Limited Partner X, a limited partner of Investment Fund
A and a foreign national that is not an excepted investor, receives
access to the material non-public technical information of
Corporation A. Limited Partner X's indirect investment in
Corporation A is a covered investment. While Investment Fund A's
direct investment is not subject to a mandatory declaration, Limited
Partner X's indirect investment in Corporation A is subject to a
mandatory declaration.
Sec. 800.402 Voluntary declarations.
Except as otherwise prohibited under Sec. 800.403(e), a party to
any proposed or completed transaction may submit to the Committee a
declaration regarding the transaction in accordance with the procedures
and requirements set forth in Sec. Sec. 800.403 and 800.404 instead of
a written notice.
Sec. 800.403 Procedures for declarations.
(a) A party or parties submitting a declaration of a transaction
under Sec. 800.401 or Sec. 800.402 shall submit electronically the
information set out in Sec. 800.404, including the certifications
required thereunder, to the Staff Chairperson in accordance with the
submission instructions on the Committee's section of the Department of
the Treasury website.
(b) No communications other than those described in paragraph (a)
of this section shall constitute the submission of a declaration for
purposes of section 721.
(c) Information and other documentary material submitted to the
Committee under this section shall be considered to have been filed
with the President or the President's designee for purposes of section
721(c) and Sec. 800.802.
(d) Persons filing a declaration shall, during the time that the
matter is pending before the Committee, promptly advise the Staff
Chairperson of any material changes in plans, facts, or circumstances
regarding the transaction, and any material change in information
provided or required to be provided to the Committee under Sec.
800.404. Unless the Committee rejects the declaration on the basis of
such material changes in accordance with Sec. 800.406(a)(2)(i), such
changes shall become part of the declaration filed by such persons
under this section, and the certification required under Sec.
800.405(d) shall apply to such changes.
(e) Parties to a transaction that have filed with the Committee a
written notice regarding a transaction under Sec. 800.501 or Sec.
802.501 or a declaration under Sec. 802.401 may not submit to the
Committee a declaration regarding the same transaction or a
substantially similar transaction without the written approval of the
Staff Chairperson.
Sec. 800.404 Contents of declarations.
(a) The party or parties submitting a declaration of a transaction
under Sec. 800.403 shall provide the information set out in this
section, which must be accurate and complete with respect to all
parties and to the transaction. (See also paragraphs (d) and (e) of
this section.)
(b) If fewer than all parties to a transaction submit a
declaration, the Committee may, at its discretion, request that the
parties to the transaction file a written notice of the transaction
under Sec. 800.501, if the Staff Chairperson determines that the
information provided by the submitting party or parties in the
declaration is insufficient for the Committee to assess the
transaction.
(c) Subject to paragraph (e) of this section, a declaration
submitted under Sec. 800.403 shall describe or provide, as applicable:
(1) The name of the foreign person(s) and U.S. business(es) that
are parties to, or, in applicable cases, the subject of, the
transaction, as well as the name, telephone number, and email address
of the primary point of contact for each party.
(2) The following information regarding the transaction in
question:
(i) A brief description of the rationale for and nature of the
transaction, including its structure (e.g., share purchase, merger,
asset purchase);
(ii) The percentage of voting interest acquired and the resulting
aggregate voting interest held by the foreign person and its
affiliates;
(iii) The percentage of economic interest acquired and the
resulting aggregate economic interest held by the foreign person and
its affiliates;
(iv) Whether the U.S. business has multiple classes of ownership,
and if so, the pre- and post-transaction share
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ownership of the foreign person(s) in the U.S. business broken out by
class;
(v) The total transaction value in U.S. dollars;
(vi) The status of the transaction, including the actual or
expected completion date of the transaction;
(vii) All sources of financing for the transaction; and
(viii) A copy of the definitive documentation of the transaction,
or if none exists, the document establishing the material terms of the
transaction.
(3) The following:
(i) A statement as to whether a party to the transaction is
stipulating that the transaction is a covered transaction and a
description of the basis for the stipulation; and
(ii) A statement as to whether a party to the transaction is
stipulating that the transaction is a foreign government-controlled
transaction and a description of the basis for the stipulation.
(4) A statement as to whether the foreign person will acquire any
of the following with respect to the U.S. business:
(i) Access to any material nonpublic technical information in the
possession of the U.S. business, and if so, a brief explanation of the
access and type of information;
(ii) Membership, observer rights, or nomination rights as set forth
in Sec. 800.211(b)(2), and if so, a statement as to the composition of
the board or other body both before and after the completion date of
the transaction;
(iii) Any involvement, other than through voting of shares, in
substantive decisionmaking of the U.S. business regarding covered
investment critical infrastructure, critical technologies, or sensitive
personal data as set forth in Sec. 800.211(b)(3), and if any, a
statement as to the involvement in such substantive decisionmaking; or
(iv) Any rights that could result in the foreign person acquiring
control of the U.S. business and, if any, a brief explanation of these
rights.
(5) The following information regarding the U.S. business:
(i) Website address;
(ii) Principal place of business;
(iii) Place of incorporation or organization; and
(iv) A list of the addresses or geographic coordinates (to at least
the fourth decimal) of all locations of the U.S. business, including
the U.S. business' headquarters, facilities, and operating locations.
(6) With respect to the U.S. business that is the subject of the
transaction and any entity of which that U.S. business is a parent, a
brief summary of their respective business activities, as, for example,
set forth in annual reports, and the product or service categories of
each, including the applicable six-digit North American Industry
Classification System (NAICS) Codes, Commercial and Government Entity
Code (CAGE Code) assigned by the Department of Defense, and any
applicable Dun and Bradstreet identification (DUNS) numbers assigned to
the U.S. business, and an explanation of how the entity is engaged in
interstate commerce in the United States, where applicable.
(7) A statement as to whether the U.S. business produces, designs,
tests, manufactures, fabricates, or develops one or more critical
technologies.
(8) A statement as to whether the U.S. business performs any of the
functions with respect to covered investment critical infrastructure as
set forth in column 2 of appendix A to this part.
(9) A statement as to whether the U.S. business directly or
indirectly maintains or collects sensitive personal data of U.S.
citizens, directly or indirectly has collected or maintained sensitive
personal data in the 12 months prior to any of the applicable events
specified in Sec. 800.241(a)(1)(i)(B), or has a demonstrated business
objective to collect such data in the future.
(10) A statement as to whether the U.S. business has any contracts
(including any subcontracts, if known) that are currently in effect or
were in effect within the past three years with any U.S. Government
agency or component, or in the past 10 years if the contract included
access to personally identifiable information of U.S. Government
personnel. If so, provide an annex listing such contracts, including
the name of the U.S. Government agency or component, the delivery order
number or contract number, the primary contractor (if the U.S. business
is a subcontractor), the start date, and the estimated completion date.
(11) A statement as to whether the U.S. business has any contracts
(including any subcontracts, if known) that are currently in effect or
were in effect within the past five years involving information,
technology, or data that is classified under Executive Order 12958, as
amended.
(12) A statement as to whether the U.S. business has received any
grant or other funding from the Department of Defense or the Department
of Energy, or participated in or collaborated on any defense or energy
program or product involving one or more critical technologies, covered
investment critical infrastructure, or other critical infrastructure
within the past five years.
(13) A statement as to whether the U.S. business participated in a
Defense Production Act Title III Program (50 U.S.C. 4501 et seq.)
within the past seven years.
(14) A statement as to whether the U.S. business has received or
placed priority rated contracts or orders under the Defense Priorities
and Allocations System (DPAS) regulation (15 CFR part 700), and the
level(s) of priority of such contracts or orders (``DX'' or ``DO'')
within the past three years.
(15) The name of the ultimate parent of the foreign person.
(16) The address of the foreign person and its ultimate parent.
(17) Complete organizational charts, both pre- and post-
transaction, including information that identifies the name, principal
place of business, and place of incorporation or other legal
organization (for entities); nationality (for individuals); and
ownership percentage (expressed in terms of both voting and economic
interest, if different) for each of the following:
(i) The immediate parent, the ultimate parent, and each
intermediate parent, if any, of each foreign person that is a party to
the transaction;
(ii) Where the ultimate parent is a private company, the ultimate
owner(s) of such parent;
(iii) Where the ultimate parent is a public company, any
shareholder with an interest of greater than five percent in such
parent; and
(iv) The U.S. business that is the subject of the transaction, both
before and after completion of the transaction.
(18) Information regarding all foreign government ownership in the
foreign person's ownership structure, including nationality and
percentage of ownership, as well as any rights that a foreign
government holds, directly or indirectly, with respect to the foreign
person.
(19) With respect to the foreign person that is party to the
transaction and any of its parents, as applicable, a brief summary of
their respective business activities, as, for example, set forth in
annual reports.
(20) A statement as to whether any party to the transaction has
been party to another transaction previously notified or submitted to
the Committee, and the case number assigned by the Committee regarding
such transaction(s).
(21) A statement (including relevant jurisdiction and criminal case
law number or legal citation) as to whether the U.S. business, the
foreign person, any parent of the foreign person, or any person of
which the foreign person is a parent has been convicted in the last 10
years of a crime in any jurisdiction.
[[Page 3143]]
(22) If applicable, a description (which may group similar items
into general product categories) of any critical technology that the
U.S. business produces, designs, tests, manufactures, fabricates, or
develops, and a list of any relevant Export Control Classification
Numbers (ECCNs) under the EAR and the USML categories under the ITAR,
and, if applicable, identify whether there are specially designed and
prepared nuclear equipment, parts and components, materials, software,
and technology covered by 10 CFR part 810; nuclear facilities,
equipment, and materials covered by 10 CFR part 110; or select agents
and toxins covered by 7 CFR part 331, 9 CFR part 121, or 42 CFR part
73.
(23) If applicable, a statement as to which functions set forth in
column 2 of appendix A to this part that the U.S. business performs
with respect to covered investment critical infrastructure, including a
description of such functions and the applicable covered investment
critical infrastructure.
(24) If applicable:
(i) The category or categories of data, as specified at Sec.
800.241, that the U.S. business directly or indirectly maintains or
collects;
(ii) For each applicable category of data specified in Sec.
800.241, individually and in the aggregate, the approximate number of
total unique persons from whom:
(A) The data is currently maintained, and
(B) The data has been maintained or collected at any point during
the 12 months prior to any of the applicable events specified in Sec.
800.241(a)(1)(i)(B);
(iii) Whether the U.S. business has a demonstrated business
objective to maintain or collect data described in Sec.
800.241(a)(1)(ii) of greater than one million individuals and such data
is an integrated part of the U.S. business's primary products or
services.
(iv) Whether the U.S. business targets or tailors products or
services to any U.S. executive branch agency or military department
with intelligence, national security, or homeland security
responsibilities, or to personnel or contractors thereof.
(d) Each party submitting a declaration shall provide a
certification of the information contained in the declaration
consistent with Sec. 800.204. A sample certification may be found on
the Committee's section of the Department of the Treasury website.
(e) A party that offers a stipulation under paragraph (c)(3) of
this section acknowledges that the Committee and the President are
entitled to rely on such stipulation in determining whether the
transaction is a covered investment, a covered control transaction, or
a foreign government-controlled transaction for the purposes of section
721 and all authorities thereunder, and waives the right to challenge
any such determination. Neither the Committee nor the President is
bound by any such stipulation, nor does any such stipulation limit the
ability of the Committee or the President to act on any authority
provided under section 721 with respect to any covered transaction.
Sec. 800.405 Beginning of 30-day assessment period.
(a) Upon receipt of a declaration submitted under Sec. 800.403,
the Staff Chairperson shall promptly inspect the declaration and shall
promptly notify in writing all parties to a transaction that have
submitted a declaration that:
(1) The Staff Chairperson has accepted the declaration and
circulated the declaration to the Committee, and the date on which the
assessment described in paragraph (b) of this section begins; or
(2) The Staff Chairperson has determined not to accept the
declaration and circulate the declaration to the Committee because the
declaration is incomplete, and an explanation of the material respects
in which the declaration is incomplete.
(b) A 30-day period for assessment of a covered transaction that is
the subject of a declaration shall commence on the date on which the
declaration is received by the Committee from the Staff Chairperson.
Such period shall end no later than the thirtieth day after it has
commenced, or if the thirtieth day is not a business day, no later than
the next business day after the thirtieth day.
(c) During the 30-day assessment period, the Staff Chairperson may
invite the parties to a covered transaction to attend a meeting with
the Committee staff to discuss and clarify issues pertaining to the
transaction.
(d) If the Committee notifies the parties to a transaction that
have submitted a declaration under Sec. 800.403 that the Committee
intends to conclude all action under section 721 with respect to that
transaction, each party that has submitted additional information
subsequent to the original declaration shall file a certification as
described in Sec. 800.204. A sample certification may be found on the
Committee's section of the Department of the Treasury website.
(e) If a party fails to provide the certification required under
paragraph (d) of this section, the Committee may, at its discretion,
take any of the actions under Sec. 800.407.
Sec. 800.406 Rejection, disposition, or withdrawal of declarations.
(a) The Committee, acting through the Staff Chairperson, may:
(1) Reject any declaration that does not comply with Sec. 800.404
and so inform the parties promptly in writing;
(2) Reject any declaration at any time, and so inform the parties
promptly in writing, if, after the declaration has been submitted and
before the Committee has taken one of the actions specified in Sec.
800.407:
(i) There is a material change in the covered transaction as to
which a declaration has been submitted; or
(ii) Information comes to light that contradicts material
information provided in the declaration by the party (or parties); or
(3) Reject any declaration at any time after the declaration has
been submitted, and so inform the parties promptly in writing, if the
party (or parties) that submitted the declaration does not provide
follow-up information requested by the Staff Chairperson within two
business days of the request, or within a longer time frame if the
party (or parties) so request in writing and the Staff Chairperson
grants that request in writing.
(b) The Staff Chairperson shall notify the party (or parties) that
submitted a declaration when the Committee has found that the
transaction that is the subject of a declaration is not a covered
transaction.
(c) Parties to a transaction that have submitted a declaration
under Sec. 800.403 may request in writing, at any time prior to the
Committee taking action under Sec. 800.407, that such declaration be
withdrawn. Such request shall be directed to the Staff Chairperson and
shall state the reasons why the request is being made and state whether
the transaction that is the subject of the declaration is being fully
and permanently abandoned. An official of the Department of the
Treasury will promptly advise the parties to the transaction in writing
of the Committee's decision.
(d) The Committee may not request or recommend that a declaration
be withdrawn and refiled, except to permit parties to a covered
transaction to correct material errors or omissions, or describe
material changes to the transaction, in the declaration submitted with
respect to that covered transaction.
(e) A party (or parties) may not submit more than one declaration
for the same or a substantially similar transaction
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without approval from the Staff Chairperson.
Note 1 to Sec. 800.406: See Sec. 800.403(e) regarding the
prohibition on submitting a declaration regarding the same
transaction or a substantially similar transaction for which a
written notice has been filed without the approval of the Staff
Chairperson.
Sec. 800.407 Committee actions.
(a) Upon receiving a declaration submitted under Sec. 800.403 with
respect to a covered transaction, the Committee may, at the discretion
of the Committee:
(1) If the Committee has reason to believe that the transaction may
raise national security considerations, request that the parties to the
transaction file a written notice under subpart E;
(2) Inform the parties to the transaction that the Committee is not
able to conclude action under section 721 with respect to the
transaction on the basis of the declaration and that the parties may
file a written notice under subpart E to seek written notification from
the Committee that the Committee has concluded all action under section
721 with respect to the transaction;
(3) Initiate a unilateral review of the transaction under Sec.
800.501(c); or
(4) Notify the parties in writing that the Committee has concluded
all action under section 721 with respect to the transaction.
(b) The Committee shall take action under paragraph (a) of this
section within the time period set forth in Sec. 800.405(b).
Subpart E--Notices
Sec. 800.501 Procedures for notices.
(a) Except as otherwise prohibited under paragraph (j) of this
section, a party or parties to a proposed or completed transaction may
file a voluntary notice of the transaction with the Committee.
Voluntary notice to the Committee is filed by sending an electronic
copy of the notice that includes, in English, the information set out
in Sec. 800.502, including the certification required under paragraph
(l) of that section. For electronic submission instructions, see the
Committee's section of the Department of the Treasury website.
(b) If the Committee determines that a transaction for which no
voluntary notice has been filed under this part, and with respect to
which the Committee has not informed the parties in writing that the
Committee has concluded all action under section 721, may be a covered
transaction and may raise national security considerations, the Staff
Chairperson, acting on the recommendation of the Committee, may request
the parties to the transaction to provide to the Committee the
information necessary to determine whether the transaction is a covered
transaction, and if the Committee determines that the transaction is a
covered transaction, to file a notice of such covered transaction under
paragraph (a) of this section.
(c) With respect to any transaction:
(1) Any member of the Committee, or his or her designee at or above
the Under Secretary or equivalent level, may, subject to paragraph
(c)(2) of this section, file an agency notice to the Committee through
the Staff Chairperson regarding a transaction if:
(i) That member has reason to believe that the transaction is a
covered transaction and may raise national security considerations and:
(A) The Committee has not informed the parties to such transaction
in writing that the Committee has concluded all action under section
721 with respect to such transaction; and
(B) The President has not announced a decision not to exercise the
President's authority under section 721(d) with respect to such
transaction; or
(ii) The transaction is a covered transaction and:
(A) The Committee has informed the parties to such transaction in
writing that the Committee has concluded all action under section 721
with respect to such transaction or determined that such transaction is
not a covered transaction, or the President has announced a decision
not to exercise the President's authority under section 721(d) with
respect to such transaction; and
(B) Either:
(1) A party to such transaction submitted false or misleading
material information to the Committee in connection with the
Committee's consideration of such transaction or omitted material
information, including material documents, from information submitted
to the Committee; or
(2) A party to or the entity resulting from consummation of such
transaction materially breaches (or, if the review or investigation of
such transaction was initiated under section 721 before August 13,
2018, intentionally materially breaches) a mitigation agreement or
condition described in section 721(l)(3)(A), such breach is certified
to the Committee by the lead department or agency monitoring and
enforcing such agreement or condition as a material breach (or, if the
review or investigation of such transaction was initiated under section
721 before August 13, 2018, an intentional material breach), and the
Committee determines that there are no other adequate and appropriate
remedies or enforcement tools available to address such breach.
(2)(i) That is an investment where a foreign person is not an
excepted investor due to the application of Sec. 800.219(d), any
member of the Committee, or his or her designee at or above the Under
Secretary or equivalent level, may file an agency notice to the
Committee through the Staff Chairperson regarding such investment if:
(A) That member has reason to believe that the transaction is a
covered transaction and may raise national security considerations;
(B) The Committee has not informed the parties to such transaction
in writing that the Committee has concluded all action under section
721 with respect to such transaction; and
(C) The President has not announced a decision not to exercise the
President's authority under section 721(d) with respect to such
transaction.
(ii) No notice filed under this paragraph (c)(2) shall be made with
respect to a transaction more than one year after the completion date
of the transaction, unless the Chairperson of the Committee determines,
in consultation with other members of the Committee, that because the
foreign person no longer meets all the criteria set forth in Sec.
800.219(a)(1) or (2), (a)(3)(i) through (iii), or (c)(1)(i) through
(iii), the transaction may threaten to impair the national security of
the United States, and in no event shall an agency notice under this
paragraph be made with respect to such a transaction more than three
years after the completion date of the transaction.
(d) Notices filed under paragraph (c) of this section are deemed
accepted upon their receipt by the Staff Chairperson. No agency notice
under paragraph (c)(1) of this section shall be made with respect to a
transaction more than three years after the completion date of the
transaction, unless the Chairperson of the Committee, in consultation
with other members of the Committee, files such an agency notice.
(e) No communications other than those described in paragraphs (a)
and (c) of this section shall constitute the filing or submitting of a
notice for purposes of section 721.
(f) Upon receipt of the electronic copy of a notice filed under
paragraph (a) of this section, including the certification required by
Sec. 800.502(l), the Staff Chairperson shall promptly inspect such
notice for completeness.
(g) Parties to a transaction are encouraged to consult with the
Committee in advance of filing a notice
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and, in appropriate cases, to file with the Committee a draft notice or
other appropriate documents to aid the Committee's understanding of the
transaction and to provide an opportunity for the Committee to request
additional information to be included in the notice. Any such pre-
notice consultation should take place, or any draft notice should be
provided, at least five business days before the filing of a voluntary
notice. All information and documentary material made available to the
Committee under this paragraph shall be considered to have been filed
with the President or the President's designee for purposes of section
721(c) and Sec. 800.802.
(h) Information and other documentary material provided by the
parties to the Committee after the filing of a voluntary notice under
this section shall be part of the notice, and shall be subject to the
final certification required under Sec. 800.502(m).
(i) For any voluntarily submitted draft or formal written notice
that includes a stipulation under section Sec. 800.502(o) that a
transaction is a covered transaction, the Committee shall provide
comments on the draft or formal written notice or accept the formal
written notice of a covered transaction not later than the date that is
10 business days after the date of submission of the draft or formal
written notice.
(j) No party to a transaction may file a notice under paragraph (a)
of this section if the transaction has been the subject of a
declaration submitted under subpart D and the Committee has not yet
taken action with respect to the transaction under Sec. 800.407.
Sec. 800.502 Contents of voluntary notices.
(a) If the parties to a transaction file a voluntary notice, they
shall provide in detail the information set out in this section, which
must be accurate and complete with respect to all parties and to the
transaction. (See also paragraph (l) of this section and Sec. 800.204
regarding certification requirements.)
(b) If fewer than all parties to a transaction file a voluntary
notice, for example in the case of a hostile takeover, each notifying
party shall provide the information set out in this section with
respect to itself and, to the extent known or reasonably available to
it, with respect to each non-notifying party.
(c) A voluntary notice filed under Sec. 800.501 shall describe or
provide, as applicable:
(1) The following information regarding the transaction in
question:
(i) A summary setting forth the essentials of the transaction,
including a statement of the purpose of the transaction, and its scope,
both within and outside of the United States;
(ii) The nature of the transaction, for example, whether the
acquisition is by merger, consolidation, the purchase of voting
interest, or otherwise;
(iii) The name, United States address (if any), website address (if
any), nationality (for individuals) or place of incorporation or other
legal organization (for entities), and address of the principal place
of business of each foreign person that is a party to the transaction;
(iv) The name, address, website address (if any), principal place
of business, and place of incorporation or other legal organization of
the U.S. business that is the subject of the transaction;
(v) The name, address, and nationality (for individuals) or place
of incorporation or other legal organization (for entities) of:
(A) The immediate parent, the ultimate parent, and each
intermediate parent, if any, of the foreign person that is a party to
the transaction;
(B) Where the ultimate parent is a private company, the ultimate
owner(s) of such parent; and
(C) Where the ultimate parent is a public company, any shareholder
with an interest of greater than five percent in such parent;
(vi) The name, address, website address (if any), and nationality
(for individuals) or place of incorporation or other legal organization
(for entities) of each person that will control the U.S. business being
acquired;
(vii) The actual or expected completion date of the transaction;
(viii) A good faith approximation of the net value of the interest
acquired in the U.S. business in U.S. dollars, as of the date of the
notice;
(ix) The name of any and all financial institutions involved in the
transaction, including as advisors, underwriters, or sources of
financing for the transaction;
(x) A copy of any partnership agreements, integration agreements,
or other side agreements relating to the transaction;
(xi) A statement as to whether the foreign person will acquire any
of the following in the U.S. business:
(A) Access to any material nonpublic technical information in the
possession of the U.S. business, and if so, a brief explanation of the
type of access and type of information;
(B) Membership, observer rights, or nomination rights as set forth
in Sec. 800.211(b)(2), and if so, a description of such rights and a
statement as to the composition of the board or other body both before
and after the completion date of the transaction, as well as a copy of
the document(s) setting forth the post-acquisition governance
provisions (e.g., quorum requirements, special rights) for the board of
directors or other body;
(C) Any involvement, other than through voting of shares, in
substantive decisionmaking of the U.S. business regarding covered
investment critical infrastructure, critical technologies, or sensitive
personal data as set forth in Sec. 800.211(b)(3), and if so, a brief
explanation of the nature and extent of involvement;
(2) With respect to a transaction structured as an acquisition of
assets of a U.S. business, a detailed description of the assets of the
U.S. business being acquired, including the approximate value of those
assets in U.S. dollars;
(3) With respect to the U.S. business that is the subject of the
transaction and any entity of which that U.S. business is a parent
(unless that entity is excluded from the scope of the transaction):
(i) Their respective business activities, as, for example, set
forth in annual reports, and the product or service categories of each,
including an estimate of U.S. market share for such product or service
categories and the methodology used to determine market share, a list
of direct competitors for those primary product or service categories,
and their NAICS Code, if any, and an explanation of how the entity is
engaged in interstate commerce in the United States, where applicable;
(ii) The street address (and mailing address, if different) within
the United States and website address (if any) of each facility that is
manufacturing classified or unclassified products or producing services
described in paragraph (c)(3)(v) of this section, and their respective
CAGE Codes and DUNS number;
(iii) Each contract (identified by agency and number) that is
currently in effect or was in effect within the past five years with
any agency of the U.S. Government involving any information,
technology, or data that is classified under Executive Order 12958, as
amended, its estimated final completion date, and the name, office, and
telephone number of the contracting official;
(iv) Any other contract (identified by agency and number) that is
currently in effect or was in effect within the past three years with
any U.S. Government agency or component with national defense, homeland
security, or other
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national security responsibilities, including law enforcement
responsibility as it relates to defense, homeland security, or national
security, its estimated final completion date, and the name, office,
and telephone number of the contracting official;
(v) Any products or services (including research and development):
(A) That it supplies, directly or indirectly, to any agency of the
U.S. Government, including as a prime contractor or first tier
subcontractor, a supplier to any such prime contractor or
subcontractor, or, if known by the parties filing the notice, a
subcontractor at any tier; and
(B) If known by the parties filing the notice, for which it is a
single qualified source (i.e., other acceptable suppliers are readily
available to be so qualified) or a sole source (i.e., no other supplier
has needed technology, equipment, and manufacturing process
capabilities) for any such agencies and whether there are other
suppliers in the market that are available to be so qualified;
(vi) Any products or services (including research and development)
that:
(A) It supplies to third parties and it knows are rebranded by the
purchaser or incorporated into the products of another entity, and the
names or brands under which such rebranded products or services are
sold; and
(B) In the case of services, it provides on behalf of, or under the
name of, another entity, and the name of any such entities;
(vii) For the prior three years--
(A) A list of priority rated contracts or orders under DPAS)
regulation that the U.S. business that is the subject of the
transaction has received and the level of priority of such contracts or
orders (``DX'' or ``DO''); and
(B) A list of such priority rated contracts or orders that the U.S.
business has placed with other entities and the level of priority of
such contracts or orders, and the acquiring party's plan to ensure that
any new entity formed at the completion of the notified transaction (or
the U.S. business, if no new entity is formed) complies with the DPAS
regulations;
(viii) A description and copy of the cyber security plan, if any,
that will be used to protect against cyber attacks on the operation,
design, and development of the U.S. business's services, networks,
systems, data storage (including the collection or maintenance of
sensitive personal data), and facilities;
(ix) A description of whether the U.S. business performs any of the
functions with respect to covered investment critical infrastructure,
if any, as set forth in column 2 of appendix A to this part. This
statement shall include a description of such functions, including the
applicable covered investment critical infrastructure;
(x)(A) A description of whether the U.S. business produces,
designs, tests, manufactures, fabricates, or develops one or more:
(1) Items that are subject to the EAR and, if so, a description
(which may group similar items into general product categories) of the
items and a list of the relevant commodity classifications set forth on
the CCL (i.e., ECCNs or EAR99 designation);
(2) Defense articles and defense services, and related technical
data covered by the USML in the ITAR, and, if so, the category of the
USML; articles and services for which commodity jurisdiction requests
(22 CFR 120.4) are pending; and articles and services (including those
under development) that may be designated or determined in the future
to be defense articles or defense services under 22 CFR 120.3;
(3) Specially designed and prepared nuclear equipment, parts and
components, materials, software, and technology covered by 10 CFR part
810;
(4) Nuclear facilities, equipment, and material covered by 10 CFR
part 110;
(5) Select Agents and Toxins (7 CFR part 331, 9 CFR part 121, and
42 CFR part 73); or
(6) Emerging and foundational technologies controlled under section
1758 of the Export Control Reform Act of 2018 (codified at 50 U.S.C.
4817);
(B) A description of whether the U.S. business otherwise trades in
any item described in paragraphs (c)(3)(x)(A)(1) through (6) of this
section, to the extent not addressed in the voluntary notice in
response to paragraph (c)(3)(x)(A) of this section; and
(C) For any item described in paragraphs (c)(3)(x)(A)(1) through
(6) of this section for which there is no completed Commodity
Classification Automated Tracking System or Commodity Jurisdiction
determination, the voluntary notice shall include a brief statement as
to how the parties evaluated the item (e.g., self-classification by
individuals with technical knowledge at the U.S. business,
classification information provided by the manufacturer, classification
provided by outside counsel or third party consultant, etc.);
(xi) A description of whether the U.S. business directly or
indirectly maintains or collects sensitive personal data of U.S.
citizens, directly or indirectly has collected or maintained sensitive
personal data in the 12 months prior to any of the applicable events
specified in Sec. 800.241(a)(1)(i)(B), or has a demonstrated business
objective to maintain or collect such data in the future including:
(A) The category or categories of data specified in Sec. 800.241
that the U.S. business directly or indirectly maintains or collects or
intends to maintain or collect;
(B) For each applicable category of data specified in Sec.
800.241, individually and in the aggregate, the approximate number of
total unique persons from whom:
(1) The data is currently maintained; and
(2) The data has been maintained or collected at any point during
the 12 months prior to any of the applicable events specified in Sec.
800.241(a)(1)(i)(B);
(C) Whether the U.S. business has a demonstrated business objective
to maintain or collect data described in Sec. 800.241(a)(1)(ii) of
greater than one million individuals and such data is an integrated
part of the U.S. business's primary products or services, and if so,
please provide a brief explanation;
(D) A description of how the U.S. business targets or tailors its
products or services to any U.S. executive branch agency or military
department with intelligence, national security, or homeland security
responsibilities, or personnel or contractors thereof;
(E) The commercial rationale of the U.S. business for maintaining
or collecting such sensitive personal data and a description of how the
U.S. business uses and protects such sensitive personal data, including
a description of how decisions regarding the use of sensitive personal
data are made, and by whom;
(F) A description of the U.S. business's policies and practices
regarding the sale, license, or transfer of, or grant of access to,
sensitive personal data to third parties, including a copy of any
notice provided to customers regarding the use and transfer of
sensitive personal data;
(G) A description of the U.S. business's policies and practices
regarding retention of sensitive personal data; and
(H) Any plans by the foreign party to the transaction to alter any
of the foregoing;
(4) Whether the U.S. business that is the subject of the
transaction:
(i) Possesses any licenses, permits, or other authorizations other
than those under the regulatory authorities listed in this paragraph
(c)(4) that have been granted by an agency of the U.S. Government (if
applicable,
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identification of the relevant licenses shall be provided); or
(ii) Has technology that has military applications (if so, an
identification of such technology and a description of such military
applications shall be included);
(5) With respect to the foreign person engaged in the transaction
and its parents:
(i) The business or businesses of the foreign person and its
ultimate parent, as such businesses are described, for example, in
annual reports, and the CAGE codes, NAICS codes, and DUNS numbers, if
any, for such businesses;
(ii) The plans of the foreign person for the U.S. business with
respect to:
(A) Reducing, eliminating, or selling research and development
facilities;
(B) Changing product quality;
(C) Shutting down or moving outside of the United States facilities
that are within the United States;
(D) Consolidating or selling product lines or technology;
(E) Modifying or terminating contracts referred to in paragraphs
(c)(3)(iii) and (iv) of this section; or
(F) Eliminating domestic supply by selling products solely to non-
domestic markets;
(iii) Whether the foreign person is controlled by or acting on
behalf of a foreign government, including as an agent or
representative, or in some similar capacity, and if so, the identity of
the foreign government;
(iv) Whether a foreign government or a person controlled by or
acting on behalf of a foreign government:
(A) Has or controls ownership interests, including contingent
equity interest, of the acquiring foreign person or any parent of the
acquiring foreign person, and if so, the nature and amount of any such
interests, and with regard to contingent equity interest, the terms and
timing of conversion;
(B) Has the right or power to appoint any of the principal officers
or the members of the board of directors (including other persons who
perform the duties usually associated with such titles) of the foreign
person that is a party to the transaction or any parent of that foreign
person;
(C) Holds any other contingent interest (for example, such as might
arise from a lending transaction) in the foreign acquiring party and,
if so, the rights that are covered by this contingent interest, and the
manner in which they would be enforced; or
(D) Has any other affirmative or negative rights or powers that
could be relevant to the Committee's determination of whether the
notified transaction is a foreign government-controlled transaction,
and if there are any such rights or powers, their source (for example,
a ``golden share,'' shareholders agreement, contract, statute, or
regulation) and the mechanics of their operation;
(v) Any formal or informal arrangements among foreign persons that
hold an ownership interest in any foreign person that is a party to the
transaction or between such foreign person and other foreign persons to
act in concert on particular matters affecting the U.S. business that
is the subject of the transaction, and provide a copy of any documents
that establish those rights or describe those arrangements;
(vi) For each member of the board of directors or equivalent
governing body (including external directors and other persons who
perform the duties usually associated with such titles) and officers
(including president, senior vice president, executive vice president,
and other persons who perform duties normally associated with such
titles) of the acquiring foreign person engaged in the transaction and
its immediate, intermediate, and ultimate parents, and for any
individual having an ownership interest of five percent or more in the
acquiring foreign person engaged in the transaction and in the foreign
person's ultimate parent, the following information:
(A) A curriculum vitae or similar professional synopsis, provided
as part of the main notice, and
(B) The following ``personal identifier information,'' which, for
privacy reasons, and to ensure limited distribution, shall be set forth
in a separate document, not in the main notice:
(1) Full name (last, first, middle name);
(2) All other names and aliases used;
(3) Business address;
(4) Country and city of residence;
(5) Date of birth, in the format MM/DD/YYYY;
(6) Place of birth;
(7) U.S. Social Security number (where applicable);
(8) National identity number, including nationality, date and place
of issuance, and expiration date (where applicable);
(9) U.S. or foreign passport number (if more than one, all must be
fully disclosed), nationality, date and place of issuance, and
expiration date and, if a U.S. visa holder, the visa type and number,
date and place of issuance, and expiration date; and
(10) Dates and nature of foreign government and foreign military
service (where applicable), other than military service at a rank below
the top two non-commissioned ranks of the relevant foreign country; and
(vii) The following ``business identifier information'' for the
immediate, intermediate, and ultimate parents of the foreign person
engaged in the transaction, including their main offices and branches:
(A) Business name, including all names under which the business is
known to be or has been doing business;
(B) Business address;
(C) Business phone number, website address, and email address; and
(D) Employer identification number or other domestic tax or
corporate identification number.
(d)(1) The voluntary notice shall list any filings with, or reports
to, agencies of the U.S. Government that have been or will be made with
respect to the transaction prior to its completion, indicating the
agencies concerned, the nature of the filing or report, the date on
which it was filed or the estimated date by which it will be filed, and
a relevant contact point and/or telephone number within the agency, if
known.
(2) Example: Corporation A, a foreign person, intends to acquire
Corporation X, which is wholly owned and controlled by a U.S. national
and which has a Facility Security Clearance under the Department of
Defense Industrial Security Program. See Department of Defense,
``Industrial Security Regulation,'' DOD 5220.22-R, and ``Industrial
Security Manual for Safeguarding Classified Information,'' DOD 5220.22-
M. Corporation X accordingly files a revised Form DD SF-328, and enters
into discussions with the Defense Security Service about effectively
insulating its facilities from the foreign person. Corporation X may
also have made filings with the U.S. Securities and Exchange
Commission, the Department of Commerce, the Department of State, or
other federal departments and agencies. This paragraph (d) requires
that certain specific information about these filings be reported to
the Committee in a voluntary notice.
(e) In the case of the establishment of a joint venture in which
one or more of the parties is contributing a U.S. business, information
for the voluntary notice shall be prepared on the assumption that the
foreign person that is party to the joint venture has made an
acquisition of the existing U.S. business that the other party to the
joint venture is contributing or transferring to the joint venture. The
voluntary notice shall describe the name and address of the joint
venture and the entities that
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established, or are establishing, the joint venture.
(f) In the case of the acquisition of some but not all of the
assets of an entity, paragraph (c) of this section requires submission
of the specified information only with respect to the assets of the
entity that have been or are proposed to be acquired.
(g) Persons filing a voluntary notice shall, with respect to the
foreign person that is a party to the transaction, its immediate
parent, the U.S. business that is the subject of the transaction, and
each entity of which the foreign person is a parent, append to the
voluntary notice the most recent annual report of each such entity, in
English. Separate reports are not required for any entity whose
financial results are included within the consolidated financial
results stated in the annual report of any parent of any such entity,
unless the transaction involves the acquisition of a U.S. business
whose parent is not being acquired, in which case the notice shall
include the most recent audited financial statement of the U.S.
business that is the subject of the transaction. If a U.S. business
does not prepare an annual report and its financial results are not
included within the consolidated financial results stated in the annual
report of a parent, the filing shall include, if available, the
entity's most recent audited financial statement (or, if an audited
financial statement is not available, the unaudited financial
statement).
(h) Persons filing a voluntary notice shall, during the time that
the matter is pending before the Committee or the President, promptly
advise the Staff Chairperson of any material changes in plans, facts
and circumstances addressed in the notice, and information provided or
required to be provided to the Committee under this section, and shall
file amendments to the notice to reflect such material changes. Such
amendments shall become part of the notice filed by such persons under
Sec. 800.501, and the certifications required under paragraphs (l) and
(m) of this section shall apply to such amendments.
(i) Persons filing a voluntary notice shall include a copy of the
most recent asset or stock purchase agreement or other document
establishing the agreed terms of the transaction.
(j) Persons filing a voluntary notice shall include:
(1) Complete organizational charts, both pre- and post-transaction,
including information that identifies the name, principal place of
business, and place of incorporation or other legal organization (for
entities); nationality (for individuals); and ownership percentage
(expressed in terms of both voting and economic interest, if different)
for each of the following:
(i) The immediate parent, the ultimate parent, and each
intermediate parent, if any, of each foreign person that is a party to
the transaction;
(ii) Where the ultimate parent is a private company, the ultimate
owner(s) of such parent;
(iii) Where the ultimate parent is a public company, any
shareholder with an interest of greater than five percent in such
parent; and
(iv) The U.S. business that is the subject of the transaction, both
before and after completion of the transaction; and
(2) The opinion of the person regarding whether:
(i) It is a foreign person;
(ii) It is controlled by a foreign government;
(iii) A foreign government holds a substantial interest in the
foreign person that is party to the transaction; and
(iv) The transaction has resulted or could result in a covered
control transaction or a covered investment, and the reasons for its
view, focusing in particular on any powers (for example, by virtue of a
shareholders agreement, contract, statute, or regulation) that the
foreign person will have with regard to the U.S. business, and how
those powers can or will be exercised, or any other access, rights, or
involvement the foreign person will have in a U.S. business with
respect to critical technologies, covered investment critical
infrastructure, or sensitive personal data.
(k) Persons filing a voluntary notice shall include information as
to whether:
(1) Any party to the transaction is, or has been, a party to a
mitigation agreement entered into or condition imposed under section
721, and if so, shall specify the date and purpose of such agreement or
condition and the U.S. Government signatories; and
(2) Any party to the transaction (including such party's parents,
subsidiaries, or entities under common control with the party) has been
a party to a transaction previously notified to the Committee.
(l) Each party filing a voluntary notice shall provide a
certification of the notice consistent with Sec. 800.204. A sample
certification may be found on the Committee's section of the Department
of the Treasury website.
(m) At the conclusion of a review or investigation, each party that
has filed additional information subsequent to the original notice
shall file a final certification. (See Sec. 800.204.) A sample
certification may be found at the Committee's section of the Department
of the Treasury website.
(n) Parties filing a voluntary notice shall include with the notice
a list identifying each document provided as part of the notice,
including all documents provided as attachments or exhibits to the
narrative response.
(o) A party filing a voluntary notice may stipulate that the
transaction is a covered transaction and, if the party stipulates that
the transaction is a covered transaction, that the transaction is a
foreign government-controlled transaction. A stipulation offered by any
party under this section must be accompanied by a detailed description
of the basis for the stipulation. The required description of the basis
shall include, but is not limited to, discussion of all relevant
information responsive to paragraphs (c)(6)(iii) through (v) of this
section. A party that offers such a stipulation acknowledges that the
Committee and the President are entitled to rely on such stipulation in
determining whether the transaction is a covered transaction, a foreign
government-controlled transaction, and/or subject to mandatory
declaration or notice for the purposes of section 721 and all
authorities thereunder, and waives the right to challenge any such
determination. Neither the Committee nor the President is bound by any
such stipulation, nor does any such stipulation limit the ability of
the Committee or the President to act on any authority provided under
section 721 with respect to any covered transaction.
Sec. 800.503 Beginning of 45-day review period.
(a) The Staff Chairperson shall accept a voluntary notice the next
business day after the Staff Chairperson has:
(1) Determined that the notice complies with Sec. 800.502; and
(2) Disseminated the notice to all members of the Committee.
(b) A 45-day period for review of a transaction shall commence on
the date on which the voluntary notice has been accepted, agency notice
has been received by the Staff Chairperson, or the Chairperson of the
Committee has requested a notice under Sec. 800.501(b). Such review
shall end no later than the forty-fifth day after it has commenced, or
if the forty-fifth day is not a business day, no later than the next
business day after the forty-fifth day.
(c) The Staff Chairperson shall promptly advise in writing all
parties to a transaction that have filed a voluntary notice of:
(1) The acceptance of the notice;
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(2) The date on which the review begins; and
(3) The designation of any lead agency or agencies.
(d) Within two business days after receipt of an agency notice by
the Staff Chairperson, the Staff Chairperson shall send written advice
of such notice to the parties to the transaction that is subject to the
notice. Such written advice shall identify the date on which the review
began.
(e) The Staff Chairperson shall promptly circulate to all Committee
members any draft pre-filing notice, any agency notice, any complete
notice, and any subsequent information filed by the parties.
Sec. 800.504 Deferral, rejection, or disposition of certain
voluntary notices.
(a) The Committee, acting through the Staff Chairperson, may:
(1) Reject any voluntary notice that does not comply with Sec.
800.501 or Sec. 800.502 and so inform the parties promptly in writing;
(2) Reject any voluntary notice at any time, and so inform the
parties promptly in writing, if, after the notice has been submitted
and before action by the Committee or the President has been concluded:
(i) There is a material change in the transaction as to which
notification has been made; or
(ii) Information comes to light that contradicts material
information provided in the notice by the parties;
(3) Reject any voluntary notice at any time after the notice has
been accepted, and so inform the parties promptly in writing, if the
party or parties that have submitted the voluntary notice do not
provide follow-up information requested by the Staff Chairperson within
three business days of the request, or within a longer time frame if
the parties so request in writing and the Staff Chairperson grants that
request in writing; or
(4) Reject any voluntary notice before the conclusion of a review
or investigation, and so inform the parties promptly in writing, if one
of the parties submitting the voluntary notice has not submitted the
final certification required by Sec. 800.502(m).
(b) Notwithstanding the authority of the Staff Chairperson under
paragraph (a) of this section to reject an incomplete notice, the Staff
Chairperson may defer acceptance of the notice, and the beginning of
the review period specified by Sec. 800.503, to obtain any information
required under this section that has not been submitted by the
notifying party or parties or other parties to the transaction. Where
necessary to obtain such information, the Staff Chairperson may inform
any non-notifying party or parties that notice has been filed with
respect to a transaction involving the party, and request that certain
information required under this section, as specified by the Staff
Chairperson, be provided to the Committee within seven days after
receipt of the Staff Chairperson's request.
(c) The Staff Chairperson shall notify the parties when the
Committee has found that the transaction that is the subject of a
voluntary notice is not a covered transaction.
(d) Examples:
(1) Example 1. The Staff Chairperson receives a joint notice
from Corporation A, a foreign person, and Corporation X, a company
that is owned and controlled by U.S. nationals, with respect to
Corporation A's intent to purchase all of the shares of Corporation
X. The joint notice does not contain any information described under
Sec. 800.502 concerning classified materials and products or
services supplied to the U.S. military services. The Staff
Chairperson may reject the notice or defer the start of the review
period until the parties have supplied the omitted information.
(2) Example 2. Same facts as the first sentence of Example 1 of
this section, except that the joint notice indicates that
Corporation A does not intend to purchase Corporation X's Division
Y, which is engaged in classified work for a U.S. Government agency.
Corporations A and X notify the Committee on the 40th day of the 45-
day notice period that Division Y will also be acquired by
Corporation A. This fact constitutes a material change with respect
to the transaction as originally notified, and the Staff Chairperson
may reject the notice.
(3) Example 3. The Staff Chairperson receives a joint notice by
Corporation A, a foreign person, and Corporation X, a U.S. business,
indicating that Corporation A intends to purchase five percent of
the voting securities of Corporation X. Under the particular facts
and circumstances presented, the Committee concludes that
Corporation A's purchase of this interest in Corporation X could not
result in a covered investment in or foreign control of Corporation
X. The Staff Chairperson shall advise the parties in writing that
the transaction as presented is not subject to section 721.
(4) Example 4. The Staff Chairperson receives a voluntary notice
involving the acquisition by Company A, a foreign person, of the
entire interest in Company X, a U.S. business. The notice mentions
the involvement of a second foreign person in the transaction,
Company B, but states that Company B is merely a passive investor in
the transaction. During the course of the review, the parties
provide information that clarifies that Company B has the right to
appoint two members of Company X's board of directors. This
information contradicts the material assertion in the notice that
Company B is a passive investor. The Committee may reject this
notice without concluding review under section 721.
Sec. 800.505 Determination of whether to undertake an investigation.
(a) After a review of a notified transaction under Sec. 800.503,
the Committee shall undertake an investigation of any transaction that
it has determined to be a covered transaction if:
(1) A member of the Committee (other than a member designated as ex
officio under section 721(k)) advises the Staff Chairperson that the
member believes that the transaction threatens to impair the national
security of the United States and that the threat has not been
mitigated; or
(2) The lead agency recommends, and the Committee concurs, that an
investigation be undertaken.
(b) The Committee shall also undertake, after a review of a covered
transaction under Sec. 800.503, an investigation to determine the
effects on national security of any covered transaction that:
(1) Is a foreign government-controlled transaction; or
(2) Would result in control by a foreign person of critical
infrastructure of or within the United States, if the Committee
determines that the transaction could impair national security and such
impairment has not been mitigated.
(c) The Committee shall undertake an investigation as described in
paragraph (b) of this section unless the Chairperson of the Committee
(or the Deputy Secretary of the Treasury) and the head of any lead
agency (or his or her delegee at the deputy level or equivalent)
designated by the Chairperson determine on the basis of the review that
the covered transaction will not impair the national security of the
United States.
Sec. 800.506 Determination not to undertake an investigation.
If the Committee determines, during the review period described in
Sec. 800.503, not to undertake an investigation of a notified covered
transaction, action under section 721 shall be concluded. An official
at the Department of the Treasury shall promptly inform the parties to
a covered transaction in writing of a determination of the Committee
not to undertake an investigation and to conclude action under section
721.
Sec. 800.507 Commencement of investigation.
(a) If it is determined that an investigation should be undertaken,
such investigation shall commence no later than the end of the review
period described in Sec. 800.503.
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(b) An official of the Department of the Treasury shall promptly
inform the parties to a covered transaction in writing of the
commencement of an investigation.
Sec. 800.508 Completion or termination of investigation and report
to the President.
(a) Subject to paragraph (e) of this section, the Committee shall
complete an investigation no later than the forty-fifth day after the
date the investigation commences, or, if the forty-fifth day is not a
business day, no later than the next business day after the forty-fifth
day.
(b) Upon completion or termination of any investigation, the
Committee shall send a report to the President requesting the
President's decision if:
(1) The Committee recommends that the President suspend or prohibit
the transaction;
(2) The Committee is unable to reach a decision on whether to
recommend that the President suspend or prohibit the transaction; or
(3) The Committee requests that the President make a determination
with regard to the transaction.
(c) In circumstances when the Committee sends a report to the
President requesting the President's decision with respect to a covered
transaction, such report shall include information relevant to sections
721(d)(4)(A) and (B), and shall present the Committee's recommendation.
If the Committee is unable to reach a decision to present a single
recommendation to the President, the Chairperson of the Committee shall
submit a report of the Committee to the President setting forth the
differing views and presenting the issues for decision.
(d) Upon completion or termination of an investigation, if the
Committee determines to conclude all deliberative action under section
721 with regard to a notified covered transaction without sending a
report to the President, action under section 721 shall be concluded.
An official at the Department of the Treasury shall promptly advise the
parties to such a transaction in writing of a determination to conclude
action.
(e) In extraordinary circumstances, the Chairperson may, upon a
written request signed by the head of a lead agency, extend an
investigation for one 15-day period. A request to extend an
investigation must describe, with particularity, the extraordinary
circumstances that warrant the Chairperson extending the investigation.
The authority of the head of a lead agency to request the extension of
an investigation may not be delegated to any person other than the
deputy head (or equivalent thereof) of the lead agency. If the
Chairperson extends an investigation under this paragraph with respect
to a covered transaction, the Committee shall promptly notify the
parties to the transaction of the extension.
(f) For purposes of paragraph (e) of this section, the term
extraordinary circumstances means circumstances for which extending an
investigation is necessary and the appropriate course of action, in the
Chairperson's discretion, due to a force majeure event or to protect
the national security of the United States.
Sec. 800.509 Withdrawal of notices.
(a) A party (or parties) to a transaction that has filed notice
under Sec. 800.501(a) may request in writing, at any time prior to
conclusion of all action under section 721, that such notice be
withdrawn. Such request shall be directed to the Staff Chairperson and
shall state the reasons why the request is being made. Such requests
will ordinarily be granted, unless otherwise determined by the
Committee. An official of the Department of the Treasury will promptly
advise the parties to the transaction in writing of the Committee's
decision.
(b) Any request to withdraw an agency notice by the agency that
filed it shall be in writing and shall be effective only upon approval
by the Committee. An official of the Department of the Treasury shall
advise the parties to the transaction in writing of the Committee's
decision to approve the withdrawal request within two business days of
the Committee's decision.
(c) In any case where a request to withdraw a notice is granted
under paragraph (a) of this section:
(1) The Staff Chairperson, in consultation with the Committee,
shall establish, as appropriate:
(i) A process for tracking actions that may be taken by any party
to the covered transaction before a notice is refiled under Sec.
800.501; and
(ii) Interim protections to address specific national security
concerns with the covered transaction identified during the review or
investigation of the covered transaction.
(2) The Staff Chairperson shall specify a time frame, as
appropriate, for the parties to resubmit a notice and shall advise the
parties of that time frame in writing.
(d) A notice of a transaction that is submitted under paragraph
(c)(2) of this section shall be deemed a new notice for purposes of the
regulations in this part, including Sec. 800.701.
Subpart F--Committee Procedures
Sec. 800.601 General.
(a) In any assessment, review, or investigation of a covered
transaction, the Committee should consider the factors specified in
section 721(f) and, as appropriate, require the parties to provide to
the Committee the information necessary to consider such factors. The
Committee's assessment, review, or investigation (if necessary) shall
examine, as appropriate, whether:
(1) The transaction is a covered transaction;
(2) There is credible evidence to support a belief that any foreign
person party to a covered transaction might take action that threatens
to impair the national security of the United States; and
(3) Provisions of law, other than section 721 and the International
Emergency Economic Powers Act, provide adequate and appropriate
authority to protect the national security of the United States.
(b) During an assessment, review, or investigation, the Staff
Chairperson may invite the parties to a notified transaction to attend
a meeting with the Committee staff to discuss and clarify issues
pertaining to the transaction. During an investigation, a party to the
transaction under investigation may request a meeting with the
Committee staff; such a request ordinarily will be granted.
(c) The Staff Chairperson shall be the point of contact for
receiving material filed with the Committee, including notices and
declarations.
(d) Where more than one lead agency is designated, communications
on material matters between a party to the transaction and a lead
agency shall include all lead agencies designated with regard to those
matters.
(e) The parties' description of a transaction in a declaration or
notice does not limit the ability of the Committee to, as appropriate,
assess, review, or investigate, or exercise any other authorities
available under section 721 with respect to any covered transaction
that the Committee identifies as having been notified to the Committee
based upon the facts set forth in the declaration or notice, any
additional information provided to the Committee subsequent to the
original declaration or notice, or any other information available to
the Committee.
Sec. 800.602 Role of the Secretary of Labor.
In response to a request from the Chairperson of the Committee, the
Secretary of Labor shall identify for the Committee any risk mitigation
[[Page 3151]]
provisions proposed to or by the Committee that would violate U.S.
employment laws or require a party to violate U.S. employment laws. The
Secretary of Labor shall serve no policy role on the Committee.
Sec. 800.603 Materiality.
The Committee generally will not consider as material minor
inaccuracies, omissions, or changes relating to financial or commercial
factors not having a bearing on national security.
Sec. 800.604 Tolling of deadlines during lapse in appropriations.
Any deadline or time limitation under subpart D or E imposed on the
Committee shall be tolled during a lapse in appropriations.
Subpart G--Finality of Action
Sec. 800.701 Finality of actions under section 721.
(a) All authority available to the President or the Committee under
section 721(d), including divestment authority, shall remain available
at the discretion of the President with respect to:
(1) Covered control transactions proposed or pending on or after
August 23, 1988;
(2) Transactions that, between November 10, 2018, and February 12,
2020, fell within the scope of part 801 of this title; and
(3) Covered investments proposed or pending after February 13,
2020.
(b) Subject to Sec. 800.501(c)(1)(ii), such authority shall not be
exercised if:
(1) Subject to Sec. 800.219(d), the Committee, through its Staff
Chairperson, has advised a party (or the parties) in writing that a
particular transaction with respect to which a voluntary notice or a
declaration has been filed is not a covered transaction;
(2) The parties to the transaction have been advised in writing
under Sec. 800.407(a)(4), Sec. 800.506, or Sec. 800.508(d) that the
Committee has concluded all action under section 721 with respect to
the covered transaction; or
(3) The President has previously announced, under section 721(d),
his or her decision not to exercise his or her authority under section
721 with respect to the covered transaction.
(c) Divestment or other relief under section 721 shall not be
available with respect to transactions that were completed prior to
August 23, 1988.
Subpart H--Provision and Handling of Information
Sec. 800.801 Obligation of parties to provide information.
(a) Parties to a transaction that is notified or declared under
subparts D or E, or a transaction for which no notice or declaration
has been submitted and for which the Staff Chairperson has requested
information to assess whether the transaction is a covered transaction,
shall provide information to the Staff Chairperson that will enable the
Committee to conduct a full assessment, review, and/or investigation of
the transaction. Parties to a transaction that have filed information
with the Committee shall promptly advise the Staff Chairperson of any
material changes to such information. If deemed necessary by the
Committee, information may be obtained from parties to a transaction or
other persons through subpoena or otherwise, under the Defense
Production Act Reauthorization of 2003, as amended (50 U.S.C. 4555(a)).
(b) Documentary materials or information required or requested to
be filed with the Committee under this part shall be submitted in
English. Supplementary materials, such as annual reports, written in a
foreign language shall be submitted in certified English translation.
(c) Any information filed with the Committee in connection with any
action for which a report is required under section 721(l)(6)(B) with
respect to the implementation of a mitigation agreement or condition
described in section 721(l)(3)(A) shall be accompanied by a
certification that complies with the requirements of section 721(n) and
Sec. 800.204. A sample certification may be found at the Committee's
section of the Department of the Treasury website.
Sec. 800.802 Confidentiality.
(a) Except as provided in paragraph (b) of this section, any
information or documentary material submitted or filed with the
Committee under this part, including information or documentary
material filed under Sec. 800.501(g), shall be exempt from disclosure
under the Freedom of Information Act, as amended (5 U.S.C. 552 et
seq.), and no such information or documentary material may be made
public.
(b) Paragraph (a) of this section shall not prohibit disclosure of
the following:
(1) Information relevant to any administrative or judicial action
or proceeding;
(2) Information to Congress or to any duly authorized committee or
subcommittee of Congress;
(3) Information important to the national security analysis or
actions of the Committee to any domestic governmental entity, or to any
foreign governmental entity of a United States ally or partner, under
the exclusive direction and authorization of the Chairperson, only to
the extent necessary for national security purposes, and subject to
appropriate confidentiality and classification requirements; or
(4) Information that the parties have consented to be disclosed to
third parties.
(c) This section shall continue to apply with respect to
information and documentary material submitted or filed with the
Committee in any case where:
(1) Action has concluded under section 721 concerning a notified
transaction;
(2) A request to withdraw a notice or a declaration is granted
under Sec. 800.509 or Sec. 800.406(c), respectively, or where a
notice or a declaration has been rejected under Sec. 800.504(a) or
Sec. 800.406(a), respectively;
(3) The Committee determines that a notified or declared
transaction is not a covered transaction; or
(4) Such information or documentary material was filed under
subpart D and the parties do not subsequently file a notice under
subpart E.
(d) Nothing in paragraph (a) of this section shall be interpreted
to prohibit the public disclosure by a party of documentary material or
information that it has submitted or filed with the Committee. Any such
documentary material or information so disclosed may subsequently be
reflected in the public statements of the Chairperson, who is
authorized to communicate with the public and the Congress on behalf of
the Committee, or of the Chairperson's designee.
(e) The provisions of the Defense Production Act Reauthorization of
2003, as amended (50 U.S.C. 4555(d)) relating to fines and imprisonment
shall apply with respect to the disclosure of information or
documentary material filed with the Committee under these regulations.
Subpart I--Penalties and Damages
Sec. 800.901 Penalties and damages.
(a) Any person who submits a declaration or notice with a material
misstatement or omission or makes a false certification under Sec.
800.404, Sec. 800.405, or Sec. 800.502 may be liable to the United
States for a civil penalty not
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to exceed $250,000 per violation. The amount of the penalty imposed for
a violation shall be based on the nature of the violation.
(b) Any person who fails to comply with the requirements of Sec.
800.401 may be liable to the United States for a civil penalty not to
exceed $250,000 or the value of the transaction, whichever is greater.
The amount of the penalty imposed for a violation shall be based on the
nature of the violation.
(c) Any person who, after December 22, 2008, violates,
intentionally or through gross negligence, a material provision of a
mitigation agreement entered into before October 11, 2018, with, a
material condition imposed before October 11, 2018, by, or an order
issued before October 11, 2018, by, the United States under section
721(l) may be liable to the United States for a civil penalty not to
exceed $250,000 per violation or the value of the transaction,
whichever is greater. Any person who violates a material provision of a
mitigation agreement entered into on or after October 11, 2018, with, a
material condition imposed on or after October 11, 2018, by, or an
order issued on or after October 11, 2018, by, the United States under
section 721(l) may be liable to the United States for a civil penalty
not to exceed $250,000 per violation or the value of the transaction,
whichever is greater. For clarification, under the previous two
sentences, whichever penalty amount is greater may be imposed per
violation, and the amount of the penalty imposed for a violation shall
be based on the nature of the violation.
(d) A mitigation agreement entered into or amended under section
721(l) after December 22, 2008, may include a provision providing for
liquidated or actual damages for breaches of the agreement. The
mitigation agreement shall specify the amount of any liquidated damages
that are a reasonable assessment of the harm to the national security
that could result from a breach of the agreement. Any mitigation
agreement containing a liquidated damages provision shall include a
provision specifying that the Committee may consider the severity of
the breach in deciding whether to seek a lesser amount than that
stipulated in the agreement.
(e) A determination to impose penalties under paragraphs (a)
through (c) of this section must be made by the Committee. Notice of
the penalty, including a written explanation of the conduct to be
penalized and the amount of the penalty, shall be sent to the subject
person electronically and by U.S. mail or courier service. Notice shall
be deemed to have been effected by the earlier of the date of
electronic transmission and the date of receipt of U.S. mail or courier
service. For the purposes of this section, the term subject person
means the person or persons who may be liable to the United States for
a civil penalty.
(f) Upon receiving notice of a penalty to be imposed under
paragraphs (a) through (c) of this section, the subject person may,
within 15 business days of receipt of such notice, submit a petition
for reconsideration to the Staff Chairperson, including a defense,
justification, or explanation for the conduct to be penalized. The
Committee will review the petition and issue any final penalty
determination within 15 business days of receipt of the petition. The
Staff Chairperson and the subject person may extend either such period
through written agreement. The Committee and the subject person may
reach an agreement on an appropriate remedy at any time before the
Committee issues any final penalty determination.
(g) The penalties and damages authorized in paragraphs (a) through
(d) of this section may be recovered in a civil action brought by the
United States in federal district court.
(h) Section 2 of the False Statements Accountability Act of 1996,
as amended (18 U.S.C. 1001), shall apply to all information provided to
the Committee under section 721, including by any party to a covered
transaction.
(i) The penalties and damages available under this section are
without prejudice to other penalties, civil or criminal, available
under law.
(j) The imposition of a civil monetary penalty or damages under
these regulations creates a debt due to the U.S. Government. The
Department of the Treasury may take action to collect the penalty or
damages assessed if not paid within the time prescribed by the
Committee and notified to the applicable party or parties. In addition
or instead, the matter may be referred to the Department of Justice for
appropriate action to recover the penalty or damages.
Sec. 800.902 Effect of lack of compliance.
If, at any time after a mitigation agreement or condition is
entered into or imposed under section 721(l), the Committee or a lead
agency in coordination with the Staff Chairperson, as the case may be,
determines that a party or parties to the agreement or condition are
not in compliance with the terms of the agreement or condition, the
Committee or a lead agency in coordination with the Staff Chairperson
may, in addition to the authority of the Committee to impose penalties
under section 721(h) and to unilaterally initiate a review of any
covered transaction under section 721(b)(1)(D)(iii):
(a) Negotiate a plan of action for the party or parties to
remediate the lack of compliance, with failure to abide by the plan or
otherwise remediate the lack of compliance serving as the basis for the
Committee to find a material breach of the agreement or condition;
(b) Require that the party or parties submit a written notice or
declaration under clause (i) of section 721(b)(1)(C) with respect to a
covered transaction initiated after the date of the determination of
noncompliance and before the date that is five years after the date of
the determination to the Committee to initiate a review of the
transaction under section 721(b); or
(c) Seek injunctive relief.
Subpart J--Foreign National Security Investment Review Regimes
Sec. 800.1001 Determinations.
(a) The Committee may determine at any time that a foreign state
has established and is effectively utilizing a robust process to
analyze foreign investments for national security risks and to
facilitate coordination with the United States on matters relating to
investment security.
(b) The Committee may rescind a determination under paragraph (a)
of this section if the Committee determines that such a rescission is
appropriate.
(c) The Chairperson of the Committee shall publish a notice of any
determination or rescission of a determination under paragraph (a) or
(b) of this section, respectively, in the Federal Register.
Sec. 800.1002 Effect of determinations.
(a) A determination under Sec. 800.1001(a) shall take effect
immediately upon publication of a notice of such determination under
Sec. 800.1001(c) and remain in effect unless rescinded under Sec.
800.1001(b).
(b) A rescission of a determination under Sec. 800.1001(b) shall
take effect on the date specified in the notice published under Sec.
800.1001(c).
(c) A determination under Sec. 800.1001(a) does not apply to any
transaction for which a declaration or notice has been accepted by the
Staff Chairperson under Sec. 800.405(a)(1) or Sec. 800.503(a),
respectively.
(d) A rescission of a determination under Sec. 800.1001(b) does
not apply to any transaction for which:
(1) The completion date is prior to the date upon which the
rescission of a
[[Page 3153]]
determination under paragraph (b) of this section becomes effective; or
(2) The following has occurred before publication of the rescission
of determination under Sec. 800.1001(c):
(i) The parties to the transaction have executed a binding written
agreement, or other binding document, establishing the material terms
of the transaction that is ultimately consummated;
(ii) A party has made a public offer to shareholders to buy shares
of a U.S. business; or
(iii) A shareholder has solicited proxies in connection with an
election of the board of directors of a U.S. business or has requested
the conversion of convertible voting securities.
Appendix A to Part 800--Covered Investment Critical Infrastructure and
Functions Related to Covered Investment Critical Infrastructure
------------------------------------------------------------------------
Column 2--Functions related
Column 1--Covered investment critical to covered investment
infrastructure critical infrastructure
------------------------------------------------------------------------
(i) Any: (i) Own or operate any:
(a) Internet protocol network that has (a) Internet protocol
access to every other internet protocol network that has access to
network solely via settlement-free every other internet
peering; or protocol network solely via
settlement-free peering; or
(b) telecommunications service or (b) telecommunications
information service, each as defined in service or information
section 3(a)(2) of the Communications Act service, each as defined in
of 1934, as amended (47 U.S.C. 153), or section 3(a)(2) of the
fiber optic cable, in each case that Communications Act of 1934,
directly serves any military installation as amended (47 U.S.C. 153),
identified in Sec. 802.227. or fiber optic cable, in
each case that directly
serves any military
installation identified in
Sec. 802.227.
(ii) Any internet exchange point that (ii) Own or operate any
supports public peering. internet exchange point
that supports public
peering.
(iii) Any submarine cable system requiring (iii) Own or operate any
a license under section 1 of the Cable submarine cable system
Landing License Act of 1921 (47 U.S.C. requiring a license under
34), which includes any associated section 1 of the Cable
submarine cable, submarine cable landing Landing License Act of 1921
facilities, and any facility that (47 U.S.C. 34), which
performs network management, monitoring, includes any associated
maintenance, or other operational submarine cable, submarine
functions for such submarine cable cable landing facilities,
system. and any facility that
performs network
management, monitoring,
maintenance, or other
operational functions for
such submarine cable
system.
(iv) Any submarine cable, landing (iv) Supply or service any
facility, or facility that performs submarine cable, landing
network management, monitoring, facility, or facility that
maintenance, or other operational performs network
function that is part of a submarine management, monitoring,
cable system described above in item maintenance, or other
(iii) of column 1 of this appendix A. operational function that
is part of a submarine
cable system described
above in item (iii) of
column 1 of this appendix
A.
(v) Any data center that is collocated at (v) Own or operate any data
a submarine cable landing point, landing center that is collocated
station, or termination station. at a submarine cable
landing point, landing
station, or termination
station.
(vi) Any satellite or satellite system (vi) Own or operate any
providing services directly to the satellite or satellite
Department of Defense or any component system providing services
thereof. directly to the Department
of Defense or any component
thereof.
(vii) Any industrial resource other than (vii) As applicable,
commercially available off-the-shelf manufacture any industrial
items, as defined in section 4203(a) of resource other than
the National Defense Authorization Act commercially available off-
for Fiscal Year 1996, as amended (41 the-shelf items, as defined
U.S.C. 104), that is manufactured or in section 4203(a) of the
operated for a Major Defense Acquisition National Defense
Program, as defined in section 7(b)(2)(A) Authorization Act for
of the Defense Technical Corrections Act Fiscal Year 1996, as
of 1987, as amended (10 U.S.C. 2430), or amended (41 U.S.C. 104), or
a Major System, as defined in 10 U.S.C. operate any industrial
2302d, as amended, and: resource that is a
facility, in each case, for
a Major Defense Acquisition
Program, as defined in
section 7(b)(2)(A) of the
Defense Technical
Corrections Act of 1987, as
amended (10 U.S.C. 2430),
or a Major System, as
defined in 10 U.S.C. 2302d,
as amended, and:
(a) The U.S. business is a ``single (a) The U.S. business is a
source,'' ``sole source,'' or ``strategic ``single source,'' ``sole
multisource,'' to the extent the U.S. source,'' or ``strategic
business has been notified of such multisource,'' to the
status; or extent the U.S. business
has been notified of such
status; or
(b) the industrial resource: (b) the industrial resource:
(1) Requires 12 months or more to (1) Requires 12 months or
manufacture; or more to manufacture; or
(2) is a ``long lead'' item, to the extent (2) is a ``long lead'' item,
the U.S. business has been notified that to the extent the U.S.
such industrial resource is a ``long business has been notified
lead'' item. that such industrial
resource is a ``long lead''
item.
(viii) Any industrial resource, other than (viii) Manufacture any
commercially available off-the-shelf industrial resource, other
items, as defined in section 4203(a) of than commercially available
the National Defense Authorization Act off-the-shelf items, as
for Fiscal Year 1996, as amended (41 defined in section 4203(a)
U.S.C. 104), that is manufactured under a of the National Defense
``DX'' priority rated contract or order Authorization Act for
under the Defense Priorities and Fiscal Year 1996, as
Allocations System regulation (15 CFR amended (41 U.S.C. 104),
part 700, as amended) in the preceding 24 under a ``DX'' priority
months. rated contract or order
under the Defense
Priorities and Allocations
System regulation (15 CFR
part 700, as amended)
within 24 months of the
transaction in question.
(ix) Any facility in the United States (ix) Manufacture any of the
that manufactures: following in the United
States:
(a) Specialty metal, as defined in section (a) Specialty metal, as
842(a)(1)(i) of the John Warner National defined in section
Defense Authorization Act for Fiscal Year 842(a)(1)(i) of the John
2007, as amended (10 U.S.C. 2533b); Warner National Defense
Authorization Act for
Fiscal Year 2007, as
amended (10 U.S.C. 2533b);
(b) covered material, as defined in 10 (b) covered material, as
U.S.C. 2533c, as amended; defined in 10 U.S.C. 2533c,
as amended;
(c) chemical weapons antidote contained in (c) chemical weapons
automatic injectors, as described in 10 antidote contained in
U.S.C. 2534, as amended; or automatic injectors, as
described in 10 U.S.C.
2534, as amended; or
(d) carbon, alloy, and armor steel plate (d) carbon, alloy, and armor
that is in Federal Supply Class 9515 or steel plate that is in
is described by specifications of the Federal Supply Class 9515
American Society for Testing Materials or or is described by
the American Iron and Steel Institute. specifications of the
American Society for
Testing Materials or the
American Iron and Steel
Institute.
(x) Any industrial resource other than (x) As applicable,
commercially available off-the-shelf manufacture any industrial
items, as defined in 41 U.S.C. 104, as resource other than
amended, that has been funded, in whole commercially available off-
or in part, by any of the following the-shelf items, as defined
sources in the last 60 months: in 41 U.S.C. 104, as
amended, or operate any
industrial resource that is
a facility, in each case,
that has been funded, in
whole or in part, by any of
the following sources
within 60 months of the
transaction in question:
(a) Defense Production Act of 1950 Title (a) Defense Production Act
III program, as amended (50 U.S.C 4501 et of 1950 Title III program,
seq.); as amended (50 U.S.C. 4501
et seq.);
[[Page 3154]]
(b) Industrial Base Fund under section (b) Industrial Base Fund
896(b)(1) of the Ike Skelton National under section 896(b)(1) of
Defense Authorization Act for Fiscal Year the Ike Skelton National
2011, as amended (10 U.S.C. 2508); Defense Authorization Act
for Fiscal Year 2011, as
amended (10 U.S.C. 2508);
(c) Rapid Innovation Fund under section (c) Rapid Innovation Fund
1073 of Ike Skelton National Defense under section 1073 of Ike
Authorization Act for Fiscal Year 2011, Skelton National Defense
as amended (10 U.S.C. 2359a); Authorization Act for
Fiscal Year 2011, as
amended (10 U.S.C. 2359a);
(d) Manufacturing Technology Program under (d) Manufacturing Technology
10 U.S.C. 2521, as amended; Program under 10 U.S.C.
2521, as amended;
(e) Defense Logistics Agency Warstopper (e) Defense Logistics Agency
Program, as described in DLA Instruction Warstopper Program, as
1212, Industrial Capabilities Program-- described in DLA
Manage the WarStopper Program; or Instruction 1212,
Industrial Capabilities
Program--Manage the
WarStopper Program; or
(f) Defense Logistics Agency Surge and (f) Defense Logistics Agency
Sustainment contract, as described in Surge and Sustainment
Subpart 17.93 of the Defense Logistics contract, as described in
Acquisition Directive. Subpart 17.93 of the
Defense Logistics
Acquisition Directive.
(xi) Any system, including facilities, for (xi) Own or operate any
the generation, transmission, system, including
distribution, or storage of electric facilities, for the
energy comprising the bulk-power system, generation, transmission,
as defined in section 215(a)(1) of the distribution, or storage of
Federal Power Act, as amended (16 U.S.C. electric energy comprising
824o(a)(1)). the bulk-power system, as
defined in section
215(a)(1) of the Federal
Power Act, as amended (16
U.S.C. 824o(a)(1)).
(xii) Any electric storage resource, as (xii) Own or operate any
defined in 18 CFR 35.28(b)(9), as electric storage resource,
amended, that is physically connected to as defined in 18 CFR
the bulk-power system. 35.28(b)(9), as amended,
that is physically
connected to the bulk-power
system.
(xiii) Any facility that provides electric (xiii) Own or operate any
power generation, transmission, facility that provides
distribution, or storage directly to or electric power generation,
located on any military installation transmission, distribution,
identified in Sec. 802.227. or storage directly to or
located on any military
installation identified in
Sec. 802.227.
(xiv) Any industrial control system (xiv) Manufacture or service
utilized by: any industrial control
system utilized by:
(a) System comprising the bulk-power (a) System comprising the
system as described above in item (xi) of bulk-power system as
column 1 of this appendix A; or described above in item
(xi) of column 1 of this
appendix A; or
(b) a facility directly serving any (b) a facility directly
military installation as described above serving any military
in item (xiii) of column 1 of this installation as described
appendix A. above in item (xiii) of
column 1 of this appendix
A.
(xv) Any: (xv) Own or operate:
(a) Any individual refinery with the (a) Any individual refinery
capacity to produce 300,000 or more with the capacity to
barrels per day (or equivalent) of produce 300,000 or more
refined oil or gas products; or barrels per day (or
equivalent) of refined oil
or gas products; or
(b) collection of one or more refineries (b) one or more refineries
owned or operated by a single U.S. with the capacity to
business with the capacity to produce, in produce, in the aggregate,
the aggregate, 500,000 or more barrels 500,000 or more barrels per
per day (or equivalent) of refined oil or day (or equivalent) of
gas products. refined oil or gas
products.
(xvi) Any crude oil storage facility with (xvi) Own or operate any
the capacity to hold 30 million barrels crude oil storage facility
or more of crude oil. with the capacity to hold
30 million barrels or more
of crude oil.
(xvii) Any: (xvii) Own or operate any:
(a) Liquefied natural gas (LNG) import or (a) Liquefied natural gas
export terminal requiring: (LNG) import or export
terminal requiring:
(1) Approval under section 3(e) of the (1) Approval under section
Natural Gas Act, as amended (15 U.S.C. 3(e) of the Natural Gas
717b(e)), or Act, as amended (15 U.S.C.
717b(e)), or
(2) a license under section 4 of the (2) a license under section
Deepwater Port Act of 1974, as amended 4 of the Deepwater Port Act
(33 U.S.C. 1503); or of 1974, as amended (33
U.S.C. 1503); or
(b) natural gas underground storage (b) natural gas underground
facility or LNG peak-shaving facility storage facility or LNG
requiring a certificate of public peak-shaving facility
convenience and necessity under section 7 requiring a certificate of
of the Natural Gas Act, as amended (15 public convenience and
U.S.C. 717f). necessity under section 7
of the Natural Gas Act, as
amended (15 U.S.C. 717f).
(xviii) Any financial market utility that (xviii) Own or operate any
the Financial Stability Oversight Council financial market utility
has designated as systemically important that the Financial
under section 804 of the Dodd-Frank Wall Stability Oversight Council
Street Reform and Consumer Protection has designated as
Act, as amended (12 U.S.C. 5463). systemically important
under section 804 of the
Dodd-Frank Wall Street
Reform and Consumer
Protection Act, as amended
(12 U.S.C. 5463).
(xix) Any exchange registered under (xix) Own or operate any
section 6 of the Securities Exchange Act exchange registered under
of 1934, as amended (15 U.S.C. 78f), that section 6 of the Securities
facilitates trading in any national Exchange Act of 1934, as
market system security, as defined in 17 amended (15 U.S.C. 78f),
CFR Sec. 242.600, as amended, and which that facilitates trading in
exchange during at least four of the any national market system
preceding six calendar months had: security, as defined in 17
CFR Sec. 242.600, as
amended, and which exchange
during at least four of the
preceding six calendar
months had:
(a) With respect to all national market (a) With respect to all
system securities that are not options, national market system
10 percent or more of the average daily securities that are not
dollar volume reported by applicable options, 10 percent or more
transaction reporting plans; or of the average daily dollar
volume reported by
applicable transaction
reporting plans; or
(b) with respect to all listed options, 15 (b) with respect to all
percent or more of the average daily listed options, 15 percent
dollar volume reported by applicable or more of the average
national market system plans for daily dollar volume
reporting transactions in listed options. reported by applicable
national market system
plans for reporting
transactions in listed
options.
(xx) Any technology service provider in (xx) Own or operate any
the Significant Service Provider Program technology service provider
of the Federal Financial Institutions in the Significant Service
Examination Council that provides core Provider Program of the
processing services. Federal Financial
Institutions Examination
Council that provides core
processing services.
(xxi) Any rail line and associated (xxi) Own or operate any
connector line designated as part of the rail line and associated
Department of Defense's Strategic Rail connector line designated
Corridor Network. as part of the Department
of Defense's Strategic Rail
Corridor Network.
(xxii) Any interstate oil pipeline that: (xxii) Own or operate any
interstate oil pipeline
that:
(a) Has the capacity to transport: (a) Has the capacity to
transport:
(1) 500,000 barrels per day or more of (1) 500,000 barrels per day
crude oil, or or more of crude oil, or
(2) 90 million gallons per day or more of (2) 90 million gallons per
refined petroleum product; or day or more of refined
petroleum product; or
[[Page 3155]]
(b) directly serves the strategic (b) directly serves the
petroleum reserve, as defined in section strategic petroleum
152 of the Energy Policy and Conservation reserve, as defined in
Act, as amended (42 U.S.C. 6232). section 152 of the Energy
Policy and Conservation
Act, as amended (42 U.S.C.
6232).
(xxiii) Any interstate natural gas (xxiii) Own or operate any
pipeline with an outside diameter of 20 interstate natural gas
or more inches. pipeline with an outside
diameter of 20 or more
inches.
(xxiv) Any industrial control system (xxiv) Manufacture or
utilized by: service any industrial
control system utilized by:
(a) An interstate oil pipeline as (a) An interstate oil
described above in item (xxii) of column pipeline as described above
1 of this appendix A; or in item (xxii) of column 1
of this appendix A; or
(b) an interstate natural gas pipeline as (b) an interstate natural
described above in item (xxiii) of column gas pipeline as described
1 of this appendix A. above in item (xxiii) of
column 1 of this appendix
A.
(xxv) Any airport identified in Sec. (xxv) Own or operate any
802.210(a)(1) through (3). airport identified in Sec.
802.210(a)(1) through (3).
(xxvi) Any: (xxvi) Own or operate any:
(a) Maritime port identified in Sec. (a) Maritime port identified
802.210(a)(4) or (5); or in Sec. 802.210(a)(4) or
(5); or
(b) any individual terminal at such (b) any individual terminal
maritime ports. at such maritime ports.
(xxvii) Any public water system, as (xxvii) Own or operate any
defined in section 1401(4) of the Safe public water system, as
Drinking Water Act, as amended (42 U.S.C. defined in section 1401(4)
300f(4)(A)), or treatment works, as of the Safe Drinking Water
defined in section 212(2)(A) of the Clean Act, as amended (42 U.S.C.
Water Act, as amended (33 U.S.C. 300f(4)(A)), or treatment
1292(2)), which: works, as defined in
section 212(2)(A) of the
Clean Water Act, as amended
(33 U.S.C. 1292(2)), which:
(a) Regularly serves 10,000 individuals or (a) Regularly serves 10,000
more, or individuals or more, or
(b) directly serves any military (b) directly serves any
installation identified in Sec. military installation
802.227. identified in Sec.
802.227.
(xxviii) Any industrial control system (xxviii) Manufacture or
utilized by a public water system or service any industrial
treatment works as described above in control system utilized by
item (xxvii) of column 1 of this appendix a public water system or
A. treatment works as
described above in item
(xxvii) of column 1 of this
appendix A.
------------------------------------------------------------------------
Appendix B to Part 800--Industries
------------------------------------------------------------------------
Industry NAICS Code
------------------------------------------------------------------------
Aircraft Manufacturing.......................... NAICS Code: 336411.
Aircraft Engine and Engine Parts Manufacturing.. NAICS Code: 336412.
Alumina Refining and Primary Aluminum Production NAICS Code: 331313.
Ball and Roller Bearing Manufacturing........... NAICS Code: 332991.
Computer Storage Device Manufacturing........... NAICS Code: 334112.
Electronic Computer Manufacturing............... NAICS Code: 334111.
Guided Missile and Space Vehicle Manufacturing.. NAICS Code: 336414.
Guided Missile and Space Vehicle Propulsion Unit NAICS Code: 336415.
and Propulsion Unit Parts Manufacturing.
Military Armored Vehicle, Tank, and Tank NAICS Code: 336992.
Component Manufacturing.
Nuclear Electric Power Generation............... NAICS Code: 221113.
Optical Instrument and Lens Manufacturing....... NAICS Code: 333314.
Other Basic Inorganic Chemical Manufacturing.... NAICS Code: 325180.
Other Guided Missile and Space Vehicle Parts and NAICS Code: 336419.
Auxiliary Equipment Manufacturing.
Petrochemical Manufacturing..................... NAICS Code: 325110.
Petrochemical Manufacturing Powder Metallurgy NAICS Code: 332117.
Part Manufacturing.
Power, Distribution, and Specialty Transformer NAICS Code: 335311.
Manufacturing.
Primary Battery Manufacturing................... NAICS Code: 335912.
Radio and Television Broadcasting and Wireless NAICS Code: 334220.
Communications Equipment Manufacturing.
Research and Development in Nanotechnology...... NAICS Code: 541713.
Research and Development in Biotechnology NAICS Code: 541714.
(except Nanobiotechnology).
Secondary Smelting and Alloying of Aluminum..... NAICS Code: 331314.
Search, Detection, Navigation, Guidance, NAICS Code: 334511.
Aeronautical, and Nautical System and
Instrument Manufacturing.
Semiconductor and Related Device Manufacturing.. NAICS Code: 334413.
Semiconductor Machinery Manufacturing........... NAICS Code: 333242.
Storage Battery Manufacturing................... NAICS Code: 335911.
Telephone Apparatus Manufacturing............... NAICS Code: 334210.
Turbine and Turbine Generator Set Units NAICS Code: 333611.
Manufacturing.
------------------------------------------------------------------------
PART 801--PILOT PROGRAM TO REVIEW CERTAIN TRANSACTIONS INVOLVING
FOREIGN PERSONS AND CRITICAL TECHNOLOGIES
0
2. The authority citation for part 801 continues to read as follows:
Authority: 50 U.S.C. 4565; Pub. L. 115-232
0
3. Revise section 801.103 to read as follows:
Sec. 801.103 Applicability rule.
The regulations in this part apply to any pilot program covered
transaction for which the following occurred on or after November 10,
2018, and prior to February 13, 2020:
(a) The completion date, unless any of the following occurred
before October 11, 2018:
(1) The parties to the transaction executed a binding written
agreement or other document establishing the material terms of the
transaction;
(2) A party made a public offer to shareholders to buy shares of
the pilot
[[Page 3156]]
program U.S. business that is the subject of the transaction; or
(3) A shareholder solicited proxies in connection with an election
of the board of directors of the pilot program U.S. business that is
the subject of the transaction;
(b) The parties to the transaction executed a binding written
agreement or other document establishing the material terms of the
transaction;
(c) A party made a public offer to shareholders to buy shares of
the pilot program U.S. business that is the subject of the transaction;
or
(d) A shareholder solicited proxies in connection with an election
of the board of directors of the pilot program U.S. business that is
the subject of the transaction or has requested the conversion of
convertible voting securities thereof.
Sec. 801.302 [Amended]f
0
4. Amend Sec. 801.302 in paragraph (c) by removing ``(b)(2)(i) through
(b)(2)(iii)'' after ``criteria set forth in paragraphs'' and adding in
its place ``(b) through (d)''.
Dated: January 6, 2020.
Thomas Feddo,
Assistant Secretary for Investment Security.
[FR Doc. 2020-00188 Filed 1-13-20; 4:15 pm]
BILLING CODE -P