The U.S. Department of the Treasury (Treasury) has issued proposed regulations concerning the Committee on Foreign Investment in the United States (CFIUS) that will fully implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The proposed regulations were published in two parts in the Federal Register:

The new regulations must become effective no later than February 13, 2020.

While the CFIUS process continues to be largely voluntary, with most of the current regulations remaining intact (including the pilot project covering mandatory filings for certain critical technologies), there are key changes in these proposed rules.

FIRRMA Provisions on Non-Controlling Investments

The proposed regulations include expanding CFIUS’s jurisdiction to certain non-controlling investments that provide a foreign person access, rights or involvement in certain U.S. businesses (i.e., covered investments); critical technologies; critical infrastructure; and sensitive personal data. Declarations will be required when a foreign government has a “substantial interest” as defined in the regulations. The proposed regulations also create an exception from “covered investments” for certain foreign persons defined as “excepted investors” based on ties to countries identified as “excepted foreign states.” For the first time, Treasury has provided an appendix identifying covered investments in critical infrastructure and functions that would be sectors of concern in any national security review.

FIRRMA Provisions on Real Estate Transactions

The proposed regulations include new FIRRMA provisions that specifically allow the CFIUS to review certain real estate transactions, focusing on covered sites, such as specific airports, maritime ports, military installations and real estate within close proximity (defined as one mile) of the designated sites. The real estate provision also sets forth exceptions, including one for “excepted real estate investors,” which is again based on ties to certain excepted countries, and an exception for real estate transactions in an “urbanized area” or “urban cluster,” as defined by the Census Bureau. Again, for the first time, Treasury has proposed a list of identified military installations and sites that would be locations of concern in any national security review.

As a reminder, the CFIUS is an interagency committee chaired by the secretary of the Treasury that is authorized to review transactions involving foreign investment in the United States. FIRRMA was signed into law in August 2018 after receiving bipartisan support in Congress and modernizes the CFIUS review process to address national security concerns more effectively. FIRRMA expanded the president’s and CFIUS’s authorities to address foreign non-controlling investments and real estate transactions that previously fell outside CFIUS’s jurisdiction.