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CFIUS & FOCI

The Committee on Foreign Investment in the United States (CFIUS)

Torres Trade Law represents clients before CFIUS, a U.S. interagency committee responsible for regulating certain foreign investments in the United States. What makes us unique is our extensive experience with the export regulatory regimes controlling sensitive technologies as well as the issues that raise national security concerns vital in mitigating our clients’ risks. Our network of attorneys and trade advisors have ample experience in national security issues for key government agencies as well as members of the intelligence community.

We regularly advise clients on CFIUS matters, including whether a transaction should be reported to CFIUS, advising on the structure of a foreign investment, assisting in preparing CFIUS submissions, and representing clients in the CFIUS review process.

Foreign Ownership, Control, or Influence (FOCI)

We advise companies on FOCI mitigation, develop FOCI mitigation plans, and provide guidance on how transactions might be structured to best anticipate FOCI concerns.

For example, if a U.S. defense contractor with access to classified information receives funding, investment capital, or substantial revenue from a foreign source, the National Industrial Security Program can be triggered, and we can assist your company in complying with U.S. regulations.
 

Recent representative matters:

  • A UAE-based diversified technology company in its purchase of the assets and intellectual property of a U.S. semiconductor business;
  • A U.S. telecommunications services company in connection with its sale to a European investment fund;
  • A U.S.-based defense contractor in connection with its acquisition by a Japanese company, including CFIUS mitigation plan compliance and meetings with Department of Defense monitors;
  • Both a U.S safety consulting business and its private equity-backed Swiss acquirer related to CFIUS “non-notified” outreach and filing of voluntary notice in connection with a previous sale transaction;
  • A U.S. business related to a Series B financing round involving a foreign state-owned investor and critical technologies;
  • A U.S. data visualization software company in connection with a Series A funding round including foreign investors;
  • A multinational defense contractor on the application of Foreign Ownership, Control, or Influence (FOCI) regulations administered by the Defense Counterintelligence and Security Agency.
  • The U.S. subsidiary of a Hong Kong-listed Taiwanese healthcare technology company in connection with its acquisition of a U.S. healthcare software-as-a-service (SaaS) business.
  • Multiple companies in conducting export control classification reviews for “critical technologies” impacting the potential application of CFIUS regulations to investments and acquisition by foreign investors.

CFIUS Honors and Awards:

In 2024, the firm’s Founder and Managing Member joined the Foreign Investment Watch Editorial Board. The selective group is comprised of CFIUS experts, including two former heads of CFIUS, Team Telecom, and other federal agencies at the nexus of foreign investment and national security. Ms. Torres has been named as Top CFIUS Advisor 2023 and 2025 by Foreign Investment Watch.

Recent Articles:

Recent News and Speaking Engagements:

  • Olga Torres presented on Exporting CFIUS and National Security Investment Reviews in Mexico: What can we expect from the trends? at the 30th Anniversary Annual Conference for the U.S.-Mexico Bar Association (USMBA) in Cancun, Quintana Roo, MX (November 7, 2024).
  • Olga Torres, Derrick Kyle, Albert Shultz (Former CIA and CFIUS Mitigation Proxy), and Thomas Feddo (Founding/Managing Member of the Rubicon Advisors, LLC and Former Head of CFIUS) presented at the 2024 Annual Meeting for the State Bar of Texas on The National Security Impact of Your Cross-Border Deal: From Foreign Inbound (and Outbound!) Investment Reviews to Increasing Economic Sanctions (June 2024).
  • Olga Torres will present at ACI's 6th National Forum on FOCI on The Increasing Overlap of FOCI and CFIUS: Evolving Considerations Affecting Filings, Reviews, Mitigation Agreements – and Your Strategy for Managing Concurrent Processes (Sep. 20-21, 2023)
  • Derrick Kyle and Donald Pearce presented A Primer on the Committee on Foreign Investment in the United States (CFIUS): Are You Ready for Increased Enforcement?, International Law Section of the State Bar of Texas 32 Annual International Law Institute in Dallas, Texas (Apr. 20, 2023)
  • Derrick Kyle presented on Effective Solutions to “Bridge the Gap” for Investors to the United States (discussing CFIUS matters), SelectUSA in Toronto, Ontario (Nov. 9, 2022)
  • Torres Trade Law sponsored the 6th National CFIUS Conference in Washington D.C. (July, 2020).
  • Olga Torres to present on CFIUS issues at the International Bar of Texas Annual conference in Toronto, Canada (new date coming soon; postponed due to COVID-19).
  • Olga Torres presented on CFIUS issues at the InnoTech Austin Conference (October 2, 2018).

CFIUS Conference Sponsorships

Torres Trade Law is a proud sponsor of the 7th National Conference on CFIUS, the 4th National Forum on FOCI, and the 2nd European Forum on FDI Reviews and CFIUS. All three conferences will be held virtually.

The 7th National Conference on CFIUS will be held on April 20-21, 2021, this informative event discussing ensuring deal success amidst expanded scrutiny of foreign investments in technology, infrastructure, data and real estate. Engage in meaningful dialogue with leaders in National Security, International Trade, Foreign Investment and Export Controls. For more information register here and save 10% using the code: P10-999-TORL21.

The 2nd European Forum on FDI Reviews and CFIUS will be held on May 19-20, 2021. This conference will discuss the past year, as there has been significant regulatory change to many national security regimes. The European Commission’s new foreign direct investment screening regulation is now in effect and many Member States are enacting or revising their own regulations. Potential M & A deals are receiving heightened scrutiny from various regulators. With these profound changes in the EU and the global expansion of CFIUS, this timely virtual program will provide you with an in-depth overview of the process to securing the necessary approvals. For more information register here.

ACI’s 4th National Forum on FOCI will bring together key stakeholders from government, industry and private practice who are involved in some of the most significant matters to date. Companies under Foreign Ownership, Control or Influence need to stay alert on many fronts. Given the different requirements of DCSA, DOE and DHS, companies under FOCI must be fully apprised of the implications, as well as the effect on their eligibility for access to classified information. These ramifications become even more complex when a National Interest Determination (NID) comes into play. What’s more, the intersection of FOCI mitigation with the CFIUS approval process requires a well thought-out strategy toward maximizing the chances of a favorable outcome – a process that has become even more complex given the recent passing of the anticipated CFIUS Reform (FIRRMA). The 4th National Forum on FOCI will be held on September 15, 2021 register here for more information.

CFIUS FAQs:

1. What is CFIUS?

The Committee on Foreign Investment in the United States (“CFIUS”) is a United States federal interagency body that reviews certain foreign investments in U.S. businesses and certain real estate transactions by foreign persons for national security implications; and advises the President on such transactions. The Committee is chaired by the U.S. Secretary of the Treasury and composed of nine members from the federal executive branch, two ex officio members, and other members as appointed by the President.

2. Where does CFIUS derive its authority?

CFIUS operates pursuant to section 721 of Title VII of the Defense Production Act of 1950, commonly known as the Exon-Florio amendment; and as implemented by Executive Order 11858, as amended. The Exon-Florio amendment gives the President authority to suspend or prohibit certain foreign investment transactions. In 2007, section 721 was substantially revised by the Foreign Investment and National Security Act of 2007 (“FINSA”). And in 2018, section 721 was again significantly revised by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which became effective August 13, 2018. The implementing regulations are found at chapter VIII of title 31 of the Code of Federal Regulations.

3. Why is CFIUS important?

U.S. businesses engaged in certain transactions involving foreign investors may be within CFIUS's jurisdiction. If so, for transactions which CFIUS believes raise national security concerns, CFIUS can impose limitations on a foreign investment as condition of receiving CFIUS clearance. Additionally, CFIUS can recommend to the President of the United States to unwind or block the transaction. Importantly, CFIUS retains jurisdiction indefinitely to review any transaction, before or after completion. Pursuant to FIRRMA, mandatory filings are required for certain transactions and failure to file can result in severe penalties of up to $5 million or the total value of the transaction, whichever is greater. Additionally, the underlying transaction can be undone or blocked.

4. What is a CFIUS review?

A CFIUS review is a national security screening process for certain transactions involving foreign investments in U.S. businesses or U.S. real estate. CFIUS has the authority to initiate a review of any transaction falling within its jurisdiction and can request that transaction parties submit filings to the Committee with transaction details for review. Transaction parties may also choose to voluntarily submit a Declaration or Joint Voluntary Notice (JVN) to CFIUS to initiate the Committee's review of a transaction. Importantly, certain types of foreign investment transactions may trigger mandatory filing requirements with CFIUS. At the conclusion of its review, CFIUS may approve or “clear” a transaction, require mitigation measures to address identified national security risks, or, in rare cases, recommend that the President block or unwind the transaction.

5. What is the scope of CFIUS's jurisdiction?

In general, the following transactions fall under CFIUS jurisdiction:

  • Control Transactions: Any merger, acquisition, or takeover transaction that could result in control over any U.S. business by any foreign person;
  • “Covered Investments”: Certain non-passive “covered investments” in certain unaffiliated U.S. businesses that are involved in critical technologies, critical infrastructure, or the maintenance or collection of sensitive personal data of U.S. citizens (“TID U.S. Business”).
  • Covered Real Estate Transactions: Certain real estate transactions in close proximity to sensitive government facilities and ports.
  • Change in rights: Any transaction that changes a foreign person's rights in a U.S. business.
  • Evasive Transactions: Any transaction intended to evade or circumvent CFIUS jurisdiction.

6. How do you know if your transaction falls within CFIUS's jurisdiction?

Determining whether a particular transaction falls within CFIUS's jurisdiction requires a careful analysis of the subject transaction and the CFIUS regulations located at 31 C.F.R. Parts 800 and 802. This analysis typically involves obtaining a detailed overview of the subject transaction setup, a review of the involved parties and their nationalities, and a review of the target U.S. business and its activities. Once CFIUS jurisdiction is determined, relevant parties must assess whether the subject transaction triggers a mandatory CFIUS filing or whether a voluntary filing may be appropriate. Internal or external legal counsel can often provide key assistance in conducting a CFIUS jurisdiction analysis and determining whether a CFIUS filing is required or recommended.

7. What is a mandatory vs. voluntary CFIUS filing?

Certain transactions that fall within CFIUS jurisdiction trigger mandatory filing requirements. This means that the transaction parties must submit notification to CFIUS of the transaction or face potential penalties. Thus, it is highly important that transaction parties, with assistance from legal counsel as needed, conduct an analysis at the outset of a transaction to determine whether a mandatory filing is triggered. Other transactions may fall within CFIUS jurisdiction but will not trigger mandatory filing requirements. In these cases, legal counsel may assist the transaction parties with assessing the pros and cons of submitting a voluntary filing to CFIUS.

8. What triggers a mandatory filing?

Mandatory filing requirements are generally triggered in two types of transactions (certain exceptions may apply): 1.When a critical technology TID U.S. business is involved (specific criteria applies); or 2.When a foreign government has a substantial interest in a TID U.S. business.

9. What factors does CFIUS consider in its reviews?

When assessing national security implications arising from a covered transaction/investment CFIUS may consider a broad range of factors, and such factors are not disclosed by the Committee. Some general factors when assessing national security risks that CFIUS will most likely consider include:

  • Whether the target U.S. business has any contracts with the U.S. Government (USG), including contracts for national security responsibilities and classified contracts. This would also include prime or sub-contractors to USG agencies or state and local authorities.
  • Whether the target is a sole or single source supplier.
  • Whether the target's business (goods or services) could affect the security of USG agencies or create vulnerability to sabotage or espionage.
  • Whether the target U.S. business is involved with critical technologies or products (e.g., commodities, software, or technology) controlled under U.S. export control laws.
  • Whether the transaction would result in foreign control over physical or virtual "critical infrastructure.”
  • Whether the target U.S. business has any offices or facilities in locations near sensitive government facilities (e.g., military bases, national laboratories, etc.).
  • Whether the target U.S. business stores or has access to detailed personal/consumer information, including credit card, social security numbers, etc.
  • The foreign investor's nationality and extent of foreign government ownership (e.g., China and Russia investors present a higher risk).
  • Foreign investor's record and intentions such as records of the country of the investor regarding nonproliferation and other national security matters. Or if the foreign person could terminate contracts between U.S. businesses and USG agencies; reduce or eliminate research and development facilities; change product quality; shut down or move outside the U.S. facilities that are within the U.S.; consolidate or sell product lines or technology; eliminate domestic supply, to name a few.

10. Can CFIUS recommend the blocking of a transaction?

At the conclusion of its review, CFIUS may determine that a transaction threatens to impair U.S. national security and that these national security risks cannot be adequately addressed through the imposition of mitigation measures. In these instances, CFIUS may refer the case to the President for review and recommend that the President take action to block the transaction.

11. Can CFIUS unwind a transaction?

CFIUS maintains the authority to review any transaction falling within its jurisdiction, including transactions that have already been completed. The Committee may unwind a transaction that has already closed if it determines such a transaction threatens or impairs U.S. national security. Failure by the transaction parties to comply with a CFIUS unwinding may result in the Committee referring the case to the President for further action.

12. Can CFIUS require the submission of a filing even where the underlying transaction does not trigger mandatory filing requirements?

CFIUS can issue inquiries to parties of a non-notified transaction to determine if the transaction falls within the Committee's jurisdiction. In addition, CFIUS can require non-notified transaction parties to submit filings to the Committee for review, even where the underlying transaction does not trigger mandatory filing requirements. Therefore, parties that choose not to proactively submit a voluntary Declaration or Notice to CFIUS risk the possibility of being contacted by CFIUS at a later date to initiate a review, even in instances where a transaction has already closed.

13. What is CFIUS due diligence?

CFIUS due diligence refers to the review of potential CFIUS implications as part of a party's pre-transactional vetting or M&A due diligence efforts. Non-compliance with CFIUS regulations can lead to monetary penalties, transaction delays, and increased scrutiny by the Committee. In addition, it is best practice to complete the CFIUS filing and review process prior to the closing date of a transaction in case of potential outcomes involving required mitigation or transaction blocks. Parties to transactions involving foreign investment in the U.S. should mitigate potential CFIUS-related risks by conducting an analysis of potential CFIUS implications at the outset of a transaction and ensure that CFIUS considerations are included in transaction due diligence.

14. How can Torres Trade Law help?

If your transaction potentially involves a foreign buyer/investor, contact the attorneys at Torres Trade Law. We can help identify CFIUS-related risks, assist in determining whether parties should notify CFIUS of a pending or proposed transaction, advise on the structure of a foreign investment, assist in preparing CFIUS submissions, and represent clients in the CFIUS review process. We have extensive experience with export control laws and regulations, and the export control regimes play a significant role in the CFIUS analysis.

Practice Areas

CONTACT US

INSIGHTS

America First Investment Policy Restricts Adversaries and Welcomes Investment from Allies

By: Olga Torres, Managing Member, and Derrick Kyle, Senior Associate
Date: 02/24/2025

On February 21, 2025, President Trump issued a memorandum titled "America First Investment Policy" (the “Policy”), outlining new measures to shape U.S. investment policy. Though the Policy makes it clear that the United States welcomes foreign investment, its overarching theme is that “economic security is national security” and cautions against national security threats from “foreign adversaries” like the People’s Republic of China.

U.S. Issues Unprecedented Order Restricting Investment in China

Date: 01/17/2025

This article will provide a brief overview of EO 14105 and proposed implementing rules, as well as related legislative developments focused on outbound investment screening, and the outlook for outbound investment screening procedures.

*Reproduced with permission from the State Bar of Texas International Law Section. This article was first published in August 2024.

A Primer on the Committee on Foreign Investment in the United States (CFIUS)

By: Camille Edwards, Associate
Date: 01/07/2025

The Committee on Foreign Investment in the United States (“CFIUS” or “the Committee) is an interagency body of the U.S. government that plays a critical role in safeguarding national security by reviewing foreign investments in U.S. businesses and assets. Established in 1975 through an Executive Order issued by President Gerald Ford, CFIUS initially served as an advisory committee to monitor and evaluate the impact of foreign investments on the U.S. economy. Over time, its role has evolved significantly to focus on identifying and mitigating risks to national security posed by such investments.

CFIUS Review of Real Estate Transactions: A Primer and Overview of Recent Updates

Date: 12/13/2024

On November 1, 2024, the U.S. Department of Treasury (“the Treasury”), as chair of the Committee on Foreign Investment in the United States (“CFIUS”), published a Final Rule expanding its authority to review certain transactions involving foreign investment in U.S. real estate. CFIUS has jurisdiction to review certain “covered real estate transactions” located within specific degrees of proximity to sensitive government and military sites. The new Final Rule, which becomes effective on December 9, 2024, includes the addition of 59 new military installations and government sites designated as sensitive, ultimately broadening CFIUS jurisdiction. This Final Rule continues the trend of increasing government monitoring authority over foreign investment in U.S. real estate, a trend reflected at both the federal and state level.

Treasury Finalizes Rule Increasing CFIUS Penalties and Expanding Enforcement Powers

By: Derrick Kyle, Senior Associate
Date: 12/05/2024

On November 17, 2024, the Department of the Treasury (“Treasury”), in its role as chair of the Committee on Foreign Investment in the United States (“CFIUS” or “the Committee”), published a final rule (“Final Rule”) increasing maximum penalties for violations and expanding the Committee’s ability to compel parties to respond to information requests, among other revisions. The final rule becomes effective on December 26, 2024, and is very similar to the proposed rule, dated April 15, 2024, of which we wrote about in our article, Less Bark and More Bite? CFIUS Proposed Rule Enhancing Enforcement Capabilities. 

Identities of Investment Fund Limited Partners in CFIUS Reviews

By: Olga Torres, Managing Member
Date: 12/04/2024

As deals increase in complexity, and ownership structures are oftentimes opaque and obfuscated, it is important to be mindful of CFIUS’s continued stance of requesting identities of Limited Partners (LPs) in transactions involving investments funds.

In the past five to six years, more transactions being reviewed by CFIUS involve venture capital and private equity deals. This results in more complex ownership reviews, including CFIUS reviewing LPs in investment funds. In its 2024 Annual CFIUS Conference in Washington, D.C., CFIUS emphasized the need to provide information regarding LPs. 

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