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Newly Proposed Regulations Will Expand CFIUS Authority to Scrutinize Foreign Investment

Client Updates

On September 17, 2019, the Department of the Treasury issued two sets of proposed regulations (the “Proposed Regulations”) that would comprehensively implement the Foreign Risk Review Modernization Act of 2018 (“FIRRMA”).  The Proposed Regulations largely implement the provisions of FIRRMA discussed in our earlier client alert found here.  In particular, the Proposed Regulations provide greater clarity regarding the Committee on Foreign Investment in the United States’ (“CFIUS” or “Committee”) jurisdiction over “covered investments” and covered real estate transactions. 

Keys Elements of the Proposed Regulations Regarding “Covered Investments”

As discussed in our earlier client update, FIRRMA expands CFIUS jurisdiction to cover not only controlling investments by foreign persons in certain U.S. businesses but also certain non-controlling investments.  In this regard, the Proposed Regulations define “covered investments” to include non-controlling investments that afford a foreign person (1) access to material, nonpublic technical information, (2) membership or observer rights on the board of directors, or (3) involvement in certain substantive decision-making in a U.S. business that is involved with critical technologies, critical infrastructure, or sensitive personal data.[1]  Specifically, … 

  • Critical technologies include transactions related to U.S. businesses that design, test, manufacture, fabricate, or develop one or more critical technologies.  “Critical technologies” are defined as certain items subject to export controls as well as emerging and foundational technologies controlled pursuant to the Export Control Reform Act of 2018.

  • Critical infrastructure includes transactions related to U.S. businesses that perform specified functions owning, operating, manufacturing, supplying, or servicing with respect to at least one of the subsectors identified in an appendix to the Proposed Regulations.  The subsectors include internet networks and telecommunications; submarine cables; satellites; defense services; electric power; water utilities; oil and gas refineries, storage and pipelines; LNG terminals; financial exchanges; and transportation.

  • Sensitive personal data includes transactions related to U.S. businesses that maintain or collect sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security.  “Sensitive personal data” includes ten categories of data maintained or collected by U.S. businesses that (i) target or tailor products or services to sensitive populations, including U.S. military members and employees of federal agencies involved in national security, (ii) collect or maintain such data on at least one million individuals, or (iii) have a demonstrated business objective to maintain or collect such data on greater than one million individuals and such data is an integrated part of the U.S. business’s primary products or services.  The categories of data include types of financial, geolocation, and health data, among others.  “Sensitive personal data” also includes genetic information, without regard to how or why it is collected by the U.S. business.

In the Proposed Regulations, businesses engaged in the above areas are referred to as “Technology, Infrastructure, and Data” (“TID”) U.S. businesses. 

Keys Elements of the Proposed Regulations Regarding Real Estate Transactions

As discussed in our earlier client update, FIRRMA also expands CFIUS jurisdiction to include certain real estate transactions.  In this respect, the Proposed Regulations establish CFIUS jurisdiction over the purchase or lease by, or a concession to, a foreign person of certain covered real estate sites in the U.S. that affords a foreign person three or more of the following property rights: (1) to physically access; (2) to exclude; (3) to improve or develop; or (4) to affix structures or objects to the property.

Under the Proposed Regulations, CFIUS jurisdiction over real estate transactions focuses on transactions in and/or around specific airports, maritime ports, and military installations.  The relevant military installations are listed by name and location in an appendix to the Proposed Regulations.  The relevant airports and maritime ports are published by the Department of Transportation.

The Proposed Regulations focus on real estate locations that are within:

  • an air or maritime port (or that will function as part of the port);

  • “close proximity” (defined as one mile) of certain specified U.S. military installations;

  • “extended range” (defined as between one mile and 100 miles) of certain specified military installations; or

  • certain geographic areas associated with missile fields and off­shore ranges.

The Proposed Regulations also create the following exceptions from covered real estate transactions:

  • Transactions by certain foreign persons defined as “excepted real estate investors” based on their ties to certain countries to be identified by CFIUS as “excepted real estate foreign states;”

  • Transactions in an “urbanized area” or “urban cluster,” as defined by the Census Bureau, except those relating to relevant ports and those in “close proximity” to certain military installations;

  • The purchase, lease, or concession of a single “housing unit,” as defined by the Census Bureau; and

  • Transactions involving certain commercial office space in a multi-unit commercial office building.


    Both sets of Proposed Regulations provide a joint short-form declaration as an alternative to CFIUS’s traditional joint voluntary notice.  Declarations will allow parties to submit basic information regarding a transaction that should generally not exceed five pages in length.  The Department of the Treasury will accept declarations using a standard template form which will be available by the time the final regulations become effective.  In most instances filing a declaration will be voluntary.  But in certain transactions involving foreign government interests, the filing of a declaration will be mandatory.  More detail on mandatory declarations under FIRRMA can be found in our client alert referenced above

    Effective Date of the Proposed Regulations

    The Department of the Treasury is currently seeking public comment on the Proposed Regulations which will conclude on October 17, 2019.  Comments on the Proposed Regulations will inform the development of the final regulations to implement FIRRMA.  The final regulations of FIRRMA must become effective no later than February 13, 2020.



[1] Transactions by certain “excepted investors” may be excluded from the definition of “covered investments” based on the investors’ ties to certain countries to be identified by CFIUS. 

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