New Foreign Investment Status Quo: CFIUS Mandatory Filings and Potential Penalties

By: Olga L Torres, Managing Member, Maria Alonso, Associate, Pierfilippo Natta, Legal Intern
Date: 10/11/2018

On October 10, 2018, the U.S Department of the Treasury issued temporary regulations to conduct pilot programs to implement provisions of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), [1] which became effective August 13, 2018, and amended section 721 of the Defense Production Act of 1950 specifically to protect American technology companies and intellectual property. As Torres Law previously discussed in several articles, the Committee on Foreign Investment in the United States (“CFIUS”) reviews foreign investment in U.S. companies for national security considerations, and FIRRMA has significantly expanded CFIUS jurisdiction.

For context, prior to FIRRMA, CFIUS’s review authority did not sufficiently address new and emerging risks due to changes in technology and foreign direct investment methods. CFIUS could only review foreign transactions that could result in foreign control of a U.S. business. These transactions were typically limited to conventional foreign acquisitions and mergers involving a U.S. business, but CFIUS had no authority to prevent a foreign entity from acquiring a non-controlling interest in critical technologies. 

CFIUS under FIRRMA can now review “other investments” made by foreign persons in Pilot Program industries, including non-controlling foreign investments in a U.S. business involved in “critical infrastructure,” “critical technology,” or a U.S. business that maintains or collects “sensitive personal data” of U.S. persons.

Starting November 10, 2018, CFIUS will be empowered to review non-controlling critical technology foreign investments, including any equity interest in which a foreign person has access to sensitive personal data of U.S. persons or membership/observer rights on a governing body.[2] The new temporary Pilot Program will require foreign investors to file mandatory declarations for transactions that fall within the scope of the Pilot Program, and failure to do so could result in civil monetary penalties up to the value of the transaction. The mandatory declarations are abbreviated notices that generally should not exceed five pages in length. Foreign investors, from any country, are required to make the mandatory declarations either by making the mandatory declaration at least 45 days before the expected completion date of the transaction or by filing a notice under CFIUS’ standard procedures. CFIUS will have 30 days to act.

The temporary Pilot Program covers foreign investments that would give the foreign investor:

  • Access to any material nonpublic technical information in the possession of the target U.S. business;
  • Membership or observer rights on the board of directors or equivalent governing body of the U.S. business, or the right to nominate an individual to a position on the board of directors or equivalent governing body of the U.S. business; or
  • Any involvement, other than through voting of shares, in substantive decision-making of the U.S. business regarding the use, development, acquisition, or release of critical technology.

Moreover, the U.S. critical technology businesses covered include any U.S. business that produces, designs, tests, manufactures, fabricates, or develops a critical technology that is either: 1) utilized in connection with the U.S. business’s activity in one or more Pilot Program industries; or 2) designed by the U.S. business specifically for use in one or more Pilot Program industries. The term “critical technology” is defined by FIRRMA, which includes: 1) defense articles or defense services included on the U.S. Munitions List of the International Traffic in Arms Regulations (“ITAR”); 2) items included on the Commerce Control List of the Export Administration Regulations (“EAR”) that are controlled by multilateral regimes or for reasons relating to regional stability or surreptitious listening; 3) nuclear equipment, facilities, materials, software, and technology subject to export regulations by the Department of Energy or Nuclear Regulatory Commission; 4) select agents and toxins; and 5) “emerging and foundational technologies controlled pursuant to the Export Control Reform Act of 2018.”[3]  The Pilot Program covers 27 industries, identified by their respective North American Industry Classification System (NAICS) code.[4] Annex A[5] to Part 801 lists the 27 industries.

Lastly, effective October 11, 2018, to conform to FIRRMA Treasury issued several amendments to existing CFIUS regulations, 31 C.F.R. Part 800.[6] The temporary Pilot Program will end no later than March 5, 2020. Parties who wish to submit written comments on the interim rule may do so by November 10 via the Federal government eRulemaking Portal at and by mail.[7] CFIUS will consider any comments received and will address comments in the final rule.

For more information on the new CFIUS Pilot Program and whether your future investments in the U.S. could trigger mandatory filing requirements, please do not hesitate to contact us.


[1] See Press Release, U.S. Dep’t of the Treasury, Treasury Releases Interim Regulations for FIRRMA Pilot Program, (Oct. 10, 2018) (available at

[2] Determination and Temporary Provisions Pertaining to a Pilot Program to Review Certain Transactions Involving Foreign Persons and Critical Technologies, 83 Fed. Reg. 51,322 (Oct. 11, 2018) (to be codified at 31 C.F.R. pt. 801).

[3] The Export Controls Act of 2018 (ECA), which is not part of FIRRMA, will control “emerging and foundational technologies” not covered under existing export control authorities such as the EAR or the ITAR. The ECA does not define “emerging and foundation technologies” further than technologies that are essential to U.S. national security, but are not considered “critical technology” under FIRRMA.

[4] See Determination and Temporary Provisions Pertaining to a Pilot Program to Review Certain Transactions Involving Foreign Persons and Critical Technologies, 83 Fed. Reg. 51,322, 51,333 (Oct. 11, 2018) (to be codified at 31 C.F.R. pt. 801).

[5] Scroll down to page 12 in pdf of Federal Register, 83 Fed. Reg. 51,322, 51,333.

[6] Provisions Pertaining to Certain Investments in the United States by Foreign Persons, 83 Fed. Reg. 51,316 (Oct. 11, 2018) (to be codified at 31 C.F.R. pt. 800).

[7] Send to U.S. Department of Treasury, Attention: Thomas Feddo, Deputy Assistant Secretary for Investment Security, 1500 Pennsylvania Avenue, N.W., Washington, DC 20220.

Browse by Type

Browse by Practice Area