As we previously reported in our August 9th blog post the new CFIUS requirements were approved by the U.S. House and Senate with the passage of the Foreign Investment Risk Review Modernization Act (FIRRMA).
Since then, on November 10, 2018, the FIRRMA pilot program went into effect, implementing two key provisions of the legislation: expanded jurisdiction rules that target critical technologies and new mandatory filing requirements. CFIUS’s jurisdiction now includes reviews of certain investments by foreign persons that do not necessarily constitute an acquisition of “control” of a U.S. business (FIRRMA refers to these as “other investments”). An investment can now fall within the purview of CFIUS review if it gives the foreign investor one of the following:
- Access to any material nonpublic technical information in the possession of the U.S. business;
- Membership or observer rights on the board of directors or equivalent governing body of the U.S. business, or the right to nominate an individual to a position on the board of directors or equivalent governing body of the U.S. business; or
- Any involvement, other than through voting of shares, in substantive decision-making of the U.S. business regarding the use, development, acquisition, or release of critical technologies.
In addition, the pilot program covers any U.S. business that produces, designs, tests, manufactures, fabricates, or develops a critical technology that is: (1) utilized in connection with the U.S. business’s activity in one or more “Pilot Program Industries,” or (2) designed by the U.S. business specifically for use in one or more “Pilot Program Industries” (the program covers 27 Pilot Program Industries for which the U.S. government determined that “strategically motivated foreign investment” could pose a threat to U.S. technical superiority and national security, including the manufacturing of aircraft, computers, wireless communications equipment, and semiconductors).
On November 19, BIS published an advance notice of proposed rulemaking (ANPRM) in the Federal Register seeking public comments on how the U.S. should define and identify “emerging” technologies to assist and inform the ongoing interagency process.
The notice lists 14 representative categories of technology that BIS intends to focus on:
- Artificial intelligence (AI)
- Position, Navigation, and Timing (PNT) technology
- Microprocessor technology
- Advanced computing technology
- Data analytics technology
- Quantum information and sensing technology
- Logistics technology
- Additive manufacturing (e.g., 3D printing)
- Brain-computer interfaces
- Advanced materials
- Advanced surveillance technologies
BIS also noted that it will issue a separate request for comments regarding “foundational” technologies with national security implications. If you are conducting business in or related to one of the 14 representative technology categories in the ANPRM for emerging technologies, we encourage you to consider submitting comments to BIS by the December 19, 2018 deadline. This is an opportunity to provide clarification, prevent misunderstanding, and help shape regulatory policies that are likely to have significant downstream effects.
For more background information on this topic, please see our November 30, 2018 alert.
If you need any assistance in understanding the updated CFIUS rules, BIS proposal or changes to export controls, please let us know.
Have a great day,
Alan Enslen and Julius Bodie