Thought Leadership

Treasury Issues Proposed Rule Expanding Reporting for Critical Technology Transactions to CFIUS

Client Updates

The U.S. Department of the Treasury, as chair of the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”), has issued a proposed rule to expand the requirement for filing mandatory declarations pertaining to certain foreign investments in U.S. businesses involved in critical technologies.

In October 2018, CFIUS took its first major step to implement its expanded authorities under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) by  implementing a pilot program to establish mandatory declarations for foreign investments in U.S. businesses that produce, design, test, manufacture, fabricate, or develop critical technologies in connection with certain specified industries, as identified by reference to North American Industry Classification System (NAICS) codes.  Critical technologies include defense articles and services included on the United States Munitions List (USML); most items included on the Commerce Control List (CCL) in the Export Administration Regulations (EAR); specified nuclear equipment, software and facilities; and designated emerging and foundational technologies.

 The proposed rule re-scopes the mandatory declarations for such transactions to no longer limit mandatory declaration filings to certain enumerated industries.  Instead, under the proposed rule, a mandatory declaration may be required for a foreign investment in a U.S. business if the critical technologies that the U.S. business produces, designs, tests, manufactures, fabricates, or develops would require a U.S. regulatory authorization to export, re-export, transfer (in-country), or retransfer to the foreign persons involved in the transaction, or certain foreign persons in the ownership chain, regardless of the industry involved.   The proposed rule, if implemented, has the potential to greatly impact a wide range of U.S. businesses involved in the development and production of critical technologies, which previously may not have been subject to mandatory filings before CFIUS.

I. Critical Technology Mandatory Declarations under the Proposed Rule

Under the proposed rule, declarations are required for a covered transaction (including less-than-controlling investments) involving a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies for which a “U.S. regulatory authorization” would be required for the export, re-export, transfer (in-country), or retransfer of such technology to a foreign person that is a party to the covered transaction, and such foreign person:

  • could directly control such U.S. business as a result of the covered transaction;

  • is directly acquiring a less-than-controlling interest that is a covered investment in such U.S. business;

  • has a direct investment in such U.S. business, the rights of such foreign person with respect to such U.S. business are changing, and such change in rights could result in a covered control transaction or a covered investment;

  • is a party to any transaction, transfer, agreement, or arrangement, the structure of which is designed or intended to evade or circumvent the application of CFIUS regulations; or

  • individually holds or is part of a group of foreign persons that, in the aggregate, holds, a “voting interest for purposes of critical technology mandatory declarations” in a foreign person.

II. U.S. Regulatory Authorization Becomes a Trigger for Mandatory Declaration Filings

The proposed rule introduces the term “U.S. regulatory authorization” to specify the types of regulatory licenses or authorizations that are required under the four main U.S. export control regimes, which if applicable in the context of a particular transaction under the proposed rule, would trigger a mandatory declaration.  The term “U.S. regulatory authorization” is defined to include:

  • a license or other approval issued by the Department of State under the International Traffic in Arms Regulations (ITAR);

  • a license from the Department of Commerce under the EAR;

  • a specific or general authorization from the Department of Energy under the regulations governing assistance to foreign atomic energy activities; or

  • a specific license from the Nuclear Regulatory Commission under the regulations governing the export or import of nuclear equipment and material.


Under the proposed rule, license exemptions or license exceptions available under the ITAR or EAR would not be applicable in determining whether a “U.S. regulatory authorization” would be required, except for certain limited EAR license exceptions.  The determination as to whether a “U.S. regulatory authorization” would be required (and thus trigger the mandatory filing requirements in the proposed rule) would be determined based on the location of the foreign person’s principal place of business or nationality (as appropriate) and as if the foreign person would be an “end user” of the critical technology.


The proposed rule also specifies that certain persons and entities in the ownership chain of a foreign person party to a critical technology transaction that have a 25 percent voting interest in the foreign person party should be analyzed for export authorization purposes in determining whether the particular transaction or investment could trigger a mandatory declaration.  The ownership interests of related parties may be aggregated for the purposes of determining voting interests in a foreign party.


III. Timing of the Proposed Rule

The Treasury Department is currently accepting written comments on the proposed rule from all interested persons.  Written comments must be received by June 22, 2020. 

The proposed rule does not indicate when the final rule might be implemented.

Please contact one of the authors below or your Baker Botts relationship attorney with any questions.


Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit

Related Professionals