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The Treasury officials issued Wednesday new rules requiring all foreign investors to certain operations involving critical US technologies to submit to national security reviews or fines up to the value of proposed transactions.
The new regulation, which implements a recently adopted law to tighten foreign investment controls, is broader than some have advocated and is likely to bring unprecedented numbers of transactions to the US Foreign Investment Committee, known as Cfius.
The inter-agency committee led by the Treasury will now ask foreign investors to warn of any agreements giving them access to critical technologies in 27 industries (semiconductors, telecommunications and defense) which, according to Cfius, could threaten the national security of the United States and its technological superiority. officials.
Previously, Cfius was more interested in transactions in which foreigners took control of US companies, and the review process was optional. Historically, investors have been encouraged to file and seek approval from Cfius, otherwise the committee could still decide to revise their contract and recommend to the president to block or unwind it, which would create a significant risk .
However, in recent years, lawmakers and officials have come to believe that many agreements involving significant US technology were under the radar of the committee, creating risks to national security. They were particularly concerned about a series of Chinese technology deals in Silicon Valley.
The new rules expand Cfius' current mandate to uncontrolled US commercial investments giving outsiders access to important non-public technical information, rights of members or observers on the board of directors of that company, or any involvement, other as the vote of actions, in the decision-making. major decisions for this company regarding critical technology, Treasury officials said. "Critical Technology" refers to the elements of the US Export Control Lists, which are also updated.
In August, President Trump promulgated the Cfius measure as part of a broader annual bill pertaining to defense clearance. Led by Senator John Cornyn (R., Texas) and Rep. Robert Pittenger (R., NC), the Cfius initiative received broad bipartisan support, but some companies and some Congressional traders worked to have the scope of the measure is as narrow as possible. possible because they feared that this would unnecessarily hamper foreign investment, which the United States has long praised as a source of economic growth and jobs.
The lawyers representing the principals in front of Cfius stated that, even if the passage of the measure represented a very different approach to foreign investment, the real scope of the new rules and their impact on companies would not be revealed. only through the long process the executive branch.
For example, the legislation specified that investors would now also be required to file short notices for the review of non-controlling investments if the agreements were guaranteed by foreign governments and involved essential technology, but the committee has discretion to determine what other types of transactions the decision makers made according to an initial assessment of the measure by the law firm Covington & Burling LLP.
The new temporary regulations will come into effect in one month and will be replaced by permanent regulations about 15 months later. Under the new regime, even foreign investors involved in such technology agreements, supported by a government and not supported by the government, should be declared.
And the pilot regulation does not specify Chinese and Russian investors as priorities to consider, such as House Financial Services chairman Jeb Hensarling (R., Texas) and senior member Maxine Waters (D., ca.) whose committee is responsible for Cfius. , had asked in a letter to the Treasury in September, in which he sought a favorable treatment for the allies.
Write to Kate O'Keeffe at [email protected]
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