Provisions Pertaining to Certain Investments in the United States by Foreign Persons, 50174-50211 [2019-20099]

Download as PDF 50174 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules DEPARTMENT OF THE TREASURY Office of Investment Security 31 CFR Part 800 RIN 1505–AC64 Provisions Pertaining to Certain Investments in the United States by Foreign Persons Office of Investment Security, Department of the Treasury ACTION: Proposed rule. AGENCY: This proposed rule would replace the current regulations that implement section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). While this proposed rule retains many provisions of the existing regulations, a number of substantive changes are proposed, primarily to implement FIRRMA. SUMMARY: Written comments must be received by October 24, 2019. The Department of the Treasury is considering holding during the comment period a teleconference regarding the proposed rule for members of the public. Information about any public teleconference, including the date, time, and how to attend, will be published on the Department of the Treasury website at https://home.treasury.gov/policy-issues/ international/the-committee-on-foreigninvestment-in-the-united-states-cfius. ADDRESSES: Written comments on this proposed rule may be submitted through one of two methods: • Electronic Submission: Comments may be submitted electronically through the Federal government eRulemaking portal at https://www.regulations.gov. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt, and enables the Department of the Treasury to make the comments available to the public. Please note that comments submitted through https://www.regulations.gov will be public, and can be viewed by members of the public. • Mail: Send to U.S. Department of the Treasury, Attention: Thomas Feddo, Deputy Assistant Secretary for Investment Security, 1500 Pennsylvania Avenue NW, Washington, DC 20220. In general, the Department of the Treasury will post all comments to https://www.regulations.gov without change, including any business or personal information provided, such as names, addresses, email addresses, or khammond on DSKJM1Z7X2PROD with PROPOSALS3 DATES: VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 telephone numbers. All comments received, including attachments and other supporting material, will be part of the public record and subject to public disclosure. You should only submit information that you wish to make publicly available. FOR FURTHER INFORMATION CONTACT: For questions about this proposed rule, contact: Laura Black, Director of Investment Security Policy and International Relations; Meena R. Sharma, Deputy Director of Investment Security Policy and International Relations; David Shogren, Senior Policy Advisor; or Alexander Sevald, Senior Policy Advisor, at U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220; telephone: (202) 622–3425; email: CFIUS.FIRRMA@treasury.gov. SUPPLEMENTARY INFORMATION: I. Background A. The Statute The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), Subtitle A of Title XVII of Public Law 115–232, 132 Stat. 2173, which amends section 721 (section 721) of the Defense Production Act of 1950, as amended (DPA), requires the issuance of regulations implementing its provisions. In Executive Order 13456, 73 FR 4677 (Jan. 23, 2008), the President directs the Secretary of the Treasury to issue regulations implementing section 721. This proposed rule is being issued pursuant to that authority. FIRRMA was passed by Congress as H.R. 5515 and was enacted on August 13, 2018. Prior to the enactment of FIRRMA, section 721 authorized the President, acting through the Committee on Foreign Investment in the United States (CFIUS or the Committee), to review mergers, acquisitions, and takeovers by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the United States, to determine the effects of such transactions on the national security of the United States. FIRRMA maintains the Committee’s jurisdiction over any transaction which could result in foreign control of any U.S. business, and broadens the authorities of the President and CFIUS under section 721 to address national security concerns arising from certain investments and real estate transactions. Additionally, FIRRMA modernizes CFIUS’s processes to better enable timely and effective reviews of transactions falling under its jurisdiction (which FIRRMA describes as ‘‘covered transactions’’). In enacting PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 FIRRMA, Congress acknowledged the important role of foreign investment in the U.S. economy and reiterated its support of the United States’ open investment policy, consistent with the protection of national security. A brief summary of key provisions of FIRRMA, as relevant for this rulemaking, follows. FIRRMA expands and clarifies the jurisdiction of the Committee by explicitly adding four types of transactions as covered transactions in the DPA: (1) The purchase or lease by, or concession to, a foreign person of certain real estate in the United States; (2) non-controlling ‘‘other investments’’ that afford a foreign person an equity interest in and specified access to information in the possession of, rights in, or involvement in the decisionmaking of certain U.S. businesses involved in certain critical technologies, critical infrastructure, or sensitive personal data; (3) any change in a foreign person’s rights if such change could result in foreign control of a U.S. business or an other investment in certain U.S. businesses; and (4) any other transaction, transfer, agreement, or arrangement, the structure of which is designed or intended to evade or circumvent the application of section 721. With respect to the Committee’s expanded jurisdiction over certain real estate transactions and other investments, FIRRMA instructs the Committee to specify criteria to limit the application of that expansion of jurisdiction to certain categories of foreign persons. The proposed rule addresses all of these types of covered transactions except for real estate transactions, which are the subject of a separate and concurrent rulemaking. In addition to expanding the Committee’s jurisdiction, FIRRMA prescribes certain process changes. FIRRMA allows parties to submit an abbreviated filing for any covered transaction through a declaration, as an alternative to CFIUS’s traditional voluntary notice, both of which are discussed below. Declarations will allow parties to submit basic information regarding a transaction in an abbreviated form that should generally not exceed five pages in length. FIRRMA also sets forth an abbreviated timeframe for the Committee to respond to submitted declarations. FIRRMA introduces a mandatory declaration requirement in certain circumstances. Specifically, FIRRMA creates a mandatory declaration requirement for certain covered transactions where a foreign government has a substantial interest. Additionally, FIRRMA authorizes CFIUS to mandate E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 through regulations the submitting of a declaration for covered transactions involving certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. In both cases, parties have the option of filing a notice rather than submitting a declaration if they so choose. FIRRMA also codifies certain processes related to the Committee’s authority to identify non-notified and non-declared transactions. FIRRMA permits a party to a transaction to stipulate that a transaction is a covered transaction and, as relevant, a foreign governmentcontrolled transaction. A party can make a stipulation in either a notice or a declaration. If a party makes a stipulation in a notice, CFIUS must provide comments on or accept the notice no later than 10 business days after the date of the filing. Additionally, FIRRMA extends the timing of the review period for transactions filed as notices from 30 days to 45 days and allows the Secretary of the Treasury to grant one 15-day extension of the 45-day investigation period in ‘‘extraordinary circumstances.’’ These provisions were made effective in a rulemaking on October 11, 2018. 83 FR 51316. FIRRMA establishes a 30-day review period for transactions submitted as declarations. The notice and declarations processes are discussed in further detail below. B. Effective Date of Certain Provisions Congress divided FIRRMA’s provisions into two categories: Those effective immediately and those that become effective no later than February 13, 2020. Specifically, section 1727(a) of FIRRMA lists the provisions that became effective immediately upon enactment of the statute. A number of the immediately effective provisions required revisions to the CFIUS regulations existing at that time at part 800 of title 31 of the Code of Federal Regulations. On October 11, 2018, the Department of the Treasury published an interim rule implementing the immediately effective provisions of, and making updates consistent with, FIRRMA. 83 FR 51316. That interim rule was intended to provide clarity regarding the processes and procedures of the Committee pending the full implementation of FIRRMA. The interim rule provided for a public comment period of 30 days. One comment was received and is discussed below. Section 1727(b) of FIRRMA delayed the effectiveness of any provision of VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 FIRRMA not specified in section 1727(a) until the earlier of: (1) The date that is 18 months after the date of enactment of FIRRMA (i.e., February 13, 2020); or (2) the date that is 30 days after publication in the Federal Register of a determination by the chairperson of the Committee that the regulations, organizational structure, personnel, and other resources necessary to administer the new provisions are in place. The proposed regulations in this notice are intended to fully implement the provisions of FIRRMA, with the exception of (1) CFIUS’s new jurisdiction over certain real estate transactions, (2) CFIUS’s new authority to impose filing fees, and (3) CFIUS’s authority to mandate declarations for certain transactions involving critical technologies, each of which is the subject of a separate rulemaking, as discussed below. Notwithstanding section 1727(b), section 1727(c) of FIRRMA authorizes CFIUS to conduct one or more pilot programs to implement any authority provided pursuant to any provision of, or amendment made by, FIRRMA that did not take effect immediately upon enactment. On October 11, 2018, the Department of the Treasury published an interim rule setting forth the scope of, and procedures for, a pilot program to review certain transactions involving foreign persons and critical technologies (Pilot Program Interim Rule). 83 FR 51322. That Pilot Program Interim Rule, which went into effect on November 10, 2018, established mandatory declarations for certain transactions involving investments by foreign persons in certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. The Pilot Program Interim Rule provided for a public comment period of 30 days, and a number of comments were received. As discussed below, the Committee is still considering those comments and the scope of mandatory declarations for covered transactions involving critical technologies. The Department of the Treasury expects to address in the final rule the comments previously received on the Pilot Program Interim Rule and any new comments provided in response to this proposed rule. C. Structure of FIRRMA Rulemaking and This Proposed Rule Consistent with CFIUS processes generally, the proposed rule reflects extensive consultation with CFIUS member agencies, as well as other relevant agencies. The proposed rule retains many of the basic features of the existing regulations, while PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 50175 implementing the changes that FIRRMA made to CFIUS’s jurisdiction and process. Given the number of revisions, the proposed rule amends and restates part 800 in its entirety. Although the new part 800 is being restated here in full, many of the provisions of the prior part 800 are not being materially modified. The Committee will consider all comments provided to the proposed rule, but is particularly interested in receiving comments relating to the new provisions and revisions being proposed here and outlined below, rather than comments relating to the text of part 800 that has not been changed. In updating part 800 to incorporate CFIUS’s new jurisdiction over noncontrolling other investments (which this rule describes as ‘‘covered investments’’), certain conforming edits were made to existing provisions. For example, the coverage section in subpart C of the proposed rule on ‘‘covered control transactions’’ is based on the ‘‘covered transactions’’ section in the existing part 800 regulations and provides examples of the different bases of jurisdiction over control transactions and covered investments. In that respect, there is also now a covered investment section within the coverage subpart for the new jurisdiction. Finally, the proposed rule incorporates the changes made to part 800 in the interim rule published in October 2018, and updates certain other provisions. This proposed rule does not implement the authority FIRRMA provided to the Committee to review the purchase or lease by, or concession to, a foreign person of certain real estate in the United States. A concurrent proposed rule implements such authority under a separate part 802 within title 31 of the CFR. The Department of the Treasury determined that the technical and procedural aspects of CFIUS’s review of transactions involving real estate are sufficiently distinct from those related to control transactions and covered investments to warrant separate rulemaking. Parties should be aware that certain transactions that are not covered transactions under this proposed rule could potentially be covered real estate transactions under the proposed part 802 real estate regulations. FIRRMA authorizes the Committee to assess and collect fees with respect to covered transactions for which a written notice is filed, and the Committee is considering how to implement this authority. The proposed rule also does not address filing fees. The Department of the Treasury will publish a separate E:\FR\FM\24SEP3.SGM 24SEP3 50176 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules proposed rule regarding fees at a later date. The proposed rule does not modify the regulations currently at 31 CFR part 801, which sets forth the Pilot Program Interim Rule. CFIUS continues to evaluate the Pilot Program Interim Rule, and the Department of the Treasury welcomes comments on the retention of the mandatory declaration aspect of the Pilot Program Interim Rule for certain transactions involving critical technologies. The Department of the Treasury received comments regarding the Pilot Program Interim Rule from a variety of commenters and expects to address these comments in the final rule associated with this proposed rule. The proposed rule seeks to provide clarity to the business and investment communities with respect to the types of U.S. businesses that are covered under FIRRMA’s other investment authority. Given the level of specificity provided in certain provisions of the proposed rule, the pace of technological development, the evolving use of data, and the evolving national security landscape more generally, the Department of the Treasury anticipates that it will periodically review, and as necessary, make changes to the regulations, consistent with applicable law. II. Discussion of Proposed Rule khammond on DSKJM1Z7X2PROD with PROPOSALS3 A. Subpart A—General The following discussion describes several key changes to subpart A. Section 800.102—Risk-based analysis. FIRRMA requires that any determination of the Committee to suspend a covered transaction, to refer a covered transaction to the President, or to negotiate, enter into or impose, or enforce any agreement or condition with respect to a covered transaction, be based on a risk-based analysis, conducted by the Committee, of the effects on the national security of the United States of the covered transaction, which must include an assessment of the threat, vulnerabilities, and consequences to national security related to the transaction. The proposed rule includes definitions of the terms ‘‘threat,’’ ‘‘vulnerabilities,’’ and ‘‘consequences to national security’’ used in risk-based analyses undertaken by the Committee. Section 800.104—Applicability rule. The proposed rule clarifies the existing applicability rule. The proposed rule also removes the provision previously found at § 800.103(b)(4) that established applicability to a transaction based upon a Committee determination that a commitment had been made. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 B. Subpart B—Definitions Several key changes to the existing part 800 definitions and several key new definitions that are broadly applicable to both control transactions and covered investments are discussed immediately below. Certain new definitions that are applicable to specific substantive areas regarding covered investments are discussed in the applicable subsections below. Section 800.203—Business day. The proposed rule modifies the definition for ‘‘business day’’ to exclude days where there U.S. Office of Personnel Management has announced the closure of Federal offices in the Washington, DC area. The proposed rule also addresses the impact on certain timing requirements where a submission is received after 5 p.m. (Eastern Time). Section 800.206—Completion date. The proposed rule includes a definition for ‘‘completion date.’’ The proposed rule clarifies that, in the event that a covered transaction will be effectuated through multiple or staged closings, the completion date is the earliest date on which any transfer of interest or change in rights that constitutes a covered transaction occurs. Section 800.207—Contingent equity interest. FIRRMA uses the term ‘‘contingent equity interest’’ in the definition of investment. The proposed rule eliminates the term ‘‘convertible voting instrument’’ in the existing part 800 in light of the new definition of ‘‘contingent equity interest.’’ The proposed rule also updates the references in the timing rule at § 800.308. Section 800.214—Critical infrastructure. The proposed rule revises the definition for ‘‘critical infrastructure’’ to conform to the language in FIRRMA. As discussed further below, however, for the purposes of an other investment, FIRRMA requires CFIUS to specify a subset of critical infrastructure. Section 800.252—U.S. business. The proposed rule revises the definition for ‘‘U.S. business’’ to conform to the definition in FIRRMA. C. Covered Investments The proposed rule implements CFIUS’s authority, provided under FIRRMA, to review an investment by a foreign person in certain types of U.S. businesses that affords the foreign person certain access to information in the possession of, rights in, or involvement in the decisionmaking of certain U.S. businesses but that does not afford the foreign person control over the U.S. business. The proposed rule PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 uses the term ‘‘covered investments’’ for these investments, as defined in § 800.211. The types of access, rights, or involvement that could give rise to a covered investment are set forth in § 800.211(b). That section implements the definitions in FIRRMA describing transactions that afford the foreign person (1) access to material non-public technical information in the possession of the U.S. business, (2) membership or observer rights on the board of directors (or equivalent body) of the U.S. business, or (3) any involvement in substantive decisionmaking of the U.S. business regarding certain actions related to critical technologies, critical infrastructure, or sensitive personal data. The proposed rule further defines ‘‘material non-public technical information’’ (see § 800.233) and ‘‘substantive decisionmaking’’ (see § 800.245). The types of businesses in which an investment may constitute a covered investment are those that have certain involvement in critical technologies, critical infrastructure, and sensitive personal data, as further described below and in the proposed rule. These businesses are referred to as ‘‘TID U.S. businesses’’ in the proposed rule (see § 800.248). ‘‘TID’’ is an acronym for Technology, Infrastructure, and Data. FIRRMA, moreover, limits such covered investments to those made in an unaffiliated business. Thus, the proposed rule adds a definition for ‘‘unaffiliated TID U.S. business,’’ which excludes entities in which the foreign person already holds a majority of the voting interest or the right to appoint the majority of the entity’s board or equivalent governing body. Notably, CFIUS retains jurisdiction over any transaction through which any foreign person could acquire control of any U.S. business, regardless of whether the transaction involves critical technology, critical infrastructure, or sensitive personal data. In connection with the new jurisdiction over covered investments, FIRRMA requires that the Committee prescribe regulations to limit its application to the investments of certain categories of foreign persons. This proposed rule implements this requirement by ‘‘excepting’’ certain foreign persons from the provisions relating to covered investments if the foreign persons meet specified criteria. It also includes clarifications contained in FIRRMA regarding the treatment of certain investments through investment funds and an exception specified in FIRRMA for investments involving air carriers. E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules 1. Covered Investments Involving Critical Technology FIRRMA expands CFIUS’s jurisdiction to include covered investments by a foreign person in an unaffiliated U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies. Section 800.215—Critical technologies. The proposed rule defines ‘‘critical technologies’’ consistent with the language in FIRRMA. Subpart (f) of FIRRMA’s definition of critical technology, as set out in this proposed rule, captures emerging and foundational technologies controlled pursuant to section 1758 of the Export Control Reform Act of 2018 (ECRA), Subtitle B of Title XVII of Public Law 115–232. Pursuant to ECRA, the Bureau of Industry and Security within the Department of Commerce identifies and places export controls on specified emerging and foundational technologies. As technologies become controlled pursuant to rulemaking under ECRA, they will automatically be covered under the definition of ‘‘critical technologies’’ under part 800. As noted above, CFIUS will continue to have authority to review any transaction that could result in control by a foreign person of any U.S. business, including a U.S. business with technology, critical or otherwise, and export controlled or otherwise. khammond on DSKJM1Z7X2PROD with PROPOSALS3 2. Covered Investments Involving Critical Infrastructure FIRRMA expands CFIUS’s jurisdiction to include covered investments by a foreign person in an unaffiliated U.S. business that ‘‘owns, operates, manufactures, supplies, or services critical infrastructure.’’ FIRRMA requires that the regulations implementing this provision limit the application of covered investment jurisdiction to a subset of critical infrastructure that must be specified in the regulations. Moreover, FIRRMA specifically provides that any definition of ‘‘critical infrastructure’’ established under any provision of law other than section 721 is not determinative for the purposes of section 721, including this proposed rule. Similarly, the subset of critical infrastructure identified in appendix A is not intended to alter the definition of ‘‘critical infrastructure’’ as used in any other regulatory regime or context. Section 800.212—Covered investment critical infrastructure. The proposed rule identifies the subset of critical infrastructure that is relevant for the Committee’s jurisdiction over covered VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 investments through a list of specific types of infrastructure in appendix A. As noted above, the Department of the Treasury anticipates periodically revising the regulations, potentially including revisions to this list. To distinguish this subset of critical infrastructure from critical infrastructure more broadly, this proposed rule creates a new term, ‘‘covered investment critical infrastructure’’ (see § 800.212). As noted above, FIRRMA describes, subject to the regulations implementing this provision, a U.S. business that falls under other investment jurisdiction with respect to critical infrastructure as one that ‘‘owns, operates, manufactures, supplies, or services’’ the subset of critical infrastructure. This proposed rule refers to these activities as ‘‘functions.’’ In furtherance of FIRRMA’s requirement to limit the application of other investment jurisdiction regarding critical infrastructure, the proposed rule sets forth which functions apply to each enumerated specific type of covered investment critical infrastructure. The proposed rule therefore links the relevant functions with the enumerated specific types of covered investment critical infrastructure in appendix A. Column 1 of appendix A lists the covered investment critical infrastructure and Column 2 lists the relevant functions that apply to enumerated specific types of covered investment critical infrastructure. Appendix A is integral to the proposed rule and key to determining whether a U.S. business is a TID U.S. business for purposes of critical infrastructure covered investment jurisdiction. Only a U.S. business that performs one of the specified functions listed in Column 2 of appendix A with respect to the enumerated specific type of covered investment infrastructure listed in Column 1 is a TID U.S. business for purposes of critical infrastructure covered investments. The proposed rule also clarifies the meaning of certain of the functions listed in FIRRMA. Section 800.235—Own. The proposed rule defines ‘‘own’’ solely for the purpose of Column 2 of appendix A, which in turn determines which owners of covered investment critical infrastructure are TID U.S. businesses for purposes of covered investment jurisdiction. The term limits owners to only those of U.S. businesses that directly possess the systems or assets constituting the applicable covered investment critical infrastructure. Sections 800.232—Manufacture; 800.242—Service; and 800.246— Supply. The proposed rule also defines PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 50177 ‘‘manufacture,’’ ‘‘service,’’ and ‘‘supply.’’ It does not define ‘‘operate’’ given the commonly understood meaning of that term. Importantly, appendix A only applies to the subset of critical infrastructure subject to covered investment jurisdiction, and is not applicable in any other context. Appendix A implements FIRRMA’s direction to identify a subset of critical infrastructure for purposes of covered investments and therefore does not modify the definition of critical infrastructure as it applies to CFIUS’s jurisdiction more broadly over control transactions. As noted above, CFIUS will continue to have authority to review any transaction that could result in control by a foreign person of any U.S. business, regardless of whether the U.S. business involves critical infrastructure as broadly defined by FIRRMA or the narrower subset of covered investment critical infrastructure introduced in this proposed rule. 3. Covered Investments Involving Sensitive Personal Data FIRRMA expands CFIUS’s jurisdiction to include covered investments by a foreign person in an unaffiliated U.S. business that maintains or collects sensitive personal data of U.S. citizens that ‘‘may be exploited in a manner that threatens to harm national security.’’ Section 800.241—Sensitive personal data. To implement this provision, the proposed rule sets forth a detailed definition for ‘‘sensitive personal data.’’ The Committee anticipates periodically revising the regulations, potentially including revisions to this definition. Given that most companies collect some type of data on individuals, the proposed rule protects national security while attempting to minimize any chilling effect on beneficial foreign investment by focusing on the sensitivity of the data itself, as well as the sensitivity of the population about whom the data is maintained or collected. In particular, the proposed rule identifies specific categories of data that constitute sensitive personal data only if the U.S. business (a) targets or tailors its products or services to sensitive U.S. Government personnel or contractors, (b) maintains or collects such data on greater than one million individuals, or (c) has 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 proposed definition also includes all genetic information and generally carves E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 50178 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules out data pertaining to a U.S. business’s own employees. The proposed rule defines ‘‘targets or tailors’’ (see § 800.247) and provides examples of businesses that meet the definition. By focusing on U.S. businesses that target or tailor their products or services to these potentially sensitive populations, the Committee expects to review transactions involving U.S. businesses that are more likely to have sensitive personal data concerning such individuals. Even if a U.S. business does not target or tailor its products or services to such individuals, however, if the U.S. business maintains or collects data on a large number of individuals, it is more likely to capture data on sensitive populations. The proposed threshold of one million accounts for this possibility. Similarly, if a U.S. business is a data-driven company that plans to maintain or collect sensitive personal data on a large number of individuals in the future, as demonstrated by the U.S. business’s statements or actions, it may capture data on sensitive populations. Section 800.241(a)(1)(ii)(A)—This section describes certain financial data that could be used to determine if an individual is experiencing financial hardship. The types of data the proposed rule seeks to capture include bank account statements or detailed financial information included in an application for a home mortgage or credit card. Information regarding ordinary consumer transactions, such as a record of a credit card purchase at a retail establishment, would not generally fall into this category. Section 800.241(a)(1)(ii)(B)—This section describes information that is collected by consumer reporting agencies, such as an individual’s credit score, or summaries of debts and payment histories. Many companies periodically receive information about an individual’s credit from a consumer reporting agency, and § 800.241(a)(1)(ii)(B) generally excludes these companies from its scope if they receive a limited set of the information, such as a credit score, for the legitimate purposes described in the Fair Credit Reporting Act. Section 800.241(a)(1)(ii)(C)—This section describes data contained in certain types of personal insurance applications, many of which contain detailed personal information related to financial status and health. Section 800.241(a)(1)(ii)(D)—This section describes health-related data. Section 800.241(a)(1)(ii)(E)—This section describes non-public electronic communications, including email, which may include all manner of VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 sensitive information, but only if the U.S. business is providing communications platforms used by third parties. For example, email communications between a U.S. business and its own customers would not be covered. Rather, this section describes the situation where a U.S. business offers email, chat, or messaging services, a primary purpose of which is to allow third parties to communicate with each other. Section 800.241(a)(1)(ii)(F)—This section describes geolocation data that is often collected by mobile mapping applications, GPS services, or wireless communications providers. Section 800.241(a)(1)(ii)(G)—This section describes data that is generated by companies that provide biometric identification services. Section 800.241(a)(1)(ii)(H)–(J)— These sections describes certain data that is held by companies, typically government contractors, that issue official government identification cards or process personnel security clearances. Section 800.227—Identifiable data; § 800.239—Personal identifier. The proposed rule also includes a definition of ‘‘identifiable data.’’ In some cases, a U.S. business may maintain or collect the data described in § 800.241(a)(1)(ii)(A)–(J), but it is not possible to attribute such data to any specific individual. For example, a U.S. business may store health records on its servers, but those records are encrypted such that only a third party in possession of the encryption key can read the data. The U.S. business in these circumstances would not be maintaining or collecting sensitive personal data. The proposed rule makes clear, however, that identifiable data is not limited to data that includes an individual’s name or other obvious identifier, but rather includes any personal identifier, as defined in § 800.239. Finally, § 800.241(a)(2) describes genetic information, as defined pursuant to the regulations implementing HIPAA. Unlike the categories described in sections 800.241(a)(1)(ii)(A)–(J), the requirement that the U.S. business target or tailor to certain U.S. Government personnel or contractors, maintain or collect data on greater than one million individuals, or have a demonstrated business objective to maintain or collect such data on greater than one million individuals if such data is an integrated part of the U.S. business’s primary products or services as well as the requirement that the data be identifiable, does not apply to genetic information. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 As noted above, CFIUS will continue to have authority to review any transaction that could result in control by a foreign person of any U.S. business, regardless of whether the U.S. business maintains or collects sensitive personal data. 4. Country Specification for Covered Investments FIRRMA requires CFIUS to specify criteria to limit the application of FIRRMA’s expanded jurisdiction over other investments to certain categories of foreign persons. The proposed rule addresses FIRRMA’s requirement through three new defined terms, ‘‘excepted investor,’’ ‘‘excepted foreign state,’’ and ‘‘minimum excepted ownership,’’ which operate together to exclude from CFIUS’s jurisdiction covered investments by certain foreign persons who meet certain criteria establishing sufficiently close ties to certain foreign states. Sections 800.220, 800.219, and 800.234 define excepted investor, excepted foreign state, and minimum excepted ownership, respectively. Section 800.220—Excepted investor. The proposed rule sets forth a narrow definition of excepted investor in the interest of protecting national security, in light of increasingly complex ownership structures, and to prevent foreign persons from circumventing CFIUS’s jurisdiction. Thus, the criteria specified in § 800.220 require that a foreign person have a substantial connection (e.g., nationality of ultimate beneficial owners and place of incorporation) to one or more particular foreign states in order to be deemed an excepted investor. Note that foreign persons who have violated, or whose parents or subsidiaries have violated, certain U.S. laws, executive orders, regulations, orders, directives, or licenses, or who have submitted a material misstatement or omission in a CFIUS notice or declaration or violated a material provision of a mitigation agreement, among other things, will not be considered excepted investors. Additionally, note that a foreign person who is an excepted investor at the time of the transaction, but, who, for up to three years after the completion date, fails to meet to certain criteria, is deemed not to be an excepted investor and the transaction is thus subject to CFIUS jurisdiction as a covered investment. Any member of the Committee may file an agency notice of the transaction for up to one year (and the Chairperson of the Committee for up to three years in extraordinary circumstances). E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 Section 800.219—Excepted foreign state. The rule proposes that the excepted foreign state definition operate as a two-factor conjunctive test. First, the foreign state must be included in a defined group of eligible foreign states, which will be separately published on the Department of the Treasury website. As this is a new concept with potentially significant implications for the national security of the United States, CFIUS initially intends to designate a limited number of eligible foreign states. CFIUS plans to review this group in the future and potentially expand the number of eligible foreign states. Second, in furtherance of CFIUS’s efforts to encourage partner countries to implement robust processes to review foreign investment in their countries and to increase cooperation with the United States, the Secretary of the Treasury, with the agreement of a supermajority of Committee member agencies, will also make a determination, as described in subpart J, for each eligible foreign state as to whether such foreign state has established and is effectively utilizing a robust process to assess foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security. In making these determinations, CFIUS will consider factors that will be made available on the Department of the Treasury website. The Committee is considering delaying the effectiveness of this requirement in order to provide the eligible foreign states time to enhance their foreign investment review processes and bilateral cooperation. Any such determinations identifying a foreign state as an excepted foreign state will be published in the Federal Register and incorporated into the Committee’s list of excepted foreign states, which will be made available on the Department of the Treasury website. D. Subpart C—Coverage Subpart C of the proposed rule includes provisions that describe with particularity transactions that are, or are not, covered control transactions (§ 800.301–302). Similar provisions address covered investments (§ 800.303–304). The proposed rule contains numerous examples in this subpart to clarify the coverage of certain transactions. Section 800.305—Incremental acquisitions. Under the existing § 800.204(e), ‘‘[a]ny transaction in which a foreign person acquires an additional interest in a U.S. business that was previously the subject of a VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 covered transaction for which the Committee concluded all action under section 721 shall not be deemed to be a transaction that could result in foreign control over that U.S. business (i.e., it is not a covered transaction).’’ This provision was introduced when the scope of CFIUS’s jurisdiction included only transactions that could result in foreign control of a U.S. business and when the only means to file was by filing a written notice. This proposed rule moves the provision to Subpart C and clarifies that a transaction shall not be deemed to be a covered transaction if a foreign person acquires an additional interest in a U.S. business over which the same foreign person or any of its direct or indirect whollyowned subsidiaries previously acquired direct control in the U.S. business in a covered control transaction for which the Committee concluded all action under Section 721 on the basis of a notice. It further clarifies that this provision does not apply to incremental acquisitions in a U.S. business by a foreign person that had not previously acquired control of the U.S. business nor to a transaction for which the Committee had concluded all action under section 721 on the basis of a declaration. In other words, the incremental acquisition rule does not apply where the initial transaction was submitted only as declaration or was a covered investment. Section 800.307—Specific clarifications for investment funds. The proposed rule implements provisions in FIRRMA relating to investment funds. Specifically, it clarifies that, in the context of an indirect investment by a foreign person in an unaffiliated TID U.S. business through an investment fund that affords the foreign person (or a designee of the foreign person) membership as a limited partner or equivalent on an advisory board or committee of the fund, where all of the criteria in § 800.307 are satisfied, a limited partner’s membership on the investment fund’s advisory board or committee does not in and of itself render the foreign person’s indirect investment in an unaffiliated TID U.S. business a covered investment. E. Subpart D—Declarations FIRRMA introduces an abbreviated filing process through the submission of a declaration, which allows parties to submit basic information regarding a transaction to the Committee. A declaration may be submitted for any covered transaction and, in certain cases, is mandated. Parties may choose to file a notice in lieu of declaration to PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 50179 satisfy a mandatory declaration requirement. Declarations differ from notices in three key ways. First, declarations are shorter in length, generally not exceeding five pages. As part of the Pilot Program Interim Rule, CFIUS developed a standard fillable declaration form for parties to use when submitting a transaction for review. To facilitate the submission of declarations under the proposed rule, CFIUS intends to maintain a standard fillable form, making certain modifications to the form for use with respect to different types of transactions. Parties will be able to use the form to submit voluntary and mandatory declarations to the Committee. Second, the timeline for the Committee to take action on declarations is shorter than for notices. FIRRMA provides CFIUS up to 30 days to respond to a declaration. This differs from the timeline for notices, which is 45 days for a review and an additional 45 days for an investigation, with a possibility of a 15-day extension in ‘‘extraordinary circumstances.’’ Third, FIRRMA provides CFIUS with several potential responses to a declaration, and CFIUS need not make a final determination with respect to action under section 721 on the basis of a declaration. 1. Mandatory Declarations Section 800.401—Mandatory declarations. The proposed rule implements FIRRMA’s requirement for mandatory declarations for certain transactions in which a foreign person obtains a ‘‘substantial interest’’ in a U.S. business where a foreign government in turn holds a ‘‘substantial interest’’ in the foreign person. The proposed rule defines the term substantial interest with respect to a person’s ability to influence the actions of another person in a manner that has the potential, directly or indirectly, to impair the national security of the United States. In most cases, the foreign person best placed to influence a U.S. business— and therefore exploit any vulnerability in a U.S. business—is the foreign person with the closest relationship to the U.S. business. With respect to an investment involving multiple tiers of investing entities, this foreign person is very frequently the one that sits closest to the U.S. business on the post-closing organizational chart. This entity, when compared to other entities higher in the organizational chart, often has a greater ability to interact directly with—and therefore influence—the U.S. business, both from a corporate governance perspective as well as an operational E:\FR\FM\24SEP3.SGM 24SEP3 50180 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules a transaction that is the subject of a declaration until such time as the Committee’s assessment of the declaration has been completed (see § 800.501(j)). Section 800.404—Contents of declarations. The proposed rule sets forth the information that is required in a declaration, consistent with FIRRMA’s requirement that CFIUS establish declarations as ‘‘abbreviated notices that would not generally exceed five pages in length.’’ As part of a declaration, parties may voluntarily stipulate that the transaction is a covered transaction and, if so, whether the transaction is a foreign-government controlled transaction. Section 800.405—Beginning of 30-day assessment period. The proposed rule requires that the Committee take action on a declaration within 30 days of the Committee’s receipt of the declaration from the Staff Chairperson. One distinction from the provisions regarding declarations in the Pilot Program Interim Rule is that the proposed rule explicitly provides that the Staff Chairperson may invite parties to a declaration to attend a meeting with Committee Staff to discuss and clarify issues pertaining to the transaction that is the subject of the declaration. Section 800.406—Rejection, disposition, or withdrawal of declarations. The proposed rule provides that the Committee may reject a declaration if it is incomplete, there is a material change in the transaction that has been notified, information comes to light that contradicts material information provided by the parties in the declaration, or parties to a submitted declaration fail to provide information 2. Voluntary Declarations requested by the Committee within two business days of the request (unless Section 800.402—Voluntary such timeframe is extended by the Staff declarations. The proposed rule Chairperson). The proposed rule also implements FIRRMA’s provision establishes procedures for parties to enabling parties to choose to file a withdraw a declaration, and makes clear declaration with CFIUS instead of a that parties may not submit more than written notice. one declaration for the same or 3. Procedures and Contents for substantially similar transaction without Declarations approval from the Staff Chairperson. Section 800.407—Committee actions. Section 800.403—Procedures for declarations. The proposed rule outlines The proposed rule implements FIRRMA’s mandate that the Committee the process under which parties submit take one of four actions in response to a declaration. The contents and a declaration: (1) Request that the procedures for submitting mandatory and voluntary declarations are identical. parties file a notice; (2) inform the parties that CFIUS cannot complete In order to submit a declaration, the action under section 721 on the basis of parties need to provide the information the declaration, and that they may file required by § 800.404, including a notice to seek written notification certifications. The rule does not permit parties to submit a declaration regarding from the Committee that the Committee has concluded all action under section a transaction that is also the subject of 721 with respect to the transaction; (3) a notice without written approval from initiate a unilateral review of the the Staff Chairperson. Conversely, transaction through an agency notice; or parties may not file a notice regarding khammond on DSKJM1Z7X2PROD with PROPOSALS3 perspective. The proposed rule therefore establishes in § 800.244(a) the voting interest threshold for substantial interest between a foreign person and U.S. business at a 25 percent voting interest, direct or indirect, and between a foreign government and a foreign person at a 49 percent or greater voting interest, direct or indirect. For purposes of determining the percentage of voting interest held indirectly by one entity in another, the rule establishes that any voting interest of a parent entity in a subsidiary entity will be deemed to be a 100 percent voting interest. The proposed rule also clarifies in § 800.244(b) how the voting interest in a limited partnership is to be calculated. The proposed rule does not provide for a waiver of this requirement. As discussed above, CFIUS is considering whether to continue the mandatory declaration requirement under the Pilot Program Interim Rule, which requires declarations for covered control transactions and covered investments in certain U.S. businesses with critical technologies involved in one or more of 27 specified industries. Section 800.401(e)(2). FIRRMA also provides that, for mandatory declarations, the Committee can require that a declaration be submitted up to 45 days prior to the completion of the transaction. Under the proposed rule, mandatory declarations would need to be submitted to CFIUS at least 30 days in advance of the completion date. Section 800.401(d). Where there is a mandatory declaration requirement, parties may choose to submit a written notice at least 30 days prior to the completion date of the transaction instead of a declaration. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 (4) notify the parties that CFIUS has concluded all action under section 721. F. Subpart E—Notices The proposed rule does not make significant changes to the procedures and requirements for notices. Section 800.502(o)—Contents of voluntary notices. FIRRMA allows parties to ‘‘stipulate’’ that the transaction is a covered transaction and, as relevant, a foreign governmentcontrolled transaction. FIRRMA directs the Committee to provide comments or accept the notice within 10 business days from the submission date of the draft or formal written notice in cases where the transaction parties have stipulated that the transaction is a covered transaction. In addition, stipulating control reduces certain information requirements, and will allow the Committee to more quickly turn to reviewing the substance of the transaction. (See § 800.502(j)(2).) In making a stipulation, parties acknowledge that the Committee and the President are entitled to rely on such stipulation in determining whether the transaction is a covered transaction and/ or a foreign government-controlled transaction, and parties making a stipulation waive the right to challenge any such determination. Neither the Committee nor the President is bound by any such stipulation, nor does any such stipulation limit the ability of the Committee or the President to act on any authority provided under section 721, with respect to any covered transaction. Section 800.502(c)(1)(xi) and (c)(3)(ix)–(xi)—Contents of voluntary notices. The rule proposes additions to the information requirements to require submission of information necessary to analyze covered investments. A few additional changes to the information requirements have been introduced for clarity and to include information that CFIUS determined was necessary based on experience. Section 800.503—Beginning of 45-day review period. FIRRMA changes the timeframe for CFIUS’s review of a transaction filed as a notice, extending it from 30 days to 45 days. This change was one of the immediately effective provisions of FIRRMA that was implemented through the interim rule published at 83 FR 51316. The proposed rule, consistent with the interim rule, incorporates that timing change. G. Subpart G—Finality of Action FIRRMA maintains that a covered transaction that has been notified to CFIUS as a notice and on which CFIUS has concluded action under section 721 E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules after determining that there are no unresolved national security concerns, qualifies for a ‘‘safe harbor,’’ and extends the same treatment to transactions submitted as a declaration. This means that, unless a party to a transaction submitted false or misleading material information or omitted material information, and subject to compliance with the terms of any mitigation agreement entered into with or conditions imposed by CFIUS, the transaction can proceed without the possibility of subsequent suspension or prohibition under section 721. A covered transaction on which CFIUS has not concluded action does not qualify for the safe harbor, and CFIUS has the authority to initiate review of the transaction on its own, even after the transaction has been completed, which CFIUS may choose to do if it believes the transaction presents national security considerations. khammond on DSKJM1Z7X2PROD with PROPOSALS3 H. Subpart I—Penalties and Damages The Department of the Treasury amended the penalty provisions of its regulations in the interim rule published at 83 FR 51316, which updated CFIUS’s penalties provision consistent with revisions made to section 721 by FIRRMA. The proposed rule adopts the revisions from the interim rule and makes certain other updates to subpart I. Section 800.901—Penalties and damages. The proposed rule, consistent with the interim rule, removes the qualifier ‘‘intentionally or through gross negligence’’ with respect to a material misstatement or omission in the context of the imposition of civil penalties. These revisions did not, and do not, apply to material misstatements, omissions, or certifications made prior to the interim rule’s effective date (October 11, 2018), or to violations occurring after the implementation of the interim rule of a material provision of a mitigation agreements or material conditions of an order entered into or imposed prior to the implementation of the interim rule. Section 800.902—Effect of lack of compliance. The proposed rule, consistent with the interim rule, includes a provision authorizing the Committee to negotiate a remediation plan for lack of compliance with a mitigation agreement or condition entered into or imposed under section 721(l), require filings for future covered transactions for five years, or seek injunctive relief, in addition to other available remedies. The proposed rule includes certain other modifications to subpart I, VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 including with respect to how penalties are calculated, imposed, and enforced. III. Public Comments The Department of the Treasury received one comment to the interim rule. The commenter sought additional information about what circumstances the Committee believes would warrant a 15-day extension of an investigation in order ‘‘to protect the national security of the United States.’’ Response: The interim rule provides that where a Committee member requests to extend an investigation, that request must include a description, ‘‘with particularity, [of] the extraordinary circumstances that warrant the Chairperson extending the investigation.’’ 31 CFR 800.506. Accordingly, whether ‘‘extraordinary circumstances’’ exist depends on the specific facts of a particular investigation, and are difficult to generalize. While we understand the commenter’s interest in additional information from the Committee, at this time we are not considering altering or expanding on the extraordinary circumstances provisions relating to a 15-day extension of an investigation in part 800. IV. Rulemaking Requirements Executive Order 12866 These regulations are not subject to the general requirements of Executive Order 12866, which covers review of regulations by the Office of Information and Regulatory Affairs in the Office of Management and Budget, because they relate to a foreign affairs function of the United States, pursuant to section 3(d)(2) of that order. Paperwork Reduction Act The collections of information contained in this notice of proposed rulemaking have been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) (PRA). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, or via email to OIRA_ Submission@omb.eop.gov, with copies to Thomas Feddo, Deputy Assistant Secretary for Investment Security, U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220. Comments on the collection of information should be received by November 25, 2019. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 50181 In accordance with 5 CFR 1320.8(d)(1), the Department of the Treasury is soliciting comments from members of the public concerning this collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency’s estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology. The burden of the information collections in this proposed rule is estimated as follows: For Notices Estimated total annual reporting and/ or recordkeeping burden: 26,000 hours. Estimated average annual burden per respondent: 130 hours. Estimated number of respondents: 200 per year. Estimated annual frequency of responses: Not applicable. For Declarations Estimated total annual reporting and/ or recordkeeping burden: 11,000 hours. Estimated average annual burden per respondent: 20 hours. Estimated number of respondents: 550 per year. Estimated annual frequency of responses: Not applicable. Under the PRA, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. Initial Regulatory Flexibility Analysis The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) generally requires an agency to prepare a regulatory flexibility analysis unless the agency certifies that the rule will not, once implemented, have a significant economic impact on a substantial number of small entities. The RFA applies whenever an agency is required to publish a general notice of proposed rulemaking under section 553(b) of the Administrative Procedure Act (5 U.S.C. 553) (APA), or any other law. As set forth below, because regulations issued pursuant to the DPA, such as these E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 50182 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules regulations, are not subject to the APA, or another law requiring the publication of a general notice of proposed rulemaking, the RFA does not apply. The proposed rule implements section 721 of the DPA. Section 709(a) of the DPA provides that the regulations issued under it are not subject to the rulemaking requirements of the APA. Section 709(b)(1) instead provides that any regulation issued under the DPA be published in the Federal Register and opportunity for public comment be provided for not less than 30 days. Section 709(b)(3) of the DPA also provides that all comments received during the public comment period be considered and the publication of the final regulation contain written responses to such comments. Consistent with the plain text of the DPA, legislative history confirms that Congress intended that regulations under the DPA be exempt from the notice and comment provisions of the APA and instead provided that the agency include a statement that interested parties were consulted in the formulation of the final regulation. See H.R. Conf. Rep. No. 102–1028, at 42 (1992) and H.R. Rep. No. 102–208 pt. 1, at 28 (1991). The limited public participation procedures described in the DPA do not require a general notice of proposed rulemaking as set forth in the RFA. Further, the mechanisms for publication and public participation are sufficiently different to distinguish the DPA procedures from a rule that requires a general notice of proposed rulemaking. In providing the President with expanded authority to suspend or prohibit the acquisition, merger, or takeover of, or certain other investments in, a U.S. business by a foreign person if such a transaction would threaten to impair the national security of the United States, Congress could not have contemplated that regulations implementing such authority would be subject to RFA analysis. For these reasons, the RFA does not apply to these regulations. Notwithstanding the inapplicability of the RFA, the Department of the Treasury has undertaken an analysis of the proposed rule’s potential impact on small businesses in the United States. While the Department of the Treasury believes that the proposed rule likely would not have a ‘‘significant economic impact on a substantial number of small entities’’ (5 U.S.C. 605(b)), the Department of the Treasury does not have complete data at this time to make this determination, and therefore invites the public to comment on its analysis. As discussed above, the proposed rule expands the jurisdiction of the VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 Committee to include additional types of transactions not previously subject to CFIUS review. Additionally, the Committee will retain its existing jurisdiction over any transaction through which any foreign person could acquire control of any U.S. business. Accordingly, the proposed rule may impact any U.S. business, including a small U.S. business that engages in a covered transaction. There is no single source for information on the number of small U.S. businesses that receive foreign investment (direct or indirect), including those involved with critical technologies, critical infrastructure, or sensitive personal data, such that they would be directly impacted by this rule. However, the Bureau of Economic Analysis (BEA) within the Department of Commerce collects, on an annual basis, data on new foreign direct investment in the United States through its Survey of New Foreign Direct Investment in the United States (Form BE-13). While these data are selfreported, and include only direct investments in U.S. businesses in which the foreign person acquires at least 10 percent of the voting shares (and consequently, do not capture investments below 10 percent, which may nevertheless be covered transactions), they nonetheless provide relevant information on a category of U.S. businesses that receive foreign investment, some of which may be covered by the proposed rule. According to the BEA, in 2018, the most current year for which data is available, foreign persons obtained at least a 10 percent voting share in 832 U.S. businesses. U.S. Bureau of Economic Analysis, ‘‘Number of Investments Initiated in 2018, Distribution of Planned Total Expenditures, Size by Type of Investment,’’ https://apps.bea.gov/ international/xls/Table15-14-15-16-1718.xls (last visited September 11, 2019). The BEA only reports the general size of the investment transaction, not the type of the U.S. business involved, nor whether the U.S. business is considered a ‘‘small business’’ by the Small Business Administration (SBA), which defines small businesses based on annual revenue or number of employees. The smallest foreign investment transactions that the BEA reports are those with a dollar value below $50 million. While not all U.S. businesses receiving a foreign investment of less than $50 million are considered ‘‘small’’ for the purposes of the RFA, many might be, and the number of U.S. businesses receiving foreign investments of less than $50 PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 million can serve as a proxy for the number of transactions involving small U.S. businesses that might be subject to CFIUS’s jurisdiction. Of the above mentioned 832 U.S. businesses receiving foreign investment in 2018, 576 were involved in transactions valued at less than $50 million. Although this figure is under inclusive because it does not capture all transactions that could potentially fall under the proposed rule, it also is over inclusive because it is not limited to any particular type of U.S. business. We believe the figure of 576 is the best estimate based on the available data of the number of small U.S. businesses that may be impacted by this rule. According to the SBA, there are 30.2 million small businesses (defined as ‘‘firms employing fewer than 500 employees’’) in the United States. https://www.sba.gov/sites/default/files/ advocacy/2018-Small-Business-ProfilesUS.pdf. If approximately 600 small U.S. businesses will be potentially impacted by this rule, then the rule may potentially impact less than one percent of all small U.S. businesses. Accordingly, the Department of the Treasury does not believe the rule will impact a ‘‘substantial number of small entities.’’ Nonetheless, the proposed rule includes provisions that would reduce the costs to all businesses, including small businesses. For example, the availability of a shorter declaration for covered transactions may result in smaller cost to entities than having to prepare a lengthier notice. Additionally, having a fillable form for declarations may reduce some of the cost for parties. The Department of the Treasury seeks information and comment on the types and number of small entities potentially impacted by this proposed rule. If necessary, the Department of the Treasury will undertake a final regulatory flexibility analysis in the final rule. List of Subjects in 31 CFR Part 800 Foreign investments in the United States, Investigations, Investments, Investment companies, National defense, Reporting and Recordkeeping requirements. For the reasons set forth in the preamble, the Department of the Treasury proposes to revise part 800 of title 31 of the Code of Federal Regulations, to read as follows: E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules 800.302 Transactions that are not covered control transactions. 800.303 Transactions that are covered investments. 800.304 Transactions that are not covered investments. 800.305 Incremental acquisitions. 800.306 Lending transactions. 800.307 Specific clarifications for investment funds. 800.308 Timing rule for a contingent equity interest. PART 800—REGULATIONS PERTAINING TO CERTAIN INVESTMENTS IN THE UNITED STATES BY FOREIGN PERSONS Subpart A—General Sec. 800.101 800.102 800.103 800.104 Scope. Risk-based analysis. Effect on other law. Applicability rule. khammond on DSKJM1Z7X2PROD with PROPOSALS3 Subpart B—Definitions 800.201 Aggregated data. 800.202 Anonymized data. 800.203 Business day. 800.204 Certification. 800.205 Committee; Chairperson of the Committee; Staff Chairperson. 800.206 Completion date. 800.207 Contingent equity interest. 800.208 Control. 800.209 Conversion. 800.210 Covered control transaction. 800.211 Covered investment. 800.212 Covered investment critical infrastructure. 800.213 Covered transaction. 800.214 Critical infrastructure. 800.215 Critical technologies. 800.216 Effective date. 800.217 Encrypted data. 800.218 Entity. 800.219 Excepted foreign state. 800.220 Excepted investor. 800.221 Foreign entity. 800.222 Foreign government. 800.223 Foreign government-controlled transaction. 800.224 Foreign national. 800.225 Foreign person. 800.226 Hold. 800.227 Identifiable data. 800.228 Investment. 800.229 Investment fund. 800.230 Involvement. 800.231 Lead agency. 800.232 Manufacture. 800.233 Material nonpublic technical information. 800.234 Minimum excepted ownership. 800.235 Own. 800.236 Parent. 800.237 Party to a transaction. 800.238 Person. 800.239 Personal identifier. 800.240 Section 721. 800.241 Sensitive personal data. 800.242 Service. 800.243 Solely for the purpose of passive investment. 800.244 Substantial interest. 800.245 Substantive decisionmaking. 800.246 Supply. 800.247 Targets or tailors. 800.248 TID U.S. business. 800.249 Transaction. 800.250 Unaffiliated TID U.S. business. 800.251 United States. 800.252 U.S. business. 800.253 U.S. national. 800.254 Voting interest. Subpart C—Coverage 800.301 Transactions that are covered control transactions. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 Subpart D—Declarations 800.401 Mandatory declarations. 800.402 Voluntary declarations. 800.403 Procedures for declarations. 800.404 Contents of declarations. 800.405 Beginning of 30-day assessment period. 800.406 Rejection, disposition, or withdrawal of declarations. 800.407 Committee actions. Subpart E—Notices 800.501 Procedures for notices. 800.502 Contents of voluntary notices. 800.503 Beginning of a 45-day review period. 800.504 Deferral, rejection, or disposition of certain voluntary notices. 800.505 Determination of whether to undertake an investigation. 800.506 Determination not to undertake an investigation. 800.507 Commencement of investigation. 800.508 Completion or termination of investigation and report to the President. 800.509 Withdrawal of notices. Subpart F—Committee Procedures 800.601 General. 800.602 Role of the Secretary of Labor. 800.603 Materiality. 800.604 Tolling of deadlines during lapse in appropriations. Subpart G—Finality of Action 800.701 Finality of actions under section 721. Subpart H—Provision and Handling of Information 800.801 Obligation of parties to provide information. 800.802 Confidentiality. Subpart I—Penalties and Damages 800.901 Penalties and damages. 800.902 Effect of lack of compliance. Subpart J—Foreign National Security Investment Review Regimes 800.1001 Determinations. 800.1002 Effect of determinations. Appendix A to Part 800—Covered investment critical infrastructure and functions related to covered investment critical infrastructure Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677. Subpart A—General § 800.101 Scope. (a) Section 721 of title VII of the Defense Production Act of 1950 (50 PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 50183 U.S.C. 4565), as amended, authorizes the President to suspend or prohibit any covered transaction, when, in the President’s judgment, there is credible evidence that leads the President to believe that the foreign person engaging in a covered transaction might take action that threatens to impair the national security of the United States, and when provisions of law other than section 721 and the International Emergency Economic Powers Act (50 U.S.C. 1701–1706), do not, in the judgment of the President, provide adequate and appropriate authority for the President to protect the national security in the matter before the President. Section 721 also authorizes the Committee to review covered transactions and to mitigate any risk to the national security of the United States that arises as a result of such transactions. (b) This part implements regulations pertaining to covered transactions as defined in § 800.213 of this part. Regulations pertaining to covered real estate transactions are addressed in part 802 of this title. § 800.102 Risk-based analysis. Any determination of the Committee with respect to a covered transaction to suspend, refer to the President, or to negotiate, enter into or impose, or enforce any agreement or condition under section 721 shall be based on a risk-based analysis, conducted by the Committee, of the effects on the national security of the United States of the covered transaction. Any such riskbased analysis shall include credible evidence demonstrating the risk and an assessment of the threat, vulnerabilities, and consequences to national security related to the transaction. For purposes of this part, any such analysis of risk shall include and be informed by consideration of the following elements: (a) The threat, which is a function of the intent and capability of a foreign person to take action to impair the national security of the United States; (b) The vulnerabilities, which are the extent to which the nature of the U.S. business presents susceptibility to impairment of national security; and (c) The consequences to national security, which are the potential effects on national security that could reasonably result from the exploitation of the vulnerabilities by the threat actor. § 800.103 Effect on other law. Nothing in this part shall be construed as altering or affecting any other authority, process, regulation, investigation, enforcement measure, or review provided by or established under E:\FR\FM\24SEP3.SGM 24SEP3 50184 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules any other provision of federal law, including without limitation the International Emergency Economic Powers Act, or any other authority of the President or the Congress under the Constitution of the United States. § 800.104 Applicability rule. (a) Except as provided in paragraphs (b) and (c) of this section and otherwise in this part, the regulations in this part apply from [EFFECTIVE DATE OF FINAL RULE]. (b) For any transaction for which the following has occurred before [EFFECTIVE DATE OF FINAL RULE], the corresponding provisions of the regulations in this part that were in effect the day before [EFFECTIVE DATE OF FINAL RULE] will apply: (1) The completion date; (2) The parties to the transaction have executed a binding written agreement, or other binding document, establishing the material terms of the transaction; (3) A party has made a public offer to shareholders to buy shares of a U.S. business; or (4) A shareholder has solicited proxies in connection with an election of the board of directors of a U.S. business or an owner or holder of a contingent equity interest has requested the conversion of the contingent equity interest. (c) For any transaction that, between November 10, 2018 and [EFFECTIVE DATE], fell within the scope of part 801 of this title, the regulations in part 801 will continue to apply. Note 1 to § 800.104: See subpart I (Penalties and Damages) of this part for specific applicability rules pertaining to that subpart. Subpart B—Definitions § 800.201 Aggregated data. The term aggregated data means data that have been combined or collected together in summary or other form such that the data cannot be identified with any individual. § 800.202 Anonymized data. The term anonymized data means data from which all personal identifiers have been completely removed. khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.203 Business day. The term business day means Monday through Friday, except the legal public holidays specified in 5 U.S.C. 6103, any day declared to be a holiday by federal statute or executive order, or any day with respect to which the U.S. Office of Personnel Management has announced that Federal agencies in the Washington, DC, area are closed to the public. For VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 purposes of calculating any deadline imposed by this part triggered by the submission of a party to a transaction under § 800.401(e)(2) or § 800.501(i), any submissions received after 5 p.m. Eastern Time are deemed to be submitted on the next business day. Note 1 to § 800.203: See § 800.604 regarding the tolling of deadlines during a lapse in appropriations. § 800.204 Certification. Note 1 to § 800.204: A sample certification may be found at the Committee’s section of the Department of the Treasury website, currently available at https:// home.treasury.gov/policy-issues/ international/the-committee-on-foreigninvestment-in-the-united-states-cfius. Frm 00012 Fmt 4701 Sfmt 4702 The term Committee means the Committee on Foreign Investment in the United States. The Chairperson of the Committee is the Secretary of the Treasury. The Staff Chairperson of the Committee is the Department of the Treasury official so designated by the Secretary of the Treasury or by the Secretary’s designee. § 800.206 (a) The term certification means a written statement signed by the chief executive officer or other duly authorized designee of a party filing a notice, declaration, or information, certifying under the penalties provided in the False Statements Accountability Act of 1996, as amended (18 U.S.C. 1001) that the notice, declaration, or information filed: (1) Fully complies with the requirements of section 721, the regulations in this part, and any agreement or condition entered into with the Committee or any member of the Committee, and (2) Is accurate and complete in all material respects, as it relates to: (i) The transaction, and (ii) The party providing the certification, including its parents, subsidiaries, and any other related entities described in the notice, declaration, or information. (b) For purposes of this section, a duly authorized designee is: (1) In the case of a partnership, any general partner thereof; (2) In the case of a corporation, any officer or director thereof; (3) In the case of any entity lacking partners, officers, or directors, any individual within the organization exercising executive functions similar to those of a general partner of a partnership or an officer or director of a corporation; and (4) In the case of an individual, such individual or his or her legal representative. (c) In each case described in paragraphs (b)(1) through (4) of this section, such designee must possess actual authority to make the certification on behalf of the party filing a notice, declaration, or information. PO 00000 § 800.205 Committee; Chairperson of the Committee; Staff Chairperson. Completion date. The term completion date means, with respect to a transaction, the earliest date upon which any ownership interest, including a contingent equity interest, is conveyed, assigned, delivered, or otherwise transferred to a person, or a change in rights that could result in a covered control transaction or covered investment occurs. Note 1 to § 800.206: See § 800.308 regarding the timing rule for a contingent equity interest. § 800.207 Contingent equity interest. The term contingent equity interest means a financial instrument that currently does not constitute an equity interest but is convertible into, or provides the right to acquire, an equity interest upon the occurrence of a contingency or defined event. § 800.208 Control. (a) The term control means the power, direct or indirect, whether or not exercised, through the ownership of a majority or a dominant minority of the total outstanding voting interest in an entity, board representation, proxy voting, a special share, contractual arrangements, formal or informal arrangements to act in concert, or other means, to determine, direct, or decide important matters affecting an entity; in particular, but without limitation, to determine, direct, take, reach, or cause decisions regarding the following matters, or any other similarly important matters affecting an entity: (1) The sale, lease, mortgage, pledge, or other transfer of any of the tangible or intangible principal assets of the entity, whether or not in the ordinary course of business; (2) The reorganization, merger, or dissolution of the entity; (3) The closing, relocation, or substantial alteration of the production, operational, or research and development facilities of the entity; (4) Major expenditures or investments, issuances of equity or debt, or dividend payments by the entity, or approval of the operating budget of the entity; E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules (5) The selection of new business lines or ventures that the entity will pursue; (6) The entry into, termination, or non-fulfillment by the entity of significant contracts; (7) The policies or procedures of the entity governing the treatment of nonpublic technical, financial, or other proprietary information of the entity; (8) The appointment or dismissal of officers or senior managers or in the case of a partnership, the general partner; (9) The appointment or dismissal of employees with access to critical technology or other sensitive technology or classified U.S. Government information; or (10) The amendment of the Articles of Incorporation, constituent agreement, or other organizational documents of the entity with respect to the matters described in paragraphs (a)(1) through (9) of this section. (b) In examining questions of control in situations where more than one foreign person has an ownership interest in an entity, consideration will be given to factors such as whether the foreign persons are related or have formal or informal arrangements to act in concert, whether they are agencies or instrumentalities of the national or subnational governments of a single foreign state, and whether a given foreign person and another person that has an ownership interest in the entity are both controlled by any of the national or subnational governments of a single foreign state. (c) The following minority shareholder protections shall not in themselves be deemed to confer control over an entity: (1) The power to prevent the sale or pledge of all or substantially all of the assets of an entity or a voluntary filing for bankruptcy or liquidation; (2) The power to prevent an entity from entering into contracts with majority investors or their affiliates; (3) The power to prevent an entity from guaranteeing the obligations of majority investors or their affiliates; (4) The power to purchase an additional interest in an entity to prevent the dilution of an investor’s pro rata interest in that entity in the event that the entity issues additional instruments conveying interests in the entity; (5) The power to prevent the change of existing legal rights or preferences of the particular class of stock held by minority investors, as provided in the relevant corporate documents governing such shares; and VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 (6) The power to prevent the amendment of the Articles of Incorporation, constituent agreement, or other organizational documents of an entity with respect to the matters described in paragraphs (c)(1) through (5) of this section. (d) The Committee will consider, on a case-by-case basis, whether minority shareholder protections other than those listed in paragraph (c) of this section do not confer control over an entity. (e) Examples: (1) Example 1. Corporation A is a U.S. business. A U.S. investor owns 50 percent of the voting interest in Corporation A, and the remaining voting interest is owned in equal shares by five unrelated foreign investors. The foreign investors jointly financed their investment in Corporation A and vote as a single block on matters affecting Corporation A. The foreign investors have an informal arrangement to act in concert with regard to Corporation A, and, as a result, the foreign investors control Corporation A. (2) Example 2. Same facts as in Example 1 of this section with regard to the composition of Corporation A’s shareholders. The foreign investors in Corporation A have no contractual or other commitments to act in concert, and have no informal arrangements to do so. Assuming no other relevant facts, the foreign investors do not control Corporation A. (3) Example 3. Corporation A, a foreign person, is a private equity fund that routinely acquires equity interests in companies and manages them for a period of time. Corporation B is a U.S. business. In addition to its acquisition of seven percent of Corporation B’s voting shares, Corporation A acquires the right to terminate significant contracts of Corporation B. Corporation A controls Corporation B. (4) Example 4. Corporation A, a foreign person, acquires a nine percent interest in the shares of Corporation B, a U.S. business. As part of the transaction, Corporation A also acquires certain veto rights that determine important matters affecting Corporation B, including the right to veto the dismissal of senior executives of Corporation B. Corporation A controls Corporation B. (5) Example 5. Corporation A, a foreign person, acquires a thirteen percent interest in the shares of Corporation B, a U.S. business, and the right to appoint one member of Corporation B’s seven-member Board of Directors. Corporation A receives minority shareholder protections listed in § 800.208(c) but receives no other positive or negative rights with respect to Corporation B. Assuming no other relevant facts, Corporation A does not control Corporation B. (6) Example 6. Corporation A, a foreign person, acquires a twenty percent interest in the shares of Corporation B, a U.S. business. Corporation A has negotiated an irrevocable passivity agreement that completely precludes it from controlling Corporation B. Corporation A does, however, receive the right to prevent Corporation B from entering into contracts with majority investors or their PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 50185 affiliates and to prevent Corporation B from guaranteeing the obligations of majority investors or their affiliates. Assuming no other relevant facts, Corporation A does not control Corporation B. (7) Example 7. Limited Partnership A comprises two limited partners, each of which holds 49 percent of the interest in the partnership, and a general partner, which holds two percent of the interest. The general partner has sole authority to determine, direct, and decide all important matters affecting the partnership and a fund operated by the partnership. The general partner alone controls Limited Partnership A and the fund. (8) Example 8. Same facts as in Example 7 of this section, except that each of the limited partners has the authority to veto major investments proposed by the general partner and to choose the fund’s representatives on the boards of the fund’s portfolio companies. The general partner and the limited partners each have control over Limited Partnership A and the fund. Note 1 to § 800.208: See § 800.302(b) regarding the Committee’s treatment of transactions in which a foreign person holds or acquires ten percent or less of the outstanding voting interest in a U.S. business solely for the purpose of passive investment. See § 800.303 regarding the Committee’s treatment of transactions that do not result in control over a U.S. business by a foreign person, but may be covered investments. See § 800.305 regarding the Committee’s treatment of a subsequent transaction involving a foreign person that previously acquired control of the U.S. business. § 800.209 Conversion. The term conversion means the exercise of a right inherent in the ownership or holding of a particular financial instrument to exchange any such instrument for an equity interest. § 800.210 Covered control transaction. The term covered control transaction means any transaction that is proposed or pending after August 23, 1988, by or with any foreign person that could result in foreign control of any U.S. business, including without limitation such a transaction carried out through a joint venture. § 800.211 Covered investment. The term covered investment means an investment, direct or indirect, by a foreign person other than an excepted investor in an unaffiliated TID U.S. business that is proposed or pending after [EFFECTIVE DATE OF FINAL RULE], and that: (a) Is not a covered control transaction; and (b) Affords the foreign person: (1) Access to any material nonpublic technical information in the possession of the TID U.S. business; (2) Membership or observer rights on the board of directors or equivalent E:\FR\FM\24SEP3.SGM 24SEP3 50186 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules governing body of the TID U.S. business or the right to nominate an individual to a position on the board of directors or equivalent governing body of the TID U.S. business; or (3) Any involvement, other than through voting of shares, in substantive decisionmaking of the TID U.S. business regarding: (i) The use, development, acquisition, safekeeping, or release of sensitive personal data of U.S. citizens maintained or collected by the TID U.S. business; (ii) The use, development, acquisition, or release of critical technologies; or (iii) The management, operation, manufacture, or supply of covered investment critical infrastructure. (c) Notwithstanding paragraphs (a) and (b) of this section, no investment involving an air carrier, as defined in 49 U.S.C. 40102(a)(2), that holds a certificate issued under 49 U.S.C. 41102 shall be a covered investment. § 800.212 Covered investment critical infrastructure. The term covered investment critical infrastructure means, in the context of a particular covered investment, the systems and assets, whether physical or virtual, set forth in Column 1 of appendix A to part 800. § 800.213 Covered transaction. The term covered transaction means any of the following: (a) A covered control transaction; (b) A covered investment; (c) A change in the rights that a foreign person has with respect to a U.S. business in which the foreign person has an investment, if that change could result in a covered control transaction or a covered investment; or (d) Any other transaction, transfer, agreement, or arrangement, the structure of which is designed or intended to evade or circumvent the application of section 721. khammond on DSKJM1Z7X2PROD with PROPOSALS3 Note 1 to § 800.213: Any transaction described in (a) through (d) of this section that arises pursuant to a bankruptcy proceeding or other form of default on debt is a covered transaction. See also § 800.306 for the treatment of certain lending transactions. § 800.214 Critical infrastructure. The term critical infrastructure means, in the context of a particular covered control transaction, systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems or assets would have a debilitating impact on national security. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 § 800.215 Critical technologies. The term critical technologies means the following: (a) Defense articles or defense services included on the United States Munitions List (USML) set forth in the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120– 130); (b) Items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations (EAR) (15 CFR parts 730–774), and controlled— (1) Pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; or (2) For reasons relating to regional stability or surreptitious listening; (c) Specially designed and prepared nuclear equipment, parts and components, materials, software, and technology covered by 10 CFR part 810 (relating to assistance to foreign atomic energy activities); (d) Nuclear facilities, equipment, and material covered by 10 CFR part 110 (relating to export and import of nuclear equipment and material); (e) Select agents and toxins covered by 7 CFR part 331, 9 CFR part 121, or 42 CFR part 73; and (f) Emerging and foundational technologies controlled pursuant to section 1758 of the Export Control Reform Act of 2018 (50 U.S.C. 4817). § 800.216 Effective date. The term effective date means [EFFECTIVE DATE OF FINAL RULE]. § 800.217 Encrypted data. The term encrypted data means data to which National Institute of Standards and Technology (NIST)-allowed cryptographic techniques, as identified in the most current NIST special publication 800–175B, or superseding publication, have been applied. § 800.218 Entity. The term entity means any branch, partnership, group or sub-group, association, estate, trust, corporation or division of a corporation, or organization (whether or not organized under the laws of any State or foreign state); assets (whether or not organized as a separate legal entity) operated by any one of the foregoing as a business undertaking in a particular location or for particular products or services; and any government (including a foreign national or subnational government, the U.S. Government, a subnational government within the United States, PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 and any of their respective departments, agencies, or instrumentalities). (See examples in § 800.301(g)(5) through (14) and § 800.302(g)(5) through (10).) § 800.219 Excepted foreign state. The term excepted foreign state means each foreign state from time to time identified by the Chairperson of the Committee, with the agreement of two-thirds of the voting members of the Committee, and, beginning on [TWO YEARS AFTER EFFECTIVE DATE OF FINAL RULE] with respect to which the Chairperson of the Committee has made a determination pursuant to § 800.1001(a). Note 1 to § 800.219: The name of each foreign state identified by the Chairperson of the Committee as an excepted foreign state will be published in a notice in the Federal Register and incorporated into the Committee’s list of excepted foreign states. § 800.220 Excepted investor. (a) The term excepted investor means a foreign person who is, as of the completion date and subject to paragraphs (c) and (d) of this section: (1) A foreign national who is a national of one or more excepted foreign states and is not also a national of any foreign state that is not an excepted foreign state; (2) A foreign government of an excepted foreign state; or (3) A foreign entity that meets each of the following conditions with respect to itself and each of its parents (if any): (i) Such entity is organized under the laws of an excepted foreign state or in the United States; (ii) Such entity has its principal place of business in an excepted foreign state or the United States; (iii) Each member or observer of the board of directors or similar body of such entity is a U.S. national or, if a foreign national, is a national of one or more excepted foreign states and is not also a national of any foreign state that is not an excepted foreign state; (iv) Any foreign person that individually holds, or each foreign person that is part of a group of foreign persons that, in the aggregate, holds, five percent or more of the outstanding voting interest of such entity; holds the right to five percent or more of the profits of such entity; holds the right in the event of dissolution to five percent or more of the assets of such entity; or could exercise control over such entity, is: (A) A foreign national who is a national of one or more excepted foreign states and is not also a national of any foreign state that is not an excepted foreign state; E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules (B) A foreign government of an excepted foreign state; or (C) A foreign entity that is organized under the laws of an excepted foreign state and has its principal place of business in an excepted foreign state or in the United States; and (v) The minimum excepted ownership of such entity is held, individually or in the aggregate, by one or more persons each of whom is: (A) Not a foreign person; (B) A foreign national who is a national of one or more excepted foreign states and is not also a national of any foreign state that is not an excepted foreign state; (C) A foreign government of an excepted foreign state; or (D) A foreign entity that is organized under the laws of an excepted foreign state and has its principal place of business in an excepted foreign state or in the United States. (b) When more than one person holds an ownership interest in an entity, in determining whether the ownership interests of such persons should be aggregated for purposes of paragraph (a)(3)(iv) of this section, consideration will be given to factors such as whether the persons holding the ownership interests are related or have formal or informal arrangements to act in concert, whether they are agencies or instrumentalities of the national or subnational governments of a single foreign state, and whether a given foreign person and another foreign person that has an ownership interest in the entity are both controlled by any of the national or subnational governments of a single foreign state. (c) Notwithstanding paragraph (a) of this section, a foreign person is not an excepted investor with respect to a transaction if: (1) In the five years prior to the completion date of the transaction the foreign person or any of its parents or subsidiaries: (i) Has received written notice from the Committee that it has submitted a material misstatement or omission in a notice or declaration or made a false certification under this part or parts 801 or 802 of this title; (ii) Has received written notice from the Committee that it has violated a material provision of a mitigation agreement entered into with, material condition imposed by, or an order issued by, the Committee or a lead agency under section 721(l); (iii) Has been subject to action by the President under section 721(d); (iv) Has: (A) Received a written Finding of Violation or Penalty Notice imposing a VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 civil monetary penalty from the Department of the Treasury Office of Foreign Assets Control (OFAC); or (B) Entered into a settlement agreement with OFAC with respect to apparent violations of U.S. sanctions laws administered by OFAC, including without limitation the International Emergency Economic Powers Act, the Trading With the Enemy Act, the Foreign Narcotics Kingpin Designation Act, each as amended, or of any executive order, regulation, order, directive, or license issued pursuant thereto; (v) Has received a written notice of debarment from the Department of State Directorate of Defense Trade Controls, as described in 22 CFR parts 127 and 128; (vi) Has been a respondent or party in a final order, including a settlement order, issued by the Department of Commerce Bureau of Industry and Security (BIS) regarding violations of U.S. export control laws administered by BIS, including without limitation the Export Control Reform Act of 2018 (Title XVII, Subtitle B of Pub. L. 115– 232, 132 Stat. 2208, 50 U.S.C. 4801, et seq.), the EAR, or of any executive order, regulation, order, directive, or license issued pursuant thereto; (vii) Has received a final decision from the Department of Energy National Nuclear Security Administration imposing a civil penalty with respect to a violation of section 57 b. of the Atomic Energy Act of 1954, as implemented under 10 CFR part 810; or (viii) Has been convicted of a crime under, or has entered into a deferred prosecution agreement or nonprosecution agreement with the Department of Justice with respect to a violation of, any felony crime in any jurisdiction within the United States; or (2) The foreign person or any of its parents or subsidiaries is, on the date on which the parties to the transaction first execute a binding written agreement, or other binding document, establishing the material terms of the transaction, listed on either the BIS Unverified List or Entity List in 15 CFR part 744. (d) Irrespective of whether the foreign person satisfies the criteria in paragraphs (a)(1), (2), or (3)(i) through (iii) of this section as of the completion date, if at any time during the three-year period following the completion date, the foreign person no longer meets all the criteria set forth in paragraphs (a)(1), (2), or (3)(i) through (iii) of this section, the foreign person is not an excepted investor with respect to the transaction from the completion date onward. This paragraph does not apply when an excepted investor no longer meets any PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 50187 of the criteria solely due to a rescission of a determination under § 800.1001(b) or if a particular foreign state otherwise ceases to be an excepted foreign state. (e) A foreign person may waive its status as an excepted investor with respect to a transaction at any time by submitting a declaration pursuant to § 800.403 or filing a notice pursuant to § 800.501 regarding the transaction in which it explicitly waives such status. In such case, the foreign person will be deemed not to be an excepted investor and the provisions of Subpart D or E, as applicable, will apply. Note 1 to § 800.220: See § 800.501(c)(2) regarding an agency notice where a foreign person is not an excepted investor solely due to § 800.220(d). § 800.221 Foreign entity. (a) The term foreign entity means any branch, partnership, group or sub-group, association, estate, trust, corporation or division of a corporation, or organization organized under the laws of a foreign state if either its principal place of business is outside the United States or its equity securities are primarily traded on one or more foreign exchanges. (b) Notwithstanding paragraph (a) of this section, any branch, partnership, group or sub-group, association, estate, trust, corporation or division of a corporation, or organization that demonstrates that a majority of the equity interest in such entity is ultimately owned by U.S. nationals is not a foreign entity. § 800.222 Foreign government. The term foreign government means any government or body exercising governmental functions, other than the U.S. Government or a subnational government of the United States. The term includes, but is not limited to, national and subnational governments, including their respective departments, agencies, and instrumentalities. § 800.223 Foreign government-controlled transaction. The term foreign governmentcontrolled transaction means any covered control transaction that could result in control of a U.S. business by a foreign government or a person controlled by or acting on behalf of a foreign government. § 800.224 Foreign national. The term foreign national means any individual other than a U.S. national. § 800.225 Foreign person. (a) The term foreign person means: (1) Any foreign national, foreign government, or foreign entity; or E:\FR\FM\24SEP3.SGM 24SEP3 50188 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 (2) Any entity over which control is exercised or exercisable by a foreign national, foreign government, or foreign entity. (b) Examples: (1) Example 1. Corporation A is organized under the laws of a foreign state and is engaged in business only outside the United States. All of its shares are held by Corporation X, which solely controls Corporation A. Corporation X is organized in the United States and is wholly owned and controlled by U.S. nationals. Assuming no other relevant facts, Corporation A, although organized and only operating outside the United States, is not a foreign person. (2) Example 2. Same facts as in the first sentence of Example 1 of this section. The government of the foreign state under whose laws Corporation A is organized exercises control over Corporation A because a law establishing Corporation A gives the foreign state the right to appoint Corporation A’s board members. Corporation A is a foreign person. (3) Example 3. Corporation A is organized in the United States, is engaged in interstate commerce in the United States, and is controlled by Corporation X. Corporation X is organized under the laws of a foreign state, its principal place of business is located outside the United States, and 50 percent of its shares are held by foreign nationals and 50 percent of its shares are held by U.S. nationals. Both Corporation A and Corporation X are foreign persons. Corporation A is also a U.S. business. (4) Example 4. Corporation A is organized under the laws of a foreign state and is owned and controlled by a foreign national. A branch of Corporation A engages in interstate commerce in the United States. Corporation A (including its branch) is a foreign person. The branch is also a U.S. business. (5) Example 5. Corporation A is a corporation organized under the laws of a foreign state and its principal place of business is located outside the United States. Forty-five percent of the voting interest in Corporation A is owned in equal shares by numerous unrelated foreign investors, none of whom has control. The foreign investors have no formal or informal arrangement to act in concert with regard to Corporation A with any other holder of voting interest in Corporation A. Corporation A demonstrates that the remainder of the voting interest in Corporation A is held by U.S. nationals. Assuming no other relevant facts, Corporation A is not a foreign person. (6) Example 6. Same facts as Example 5 of this section, except that one of the foreign investors controls Corporation A. Assuming no other relevant facts, Corporation A is not a foreign entity pursuant to § 800.221(b), but it is a foreign person because it is controlled by a foreign person. § 800.226 Hold. The terms hold(s) and holding mean legal or beneficial ownership, whether direct or indirect, whether through fiduciaries, agents, or other means. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 § 800.227 Identifiable data. The term identifiable data means data that can be used to distinguish or trace an individual’s identity, including without limitation through the use of any personal identifier. For the avoidance of doubt, aggregated data or anonymized data is identifiable data if any party to the transaction has, or as a result of the transaction will have, the ability to disaggregate or de-anonymize the data, or if the data is otherwise capable of being used to distinguish or trace an individual’s identity. Identifiable data does not include encrypted data, unless the U.S. business that maintains or collects the encrypted data has the means to de-encrypt the data so as to distinguish or trace an individual’s identity. § 800.228 Investment. The term investment means the acquisition of equity interest, including contingent equity interest. § 800.229 Investment fund. The term investment fund means any entity that is an ‘‘investment company,’’ as defined in section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), or would be an ‘‘investment company’’ but for one or more of the exemptions provided in section 3(b) or 3(c) thereunder. § 800.230 Involvement. The term involvement means the right or ability to participate, whether or not exercised, including without limitation by doing any of the following: (a) Providing input into a final decision; (b) Consulting with or providing advice to a decisionmaker; (c) Exercising special approval or veto rights; (d) Participating on a committee with decisionmaking authority; or (e) Advising on the appointment officers or selecting employees who are engaged in substantive decisionmaking. § 800.231 Lead agency. The term lead agency means the Department of the Treasury and any other agency designated by the Chairperson of the Committee to have primary responsibility, on behalf of the Committee, for the specific activity for which the Chairperson designates it as a lead agency, including without limitation all or a portion of an assessment, a review, an investigation, or the negotiation or monitoring of a mitigation agreement or condition. § 800.232 Manufacture. Solely for the purposes of Column 2 of appendix A to part 800, the term PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 manufacture means to produce or reproduce, whether physically or virtually. § 800.233 Material nonpublic technical information. (a) The term material nonpublic technical information means information that: (1) Provides knowledge, know-how, or understanding not available in the public domain, of the design, location, or operation of critical infrastructure, including without limitation vulnerability information such as that related to physical security or cybersecurity; or (2) Is not available in the public domain and is necessary to design, fabricate, develop, test, produce, or manufacture a critical technology, including without limitation processes, techniques, or methods; (b) The term material nonpublic technical information does not include financial information regarding the performance of an entity. (c) Example: Corporation A, a foreign person that is not an excepted investor, proposes to acquire a four percent, noncontrolling equity interest in Corporation B. Corporation B is a U.S. business that services an industrial control system utilized by an interstate oil pipeline that has the capacity to transport 600,000 barrels per day of crude oil (ICS B). ICS B is covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. The source code for ICS B is not available in the public domain. Pursuant to the terms of the investment, Corporation A will have access to the source code for ICS B. The proposed investment therefore affords Corporation A access to material nonpublic technical information in the possession Corporation B regarding the design and operation of covered investment critical infrastructure. § 800.234 Minimum excepted ownership. The term minimum excepted ownership means: (a) With respect to an entity whose equity securities are primarily traded on an exchange in an excepted foreign state or the United States, a majority of its voting interest, the right to a majority of its profits, and the right in the event of dissolution to a majority of its assets; and (b) With respect to an entity whose equity securities are not primarily traded on an exchange in an excepted foreign state or the United States, 90 percent or more of its voting interest, the right to 90 percent or more of its profits, and the right in the event of E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules dissolution to 90 percent or more of its assets. § 800.235 Own. Solely for the purposes of Column 2 of appendix A to part 800, the term own means to directly possess the applicable covered investment critical infrastructure. § 800.236 Parent. (a) The term parent means a person who or which directly or indirectly: (1) Holds or will hold at least 50 percent of the outstanding voting interest in an entity; or (2) Holds or will hold the right to at least 50 percent of the profits of an entity, or has or will have the right in the event of the dissolution to at least 50 percent of the assets of that entity. (b) Any entity that meets the conditions of paragraph (a)(1) or (2) of this section with respect to another entity (i.e., the intermediate parent) is also a parent of any other entity of which the intermediate parent is a parent. (c) Examples: (1) Example 1. Corporation P holds 50 percent of the voting interest in Corporations R and S. Corporation R holds 40 percent of the voting interest in Corporation X; Corporation S holds 50 percent of the voting interest in Corporation Y, which in turn holds 50 percent of the voting interest in Corporation Z. Corporation P is a parent of Corporations R, S, Y, and Z, but not of Corporation X. Corporation S is a parent of Corporation Y and Z, and Corporation Y is a parent of Corporation Z. (2) Example 2. Corporation A holds warrants which when exercised will entitle it to vote 50 percent of the outstanding shares of Corporation B. Corporation A is a parent of Corporation B. khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.237 (a) The term party to a transaction means: (1) In the case of an acquisition of an ownership interest in an entity, the person acquiring the ownership interest, the person from which such ownership interest is acquired, and the entity whose ownership interest is being acquired, without regard to any person providing brokerage or underwriting services for the transaction; (2) In the case of a merger, the surviving entity, and the entity or entities that are merged into that entity as a result of the transaction; (3) In the case of a consolidation, the entities being consolidated, and the new consolidated entity; (4) In the case of a proxy solicitation, the person soliciting proxies, and the person who issued the voting interest; (5) In the case of the acquisition or conversion of contingent equity 17:44 Sep 23, 2019 Jkt 247001 § 800.238 Person. The term person means any individual or entity. § 800.239 Personal identifier. The term personal identifier means name, physical address, email address, social security number, phone number, or other information that identifies a specific individual. § 800.240 Party to a transaction. VerDate Sep<11>2014 interests, the issuer and the person holding the contingent equity interests; (6) In the case of a change in rights that a person has with respect to an entity in which that person has an investment, the person whose rights change as a result of the transaction and the entity to which those rights apply; (7) In the case of a transfer, agreement, arrangement, or any other type of transaction, the structure of which is designed or intended to evade or circumvent the application of section 721, any person that participates in such transfer, agreement, arrangement, or other type of transaction; (8) In the case of any other type of transaction, any person who is in a role comparable to that of a person described in paragraphs (a)(1) through (7) of this section; and (9) In all cases, each party that submitted a declaration or notice to the Committee regarding a transaction. (b) For purposes of section 721(l), the term party to a transaction includes any affiliate of any party described in paragraphs (a)(1) through (9) of this section that the Committee, or a lead agency acting on behalf of the Committee, determines is relevant to mitigating a risk to the national security of the United States. Section 721. The term section 721 means section 721 of title VII of the Defense Production Act of 1950 (50 U.S.C. 4565), as amended. § 800.241 Sensitive personal data. (a) The term sensitive personal data means, except as provided in paragraph (b) of this section: (1) Identifiable data that is: (i) Maintained or collected by a U.S. business that: (A) Targets or tailors products or services to any U.S. executive branch agency or military department with intelligence, national security, or homeland security responsibilities, or to personnel and contractors thereof; (B) Has maintained or collected such data on greater than one million individuals at any point over the preceding twelve (12) months; or (C) Has a demonstrated business objective to maintain or collect such PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 50189 data on greater than one million individuals and such data is an integrated part of the U.S. business’s primary products or services; and (ii) Within any of the following categories: (A) Data that could be used to analyze or determine an individual’s financial distress or hardship; (B) The set of data in a consumer report, as defined pursuant to 15 U.S.C. 1681a, unless such data is obtained from a consumer reporting agency for one or more purposes identified in 15 U.S.C. 1681b(a) and such data is not substantially similar to the full contents of a consumer file as defined pursuant to 15 U.S.C. 1681a.; (C) The set of data in an application for health insurance, long-term care insurance, professional liability insurance, mortgage insurance, or life insurance; (D) Data relating to the physical, mental, or psychological health condition of an individual; (E) Non-public electronic communications, including without limitation email, messaging, or chat communications, between or among users of a U.S. business’s products or services if a primary purpose of such product or service is to facilitate thirdparty user communications; (F) Geolocation data collected using positioning systems, cell phone towers, or WiFi access points such as via a mobile application, vehicle GPS, other onboard mapping tool, or wearable electronic device; (G) Biometric enrollment data including without limitation facial, voice, retina/iris, and palm/fingerprint templates; (H) Data stored and processed for generating a state or federal government identification card; (I) Data concerning U.S. Government personnel security clearance status; or (J) The set of data in an application for a U.S. Government personnel security clearance or an application for employment in a position of public trust; and (2) Genetic information, as defined pursuant to 45 CFR 160.103. (b) The term sensitive personal data shall not include, regardless of the applicability of the criteria described in paragraph (a) of this section: (1) Data maintained or collected by a U.S. business concerning the employees of that U.S. business, unless the data pertains to employees of U.S. Government contractors who hold U.S. Government personnel security clearances; or (2) Data that is a matter of public record, such as court records or other E:\FR\FM\24SEP3.SGM 24SEP3 50190 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules government records that are generally available to the public. § 800.242 Service. Solely for the purposes of Column 2 of appendix A to part 800, the term service means to repair, maintain, refurbish, replace, overhaul, or update. § 800.243 Solely for the purpose of passive investment. (a) Ownership interests are held or acquired solely for the purpose of passive investment if the person holding or acquiring such interests does not plan or intend to exercise control and— (1) Is not afforded any rights that if exercised would constitute control; (2) Does not acquire any access, rights, or involvement specified § 800.211(b); (3) Does not possess or develop any purpose other than passive investment; and (4) Does not take any action inconsistent with holding or acquiring such interests solely for the purpose of passive investment. (See § 800.302(b).) (b) Example: Corporation A, a foreign person, acquires a voting interest in Corporation B, a U.S. business. In addition to the voting interest, Corporation A negotiates the right to appoint a member of Corporation B’s Board of Directors. The acquisition by Corporation A of a voting interest in Corporation B is not solely for the purpose of passive investment. khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.244 Substantial interest. (a) The term substantial interest means a voting interest, direct or indirect, of 25 percent or more by a foreign person in a U.S. business and a voting interest, direct or indirect, of 49 percent or more by a foreign government in a foreign person. (b) In the case of entity organized as a limited partnership, a foreign government will be considered to have a substantial interest in such partnership if either: (1) It holds 49 percent or more of the voting interest in the general partner; or (2) It is a limited partner and holds 49 percent or more of the voting interest of the limited partners. (c) For purposes of determining the percentage of voting interest held indirectly by one entity in another entity, any voting interest of a parent will be deemed to be a 100 percent voting interest in any entity of which it is a parent. § 800.245 Substantive decisionmaking. (a) The term substantive decisionmaking means the process through which decisions regarding significant matters affecting an entity VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 are undertaken, including without limitation, as applicable: (1) Pricing, sales, and specific contracts, including without limitation the license, sale, or transfer of sensitive personal data to any third party, including without limitation pursuant to a customer, vendor, or joint venture agreement; (2) Supply arrangements; (3) Corporate strategy and business development; (4) Research and development, including without limitation location and budget allocation; (5) Manufacturing locations; (6) Access to critical technologies, covered investment critical infrastructure, material nonpublic technical information, or sensitive personal data, including without limitation pursuant to a customer, vendor, or joint venture agreement; (7) Physical and cyber security protocols, including without limitation the storage and protection of critical technologies, covered investment critical infrastructure, or sensitive personal data; (8) Practices, policies, and procedures governing the collection, use, or storage of sensitive personal data, including without limitation: (i) The establishment or maintenance of, or changes to, the architecture of information technology systems and networks used in collecting or maintaining sensitive personal data; or (ii) Privacy policies and agreements for individuals from whom sensitive personal data is collected setting forth parameters regarding whether and how sensitive personal data may be collected, maintained, accessed, or disseminated; or (9) Strategic partnerships. (b) The term substantive decisionmaking does not include strictly administrative decisions. (c) Examples: (1) Example 1. Corporation A, a foreign person that is not an excepted investor, proposes to acquire a four percent, noncontrolling equity interest in Corporation B. Corporation B is an unaffiliated TID U.S. business that operates a container terminal at a strategic seaport within the National Port Readiness Network (Terminal B). Pursuant to the terms of the investment, Corporation A will have approval rights over which customers may utilize Terminal B. The proposed investment therefore affords Corporation A involvement in substantive decisionmaking of Corporation B regarding the management, operation, manufacture, or supply of covered investment critical infrastructure. (2) Example 2. Same facts as Example 1 of this section, except that instead of customer approval rights, Corporation A has the right PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 to decide whether to claim certain tax credits with respect to Terminal B on its own income tax filing, which prevents Corporation B from claiming such credits. Assuming no other relevant facts, the proposed investment does not afford Corporation A involvement in substantive decisionmaking of Corporation B regarding the management, operation, manufacture, or supply of covered investment critical infrastructure. § 800.246 Supply. Solely for the purposes of Column 2 of appendix A to part 800, the term supply means to provide third-party physical or cyber security. § 800.247 Targets or tailors. (a) The term targets or tailors means customizing products or services for use by a person or group of persons or actively marketing to or soliciting a person or group of persons. (b) Examples: (1) Example 1. Corporation A, a U.S. business, operates facilities throughout the United States that offer healthcare-related products and services. Some of Corporation A’s facilities are located within metropolitan areas that also include U.S. military facilities. Absent additional relevant facts, Corporation A does not target or tailor its products or services for purposes of § 800.241(a)(1)(i)(A). (2) Example 2. Same facts as Example 2 of this section, except that Corporation A operates a facility on the premises of a U.S. military facility. Corporation A targets or tailors its products or services for purposes of § 800.241(a)(1)(i)(A). (3) Example 3. Corporation A, a U.S. business, offers a discount to all customers that are employed in the public sector broadly, including active duty U.S. military personnel. Absent additional relevant facts, Corporation A does not target or tailor its products or services for purposes of § 800.241(a)(1)(i)(A). (4) Example 4. Same facts as Example 3 of this section, except that Corporation A offers a discount solely to uniformed U.S. military personnel or distributes marketing materials that promote the particular usefulness of Corporation A’s products to military personnel. Corporation A targets or tailors its products or services for purposes of § 800.241(a)(1)(i)(A). § 800.248 TID U.S. business. The term TID U.S. business means any U.S. business that: (a) Produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies; (b) Performs the functions as set forth in Column 2 of appendix A to part 800 with respect to covered investment critical infrastructure; or (c) Maintains or collects, directly or indirectly, sensitive personal data of U.S. citizens. (d) Examples: (1) Example 1. Corporation A, a U.S. business, operates a munitions plant in the E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules United States that produces a variety of military grade explosives. Some of the explosives manufactured by Corporation A are subject to export controls because they are listed on the USML. Corporation A manufactures critical technologies and is therefore a TID U.S. business. (2) Example 2. Facility A is a crude oil storage facility with the capacity to hold 50 million barrels of crude oil. Corporation A is a U.S. business that operates Facility A. Corporation B is a U.S. business that provides third-party physical security to Facility A by guarding the gate to Facility A and patrolling the fence surrounding Facility A. Corporation C produces the fencing used by Facility A. Corporation D produces the commercially available off-the-shelf cyber security software utilized in Facility A. Corporation E provides third-party cyber security to Facility by running Facility A’s cyber security defenses. Facility A is covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. Corporation A, Corporation B, and Corporation E each perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to Facility A and each is therefore a TID U.S. business. Assuming no other relevant facts, neither Corporation C nor Corporation D perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to Facility A and neither is therefore a TID U.S. business. (3) Example 3. Pipeline A is an interstate natural gas pipeline with an outside diameter of 36 inches. Corporation A is a U.S. business that owns Pipeline A. Corporation B is a U.S. business that manufactures the pipe segments with an outside diameter of 36 inches that are used in Pipeline A. Pipeline A is covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. Corporation A performs one of the functions as set forth in Column 2 of appendix A to part 800 with respect to Pipeline A and is therefore a TID U.S. business. Assuming no other relevant facts, Corporation B does not perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to Pipeline A and is therefore not a TID U.S. business. (4) Example 4. IXP A is an internet exchange point that supports public peering. Corporation A is a U.S. business that operates IXP A. Corporation B is a U.S. business that maintains the physical premises of IXP A. IXP A is covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. Corporation A performs one of the functions as set forth in Column 2 of appendix A to part 800 with respect to IXP A and is therefore a TID U.S. business. Assuming no other relevant facts, Corporation B does not perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to IXP A and is therefore not a TID U.S. business. (5) Example 5. SCADA System A is a supervisory control and data acquisition system utilized by a public water system, as defined in section 1401(4) of the Safe Drinking Water Act (42 U.S.C. 300f(4)(A)), as amended, that regularly serves 15,000 VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 individuals. Corporation A is a U.S. business that produces SCADA System A by building the hardware and integrating all the software. Corporation B is a U.S. business that produces commercially available off-the-shelf software that is sold to Corporation A and used as a component in SCADA System A. SCADA System A is covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. Corporation A, as the manufacturer of SCADA System A, performs one of the functions as set forth in Column 2 of appendix A to part 800 with respect to SCADA System A and is therefore a TID U.S. business. Assuming no other relevant facts, Corporation B does not perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to SCADA System A and is therefore not a TID U.S. business. (6) Example 6. Same facts as Example 5 of this section. Corporation B later releases a patch that updates the commercially available off-the-shelf software that is a component of SCADA System A. As the software is only a component of SCADA System A, the software itself is not covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. Assuming no other relevant facts, Corporation B does not perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to SCADA System A and is therefore not a TID U.S. business. (7) Example 7. Alloy A is a steel alloy containing two percent manganese. Corporation A is a U.S. business that manufactures Alloy A in Facility A by melting the constituent metals. Facility A is in the United States. Corporation B is a U.S. business that purchases Alloy A from Corporation A and resells it to a prime contractor of the Department of Defense. Facility A is covered investment critical infrastructure as set forth in Column 1 of appendix A to part 800. Corporation A performs one of the functions as set forth in Column 2 of appendix A to part 800 with respect to Alloy A and is therefore a TID U.S. business. Assuming no other relevant facts, Corporation B does not perform one of the functions as set forth in Column 2 of appendix A to part 800 with respect to Alloy A and is therefore not a TID U.S. business. (8) Example 8. Corporation A, a U.S. business, is a credit reporting agency and maintains consumer reports on greater than one million individuals. Corporation A maintains sensitive personal data and is therefore a TID U.S. business. (9) Example 9. Same facts as in Example 8 of this section, except that Corporation A maintains the sensitive personal data through its subsidiary, Corporation X. Corporation A is a TID U.S. business because it indirectly maintains sensitive personal data. Corporation X is also a TID U.S. business because it directly maintains sensitive personal data. § 800.249 Transaction. The term transaction means any of the following, whether proposed or completed: PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 50191 (a) A merger, acquisition, or takeover, including without limitation: (1) The acquisition of an ownership interest in an entity; (2) The acquisition of proxies from holders of a voting interest in an entity; (3) A merger or consolidation; (4) The formation of a joint venture; or (5) A long-term lease or concession arrangement under which a lessee (or equivalent) makes substantially all business decisions concerning the operation of a leased entity (or equivalent), as if it were the owner; (b) An investment; or (c) The conversion of a contingent equity interest. (d) Example. Corporation A, a foreign person, signs a concession agreement to operate the toll road business of Corporation B, a U.S. business, for 99 years. Corporation B, however, is required under the agreement to perform safety and security functions with respect to the business and to monitor compliance by Corporation A with the operating requirements of the agreement on an ongoing basis. Corporation B may terminate the agreement or impose other penalties for breach of these operating requirements. Assuming no other relevant facts, this is not a transaction. Note 1 to § 800.249: See § 800.308 regarding factors the Committee will consider in determining whether to include the access, rights, or involvement to be acquired by a foreign person upon the conversion of contingent equity interests as part of the Committee’s analysis of whether a transaction that involves such interests is a covered transaction. § 800.250 Unaffiliated TID U.S. business. The term unaffiliated TID U.S. business means, with respect to a foreign person, a TID U.S. business in which that foreign person does not directly hold more than 50 percent of the outstanding voting interest or have the right to appoint more than half of the members of the board of directors or equivalent governing body. § 800.251 United States. The term United States or U.S. means the United States of America, the States of the United States, the District of Columbia, and any commonwealth, territory, dependency, or possession of the United States, or any subdivision of the foregoing, and includes the Outer Continental Shelf, as defined in the Outer Continental Shelf Lands Act, as amended (43 U.S.C. 1331(a)). For purposes of these regulations and their examples, an entity organized under the laws of the United States of America, E:\FR\FM\24SEP3.SGM 24SEP3 50192 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules one of the States, the District of Columbia, or a commonwealth, territory, dependency, or possession of the United States is an entity organized ‘‘in the United States.’’ § 800.252 U.S. business. (a) The term U.S. business means any entity, irrespective of the nationality of the persons that control it, engaged in interstate commerce in the United States. (b) Examples: (1) Example 1. Corporation A is organized under the laws of a foreign state and is wholly owned and controlled by a foreign national. It engages in interstate commerce in the United States through a branch or subsidiary. Its branch or subsidiary is a U.S. business. Corporation A and its branch or subsidiary is each also a foreign person should any of them engage in a transaction involving a U.S. business. (2) Example 2. Same facts as in the first sentence of Example 1 of this section. Corporation A, however, does not have a branch office, subsidiary, or fixed place of business in the United States. It exports and licenses technology to an unrelated company in the United States. Assuming no other relevant facts, Corporation A is not a U.S. business. (3) Example 3. Corporation A, a company organized under the laws of a foreign state, is wholly owned and controlled by Corporation X. Corporation X is organized in the United States and is wholly owned and controlled by U.S. nationals. Corporation A does not have a branch office, subsidiary, or fixed place of business in the United States. It exports goods to Corporation X and to unrelated companies in the United States. Assuming no other relevant facts, Corporation A is not a U.S. business. § 800.253 U.S. national. The term U.S. national means an individual who is a U.S. citizen or an individual who, although not a U.S. citizen, owes permanent allegiance to the United States. § 800.254 Voting interest. khammond on DSKJM1Z7X2PROD with PROPOSALS3 The term voting interest means any interest in an entity that entitles the owner or holder of that interest to vote for the election of directors of the entity (or, with respect to unincorporated entities, individuals exercising similar functions) or to vote on other matters affecting the entity. Subpart C—Coverage § 800.301 Transactions that are covered control transactions. Transactions that are covered control transactions include, without limitation: (a) A transaction which, irrespective of the actual arrangements for control provided for in the terms of the transaction, results or could result in VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 control of a U.S. business by a foreign person. (See the examples in § 800.301(g)(1),(2), and (3).) (b) A transaction in which a foreign person conveys its control of a U.S. business to another foreign person. (See the example in § 800.301(g)(4).) (c) A transaction that results or could result in control by a foreign person of any part of an entity or of assets, if such part of an entity or assets constitutes a U.S. business. (See § 800.302(c) and the examples in § 800.301(g)(5) through (14).) (d) A joint venture in which the parties enter into a contractual or other similar arrangement, including an agreement on the establishment of a new entity, but only if one or more of the parties contributes a U.S. business and a foreign person could control that U.S. business by means of the joint venture. (See the examples in § 800.301(g)(15) through (17).) (e) A change in the rights that a foreign person has with respect to a U.S. business in which the foreign person has an investment, if that change could result in foreign control of the U.S. business. (See the example in § 800.301(g)(18).) (f) A transaction the structure of which is designed to evade or circumvent the application of section 721. (See the example in § 800.301(g)(19).) (g) Examples: (1) Example 1. Corporation A, a foreign person, proposes to purchase all of the shares of Corporation X, which is a U.S. business. As the sole owner, Corporation A will have the right to elect directors and appoint other primary officers of Corporation X, and those directors will have the right to make decisions about the closing and relocation of particular production facilities and the termination of significant contracts. The directors also will have the right to propose to Corporation A, the sole shareholder, the dissolution of Corporation X and the sale of its principal assets. The proposed transaction is a covered control transaction. (2) Example 2. Same facts as in Example 1 of this section, except that Corporation A plans to retain the existing directors of Corporation X, all of whom are U.S. nationals. Although Corporation A may choose not to exercise its power to elect new directors for Corporation X, Corporation A nevertheless will have that exercisable power. The proposed transaction is a covered control transaction. (3) Example 3. Corporation A, a foreign person, proposes to purchase 50 percent of the shares in Corporation X, a U.S. business, from Corporation B, also a U.S. business. Corporation B would retain the other 50 percent of the shares in Corporation X, and Corporation A and Corporation B would contractually agree that Corporation A would not exercise its voting and other rights for ten PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 years. The proposed transaction is a covered control transaction. (4) Example 4. Corporation X is a U.S. business, but is wholly owned and controlled by Corporation Y, a foreign person. Corporation Z, also a foreign person, but not related to Corporation Y, seeks to acquire Corporation X from Corporation Y. The proposed transaction is a covered control transaction because it could result in control of Corporation X, a U.S. business, by another foreign person, Corporation Z. (5) Example 5. Corporation X, a foreign person, has a branch office located in the United States. Corporation A, a foreign person, proposes to buy that branch office. The proposed transaction is a covered control transaction. (6) Example 6. Corporation A, a foreign person, buys a branch office located entirely outside the United States of Corporation Y, which is incorporated in the United States. Assuming no other relevant facts, the branch office of Corporation Y is not a U.S. business, and the transaction is not a covered control transaction. (7) Example 7. Corporation A, a foreign person, makes a start-up, or ‘‘greenfield,’’ investment in the United States. That investment involves activities such as the foreign person separately arranging for the financing of and the construction of a plant to make a new product, buying supplies and inputs, hiring personnel, and purchasing the necessary technology. The investment involves incorporating a newly formed subsidiary of the foreign person. Assuming no other relevant facts, Corporation A will not have acquired a U.S. business, and its greenfield investment is not a covered control transaction. However, this transaction may be subject to the provisions of part 802 of this title, which addresses certain transactions concerning real estate. (8) Example 8. Corporation A, a foreign person, intends to make an early-stage investment in a start-up company in the United States. Prior to the investment by the foreign person, the start-up has incorporated, established a domain name, hired personnel, developed business plans, sought financing, rented office space, and engaged in other activities that constitute interstate commerce in the United States, without the involvement of the foreign person. As a result of the investment, Corporation A could control the U.S. business. Under these facts, Corporation A is acquiring a U.S. business and the proposed transaction is a covered control transaction. (9) Example 9. Corporation A, a foreign person, purchases substantially all of the assets of Corporation B. Corporation B, which is incorporated in the United States, was in the business of producing industrial equipment, but stopped producing and selling such equipment one week before Corporation A purchased substantially all of its assets. At the time of the transaction, Corporation B continued to have employees on its payroll, maintained know-how in producing the industrial equipment it previously produced, and maintained relationships with its prior customers, all of which were transferred to Corporation A. The acquisition of substantially all of the assets E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules of Corporation B by Corporation A is a covered control transaction. (10) Example 10. Corporation X, a foreign person, seeks to acquire from Corporation A, a U.S. business, an empty warehouse facility located in the United States. The acquisition would be limited to the physical facility, and would not include customer lists, intellectual property, or other proprietary information, or other intangible assets or the transfer of personnel. Assuming no other relevant facts, the facility is not an entity and therefore not a U.S. business, and the proposed acquisition of the facility is not a covered control transaction. However, this transaction may be subject to the provisions of part 802 of this title, which addresses certain transactions concerning real estate. (11) Example 11. Same facts as Example 6 of this section, except that, in addition to the proposed acquisition of Corporation A’s warehouse facility, Corporation X would acquire the personnel, customer list, equipment, and inventory management software used to operate the facility. Under these facts, Corporation X is acquiring a U.S. business, and the proposed acquisition is a covered control transaction. (12) Example 12. Corporation A, a foreign person, seeks to acquire from Corporation X, a U.S. business, certain tangible and intangible assets that Corporation X operates as a business in the United States. Corporation A intends to use the assets to establish a business undertaking in a foreign country. Under these facts, Corporation X is acquiring a U.S. business, and the proposed acquisition is a covered control transaction. (13) Example 13. Corporation A, a foreign person, seeks to acquire from Corporation X, a U.S. business, proprietary software developed by Corporation X. The acquisition would be limited to the software and would not include customer lists, marketing material, or other proprietary information; any other tangible or intangible assets; or the transfer of personnel. Assuming no other relevant facts, the software does not constitute an entity and therefore not a U.S. business, and the proposed acquisition of the software is not a covered control transaction. (14) Example 14. Same facts as Example 9 of this section, except that, in addition to the proposed acquisition of Corporation X’s proprietary software, Corporation A would acquire Corporation X’s customer lists, advertising and promotional material, branding, trademarks, domain names, and internet presence. Under these facts, Corporation A is acquiring a U.S. business, and the proposed acquisition is a covered control transaction. (15) Example 15. Corporation A, a foreign person, and Corporation X, a U.S. business, form a separate corporation, JV Corporation, to which Corporation A contributes only cash and Corporation X contributes a U.S. business. Each owns 50 percent of the shares of JV Corporation and, under the Articles of Incorporation of JV Corporation, both Corporation A and Corporation X have veto power over all of the matters affecting JV Corporation identified under § 800.208, giving them both control over JV Corporation. The place of incorporation of JV Corporation is not relevant to the determination of VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 whether the transaction is a covered control transaction. The formation of JV Corporation is a covered control transaction. (16) Example 16. Corporation A, a foreign person, and Corporation X, a U.S. business, form a separate corporation, JV Corporation, to which Corporation A contributes funding and managerial and technical personnel, while Corporation X contributes certain land and equipment that do not in this example constitute a U.S. business. Corporations A and X each have a 50 percent interest in the joint venture. Assuming no other relevant facts, the formation of JV Corporation is not a covered control transaction. However, this transaction may be subject to the provisions of part 802 of this title, which addresses certain transactions concerning real estate. (17) Example 17. Same facts as Example 2 of this section, except that, in addition to contributing certain land and equipment, Corporation X also contributes intellectual property, other proprietary information, and other intangible assets, that together with the land and equipment constitute a U.S. business, to JV Corporation. Under these facts, Corporation X has contributed a U.S. business, and the formation of JV Corporation is a covered control transaction. (18) Example 18. Corporation A, a foreign person, holds a 10 percent ownership interest in Corporation X, a U.S. business. Corporation X subsequently provides Corporation A the right to appoint the Chief Executive Officer and the Chief Technical Officer of Corporation X. Corporation A does not acquire any additional ownership interest in Corporation X. The change in rights is a covered control transaction. (19) Example 19. Corporation A is organized under the laws of a foreign state and is wholly owned and controlled by a foreign national. With a view towards circumventing section 721, Corporation A transfers money to a U.S. citizen, who, pursuant to informal arrangements with Corporation A and on its behalf, purchases all the shares in Corporation X, a U.S. business. The transaction is a covered control transaction. § 800.302 Transactions that are not covered control transactions. Transactions that are not covered control transactions include, without limitation: (a) A stock split or pro rata stock dividend that does not involve a change in control. (See the example in § 800.302(g)(1).) (b) A transaction that results in a foreign person holding ten percent or less of the outstanding voting interest in a U.S. business (regardless of the dollar value of the interest so acquired), but only if the transaction is solely for the purpose of passive investment. (See § 800.243 and the examples in § 800.302(g)(2) through (4).) (c) An acquisition of any part of an entity or of assets, if such part of an entity or assets do not constitute a U.S. business. (See § 800.301(c) and the examples in § 800.302(g)(5) through (10).) PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 50193 (d) An acquisition of securities by a person acting as a securities underwriter, in the ordinary course of business and in the process of underwriting. (e) An acquisition pursuant to a condition in a contract of insurance relating to fidelity, surety, or casualty obligations if the contract was made by an insurer in the ordinary course of business. (f) A change in the rights that a foreign person has with respect to a U.S. business in which that foreign person has an investment, if that change could not result in foreign control of the U.S. business. (See the example in § 800.302(g)(11).) (g) Examples: (1) Example 1. Corporation A, a foreign person, holds 10,000 shares of Corporation B, a U.S. business, constituting ten percent of the stock of Corporation B. Corporation B pays a 2-for-1 stock dividend. As a result of this stock split, Corporation A holds 20,000 shares of Corporation B, still constituting ten percent of the stock of Corporation B. Assuming no other relevant facts, the acquisition of additional shares is not a covered control transaction. (2) Example 2. In an open market purchase solely for the purpose of passive investment, Corporation A, a foreign person, acquires seven percent of the voting securities of Corporation X, which is a U.S. business. Assuming no other relevant facts, the acquisition of the securities is not a covered control transaction. (3) Example 3. Corporation A, a foreign person, acquires nine percent of the voting shares of Corporation X, a U.S. business. Corporation A also negotiates contractual rights that give it the power to control important matters of Corporation X. The acquisition by Corporation A of the voting shares of Corporation X is not solely for the purpose of passive investment and is a covered control transaction. (4) Example 4. Corporation A, a foreign person, acquires five percent of the voting shares in Corporation B, a U.S. business. In addition to the securities, Corporation A obtains the right to appoint one out of eleven seats on Corporation B’s Board of Directors. The acquisition by Corporation A of Corporation B’s securities is not solely for the purpose of passive investment. Whether the transaction is a covered control transaction would depend on whether Corporation A obtains control of Corporation B as a result of the transaction. See § 800.303 for transactions that are covered investments. (5) Example 5. Corporation A, a foreign person, acquires, from separate U.S. nationals: products held in inventory; land, and; machinery for export. Assuming no other relevant facts, Corporation A has not acquired a U.S. business, and this acquisition is not a covered control transaction. (6) Example 6. Corporation X, a U.S. business, produces armored personnel carriers in the United States. Corporation A, a foreign person, seeks to acquire the annual production of those carriers from Corporation E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 50194 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules X under a long-term contract. Assuming no other relevant facts, this transaction is not a covered control transaction. (7) Example 7. Same facts as Example 2 of this section, except that Corporation X, a U.S. business, has developed important technology in connection with the production of armored personnel carriers. Corporation A seeks to negotiate an agreement under which it would be licensed to manufacture using that technology. Assuming no other relevant facts, neither the proposed acquisition of technology pursuant to that license agreement, nor the actual acquisition, is a covered control transaction. (8) Example 8. Same facts as Example 2 of this section, except that Corporation A enters into a contractual arrangement to acquire the entire armored personnel carrier business operations of Corporation X, including production facilities, customer lists, technology, and staff, which together constitute a U.S. business. This transaction is a covered control transaction. (9) Example 9. Same facts as Example 2 of this section, except that Corporation X suspended all activities of its armored personnel carrier business a year ago and currently is in bankruptcy proceedings. Existing equipment provided by Corporation X is being serviced by another company, which purchased the service contracts from Corporation X. The business’s production facilities are idle but still in working condition, some of its key former employees have agreed to return if the business is resuscitated, and its technology and customer and vendor lists are still current. Corporation X’s personnel carrier business constitutes a U.S. business, and its purchase by Corporation A is a covered control transaction. (10) Example 10. Same facts as Example 2 of this section, except that Corporation A and Corporation X establish a joint venture that will be controlled by Corporation A to manufacture armored personnel carriers outside the United States, and Corporation X contributes assets constituting a U.S. business, including intellectual property and other intangible assets required to manufacture the armored personnel carriers, to the joint venture. Corporation X has contributed a U.S. business to the joint venture, and the establishment of the joint venture is a covered control transaction. (11) Example 11. Corporation A, a foreign person, holds a 10 percent ownership interest in Corporation X, a U.S. business. Corporation A and Corporation X enter into a contractual arrangement pursuant to which Corporation A gains the right to purchase an additional interest in Corporation X to prevent the dilution of Corporation A’s pro rata interest in Corporation X in the event that Corporation X issues additional instruments conveying interests in Corporation X. Corporation A does not acquire any additional rights or ownership interest in Corporation X pursuant to the contractual arrangement. Assuming no other relevant facts, the transaction is not a covered control transaction. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 § 800.303 Transactions that are covered investments. Transactions that are covered investments include, without limitation: (a) A transaction that meets the requirements of § 800.211 irrespective of the percentage of voting interest acquired. (See the examples in § 800.303(f)(1) through (3).) (b) A transaction that meets the requirements of § 800.211, irrespective of the fact that the Committee concluded all action under section 721 for a previous covered investment by the same foreign person in the same TID U.S. business, where such transaction involves the acquisition of access, rights, or involvement specified in § 800.211 in addition to those notified to the Committee in the transaction for which the Committee previously concluded action. (See the example in § 800.303(f)(4).) (c) A transaction that meets the requirements of § 800.211, irrespective of the fact that the critical technology produced, designed, tested, manufactured, fabricated, or developed by the TID U.S. business became controlled pursuant to section 1758 of the Export Control Reform Act of 2018 after the effective date, unless any of the criteria set forth in § 800.104(b) are satisfied with respect to the transaction prior to the critical technology becoming controlled. (See the example in § 800.303(f)(5).) (d) A change in the rights that a foreign person has with respect to a U.S. business in which the foreign person has an investment, if that change could result in a covered investment. (See the example in § 800.303(f)(6).) (e) A transaction the structure of which is designed to evade or circumvent the application of section 721. (See the example in § 800.303(f)(7).) (f) Examples: (1) Example 1. Corporation A, a foreign person who is not an excepted investor, proposes to acquire a four percent, noncontrolling equity interest in Corporation B. Corporation B is a U.S. business that manufactures a critical technology. Corporation B is therefore a TID U.S. business. Pursuant to the terms of the investment, a designee of Corporation A will have the right to observe the meetings of the board of directors of Corporation B. The proposed transaction is a covered investment. (2) Example 2. Same facts as Example 1 of this section, except that, pursuant to the terms of the investment, instead of observer rights, Corporation A has consultation rights with respect to Corporation B’s licensing of a critical technology to third parties. Corporation A is therefore involved in substantive decisionmaking with respect to PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 Corporation B and the proposed transaction is a covered investment. (3) Example 3. Corporation A is a foreign person that is an excepted investor. Corporation B, a foreign person that is not an excepted investor, owns a three percent, noncontrolling equity interest in Corporation A. Corporation A proposes to acquire a four percent, non-controlling equity interest in Corporation C, an unaffiliated TID U.S. business. Pursuant to the terms of the investment in Corporation C and Corporation A’s governance documents, Corporation A and Corporation B will each have access to material nonpublic technical information in Corporation C’s possession. The transaction is a covered investment because Corporation B is making an investment that will result in access to material nonpublic technical information pursuant to § 800.211(b). (4) Example 4. The Committee concludes all action under section 721 with respect to a covered investment by Corporation A, a foreign person who is not an excepted investor, in which Corporation A acquires a four percent, non-controlling equity interest with access to material non-public information in Corporation B, an unaffiliated TID U.S. business. One year later, Corporation A proposes to acquire an additional five percent equity interest in Corporation B, resulting in Corporation A holding a nine percent, non-controlling equity interest in Corporation B. Pursuant to the terms of the additional investment, Corporation A will receive the right to appoint a member to the board of directors of Corporation B. The proposed transaction is a covered investment because the transaction involves both an acquisition of an equity interest in an unaffiliated TID U.S. business and a new right under § 800.211. (5) Example 5. Corporation A, a foreign person who is not an excepted investor, has executed a binding written agreement establishing the material terms of a proposed non-controlling investment in Corporation B, an unaffiliated TID U.S. business. The proposed investment will afford Corporation A access to material nonpublic technical information in the possession of Corporation B. The only controlled technology produced, designed, tested, manufactured, fabricated, or developed by Corporation B became controlled pursuant to section 1758 of the Export Control Reform Act of 2018 after the effective date but prior to the date upon which the binding written agreement establishing the material terms of the investment was executed. The proposed transaction is a covered investment. (6) Example 6. Corporation A, a foreign person who is not an excepted investor, holds a four percent non-controlling ownership interest in Corporation X, an unaffiliated TID U.S. business, but Corporation A was not afforded any of the access, rights, or involvement specified in § 800.211(b) at the time of its investment. Corporation A subsequently gains the right to appoint a member of the board of directors of Corporation X. Assuming no other relevant facts, the transaction is a covered investment. (7) Example 7. Corporation A is organized under the laws of a foreign state, is wholly owned and controlled by a foreign national, E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules and is not an excepted investor. With a view towards circumventing section 721, Corporation A transfers money to a U.S. citizen, who, pursuant to informal arrangements with Corporation A and on its behalf, makes a non-controlling minority equity investment in Corporation X, an unaffiliated TID U.S. business that maintains and collects sensitive personal data on U.S. citizens. In connection with the investment, the U.S. citizen is afforded the right to be involved in substantive decisionmaking regarding the release of sensitive personal data of U.S. citizens maintained by Corporation X. The transaction is a covered investment. § 800.304 Transactions that are not covered investments. khammond on DSKJM1Z7X2PROD with PROPOSALS3 Transactions that are not covered investments include, without limitation: (a) An investment by a foreign person in an unaffiliated TID U.S. business that does not afford the foreign person any of the access, rights, or involvement specified in § 800.211(b). (See the examples in § 800.304(f)(1) and (2).) (b) An investment by a foreign person who is an excepted investor in an unaffiliated TID U.S. business. (See the example in § 800.304(f)(3).) (c) A transaction that results or could result in control by a foreign person of an unaffiliated TID U.S. business. (See the example in § 800.304(f)(4).) (d) A stock split or pro rata stock dividend that does not afford the foreign person any of the access, rights, or involvement specified in § 800.211(b). (See the example in § 800.304(f)(5).) (e) An acquisition of securities by a person acting as a securities underwriter, in the ordinary course of business and in the process of underwriting. (f) Examples: (1) Example 1. In an open market purchase solely for the purpose of passive investment, Corporation A, a foreign person who is not an excepted investor, acquires seven percent of the voting securities of Corporation X, an unaffiliated TID U.S. business. Assuming no other relevant facts, the acquisition of the securities is not a covered investment. (2) Example 2. The Committee concluded all action under section 721 with respect to a covered investment in which Corporation A, a foreign person who is not an excepted investor, acquired a four percent, noncontrolling equity interest with board observer rights in Corporation B, an unaffiliated TID U.S. business. One year later, Corporation A proposes to acquire an additional five percent equity interest in Corporation B, which would result in Corporation A holding a nine percent, noncontrolling equity interest in Corporation B. The proposed investment does not afford Corporation A any additional access, rights, or involvement with respect to Corporation B, including the access, rights, or involvement specified in § 800.211(b). Assuming no other relevant facts, the VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 proposed transaction is not a covered investment. (3) Example 3. Corporation A, a foreign person who is an excepted investor, proposes to acquire a four percent, non-controlling equity interest in Corporation B, an unaffiliated TID U.S. business. Pursuant to the terms of the investment, a designee of Corporation A will have the right to observe the meetings of the board of directors of Corporation B. Assuming no other relevant facts, the proposed transaction is not a covered investment. (4) Example 4. Corporation A, a foreign person who is an excepted investor, proposes to purchase all of the shares of Corporation B, an unaffiliated TID U.S. business. As the sole owner, Corporation A will have the right to elect directors and appoint other primary officers of Corporation B. Assuming no other relevant facts, the proposed transaction is not a covered investment. It is, however, a covered control transaction. Whether Corporation A is an excepted investor or whether Corporation B is an unaffiliated TID U.S. business are not relevant to the determination of whether the transaction is a covered control transaction. (See § 800.301). (5) Example 5. Corporation A, a foreign person who is not an excepted investor, holds 10,000 shares and board observer rights in Corporation B, an unaffiliated TID U.S. business, constituting ten percent of the stock of Corporation B. Corporation B pays a 2-for1 stock dividend. As a result of this stock split, Corporation A holds 20,000 shares of Corporation B, still constituting ten percent of the stock of Corporation B. The proposed investment does not afford Corporation A any additional access, rights, or involvement with respect to Corporation B, including those specified in § 800.211(b). Assuming no other relevant facts, the acquisition of additional shares is not a covered investment. § 800.305 Incremental acquisitions. (a) Any transaction in which a foreign person acquires an additional interest in a U.S. business over which the same foreign person, or any of its direct or indirect wholly-owned subsidiaries, previously acquired direct control in the U.S. business in a covered control transaction for which the Committee concluded all action under section 721 on the basis of a notice filed pursuant to § 800.501 shall not be deemed to be a covered transaction. If, however, a foreign person that did not acquire control of the U.S. business in the prior transaction is a party to the later transaction, the later transaction may be a covered transaction. (b) Examples: (1) Example 1. Corporation A, a foreign person, directly acquires a 40 percent interest and important rights with respect to Corporation B, a U.S. business. The documentation pertaining to the transaction gives no indication that Corporation A’s interest in Corporation B may increase at a later date. Corporation A and Corporation B file a voluntary notice of the transaction with PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 50195 the Committee. Following its review of the transaction, the Committee informs the parties that the notified transaction is a covered control transaction, and concludes action under section 721. Three years later, Corporation A acquires the remainder of the voting interest in Corporation B. Assuming no other relevant facts, because the Committee, on the basis of the notice submitted by the parties, concluded all action with respect to Corporation A’s earlier direct investment in the same U.S. business, and because no other foreign person is a party to this subsequent transaction, this subsequent transaction is not a covered transaction. (2) Example 2. Same facts as Example 1 of this section, except that Corporation A and Corporation B file a declaration of the transaction, rather than a notice, with the Committee, and the Committee concluded all action on the basis of the declaration. The subsequent transaction may be a covered transaction, depending on the specific facts and circumstances. § 800.306 Lending transactions. (a) The extension of a loan or a similar financing arrangement by a foreign person to a U.S. business, regardless of whether accompanied by the creation in favor of the foreign person of a secured interest over securities or other assets of the U.S. business, shall not, by itself, constitute a covered transaction. (1) The Committee will accept notices or declarations concerning a loan or a similar financing arrangement that does not, by itself, constitute a covered transaction only at the time that, because of imminent or actual default or other condition, there is a significant possibility that the foreign person may obtain control of a U.S. business, or acquire equity interest and access, rights, or involvement specified in § 800.211(b) over a TID U.S. business, as a result of the default or other condition. (2) Where the Committee accepts a notice or declaration concerning a loan or a similar financing arrangement pursuant to paragraph (a)(1) of this section, and a party to the transaction is a foreign person that makes loans in the ordinary course of business, the Committee will take into account whether the foreign person has made any arrangements to transfer management decisions, or day-to-day control over the U.S. business to U.S. nationals for purposes of determining whether such loan or financing arrangement constitutes a covered transaction. (b) Notwithstanding paragraph (a) of this section, a loan or a similar financing arrangement through which a foreign person acquires an interest in profits of a U.S. business, the right to appoint members of the board of directors of the U.S. business, or other E:\FR\FM\24SEP3.SGM 24SEP3 50196 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 comparable financial or governance rights characteristic of an equity investment but not of a typical loan may constitute a covered transaction. (c) An acquisition of voting interest in or assets of a U.S. business by a foreign person upon default or other condition involving a loan or a similar financing arrangement does not constitute a covered transaction, provided that the loan was made by a syndicate of banks in a loan participation where the foreign lender (or lenders) in the syndicate: (1) Needs the majority consent of the U.S. participants in the syndicate to take action, and cannot on its own initiate any action vis-a`-vis the debtor; or (2) Does not have a lead role in the syndicate, and is subject to a provision in the loan or financing documents limiting its ability to control the debtor such that control for purposes of § 800.208 could not be acquired. (d) Examples: (1) Example 1. Corporation A, which is a U.S. business, borrows funds from Corporation B, a bank organized under the laws of a foreign state and controlled by foreign persons. As a condition of the loan, Corporation A agrees not to sell or pledge its principal assets to any person. Assuming no other relevant facts, this lending arrangement does not alone constitute a covered transaction. (2) Example 2. Same facts as in Example 1 of this section, except that Corporation A defaults on its loan from Corporation B and seeks bankruptcy protection. Corporation A has no funds with which to satisfy Corporation B’s claim, which is greater than the value of Corporation A’s principal assets. Corporation B’s secured claim constitutes the only secured claim against Corporation A’s principal assets, creating a high probability that Corporation B will receive title to Corporation A’s principal assets, which constitute a U.S. business. Assuming no other relevant facts, the Committee would accept a notice of the impending bankruptcy court adjudication transferring control of Corporation A’s principal assets to Corporation B, which would constitute a covered control transaction. (3) Example 3. Corporation A, a foreign bank, makes a loan to Corporation B, a U.S. business. The loan documentation extends to Corporation A rights in Corporation B that are characteristic of an equity investment but not of a typical loan, including dominant minority representation on the board of directors of Corporation B and the right to be paid dividends by Corporation B. This loan is a covered control transaction. (4) Example 4. Same facts as in Example 3 of this section, except that Corporation B is an unaffiliated TID U.S. business and the loan documentation extends to Corporation A’s involvement in substantive decisionmaking with respect to Corporation B. Whether the loan is a covered control transaction would depend on whether Corporation A obtains control of Corporation B as a result of the loan, but, if it could not VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 result in Corporation A’s control of Corporation B, this loan is a covered investment. § 800.307 Specific clarifications for investment funds. (a) Notwithstanding § 800.303, an indirect investment by a foreign person in a TID U.S. business through an investment fund that affords the foreign person (or a designee of the foreign person) membership as a limited partner or equivalent on an advisory board or a committee of the fund shall not be considered a covered investment with respect to the foreign person if: (1) The fund is managed exclusively by a general partner, a managing member, or an equivalent; (2) The foreign person is not the general partner, managing member, or equivalent; (3) The advisory board or committee does not have the ability to approve, disapprove, or otherwise control: (i) Investment decisions of the investment fund; or (ii) Decisions made by the general partner, managing member, or equivalent related to entities in which the investment fund is invested; (4) The foreign person does not otherwise have the ability to control the investment fund, including without limitation the authority: (i) To approve, disapprove, or otherwise control investment decisions of the investment fund; (ii) To approve, disapprove, or otherwise control decisions made by the general partner, managing member, or equivalent related to entities in which the investment fund is invested; or (iii) To unilaterally dismiss, prevent the dismissal of, select, or determine the compensation of the general partner, managing member, or equivalent; (5) The foreign person does not have access to material nonpublic technical information as a result of its participation on the advisory board or committee; and (6) The investment does not afford the foreign person any of the access, rights, or involvement specified in § 800.211(b). (b) For the purposes of paragraphs (a)(3) and (4) of this section, and except as provided in paragraph (c) of this section, a waiver of a potential conflict of interest, a waiver of an allocation limitation, or a similar activity, applicable to a transaction pursuant to the terms of an agreement governing an investment fund shall not be considered to constitute control of investment decisions of the investment fund or decisions relating to entities in which the investment fund is invested. PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 (c) In extraordinary circumstances, the Committee may consider the waiver of a potential conflict of interest, the waiver of an allocation limitation, or a similar activity, applicable to a transaction pursuant to the terms of an agreement governing an investment fund, to constitute control of investment decisions of the investment fund or decisions relating to entities in which the investment fund is invested. (d) Example: Limited Partner A, a foreign person, is a limited partner in an investment fund that invests in Corporation B, an unaffiliated TID U.S. business. The investment fund is managed exclusively by a general partner, who is not a foreign person. The investment affords Limited Partner A membership on an advisory board of the investment fund. The advisory board provides industry expertise, assists with the sourcing of transactions, and votes on the compensation of the general partner, but it does not control investment decisions of the fund or decisions made by the general partner related to entities in which the fund is invested. Limited Partner A does not otherwise have the ability to control the fund. Limited Partner A’s investment in Corporation B does not afford it access to any material nonpublic technical information in the possession of Corporation B, the right to be a member or observer, or to nominate a member or observer, to the board of Corporation B, nor any involvement in the substantive decisionmaking of Corporation B. Assuming no other facts, the investment by Limited Partner A is not a covered investment. § 800.308 Timing rule for a contingent equity interest. (a) For purposes of determining whether to include the rights that a holder of contingent equity interest will acquire upon conversion of, or exercise of a right provided by, those interests in the Committee’s analysis of whether a notified transaction is a covered transaction, the Committee will consider factors that include: (1) The imminence of conversion or satisfaction of contingent conditions; (2) Whether conversion or satisfaction of contingent conditions depends on factors within the control of the acquiring party; and (3) Whether the amount of interest and the rights that would be acquired upon conversion or satisfaction of contingent conditions can be reasonably determined at the time of acquisition. (b) When the Committee, applying paragraph (a) of this section, determines that the rights that the holder will acquire upon conversion or satisfaction E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules of contingent condition will not be included in the Committee’s analysis of whether a notified transaction is a covered transaction, the Committee will disregard the contingent equity interest for purposes of that transaction except to the extent that they convey immediate rights to the holder with respect to the entity that issued the interest. (c) Examples: (1) Example 1. Corporation A, a foreign person, notifies the Committee that it intends to buy common stock and debentures of Corporation X, a U.S. business. By their terms, the debentures are convertible into common stock only upon the occurrence of an event the timing of which is not in the control of Corporation A, and the number of common shares that would be acquired upon conversion cannot now be determined. Assuming no other relevant facts, the Committee will disregard the debentures in the course of its covered transaction analysis at the time that Corporation A acquires the debentures. In the event that it determines that the acquisition of the common stock is not a covered transaction, the Committee will so inform the parties. Once the conversion of the instruments becomes imminent, it may be appropriate for the Committee to consider the rights that would result from the conversion and whether the conversion is a covered transaction. The conversion of those debentures into common stock could be a covered transaction, depending on what percentage of Corporation X’s voting securities Corporation A would receive and what powers those securities would confer on Corporation A. (2) Example 2. Same facts as Example 1 of this section, except that the debentures at issue are convertible at the sole discretion of Corporation A after six months, and if converted, would represent a 50 percent interest in Corporation X. The Committee may consider the rights that would result from the conversion as part of its analysis. Subpart D—Declarations khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.401 Mandatory declarations. (a) Except as provided in paragraph (c) or (d) of this section, the parties to a transaction described in paragraph (b) of this section shall submit to the Committee a declaration with information regarding the transaction in accordance with § 800.403. (b) A covered transaction that results in the acquisition of a substantial interest in a TID U.S. business by a foreign person in which a foreign government has a substantial interest. (c) The submission of a declaration shall not be required pursuant to paragraph (b) of this section with respect to an investment by an investment fund if: (1) The fund is managed exclusively by a general partner, a managing member, or an equivalent; VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 (2) The general partner, managing member, or equivalent that exclusively manages the fund is not a foreign person; and (3) The investment fund satisfies, with respect to any foreign person with membership as a limited partner on an advisory board or a committee of the fund, the criteria specified in § 800.307(a)(3) and (4); (d) Notwithstanding paragraph (a) of this section, parties to a covered transaction may elect to submit a written notice pursuant to subpart E of this part regarding the transaction instead of a declaration. (e) Parties shall submit to the Committee the declaration required pursuant to paragraph (a) of this section, or a written notice pursuant to paragraph (d) of this section, no later than: (1) [EFFECTIVE DATE OF FINAL RULE], or promptly thereafter, if the completion date of the transaction is between [EFFECTIVE DATE OF FINAL RULE] and [DATE WHICH IS 30 DAYS AFTER THE EFFECTIVE DATE OF FINAL RULE]; or (2) Thirty days before the completion date of the transaction, if the completion date of the transaction is after [DATE THAT IS 30 DAYS AFTER THE EFFECTIVE DATE OF FINAL RULE]. (f) Notwithstanding paragraph (e)(2) of this section, the parties to a covered transaction may complete a transaction subject to a mandatory declaration or notice under this section at any time after having been informed in writing by the Committee that the Committee has concluded all action under section 721 or that the Committee is not able to complete action pursuant to § 800.807(a)(2). (g) In the event that the Committee rejects or permits a withdrawal of a declaration or notice required under section, the parties shall not complete the transaction earlier than 30 days after the date of the resubmission, except with the written approval of the Staff Chairperson. § 800.402 Voluntary declarations. Except as otherwise prohibited under § 800.403(e), a party to any proposed or completed transaction may submit to the Committee a declaration regarding the transaction in accordance with the procedures and requirements set forth in § 800.403 and § 800.404 instead of a written notice. § 800.403 Procedures for declarations. (a) A party or parties shall submit a declaration of a covered transaction pursuant to § 800.401 or § 800.402 by submitting electronically the PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 50197 information set out in § 800.404, including the certifications required thereunder, to the Staff Chairperson in accordance with the submission instructions on the Committee’s section of the Department of the Treasury website at https://home.treasury.gov/ policy-issues/international/thecommittee-on-foreign-investment-in-theunited-states-cfius. (b) No communications other than those described in paragraph (a) of this section shall constitute the submission of a declaration for purposes of section 721. (c) Information and other documentary material submitted to the Committee pursuant to this section shall be considered to have been filed with the President or the President’s designee for purposes of section 721(c) and § 800.802. (d) Persons filing a declaration shall, during the time that the matter is pending before the Committee, promptly advise the Staff Chairperson of any material changes in plans, facts, or circumstances addressed in the declaration, and any material change in information provided or required to be provided to the Committee under § 800.404. Unless the Committee rejects the declaration on the basis of such material changes in accordance with § 800.406(a)(2)(i), such changes shall become part of the declaration filed by such persons under § 800.403, and the certification required under § 800.405(d) shall apply to such changes. (e) Parties to a covered transaction that have filed with the Committee a written notice regarding a transaction pursuant to § 800.501 may not submit to the Committee a declaration regarding the same transaction or a substantially similar transaction without the written approval of the Staff Chairperson. § 800.404 Contents of declarations. (a) The party or parties submitting a declaration of a covered transaction pursuant to § 800.403 shall provide the information set out in this section, which must be accurate and complete with respect to all parties and to the transaction. (See also paragraphs (d) and (e) of this section.) (b) If fewer than all the parties to a transaction submit a declaration, the Committee may, at its discretion, request that the parties to the transaction file a written notice of the transaction under § 800.501, if the Staff Chairperson determines that the information provided by the submitting party or parties in the declaration is insufficient for the Committee to assess the transaction. E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 50198 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules (c) Subject to paragraph (e) of this section, a declaration submitted pursuant to § 800.403 shall describe or provide, as applicable: (1) The name of the foreign person(s) and U.S. business(es) that are parties to, or, in applicable cases, the subject of the transaction, as well as the name, telephone number, and email address of the primary point of contact for each party. (2) The following information regarding the transaction in question, including: (i) A brief description of the rationale and nature of the transaction, including its structure (e.g., share purchase, merger, asset purchase); (ii) The percentage of voting interest acquired and the resulting aggregate voting interest held by the foreign person and its affiliates; (iii) The percentage of economic interest acquired and the resulting aggregate economic interest held by the foreign person and its affiliates; (iv) Whether the U.S. business has multiple classes of ownership; (v) The total transaction value in U.S. dollars; (vi) The actual or expected completion date of the transaction; (vii) All sources of financing for the transaction; and (viii) A copy of the definitive documentation of the transaction, or if none exists, the document establishing the material terms of the transaction. (3) The following: (i) A statement as to whether a party to the transaction is stipulating that the transaction is a covered transaction and a description of the basis for the stipulation; and (ii) A statement as to whether a party to the transaction is stipulating that the transaction is a foreign governmentcontrolled transaction and a description of the basis for the stipulation. (4) A statement as to whether the foreign person will acquire any of the following with respect to the U.S. business: (i) Access to any material nonpublic technical information in the possession of the U.S. business, and if so, a brief explanation of the type of access and type of information; (ii) Membership, observer rights, or nomination rights as set forth in § 800.211(b)(2), and if so, a statement as to the composition of the board or other body both before and after the completion date of the transaction; (iii) Any involvement, other than through voting shares, in substantive decisionmaking of the U.S. business regarding critical infrastructure, critical technologies, or sensitive personal data VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 as set forth in § 800.211(b)(3), and if so, a statement as to the involvement in such substantive decisionmaking; or (iv) Any rights that could result in the foreign person acquiring control of the U.S. business and, if any, a brief explanation of these rights. (5) The following information regarding the covered transaction U.S. business: (i) Website address; (ii) Principal place of business; (iii) Place of incorporation or organization; and (iv) A list of the addresses or geographic coordinates (to at least the fourth decimal) of all locations of the U.S. business, including the U.S. business’ headquarters, facilities, and operating locations. (6) With respect to the U.S. business that is the subject of the transaction and any entity of which that U.S. business is a parent, a brief summary of their respective business activities, as, for example, set forth in annual reports, and the product or service categories of each, including the applicable six-digit North American Industry Classification System (NAICS) Codes, Commercial and Government Entity Code (CAGE Code) assigned by the Department of Defense, and any applicable Dun and Bradstreet identification (DUNS) numbers assigned to the U.S. business. (7) A statement as to whether the U.S. business produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies. (8) A statement as to whether the U.S. business performs any of the functions with respect to covered investment critical infrastructure as set forth in Column 2 of appendix A to part 800. (9) A statement as to whether the U.S. business maintains or collects sensitive personal data on U.S. citizens. (10) A statement as to whether the U.S. business has any contracts (including any subcontracts, if known) that are currently in effect or were in effect within the past three years with any U.S. Government agency or component, or in the past 10 years if the contract included access to personally identifiable information of U.S. Government personnel. If so, provide an annex listing such contracts, including the name of the U.S. Government agency or component, the delivery order number or contract number, the primary contractor (if the U.S. business is a subcontractor), the start date, and the estimated completion date. (11) A statement as to whether the U.S. business has any contracts (including any subcontracts, if known) that are currently in effect or were in effect within the past five years PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 involving information, technology, or data that is classified under Executive Order 12958, as amended. (12) A statement as to whether the U.S. business has received any grant or other funding from the Department of Defense or the Department of Energy, or participated in or collaborated on any defense or energy program or product involving one or more critical technologies or critical infrastructure within the past five years. (13) A statement as to whether the U.S. business participated in a Defense Production Act Title III Program (50 U.S.C. 4501, et seq.) within the past seven years. (14) A statement as to whether the U.S. business has received or placed priority rated contracts or orders under the Defense Priorities and Allocations System (DPAS) regulation (15 CFR part 700), and the level(s) of priority of such contracts or orders (DX or DO) within the past three years. (15) The name of the ultimate parent of the foreign person. (16) The principal place of business and address of the foreign person, ultimate parent and ultimate owner of such parent. (17) Complete organizational charts, both pre- and post-transaction, including information that identifies the name, principal place of business and place of incorporation or other legal organization (for entities), nationality (for individuals), and ownership percentage (expressed in terms of both voting and economic interest, if different) for each of the following: (i) The immediate parent, the ultimate parent, and each intermediate parent, if any, of each foreign person that is a party to the transaction; (ii) Where the ultimate parent is a private company, the ultimate owner(s) of such parent; (iii) Where the ultimate parent is a public company, any shareholder with an interest of greater than five percent in such parent; and (iv) The U.S. business that is the subject of the transaction, both before and after completion of the transaction. (18) Information regarding all foreign government ownership in the foreign person’s ownership structure, including nationality and percentage of ownership, as well as any rights that a foreign government holds, directly or indirectly, with respect to the foreign person. (19) With respect to the foreign person that is party to the transaction and any of its parents, as applicable, a brief summary of their respective business activities, as, for example, set forth in annual reports. E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules (20) A statement as to whether any party to the transaction has been party to another transaction previously notified or submitted to the Committee, and the case number assigned by the Committee regarding such transaction(s). (21) A statement (including relevant jurisdiction and criminal case law number or legal citation) as to whether the U.S. business, the foreign person, or any parent or subsidiary of the foreign person has been convicted in the last ten years of a crime in any jurisdiction. (22) If applicable, a description (which may group similar items into general product categories) of the items, their uses, and a list of any relevant classifications for the critical technologies that the U.S. business produces, designs, tests, manufactures, fabricates, or develops. (23) If applicable, a statement as to which functions set forth in Column 2 of appendix A to part 800 that the U.S. business performs with respect to covered investment critical infrastructure, including a description of such functions and the applicable covered investment critical infrastructure. (24) If applicable: (i) The category or categories of sensitive personal data, as specified at § 800.241, that the U.S. business maintains or collects, or intends to maintain or collect; (ii) The approximate number of total unique individuals from whom sensitive personal data is currently maintained, and has been collected over the last 12 months; (iii) Whether the U.S. business targets or tailors its products or services to U.S. Government personnel or contractors from whom it maintains or collects sensitive personal data. (d) Each party submitting a declaration shall provide a certification of the information contained in the declaration consistent with § 800.204 of this chapter. A sample certification may be found on the Committee’s section of the Department of the Treasury website at https://home.treasury.gov/policyissues/international/the-committee-onforeign-investment-in-the-united-statescfius. (e) A party that offers a stipulation pursuant to paragraph (c)(3) of this section acknowledges that the Committee and the President are entitled to rely on such stipulation in determining whether the transaction is a covered investment, a covered control transaction, or a foreign governmentcontrolled transaction for the purposes of section 721 and all authorities thereunder, and waives the right to VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 challenge any such determination. Neither the Committee nor the President is bound by any such stipulation, nor does any such stipulation limit the ability of the Committee or the President to act on any authority provided under section 721 with respect to any covered transaction. § 800.405 period. Beginning of 30-day assessment (a) Upon receipt of a declaration submitted pursuant to § 800.403, the Staff Chairperson shall promptly inspect the declaration and shall promptly notify in writing all parties to a transaction that have submitted a declaration that: (1) The Staff Chairperson has accepted the declaration and circulated the declaration to the Committee, and the date on which the assessment described in paragraph (b) of this section begins; or (2) The Staff Chairperson has determined not to accept the declaration and circulate the declaration to the Committee because the declaration is incomplete, and an explanation of the material respects in which the declaration is incomplete. (b) A 30-day period for assessment of a covered transaction that is the subject of a declaration shall commence on the date on which the declaration is received by the Committee from the Staff Chairperson. Such period shall end no later than the thirtieth day after it has commenced, or if the thirtieth day is not a business day, no later than the next business day after the thirtieth day. (c) During the 30-day assessment period, the Staff Chairperson may invite the parties to a covered transaction to attend a meeting with the Committee staff to discuss and clarify issues pertaining to the transaction. (d) If the Committee notifies the parties to a transaction that have submitted a declaration pursuant to § 800.403 that the Committee intends to conclude all action under section 721 with respect to that transaction, each party that has submitted additional information subsequent to the original declaration shall file a certification as described in § 800.204. A sample certification may be found on the Committee’s section of the Department of the Treasury website at https:// home.treasury.gov/policy-issues/ international/the-committee-on-foreigninvestment-in-the-united-states-cfius. (e) If a party fails to provide the certification required under paragraph (d) of this section, the Committee may, at its discretion, take any of the actions under § 800.407. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 50199 § 800.406 Rejection, disposition, or withdrawal of declarations. (a) The Committee, acting through the Staff Chairperson, may: (1) Reject any declaration that does not comply with § 800.404 and so inform the parties promptly in writing; (2) Reject any declaration at any time, and so inform the parties promptly in writing, if, after the declaration has been submitted and before the Committee has taken one of the actions specified in § 800.407: (i) There is a material change in the covered transaction as to which a declaration has been submitted; or (ii) Information comes to light that contradicts material information provided in the declaration by the party (or parties); or (3) Reject any declaration at any time after the declaration has been submitted, and so inform the parties promptly in writing, if the party (or parties) that submitted the declaration does not provide follow-up information requested by the Staff Chairperson within two business days of the request, or within a longer time frame if the party (or parties) so request in writing and the Staff Chairperson grants that request in writing. (b) The Staff Chairperson shall notify the parties that submitted a declaration when the Committee has found that the transaction that is the subject of a declaration is not a covered transaction. (c) Parties to a transaction that have submitted a declaration pursuant to § 800.403 may request in writing, at any time prior to the Committee taking action under § 800.407, that such declaration be withdrawn. Such request shall be directed to the Staff Chairperson and shall state the reasons why the request is being made and state whether the transaction that is the subject of the declaration is being fully and permanently abandoned. An official of the Department of the Treasury will promptly advise the parties to the transaction in writing of the Committee’s decision. (d) The Committee may not request or recommend that a declaration be withdrawn and refiled, except to permit parties to a covered transaction to correct material errors or omissions, or describe material changes to the transaction, in the declaration submitted with respect to that covered transaction. (e) A party (or parties) may not submit more than one declaration for the same or a substantially similar transaction without approval from the Staff Chairperson. Note 1 to § 800.406: See § 800.403(e) regarding the prohibition on submitting a E:\FR\FM\24SEP3.SGM 24SEP3 50200 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules declaration regarding the same transaction or a substantially similar transaction for which a written notice has been filed without the approval of the Staff Chairperson. § 800.407 Committee actions. (a) Upon receiving a declaration submitted pursuant to § 800.403 with respect to a covered transaction, the Committee may, at the discretion of the Committee: (1) Request that the parties to the transaction file a written notice pursuant to subpart E; (2) Inform the parties to the transaction that the Committee is not able to conclude action under section 721 with respect to the transaction on the basis of the declaration and that the parties may file a written notice pursuant to subpart E to seek written notification from the Committee that the Committee has concluded all action under section 721 with respect to the transaction; (3) Initiate a unilateral review of the transaction under § 800.501(c); or (4) Notify the parties in writing that the Committee has concluded all action under section 721 with respect to the transaction. (b) The Committee shall take action under paragraph (a) of this section within the time period set forth in § 800.405(b). Subpart E—Notices khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.501 Procedures for notices. (a) A party or parties to a proposed or completed transaction may file a voluntary notice of the transaction with the Committee. Voluntary notice to the Committee is filed by sending an electronic copy of the notice that includes, in English, the information set out in § 800.502, including the certification required under paragraph (l) of that section. For electronic submission instructions, see the Committee’s section of the Department of the Treasury website, currently available at https://home.treasury.gov/ policy-issues/international/thecommittee-on-foreign-investment-in-theunited-states-cfius. (b) If the Committee determines that a transaction for which no voluntary notice has been filed under paragraph (a) of this section may be a covered transaction and may raise national security considerations, the Staff Chairperson, acting on the recommendation of the Committee, may request the parties to the transaction to provide to the Committee the information necessary to determine whether the transaction is a covered transaction, and if the Committee VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 determines that the transaction is a covered transaction, to file a notice under paragraph (a) of such covered transaction. (c) With respect to any transaction: (1) Subject to paragraph (c)(2) of this section, any member of the Committee, or his designee at or above the Under Secretary or equivalent level, may file an agency notice to the Committee through the Staff Chairperson regarding a transaction if: (i) That member has reason to believe that the transaction is a covered transaction and may raise national security considerations and: (A) The Committee has not informed the parties to such transaction in writing that the Committee has concluded all action under section 721 with respect to such transaction; and (B) The President has not announced a decision not to exercise the President’s authority under section 721(d) with respect to such transaction; or (ii) The transaction is a covered transaction and: (A) The Committee has informed the parties to such transaction in writing that the Committee has concluded all action under section 721 with respect to such transaction, or the President has announced a decision not to exercise the President’s authority under section 721(d) with respect to such transaction; and (B) Either: (1) A party to such transaction submitted false or misleading material information to the Committee in connection with the Committee’s consideration of such transaction or omitted material information, including material documents, from information submitted to the Committee; or (2) A party to such transaction or the entity resulting from consummation of such transaction materially breaches a mitigation agreement or condition described in section 721(l)(3)(A), such breach is certified to the Committee by the lead department or agency monitoring and enforcing such agreement or condition as a material breach, and the Committee determines that there are no other adequate and appropriate remedies or enforcement tools available to address such breach. (2)(i) That is an investment where a foreign person is not an excepted investor due to the application of § 800.220(d), any member of the Committee, or his designee at or above the Under Secretary or equivalent level, may file an agency notice to the Committee through the Staff Chairperson regarding such investment if: PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 (A) That member has reason to believe that the transaction is a covered transaction and may raise national security considerations; (B) The Committee has not informed the parties to such transaction in writing that the Committee has concluded all action under section 721 with respect to such transaction; and (C) The President has not announced a decision not to exercise the President’s authority under section 721(d) with respect to such transaction. (ii) No notice filed pursuant to this paragraph (c)(2) shall be made with respect to a transaction more than one year after the completion date of the transaction, unless the Chairperson of the Committee determines, in consultation with other members of the Committee, that because the foreign person no longer meets all the criteria set forth in § 800.220(a)(1), (2), or (3)(i) through (iii) the transaction may threaten to impair the national security of the United States, and in no event shall an agency notice under this paragraph be made with respect to such a transaction more than three years after the completion date of the transaction. (d) Notices filed under paragraph (c) of this section are deemed accepted upon their receipt by the Staff Chairperson. No agency notice under paragraph (c)(1) of this section shall be made with respect to a transaction more than three years after the completion date of the transaction, unless the Chairperson of the Committee, in consultation with other members of the Committee, files such an agency notice. (e) No communications other than those described in paragraphs (a) and (c) of this section shall constitute the filing or submitting of a notice for purposes of section 721. (f) Upon receipt of the electronic copy of a notice filed under paragraph (a) of this section, including the certification required by § 800.502(l), the Staff Chairperson shall promptly inspect such notice for completeness. (g) Parties to a transaction are encouraged to consult with the Committee in advance of filing a notice and, in appropriate cases, to file with the Committee a draft notice or other appropriate documents to aid the Committee’s understanding of the transaction and to provide an opportunity for the Committee to request additional information to be included in the notice. Any such prenotice consultation should take place, or any draft notice should be provided, at least five business days before the filing of a voluntary notice. All information and documentary material made available to the Committee pursuant to E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules this paragraph shall be considered to have been filed with the President or the President’s designee for purposes of section 721(c) and § 800.802. (h) Information and other documentary material provided by the parties to the Committee after the filing of a voluntary notice under this section shall be part of the notice, and shall be subject to the certification requirements of § 800.502(m). (i) For any voluntarily submitted draft or formal written notice that includes a stipulation pursuant to section § 800.502(o) that a transaction is a covered transaction, the Committee shall provide comments on a draft or formal written notice or accept a formal written notice of a covered transaction not later than the date that is 10 business days after the date of submission of the draft or formal written notice. (j) No party to a transaction may file a notice pursuant to paragraph (a) of this section if the transaction has been subject to a declaration submitted pursuant to subpart D and the Committee has not yet taken action with respect to the transaction pursuant to § 800.407. khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.502 Contents of voluntary notices. (a) If the parties to a transaction file a voluntary notice, they shall provide in detail the information set out in this section, which must be accurate and complete with respect to all parties and to the transaction. (See also paragraph (l) of this section and § 800.204 regarding certification requirements.) (b) If fewer than all the parties to a transaction file a voluntary notice, for example in the case of a hostile takeover, each notifying party shall provide the information set out in this section with respect to itself and, to the extent known or reasonably available to it, with respect to each non-notifying party. (c) A voluntary notice filed pursuant to § 800.501 shall describe or provide, as applicable: (1) The transaction in question, including: (i) A summary setting forth the essentials of the transaction, including a statement of the purpose of the transaction, and its scope, both within and outside of the United States; (ii) The nature of the transaction, for example, whether the acquisition is by merger, consolidation, the purchase of voting interest, or otherwise; (iii) The name, United States address (if any), website address (if any), nationality (for individuals) or place of incorporation or other legal organization (for entities), and address of the VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 principal place of business of each foreign person that is a party to the transaction; (iv) The name, address, website address (if any), principal place of business, and place of incorporation or other legal organization of the U.S. business that is the subject of the transaction; (v) The name, address, and nationality (for individuals) or place of incorporation or other legal organization (for entities) of: (A) The immediate parent, the ultimate parent, and each intermediate parent, if any, of the foreign person that is a party to the transaction; (B) Where the ultimate parent is a private company, the ultimate owner(s) of such parent; and (C) Where the ultimate parent is a public company, any shareholder with an interest of greater than five percent in such parent; (vi) The name, address, website address (if any), and nationality (for individuals) or place of incorporation or other legal organization (for entities) of each person that will control the U.S. business being acquired; (vii) The expected date for completion of the transaction, or the date it was completed; (viii) A good faith approximation of the net value of the interest acquired in the U.S. business in U.S. dollars, as of the date of the notice; (ix) The name of any and all financial institutions involved in the transaction, including as advisors, underwriters, or a source of financing for the transaction; (x) A copy of any partnership agreements, integration agreements, or other side agreements relating to the transaction; (xi) A statement as to whether the foreign person will acquire any of the following in the U.S. business: (A) Access to any material nonpublic technical information in the possession of the U.S. business, and if so, a brief explanation of the type of access and type of information; (B) Membership, observer rights, or nomination rights as set forth in § 800.211(b)(2), and if so, a statement as to the composition of the board or other body both before and after the completion date of the transaction; (C) Any involvement, other than through voting shares, in substantive decisionmaking of the U.S. business regarding critical infrastructure, critical technologies, or sensitive personal data as set forth in § 800.211(b)(3); (2) With respect to a transaction structured as an acquisition of assets of a U.S. business, a detailed description of the assets of the U.S. business being PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 50201 acquired, including the approximate value of those assets in U.S. dollars; (3) With respect to the U.S. business that is the subject of the transaction and any entity of which that U.S. business is a parent (unless that entity is excluded from the scope of the transaction): (i) Their respective business activities, as, for example, set forth in annual reports, and the product or service categories of each, including an estimate of U.S. market share for such product or service categories and the methodology used to determine market share, a list of direct competitors for those primary product or service categories, and their NAICS Code, if any; (ii) The street address (and mailing address, if different) within the United States and website address (if any) of each facility that is manufacturing classified or unclassified products or producing services described in paragraph (c)(3)(v) of this section, and their respective CAGE Codes, their DUNS number; (iii) Each contract (identified by agency and number) that is currently in effect or was in effect within the past five years with any agency of the U.S. Government involving any information, technology, or data that is classified under Executive Order 12958, as amended, its estimated final completion date, and the name, office, and telephone number of the contracting official; (iv) Any other contract (identified by agency and number) that is currently in effect or was in effect within the past three years with any U.S. Government agency or component with national defense, homeland security, or other national security responsibilities, including law enforcement responsibility as it relates to defense, homeland security, or national security, its estimated final completion date, and the name, office, and telephone number of the contracting official; (v) Any products or services (including research and development): (A) That it supplies, directly or indirectly, to any agency of the U.S. Government, including as a prime contractor or first tier subcontractor, a supplier to any such prime contractor or subcontractor, or, if known by the parties filing the notice, a subcontractor at any tier; and (B) If known by the parties filing the notice, for which it is a single qualified source (i.e., other acceptable suppliers are readily available to be so qualified) or a sole source (i.e., no other supplier has needed technology, equipment, and manufacturing process capabilities) for any such agencies and whether there are E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 50202 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules other suppliers in the market that are available to be so qualified; (vi) Any products or services (including research and development) that: (A) It supplies to third parties and it knows are rebranded by the purchaser or incorporated into the products of another entity, and the names or brands under which such rebranded products or services are sold; and (B) In the case of services, it provides on behalf of, or under the name of, another entity, and the name of any such entities; (vii) For the prior three years— (A) A list of priority rated contracts or orders under DPAS regulation that the U.S. business that is the subject of the transaction has received and the level of priority of such contracts or orders (‘‘DX’’ or ‘‘DO’’); and (B) A list of such priority rated contracts or orders that the U.S. business has placed with other entities and the level of priority of such contracts or orders, and the acquiring party’s plan to ensure that any new entity formed at the completion of the notified transaction (or the U.S. business, if no new entity is formed) complies with the DPAS regulations; (viii) A description and copy of the cyber security plan, if any, that will be used to protect against cyber attacks on the operation, design, and development of the U.S. business’s services, networks, systems, data storage (including the collection or maintenance of sensitive personal data), and facilities; (ix) A description of whether the U.S. business performs any of the functions, if any, as set forth in Column 2 of appendix A to part 800. This statement shall include a description of such functions, including the applicable covered investment critical infrastructure; (x) A description of whether it produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies; (xi) A description of whether it maintains or collects sensitive personal data, including: (A) The category or categories of sensitive personal data specified in § 800.241 that the U.S. business maintains or collects or intends to maintain or collect; (B) For each category of sensitive personal data, the approximate number of total unique persons from whom the sensitive personal data is currently maintained or has been collected during the previous three years, if known; (C) A description of how the U.S. business targets or tailors its products or VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 services to U.S. Government personnel or contractors (as described in § 800.247) about whom it collects sensitive personal data, if applicable; (D) The commercial rationale of the U.S. business for maintaining or collecting such sensitive personal data and a description of how the U.S. business uses and protects such sensitive personal data, including a description of how decisions regarding the use of sensitive personal data are made, and by whom; (E) A description of the U.S. business’s policies and practices regarding the sale, license, or transfer of, or grant of access to, sensitive personal data to third parties, including a copy of any notice provided to customers regarding the use and transfer of sensitive personal data; (F) A description of the U.S. business’s policies and practices regarding retention of sensitive personal data; and (G) Any plans by the foreign party to the transaction to alter any of the foregoing; (4) Whether the U.S. business that is being acquired produces or trades in: (i) Items that are subject to the EAR and, if so, a description (which may group similar items into general product categories) of the items and a list of the relevant commodity classifications set forth on the CCL (i.e., Export Control Classification Numbers (ECCNs) or EAR99 designation); (ii) Defense articles and defense services, and related technical data covered by the USML in the ITAR, and, if so, the category of the USML; articles and services for which commodity jurisdiction requests (22 CFR 120.4) are pending; and articles and services (including those under development) that may be designated or determined in the future to be defense articles or defense services pursuant to 22 CFR 120.3; (iii) Products and technology that are subject to export authorization administered by the Department of Energy (10 CFR part 810), or export licensing requirements administered by the Nuclear Regulatory Commission (10 CFR part 110); (iv) Select Agents and Toxins (7 CFR part 331, 9 CFR part 121, and 42 CFR part 73); or (v) Emerging and foundational technologies controlled pursuant to section 1758 of the Export Control Reform Act of 2018 (codified at 50 U.S.C. 4817); (5) Whether the U.S. business that is the subject of the transaction: (i) Possesses any licenses, permits, or other authorizations other than those PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 under the regulatory authorities listed in paragraph (c)(4) of this section that have been granted by an agency of the U.S. Government (if applicable, identification of the relevant licenses shall be provided); or (ii) Has technology that has military applications (if so, an identification of such technology and a description of such military applications shall be included); (6) With respect to the foreign person engaged in the transaction and its parents: (i) The business or businesses of the foreign person and its ultimate parent, as such businesses are described, for example, in annual reports, and the CAGE codes, NAICS codes, and DUNS numbers, if any, for such businesses; (ii) The plans of the foreign person for the U.S. business with respect to: (A) Reducing, eliminating, or selling research and development facilities; (B) Changing product quality; (C) Shutting down or moving outside of the United States facilities that are within the United States; (D) Consolidating or selling product lines or technology; (E) Modifying or terminating contracts referred to in paragraphs (c)(3)(iii) and (iv) of this section; or (F) Eliminating domestic supply by selling products solely to non-domestic markets; (iii) Whether the foreign person is controlled by or acting on behalf of a foreign government, including without limitation as an agent or representative, or in some similar capacity, and if so, the identity of the foreign government; (iv) Whether a foreign government or a person controlled by or acting on behalf of a foreign government: (A) Has or controls ownership interests, including contingent equity interest, of the acquiring foreign person or any parent of the acquiring foreign person, and if so, the nature and amount of any such interests, and with regard to contingent equity interest, the terms and timing of conversion; (B) Has the right or power to appoint any of the principal officers or the members of the board of directors (including other persons who perform the duties usually associated with such titles) of the foreign person that is a party to the transaction or any parent of that foreign person; (C) Holds any other contingent interest (for example, such as might arise from a lending transaction) in the foreign acquiring party and, if so, the rights that are covered by this contingent interest, and the manner in which they would be enforced; or (D) Has any other affirmative or negative rights or powers that could be E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules relevant to the Committee’s determination of whether the notified transaction is a foreign governmentcontrolled transaction, and if there are any such rights or powers, their source (for example, a ‘‘golden share,’’ shareholders agreement, contract, statute, or regulation) and the mechanics of their operation; (v) Any formal or informal arrangements among foreign persons that hold an ownership interest in the foreign person that is a party to the transaction or between such foreign person and other foreign persons to act in concert on particular matters affecting the U.S. business that is the subject of the transaction, and provide a copy of any documents that establish those rights or describe those arrangements; (vi) For each member of the board of directors or similar body (including external directors and other persons who perform the duties usually associated with such titles) and officers (including president, senior vice president, executive vice president, and other persons who perform duties normally associated with such titles) of the acquiring foreign person engaged in the transaction and its immediate, intermediate, and ultimate parents, and for any individual having an ownership interest of five percent or more in the acquiring foreign person engaged in the transaction and in the foreign person’s ultimate parent, the following information: (A) A curriculum vitae or similar professional synopsis, provided as part of the main notice, and (B) The following ‘‘personal identifier information,’’ which, for privacy reasons, and to ensure limited distribution, shall be set forth in a separate document, not in the main notice: (1) Full name (last, first, middle name); (2) All other names and aliases used; (3) Business address; (4) Country and city of residence; (5) Date of birth, in the format MM/ DD/YYYY; (6) Place of birth; (7) U.S. Social Security number (where applicable); (8) National identity number, including nationality, date and place of issuance, and expiration date (where applicable); (9) U.S. or foreign passport number (if more than one, all must be fully disclosed), nationality, date and place of issuance, and expiration date and, if a U.S. visa holder, the visa type and number, date and place of issuance, and expiration date; and VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 (10) Dates and nature of foreign government and foreign military service (where applicable), other than military service at a rank below the top two noncommissioned ranks of the relevant foreign country; and (vii) The following ‘‘business identifier information’’ for the immediate, intermediate, and ultimate parents of the foreign person engaged in the transaction, including their main offices and branches: (A) Business name, including all names under which the business is known to be or has been doing business; (B) Business address; (C) Business phone number, website address, and email address; and (D) Employer identification number or other domestic tax or corporate identification number. (d) The voluntary notice shall list any filings with, or reports to, agencies of the U.S. Government that have been or will be made with respect to the transaction prior to its completion, indicating the agencies concerned, the nature of the filing or report, the date on which it was filed or the estimated date by which it will be filed, and a relevant contact point and/or telephone number within the agency, if known. (1) Example: Corporation A, a foreign person, intends to acquire Corporation X, which is wholly owned and controlled by a U.S. national and which has a Facility Security Clearance under the Department of Defense Industrial Security Program. See Department of Defense, ‘‘Industrial Security Regulation,’’ DOD 5220.22–R, and ‘‘Industrial Security Manual for Safeguarding Classified Information,’’ DOD 5220.22–M. Corporation X accordingly files a revised Form DD SF– 328, and enters into discussions with the Defense Security Service about effectively insulating its facilities from the foreign person. Corporation X may also have made filings with the U.S. Securities and Exchange Commission, the Department of Commerce, the Department of State, or other federal departments and agencies. Paragraph (d) of this section requires that certain specific information about these filings be reported to the Committee in a voluntary notice. (e) In the case of the establishment of a joint venture in which one or more of the parties is contributing a U.S. business, information for the voluntary notice shall be prepared on the assumption that the foreign person that is party to the joint venture has made an acquisition of the existing U.S. business that the other party to the joint venture is contributing or transferring to the joint venture. The voluntary notice shall PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 50203 describe the name and address of the joint venture and the entities that established, or are establishing, the joint venture. (f) In the case of the acquisition of some but not all of the assets of an entity, paragraph (c) of this section requires submission of the specified information only with respect to the assets of the entity that have been or are proposed to be acquired. (g) Persons filing a voluntary notice shall, with respect to the foreign person that is a party to the transaction, its immediate parent, the U.S. business that is the subject of the transaction, and each entity of which the foreign person is a parent, append to the voluntary notice the most recent annual report of each such entity, in English. Separate reports are not required for any entity whose financial results are included within the consolidated financial results stated in the annual report of any parent of any such entity, unless the transaction involves the acquisition of a U.S. business whose parent is not being acquired, in which case the notice shall include the most recent audited financial statement of the U.S. business that is the subject of the transaction. If a U.S. business does not prepare an annual report and its financial results are not included within the consolidated financial results stated in the annual report of a parent, the filing shall include, if available, the entity’s most recent audited financial statement (or, if an audited financial statement is not available, the unaudited financial statement). (h) Persons filing a voluntary notice shall, during the time that the matter is pending before the Committee or the President, promptly advise the Staff Chairperson of any material changes in plans, facts and circumstances addressed in the notice, and information provided or required to be provided to the Committee under this section, and shall file amendments to the notice to reflect such material changes. Such amendments shall become part of the notice filed by such persons under § 800.501, and the certifications required under paragraphs (l) and (m) of this section shall apply to such amendments. (i) Persons filing a voluntary notice shall include a copy of the most recent asset or stock purchase agreement or other document establishing the agreed terms of the transaction. (j) Persons filing a voluntary notice shall include: (1) Complete organizational charts, both pre- and post-transaction, including without limitation, information that identifies the name, E:\FR\FM\24SEP3.SGM 24SEP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 50204 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules principal place of business and place of incorporation or other legal organization (for entities), nationality (for individuals), and ownership percentage (expressed in terms of both voting and economic interest, if different) for each of the following: (i) The immediate parent, the ultimate parent, and each intermediate parent, if any, of each foreign person that is a party to the transaction; (ii) Where the ultimate parent is a private company, the ultimate owner(s) of such parent; (iii) Where the ultimate parent is a public company, any shareholder with an interest of greater than five percent in such parent; and (iv) The U.S. business that is the subject of the transaction, both before and after completion of the transaction; and (2) The opinion of the person regarding whether: (i) It is a foreign person; (ii) It is controlled by a foreign government; (iii) A foreign government holds a substantial interest in the foreign person that is party to the transaction; and (iv) The transaction has resulted or could result in a covered control transaction or a covered investment, and the reasons for its view, focusing in particular on any powers (for example, by virtue of a shareholders agreement, contract, statute, or regulation) that the foreign person will have with regard to the U.S. business, and how those powers can or will be exercised, or any other access, rights, or involvement the foreign person will have in a U.S. business with respect to critical technologies, critical infrastructure, or sensitive personal data. (k) Persons filing a voluntary notice shall include information as to whether: (1) Any party to the transaction is, or has been, a party to a mitigation agreement entered into or condition imposed under section 721, and if so, shall specify the date and purpose of such agreement or condition and the U.S. Government signatories; and (2) Any party to the transaction (including such party’s parents, subsidiaries, or entities under common control with the party) has been a party to a transaction previously notified to the Committee. (l) Each party filing a voluntary notice shall provide a certification of the notice consistent with § 800.204. A sample certification may be found on the Committee’s section of the Department of the Treasury website, currently available at https://home.treasury.gov/ policy-issues/international/the- VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 committee-on-foreign-investment-in-theunited-states-cfius. (m) At the conclusion of a review or investigation, each party that has filed additional information subsequent to the original notice shall file a final certification. (See § 800.204.) A sample certification may be found at the Committee’s section of the Department of the Treasury website, currently available at https://home.treasury.gov/ policy-issues/international/thecommittee-on-foreign-investment-in-theunited-states-cfius. (n) Parties filing a voluntary notice shall include with the notice a list identifying each document provided as part of the notice, including all documents provided as attachments or exhibits to the narrative response. (o) A party filing a voluntary notice may stipulate that the transaction is a covered transaction and, if the party stipulates that the transaction is a covered transaction, that the transaction is a foreign government-controlled transaction. A stipulation offered by any party pursuant to this section must be accompanied by a detailed description of the basis for the stipulation. The required description of the basis shall include, but is not limited to, discussion of all relevant information responsive to paragraphs (c)(6)(iii) through (v) of this section. A party that offers such a stipulation acknowledges that the Committee and the President are entitled to rely on such stipulation in determining whether the transaction is a covered transaction, a foreign government-controlled transaction, and/ or subject to mandatory declaration or notice for the purposes of section 721 and all authorities thereunder, and waives the right to challenge any such determination. Neither the Committee nor the President is bound by any such stipulation, nor does any such stipulation limit the ability of the Committee or the President to act on any authority provided under section 721 with respect to any covered transaction. § 800.503 period. Beginning of a 45-day review (a) The Staff Chairperson of the Committee shall accept a voluntary notice the next business day after the Staff Chairperson has: (1) Determined that the notice complies with § 800.502; and (2) Disseminated the notice to all members of the Committee. (b) A 45-day period for review of a transaction shall commence on the date on which the voluntary notice has been accepted, agency notice has been received by the Staff Chairperson of the PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 Committee, or the Chairperson of the Committee has requested a notice pursuant to § 800.501(b). Such review shall end no later than the forty-fifth day after it has commenced, or if the forty-fifth day is not a business day, no later than the next business day after the forty-fifth day. (c) The Staff Chairperson shall promptly advise in writing all parties to a transaction that have filed a voluntary notice of: (1) The acceptance of the notice; (2) The date on which the review begins; and (3) The designation of any lead agency or agencies. (d) Within two business days after receipt of an agency notice by the Staff Chairperson, the Staff Chairperson shall send written advice of such notice to the parties to the transaction that is subject to the notice. Such written advice shall identify the date on which the review began. (e) The Staff Chairperson shall promptly circulate to all Committee members any draft pre-filing notice, any agency notice, any complete notice, and any subsequent information filed by the parties. § 800.504 Deferral, rejection, or disposition of certain voluntary notices. (a) The Committee, acting through the Staff Chairperson, may: (1) Reject any voluntary notice that does not comply with § 800.501 or § 800.502 and so inform the parties promptly in writing; (2) Reject any voluntary notice at any time, and so inform the parties promptly in writing, if, after the notice has been submitted and before action by the Committee or the President has been concluded: (i) There is a material change in the transaction as to which notification has been made; or (ii) Information comes to light that contradicts material information provided in the notice by the parties; (3) Reject any voluntary notice at any time after the notice has been accepted, and so inform the parties promptly in writing, if the party or parties that have submitted the voluntary notice do not provide follow-up information requested by the Staff Chairperson within three business days of the request, or within a longer time frame if the parties so request in writing and the Staff Chairperson grants that request in writing; or (4) Reject any voluntary notice before the conclusion of a review or investigation, and so inform the parties promptly in writing, if one of the parties submitting the voluntary notice has not E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 submitted the final certification required by § 800.502(m). (b) Notwithstanding the authority of the Staff Chairperson under paragraph (a) of this section to reject an incomplete notice, the Staff Chairperson may defer acceptance of the notice, and the beginning of the review period specified by § 800.503, to obtain any information required under this section that has not been submitted by the notifying party or parties or other parties to the transaction. Where necessary to obtain such information, the Staff Chairperson may inform any non-notifying party or parties that notice has been filed with respect to a proposed transaction involving the party, and request that certain information required under this section, as specified by the Staff Chairperson, be provided to the Committee within seven days after receipt of the Staff Chairperson’s request. (c) The Staff Chairperson shall notify the parties when the Committee has found that the transaction that is the subject of a voluntary notice is not a covered transaction. (d) Examples: (1) Example 1. The Staff Chairperson receives a joint notice from Corporation A, a foreign person, and Corporation X, a company that is owned and controlled by U.S. nationals, with respect to Corporation A’s intent to purchase all of the shares of Corporation X. The joint notice does not contain any information described under § 800.502 concerning classified materials and products or services supplied to the U.S. military services. The Staff Chairperson may reject the notice or defer the start of the review period until the parties have supplied the omitted information. (2) Example 2. Same facts as in the first sentence of Example 1 of this section, except that the joint notice indicates that Corporation A does not intend to purchase Corporation X’s Division Y, which is engaged in classified work for a U.S. Government agency. Corporations A and X notify the Committee on the 40th day of the 45-day notice period that Division Y will also be acquired by Corporation A. This fact constitutes a material change with respect to the transaction as originally notified, and the Staff Chairperson may reject the notice. (3) Example 3. The Staff Chairperson receives a joint notice by Corporation A, a foreign person, and Corporation X, a U.S. business, indicating that Corporation A intends to purchase five percent of the voting securities of Corporation X. Under the particular facts and circumstances presented, the Committee concludes that Corporation A’s purchase of this interest in Corporation X could not result in a covered investment in or foreign control of Corporation X. The Staff Chairperson shall advise the parties in writing that the transaction as presented is not subject to section 721. (4) Example 4. The Staff Chairperson receives a voluntary notice involving the VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 acquisition by Company A, a foreign person, of the entire interest in Company X, a U.S. business. The notice mentions the involvement of a second foreign person in the transaction, Company B, but states that Company B is merely a passive investor in the transaction. During the course of the review, the parties provide information that clarifies that Company B has the right to appoint two members of Company X’s board of directors. This information contradicts the material assertion in the notice that Company B is a passive investor. The Committee may reject this notice without concluding review under section 721. § 800.505 Determination of whether to undertake an investigation. (a) After a review of a notified transaction under § 800.503, the Committee shall undertake an investigation of any transaction that it has determined to be a covered transaction if: (1) A member of the Committee (other than a member designated as ex officio under section 721(k)) advises the Staff Chairperson that the member believes that the transaction threatens to impair the national security of the United States and that the threat has not been mitigated; or (2) The lead agency recommends, and the Committee concurs, that an investigation be undertaken. (b) The Committee shall also undertake, after a review of a covered transaction under § 800.503, an investigation to determine the effects on national security of any covered transaction that: (1) Is a foreign government-controlled transaction; or (2) Would result in control by a foreign person of critical infrastructure of or within the United States, if the Committee determines that the transaction could impair the national security and such impairment has not been mitigated. (c) The Committee shall undertake an investigation as described in paragraph (b) of this section unless the Chairperson of the Committee (or the Deputy Secretary of the Treasury) and the head of any lead agency (or his or her delegee at the deputy level or equivalent) designated by the Chairperson determine on the basis of the review that the covered transaction will not impair the national security of the United States. § 800.506 Determination not to undertake an investigation. If the Committee determines, during the review period described in § 800.503, not to undertake an investigation of a notified covered transaction, action under section 721 shall be concluded. An official at the PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 50205 Department of the Treasury shall promptly inform the parties to a covered transaction in writing of a determination of the Committee not to undertake an investigation and to conclude action under section 721. § 800.507 Commencement of investigation. (a) If it is determined that an investigation should be undertaken, such investigation shall commence no later than the end of the review period described in § 800.503. (b) An official of the Department of the Treasury shall promptly inform the parties to a covered transaction in writing of the commencement of an investigation. § 800.508 Completion or termination of investigation and report to the President. (a) Subject to paragraph (e) of this section, the Committee shall complete an investigation no later than the fortyfifth day after the date the investigation commences, or, if the forty-fifth day is not a business day, no later than the next business day after the forty-fifth day. (b) Upon completion or termination of any investigation, the Committee shall send a report to the President requesting the President’s decision if: (1) The Committee recommends that the President suspend or prohibit the transaction; (2) The Committee is unable to reach a decision on whether to recommend that the President suspend or prohibit the transaction; or (3) The Committee requests that the President make a determination with regard to the transaction. (c) In circumstances when the Committee sends a report to the President requesting the President’s decision with respect to a covered transaction, such report shall include information relevant to sections 721(d)(4)(A) and (B), and shall present the Committee’s recommendation. If the Committee is unable to reach a decision to present a single recommendation to the President, the Chairperson of the Committee shall submit a report of the Committee to the President setting forth the differing views and presenting the issues for decision. (d) Upon completion or termination of an investigation, if the Committee determines to conclude all deliberative action under section 721 with regard to a notified covered transaction without sending a report to the President, action under section 721 shall be concluded. An official at the Department of the Treasury shall promptly advise the parties to such a transaction in writing of a determination to conclude action. E:\FR\FM\24SEP3.SGM 24SEP3 50206 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules (e) In extraordinary circumstances, the Chairperson may, upon a written request signed by the head of a lead agency, extend an investigation for one 15-day period. A request to extend an investigation must describe, with particularity, the extraordinary circumstances that warrant the Chairperson extending the investigation. The authority of the head of a lead agency to request the extension of an investigation may not be delegated to any person other than the deputy head (or equivalent thereof) of the lead agency. If the Chairperson extends an investigation pursuant to this paragraph with respect to a covered transaction, the Committee shall promptly notify the parties to the transaction of the extension. (f) For purposes of paragraph (e) of this section, ‘‘extraordinary circumstances’’ means circumstances for which extending an investigation is necessary and the appropriate course of action due to a force majeure event or to protect the national security of the United States. khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.509 Withdrawal of notices. (a) A party (or parties) to a transaction that has filed notice under § 800.501(a) may request in writing, at any time prior to conclusion of all action under section 721, that such notice be withdrawn. Such request shall be directed to the Staff Chairperson and shall state the reasons why the request is being made. Such requests will ordinarily be granted, unless otherwise determined by the Committee. An official of the Department of the Treasury will promptly advise the parties to the transaction in writing of the Committee’s decision. (b) Any request to withdraw an agency notice by the agency that filed it shall be in writing and shall be effective only upon approval by the Committee. An official of the Department of the Treasury shall advise the parties to the transaction in writing of the Committee’s decision to approve the withdrawal request within two business days of the Committee’s decision. (c) In any case where a request to withdraw a notice is granted under paragraph (a) of this section: (1) The Staff Chairperson, in consultation with the Committee, shall establish, as appropriate: (i) A process for tracking actions that may be taken by any party to the covered transaction before notice is refiled under § 800.501; and (ii) Interim protections to address specific national security concerns with the transaction identified during the VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 review or investigation of the transaction. (2) The Staff Chairperson shall specify a time frame, as appropriate, for the parties to resubmit a notice and shall advise the parties of that time frame in writing. (d) A notice of a transaction that is submitted pursuant to paragraph (c)(2) of this section shall be deemed a new notice for purposes of the regulations in this part, including § 800.701. Subpart F—Committee Procedures § 800.601 General. (a) In any assessment, review, or investigation of a covered transaction, the Committee should consider the factors specified in section 721(f) and, as appropriate, require parties to provide to the Committee the information necessary to consider such factors. The Committee’s assessment, review, or investigation (if necessary) shall examine, as appropriate, whether: (1) The transaction is a covered transaction; (2) There is credible evidence to support a belief that any foreign person party to a covered transaction might take action that threatens to impair the national security of the United States; and (3) Provisions of law, other than section 721 and the International Emergency Economic Powers Act, provide adequate and appropriate authority to protect the national security of the United States. (b) During an assessment, review, or investigation, the Staff Chairperson may invite the parties to a notified transaction to attend a meeting with the Committee staff to discuss and clarify issues pertaining to the transaction. During an investigation, a party to the transaction under investigation may request a meeting with the Committee staff; such a request ordinarily will be granted. (c) The Staff Chairperson shall be the point of contact for receiving material filed with the Committee, including notices. (d) Where more than one lead agency is designated, communications on material matters between a party to the transaction and a lead agency shall include all lead agencies designated with regard to those matters. (e) The parties’ description of a transaction in a declaration or notice does not limit the ability of the Committee to, as appropriate, assess, review, or investigate, or exercise any other authorities available under section 721 with respect to any covered transaction that the Committee PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 identifies as having been notified to the Committee based upon the facts set forth in the declaration or notice, any additional information provided to the Committee subsequent to the original declaration or notice, or any other information available to the Committee. § 800.602 Role of the Secretary of Labor. In response to a request from the Chairperson of the Committee, the Secretary of Labor shall identify for the Committee any risk mitigation provisions proposed to or by the Committee that would violate U.S. employment laws or require a party to violate U.S. employment laws. The Secretary of Labor shall serve no policy role on the Committee. § 800.603 Materiality. The Committee generally will not consider as material minor inaccuracies, omissions, or changes relating to financial or commercial factors not having a bearing on national security. § 800.604 Tolling of deadlines during lapse in appropriations. Any deadline or time limitation under subparts D or E imposed on the Committee shall be tolled during a lapse in appropriations. Subpart G—Finality of Action § 800.701 721. Finality of actions under section (a) All authority available to the President or the Committee under section 721(d), including without limitation divestment authority, shall remain available at the discretion of the President with respect to: (1) Covered control transactions proposed or pending on or after August 23, 1988; (2) Transactions that, between November 10, 2018, and [EFFECTIVE DATE], fell within the scope of part 801 of this title; and (3) Covered investments proposed or pending after the effective date. (b) Subject to § 800.501(c)(1)(ii), such authority shall not be exercised if: (1) The Committee, through its Staff Chairperson, has advised a party (or the parties) in writing that a particular transaction with respect to which a voluntary notice or a declaration has been filed is not a covered transaction; (2) The parties to the transaction have been advised in writing pursuant to § 800.407(a)(4), § 800.506, or § 800.508(d) that the Committee has concluded all action under section 721 with respect to the covered transaction; or (3) The President has previously announced, pursuant to section 721(d), E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules his decision not to exercise his authority under section 721 with respect to the covered transaction. (c) Divestment or other relief under section 721 shall not be available with respect to transactions that were completed prior to August 23, 1988. Subpart H—Provision and Handling of Information khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 800.801 Obligation of parties to provide information. (a) Parties to a transaction that is notified or declared under subparts D or E, or a transaction for which no notice or declaration has been submitted and for which the Staff Chairperson has requested information to assess whether the transaction is a covered transaction, shall provide information to the Staff Chairperson that will enable the Committee to conduct a full assessment, review, and/or investigation of the proposed transaction, and shall promptly advise the Staff Chairperson of any material changes in plans or information pursuant to § 800.403(d) or § 800.502(h). If deemed necessary by the Committee, information may be obtained from parties to a transaction or other persons through subpoena or otherwise, pursuant to the Defense Production Act Reauthorization of 2003, as amended, Public Law 108–195 (50 U.S.C. 4555(a)). (b) Documentary materials or information required or requested to be filed with the Committee under this part shall be submitted in English. Supplementary materials, such as annual reports, written in a foreign language, shall be submitted in certified English translation. (c) Any information filed with the Committee in connection with any action for which a report is required pursuant to section 721(l)(3)(B) with respect to the implementation of a mitigation agreement or condition described in section 721(l)(1)(A) shall be accompanied by a certification that complies with the requirements of section 721(n) and § 800.204. A sample certification may be found at the Committee’s section of the Department of the Treasury website, currently available at https://home.treasury.gov/ policy-issues/international/thecommittee-on-foreign-investment-in-theunited-states-cfius. § 800.802 Confidentiality. (a) Except as provided in paragraph (b) of this section, any information or documentary material submitted or filed with the Committee pursuant to this part, including information or documentary material filed pursuant to VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 § 800.501(g) shall be exempt from disclosure under the Freedom of Information Act, as amended (5 U.S.C. 552, et seq.), and no such information or documentary material may be made public. (b) Paragraph (a) of this section shall not prohibit disclosure of the following: (1) Information relevant to any administrative or judicial action or proceeding; (2) Information to Congress or to any duly authorized committee or subcommittee of Congress; (3) Information important to the national security analysis or actions of the Committee to any domestic governmental entity, or to any foreign governmental entity of a United States ally or partner, under the exclusive direction and authorization of the Chairperson, only to the extent necessary for national security purposes, and subject to appropriate confidentiality and classification requirements; or (4) Information that the parties have consented to be disclosed to third parties. (c) This section shall continue to apply with respect to information and documentary material submitted or filed with the Committee in any case where: (1) Action has concluded under section 721 concerning a notified transaction; (2) A request to withdraw a notice or a declaration is granted under § 800.509 or § 800.406(c), respectively, or where a notice or a declaration has been rejected under § 800.504(a) or § 800.406(a), respectively; (3) The Committee determines that a notified or declared transaction is not a covered transaction; or (4) Such information or documentary material was filed pursuant to subpart D and the parties do not subsequently file a notice pursuant to subpart E. (d) Nothing in paragraph (a) of this section shall be interpreted to prohibit the public disclosure by a party of documentary material or information that it has submitted or filed with the Committee. Any such documentary material or information so disclosed may subsequently be reflected in the public statements of the Chairperson, who is authorized to communicate with the public and the Congress on behalf of the Committee, or of the Chairperson’s designee. (e) The provisions of the Defense Production Act Reauthorization of 2003, as amended (50 U.S.C. 4555(d)) relating to fines and imprisonment shall apply with respect to the disclosure of information or documentary material PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 50207 filed with the Committee under these regulations. Subpart I—Penalties and Damages § 800.901 Penalties and damages. (a) Any person who submits a material misstatement or omission in a declaration or notice, or makes a false certification under § 800.404, § 800.405, or § 800.502 may be liable to the United States for a civil penalty not to exceed $250,000 per violation. The amount of the penalty imposed for a violation shall be based on the nature of the violation. (b) Any person who fails to comply with the requirements of § 800.401 may be liable to the United States for a civil penalty not to exceed $250,000 per violation or the value of the transaction, whichever is greater. The amount of the penalty imposed for a violation shall be based on the nature of the violation. (c) Any person who, after October 11, 2018, violates, intentionally or through gross negligence, a material provision of a mitigation agreement entered into before October 11, 2018 with, a material condition imposed before October 11, 2018 by, or an order issued before October 11, 2018 by, the United States under section 721(l) may be liable to the United States for a civil penalty not to exceed $250,000 per violation or the value of the transaction, whichever is greater. Any person who violates a material provision of a mitigation agreement entered into on or after October 11, 2018 with, a material condition imposed on or after October 11, 2018 by, or an order issued on or after October 11, 2018 by, the United States under section 721(l) may be liable to the United States for a civil penalty not to exceed $250,000 per violation or the value of the transaction, whichever is greater. The amount of the penalty imposed for a violation shall be based on the nature of the violation. (d) A mitigation agreement entered into or amended under section 721(l) after December 22, 2008, may include a provision providing for liquidated or actual damages for breaches of the agreement. The Committee shall set the amount of any liquidated damages as a reasonable assessment of the harm to the national security that could result from a breach of the agreement. Any mitigation agreement containing a liquidated damages provision shall include a provision specifying that the Committee will consider the severity of the breach in deciding whether to seek a lesser amount than that stipulated in the agreement. (e) A determination to impose penalties under paragraphs (a) through (c) of this section must be made by the E:\FR\FM\24SEP3.SGM 24SEP3 50208 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules Committee. Notice of the penalty, including a written explanation of the penalized conduct and the amount of the penalty, shall be sent to the penalized party electronically and by U.S. mail. (f) Upon receiving notice of the imposition of a penalty under paragraphs (a) through (c) of this section, the penalized party may, within 15 days of receipt of the notice of the penalty, submit a petition for reconsideration to the Staff Chairperson, including a defense, justification, or explanation for the penalized conduct. The Committee will review the petition and issue a final decision within 15 days of receipt of the petition. (g) The penalties and damages authorized in paragraphs (a) through (d) of this section may be recovered in a civil action brought by the United States in federal district court. (h) Section 2 of the False Statements Accountability Act of 1996, as amended (18 U.S.C. 1001), shall apply to all information provided to the Committee under section 721, including by any party to a covered transaction. (i) The penalties and damages available under this section are without prejudice to other penalties, civil or criminal, available under law. (j) The imposition of a civil monetary penalty or damages pursuant to these regulations creates a debt due to the U.S. Government. The Department of the Treasury may take action to collect the penalty or damages assessed if not paid within the time prescribed by the Committee and notified to the applicable party or parties. In addition or instead, the matter may be referred to the Department of Justice for appropriate action to recover the penalty or damages. § 800.902 Effect of lack of compliance. khammond on DSKJM1Z7X2PROD with PROPOSALS3 (a) If, at any time after a mitigation agreement or condition is entered into or imposed under section 721(l), the Committee or a lead agency in coordination with the Staff Chairperson, as the case may be, determines that a party or parties to the agreement or condition are not in compliance with the terms of the agreement or condition, the Committee or a lead agency, in coordination with the Staff Chairperson may, in addition to the authority of the Committee to impose penalties pursuant to section 721(h) and to unilaterally initiate a review of any covered transaction pursuant to section 721(b)(1)(D)(iii): (1) Negotiate a plan of action for the party or parties to remediate the lack of compliance, with failure to abide by the plan or otherwise remediate the lack of compliance serving as the basis for the Committee to find a material breach of the agreement or condition; (2) Require that the party or parties submit a written notice or declaration under clause (i) of section 721(b)(1)(C) with respect to a covered transaction initiated after the date of the determination of noncompliance and before the date that is five years after the date of the determination to the Committee to initiate a review of the transaction under section 721(b); or (3) Seek injunctive relief. Subpart J—Foreign National Security Investment Review Regimes § 800.1001 Determinations. (a) The Chairperson of the Committee, with the agreement of two-thirds of the voting members of the Committee, may determine at any time that a foreign state has established and is effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security. (b) The Chairperson of the Committee may rescind a determination under paragraph (a) of this section if the Chairperson of the Committee determines, with the agreement of twothirds of the voting members of the Committee, that such a rescission is appropriate. (c) The Chairperson of the Committee shall publish a notice of any determination or rescission of a determination under paragraph (a) or (b) of this section, respectively, in the Federal Register. § 800.1002 Effect of determinations. (a) A determination under § 800.1001(a) shall take effect immediately upon publication of a notice of such determination under § 800.1001(c) and remain in effect unless rescinded pursuant to paragraph (b) of this section. (b) A rescission of a determination under § 800.1001(b) shall take effect on the date specified in the notice published under § 800.1001(c). (c) A determination under § 800.1001(a) does not apply to any transaction for which a declaration or notice has been accepted by the Staff Chairperson pursuant to § 800.405(a)(1) or § 800.503(a), respectively. (d) A rescission of a determination under § 800.1001(b) does not apply to any transaction for which: (1) The completion date is prior to the date upon which the rescission of a determination under paragraph (b) of this section becomes effective; or (2) The following has occurred before publication of the rescission of determination under § 800.1001(c): (i) The parties to the transaction have executed a binding written agreement, or other binding document, establishing the material terms of the transaction that is ultimately consummated; (ii) A party has made a public offer to shareholders to buy shares of a U.S. business; or (iii) A shareholder has solicited proxies in connection with an election of the board of directors of a U.S. business or has requested the conversion of convertible voting securities. Appendix A to Part 800—Covered Investment Critical Infrastructure and Functions Related to Covered Investment Critical Infrastructure Column 1—Covered investment critical infrastructure Column 2—Functions related to covered investment critical infrastructure (i) Any: (a) internet protocol network that has access to every other internet protocol network solely via settlement-free peering; or (b) telecommunications service or information service, each as defined in section 3(a)(2) of the Communications Act of 1934 (47 U.S.C. 153), as amended, or fiber optic cable that directly serves any military installation identified in § 802.229. (ii) Any internet exchange point that supports public peering. (i) Own or operate any: (a) internet protocol network that has access to every other internet protocol network solely via settlement-free peering; or (b) telecommunications service or information service, each as defined in section 3(a)(2) of the Communications Act of 1934 (47 U.S.C. 153), as amended, or fiber optic cable that directly serves any military installation identified in § 802.229. (ii) Own or operate any internet exchange point that supports public peering. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules Column 1—Covered investment critical infrastructure Column 2—Functions related to covered investment critical infrastructure (iii) Any submarine cable system requiring a license pursuant to section 1 of the Cable Landing Licensing Act of 1921 (47 U.S.C. 34), as amended, which includes any associated submarine cable, submarine cable landing facilities, and any facility that performs network management, monitoring, maintenance, or other operational functions for such submarine cable system. (iv) Any submarine cable, landing facility, or facility that performs network management, monitoring, maintenance, or other operational function that is part of a submarine cable system described above in item (iii) of Column 1 of appendix A to part 800. (v) Any data center that is collocated at a submarine cable landing point, landing station, or termination station. (vi) Any satellite or satellite system providing services directly to the Department of Defense or any component thereof. (vii) Any industrial resource other than commercially available off-theshelf items, as defined in section 4203(a) of the National Defense Authorization Act for Fiscal Year 1996 (41 U.S.C. 104), as amended, that is manufactured or operated for a Major Defense Acquisition Program, as defined in section 7(b)(2)(A) of the Defense Technical Corrections Act of 1987 (10 U.S.C. 2430), as amended, or a Major System, as defined in 10 U.S.C. 2302d, as amended and: (iii) Own or operate any submarine cable system requiring a license pursuant to section 1 of the Cable Landing Licensing Act of 1921 (47 U.S.C. 34), as amended, which includes any associated submarine cable, submarine cable landing facilities, and any facility that performs network management, monitoring, maintenance, or other operational functions for such submarine cable system. (iv) Supply or service any submarine cable, landing facility, or facility that performs network management, monitoring, maintenance, or other operational function that is part of a submarine cable system described above in item (iii) of Column 1 of appendix A to part 800. (v) Own or operate any data center that is collocated at a submarine cable landing point, landing station, or termination station. (vi) Own or operate any satellite or satellite system providing services directly to the Department of Defense or any component thereof. (vii) As applicable, manufacture any industrial resource other than commercially available off-the-shelf items, as defined in section 4203(a) of the National Defense Authorization Act for Fiscal Year 1996 (41 U.S.C. 104), as amended, or operate any industrial resource that is a facility, in each case, for a Major Defense Acquisition Program, as defined in section 7(b)(2)(A) of the Defense Technical Corrections Act of 1987 (10 U.S.C. 2430), as amended, or a Major System, as defined in 10 U.S.C. 2302d, as amended and: (a) the U.S. business is a ‘‘single source,’’ ‘‘sole source,’’ or ‘‘strategic multisource,’’ to the extent the U.S. business has been notified of such status; or (b) the industrial resource: (1) requires 12 months or more to manufacture; or (2) is a ‘‘long lead’’ item, to the extent the U.S. business has been notified that such industrial resource is a ‘‘long lead’’ item. (viii) Manufacture any industrial resource, other than commercially available off-the-shelf items, as defined in section 4203(a) of the National Defense Authorization Act for Fiscal Year 1996 (41 U.S.C. 104), as amended, pursuant to a ‘‘DX’’ priority rated contract or order under the Defense Priorities and Allocations System regulation (15 CFR part 700, as amended) within 24 months of the transaction in question. (ix) Manufacture any of the following in the United States: (a) specialty metal, as defined in section 842(a)(1)(i) of the John Warner National Defense Authorization Act for Fiscal Year 2007 (10 U.S.C. 2533b), as amended; (b) covered material, as defined in 10 U.S.C. 2533c, as amended; (c) chemical weapons antidote contained in automatic injectors, as described in 10 U.S.C. 2534, as amended; or (d) carbon, alloy, and armor steel plate that is in Federal Supply Class 9515 or is described by specifications of the American Society for Testing Materials or the American Iron and Steel Institute. (x) As applicable, manufacture any industrial resource other than commercially available off-the-shelf items, as defined in 41 U.S.C. 104, as amended, or operate any industrial resource that is a facility, in each case, that has been funded, in whole or in part, by any of the following sources within 60 months of the transaction in question: (a) Defense Production Act of 1950 Title III program (50 U.S.C. 4501, et seq.), as amended; (b) Industrial Base Fund pursuant to section 896(b)(1) of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (10 U.S.C. 2508), as amended; (c) Rapid Innovation Fund pursuant to section 1073 of Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (10 U.S.C. 2359a), as amended; (d) Manufacturing Technology Program pursuant to 10 U.S.C. 2521, as amended; (e) Defense Logistics Agency Warstopper Program, as described in DLA Instruction 1212, Industrial Capabilities Program—Manage the WarStopper Program; or (f) Defense Logistics Agency Surge and Sustainment contract, as described in Subpart 17.93 of the Defense Logistics Acquisition Directive. (xi) Own or operate any system, including facilities, for the generation, transmission, distribution, or storage of electric energy comprising the bulk-power system, as defined in section 215(a)(1) of the Federal Power Act (16 U.S.C. 824o(a)(1)), as amended. (a) the U.S. business is a ‘‘single source,’’ ‘‘sole source,’’ or ‘‘strategic multisource,’’ to the extent the U.S. business has been notified of such status; or (b) the industrial resource: (1) requires 12 months or more to manufacture; or (2) is a ‘‘long lead’’ item, to the extent the U.S. business has been notified that such industrial resource is a ‘‘long lead’’ item. (viii) Any industrial resource, other than commercially available off-theshelf items, as defined in section 4203(a) of the National Defense Authorization Act for Fiscal Year 1996 (41 U.S.C. 104), as amended, that is manufactured pursuant to a ‘‘DX’’ priority rated contract or order under the Defense Priorities and Allocations System regulation (15 CFR part 700, as amended) in the preceding 24 months. (ix) Any facility in the United States that manufactures: (a) specialty metal, as defined in section 842(a)(1)(i) of the John Warner National Defense Authorization Act for Fiscal Year 2007 (10 U.S.C. 2533b), as amended; (b) covered material, as defined in 10 U.S.C. 2533c, as amended; (c) chemical weapons antidote contained in automatic injectors, as described in 10 U.S.C. 2534, as amended; or (d) carbon, alloy, and armor steel plate that is in Federal Supply Class 9515 or is described by specifications of the American Society for Testing Materials or the American Iron and Steel Institute. (x) Any industrial resource other than commercially available off-theshelf items, as defined in 41 U.S.C. 104, as amended, that has been funded, in whole or in part, by any of the following sources in the last 60 months: khammond on DSKJM1Z7X2PROD with PROPOSALS3 50209 (a) Defense Production Act of 1950 Title III program (50 U.S.C. 4501, et seq.), as amended; (b) Industrial Base Fund pursuant to section 896(b)(1) of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (10 U.S.C. 2508), as amended; (c) Rapid Innovation Fund pursuant to section 1073 of Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (10 U.S.C. 2359a), as amended; (d) Manufacturing Technology Program pursuant to 10 U.S.C. 2521, as amended; (e) Defense Logistics Agency Warstopper Program, as described in DLA Instruction 1212, Industrial Capabilities Program—Manage the WarStopper Program; or (f) Defense Logistics Agency Surge and Sustainment contract, as described in Subpart 17.93 of the Defense Logistics Acquisition Directive. (xi) Any system, including facilities, for the generation, transmission, distribution, or storage of electric energy comprising the bulk-power system, as defined in section 215(a)(1) of the Federal Power Act (16 U.S.C. 824o(a)(1)), as amended. VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 E:\FR\FM\24SEP3.SGM 24SEP3 50210 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules Column 1—Covered investment critical infrastructure Column 2—Functions related to covered investment critical infrastructure (xii) Any electric storage resource, as defined in 18 CFR § 35.28(b)(9), as amended, that is physically connected to the bulk-power system. (xii) Own or operate any electric storage resource, as defined in 18 CFR § 35.28(b)(9), as amended, that is physically connected to the bulk-power system. (xiii) Own or operate any facility that provides electric power generation, transmission, distribution, or storage directly to or located on any military installation identified in § 802.229. (xiv) Manufacture or service any industrial control system utilized by: (a) system comprising the bulk-power system as described above in item (xi) of Column 1 of appendix A to part 800; or (b) a facility directly serving any military installation as described above in item (xiii) of Column 1 of appendix A to part 800. (xv) Own or operate: (a) any individual refinery with the capacity to produce 300,000 or more barrels per day (or equivalent) of refined oil or gas products; or (b) one or more refineries with the capacity to produce, in the aggregate, 500,000 or more barrels per day (or equivalent) of refined oil or gas products. khammond on DSKJM1Z7X2PROD with PROPOSALS3 (xiii) Any facility that provides electric power generation, transmission, distribution, or storage directly to or located on any military installation identified in § 802.229. (xiv) Any industrial control system utilized by: (a) system comprising the bulk-power system as described above in item (xi) of Column 1 of appendix A to part 800; or (b) a facility directly serving any military installation as described above in item (xiii) of Column 1 of appendix A to part 800. (xv) Any: (a) any individual refinery with the capacity to produce 300,000 or more barrels per day (or equivalent) of refined oil or gas products; or (b) collection of one or more refineries owned or operated by a single U.S. business with the capacity to produce, in the aggregate, 500,000 or more barrels per day (or equivalent) of refined oil or gas products. (xvi) Any crude oil storage facility with the capacity to hold 30 million barrels or more of crude oil. (xvii) Any: (a) liquefied natural gas (LNG) import or export terminal requiring. (1) approval pursuant to section 3(e) of the Natural Gas Act (15 U.S.C. 717b(e)), as amended, or (2) a license pursuant to section 4 of the Deepwater Port Act of 1974 (33 U.S.C. 1503), as amended; or (b) natural gas underground storage facility or LNG peak-shaving facility requiring a certificate of public convenience and necessity pursuant to section 7 of the Natural Gas Act (15 U.S.C. 717f), as amended. (xviii) Any financial market utility that the Financial Stability Oversight Council has designated as systemically important pursuant to section 804 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5463), as amended. (xix) Any exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f), as amended, that facilitates trading in any national market system security, as defined in 17 CFR § 242.600, as amended, and which exchange during at least four of the preceding six calendar months had: (a) with respect to all national market system securities that are not options, ten percent or more of the average daily dollar volume reported by applicable transaction reporting plans; or (b) with respect to all listed options, fifteen percent or more of the average daily dollar volume reported by applicable national market system plans for reporting transactions in listed options. (xx) Any technology service provider in the Significant Service Provider Program of the Federal Financial Institutions Examination Council that provides core processing services. (xxi) Any rail line and associated connector line designated as part of the Department of Defense’s Strategic Rail Corridor Network. (xxii) Any interstate oil pipeline that: (a) has the capacity to transport: (1) 500,000 barrels per day or more of crude oil, or (2) 90 million gallons per day or more of refined petroleum product; or (b) directly serves the strategic petroleum reserve, as defined in section 152 of the Energy Policy and Conservation Act (42 U.S.C. 6232), as amended. (xxiii) Any interstate natural gas pipeline with an outside diameter of 20 or more inches. (xxiv) Any industrial control system utilized by: (a) an interstate oil pipeline as described above in item (xxii) of Column 1 of appendix A to part 800; or (b) an interstate natural gas pipeline as described above in item (xxiii) of Column 1 of appendix A to part 800. (xxv) Any airport identified in § 802.201. (xxvi) Any: (a) maritime port identified in § 802.228; or (b) any individual terminal at such maritime ports. (xxvii) Any public water system, as defined in section 1401(4) of the Safe Drinking Water Act (42 U.S.C. 300f(4)(A)), as amended, or treatment works, as defined in section 212(2)(A) of the Clean Water Act (33 U.S.C. 1292(2)), as amended, which: VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 PO 00000 Frm 00038 Fmt 4701 (xvi) Own or operate any crude oil storage facility with the capacity to hold 30 million barrels or more of crude oil. (xvii) Own or operate any: (a) liquefied natural gas (LNG) import or export terminal requiring: (1) approval pursuant to section 3(e) of the Natural Gas Act (15 U.S.C. 717b(e)), as amended, or (2) a license pursuant to section 4 of the Deepwater Port Act of 1974 (33 U.S.C. 1503), as amended; or (b) natural gas underground storage facility or LNG peak-shaving facility requiring a certificate of public convenience and necessity pursuant to section 7 of the Natural Gas Act (15 U.S.C. 717f), as amended. (xviii) Own or operate any financial market utility that the Financial Stability Oversight Council has designated as systemically important pursuant to section 804 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5463), as amended. (xix) Own or operate any exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f), as amended, that facilitates trading in any national market system security, as defined in 17 CFR § 242.600, as amended, and which exchange during at least four of the preceding six calendar months had: (a) with respect to all national market system securities that are not options, ten percent or more of the average daily dollar volume reported by applicable transaction reporting plans; or (b) with respect to all listed options, fifteen percent or more of the average daily dollar volume reported by applicable national market system plans for reporting transactions in listed options. (xx) Own or operate any technology service provider in the Significant Service Provider Program of the Federal Financial Institutions Examination Council that provides core processing services. (xxi) Own or operate any rail line and associated connector line designated as part of the Department of Defense’s Strategic Rail Corridor Network. (xxii) Own or operate any interstate oil pipeline that: (a) has the capacity to transport: (1) 500,000 barrels per day or more of crude oil, or (2) 90 million gallons per day or more of refined petroleum product; or (b) directly serves the strategic petroleum reserve, as defined in section 152 of the Energy Policy and Conservation Act (42 U.S.C. 6232), as amended. (xxiii) Own or operate any interstate natural gas pipeline with an outside diameter of 20 or more inches. (xxiv) Manufacture or service any industrial control system utilized by: (a) an interstate oil pipeline as described above in item (xxii) of Column 1 of appendix A to part 800; or (b) an interstate natural gas pipeline as described above in item (xxiii) of Column 1 of appendix A to part 800. (xxv) Own or operate any airport identified in § 802.201. (xxvi) Own or operate any: (a) maritime port identified in § 802.228; or (b) any individual terminal at such maritime ports. (xxvii) Own or operate any public water system, as defined in section 1401(4) of the Safe Drinking Water Act (42 U.S.C. 300f(4)(A)), as amended, or treatment works, as defined in section 212(2)(A) of the Clean Water Act (33 U.S.C. 1292(2)), as amended, which: Sfmt 4700 E:\FR\FM\24SEP3.SGM 24SEP3 Federal Register / Vol. 84, No. 185 / Tuesday, September 24, 2019 / Proposed Rules Column 1—Covered investment critical infrastructure Column 2—Functions related to covered investment critical infrastructure (a) regularly serves 10,000 individuals or more, or (b) directly serves any military installation identified in § 802.229. (xxviii) Any industrial control system utilized by a public water system or treatment works as described above in item (xxvii) of Column 1 of appendix A to part 800. (a) regularly serves 10,000 individuals or more, or (b) directly serves any military installation identified in § 802.229. (xxviii) Manufacture or service any industrial control system utilized by a public water system or treatment works as described above in item (xxvii) of Column 1 of appendix A to part 800. Dated: September 11, 2019. Thomas Feddo, Deputy Assistant Secretary for Investment Security. [FR Doc. 2019–20099 Filed 9–17–19; 4:15 pm] BILLING CODE 4810–25–P khammond on DSKJM1Z7X2PROD with PROPOSALS3 50211 VerDate Sep<11>2014 17:44 Sep 23, 2019 Jkt 247001 PO 00000 Frm 00039 Fmt 4701 Sfmt 9990 E:\FR\FM\24SEP3.SGM 24SEP3

Agencies

[Federal Register Volume 84, Number 185 (Tuesday, September 24, 2019)]
[Proposed Rules]
[Pages 50174-50211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20099]



[[Page 50173]]

Vol. 84

Tuesday,

No. 185

September 24, 2019

Part IV





Department of the Treasury





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Office of Investment Security





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31 CFR Part 800





Provisions Pertaining to Certain Investments in the United States by 
Foreign Persons; Proposed Rule

Federal Register / Vol. 84 , No. 185 / Tuesday, September 24, 2019 / 
Proposed Rules

[[Page 50174]]


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DEPARTMENT OF THE TREASURY

Office of Investment Security

31 CFR Part 800

RIN 1505-AC64


Provisions Pertaining to Certain Investments in the United States 
by Foreign Persons

AGENCY: Office of Investment Security, Department of the Treasury

ACTION: Proposed rule.

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SUMMARY: This proposed rule would replace the current regulations that 
implement section 721 of the Defense Production Act of 1950, as amended 
by the Foreign Investment Risk Review Modernization Act of 2018 
(FIRRMA). While this proposed rule retains many provisions of the 
existing regulations, a number of substantive changes are proposed, 
primarily to implement FIRRMA.

DATES: Written comments must be received by October 24, 2019.
    The Department of the Treasury is considering holding during the 
comment period a teleconference regarding the proposed rule for members 
of the public. Information about any public teleconference, including 
the date, time, and how to attend, will be published on the Department 
of the Treasury website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.

ADDRESSES: Written comments on this proposed rule may be submitted 
through one of two methods:
     Electronic Submission: Comments may be submitted 
electronically through the Federal government eRulemaking portal at 
https://www.regulations.gov. Electronic submission of comments allows 
the commenter maximum time to prepare and submit a comment, ensures 
timely receipt, and enables the Department of the Treasury to make the 
comments available to the public. Please note that comments submitted 
through https://www.regulations.gov will be public, and can be viewed 
by members of the public.
     Mail: Send to U.S. Department of the Treasury, Attention: 
Thomas Feddo, Deputy Assistant Secretary for Investment Security, 1500 
Pennsylvania Avenue NW, Washington, DC 20220.
    In general, the Department of the Treasury will post all comments 
to https://www.regulations.gov without change, including any business 
or personal information provided, such as names, addresses, email 
addresses, or telephone numbers. All comments received, including 
attachments and other supporting material, will be part of the public 
record and subject to public disclosure. You should only submit 
information that you wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: For questions about this proposed 
rule, contact: Laura Black, Director of Investment Security Policy and 
International Relations; Meena R. Sharma, Deputy Director of Investment 
Security Policy and International Relations; David Shogren, Senior 
Policy Advisor; or Alexander Sevald, Senior Policy Advisor, at U.S. 
Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 
20220; telephone: (202) 622-3425; email: [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

A. The Statute

    The Foreign Investment Risk Review Modernization Act of 2018 
(FIRRMA), Subtitle A of Title XVII of Public Law 115-232, 132 Stat. 
2173, which amends section 721 (section 721) of the Defense Production 
Act of 1950, as amended (DPA), requires the issuance of regulations 
implementing its provisions. In Executive Order 13456, 73 FR 4677 (Jan. 
23, 2008), the President directs the Secretary of the Treasury to issue 
regulations implementing section 721. This proposed rule is being 
issued pursuant to that authority.
    FIRRMA was passed by Congress as H.R. 5515 and was enacted on 
August 13, 2018. Prior to the enactment of FIRRMA, section 721 
authorized the President, acting through the Committee on Foreign 
Investment in the United States (CFIUS or the Committee), to review 
mergers, acquisitions, and takeovers by or with any foreign person 
which could result in foreign control of any person engaged in 
interstate commerce in the United States, to determine the effects of 
such transactions on the national security of the United States.
    FIRRMA maintains the Committee's jurisdiction over any transaction 
which could result in foreign control of any U.S. business, and 
broadens the authorities of the President and CFIUS under section 721 
to address national security concerns arising from certain investments 
and real estate transactions. Additionally, FIRRMA modernizes CFIUS's 
processes to better enable timely and effective reviews of transactions 
falling under its jurisdiction (which FIRRMA describes as ``covered 
transactions''). In enacting FIRRMA, Congress acknowledged the 
important role of foreign investment in the U.S. economy and reiterated 
its support of the United States' open investment policy, consistent 
with the protection of national security. A brief summary of key 
provisions of FIRRMA, as relevant for this rulemaking, follows.
    FIRRMA expands and clarifies the jurisdiction of the Committee by 
explicitly adding four types of transactions as covered transactions in 
the DPA: (1) The purchase or lease by, or concession to, a foreign 
person of certain real estate in the United States; (2) non-controlling 
``other investments'' that afford a foreign person an equity interest 
in and specified access to information in the possession of, rights in, 
or involvement in the decisionmaking of certain U.S. businesses 
involved in certain critical technologies, critical infrastructure, or 
sensitive personal data; (3) any change in a foreign person's rights if 
such change could result in foreign control of a U.S. business or an 
other investment in certain U.S. businesses; and (4) any other 
transaction, transfer, agreement, or arrangement, the structure of 
which is designed or intended to evade or circumvent the application of 
section 721. With respect to the Committee's expanded jurisdiction over 
certain real estate transactions and other investments, FIRRMA 
instructs the Committee to specify criteria to limit the application of 
that expansion of jurisdiction to certain categories of foreign 
persons. The proposed rule addresses all of these types of covered 
transactions except for real estate transactions, which are the subject 
of a separate and concurrent rulemaking.
    In addition to expanding the Committee's jurisdiction, FIRRMA 
prescribes certain process changes. FIRRMA allows parties to submit an 
abbreviated filing for any covered transaction through a declaration, 
as an alternative to CFIUS's traditional voluntary notice, both of 
which are discussed below. Declarations will allow parties to submit 
basic information regarding a transaction in an abbreviated form that 
should generally not exceed five pages in length. FIRRMA also sets 
forth an abbreviated timeframe for the Committee to respond to 
submitted declarations.
    FIRRMA introduces a mandatory declaration requirement in certain 
circumstances. Specifically, FIRRMA creates a mandatory declaration 
requirement for certain covered transactions where a foreign government 
has a substantial interest. Additionally, FIRRMA authorizes CFIUS to 
mandate

[[Page 50175]]

through regulations the submitting of a declaration for covered 
transactions involving certain U.S. businesses that produce, design, 
test, manufacture, fabricate, or develop one or more critical 
technologies. In both cases, parties have the option of filing a notice 
rather than submitting a declaration if they so choose.
    FIRRMA also codifies certain processes related to the Committee's 
authority to identify non-notified and non-declared transactions.
    FIRRMA permits a party to a transaction to stipulate that a 
transaction is a covered transaction and, as relevant, a foreign 
government-controlled transaction. A party can make a stipulation in 
either a notice or a declaration. If a party makes a stipulation in a 
notice, CFIUS must provide comments on or accept the notice no later 
than 10 business days after the date of the filing.
    Additionally, FIRRMA extends the timing of the review period for 
transactions filed as notices from 30 days to 45 days and allows the 
Secretary of the Treasury to grant one 15-day extension of the 45-day 
investigation period in ``extraordinary circumstances.'' These 
provisions were made effective in a rulemaking on October 11, 2018. 83 
FR 51316. FIRRMA establishes a 30-day review period for transactions 
submitted as declarations. The notice and declarations processes are 
discussed in further detail below.

B. Effective Date of Certain Provisions

    Congress divided FIRRMA's provisions into two categories: Those 
effective immediately and those that become effective no later than 
February 13, 2020.
    Specifically, section 1727(a) of FIRRMA lists the provisions that 
became effective immediately upon enactment of the statute. A number of 
the immediately effective provisions required revisions to the CFIUS 
regulations existing at that time at part 800 of title 31 of the Code 
of Federal Regulations. On October 11, 2018, the Department of the 
Treasury published an interim rule implementing the immediately 
effective provisions of, and making updates consistent with, FIRRMA. 83 
FR 51316. That interim rule was intended to provide clarity regarding 
the processes and procedures of the Committee pending the full 
implementation of FIRRMA. The interim rule provided for a public 
comment period of 30 days. One comment was received and is discussed 
below.
    Section 1727(b) of FIRRMA delayed the effectiveness of any 
provision of FIRRMA not specified in section 1727(a) until the earlier 
of: (1) The date that is 18 months after the date of enactment of 
FIRRMA (i.e., February 13, 2020); or (2) the date that is 30 days after 
publication in the Federal Register of a determination by the 
chairperson of the Committee that the regulations, organizational 
structure, personnel, and other resources necessary to administer the 
new provisions are in place. The proposed regulations in this notice 
are intended to fully implement the provisions of FIRRMA, with the 
exception of (1) CFIUS's new jurisdiction over certain real estate 
transactions, (2) CFIUS's new authority to impose filing fees, and (3) 
CFIUS's authority to mandate declarations for certain transactions 
involving critical technologies, each of which is the subject of a 
separate rulemaking, as discussed below.
    Notwithstanding section 1727(b), section 1727(c) of FIRRMA 
authorizes CFIUS to conduct one or more pilot programs to implement any 
authority provided pursuant to any provision of, or amendment made by, 
FIRRMA that did not take effect immediately upon enactment. On October 
11, 2018, the Department of the Treasury published an interim rule 
setting forth the scope of, and procedures for, a pilot program to 
review certain transactions involving foreign persons and critical 
technologies (Pilot Program Interim Rule). 83 FR 51322. That Pilot 
Program Interim Rule, which went into effect on November 10, 2018, 
established mandatory declarations for certain transactions involving 
investments by foreign persons in certain U.S. businesses that produce, 
design, test, manufacture, fabricate, or develop one or more critical 
technologies. The Pilot Program Interim Rule provided for a public 
comment period of 30 days, and a number of comments were received. As 
discussed below, the Committee is still considering those comments and 
the scope of mandatory declarations for covered transactions involving 
critical technologies. The Department of the Treasury expects to 
address in the final rule the comments previously received on the Pilot 
Program Interim Rule and any new comments provided in response to this 
proposed rule.

C. Structure of FIRRMA Rulemaking and This Proposed Rule

    Consistent with CFIUS processes generally, the proposed rule 
reflects extensive consultation with CFIUS member agencies, as well as 
other relevant agencies. The proposed rule retains many of the basic 
features of the existing regulations, while implementing the changes 
that FIRRMA made to CFIUS's jurisdiction and process.
    Given the number of revisions, the proposed rule amends and 
restates part 800 in its entirety. Although the new part 800 is being 
restated here in full, many of the provisions of the prior part 800 are 
not being materially modified. The Committee will consider all comments 
provided to the proposed rule, but is particularly interested in 
receiving comments relating to the new provisions and revisions being 
proposed here and outlined below, rather than comments relating to the 
text of part 800 that has not been changed.
    In updating part 800 to incorporate CFIUS's new jurisdiction over 
non-controlling other investments (which this rule describes as 
``covered investments''), certain conforming edits were made to 
existing provisions. For example, the coverage section in subpart C of 
the proposed rule on ``covered control transactions'' is based on the 
``covered transactions'' section in the existing part 800 regulations 
and provides examples of the different bases of jurisdiction over 
control transactions and covered investments. In that respect, there is 
also now a covered investment section within the coverage subpart for 
the new jurisdiction. Finally, the proposed rule incorporates the 
changes made to part 800 in the interim rule published in October 2018, 
and updates certain other provisions.
    This proposed rule does not implement the authority FIRRMA provided 
to the Committee to review the purchase or lease by, or concession to, 
a foreign person of certain real estate in the United States. A 
concurrent proposed rule implements such authority under a separate 
part 802 within title 31 of the CFR. The Department of the Treasury 
determined that the technical and procedural aspects of CFIUS's review 
of transactions involving real estate are sufficiently distinct from 
those related to control transactions and covered investments to 
warrant separate rulemaking.
    Parties should be aware that certain transactions that are not 
covered transactions under this proposed rule could potentially be 
covered real estate transactions under the proposed part 802 real 
estate regulations.
    FIRRMA authorizes the Committee to assess and collect fees with 
respect to covered transactions for which a written notice is filed, 
and the Committee is considering how to implement this authority. The 
proposed rule also does not address filing fees. The Department of the 
Treasury will publish a separate

[[Page 50176]]

proposed rule regarding fees at a later date.
    The proposed rule does not modify the regulations currently at 31 
CFR part 801, which sets forth the Pilot Program Interim Rule. CFIUS 
continues to evaluate the Pilot Program Interim Rule, and the 
Department of the Treasury welcomes comments on the retention of the 
mandatory declaration aspect of the Pilot Program Interim Rule for 
certain transactions involving critical technologies. The Department of 
the Treasury received comments regarding the Pilot Program Interim Rule 
from a variety of commenters and expects to address these comments in 
the final rule associated with this proposed rule.
    The proposed rule seeks to provide clarity to the business and 
investment communities with respect to the types of U.S. businesses 
that are covered under FIRRMA's other investment authority. Given the 
level of specificity provided in certain provisions of the proposed 
rule, the pace of technological development, the evolving use of data, 
and the evolving national security landscape more generally, the 
Department of the Treasury anticipates that it will periodically 
review, and as necessary, make changes to the regulations, consistent 
with applicable law.

II. Discussion of Proposed Rule

A. Subpart A--General

    The following discussion describes several key changes to subpart 
A.
    Section 800.102--Risk-based analysis. FIRRMA requires that any 
determination of the Committee to suspend a covered transaction, to 
refer a covered transaction to the President, or to negotiate, enter 
into or impose, or enforce any agreement or condition with respect to a 
covered transaction, be based on a risk-based analysis, conducted by 
the Committee, of the effects on the national security of the United 
States of the covered transaction, which must include an assessment of 
the threat, vulnerabilities, and consequences to national security 
related to the transaction. The proposed rule includes definitions of 
the terms ``threat,'' ``vulnerabilities,'' and ``consequences to 
national security'' used in risk-based analyses undertaken by the 
Committee.
    Section 800.104--Applicability rule. The proposed rule clarifies 
the existing applicability rule. The proposed rule also removes the 
provision previously found at Sec.  800.103(b)(4) that established 
applicability to a transaction based upon a Committee determination 
that a commitment had been made.

B. Subpart B--Definitions

    Several key changes to the existing part 800 definitions and 
several key new definitions that are broadly applicable to both control 
transactions and covered investments are discussed immediately below. 
Certain new definitions that are applicable to specific substantive 
areas regarding covered investments are discussed in the applicable 
subsections below.
    Section 800.203--Business day. The proposed rule modifies the 
definition for ``business day'' to exclude days where there U.S. Office 
of Personnel Management has announced the closure of Federal offices in 
the Washington, DC area. The proposed rule also addresses the impact on 
certain timing requirements where a submission is received after 5 p.m. 
(Eastern Time).
    Section 800.206--Completion date. The proposed rule includes a 
definition for ``completion date.'' The proposed rule clarifies that, 
in the event that a covered transaction will be effectuated through 
multiple or staged closings, the completion date is the earliest date 
on which any transfer of interest or change in rights that constitutes 
a covered transaction occurs.
    Section 800.207--Contingent equity interest. FIRRMA uses the term 
``contingent equity interest'' in the definition of investment. The 
proposed rule eliminates the term ``convertible voting instrument'' in 
the existing part 800 in light of the new definition of ``contingent 
equity interest.'' The proposed rule also updates the references in the 
timing rule at Sec.  800.308.
    Section 800.214--Critical infrastructure. The proposed rule revises 
the definition for ``critical infrastructure'' to conform to the 
language in FIRRMA. As discussed further below, however, for the 
purposes of an other investment, FIRRMA requires CFIUS to specify a 
subset of critical infrastructure.
    Section 800.252--U.S. business. The proposed rule revises the 
definition for ``U.S. business'' to conform to the definition in 
FIRRMA.

C. Covered Investments

    The proposed rule implements CFIUS's authority, provided under 
FIRRMA, to review an investment by a foreign person in certain types of 
U.S. businesses that affords the foreign person certain access to 
information in the possession of, rights in, or involvement in the 
decisionmaking of certain U.S. businesses but that does not afford the 
foreign person control over the U.S. business. The proposed rule uses 
the term ``covered investments'' for these investments, as defined in 
Sec.  800.211.
    The types of access, rights, or involvement that could give rise to 
a covered investment are set forth in Sec.  800.211(b). That section 
implements the definitions in FIRRMA describing transactions that 
afford the foreign person (1) access to material non-public technical 
information in the possession of the U.S. business, (2) membership or 
observer rights on the board of directors (or equivalent body) of the 
U.S. business, or (3) any involvement in substantive decisionmaking of 
the U.S. business regarding certain actions related to critical 
technologies, critical infrastructure, or sensitive personal data. The 
proposed rule further defines ``material non-public technical 
information'' (see Sec.  800.233) and ``substantive decisionmaking'' 
(see Sec.  800.245).
    The types of businesses in which an investment may constitute a 
covered investment are those that have certain involvement in critical 
technologies, critical infrastructure, and sensitive personal data, as 
further described below and in the proposed rule. These businesses are 
referred to as ``TID U.S. businesses'' in the proposed rule (see Sec.  
800.248). ``TID'' is an acronym for Technology, Infrastructure, and 
Data. FIRRMA, moreover, limits such covered investments to those made 
in an unaffiliated business. Thus, the proposed rule adds a definition 
for ``unaffiliated TID U.S. business,'' which excludes entities in 
which the foreign person already holds a majority of the voting 
interest or the right to appoint the majority of the entity's board or 
equivalent governing body.
    Notably, CFIUS retains jurisdiction over any transaction through 
which any foreign person could acquire control of any U.S. business, 
regardless of whether the transaction involves critical technology, 
critical infrastructure, or sensitive personal data.
    In connection with the new jurisdiction over covered investments, 
FIRRMA requires that the Committee prescribe regulations to limit its 
application to the investments of certain categories of foreign 
persons. This proposed rule implements this requirement by 
``excepting'' certain foreign persons from the provisions relating to 
covered investments if the foreign persons meet specified criteria. It 
also includes clarifications contained in FIRRMA regarding the 
treatment of certain investments through investment funds and an 
exception specified in FIRRMA for investments involving air carriers.

[[Page 50177]]

1. Covered Investments Involving Critical Technology
    FIRRMA expands CFIUS's jurisdiction to include covered investments 
by a foreign person in an unaffiliated U.S. business that produces, 
designs, tests, manufactures, fabricates, or develops one or more 
critical technologies.
    Section 800.215--Critical technologies. The proposed rule defines 
``critical technologies'' consistent with the language in FIRRMA. 
Subpart (f) of FIRRMA's definition of critical technology, as set out 
in this proposed rule, captures emerging and foundational technologies 
controlled pursuant to section 1758 of the Export Control Reform Act of 
2018 (ECRA), Subtitle B of Title XVII of Public Law 115-232. Pursuant 
to ECRA, the Bureau of Industry and Security within the Department of 
Commerce identifies and places export controls on specified emerging 
and foundational technologies. As technologies become controlled 
pursuant to rulemaking under ECRA, they will automatically be covered 
under the definition of ``critical technologies'' under part 800.
    As noted above, CFIUS will continue to have authority to review any 
transaction that could result in control by a foreign person of any 
U.S. business, including a U.S. business with technology, critical or 
otherwise, and export controlled or otherwise.
2. Covered Investments Involving Critical Infrastructure
    FIRRMA expands CFIUS's jurisdiction to include covered investments 
by a foreign person in an unaffiliated U.S. business that ``owns, 
operates, manufactures, supplies, or services critical 
infrastructure.'' FIRRMA requires that the regulations implementing 
this provision limit the application of covered investment jurisdiction 
to a subset of critical infrastructure that must be specified in the 
regulations. Moreover, FIRRMA specifically provides that any definition 
of ``critical infrastructure'' established under any provision of law 
other than section 721 is not determinative for the purposes of section 
721, including this proposed rule. Similarly, the subset of critical 
infrastructure identified in appendix A is not intended to alter the 
definition of ``critical infrastructure'' as used in any other 
regulatory regime or context.
    Section 800.212--Covered investment critical infrastructure. The 
proposed rule identifies the subset of critical infrastructure that is 
relevant for the Committee's jurisdiction over covered investments 
through a list of specific types of infrastructure in appendix A. As 
noted above, the Department of the Treasury anticipates periodically 
revising the regulations, potentially including revisions to this list. 
To distinguish this subset of critical infrastructure from critical 
infrastructure more broadly, this proposed rule creates a new term, 
``covered investment critical infrastructure'' (see Sec.  800.212).
    As noted above, FIRRMA describes, subject to the regulations 
implementing this provision, a U.S. business that falls under other 
investment jurisdiction with respect to critical infrastructure as one 
that ``owns, operates, manufactures, supplies, or services'' the subset 
of critical infrastructure. This proposed rule refers to these 
activities as ``functions.'' In furtherance of FIRRMA's requirement to 
limit the application of other investment jurisdiction regarding 
critical infrastructure, the proposed rule sets forth which functions 
apply to each enumerated specific type of covered investment critical 
infrastructure. The proposed rule therefore links the relevant 
functions with the enumerated specific types of covered investment 
critical infrastructure in appendix A. Column 1 of appendix A lists the 
covered investment critical infrastructure and Column 2 lists the 
relevant functions that apply to enumerated specific types of covered 
investment critical infrastructure.
    Appendix A is integral to the proposed rule and key to determining 
whether a U.S. business is a TID U.S. business for purposes of critical 
infrastructure covered investment jurisdiction. Only a U.S. business 
that performs one of the specified functions listed in Column 2 of 
appendix A with respect to the enumerated specific type of covered 
investment infrastructure listed in Column 1 is a TID U.S. business for 
purposes of critical infrastructure covered investments. The proposed 
rule also clarifies the meaning of certain of the functions listed in 
FIRRMA.
    Section 800.235--Own. The proposed rule defines ``own'' solely for 
the purpose of Column 2 of appendix A, which in turn determines which 
owners of covered investment critical infrastructure are TID U.S. 
businesses for purposes of covered investment jurisdiction. The term 
limits owners to only those of U.S. businesses that directly possess 
the systems or assets constituting the applicable covered investment 
critical infrastructure.
    Sections 800.232--Manufacture; 800.242--Service; and 800.246--
Supply. The proposed rule also defines ``manufacture,'' ``service,'' 
and ``supply.'' It does not define ``operate'' given the commonly 
understood meaning of that term.
    Importantly, appendix A only applies to the subset of critical 
infrastructure subject to covered investment jurisdiction, and is not 
applicable in any other context. Appendix A implements FIRRMA's 
direction to identify a subset of critical infrastructure for purposes 
of covered investments and therefore does not modify the definition of 
critical infrastructure as it applies to CFIUS's jurisdiction more 
broadly over control transactions.
    As noted above, CFIUS will continue to have authority to review any 
transaction that could result in control by a foreign person of any 
U.S. business, regardless of whether the U.S. business involves 
critical infrastructure as broadly defined by FIRRMA or the narrower 
subset of covered investment critical infrastructure introduced in this 
proposed rule.
3. Covered Investments Involving Sensitive Personal Data
    FIRRMA expands CFIUS's jurisdiction to include covered investments 
by a foreign person in an unaffiliated U.S. business that maintains or 
collects sensitive personal data of U.S. citizens that ``may be 
exploited in a manner that threatens to harm national security.''
    Section 800.241--Sensitive personal data. To implement this 
provision, the proposed rule sets forth a detailed definition for 
``sensitive personal data.'' The Committee anticipates periodically 
revising the regulations, potentially including revisions to this 
definition.
    Given that most companies collect some type of data on individuals, 
the proposed rule protects national security while attempting to 
minimize any chilling effect on beneficial foreign investment by 
focusing on the sensitivity of the data itself, as well as the 
sensitivity of the population about whom the data is maintained or 
collected. In particular, the proposed rule identifies specific 
categories of data that constitute sensitive personal data only if the 
U.S. business (a) targets or tailors its products or services to 
sensitive U.S. Government personnel or contractors, (b) maintains or 
collects such data on greater than one million individuals, or (c) has 
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 proposed 
definition also includes all genetic information and generally carves

[[Page 50178]]

out data pertaining to a U.S. business's own employees.
    The proposed rule defines ``targets or tailors'' (see Sec.  
800.247) and provides examples of businesses that meet the definition. 
By focusing on U.S. businesses that target or tailor their products or 
services to these potentially sensitive populations, the Committee 
expects to review transactions involving U.S. businesses that are more 
likely to have sensitive personal data concerning such individuals. 
Even if a U.S. business does not target or tailor its products or 
services to such individuals, however, if the U.S. business maintains 
or collects data on a large number of individuals, it is more likely to 
capture data on sensitive populations. The proposed threshold of one 
million accounts for this possibility. Similarly, if a U.S. business is 
a data-driven company that plans to maintain or collect sensitive 
personal data on a large number of individuals in the future, as 
demonstrated by the U.S. business's statements or actions, it may 
capture data on sensitive populations.
    Section 800.241(a)(1)(ii)(A)--This section describes certain 
financial data that could be used to determine if an individual is 
experiencing financial hardship. The types of data the proposed rule 
seeks to capture include bank account statements or detailed financial 
information included in an application for a home mortgage or credit 
card. Information regarding ordinary consumer transactions, such as a 
record of a credit card purchase at a retail establishment, would not 
generally fall into this category.
    Section 800.241(a)(1)(ii)(B)--This section describes information 
that is collected by consumer reporting agencies, such as an 
individual's credit score, or summaries of debts and payment histories. 
Many companies periodically receive information about an individual's 
credit from a consumer reporting agency, and Sec.  800.241(a)(1)(ii)(B) 
generally excludes these companies from its scope if they receive a 
limited set of the information, such as a credit score, for the 
legitimate purposes described in the Fair Credit Reporting Act.
    Section 800.241(a)(1)(ii)(C)--This section describes data contained 
in certain types of personal insurance applications, many of which 
contain detailed personal information related to financial status and 
health.
    Section 800.241(a)(1)(ii)(D)--This section describes health-related 
data.
    Section 800.241(a)(1)(ii)(E)--This section describes non-public 
electronic communications, including email, which may include all 
manner of sensitive information, but only if the U.S. business is 
providing communications platforms used by third parties. For example, 
email communications between a U.S. business and its own customers 
would not be covered. Rather, this section describes the situation 
where a U.S. business offers email, chat, or messaging services, a 
primary purpose of which is to allow third parties to communicate with 
each other.
    Section 800.241(a)(1)(ii)(F)--This section describes geolocation 
data that is often collected by mobile mapping applications, GPS 
services, or wireless communications providers.
    Section 800.241(a)(1)(ii)(G)--This section describes data that is 
generated by companies that provide biometric identification services.
    Section 800.241(a)(1)(ii)(H)-(J)--These sections describes certain 
data that is held by companies, typically government contractors, that 
issue official government identification cards or process personnel 
security clearances.
    Section 800.227--Identifiable data; Sec.  800.239--Personal 
identifier. The proposed rule also includes a definition of 
``identifiable data.'' In some cases, a U.S. business may maintain or 
collect the data described in Sec.  800.241(a)(1)(ii)(A)-(J), but it is 
not possible to attribute such data to any specific individual. For 
example, a U.S. business may store health records on its servers, but 
those records are encrypted such that only a third party in possession 
of the encryption key can read the data. The U.S. business in these 
circumstances would not be maintaining or collecting sensitive personal 
data. The proposed rule makes clear, however, that identifiable data is 
not limited to data that includes an individual's name or other obvious 
identifier, but rather includes any personal identifier, as defined in 
Sec.  800.239.
    Finally, Sec.  800.241(a)(2) describes genetic information, as 
defined pursuant to the regulations implementing HIPAA. Unlike the 
categories described in sections 800.241(a)(1)(ii)(A)-(J), the 
requirement that the U.S. business target or tailor to certain U.S. 
Government personnel or contractors, maintain or collect data on 
greater than one million individuals, or have a demonstrated business 
objective to maintain or collect such data on greater than one million 
individuals if such data is an integrated part of the U.S. business's 
primary products or services as well as the requirement that the data 
be identifiable, does not apply to genetic information.
    As noted above, CFIUS will continue to have authority to review any 
transaction that could result in control by a foreign person of any 
U.S. business, regardless of whether the U.S. business maintains or 
collects sensitive personal data.
4. Country Specification for Covered Investments
    FIRRMA requires CFIUS to specify criteria to limit the application 
of FIRRMA's expanded jurisdiction over other investments to certain 
categories of foreign persons. The proposed rule addresses FIRRMA's 
requirement through three new defined terms, ``excepted investor,'' 
``excepted foreign state,'' and ``minimum excepted ownership,'' which 
operate together to exclude from CFIUS's jurisdiction covered 
investments by certain foreign persons who meet certain criteria 
establishing sufficiently close ties to certain foreign states. 
Sections 800.220, 800.219, and 800.234 define excepted investor, 
excepted foreign state, and minimum excepted ownership, respectively.
    Section 800.220--Excepted investor. The proposed rule sets forth a 
narrow definition of excepted investor in the interest of protecting 
national security, in light of increasingly complex ownership 
structures, and to prevent foreign persons from circumventing CFIUS's 
jurisdiction. Thus, the criteria specified in Sec.  800.220 require 
that a foreign person have a substantial connection (e.g., nationality 
of ultimate beneficial owners and place of incorporation) to one or 
more particular foreign states in order to be deemed an excepted 
investor. Note that foreign persons who have violated, or whose parents 
or subsidiaries have violated, certain U.S. laws, executive orders, 
regulations, orders, directives, or licenses, or who have submitted a 
material misstatement or omission in a CFIUS notice or declaration or 
violated a material provision of a mitigation agreement, among other 
things, will not be considered excepted investors. Additionally, note 
that a foreign person who is an excepted investor at the time of the 
transaction, but, who, for up to three years after the completion date, 
fails to meet to certain criteria, is deemed not to be an excepted 
investor and the transaction is thus subject to CFIUS jurisdiction as a 
covered investment. Any member of the Committee may file an agency 
notice of the transaction for up to one year (and the Chairperson of 
the Committee for up to three years in extraordinary circumstances).

[[Page 50179]]

    Section 800.219--Excepted foreign state. The rule proposes that the 
excepted foreign state definition operate as a two-factor conjunctive 
test. First, the foreign state must be included in a defined group of 
eligible foreign states, which will be separately published on the 
Department of the Treasury website. As this is a new concept with 
potentially significant implications for the national security of the 
United States, CFIUS initially intends to designate a limited number of 
eligible foreign states. CFIUS plans to review this group in the future 
and potentially expand the number of eligible foreign states.
    Second, in furtherance of CFIUS's efforts to encourage partner 
countries to implement robust processes to review foreign investment in 
their countries and to increase cooperation with the United States, the 
Secretary of the Treasury, with the agreement of a super-majority of 
Committee member agencies, will also make a determination, as described 
in subpart J, for each eligible foreign state as to whether such 
foreign state has established and is effectively utilizing a robust 
process to assess foreign investments for national security risks and 
to facilitate coordination with the United States on matters relating 
to investment security. In making these determinations, CFIUS will 
consider factors that will be made available on the Department of the 
Treasury website. The Committee is considering delaying the 
effectiveness of this requirement in order to provide the eligible 
foreign states time to enhance their foreign investment review 
processes and bilateral cooperation. Any such determinations 
identifying a foreign state as an excepted foreign state will be 
published in the Federal Register and incorporated into the Committee's 
list of excepted foreign states, which will be made available on the 
Department of the Treasury website.

D. Subpart C--Coverage

    Subpart C of the proposed rule includes provisions that describe 
with particularity transactions that are, or are not, covered control 
transactions (Sec.  800.301-302). Similar provisions address covered 
investments (Sec.  800.303-304). The proposed rule contains numerous 
examples in this subpart to clarify the coverage of certain 
transactions.
    Section 800.305--Incremental acquisitions. Under the existing Sec.  
800.204(e), ``[a]ny transaction in which a foreign person acquires an 
additional interest in a U.S. business that was previously the subject 
of a covered transaction for which the Committee concluded all action 
under section 721 shall not be deemed to be a transaction that could 
result in foreign control over that U.S. business (i.e., it is not a 
covered transaction).'' This provision was introduced when the scope of 
CFIUS's jurisdiction included only transactions that could result in 
foreign control of a U.S. business and when the only means to file was 
by filing a written notice. This proposed rule moves the provision to 
Subpart C and clarifies that a transaction shall not be deemed to be a 
covered transaction if a foreign person acquires an additional interest 
in a U.S. business over which the same foreign person or any of its 
direct or indirect wholly-owned subsidiaries previously acquired direct 
control in the U.S. business in a covered control transaction for which 
the Committee concluded all action under Section 721 on the basis of a 
notice. It further clarifies that this provision does not apply to 
incremental acquisitions in a U.S. business by a foreign person that 
had not previously acquired control of the U.S. business nor to a 
transaction for which the Committee had concluded all action under 
section 721 on the basis of a declaration. In other words, the 
incremental acquisition rule does not apply where the initial 
transaction was submitted only as declaration or was a covered 
investment.
    Section 800.307--Specific clarifications for investment funds. The 
proposed rule implements provisions in FIRRMA relating to investment 
funds. Specifically, it clarifies that, in the context of an indirect 
investment by a foreign person in an unaffiliated TID U.S. business 
through an investment fund that affords the foreign person (or a 
designee of the foreign person) membership as a limited partner or 
equivalent on an advisory board or committee of the fund, where all of 
the criteria in Sec.  800.307 are satisfied, a limited partner's 
membership on the investment fund's advisory board or committee does 
not in and of itself render the foreign person's indirect investment in 
an unaffiliated TID U.S. business a covered investment.

E. Subpart D--Declarations

    FIRRMA introduces an abbreviated filing process through the 
submission of a declaration, which allows parties to submit basic 
information regarding a transaction to the Committee. A declaration may 
be submitted for any covered transaction and, in certain cases, is 
mandated. Parties may choose to file a notice in lieu of declaration to 
satisfy a mandatory declaration requirement.
    Declarations differ from notices in three key ways. First, 
declarations are shorter in length, generally not exceeding five pages. 
As part of the Pilot Program Interim Rule, CFIUS developed a standard 
fillable declaration form for parties to use when submitting a 
transaction for review. To facilitate the submission of declarations 
under the proposed rule, CFIUS intends to maintain a standard fillable 
form, making certain modifications to the form for use with respect to 
different types of transactions. Parties will be able to use the form 
to submit voluntary and mandatory declarations to the Committee.
    Second, the timeline for the Committee to take action on 
declarations is shorter than for notices. FIRRMA provides CFIUS up to 
30 days to respond to a declaration. This differs from the timeline for 
notices, which is 45 days for a review and an additional 45 days for an 
investigation, with a possibility of a 15-day extension in 
``extraordinary circumstances.''
    Third, FIRRMA provides CFIUS with several potential responses to a 
declaration, and CFIUS need not make a final determination with respect 
to action under section 721 on the basis of a declaration.
1. Mandatory Declarations
    Section 800.401--Mandatory declarations. The proposed rule 
implements FIRRMA's requirement for mandatory declarations for certain 
transactions in which a foreign person obtains a ``substantial 
interest'' in a U.S. business where a foreign government in turn holds 
a ``substantial interest'' in the foreign person. The proposed rule 
defines the term substantial interest with respect to a person's 
ability to influence the actions of another person in a manner that has 
the potential, directly or indirectly, to impair the national security 
of the United States. In most cases, the foreign person best placed to 
influence a U.S. business--and therefore exploit any vulnerability in a 
U.S. business--is the foreign person with the closest relationship to 
the U.S. business. With respect to an investment involving multiple 
tiers of investing entities, this foreign person is very frequently the 
one that sits closest to the U.S. business on the post-closing 
organizational chart. This entity, when compared to other entities 
higher in the organizational chart, often has a greater ability to 
interact directly with--and therefore influence--the U.S. business, 
both from a corporate governance perspective as well as an operational

[[Page 50180]]

perspective. The proposed rule therefore establishes in Sec.  
800.244(a) the voting interest threshold for substantial interest 
between a foreign person and U.S. business at a 25 percent voting 
interest, direct or indirect, and between a foreign government and a 
foreign person at a 49 percent or greater voting interest, direct or 
indirect. For purposes of determining the percentage of voting interest 
held indirectly by one entity in another, the rule establishes that any 
voting interest of a parent entity in a subsidiary entity will be 
deemed to be a 100 percent voting interest. The proposed rule also 
clarifies in Sec.  800.244(b) how the voting interest in a limited 
partnership is to be calculated. The proposed rule does not provide for 
a waiver of this requirement.
    As discussed above, CFIUS is considering whether to continue the 
mandatory declaration requirement under the Pilot Program Interim Rule, 
which requires declarations for covered control transactions and 
covered investments in certain U.S. businesses with critical 
technologies involved in one or more of 27 specified industries.
    Section 800.401(e)(2). FIRRMA also provides that, for mandatory 
declarations, the Committee can require that a declaration be submitted 
up to 45 days prior to the completion of the transaction. Under the 
proposed rule, mandatory declarations would need to be submitted to 
CFIUS at least 30 days in advance of the completion date.
    Section 800.401(d). Where there is a mandatory declaration 
requirement, parties may choose to submit a written notice at least 30 
days prior to the completion date of the transaction instead of a 
declaration.
2. Voluntary Declarations
    Section 800.402--Voluntary declarations. The proposed rule 
implements FIRRMA's provision enabling parties to choose to file a 
declaration with CFIUS instead of a written notice.
3. Procedures and Contents for Declarations
    Section 800.403--Procedures for declarations. The proposed rule 
outlines the process under which parties submit a declaration. The 
contents and procedures for submitting mandatory and voluntary 
declarations are identical. In order to submit a declaration, the 
parties need to provide the information required by Sec.  800.404, 
including certifications. The rule does not permit parties to submit a 
declaration regarding a transaction that is also the subject of a 
notice without written approval from the Staff Chairperson. Conversely, 
parties may not file a notice regarding a transaction that is the 
subject of a declaration until such time as the Committee's assessment 
of the declaration has been completed (see Sec.  800.501(j)).
    Section 800.404--Contents of declarations. The proposed rule sets 
forth the information that is required in a declaration, consistent 
with FIRRMA's requirement that CFIUS establish declarations as 
``abbreviated notices that would not generally exceed five pages in 
length.'' As part of a declaration, parties may voluntarily stipulate 
that the transaction is a covered transaction and, if so, whether the 
transaction is a foreign-government controlled transaction.
    Section 800.405--Beginning of 30-day assessment period. The 
proposed rule requires that the Committee take action on a declaration 
within 30 days of the Committee's receipt of the declaration from the 
Staff Chairperson. One distinction from the provisions regarding 
declarations in the Pilot Program Interim Rule is that the proposed 
rule explicitly provides that the Staff Chairperson may invite parties 
to a declaration to attend a meeting with Committee Staff to discuss 
and clarify issues pertaining to the transaction that is the subject of 
the declaration.
    Section 800.406--Rejection, disposition, or withdrawal of 
declarations. The proposed rule provides that the Committee may reject 
a declaration if it is incomplete, there is a material change in the 
transaction that has been notified, information comes to light that 
contradicts material information provided by the parties in the 
declaration, or parties to a submitted declaration fail to provide 
information requested by the Committee within two business days of the 
request (unless such timeframe is extended by the Staff Chairperson). 
The proposed rule also establishes procedures for parties to withdraw a 
declaration, and makes clear that parties may not submit more than one 
declaration for the same or substantially similar transaction without 
approval from the Staff Chairperson.
    Section 800.407--Committee actions. The proposed rule implements 
FIRRMA's mandate that the Committee take one of four actions in 
response to a declaration: (1) Request that the parties file a notice; 
(2) inform the parties that CFIUS cannot complete action under section 
721 on the basis of the declaration, and that they may file a notice to 
seek written notification from the Committee that the Committee has 
concluded all action under section 721 with respect to the transaction; 
(3) initiate a unilateral review of the transaction through an agency 
notice; or (4) notify the parties that CFIUS has concluded all action 
under section 721.

F. Subpart E--Notices

    The proposed rule does not make significant changes to the 
procedures and requirements for notices.
    Section 800.502(o)--Contents of voluntary notices. FIRRMA allows 
parties to ``stipulate'' that the transaction is a covered transaction 
and, as relevant, a foreign government-controlled transaction. FIRRMA 
directs the Committee to provide comments or accept the notice within 
10 business days from the submission date of the draft or formal 
written notice in cases where the transaction parties have stipulated 
that the transaction is a covered transaction. In addition, stipulating 
control reduces certain information requirements, and will allow the 
Committee to more quickly turn to reviewing the substance of the 
transaction. (See Sec.  800.502(j)(2).) In making a stipulation, 
parties acknowledge that the Committee and the President are entitled 
to rely on such stipulation in determining whether the transaction is a 
covered transaction and/or a foreign government-controlled transaction, 
and parties making a stipulation waive the right to challenge any such 
determination. Neither the Committee nor the President is bound by any 
such stipulation, nor does any such stipulation limit the ability of 
the Committee or the President to act on any authority provided under 
section 721, with respect to any covered transaction.
    Section 800.502(c)(1)(xi) and (c)(3)(ix)-(xi)--Contents of 
voluntary notices. The rule proposes additions to the information 
requirements to require submission of information necessary to analyze 
covered investments. A few additional changes to the information 
requirements have been introduced for clarity and to include 
information that CFIUS determined was necessary based on experience.
    Section 800.503--Beginning of 45-day review period. FIRRMA changes 
the timeframe for CFIUS's review of a transaction filed as a notice, 
extending it from 30 days to 45 days. This change was one of the 
immediately effective provisions of FIRRMA that was implemented through 
the interim rule published at 83 FR 51316. The proposed rule, 
consistent with the interim rule, incorporates that timing change.

G. Subpart G--Finality of Action

    FIRRMA maintains that a covered transaction that has been notified 
to CFIUS as a notice and on which CFIUS has concluded action under 
section 721

[[Page 50181]]

after determining that there are no unresolved national security 
concerns, qualifies for a ``safe harbor,'' and extends the same 
treatment to transactions submitted as a declaration. This means that, 
unless a party to a transaction submitted false or misleading material 
information or omitted material information, and subject to compliance 
with the terms of any mitigation agreement entered into with or 
conditions imposed by CFIUS, the transaction can proceed without the 
possibility of subsequent suspension or prohibition under section 721. 
A covered transaction on which CFIUS has not concluded action does not 
qualify for the safe harbor, and CFIUS has the authority to initiate 
review of the transaction on its own, even after the transaction has 
been completed, which CFIUS may choose to do if it believes the 
transaction presents national security considerations.

H. Subpart I--Penalties and Damages

    The Department of the Treasury amended the penalty provisions of 
its regulations in the interim rule published at 83 FR 51316, which 
updated CFIUS's penalties provision consistent with revisions made to 
section 721 by FIRRMA. The proposed rule adopts the revisions from the 
interim rule and makes certain other updates to subpart I.
    Section 800.901--Penalties and damages. The proposed rule, 
consistent with the interim rule, removes the qualifier ``intentionally 
or through gross negligence'' with respect to a material misstatement 
or omission in the context of the imposition of civil penalties. These 
revisions did not, and do not, apply to material misstatements, 
omissions, or certifications made prior to the interim rule's effective 
date (October 11, 2018), or to violations occurring after the 
implementation of the interim rule of a material provision of a 
mitigation agreements or material conditions of an order entered into 
or imposed prior to the implementation of the interim rule.
    Section 800.902--Effect of lack of compliance. The proposed rule, 
consistent with the interim rule, includes a provision authorizing the 
Committee to negotiate a remediation plan for lack of compliance with a 
mitigation agreement or condition entered into or imposed under section 
721(l), require filings for future covered transactions for five years, 
or seek injunctive relief, in addition to other available remedies.
    The proposed rule includes certain other modifications to subpart 
I, including with respect to how penalties are calculated, imposed, and 
enforced.

III. Public Comments

    The Department of the Treasury received one comment to the interim 
rule. The commenter sought additional information about what 
circumstances the Committee believes would warrant a 15-day extension 
of an investigation in order ``to protect the national security of the 
United States.''
    Response: The interim rule provides that where a Committee member 
requests to extend an investigation, that request must include a 
description, ``with particularity, [of] the extraordinary circumstances 
that warrant the Chairperson extending the investigation.'' 31 CFR 
800.506. Accordingly, whether ``extraordinary circumstances'' exist 
depends on the specific facts of a particular investigation, and are 
difficult to generalize. While we understand the commenter's interest 
in additional information from the Committee, at this time we are not 
considering altering or expanding on the extraordinary circumstances 
provisions relating to a 15-day extension of an investigation in part 
800.

IV. Rulemaking Requirements

Executive Order 12866

    These regulations are not subject to the general requirements of 
Executive Order 12866, which covers review of regulations by the Office 
of Information and Regulatory Affairs in the Office of Management and 
Budget, because they relate to a foreign affairs function of the United 
States, pursuant to section 3(d)(2) of that order.

Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)) (PRA).
    Comments on the collection of information should be sent to the 
Office of Management and Budget, Attn: Desk Officer for the Department 
of the Treasury, Office of Information and Regulatory Affairs, 
Washington, DC 20503, or via email to [email protected], with 
copies to Thomas Feddo, Deputy Assistant Secretary for Investment 
Security, U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, 
Washington, DC 20220. Comments on the collection of information should 
be received by November 25, 2019.
    In accordance with 5 CFR 1320.8(d)(1), the Department of the 
Treasury is soliciting comments from members of the public concerning 
this collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond; including through the use of appropriate automated 
collection techniques or other forms of information technology.
    The burden of the information collections in this proposed rule is 
estimated as follows:
For Notices
    Estimated total annual reporting and/or recordkeeping burden: 
26,000 hours.
    Estimated average annual burden per respondent: 130 hours.
    Estimated number of respondents: 200 per year.
    Estimated annual frequency of responses: Not applicable.
For Declarations
    Estimated total annual reporting and/or recordkeeping burden: 
11,000 hours.
    Estimated average annual burden per respondent: 20 hours.
    Estimated number of respondents: 550 per year.
    Estimated annual frequency of responses: Not applicable.
    Under the PRA, an agency may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless it 
displays a valid control number assigned by the Office of Management 
and Budget.

Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
generally requires an agency to prepare a regulatory flexibility 
analysis unless the agency certifies that the rule will not, once 
implemented, have a significant economic impact on a substantial number 
of small entities. The RFA applies whenever an agency is required to 
publish a general notice of proposed rulemaking under section 553(b) of 
the Administrative Procedure Act (5 U.S.C. 553) (APA), or any other 
law. As set forth below, because regulations issued pursuant to the 
DPA, such as these

[[Page 50182]]

regulations, are not subject to the APA, or another law requiring the 
publication of a general notice of proposed rulemaking, the RFA does 
not apply.
    The proposed rule implements section 721 of the DPA. Section 709(a) 
of the DPA provides that the regulations issued under it are not 
subject to the rulemaking requirements of the APA. Section 709(b)(1) 
instead provides that any regulation issued under the DPA be published 
in the Federal Register and opportunity for public comment be provided 
for not less than 30 days. Section 709(b)(3) of the DPA also provides 
that all comments received during the public comment period be 
considered and the publication of the final regulation contain written 
responses to such comments. Consistent with the plain text of the DPA, 
legislative history confirms that Congress intended that regulations 
under the DPA be exempt from the notice and comment provisions of the 
APA and instead provided that the agency include a statement that 
interested parties were consulted in the formulation of the final 
regulation. See H.R. Conf. Rep. No. 102-1028, at 42 (1992) and H.R. 
Rep. No. 102-208 pt. 1, at 28 (1991). The limited public participation 
procedures described in the DPA do not require a general notice of 
proposed rulemaking as set forth in the RFA. Further, the mechanisms 
for publication and public participation are sufficiently different to 
distinguish the DPA procedures from a rule that requires a general 
notice of proposed rulemaking. In providing the President with expanded 
authority to suspend or prohibit the acquisition, merger, or takeover 
of, or certain other investments in, a U.S. business by a foreign 
person if such a transaction would threaten to impair the national 
security of the United States, Congress could not have contemplated 
that regulations implementing such authority would be subject to RFA 
analysis. For these reasons, the RFA does not apply to these 
regulations.
    Notwithstanding the inapplicability of the RFA, the Department of 
the Treasury has undertaken an analysis of the proposed rule's 
potential impact on small businesses in the United States. While the 
Department of the Treasury believes that the proposed rule likely would 
not have a ``significant economic impact on a substantial number of 
small entities'' (5 U.S.C. 605(b)), the Department of the Treasury does 
not have complete data at this time to make this determination, and 
therefore invites the public to comment on its analysis.
    As discussed above, the proposed rule expands the jurisdiction of 
the Committee to include additional types of transactions not 
previously subject to CFIUS review. Additionally, the Committee will 
retain its existing jurisdiction over any transaction through which any 
foreign person could acquire control of any U.S. business. Accordingly, 
the proposed rule may impact any U.S. business, including a small U.S. 
business that engages in a covered transaction.
    There is no single source for information on the number of small 
U.S. businesses that receive foreign investment (direct or indirect), 
including those involved with critical technologies, critical 
infrastructure, or sensitive personal data, such that they would be 
directly impacted by this rule. However, the Bureau of Economic 
Analysis (BEA) within the Department of Commerce collects, on an annual 
basis, data on new foreign direct investment in the United States 
through its Survey of New Foreign Direct Investment in the United 
States (Form BE[hyphen]13). While these data are self-reported, and 
include only direct investments in U.S. businesses in which the foreign 
person acquires at least 10 percent of the voting shares (and 
consequently, do not capture investments below 10 percent, which may 
nevertheless be covered transactions), they nonetheless provide 
relevant information on a category of U.S. businesses that receive 
foreign investment, some of which may be covered by the proposed rule.
    According to the BEA, in 2018, the most current year for which data 
is available, foreign persons obtained at least a 10 percent voting 
share in 832 U.S. businesses. U.S. Bureau of Economic Analysis, 
``Number of Investments Initiated in 2018, Distribution of Planned 
Total Expenditures, Size by Type of Investment,'' https://apps.bea.gov/international/xls/Table15-14-15-16-17-18.xls (last visited September 
11, 2019). The BEA only reports the general size of the investment 
transaction, not the type of the U.S. business involved, nor whether 
the U.S. business is considered a ``small business'' by the Small 
Business Administration (SBA), which defines small businesses based on 
annual revenue or number of employees. The smallest foreign investment 
transactions that the BEA reports are those with a dollar value below 
$50 million. While not all U.S. businesses receiving a foreign 
investment of less than $50 million are considered ``small'' for the 
purposes of the RFA, many might be, and the number of U.S. businesses 
receiving foreign investments of less than $50 million can serve as a 
proxy for the number of transactions involving small U.S. businesses 
that might be subject to CFIUS's jurisdiction.
    Of the above mentioned 832 U.S. businesses receiving foreign 
investment in 2018, 576 were involved in transactions valued at less 
than $50 million. Although this figure is under inclusive because it 
does not capture all transactions that could potentially fall under the 
proposed rule, it also is over inclusive because it is not limited to 
any particular type of U.S. business. We believe the figure of 576 is 
the best estimate based on the available data of the number of small 
U.S. businesses that may be impacted by this rule.
    According to the SBA, there are 30.2 million small businesses 
(defined as ``firms employing fewer than 500 employees'') in the United 
States. https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf. If approximately 600 small U.S. businesses 
will be potentially impacted by this rule, then the rule may 
potentially impact less than one percent of all small U.S. businesses. 
Accordingly, the Department of the Treasury does not believe the rule 
will impact a ``substantial number of small entities.''
    Nonetheless, the proposed rule includes provisions that would 
reduce the costs to all businesses, including small businesses. For 
example, the availability of a shorter declaration for covered 
transactions may result in smaller cost to entities than having to 
prepare a lengthier notice. Additionally, having a fillable form for 
declarations may reduce some of the cost for parties.
    The Department of the Treasury seeks information and comment on the 
types and number of small entities potentially impacted by this 
proposed rule. If necessary, the Department of the Treasury will 
undertake a final regulatory flexibility analysis in the final rule.

List of Subjects in 31 CFR Part 800

    Foreign investments in the United States, Investigations, 
Investments, Investment companies, National defense, Reporting and 
Recordkeeping requirements.

    For the reasons set forth in the preamble, the Department of the 
Treasury proposes to revise part 800 of title 31 of the Code of Federal 
Regulations, to read as follows:

[[Page 50183]]

PART 800--REGULATIONS PERTAINING TO CERTAIN INVESTMENTS IN THE 
UNITED STATES BY FOREIGN PERSONS

Subpart A--General
Sec.
800.101 Scope.
800.102 Risk-based analysis.
800.103 Effect on other law.
800.104 Applicability rule.
Subpart B--Definitions
800.201 Aggregated data.
800.202 Anonymized data.
800.203 Business day.
800.204 Certification.
800.205 Committee; Chairperson of the Committee; Staff Chairperson.
800.206 Completion date.
800.207 Contingent equity interest.
800.208 Control.
800.209 Conversion.
800.210 Covered control transaction.
800.211 Covered investment.
800.212 Covered investment critical infrastructure.
800.213 Covered transaction.
800.214 Critical infrastructure.
800.215 Critical technologies.
800.216 Effective date.
800.217 Encrypted data.
800.218 Entity.
800.219 Excepted foreign state.
800.220 Excepted investor.
800.221 Foreign entity.
800.222 Foreign government.
800.223 Foreign government-controlled transaction.
800.224 Foreign national.
800.225 Foreign person.
800.226 Hold.
800.227 Identifiable data.
800.228 Investment.
800.229 Investment fund.
800.230 Involvement.
800.231 Lead agency.
800.232 Manufacture.
800.233 Material nonpublic technical information.
800.234 Minimum excepted ownership.
800.235 Own.
800.236 Parent. 800.237 Party to a transaction.
800.238 Person. 800.239 Personal identifier.
800.240 Section 721.
800.241 Sensitive personal data.
800.242 Service.
800.243 Solely for the purpose of passive investment.
800.244 Substantial interest.
800.245 Substantive decisionmaking.
800.246 Supply.
800.247 Targets or tailors.
800.248 TID U.S. business.
800.249 Transaction.
800.250 Unaffiliated TID U.S. business.
800.251 United States.
800.252 U.S. business.
800.253 U.S. national.
800.254 Voting interest.
Subpart C--Coverage
800.301 Transactions that are covered control transactions.
800.302 Transactions that are not covered control transactions.
800.303 Transactions that are covered investments.
800.304 Transactions that are not covered investments.
800.305 Incremental acquisitions.
800.306 Lending transactions.
800.307 Specific clarifications for investment funds.
800.308 Timing rule for a contingent equity interest.
Subpart D--Declarations
800.401 Mandatory declarations.
800.402 Voluntary declarations.
800.403 Procedures for declarations.
800.404 Contents of declarations.
800.405 Beginning of 30-day assessment period.
800.406 Rejection, disposition, or withdrawal of declarations.
800.407 Committee actions.
Subpart E--Notices
800.501 Procedures for notices.
800.502 Contents of voluntary notices.
800.503 Beginning of a 45-day review period.
800.504 Deferral, rejection, or disposition of certain voluntary 
notices.
800.505 Determination of whether to undertake an investigation.
800.506 Determination not to undertake an investigation.
800.507 Commencement of investigation.
800.508 Completion or termination of investigation and report to the 
President.
800.509 Withdrawal of notices.
Subpart F--Committee Procedures
800.601 General.
800.602 Role of the Secretary of Labor.
800.603 Materiality.
800.604 Tolling of deadlines during lapse in appropriations.
Subpart G--Finality of Action
800.701 Finality of actions under section 721.
Subpart H--Provision and Handling of Information
800.801 Obligation of parties to provide information.
800.802 Confidentiality.
Subpart I--Penalties and Damages
800.901 Penalties and damages.
800.902 Effect of lack of compliance.
Subpart J--Foreign National Security Investment Review Regimes
800.1001 Determinations.
800.1002 Effect of determinations.
Appendix A to Part 800--Covered investment critical infrastructure 
and functions related to covered investment critical infrastructure

    Authority:  50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.

Subpart A--General


Sec.  800.101   Scope.

    (a) Section 721 of title VII of the Defense Production Act of 1950 
(50 U.S.C. 4565), as amended, authorizes the President to suspend or 
prohibit any covered transaction, when, in the President's judgment, 
there is credible evidence that leads the President to believe that the 
foreign person engaging in a covered transaction might take action that 
threatens to impair the national security of the United States, and 
when provisions of law other than section 721 and the International 
Emergency Economic Powers Act (50 U.S.C. 1701-1706), do not, in the 
judgment of the President, provide adequate and appropriate authority 
for the President to protect the national security in the matter before 
the President. Section 721 also authorizes the Committee to review 
covered transactions and to mitigate any risk to the national security 
of the United States that arises as a result of such transactions.
    (b) This part implements regulations pertaining to covered 
transactions as defined in Sec.  800.213 of this part. Regulations 
pertaining to covered real estate transactions are addressed in part 
802 of this title.


Sec.  800.102   Risk-based analysis.

    Any determination of the Committee with respect to a covered 
transaction to suspend, refer to the President, or to negotiate, enter 
into or impose, or enforce any agreement or condition under section 721 
shall be based on a risk-based analysis, conducted by the Committee, of 
the effects on the national security of the United States of the 
covered transaction. Any such risk-based analysis shall include 
credible evidence demonstrating the risk and an assessment of the 
threat, vulnerabilities, and consequences to national security related 
to the transaction. For purposes of this part, any such analysis of 
risk shall include and be informed by consideration of the following 
elements:
    (a) The threat, which is a function of the intent and capability of 
a foreign person to take action to impair the national security of the 
United States;
    (b) The vulnerabilities, which are the extent to which the nature 
of the U.S. business presents susceptibility to impairment of national 
security; and
    (c) The consequences to national security, which are the potential 
effects on national security that could reasonably result from the 
exploitation of the vulnerabilities by the threat actor.


Sec.  800.103   Effect on other law.

    Nothing in this part shall be construed as altering or affecting 
any other authority, process, regulation, investigation, enforcement 
measure, or review provided by or established under

[[Page 50184]]

any other provision of federal law, including without limitation the 
International Emergency Economic Powers Act, or any other authority of 
the President or the Congress under the Constitution of the United 
States.


Sec.  800.104   Applicability rule.

    (a) Except as provided in paragraphs (b) and (c) of this section 
and otherwise in this part, the regulations in this part apply from 
[EFFECTIVE DATE OF FINAL RULE].
    (b) For any transaction for which the following has occurred before 
[EFFECTIVE DATE OF FINAL RULE], the corresponding provisions of the 
regulations in this part that were in effect the day before [EFFECTIVE 
DATE OF FINAL RULE] will apply:
    (1) The completion date;
    (2) The parties to the transaction have executed a binding written 
agreement, or other binding document, establishing the material terms 
of the transaction;
    (3) A party has made a public offer to shareholders to buy shares 
of a U.S. business; or
    (4) A shareholder has solicited proxies in connection with an 
election of the board of directors of a U.S. business or an owner or 
holder of a contingent equity interest has requested the conversion of 
the contingent equity interest.
    (c) For any transaction that, between November 10, 2018 and 
[EFFECTIVE DATE], fell within the scope of part 801 of this title, the 
regulations in part 801 will continue to apply.

    Note 1 to Sec.  800.104: See subpart I (Penalties and Damages) 
of this part for specific applicability rules pertaining to that 
subpart.

Subpart B--Definitions


Sec.  800.201   Aggregated data.

    The term aggregated data means data that have been combined or 
collected together in summary or other form such that the data cannot 
be identified with any individual.


Sec.  800.202   Anonymized data.

    The term anonymized data means data from which all personal 
identifiers have been completely removed.


Sec.  800.203   Business day.

    The term business day means Monday through Friday, except the legal 
public holidays specified in 5 U.S.C. 6103, any day declared to be a 
holiday by federal statute or executive order, or any day with respect 
to which the U.S. Office of Personnel Management has announced that 
Federal agencies in the Washington, DC, area are closed to the public. 
For purposes of calculating any deadline imposed by this part triggered 
by the submission of a party to a transaction under Sec.  800.401(e)(2) 
or Sec.  800.501(i), any submissions received after 5 p.m. Eastern Time 
are deemed to be submitted on the next business day.

    Note 1 to Sec.  800.203: See Sec.  800.604 regarding the tolling 
of deadlines during a lapse in appropriations.

Sec.  800.204   Certification.

    (a) The term certification means a written statement signed by the 
chief executive officer or other duly authorized designee of a party 
filing a notice, declaration, or information, certifying under the 
penalties provided in the False Statements Accountability Act of 1996, 
as amended (18 U.S.C. 1001) that the notice, declaration, or 
information filed:
    (1) Fully complies with the requirements of section 721, the 
regulations in this part, and any agreement or condition entered into 
with the Committee or any member of the Committee, and
    (2) Is accurate and complete in all material respects, as it 
relates to:
    (i) The transaction, and
    (ii) The party providing the certification, including its parents, 
subsidiaries, and any other related entities described in the notice, 
declaration, or information.
    (b) For purposes of this section, a duly authorized designee is:
    (1) In the case of a partnership, any general partner thereof;
    (2) In the case of a corporation, any officer or director thereof;
    (3) In the case of any entity lacking partners, officers, or 
directors, any individual within the organization exercising executive 
functions similar to those of a general partner of a partnership or an 
officer or director of a corporation; and
    (4) In the case of an individual, such individual or his or her 
legal representative.
    (c) In each case described in paragraphs (b)(1) through (4) of this 
section, such designee must possess actual authority to make the 
certification on behalf of the party filing a notice, declaration, or 
information.

    Note 1 to Sec.  800.204: A sample certification may be found at 
the Committee's section of the Department of the Treasury website, 
currently available at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.

Sec.  800.205   Committee; Chairperson of the Committee; Staff 
Chairperson.

    The term Committee means the Committee on Foreign Investment in the 
United States. The Chairperson of the Committee is the Secretary of the 
Treasury. The Staff Chairperson of the Committee is the Department of 
the Treasury official so designated by the Secretary of the Treasury or 
by the Secretary's designee.


Sec.  800.206   Completion date.

    The term completion date means, with respect to a transaction, the 
earliest date upon which any ownership interest, including a contingent 
equity interest, is conveyed, assigned, delivered, or otherwise 
transferred to a person, or a change in rights that could result in a 
covered control transaction or covered investment occurs.

    Note 1 to Sec.  800.206: See Sec.  800.308 regarding the timing 
rule for a contingent equity interest.

Sec.  800.207   Contingent equity interest.

    The term contingent equity interest means a financial instrument 
that currently does not constitute an equity interest but is 
convertible into, or provides the right to acquire, an equity interest 
upon the occurrence of a contingency or defined event.


Sec.  800.208   Control.

    (a) The term control means the power, direct or indirect, whether 
or not exercised, through the ownership of a majority or a dominant 
minority of the total outstanding voting interest in an entity, board 
representation, proxy voting, a special share, contractual 
arrangements, formal or informal arrangements to act in concert, or 
other means, to determine, direct, or decide important matters 
affecting an entity; in particular, but without limitation, to 
determine, direct, take, reach, or cause decisions regarding the 
following matters, or any other similarly important matters affecting 
an entity:
    (1) The sale, lease, mortgage, pledge, or other transfer of any of 
the tangible or intangible principal assets of the entity, whether or 
not in the ordinary course of business;
    (2) The reorganization, merger, or dissolution of the entity;
    (3) The closing, relocation, or substantial alteration of the 
production, operational, or research and development facilities of the 
entity;
    (4) Major expenditures or investments, issuances of equity or debt, 
or dividend payments by the entity, or approval of the operating budget 
of the entity;

[[Page 50185]]

    (5) The selection of new business lines or ventures that the entity 
will pursue;
    (6) The entry into, termination, or non-fulfillment by the entity 
of significant contracts;
    (7) The policies or procedures of the entity governing the 
treatment of non-public technical, financial, or other proprietary 
information of the entity;
    (8) The appointment or dismissal of officers or senior managers or 
in the case of a partnership, the general partner;
    (9) The appointment or dismissal of employees with access to 
critical technology or other sensitive technology or classified U.S. 
Government information; or
    (10) The amendment of the Articles of Incorporation, constituent 
agreement, or other organizational documents of the entity with respect 
to the matters described in paragraphs (a)(1) through (9) of this 
section.
    (b) In examining questions of control in situations where more than 
one foreign person has an ownership interest in an entity, 
consideration will be given to factors such as whether the foreign 
persons are related or have formal or informal arrangements to act in 
concert, whether they are agencies or instrumentalities of the national 
or subnational governments of a single foreign state, and whether a 
given foreign person and another person that has an ownership interest 
in the entity are both controlled by any of the national or subnational 
governments of a single foreign state.
    (c) The following minority shareholder protections shall not in 
themselves be deemed to confer control over an entity:
    (1) The power to prevent the sale or pledge of all or substantially 
all of the assets of an entity or a voluntary filing for bankruptcy or 
liquidation;
    (2) The power to prevent an entity from entering into contracts 
with majority investors or their affiliates;
    (3) The power to prevent an entity from guaranteeing the 
obligations of majority investors or their affiliates;
    (4) The power to purchase an additional interest in an entity to 
prevent the dilution of an investor's pro rata interest in that entity 
in the event that the entity issues additional instruments conveying 
interests in the entity;
    (5) The power to prevent the change of existing legal rights or 
preferences of the particular class of stock held by minority 
investors, as provided in the relevant corporate documents governing 
such shares; and
    (6) The power to prevent the amendment of the Articles of 
Incorporation, constituent agreement, or other organizational documents 
of an entity with respect to the matters described in paragraphs (c)(1) 
through (5) of this section.
    (d) The Committee will consider, on a case-by-case basis, whether 
minority shareholder protections other than those listed in paragraph 
(c) of this section do not confer control over an entity.
    (e) Examples:

    (1) Example 1. Corporation A is a U.S. business. A U.S. investor 
owns 50 percent of the voting interest in Corporation A, and the 
remaining voting interest is owned in equal shares by five unrelated 
foreign investors. The foreign investors jointly financed their 
investment in Corporation A and vote as a single block on matters 
affecting Corporation A. The foreign investors have an informal 
arrangement to act in concert with regard to Corporation A, and, as 
a result, the foreign investors control Corporation A.
    (2) Example 2. Same facts as in Example 1 of this section with 
regard to the composition of Corporation A's shareholders. The 
foreign investors in Corporation A have no contractual or other 
commitments to act in concert, and have no informal arrangements to 
do so. Assuming no other relevant facts, the foreign investors do 
not control Corporation A.
    (3) Example 3. Corporation A, a foreign person, is a private 
equity fund that routinely acquires equity interests in companies 
and manages them for a period of time. Corporation B is a U.S. 
business. In addition to its acquisition of seven percent of 
Corporation B's voting shares, Corporation A acquires the right to 
terminate significant contracts of Corporation B. Corporation A 
controls Corporation B.
    (4) Example 4. Corporation A, a foreign person, acquires a nine 
percent interest in the shares of Corporation B, a U.S. business. As 
part of the transaction, Corporation A also acquires certain veto 
rights that determine important matters affecting Corporation B, 
including the right to veto the dismissal of senior executives of 
Corporation B. Corporation A controls Corporation B.
    (5) Example 5. Corporation A, a foreign person, acquires a 
thirteen percent interest in the shares of Corporation B, a U.S. 
business, and the right to appoint one member of Corporation B's 
seven-member Board of Directors. Corporation A receives minority 
shareholder protections listed in Sec.  800.208(c) but receives no 
other positive or negative rights with respect to Corporation B. 
Assuming no other relevant facts, Corporation A does not control 
Corporation B.
    (6) Example 6. Corporation A, a foreign person, acquires a 
twenty percent interest in the shares of Corporation B, a U.S. 
business. Corporation A has negotiated an irrevocable passivity 
agreement that completely precludes it from controlling Corporation 
B. Corporation A does, however, receive the right to prevent 
Corporation B from entering into contracts with majority investors 
or their affiliates and to prevent Corporation B from guaranteeing 
the obligations of majority investors or their affiliates. Assuming 
no other relevant facts, Corporation A does not control Corporation 
B.
    (7) Example 7. Limited Partnership A comprises two limited 
partners, each of which holds 49 percent of the interest in the 
partnership, and a general partner, which holds two percent of the 
interest. The general partner has sole authority to determine, 
direct, and decide all important matters affecting the partnership 
and a fund operated by the partnership. The general partner alone 
controls Limited Partnership A and the fund.
    (8) Example 8. Same facts as in Example 7 of this section, 
except that each of the limited partners has the authority to veto 
major investments proposed by the general partner and to choose the 
fund's representatives on the boards of the fund's portfolio 
companies. The general partner and the limited partners each have 
control over Limited Partnership A and the fund.

    Note 1 to Sec.  800.208: See Sec.  800.302(b) regarding the 
Committee's treatment of transactions in which a foreign person 
holds or acquires ten percent or less of the outstanding voting 
interest in a U.S. business solely for the purpose of passive 
investment. See Sec.  800.303 regarding the Committee's treatment of 
transactions that do not result in control over a U.S. business by a 
foreign person, but may be covered investments. See Sec.  800.305 
regarding the Committee's treatment of a subsequent transaction 
involving a foreign person that previously acquired control of the 
U.S. business.

Sec.  800.209   Conversion.

    The term conversion means the exercise of a right inherent in the 
ownership or holding of a particular financial instrument to exchange 
any such instrument for an equity interest.


Sec.  800.210   Covered control transaction.

    The term covered control transaction means any transaction that is 
proposed or pending after August 23, 1988, by or with any foreign 
person that could result in foreign control of any U.S. business, 
including without limitation such a transaction carried out through a 
joint venture.


Sec.  800.211   Covered investment.

    The term covered investment means an investment, direct or 
indirect, by a foreign person other than an excepted investor in an 
unaffiliated TID U.S. business that is proposed or pending after 
[EFFECTIVE DATE OF FINAL RULE], and that:
    (a) Is not a covered control transaction; and
    (b) Affords the foreign person:
    (1) Access to any material nonpublic technical information in the 
possession of the TID U.S. business;
    (2) Membership or observer rights on the board of directors or 
equivalent

[[Page 50186]]

governing body of the TID U.S. business or the right to nominate an 
individual to a position on the board of directors or equivalent 
governing body of the TID U.S. business; or
    (3) Any involvement, other than through voting of shares, in 
substantive decisionmaking of the TID U.S. business regarding:
    (i) The use, development, acquisition, safekeeping, or release of 
sensitive personal data of U.S. citizens maintained or collected by the 
TID U.S. business;
    (ii) The use, development, acquisition, or release of critical 
technologies; or
    (iii) The management, operation, manufacture, or supply of covered 
investment critical infrastructure.
    (c) Notwithstanding paragraphs (a) and (b) of this section, no 
investment involving an air carrier, as defined in 49 U.S.C. 
40102(a)(2), that holds a certificate issued under 49 U.S.C. 41102 
shall be a covered investment.


Sec.  800.212   Covered investment critical infrastructure.

    The term covered investment critical infrastructure means, in the 
context of a particular covered investment, the systems and assets, 
whether physical or virtual, set forth in Column 1 of appendix A to 
part 800.


Sec.  800.213   Covered transaction.

    The term covered transaction means any of the following:
    (a) A covered control transaction;
    (b) A covered investment;
    (c) A change in the rights that a foreign person has with respect 
to a U.S. business in which the foreign person has an investment, if 
that change could result in a covered control transaction or a covered 
investment; or
    (d) Any other transaction, transfer, agreement, or arrangement, the 
structure of which is designed or intended to evade or circumvent the 
application of section 721.

    Note 1 to Sec.  800.213: Any transaction described in (a) 
through (d) of this section that arises pursuant to a bankruptcy 
proceeding or other form of default on debt is a covered 
transaction. See also Sec.  800.306 for the treatment of certain 
lending transactions.

Sec.  800.214   Critical infrastructure.

    The term critical infrastructure means, in the context of a 
particular covered control transaction, systems and assets, whether 
physical or virtual, so vital to the United States that the incapacity 
or destruction of such systems or assets would have a debilitating 
impact on national security.


Sec.  800.215   Critical technologies.

    The term critical technologies means the following:
    (a) Defense articles or defense services included on the United 
States Munitions List (USML) set forth in the International Traffic in 
Arms Regulations (ITAR) (22 CFR parts 120-130);
    (b) Items included on the Commerce Control List set forth in 
Supplement No. 1 to part 774 of the Export Administration Regulations 
(EAR) (15 CFR parts 730-774), and controlled--
    (1) Pursuant to multilateral regimes, including for reasons 
relating to national security, chemical and biological weapons 
proliferation, nuclear nonproliferation, or missile technology; or
    (2) For reasons relating to regional stability or surreptitious 
listening;
    (c) Specially designed and prepared nuclear equipment, parts and 
components, materials, software, and technology covered by 10 CFR part 
810 (relating to assistance to foreign atomic energy activities);
    (d) Nuclear facilities, equipment, and material covered by 10 CFR 
part 110 (relating to export and import of nuclear equipment and 
material);
    (e) Select agents and toxins covered by 7 CFR part 331, 9 CFR part 
121, or 42 CFR part 73; and
    (f) Emerging and foundational technologies controlled pursuant to 
section 1758 of the Export Control Reform Act of 2018 (50 U.S.C. 4817).


Sec.  800.216   Effective date.

    The term effective date means [EFFECTIVE DATE OF FINAL RULE].


Sec.  800.217   Encrypted data.

    The term encrypted data means data to which National Institute of 
Standards and Technology (NIST)-allowed cryptographic techniques, as 
identified in the most current NIST special publication 800-175B, or 
superseding publication, have been applied.


Sec.  800.218   Entity.

    The term entity means any branch, partnership, group or sub-group, 
association, estate, trust, corporation or division of a corporation, 
or organization (whether or not organized under the laws of any State 
or foreign state); assets (whether or not organized as a separate legal 
entity) operated by any one of the foregoing as a business undertaking 
in a particular location or for particular products or services; and 
any government (including a foreign national or subnational government, 
the U.S. Government, a subnational government within the United States, 
and any of their respective departments, agencies, or 
instrumentalities). (See examples in Sec.  800.301(g)(5) through (14) 
and Sec.  800.302(g)(5) through (10).)


Sec.  800.219   Excepted foreign state.

    The term excepted foreign state means each foreign state from time 
to time identified by the Chairperson of the Committee, with the 
agreement of two-thirds of the voting members of the Committee, and, 
beginning on [TWO YEARS AFTER EFFECTIVE DATE OF FINAL RULE] with 
respect to which the Chairperson of the Committee has made a 
determination pursuant to Sec.  800.1001(a).

    Note 1 to Sec.  800.219: The name of each foreign state 
identified by the Chairperson of the Committee as an excepted 
foreign state will be published in a notice in the Federal Register 
and incorporated into the Committee's list of excepted foreign 
states.

Sec.  800.220   Excepted investor.

    (a) The term excepted investor means a foreign person who is, as of 
the completion date and subject to paragraphs (c) and (d) of this 
section:
    (1) A foreign national who is a national of one or more excepted 
foreign states and is not also a national of any foreign state that is 
not an excepted foreign state;
    (2) A foreign government of an excepted foreign state; or
    (3) A foreign entity that meets each of the following conditions 
with respect to itself and each of its parents (if any):
    (i) Such entity is organized under the laws of an excepted foreign 
state or in the United States;
    (ii) Such entity has its principal place of business in an excepted 
foreign state or the United States;
    (iii) Each member or observer of the board of directors or similar 
body of such entity is a U.S. national or, if a foreign national, is a 
national of one or more excepted foreign states and is not also a 
national of any foreign state that is not an excepted foreign state;
    (iv) Any foreign person that individually holds, or each foreign 
person that is part of a group of foreign persons that, in the 
aggregate, holds, five percent or more of the outstanding voting 
interest of such entity; holds the right to five percent or more of the 
profits of such entity; holds the right in the event of dissolution to 
five percent or more of the assets of such entity; or could exercise 
control over such entity, is:
    (A) A foreign national who is a national of one or more excepted 
foreign states and is not also a national of any foreign state that is 
not an excepted foreign state;

[[Page 50187]]

    (B) A foreign government of an excepted foreign state; or
    (C) A foreign entity that is organized under the laws of an 
excepted foreign state and has its principal place of business in an 
excepted foreign state or in the United States; and
    (v) The minimum excepted ownership of such entity is held, 
individually or in the aggregate, by one or more persons each of whom 
is:
    (A) Not a foreign person;
    (B) A foreign national who is a national of one or more excepted 
foreign states and is not also a national of any foreign state that is 
not an excepted foreign state;
    (C) A foreign government of an excepted foreign state; or
    (D) A foreign entity that is organized under the laws of an 
excepted foreign state and has its principal place of business in an 
excepted foreign state or in the United States.
    (b) When more than one person holds an ownership interest in an 
entity, in determining whether the ownership interests of such persons 
should be aggregated for purposes of paragraph (a)(3)(iv) of this 
section, consideration will be given to factors such as whether the 
persons holding the ownership interests are related or have formal or 
informal arrangements to act in concert, whether they are agencies or 
instrumentalities of the national or subnational governments of a 
single foreign state, and whether a given foreign person and another 
foreign person that has an ownership interest in the entity are both 
controlled by any of the national or subnational governments of a 
single foreign state.
    (c) Notwithstanding paragraph (a) of this section, a foreign person 
is not an excepted investor with respect to a transaction if:
    (1) In the five years prior to the completion date of the 
transaction the foreign person or any of its parents or subsidiaries:
    (i) Has received written notice from the Committee that it has 
submitted a material misstatement or omission in a notice or 
declaration or made a false certification under this part or parts 801 
or 802 of this title;
    (ii) Has received written notice from the Committee that it has 
violated a material provision of a mitigation agreement entered into 
with, material condition imposed by, or an order issued by, the 
Committee or a lead agency under section 721(l);
    (iii) Has been subject to action by the President under section 
721(d);
    (iv) Has:
    (A) Received a written Finding of Violation or Penalty Notice 
imposing a civil monetary penalty from the Department of the Treasury 
Office of Foreign Assets Control (OFAC); or
    (B) Entered into a settlement agreement with OFAC with respect to 
apparent violations of U.S. sanctions laws administered by OFAC, 
including without limitation the International Emergency Economic 
Powers Act, the Trading With the Enemy Act, the Foreign Narcotics 
Kingpin Designation Act, each as amended, or of any executive order, 
regulation, order, directive, or license issued pursuant thereto;
    (v) Has received a written notice of debarment from the Department 
of State Directorate of Defense Trade Controls, as described in 22 CFR 
parts 127 and 128;
    (vi) Has been a respondent or party in a final order, including a 
settlement order, issued by the Department of Commerce Bureau of 
Industry and Security (BIS) regarding violations of U.S. export control 
laws administered by BIS, including without limitation the Export 
Control Reform Act of 2018 (Title XVII, Subtitle B of Pub. L. 115-232, 
132 Stat. 2208, 50 U.S.C. 4801, et seq.), the EAR, or of any executive 
order, regulation, order, directive, or license issued pursuant 
thereto;
    (vii) Has received a final decision from the Department of Energy 
National Nuclear Security Administration imposing a civil penalty with 
respect to a violation of section 57 b. of the Atomic Energy Act of 
1954, as implemented under 10 CFR part 810; or
    (viii) Has been convicted of a crime under, or has entered into a 
deferred prosecution agreement or non-prosecution agreement with the 
Department of Justice with respect to a violation of, any felony crime 
in any jurisdiction within the United States; or
    (2) The foreign person or any of its parents or subsidiaries is, on 
the date on which the parties to the transaction first execute a 
binding written agreement, or other binding document, establishing the 
material terms of the transaction, listed on either the BIS Unverified 
List or Entity List in 15 CFR part 744.
    (d) Irrespective of whether the foreign person satisfies the 
criteria in paragraphs (a)(1), (2), or (3)(i) through (iii) of this 
section as of the completion date, if at any time during the three-year 
period following the completion date, the foreign person no longer 
meets all the criteria set forth in paragraphs (a)(1), (2), or (3)(i) 
through (iii) of this section, the foreign person is not an excepted 
investor with respect to the transaction from the completion date 
onward. This paragraph does not apply when an excepted investor no 
longer meets any of the criteria solely due to a rescission of a 
determination under Sec.  800.1001(b) or if a particular foreign state 
otherwise ceases to be an excepted foreign state.
    (e) A foreign person may waive its status as an excepted investor 
with respect to a transaction at any time by submitting a declaration 
pursuant to Sec.  800.403 or filing a notice pursuant to Sec.  800.501 
regarding the transaction in which it explicitly waives such status. In 
such case, the foreign person will be deemed not to be an excepted 
investor and the provisions of Subpart D or E, as applicable, will 
apply.

    Note 1 to Sec.  800.220: See Sec.  800.501(c)(2) regarding an 
agency notice where a foreign person is not an excepted investor 
solely due to Sec.  800.220(d).

Sec.  800.221   Foreign entity.

    (a) The term foreign entity means any branch, partnership, group or 
sub-group, association, estate, trust, corporation or division of a 
corporation, or organization organized under the laws of a foreign 
state if either its principal place of business is outside the United 
States or its equity securities are primarily traded on one or more 
foreign exchanges.
    (b) Notwithstanding paragraph (a) of this section, any branch, 
partnership, group or sub-group, association, estate, trust, 
corporation or division of a corporation, or organization that 
demonstrates that a majority of the equity interest in such entity is 
ultimately owned by U.S. nationals is not a foreign entity.


Sec.  800.222   Foreign government.

    The term foreign government means any government or body exercising 
governmental functions, other than the U.S. Government or a subnational 
government of the United States. The term includes, but is not limited 
to, national and subnational governments, including their respective 
departments, agencies, and instrumentalities.


Sec.  800.223   Foreign government-controlled transaction.

    The term foreign government-controlled transaction means any 
covered control transaction that could result in control of a U.S. 
business by a foreign government or a person controlled by or acting on 
behalf of a foreign government.


Sec.  800.224   Foreign national.

    The term foreign national means any individual other than a U.S. 
national.


Sec.  800.225   Foreign person.

    (a) The term foreign person means:
    (1) Any foreign national, foreign government, or foreign entity; or

[[Page 50188]]

    (2) Any entity over which control is exercised or exercisable by a 
foreign national, foreign government, or foreign entity.
    (b) Examples:

    (1) Example 1. Corporation A is organized under the laws of a 
foreign state and is engaged in business only outside the United 
States. All of its shares are held by Corporation X, which solely 
controls Corporation A. Corporation X is organized in the United 
States and is wholly owned and controlled by U.S. nationals. 
Assuming no other relevant facts, Corporation A, although organized 
and only operating outside the United States, is not a foreign 
person.
    (2) Example 2. Same facts as in the first sentence of Example 1 
of this section. The government of the foreign state under whose 
laws Corporation A is organized exercises control over Corporation A 
because a law establishing Corporation A gives the foreign state the 
right to appoint Corporation A's board members. Corporation A is a 
foreign person.
    (3) Example 3. Corporation A is organized in the United States, 
is engaged in interstate commerce in the United States, and is 
controlled by Corporation X. Corporation X is organized under the 
laws of a foreign state, its principal place of business is located 
outside the United States, and 50 percent of its shares are held by 
foreign nationals and 50 percent of its shares are held by U.S. 
nationals. Both Corporation A and Corporation X are foreign persons. 
Corporation A is also a U.S. business.
    (4) Example 4. Corporation A is organized under the laws of a 
foreign state and is owned and controlled by a foreign national. A 
branch of Corporation A engages in interstate commerce in the United 
States. Corporation A (including its branch) is a foreign person. 
The branch is also a U.S. business.
    (5) Example 5. Corporation A is a corporation organized under 
the laws of a foreign state and its principal place of business is 
located outside the United States. Forty-five percent of the voting 
interest in Corporation A is owned in equal shares by numerous 
unrelated foreign investors, none of whom has control. The foreign 
investors have no formal or informal arrangement to act in concert 
with regard to Corporation A with any other holder of voting 
interest in Corporation A. Corporation A demonstrates that the 
remainder of the voting interest in Corporation A is held by U.S. 
nationals. Assuming no other relevant facts, Corporation A is not a 
foreign person.
    (6) Example 6. Same facts as Example 5 of this section, except 
that one of the foreign investors controls Corporation A. Assuming 
no other relevant facts, Corporation A is not a foreign entity 
pursuant to Sec.  800.221(b), but it is a foreign person because it 
is controlled by a foreign person.


Sec.  800.226   Hold.

    The terms hold(s) and holding mean legal or beneficial ownership, 
whether direct or indirect, whether through fiduciaries, agents, or 
other means.


Sec.  800.227   Identifiable data.

    The term identifiable data means data that can be used to 
distinguish or trace an individual's identity, including without 
limitation through the use of any personal identifier. For the 
avoidance of doubt, aggregated data or anonymized data is identifiable 
data if any party to the transaction has, or as a result of the 
transaction will have, the ability to disaggregate or de-anonymize the 
data, or if the data is otherwise capable of being used to distinguish 
or trace an individual's identity. Identifiable data does not include 
encrypted data, unless the U.S. business that maintains or collects the 
encrypted data has the means to de-encrypt the data so as to 
distinguish or trace an individual's identity.


Sec.  800.228   Investment.

    The term investment means the acquisition of equity interest, 
including contingent equity interest.


Sec.  800.229   Investment fund.

    The term investment fund means any entity that is an ``investment 
company,'' as defined in section 3(a) of the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.), or would be an ``investment company'' 
but for one or more of the exemptions provided in section 3(b) or 3(c) 
thereunder.


Sec.  800.230   Involvement.

    The term involvement means the right or ability to participate, 
whether or not exercised, including without limitation by doing any of 
the following:
    (a) Providing input into a final decision;
    (b) Consulting with or providing advice to a decisionmaker;
    (c) Exercising special approval or veto rights;
    (d) Participating on a committee with decisionmaking authority; or
    (e) Advising on the appointment officers or selecting employees who 
are engaged in substantive decisionmaking.


Sec.  800.231   Lead agency.

    The term lead agency means the Department of the Treasury and any 
other agency designated by the Chairperson of the Committee to have 
primary responsibility, on behalf of the Committee, for the specific 
activity for which the Chairperson designates it as a lead agency, 
including without limitation all or a portion of an assessment, a 
review, an investigation, or the negotiation or monitoring of a 
mitigation agreement or condition.


Sec.  800.232   Manufacture.

    Solely for the purposes of Column 2 of appendix A to part 800, the 
term manufacture means to produce or reproduce, whether physically or 
virtually.


Sec.  800.233   Material nonpublic technical information.

    (a) The term material nonpublic technical information means 
information that:
    (1) Provides knowledge, know-how, or understanding not available in 
the public domain, of the design, location, or operation of critical 
infrastructure, including without limitation vulnerability information 
such as that related to physical security or cybersecurity; or
    (2) Is not available in the public domain and is necessary to 
design, fabricate, develop, test, produce, or manufacture a critical 
technology, including without limitation processes, techniques, or 
methods;
    (b) The term material nonpublic technical information does not 
include financial information regarding the performance of an entity.
    (c) Example: Corporation A, a foreign person that is not an 
excepted investor, proposes to acquire a four percent, non-controlling 
equity interest in Corporation B. Corporation B is a U.S. business that 
services an industrial control system utilized by an interstate oil 
pipeline that has the capacity to transport 600,000 barrels per day of 
crude oil (ICS B). ICS B is covered investment critical infrastructure 
as set forth in Column 1 of appendix A to part 800. The source code for 
ICS B is not available in the public domain. Pursuant to the terms of 
the investment, Corporation A will have access to the source code for 
ICS B. The proposed investment therefore affords Corporation A access 
to material nonpublic technical information in the possession 
Corporation B regarding the design and operation of covered investment 
critical infrastructure.


Sec.  800.234   Minimum excepted ownership.

    The term minimum excepted ownership means:
    (a) With respect to an entity whose equity securities are primarily 
traded on an exchange in an excepted foreign state or the United 
States, a majority of its voting interest, the right to a majority of 
its profits, and the right in the event of dissolution to a majority of 
its assets; and
    (b) With respect to an entity whose equity securities are not 
primarily traded on an exchange in an excepted foreign state or the 
United States, 90 percent or more of its voting interest, the right to 
90 percent or more of its profits, and the right in the event of

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dissolution to 90 percent or more of its assets.


Sec.  800.235   Own.

    Solely for the purposes of Column 2 of appendix A to part 800, the 
term own means to directly possess the applicable covered investment 
critical infrastructure.


Sec.  800.236   Parent.

    (a) The term parent means a person who or which directly or 
indirectly:
    (1) Holds or will hold at least 50 percent of the outstanding 
voting interest in an entity; or
    (2) Holds or will hold the right to at least 50 percent of the 
profits of an entity, or has or will have the right in the event of the 
dissolution to at least 50 percent of the assets of that entity.
    (b) Any entity that meets the conditions of paragraph (a)(1) or (2) 
of this section with respect to another entity (i.e., the intermediate 
parent) is also a parent of any other entity of which the intermediate 
parent is a parent.
    (c) Examples:

    (1) Example 1. Corporation P holds 50 percent of the voting 
interest in Corporations R and S. Corporation R holds 40 percent of 
the voting interest in Corporation X; Corporation S holds 50 percent 
of the voting interest in Corporation Y, which in turn holds 50 
percent of the voting interest in Corporation Z. Corporation P is a 
parent of Corporations R, S, Y, and Z, but not of Corporation X. 
Corporation S is a parent of Corporation Y and Z, and Corporation Y 
is a parent of Corporation Z.
    (2) Example 2. Corporation A holds warrants which when exercised 
will entitle it to vote 50 percent of the outstanding shares of 
Corporation B. Corporation A is a parent of Corporation B.


Sec.  800.237   Party to a transaction.

    (a) The term party to a transaction means:
    (1) In the case of an acquisition of an ownership interest in an 
entity, the person acquiring the ownership interest, the person from 
which such ownership interest is acquired, and the entity whose 
ownership interest is being acquired, without regard to any person 
providing brokerage or underwriting services for the transaction;
    (2) In the case of a merger, the surviving entity, and the entity 
or entities that are merged into that entity as a result of the 
transaction;
    (3) In the case of a consolidation, the entities being 
consolidated, and the new consolidated entity;
    (4) In the case of a proxy solicitation, the person soliciting 
proxies, and the person who issued the voting interest;
    (5) In the case of the acquisition or conversion of contingent 
equity interests, the issuer and the person holding the contingent 
equity interests;
    (6) In the case of a change in rights that a person has with 
respect to an entity in which that person has an investment, the person 
whose rights change as a result of the transaction and the entity to 
which those rights apply;
    (7) In the case of a transfer, agreement, arrangement, or any other 
type of transaction, the structure of which is designed or intended to 
evade or circumvent the application of section 721, any person that 
participates in such transfer, agreement, arrangement, or other type of 
transaction;
    (8) In the case of any other type of transaction, any person who is 
in a role comparable to that of a person described in paragraphs (a)(1) 
through (7) of this section; and
    (9) In all cases, each party that submitted a declaration or notice 
to the Committee regarding a transaction.
    (b) For purposes of section 721(l), the term party to a transaction 
includes any affiliate of any party described in paragraphs (a)(1) 
through (9) of this section that the Committee, or a lead agency acting 
on behalf of the Committee, determines is relevant to mitigating a risk 
to the national security of the United States.


Sec.  800.238   Person.

    The term person means any individual or entity.


Sec.  800.239   Personal identifier.

    The term personal identifier means name, physical address, email 
address, social security number, phone number, or other information 
that identifies a specific individual.


Sec.  800.240   Section 721.

    The term section 721 means section 721 of title VII of the Defense 
Production Act of 1950 (50 U.S.C. 4565), as amended.


Sec.  800.241   Sensitive personal data.

    (a) The term sensitive personal data means, except as provided in 
paragraph (b) of this section:
    (1) Identifiable data that is:
    (i) Maintained or collected by a U.S. business that:
    (A) Targets or tailors products or services to any U.S. executive 
branch agency or military department with intelligence, national 
security, or homeland security responsibilities, or to personnel and 
contractors thereof;
    (B) Has maintained or collected such data on greater than one 
million individuals at any point over the preceding twelve (12) months; 
or
    (C) Has 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; 
and
    (ii) Within any of the following categories:
    (A) Data that could be used to analyze or determine an individual's 
financial distress or hardship;
    (B) The set of data in a consumer report, as defined pursuant to 15 
U.S.C. 1681a, unless such data is obtained from a consumer reporting 
agency for one or more purposes identified in 15 U.S.C. 1681b(a) and 
such data is not substantially similar to the full contents of a 
consumer file as defined pursuant to 15 U.S.C. 1681a.;
    (C) The set of data in an application for health insurance, long-
term care insurance, professional liability insurance, mortgage 
insurance, or life insurance;
    (D) Data relating to the physical, mental, or psychological health 
condition of an individual;
    (E) Non-public electronic communications, including without 
limitation email, messaging, or chat communications, between or among 
users of a U.S. business's products or services if a primary purpose of 
such product or service is to facilitate third-party user 
communications;
    (F) Geolocation data collected using positioning systems, cell 
phone towers, or WiFi access points such as via a mobile application, 
vehicle GPS, other onboard mapping tool, or wearable electronic device;
    (G) Biometric enrollment data including without limitation facial, 
voice, retina/iris, and palm/fingerprint templates;
    (H) Data stored and processed for generating a state or federal 
government identification card;
    (I) Data concerning U.S. Government personnel security clearance 
status; or
    (J) The set of data in an application for a U.S. Government 
personnel security clearance or an application for employment in a 
position of public trust; and
    (2) Genetic information, as defined pursuant to 45 CFR 160.103.
    (b) The term sensitive personal data shall not include, regardless 
of the applicability of the criteria described in paragraph (a) of this 
section:
    (1) Data maintained or collected by a U.S. business concerning the 
employees of that U.S. business, unless the data pertains to employees 
of U.S. Government contractors who hold U.S. Government personnel 
security clearances; or
    (2) Data that is a matter of public record, such as court records 
or other

[[Page 50190]]

government records that are generally available to the public.


Sec.  800.242   Service.

    Solely for the purposes of Column 2 of appendix A to part 800, the 
term service means to repair, maintain, refurbish, replace, overhaul, 
or update.


Sec.  800.243   Solely for the purpose of passive investment.

    (a) Ownership interests are held or acquired solely for the purpose 
of passive investment if the person holding or acquiring such interests 
does not plan or intend to exercise control and--
    (1) Is not afforded any rights that if exercised would constitute 
control;
    (2) Does not acquire any access, rights, or involvement specified 
Sec.  800.211(b);
    (3) Does not possess or develop any purpose other than passive 
investment; and
    (4) Does not take any action inconsistent with holding or acquiring 
such interests solely for the purpose of passive investment. (See Sec.  
800.302(b).)
    (b) Example: Corporation A, a foreign person, acquires a voting 
interest in Corporation B, a U.S. business. In addition to the voting 
interest, Corporation A negotiates the right to appoint a member of 
Corporation B's Board of Directors. The acquisition by Corporation A of 
a voting interest in Corporation B is not solely for the purpose of 
passive investment.


Sec.  800.244   Substantial interest.

    (a) The term substantial interest means a voting interest, direct 
or indirect, of 25 percent or more by a foreign person in a U.S. 
business and a voting interest, direct or indirect, of 49 percent or 
more by a foreign government in a foreign person.
    (b) In the case of entity organized as a limited partnership, a 
foreign government will be considered to have a substantial interest in 
such partnership if either:
    (1) It holds 49 percent or more of the voting interest in the 
general partner; or
    (2) It is a limited partner and holds 49 percent or more of the 
voting interest of the limited partners.
    (c) For purposes of determining the percentage of voting interest 
held indirectly by one entity in another entity, any voting interest of 
a parent will be deemed to be a 100 percent voting interest in any 
entity of which it is a parent.


Sec.  800.245   Substantive decisionmaking.

    (a) The term substantive decisionmaking means the process through 
which decisions regarding significant matters affecting an entity are 
undertaken, including without limitation, as applicable:
    (1) Pricing, sales, and specific contracts, including without 
limitation the license, sale, or transfer of sensitive personal data to 
any third party, including without limitation pursuant to a customer, 
vendor, or joint venture agreement;
    (2) Supply arrangements;
    (3) Corporate strategy and business development;
    (4) Research and development, including without limitation location 
and budget allocation;
    (5) Manufacturing locations;
    (6) Access to critical technologies, covered investment critical 
infrastructure, material nonpublic technical information, or sensitive 
personal data, including without limitation pursuant to a customer, 
vendor, or joint venture agreement;
    (7) Physical and cyber security protocols, including without 
limitation the storage and protection of critical technologies, covered 
investment critical infrastructure, or sensitive personal data;
    (8) Practices, policies, and procedures governing the collection, 
use, or storage of sensitive personal data, including without 
limitation:
    (i) The establishment or maintenance of, or changes to, the 
architecture of information technology systems and networks used in 
collecting or maintaining sensitive personal data; or
    (ii) Privacy policies and agreements for individuals from whom 
sensitive personal data is collected setting forth parameters regarding 
whether and how sensitive personal data may be collected, maintained, 
accessed, or disseminated; or
    (9) Strategic partnerships.
    (b) The term substantive decisionmaking does not include strictly 
administrative decisions.
    (c) Examples:

    (1) Example 1. Corporation A, a foreign person that is not an 
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B. Corporation B is an 
unaffiliated TID U.S. business that operates a container terminal at 
a strategic seaport within the National Port Readiness Network 
(Terminal B). Pursuant to the terms of the investment, Corporation A 
will have approval rights over which customers may utilize Terminal 
B. The proposed investment therefore affords Corporation A 
involvement in substantive decisionmaking of Corporation B regarding 
the management, operation, manufacture, or supply of covered 
investment critical infrastructure.
    (2) Example 2. Same facts as Example 1 of this section, except 
that instead of customer approval rights, Corporation A has the 
right to decide whether to claim certain tax credits with respect to 
Terminal B on its own income tax filing, which prevents Corporation 
B from claiming such credits. Assuming no other relevant facts, the 
proposed investment does not afford Corporation A involvement in 
substantive decisionmaking of Corporation B regarding the 
management, operation, manufacture, or supply of covered investment 
critical infrastructure.


Sec.  800.246   Supply.

    Solely for the purposes of Column 2 of appendix A to part 800, the 
term supply means to provide third-party physical or cyber security.


Sec.  800.247   Targets or tailors.

    (a) The term targets or tailors means customizing products or 
services for use by a person or group of persons or actively marketing 
to or soliciting a person or group of persons.
    (b) Examples:

    (1) Example 1. Corporation A, a U.S. business, operates 
facilities throughout the United States that offer healthcare-
related products and services. Some of Corporation A's facilities 
are located within metropolitan areas that also include U.S. 
military facilities. Absent additional relevant facts, Corporation A 
does not target or tailor its products or services for purposes of 
Sec.  800.241(a)(1)(i)(A).
    (2) Example 2. Same facts as Example 2 of this section, except 
that Corporation A operates a facility on the premises of a U.S. 
military facility. Corporation A targets or tailors its products or 
services for purposes of Sec.  800.241(a)(1)(i)(A).
    (3) Example 3. Corporation A, a U.S. business, offers a discount 
to all customers that are employed in the public sector broadly, 
including active duty U.S. military personnel. Absent additional 
relevant facts, Corporation A does not target or tailor its products 
or services for purposes of Sec.  800.241(a)(1)(i)(A).
    (4) Example 4. Same facts as Example 3 of this section, except 
that Corporation A offers a discount solely to uniformed U.S. 
military personnel or distributes marketing materials that promote 
the particular usefulness of Corporation A's products to military 
personnel. Corporation A targets or tailors its products or services 
for purposes of Sec.  800.241(a)(1)(i)(A).


Sec.  800.248   TID U.S. business.

    The term TID U.S. business means any U.S. business that:
    (a) Produces, designs, tests, manufactures, fabricates, or develops 
one or more critical technologies;
    (b) Performs the functions as set forth in Column 2 of appendix A 
to part 800 with respect to covered investment critical infrastructure; 
or
    (c) Maintains or collects, directly or indirectly, sensitive 
personal data of U.S. citizens.
    (d) Examples:

    (1) Example 1. Corporation A, a U.S. business, operates a 
munitions plant in the

[[Page 50191]]

United States that produces a variety of military grade explosives. 
Some of the explosives manufactured by Corporation A are subject to 
export controls because they are listed on the USML. Corporation A 
manufactures critical technologies and is therefore a TID U.S. 
business.
    (2) Example 2. Facility A is a crude oil storage facility with 
the capacity to hold 50 million barrels of crude oil. Corporation A 
is a U.S. business that operates Facility A. Corporation B is a U.S. 
business that provides third-party physical security to Facility A 
by guarding the gate to Facility A and patrolling the fence 
surrounding Facility A. Corporation C produces the fencing used by 
Facility A. Corporation D produces the commercially available off-
the-shelf cyber security software utilized in Facility A. 
Corporation E provides third-party cyber security to Facility by 
running Facility A's cyber security defenses. Facility A is covered 
investment critical infrastructure as set forth in Column 1 of 
appendix A to part 800. Corporation A, Corporation B, and 
Corporation E each perform one of the functions as set forth in 
Column 2 of appendix A to part 800 with respect to Facility A and 
each is therefore a TID U.S. business. Assuming no other relevant 
facts, neither Corporation C nor Corporation D perform one of the 
functions as set forth in Column 2 of appendix A to part 800 with 
respect to Facility A and neither is therefore a TID U.S. business.
    (3) Example 3. Pipeline A is an interstate natural gas pipeline 
with an outside diameter of 36 inches. Corporation A is a U.S. 
business that owns Pipeline A. Corporation B is a U.S. business that 
manufactures the pipe segments with an outside diameter of 36 inches 
that are used in Pipeline A. Pipeline A is covered investment 
critical infrastructure as set forth in Column 1 of appendix A to 
part 800. Corporation A performs one of the functions as set forth 
in Column 2 of appendix A to part 800 with respect to Pipeline A and 
is therefore a TID U.S. business. Assuming no other relevant facts, 
Corporation B does not perform one of the functions as set forth in 
Column 2 of appendix A to part 800 with respect to Pipeline A and is 
therefore not a TID U.S. business.
    (4) Example 4. IXP A is an internet exchange point that supports 
public peering. Corporation A is a U.S. business that operates IXP 
A. Corporation B is a U.S. business that maintains the physical 
premises of IXP A. IXP A is covered investment critical 
infrastructure as set forth in Column 1 of appendix A to part 800. 
Corporation A performs one of the functions as set forth in Column 2 
of appendix A to part 800 with respect to IXP A and is therefore a 
TID U.S. business. Assuming no other relevant facts, Corporation B 
does not perform one of the functions as set forth in Column 2 of 
appendix A to part 800 with respect to IXP A and is therefore not a 
TID U.S. business.
    (5) Example 5. SCADA System A is a supervisory control and data 
acquisition system utilized by a public water system, as defined in 
section 1401(4) of the Safe Drinking Water Act (42 U.S.C. 
300f(4)(A)), as amended, that regularly serves 15,000 individuals. 
Corporation A is a U.S. business that produces SCADA System A by 
building the hardware and integrating all the software. Corporation 
B is a U.S. business that produces commercially available off-the-
shelf software that is sold to Corporation A and used as a component 
in SCADA System A. SCADA System A is covered investment critical 
infrastructure as set forth in Column 1 of appendix A to part 800. 
Corporation A, as the manufacturer of SCADA System A, performs one 
of the functions as set forth in Column 2 of appendix A to part 800 
with respect to SCADA System A and is therefore a TID U.S. business. 
Assuming no other relevant facts, Corporation B does not perform one 
of the functions as set forth in Column 2 of appendix A to part 800 
with respect to SCADA System A and is therefore not a TID U.S. 
business.
    (6) Example 6. Same facts as Example 5 of this section. 
Corporation B later releases a patch that updates the commercially 
available off-the-shelf software that is a component of SCADA System 
A. As the software is only a component of SCADA System A, the 
software itself is not covered investment critical infrastructure as 
set forth in Column 1 of appendix A to part 800. Assuming no other 
relevant facts, Corporation B does not perform one of the functions 
as set forth in Column 2 of appendix A to part 800 with respect to 
SCADA System A and is therefore not a TID U.S. business.
    (7) Example 7. Alloy A is a steel alloy containing two percent 
manganese. Corporation A is a U.S. business that manufactures Alloy 
A in Facility A by melting the constituent metals. Facility A is in 
the United States. Corporation B is a U.S. business that purchases 
Alloy A from Corporation A and resells it to a prime contractor of 
the Department of Defense. Facility A is covered investment critical 
infrastructure as set forth in Column 1 of appendix A to part 800. 
Corporation A performs one of the functions as set forth in Column 2 
of appendix A to part 800 with respect to Alloy A and is therefore a 
TID U.S. business. Assuming no other relevant facts, Corporation B 
does not perform one of the functions as set forth in Column 2 of 
appendix A to part 800 with respect to Alloy A and is therefore not 
a TID U.S. business.
    (8) Example 8. Corporation A, a U.S. business, is a credit 
reporting agency and maintains consumer reports on greater than one 
million individuals. Corporation A maintains sensitive personal data 
and is therefore a TID U.S. business.
    (9) Example 9. Same facts as in Example 8 of this section, 
except that Corporation A maintains the sensitive personal data 
through its subsidiary, Corporation X. Corporation A is a TID U.S. 
business because it indirectly maintains sensitive personal data. 
Corporation X is also a TID U.S. business because it directly 
maintains sensitive personal data.


Sec.  800.249   Transaction.

    The term transaction means any of the following, whether proposed 
or completed:
    (a) A merger, acquisition, or takeover, including without 
limitation:
    (1) The acquisition of an ownership interest in an entity;
    (2) The acquisition of proxies from holders of a voting interest in 
an entity;
    (3) A merger or consolidation;
    (4) The formation of a joint venture; or
    (5) A long-term lease or concession arrangement under which a 
lessee (or equivalent) makes substantially all business decisions 
concerning the operation of a leased entity (or equivalent), as if it 
were the owner;
    (b) An investment; or
    (c) The conversion of a contingent equity interest.
    (d) Example. Corporation A, a foreign person, signs a concession 
agreement to operate the toll road business of Corporation B, a U.S. 
business, for 99 years. Corporation B, however, is required under the 
agreement to perform safety and security functions with respect to the 
business and to monitor compliance by Corporation A with the operating 
requirements of the agreement on an ongoing basis. Corporation B may 
terminate the agreement or impose other penalties for breach of these 
operating requirements. Assuming no other relevant facts, this is not a 
transaction.

    Note 1 to Sec.  800.249:  See Sec.  800.308 regarding factors 
the Committee will consider in determining whether to include the 
access, rights, or involvement to be acquired by a foreign person 
upon the conversion of contingent equity interests as part of the 
Committee's analysis of whether a transaction that involves such 
interests is a covered transaction.

Sec.  800.250   Unaffiliated TID U.S. business.

    The term unaffiliated TID U.S. business means, with respect to a 
foreign person, a TID U.S. business in which that foreign person does 
not directly hold more than 50 percent of the outstanding voting 
interest or have the right to appoint more than half of the members of 
the board of directors or equivalent governing body.


Sec.  800.251   United States.

    The term United States or U.S. means the United States of America, 
the States of the United States, the District of Columbia, and any 
commonwealth, territory, dependency, or possession of the United 
States, or any subdivision of the foregoing, and includes the Outer 
Continental Shelf, as defined in the Outer Continental Shelf Lands Act, 
as amended (43 U.S.C. 1331(a)). For purposes of these regulations and 
their examples, an entity organized under the laws of the United States 
of America,

[[Page 50192]]

one of the States, the District of Columbia, or a commonwealth, 
territory, dependency, or possession of the United States is an entity 
organized ``in the United States.''


Sec.  800.252   U.S. business.

    (a) The term U.S. business means any entity, irrespective of the 
nationality of the persons that control it, engaged in interstate 
commerce in the United States.
    (b) Examples:

    (1) Example 1. Corporation A is organized under the laws of a 
foreign state and is wholly owned and controlled by a foreign 
national. It engages in interstate commerce in the United States 
through a branch or subsidiary. Its branch or subsidiary is a U.S. 
business. Corporation A and its branch or subsidiary is each also a 
foreign person should any of them engage in a transaction involving 
a U.S. business.
    (2) Example 2. Same facts as in the first sentence of Example 1 
of this section. Corporation A, however, does not have a branch 
office, subsidiary, or fixed place of business in the United States. 
It exports and licenses technology to an unrelated company in the 
United States. Assuming no other relevant facts, Corporation A is 
not a U.S. business.
    (3) Example 3. Corporation A, a company organized under the laws 
of a foreign state, is wholly owned and controlled by Corporation X. 
Corporation X is organized in the United States and is wholly owned 
and controlled by U.S. nationals. Corporation A does not have a 
branch office, subsidiary, or fixed place of business in the United 
States. It exports goods to Corporation X and to unrelated companies 
in the United States. Assuming no other relevant facts, Corporation 
A is not a U.S. business.


Sec.  800.253   U.S. national.

    The term U.S. national means an individual who is a U.S. citizen or 
an individual who, although not a U.S. citizen, owes permanent 
allegiance to the United States.


Sec.  800.254   Voting interest.

    The term voting interest means any interest in an entity that 
entitles the owner or holder of that interest to vote for the election 
of directors of the entity (or, with respect to unincorporated 
entities, individuals exercising similar functions) or to vote on other 
matters affecting the entity.

Subpart C--Coverage


Sec.  800.301   Transactions that are covered control transactions.

    Transactions that are covered control transactions include, without 
limitation:
    (a) A transaction which, irrespective of the actual arrangements 
for control provided for in the terms of the transaction, results or 
could result in control of a U.S. business by a foreign person. (See 
the examples in Sec.  800.301(g)(1),(2), and (3).)
    (b) A transaction in which a foreign person conveys its control of 
a U.S. business to another foreign person. (See the example in Sec.  
800.301(g)(4).)
    (c) A transaction that results or could result in control by a 
foreign person of any part of an entity or of assets, if such part of 
an entity or assets constitutes a U.S. business. (See Sec.  800.302(c) 
and the examples in Sec.  800.301(g)(5) through (14).)
    (d) A joint venture in which the parties enter into a contractual 
or other similar arrangement, including an agreement on the 
establishment of a new entity, but only if one or more of the parties 
contributes a U.S. business and a foreign person could control that 
U.S. business by means of the joint venture. (See the examples in Sec.  
800.301(g)(15) through (17).)
    (e) A change in the rights that a foreign person has with respect 
to a U.S. business in which the foreign person has an investment, if 
that change could result in foreign control of the U.S. business. (See 
the example in Sec.  800.301(g)(18).)
    (f) A transaction the structure of which is designed to evade or 
circumvent the application of section 721. (See the example in Sec.  
800.301(g)(19).)
    (g) Examples:

    (1) Example 1. Corporation A, a foreign person, proposes to 
purchase all of the shares of Corporation X, which is a U.S. 
business. As the sole owner, Corporation A will have the right to 
elect directors and appoint other primary officers of Corporation X, 
and those directors will have the right to make decisions about the 
closing and relocation of particular production facilities and the 
termination of significant contracts. The directors also will have 
the right to propose to Corporation A, the sole shareholder, the 
dissolution of Corporation X and the sale of its principal assets. 
The proposed transaction is a covered control transaction.
    (2) Example 2. Same facts as in Example 1 of this section, 
except that Corporation A plans to retain the existing directors of 
Corporation X, all of whom are U.S. nationals. Although Corporation 
A may choose not to exercise its power to elect new directors for 
Corporation X, Corporation A nevertheless will have that exercisable 
power. The proposed transaction is a covered control transaction.
    (3) Example 3. Corporation A, a foreign person, proposes to 
purchase 50 percent of the shares in Corporation X, a U.S. business, 
from Corporation B, also a U.S. business. Corporation B would retain 
the other 50 percent of the shares in Corporation X, and Corporation 
A and Corporation B would contractually agree that Corporation A 
would not exercise its voting and other rights for ten years. The 
proposed transaction is a covered control transaction.
    (4) Example 4. Corporation X is a U.S. business, but is wholly 
owned and controlled by Corporation Y, a foreign person. Corporation 
Z, also a foreign person, but not related to Corporation Y, seeks to 
acquire Corporation X from Corporation Y. The proposed transaction 
is a covered control transaction because it could result in control 
of Corporation X, a U.S. business, by another foreign person, 
Corporation Z.
    (5) Example 5. Corporation X, a foreign person, has a branch 
office located in the United States. Corporation A, a foreign 
person, proposes to buy that branch office. The proposed transaction 
is a covered control transaction.
    (6) Example 6. Corporation A, a foreign person, buys a branch 
office located entirely outside the United States of Corporation Y, 
which is incorporated in the United States. Assuming no other 
relevant facts, the branch office of Corporation Y is not a U.S. 
business, and the transaction is not a covered control transaction.
    (7) Example 7. Corporation A, a foreign person, makes a start-
up, or ``greenfield,'' investment in the United States. That 
investment involves activities such as the foreign person separately 
arranging for the financing of and the construction of a plant to 
make a new product, buying supplies and inputs, hiring personnel, 
and purchasing the necessary technology. The investment involves 
incorporating a newly formed subsidiary of the foreign person. 
Assuming no other relevant facts, Corporation A will not have 
acquired a U.S. business, and its greenfield investment is not a 
covered control transaction. However, this transaction may be 
subject to the provisions of part 802 of this title, which addresses 
certain transactions concerning real estate.
    (8) Example 8. Corporation A, a foreign person, intends to make 
an early-stage investment in a start-up company in the United 
States. Prior to the investment by the foreign person, the start-up 
has incorporated, established a domain name, hired personnel, 
developed business plans, sought financing, rented office space, and 
engaged in other activities that constitute interstate commerce in 
the United States, without the involvement of the foreign person. As 
a result of the investment, Corporation A could control the U.S. 
business. Under these facts, Corporation A is acquiring a U.S. 
business and the proposed transaction is a covered control 
transaction.
    (9) Example 9. Corporation A, a foreign person, purchases 
substantially all of the assets of Corporation B. Corporation B, 
which is incorporated in the United States, was in the business of 
producing industrial equipment, but stopped producing and selling 
such equipment one week before Corporation A purchased substantially 
all of its assets. At the time of the transaction, Corporation B 
continued to have employees on its payroll, maintained know-how in 
producing the industrial equipment it previously produced, and 
maintained relationships with its prior customers, all of which were 
transferred to Corporation A. The acquisition of substantially all 
of the assets

[[Page 50193]]

of Corporation B by Corporation A is a covered control transaction.
    (10) Example 10. Corporation X, a foreign person, seeks to 
acquire from Corporation A, a U.S. business, an empty warehouse 
facility located in the United States. The acquisition would be 
limited to the physical facility, and would not include customer 
lists, intellectual property, or other proprietary information, or 
other intangible assets or the transfer of personnel. Assuming no 
other relevant facts, the facility is not an entity and therefore 
not a U.S. business, and the proposed acquisition of the facility is 
not a covered control transaction. However, this transaction may be 
subject to the provisions of part 802 of this title, which addresses 
certain transactions concerning real estate.
    (11) Example 11. Same facts as Example 6 of this section, except 
that, in addition to the proposed acquisition of Corporation A's 
warehouse facility, Corporation X would acquire the personnel, 
customer list, equipment, and inventory management software used to 
operate the facility. Under these facts, Corporation X is acquiring 
a U.S. business, and the proposed acquisition is a covered control 
transaction.
    (12) Example 12. Corporation A, a foreign person, seeks to 
acquire from Corporation X, a U.S. business, certain tangible and 
intangible assets that Corporation X operates as a business in the 
United States. Corporation A intends to use the assets to establish 
a business undertaking in a foreign country. Under these facts, 
Corporation X is acquiring a U.S. business, and the proposed 
acquisition is a covered control transaction.
    (13) Example 13. Corporation A, a foreign person, seeks to 
acquire from Corporation X, a U.S. business, proprietary software 
developed by Corporation X. The acquisition would be limited to the 
software and would not include customer lists, marketing material, 
or other proprietary information; any other tangible or intangible 
assets; or the transfer of personnel. Assuming no other relevant 
facts, the software does not constitute an entity and therefore not 
a U.S. business, and the proposed acquisition of the software is not 
a covered control transaction.
    (14) Example 14. Same facts as Example 9 of this section, except 
that, in addition to the proposed acquisition of Corporation X's 
proprietary software, Corporation A would acquire Corporation X's 
customer lists, advertising and promotional material, branding, 
trademarks, domain names, and internet presence. Under these facts, 
Corporation A is acquiring a U.S. business, and the proposed 
acquisition is a covered control transaction.
    (15) Example 15. Corporation A, a foreign person, and 
Corporation X, a U.S. business, form a separate corporation, JV 
Corporation, to which Corporation A contributes only cash and 
Corporation X contributes a U.S. business. Each owns 50 percent of 
the shares of JV Corporation and, under the Articles of 
Incorporation of JV Corporation, both Corporation A and Corporation 
X have veto power over all of the matters affecting JV Corporation 
identified under Sec.  800.208, giving them both control over JV 
Corporation. The place of incorporation of JV Corporation is not 
relevant to the determination of whether the transaction is a 
covered control transaction. The formation of JV Corporation is a 
covered control transaction.
    (16) Example 16. Corporation A, a foreign person, and 
Corporation X, a U.S. business, form a separate corporation, JV 
Corporation, to which Corporation A contributes funding and 
managerial and technical personnel, while Corporation X contributes 
certain land and equipment that do not in this example constitute a 
U.S. business. Corporations A and X each have a 50 percent interest 
in the joint venture. Assuming no other relevant facts, the 
formation of JV Corporation is not a covered control transaction. 
However, this transaction may be subject to the provisions of part 
802 of this title, which addresses certain transactions concerning 
real estate.
    (17) Example 17. Same facts as Example 2 of this section, except 
that, in addition to contributing certain land and equipment, 
Corporation X also contributes intellectual property, other 
proprietary information, and other intangible assets, that together 
with the land and equipment constitute a U.S. business, to JV 
Corporation. Under these facts, Corporation X has contributed a U.S. 
business, and the formation of JV Corporation is a covered control 
transaction.
    (18) Example 18. Corporation A, a foreign person, holds a 10 
percent ownership interest in Corporation X, a U.S. business. 
Corporation X subsequently provides Corporation A the right to 
appoint the Chief Executive Officer and the Chief Technical Officer 
of Corporation X. Corporation A does not acquire any additional 
ownership interest in Corporation X. The change in rights is a 
covered control transaction.
    (19) Example 19. Corporation A is organized under the laws of a 
foreign state and is wholly owned and controlled by a foreign 
national. With a view towards circumventing section 721, Corporation 
A transfers money to a U.S. citizen, who, pursuant to informal 
arrangements with Corporation A and on its behalf, purchases all the 
shares in Corporation X, a U.S. business. The transaction is a 
covered control transaction.


Sec.  800.302   Transactions that are not covered control transactions.

    Transactions that are not covered control transactions include, 
without limitation:
    (a) A stock split or pro rata stock dividend that does not involve 
a change in control. (See the example in Sec.  800.302(g)(1).)
    (b) A transaction that results in a foreign person holding ten 
percent or less of the outstanding voting interest in a U.S. business 
(regardless of the dollar value of the interest so acquired), but only 
if the transaction is solely for the purpose of passive investment. 
(See Sec.  800.243 and the examples in Sec.  800.302(g)(2) through 
(4).)
    (c) An acquisition of any part of an entity or of assets, if such 
part of an entity or assets do not constitute a U.S. business. (See 
Sec.  800.301(c) and the examples in Sec.  800.302(g)(5) through (10).)
    (d) An acquisition of securities by a person acting as a securities 
underwriter, in the ordinary course of business and in the process of 
underwriting.
    (e) An acquisition pursuant to a condition in a contract of 
insurance relating to fidelity, surety, or casualty obligations if the 
contract was made by an insurer in the ordinary course of business.
    (f) A change in the rights that a foreign person has with respect 
to a U.S. business in which that foreign person has an investment, if 
that change could not result in foreign control of the U.S. business. 
(See the example in Sec.  800.302(g)(11).)
    (g) Examples:

    (1) Example 1. Corporation A, a foreign person, holds 10,000 
shares of Corporation B, a U.S. business, constituting ten percent 
of the stock of Corporation B. Corporation B pays a 2-for-1 stock 
dividend. As a result of this stock split, Corporation A holds 
20,000 shares of Corporation B, still constituting ten percent of 
the stock of Corporation B. Assuming no other relevant facts, the 
acquisition of additional shares is not a covered control 
transaction.
    (2) Example 2. In an open market purchase solely for the purpose 
of passive investment, Corporation A, a foreign person, acquires 
seven percent of the voting securities of Corporation X, which is a 
U.S. business. Assuming no other relevant facts, the acquisition of 
the securities is not a covered control transaction.
    (3) Example 3. Corporation A, a foreign person, acquires nine 
percent of the voting shares of Corporation X, a U.S. business. 
Corporation A also negotiates contractual rights that give it the 
power to control important matters of Corporation X. The acquisition 
by Corporation A of the voting shares of Corporation X is not solely 
for the purpose of passive investment and is a covered control 
transaction.
    (4) Example 4. Corporation A, a foreign person, acquires five 
percent of the voting shares in Corporation B, a U.S. business. In 
addition to the securities, Corporation A obtains the right to 
appoint one out of eleven seats on Corporation B's Board of 
Directors. The acquisition by Corporation A of Corporation B's 
securities is not solely for the purpose of passive investment. 
Whether the transaction is a covered control transaction would 
depend on whether Corporation A obtains control of Corporation B as 
a result of the transaction. See Sec.  800.303 for transactions that 
are covered investments.
    (5) Example 5. Corporation A, a foreign person, acquires, from 
separate U.S. nationals: products held in inventory; land, and; 
machinery for export. Assuming no other relevant facts, Corporation 
A has not acquired a U.S. business, and this acquisition is not a 
covered control transaction.
    (6) Example 6. Corporation X, a U.S. business, produces armored 
personnel carriers in the United States. Corporation A, a foreign 
person, seeks to acquire the annual production of those carriers 
from Corporation

[[Page 50194]]

X under a long-term contract. Assuming no other relevant facts, this 
transaction is not a covered control transaction.
    (7) Example 7. Same facts as Example 2 of this section, except 
that Corporation X, a U.S. business, has developed important 
technology in connection with the production of armored personnel 
carriers. Corporation A seeks to negotiate an agreement under which 
it would be licensed to manufacture using that technology. Assuming 
no other relevant facts, neither the proposed acquisition of 
technology pursuant to that license agreement, nor the actual 
acquisition, is a covered control transaction.
    (8) Example 8. Same facts as Example 2 of this section, except 
that Corporation A enters into a contractual arrangement to acquire 
the entire armored personnel carrier business operations of 
Corporation X, including production facilities, customer lists, 
technology, and staff, which together constitute a U.S. business. 
This transaction is a covered control transaction.
    (9) Example 9. Same facts as Example 2 of this section, except 
that Corporation X suspended all activities of its armored personnel 
carrier business a year ago and currently is in bankruptcy 
proceedings. Existing equipment provided by Corporation X is being 
serviced by another company, which purchased the service contracts 
from Corporation X. The business's production facilities are idle 
but still in working condition, some of its key former employees 
have agreed to return if the business is resuscitated, and its 
technology and customer and vendor lists are still current. 
Corporation X's personnel carrier business constitutes a U.S. 
business, and its purchase by Corporation A is a covered control 
transaction.
    (10) Example 10. Same facts as Example 2 of this section, except 
that Corporation A and Corporation X establish a joint venture that 
will be controlled by Corporation A to manufacture armored personnel 
carriers outside the United States, and Corporation X contributes 
assets constituting a U.S. business, including intellectual property 
and other intangible assets required to manufacture the armored 
personnel carriers, to the joint venture. Corporation X has 
contributed a U.S. business to the joint venture, and the 
establishment of the joint venture is a covered control transaction.
    (11) Example 11. Corporation A, a foreign person, holds a 10 
percent ownership interest in Corporation X, a U.S. business. 
Corporation A and Corporation X enter into a contractual arrangement 
pursuant to which Corporation A gains the right to purchase an 
additional interest in Corporation X to prevent the dilution of 
Corporation A's pro rata interest in Corporation X in the event that 
Corporation X issues additional instruments conveying interests in 
Corporation X. Corporation A does not acquire any additional rights 
or ownership interest in Corporation X pursuant to the contractual 
arrangement. Assuming no other relevant facts, the transaction is 
not a covered control transaction.


Sec.  800.303   Transactions that are covered investments.

    Transactions that are covered investments include, without 
limitation:
    (a) A transaction that meets the requirements of Sec.  800.211 
irrespective of the percentage of voting interest acquired. (See the 
examples in Sec.  800.303(f)(1) through (3).)
    (b) A transaction that meets the requirements of Sec.  800.211, 
irrespective of the fact that the Committee concluded all action under 
section 721 for a previous covered investment by the same foreign 
person in the same TID U.S. business, where such transaction involves 
the acquisition of access, rights, or involvement specified in Sec.  
800.211 in addition to those notified to the Committee in the 
transaction for which the Committee previously concluded action. (See 
the example in Sec.  800.303(f)(4).)
    (c) A transaction that meets the requirements of Sec.  800.211, 
irrespective of the fact that the critical technology produced, 
designed, tested, manufactured, fabricated, or developed by the TID 
U.S. business became controlled pursuant to section 1758 of the Export 
Control Reform Act of 2018 after the effective date, unless any of the 
criteria set forth in Sec.  800.104(b) are satisfied with respect to 
the transaction prior to the critical technology becoming controlled. 
(See the example in Sec.  800.303(f)(5).)
    (d) A change in the rights that a foreign person has with respect 
to a U.S. business in which the foreign person has an investment, if 
that change could result in a covered investment. (See the example in 
Sec.  800.303(f)(6).)
    (e) A transaction the structure of which is designed to evade or 
circumvent the application of section 721. (See the example in Sec.  
800.303(f)(7).)
    (f) Examples:

    (1) Example 1. Corporation A, a foreign person who is not an 
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B. Corporation B is a 
U.S. business that manufactures a critical technology. Corporation B 
is therefore a TID U.S. business. Pursuant to the terms of the 
investment, a designee of Corporation A will have the right to 
observe the meetings of the board of directors of Corporation B. The 
proposed transaction is a covered investment.
    (2) Example 2. Same facts as Example 1 of this section, except 
that, pursuant to the terms of the investment, instead of observer 
rights, Corporation A has consultation rights with respect to 
Corporation B's licensing of a critical technology to third parties. 
Corporation A is therefore involved in substantive decisionmaking 
with respect to Corporation B and the proposed transaction is a 
covered investment.
    (3) Example 3. Corporation A is a foreign person that is an 
excepted investor. Corporation B, a foreign person that is not an 
excepted investor, owns a three percent, non-controlling equity 
interest in Corporation A. Corporation A proposes to acquire a four 
percent, non-controlling equity interest in Corporation C, an 
unaffiliated TID U.S. business. Pursuant to the terms of the 
investment in Corporation C and Corporation A's governance 
documents, Corporation A and Corporation B will each have access to 
material nonpublic technical information in Corporation C's 
possession. The transaction is a covered investment because 
Corporation B is making an investment that will result in access to 
material nonpublic technical information pursuant to Sec.  
800.211(b).
    (4) Example 4. The Committee concludes all action under section 
721 with respect to a covered investment by Corporation A, a foreign 
person who is not an excepted investor, in which Corporation A 
acquires a four percent, non-controlling equity interest with access 
to material non-public information in Corporation B, an unaffiliated 
TID U.S. business. One year later, Corporation A proposes to acquire 
an additional five percent equity interest in Corporation B, 
resulting in Corporation A holding a nine percent, non-controlling 
equity interest in Corporation B. Pursuant to the terms of the 
additional investment, Corporation A will receive the right to 
appoint a member to the board of directors of Corporation B. The 
proposed transaction is a covered investment because the transaction 
involves both an acquisition of an equity interest in an 
unaffiliated TID U.S. business and a new right under Sec.  800.211.
    (5) Example 5. Corporation A, a foreign person who is not an 
excepted investor, has executed a binding written agreement 
establishing the material terms of a proposed non-controlling 
investment in Corporation B, an unaffiliated TID U.S. business. The 
proposed investment will afford Corporation A access to material 
nonpublic technical information in the possession of Corporation B. 
The only controlled technology produced, designed, tested, 
manufactured, fabricated, or developed by Corporation B became 
controlled pursuant to section 1758 of the Export Control Reform Act 
of 2018 after the effective date but prior to the date upon which 
the binding written agreement establishing the material terms of the 
investment was executed. The proposed transaction is a covered 
investment.
    (6) Example 6. Corporation A, a foreign person who is not an 
excepted investor, holds a four percent non-controlling ownership 
interest in Corporation X, an unaffiliated TID U.S. business, but 
Corporation A was not afforded any of the access, rights, or 
involvement specified in Sec.  800.211(b) at the time of its 
investment. Corporation A subsequently gains the right to appoint a 
member of the board of directors of Corporation X. Assuming no other 
relevant facts, the transaction is a covered investment.
    (7) Example 7. Corporation A is organized under the laws of a 
foreign state, is wholly owned and controlled by a foreign national,

[[Page 50195]]

and is not an excepted investor. With a view towards circumventing 
section 721, Corporation A transfers money to a U.S. citizen, who, 
pursuant to informal arrangements with Corporation A and on its 
behalf, makes a non-controlling minority equity investment in 
Corporation X, an unaffiliated TID U.S. business that maintains and 
collects sensitive personal data on U.S. citizens. In connection 
with the investment, the U.S. citizen is afforded the right to be 
involved in substantive decisionmaking regarding the release of 
sensitive personal data of U.S. citizens maintained by Corporation 
X. The transaction is a covered investment.


Sec.  800.304   Transactions that are not covered investments.

    Transactions that are not covered investments include, without 
limitation:
    (a) An investment by a foreign person in an unaffiliated TID U.S. 
business that does not afford the foreign person any of the access, 
rights, or involvement specified in Sec.  800.211(b). (See the examples 
in Sec.  800.304(f)(1) and (2).)
    (b) An investment by a foreign person who is an excepted investor 
in an unaffiliated TID U.S. business. (See the example in Sec.  
800.304(f)(3).)
    (c) A transaction that results or could result in control by a 
foreign person of an unaffiliated TID U.S. business. (See the example 
in Sec.  800.304(f)(4).)
    (d) A stock split or pro rata stock dividend that does not afford 
the foreign person any of the access, rights, or involvement specified 
in Sec.  800.211(b). (See the example in Sec.  800.304(f)(5).)
    (e) An acquisition of securities by a person acting as a securities 
underwriter, in the ordinary course of business and in the process of 
underwriting.
    (f) Examples:

    (1) Example 1. In an open market purchase solely for the purpose 
of passive investment, Corporation A, a foreign person who is not an 
excepted investor, acquires seven percent of the voting securities 
of Corporation X, an unaffiliated TID U.S. business. Assuming no 
other relevant facts, the acquisition of the securities is not a 
covered investment.
    (2) Example 2. The Committee concluded all action under section 
721 with respect to a covered investment in which Corporation A, a 
foreign person who is not an excepted investor, acquired a four 
percent, non-controlling equity interest with board observer rights 
in Corporation B, an unaffiliated TID U.S. business. One year later, 
Corporation A proposes to acquire an additional five percent equity 
interest in Corporation B, which would result in Corporation A 
holding a nine percent, non-controlling equity interest in 
Corporation B. The proposed investment does not afford Corporation A 
any additional access, rights, or involvement with respect to 
Corporation B, including the access, rights, or involvement 
specified in Sec.  800.211(b). Assuming no other relevant facts, the 
proposed transaction is not a covered investment.
    (3) Example 3. Corporation A, a foreign person who is an 
excepted investor, proposes to acquire a four percent, non-
controlling equity interest in Corporation B, an unaffiliated TID 
U.S. business. Pursuant to the terms of the investment, a designee 
of Corporation A will have the right to observe the meetings of the 
board of directors of Corporation B. Assuming no other relevant 
facts, the proposed transaction is not a covered investment.
    (4) Example 4. Corporation A, a foreign person who is an 
excepted investor, proposes to purchase all of the shares of 
Corporation B, an unaffiliated TID U.S. business. As the sole owner, 
Corporation A will have the right to elect directors and appoint 
other primary officers of Corporation B. Assuming no other relevant 
facts, the proposed transaction is not a covered investment. It is, 
however, a covered control transaction. Whether Corporation A is an 
excepted investor or whether Corporation B is an unaffiliated TID 
U.S. business are not relevant to the determination of whether the 
transaction is a covered control transaction. (See Sec.  800.301).
    (5) Example 5. Corporation A, a foreign person who is not an 
excepted investor, holds 10,000 shares and board observer rights in 
Corporation B, an unaffiliated TID U.S. business, constituting ten 
percent of the stock of Corporation B. Corporation B pays a 2-for-1 
stock dividend. As a result of this stock split, Corporation A holds 
20,000 shares of Corporation B, still constituting ten percent of 
the stock of Corporation B. The proposed investment does not afford 
Corporation A any additional access, rights, or involvement with 
respect to Corporation B, including those specified in Sec.  
800.211(b). Assuming no other relevant facts, the acquisition of 
additional shares is not a covered investment.


Sec.  800.305   Incremental acquisitions.

    (a) Any transaction in which a foreign person acquires an 
additional interest in a U.S. business over which the same foreign 
person, or any of its direct or indirect wholly-owned subsidiaries, 
previously acquired direct control in the U.S. business in a covered 
control transaction for which the Committee concluded all action under 
section 721 on the basis of a notice filed pursuant to Sec.  800.501 
shall not be deemed to be a covered transaction. If, however, a foreign 
person that did not acquire control of the U.S. business in the prior 
transaction is a party to the later transaction, the later transaction 
may be a covered transaction.
    (b) Examples:

    (1) Example 1. Corporation A, a foreign person, directly 
acquires a 40 percent interest and important rights with respect to 
Corporation B, a U.S. business. The documentation pertaining to the 
transaction gives no indication that Corporation A's interest in 
Corporation B may increase at a later date. Corporation A and 
Corporation B file a voluntary notice of the transaction with the 
Committee. Following its review of the transaction, the Committee 
informs the parties that the notified transaction is a covered 
control transaction, and concludes action under section 721. Three 
years later, Corporation A acquires the remainder of the voting 
interest in Corporation B. Assuming no other relevant facts, because 
the Committee, on the basis of the notice submitted by the parties, 
concluded all action with respect to Corporation A's earlier direct 
investment in the same U.S. business, and because no other foreign 
person is a party to this subsequent transaction, this subsequent 
transaction is not a covered transaction.
    (2) Example 2. Same facts as Example 1 of this section, except 
that Corporation A and Corporation B file a declaration of the 
transaction, rather than a notice, with the Committee, and the 
Committee concluded all action on the basis of the declaration. The 
subsequent transaction may be a covered transaction, depending on 
the specific facts and circumstances.


Sec.  800.306   Lending transactions.

    (a) The extension of a loan or a similar financing arrangement by a 
foreign person to a U.S. business, regardless of whether accompanied by 
the creation in favor of the foreign person of a secured interest over 
securities or other assets of the U.S. business, shall not, by itself, 
constitute a covered transaction.
    (1) The Committee will accept notices or declarations concerning a 
loan or a similar financing arrangement that does not, by itself, 
constitute a covered transaction only at the time that, because of 
imminent or actual default or other condition, there is a significant 
possibility that the foreign person may obtain control of a U.S. 
business, or acquire equity interest and access, rights, or involvement 
specified in Sec.  800.211(b) over a TID U.S. business, as a result of 
the default or other condition.
    (2) Where the Committee accepts a notice or declaration concerning 
a loan or a similar financing arrangement pursuant to paragraph (a)(1) 
of this section, and a party to the transaction is a foreign person 
that makes loans in the ordinary course of business, the Committee will 
take into account whether the foreign person has made any arrangements 
to transfer management decisions, or day-to-day control over the U.S. 
business to U.S. nationals for purposes of determining whether such 
loan or financing arrangement constitutes a covered transaction.
    (b) Notwithstanding paragraph (a) of this section, a loan or a 
similar financing arrangement through which a foreign person acquires 
an interest in profits of a U.S. business, the right to appoint members 
of the board of directors of the U.S. business, or other

[[Page 50196]]

comparable financial or governance rights characteristic of an equity 
investment but not of a typical loan may constitute a covered 
transaction.
    (c) An acquisition of voting interest in or assets of a U.S. 
business by a foreign person upon default or other condition involving 
a loan or a similar financing arrangement does not constitute a covered 
transaction, provided that the loan was made by a syndicate of banks in 
a loan participation where the foreign lender (or lenders) in the 
syndicate:
    (1) Needs the majority consent of the U.S. participants in the 
syndicate to take action, and cannot on its own initiate any action 
vis-[agrave]-vis the debtor; or
    (2) Does not have a lead role in the syndicate, and is subject to a 
provision in the loan or financing documents limiting its ability to 
control the debtor such that control for purposes of Sec.  800.208 
could not be acquired.
    (d) Examples:

    (1) Example 1. Corporation A, which is a U.S. business, borrows 
funds from Corporation B, a bank organized under the laws of a 
foreign state and controlled by foreign persons. As a condition of 
the loan, Corporation A agrees not to sell or pledge its principal 
assets to any person. Assuming no other relevant facts, this lending 
arrangement does not alone constitute a covered transaction.
    (2) Example 2. Same facts as in Example 1 of this section, 
except that Corporation A defaults on its loan from Corporation B 
and seeks bankruptcy protection. Corporation A has no funds with 
which to satisfy Corporation B's claim, which is greater than the 
value of Corporation A's principal assets. Corporation B's secured 
claim constitutes the only secured claim against Corporation A's 
principal assets, creating a high probability that Corporation B 
will receive title to Corporation A's principal assets, which 
constitute a U.S. business. Assuming no other relevant facts, the 
Committee would accept a notice of the impending bankruptcy court 
adjudication transferring control of Corporation A's principal 
assets to Corporation B, which would constitute a covered control 
transaction.
    (3) Example 3. Corporation A, a foreign bank, makes a loan to 
Corporation B, a U.S. business. The loan documentation extends to 
Corporation A rights in Corporation B that are characteristic of an 
equity investment but not of a typical loan, including dominant 
minority representation on the board of directors of Corporation B 
and the right to be paid dividends by Corporation B. This loan is a 
covered control transaction.
    (4) Example 4. Same facts as in Example 3 of this section, 
except that Corporation B is an unaffiliated TID U.S. business and 
the loan documentation extends to Corporation A's involvement in 
substantive decisionmaking with respect to Corporation B. Whether 
the loan is a covered control transaction would depend on whether 
Corporation A obtains control of Corporation B as a result of the 
loan, but, if it could not result in Corporation A's control of 
Corporation B, this loan is a covered investment.


Sec.  800.307   Specific clarifications for investment funds.

    (a) Notwithstanding Sec.  800.303, an indirect investment by a 
foreign person in a TID U.S. business through an investment fund that 
affords the foreign person (or a designee of the foreign person) 
membership as a limited partner or equivalent on an advisory board or a 
committee of the fund shall not be considered a covered investment with 
respect to the foreign person if:
    (1) The fund is managed exclusively by a general partner, a 
managing member, or an equivalent;
    (2) The foreign person is not the general partner, managing member, 
or equivalent;
    (3) The advisory board or committee does not have the ability to 
approve, disapprove, or otherwise control:
    (i) Investment decisions of the investment fund; or
    (ii) Decisions made by the general partner, managing member, or 
equivalent related to entities in which the investment fund is 
invested;
    (4) The foreign person does not otherwise have the ability to 
control the investment fund, including without limitation the 
authority:
    (i) To approve, disapprove, or otherwise control investment 
decisions of the investment fund;
    (ii) To approve, disapprove, or otherwise control decisions made by 
the general partner, managing member, or equivalent related to entities 
in which the investment fund is invested; or
    (iii) To unilaterally dismiss, prevent the dismissal of, select, or 
determine the compensation of the general partner, managing member, or 
equivalent;
    (5) The foreign person does not have access to material nonpublic 
technical information as a result of its participation on the advisory 
board or committee; and
    (6) The investment does not afford the foreign person any of the 
access, rights, or involvement specified in Sec.  800.211(b).
    (b) For the purposes of paragraphs (a)(3) and (4) of this section, 
and except as provided in paragraph (c) of this section, a waiver of a 
potential conflict of interest, a waiver of an allocation limitation, 
or a similar activity, applicable to a transaction pursuant to the 
terms of an agreement governing an investment fund shall not be 
considered to constitute control of investment decisions of the 
investment fund or decisions relating to entities in which the 
investment fund is invested.
    (c) In extraordinary circumstances, the Committee may consider the 
waiver of a potential conflict of interest, the waiver of an allocation 
limitation, or a similar activity, applicable to a transaction pursuant 
to the terms of an agreement governing an investment fund, to 
constitute control of investment decisions of the investment fund or 
decisions relating to entities in which the investment fund is 
invested.
    (d) Example: Limited Partner A, a foreign person, is a limited 
partner in an investment fund that invests in Corporation B, an 
unaffiliated TID U.S. business. The investment fund is managed 
exclusively by a general partner, who is not a foreign person. The 
investment affords Limited Partner A membership on an advisory board of 
the investment fund. The advisory board provides industry expertise, 
assists with the sourcing of transactions, and votes on the 
compensation of the general partner, but it does not control investment 
decisions of the fund or decisions made by the general partner related 
to entities in which the fund is invested. Limited Partner A does not 
otherwise have the ability to control the fund. Limited Partner A's 
investment in Corporation B does not afford it access to any material 
nonpublic technical information in the possession of Corporation B, the 
right to be a member or observer, or to nominate a member or observer, 
to the board of Corporation B, nor any involvement in the substantive 
decisionmaking of Corporation B. Assuming no other facts, the 
investment by Limited Partner A is not a covered investment.


Sec.  800.308   Timing rule for a contingent equity interest.

    (a) For purposes of determining whether to include the rights that 
a holder of contingent equity interest will acquire upon conversion of, 
or exercise of a right provided by, those interests in the Committee's 
analysis of whether a notified transaction is a covered transaction, 
the Committee will consider factors that include:
    (1) The imminence of conversion or satisfaction of contingent 
conditions;
    (2) Whether conversion or satisfaction of contingent conditions 
depends on factors within the control of the acquiring party; and
    (3) Whether the amount of interest and the rights that would be 
acquired upon conversion or satisfaction of contingent conditions can 
be reasonably determined at the time of acquisition.
    (b) When the Committee, applying paragraph (a) of this section, 
determines that the rights that the holder will acquire upon conversion 
or satisfaction

[[Page 50197]]

of contingent condition will not be included in the Committee's 
analysis of whether a notified transaction is a covered transaction, 
the Committee will disregard the contingent equity interest for 
purposes of that transaction except to the extent that they convey 
immediate rights to the holder with respect to the entity that issued 
the interest.
    (c) Examples:

    (1) Example 1. Corporation A, a foreign person, notifies the 
Committee that it intends to buy common stock and debentures of 
Corporation X, a U.S. business. By their terms, the debentures are 
convertible into common stock only upon the occurrence of an event 
the timing of which is not in the control of Corporation A, and the 
number of common shares that would be acquired upon conversion 
cannot now be determined. Assuming no other relevant facts, the 
Committee will disregard the debentures in the course of its covered 
transaction analysis at the time that Corporation A acquires the 
debentures. In the event that it determines that the acquisition of 
the common stock is not a covered transaction, the Committee will so 
inform the parties. Once the conversion of the instruments becomes 
imminent, it may be appropriate for the Committee to consider the 
rights that would result from the conversion and whether the 
conversion is a covered transaction. The conversion of those 
debentures into common stock could be a covered transaction, 
depending on what percentage of Corporation X's voting securities 
Corporation A would receive and what powers those securities would 
confer on Corporation A.
    (2) Example 2. Same facts as Example 1 of this section, except 
that the debentures at issue are convertible at the sole discretion 
of Corporation A after six months, and if converted, would represent 
a 50 percent interest in Corporation X. The Committee may consider 
the rights that would result from the conversion as part of its 
analysis.

Subpart D--Declarations


Sec.  800.401   Mandatory declarations.

    (a) Except as provided in paragraph (c) or (d) of this section, the 
parties to a transaction described in paragraph (b) of this section 
shall submit to the Committee a declaration with information regarding 
the transaction in accordance with Sec.  800.403.
    (b) A covered transaction that results in the acquisition of a 
substantial interest in a TID U.S. business by a foreign person in 
which a foreign government has a substantial interest.
    (c) The submission of a declaration shall not be required pursuant 
to paragraph (b) of this section with respect to an investment by an 
investment fund if:
    (1) The fund is managed exclusively by a general partner, a 
managing member, or an equivalent;
    (2) The general partner, managing member, or equivalent that 
exclusively manages the fund is not a foreign person; and
    (3) The investment fund satisfies, with respect to any foreign 
person with membership as a limited partner on an advisory board or a 
committee of the fund, the criteria specified in Sec.  800.307(a)(3) 
and (4);
    (d) Notwithstanding paragraph (a) of this section, parties to a 
covered transaction may elect to submit a written notice pursuant to 
subpart E of this part regarding the transaction instead of a 
declaration.
    (e) Parties shall submit to the Committee the declaration required 
pursuant to paragraph (a) of this section, or a written notice pursuant 
to paragraph (d) of this section, no later than:
    (1) [EFFECTIVE DATE OF FINAL RULE], or promptly thereafter, if the 
completion date of the transaction is between [EFFECTIVE DATE OF FINAL 
RULE] and [DATE WHICH IS 30 DAYS AFTER THE EFFECTIVE DATE OF FINAL 
RULE]; or
    (2) Thirty days before the completion date of the transaction, if 
the completion date of the transaction is after [DATE THAT IS 30 DAYS 
AFTER THE EFFECTIVE DATE OF FINAL RULE].
    (f) Notwithstanding paragraph (e)(2) of this section, the parties 
to a covered transaction may complete a transaction subject to a 
mandatory declaration or notice under this section at any time after 
having been informed in writing by the Committee that the Committee has 
concluded all action under section 721 or that the Committee is not 
able to complete action pursuant to Sec.  800.807(a)(2).
    (g) In the event that the Committee rejects or permits a withdrawal 
of a declaration or notice required under section, the parties shall 
not complete the transaction earlier than 30 days after the date of the 
resubmission, except with the written approval of the Staff 
Chairperson.


Sec.  800.402   Voluntary declarations.

    Except as otherwise prohibited under Sec.  800.403(e), a party to 
any proposed or completed transaction may submit to the Committee a 
declaration regarding the transaction in accordance with the procedures 
and requirements set forth in Sec.  800.403 and Sec.  800.404 instead 
of a written notice.


Sec.  800.403   Procedures for declarations.

    (a) A party or parties shall submit a declaration of a covered 
transaction pursuant to Sec.  800.401 or Sec.  800.402 by submitting 
electronically the information set out in Sec.  800.404, including the 
certifications required thereunder, to the Staff Chairperson in 
accordance with the submission instructions on the Committee's section 
of the Department of the Treasury website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (b) No communications other than those described in paragraph (a) 
of this section shall constitute the submission of a declaration for 
purposes of section 721.
    (c) Information and other documentary material submitted to the 
Committee pursuant to this section shall be considered to have been 
filed with the President or the President's designee for purposes of 
section 721(c) and Sec.  800.802.
    (d) Persons filing a declaration shall, during the time that the 
matter is pending before the Committee, promptly advise the Staff 
Chairperson of any material changes in plans, facts, or circumstances 
addressed in the declaration, and any material change in information 
provided or required to be provided to the Committee under Sec.  
800.404. Unless the Committee rejects the declaration on the basis of 
such material changes in accordance with Sec.  800.406(a)(2)(i), such 
changes shall become part of the declaration filed by such persons 
under Sec.  800.403, and the certification required under Sec.  
800.405(d) shall apply to such changes.
    (e) Parties to a covered transaction that have filed with the 
Committee a written notice regarding a transaction pursuant to Sec.  
800.501 may not submit to the Committee a declaration regarding the 
same transaction or a substantially similar transaction without the 
written approval of the Staff Chairperson.


Sec.  800.404   Contents of declarations.

    (a) The party or parties submitting a declaration of a covered 
transaction pursuant to Sec.  800.403 shall provide the information set 
out in this section, which must be accurate and complete with respect 
to all parties and to the transaction. (See also paragraphs (d) and (e) 
of this section.)
    (b) If fewer than all the parties to a transaction submit a 
declaration, the Committee may, at its discretion, request that the 
parties to the transaction file a written notice of the transaction 
under Sec.  800.501, if the Staff Chairperson determines that the 
information provided by the submitting party or parties in the 
declaration is insufficient for the Committee to assess the 
transaction.

[[Page 50198]]

    (c) Subject to paragraph (e) of this section, a declaration 
submitted pursuant to Sec.  800.403 shall describe or provide, as 
applicable:
    (1) The name of the foreign person(s) and U.S. business(es) that 
are parties to, or, in applicable cases, the subject of the 
transaction, as well as the name, telephone number, and email address 
of the primary point of contact for each party.
    (2) The following information regarding the transaction in 
question, including:
    (i) A brief description of the rationale and nature of the 
transaction, including its structure (e.g., share purchase, merger, 
asset purchase);
    (ii) The percentage of voting interest acquired and the resulting 
aggregate voting interest held by the foreign person and its 
affiliates;
    (iii) The percentage of economic interest acquired and the 
resulting aggregate economic interest held by the foreign person and 
its affiliates;
    (iv) Whether the U.S. business has multiple classes of ownership;
    (v) The total transaction value in U.S. dollars;
    (vi) The actual or expected completion date of the transaction;
    (vii) All sources of financing for the transaction; and
    (viii) A copy of the definitive documentation of the transaction, 
or if none exists, the document establishing the material terms of the 
transaction.
    (3) The following:
    (i) A statement as to whether a party to the transaction is 
stipulating that the transaction is a covered transaction and a 
description of the basis for the stipulation; and
    (ii) A statement as to whether a party to the transaction is 
stipulating that the transaction is a foreign government-controlled 
transaction and a description of the basis for the stipulation.
    (4) A statement as to whether the foreign person will acquire any 
of the following with respect to the U.S. business:
    (i) Access to any material nonpublic technical information in the 
possession of the U.S. business, and if so, a brief explanation of the 
type of access and type of information;
    (ii) Membership, observer rights, or nomination rights as set forth 
in Sec.  800.211(b)(2), and if so, a statement as to the composition of 
the board or other body both before and after the completion date of 
the transaction;
    (iii) Any involvement, other than through voting shares, in 
substantive decisionmaking of the U.S. business regarding critical 
infrastructure, critical technologies, or sensitive personal data as 
set forth in Sec.  800.211(b)(3), and if so, a statement as to the 
involvement in such substantive decisionmaking; or
    (iv) Any rights that could result in the foreign person acquiring 
control of the U.S. business and, if any, a brief explanation of these 
rights.
    (5) The following information regarding the covered transaction 
U.S. business:
    (i) Website address;
    (ii) Principal place of business;
    (iii) Place of incorporation or organization; and
    (iv) A list of the addresses or geographic coordinates (to at least 
the fourth decimal) of all locations of the U.S. business, including 
the U.S. business' headquarters, facilities, and operating locations.
    (6) With respect to the U.S. business that is the subject of the 
transaction and any entity of which that U.S. business is a parent, a 
brief summary of their respective business activities, as, for example, 
set forth in annual reports, and the product or service categories of 
each, including the applicable six-digit North American Industry 
Classification System (NAICS) Codes, Commercial and Government Entity 
Code (CAGE Code) assigned by the Department of Defense, and any 
applicable Dun and Bradstreet identification (DUNS) numbers assigned to 
the U.S. business.
    (7) A statement as to whether the U.S. business produces, designs, 
tests, manufactures, fabricates, or develops one or more critical 
technologies.
    (8) A statement as to whether the U.S. business performs any of the 
functions with respect to covered investment critical infrastructure as 
set forth in Column 2 of appendix A to part 800.
    (9) A statement as to whether the U.S. business maintains or 
collects sensitive personal data on U.S. citizens.
    (10) A statement as to whether the U.S. business has any contracts 
(including any subcontracts, if known) that are currently in effect or 
were in effect within the past three years with any U.S. Government 
agency or component, or in the past 10 years if the contract included 
access to personally identifiable information of U.S. Government 
personnel. If so, provide an annex listing such contracts, including 
the name of the U.S. Government agency or component, the delivery order 
number or contract number, the primary contractor (if the U.S. business 
is a subcontractor), the start date, and the estimated completion date.
    (11) A statement as to whether the U.S. business has any contracts 
(including any subcontracts, if known) that are currently in effect or 
were in effect within the past five years involving information, 
technology, or data that is classified under Executive Order 12958, as 
amended.
    (12) A statement as to whether the U.S. business has received any 
grant or other funding from the Department of Defense or the Department 
of Energy, or participated in or collaborated on any defense or energy 
program or product involving one or more critical technologies or 
critical infrastructure within the past five years.
    (13) A statement as to whether the U.S. business participated in a 
Defense Production Act Title III Program (50 U.S.C. 4501, et seq.) 
within the past seven years.
    (14) A statement as to whether the U.S. business has received or 
placed priority rated contracts or orders under the Defense Priorities 
and Allocations System (DPAS) regulation (15 CFR part 700), and the 
level(s) of priority of such contracts or orders (DX or DO) within the 
past three years.
    (15) The name of the ultimate parent of the foreign person.
    (16) The principal place of business and address of the foreign 
person, ultimate parent and ultimate owner of such parent.
    (17) Complete organizational charts, both pre- and post-
transaction, including information that identifies the name, principal 
place of business and place of incorporation or other legal 
organization (for entities), nationality (for individuals), and 
ownership percentage (expressed in terms of both voting and economic 
interest, if different) for each of the following:
    (i) The immediate parent, the ultimate parent, and each 
intermediate parent, if any, of each foreign person that is a party to 
the transaction;
    (ii) Where the ultimate parent is a private company, the ultimate 
owner(s) of such parent;
    (iii) Where the ultimate parent is a public company, any 
shareholder with an interest of greater than five percent in such 
parent; and
    (iv) The U.S. business that is the subject of the transaction, both 
before and after completion of the transaction.
    (18) Information regarding all foreign government ownership in the 
foreign person's ownership structure, including nationality and 
percentage of ownership, as well as any rights that a foreign 
government holds, directly or indirectly, with respect to the foreign 
person.
    (19) With respect to the foreign person that is party to the 
transaction and any of its parents, as applicable, a brief summary of 
their respective business activities, as, for example, set forth in 
annual reports.

[[Page 50199]]

    (20) A statement as to whether any party to the transaction has 
been party to another transaction previously notified or submitted to 
the Committee, and the case number assigned by the Committee regarding 
such transaction(s).
    (21) A statement (including relevant jurisdiction and criminal case 
law number or legal citation) as to whether the U.S. business, the 
foreign person, or any parent or subsidiary of the foreign person has 
been convicted in the last ten years of a crime in any jurisdiction.
    (22) If applicable, a description (which may group similar items 
into general product categories) of the items, their uses, and a list 
of any relevant classifications for the critical technologies that the 
U.S. business produces, designs, tests, manufactures, fabricates, or 
develops.
    (23) If applicable, a statement as to which functions set forth in 
Column 2 of appendix A to part 800 that the U.S. business performs with 
respect to covered investment critical infrastructure, including a 
description of such functions and the applicable covered investment 
critical infrastructure.
    (24) If applicable:
    (i) The category or categories of sensitive personal data, as 
specified at Sec.  800.241, that the U.S. business maintains or 
collects, or intends to maintain or collect;
    (ii) The approximate number of total unique individuals from whom 
sensitive personal data is currently maintained, and has been collected 
over the last 12 months;
    (iii) Whether the U.S. business targets or tailors its products or 
services to U.S. Government personnel or contractors from whom it 
maintains or collects sensitive personal data.
    (d) Each party submitting a declaration shall provide a 
certification of the information contained in the declaration 
consistent with Sec.  800.204 of this chapter. A sample certification 
may be found on the Committee's section of the Department of the 
Treasury website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (e) A party that offers a stipulation pursuant to paragraph (c)(3) 
of this section acknowledges that the Committee and the President are 
entitled to rely on such stipulation in determining whether the 
transaction is a covered investment, a covered control transaction, or 
a foreign government-controlled transaction for the purposes of section 
721 and all authorities thereunder, and waives the right to challenge 
any such determination. Neither the Committee nor the President is 
bound by any such stipulation, nor does any such stipulation limit the 
ability of the Committee or the President to act on any authority 
provided under section 721 with respect to any covered transaction.


Sec.  800.405  Beginning of 30-day assessment period.

    (a) Upon receipt of a declaration submitted pursuant to Sec.  
800.403, the Staff Chairperson shall promptly inspect the declaration 
and shall promptly notify in writing all parties to a transaction that 
have submitted a declaration that:
    (1) The Staff Chairperson has accepted the declaration and 
circulated the declaration to the Committee, and the date on which the 
assessment described in paragraph (b) of this section begins; or
    (2) The Staff Chairperson has determined not to accept the 
declaration and circulate the declaration to the Committee because the 
declaration is incomplete, and an explanation of the material respects 
in which the declaration is incomplete.
    (b) A 30-day period for assessment of a covered transaction that is 
the subject of a declaration shall commence on the date on which the 
declaration is received by the Committee from the Staff Chairperson. 
Such period shall end no later than the thirtieth day after it has 
commenced, or if the thirtieth day is not a business day, no later than 
the next business day after the thirtieth day.
    (c) During the 30-day assessment period, the Staff Chairperson may 
invite the parties to a covered transaction to attend a meeting with 
the Committee staff to discuss and clarify issues pertaining to the 
transaction.
    (d) If the Committee notifies the parties to a transaction that 
have submitted a declaration pursuant to Sec.  800.403 that the 
Committee intends to conclude all action under section 721 with respect 
to that transaction, each party that has submitted additional 
information subsequent to the original declaration shall file a 
certification as described in Sec.  800.204. A sample certification may 
be found on the Committee's section of the Department of the Treasury 
website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (e) If a party fails to provide the certification required under 
paragraph (d) of this section, the Committee may, at its discretion, 
take any of the actions under Sec.  800.407.


Sec.  800.406   Rejection, disposition, or withdrawal of declarations.

    (a) The Committee, acting through the Staff Chairperson, may:
    (1) Reject any declaration that does not comply with Sec.  800.404 
and so inform the parties promptly in writing;
    (2) Reject any declaration at any time, and so inform the parties 
promptly in writing, if, after the declaration has been submitted and 
before the Committee has taken one of the actions specified in Sec.  
800.407:
    (i) There is a material change in the covered transaction as to 
which a declaration has been submitted; or
    (ii) Information comes to light that contradicts material 
information provided in the declaration by the party (or parties); or
    (3) Reject any declaration at any time after the declaration has 
been submitted, and so inform the parties promptly in writing, if the 
party (or parties) that submitted the declaration does not provide 
follow-up information requested by the Staff Chairperson within two 
business days of the request, or within a longer time frame if the 
party (or parties) so request in writing and the Staff Chairperson 
grants that request in writing.
    (b) The Staff Chairperson shall notify the parties that submitted a 
declaration when the Committee has found that the transaction that is 
the subject of a declaration is not a covered transaction.
    (c) Parties to a transaction that have submitted a declaration 
pursuant to Sec.  800.403 may request in writing, at any time prior to 
the Committee taking action under Sec.  800.407, that such declaration 
be withdrawn. Such request shall be directed to the Staff Chairperson 
and shall state the reasons why the request is being made and state 
whether the transaction that is the subject of the declaration is being 
fully and permanently abandoned. An official of the Department of the 
Treasury will promptly advise the parties to the transaction in writing 
of the Committee's decision.
    (d) The Committee may not request or recommend that a declaration 
be withdrawn and refiled, except to permit parties to a covered 
transaction to correct material errors or omissions, or describe 
material changes to the transaction, in the declaration submitted with 
respect to that covered transaction.
    (e) A party (or parties) may not submit more than one declaration 
for the same or a substantially similar transaction without approval 
from the Staff Chairperson.

    Note 1 to Sec.  800.406: See Sec.  800.403(e) regarding the 
prohibition on submitting a

[[Page 50200]]

declaration regarding the same transaction or a substantially 
similar transaction for which a written notice has been filed 
without the approval of the Staff Chairperson.

Sec.  800.407  Committee actions.

    (a) Upon receiving a declaration submitted pursuant to Sec.  
800.403 with respect to a covered transaction, the Committee may, at 
the discretion of the Committee:
    (1) Request that the parties to the transaction file a written 
notice pursuant to subpart E;
    (2) Inform the parties to the transaction that the Committee is not 
able to conclude action under section 721 with respect to the 
transaction on the basis of the declaration and that the parties may 
file a written notice pursuant to subpart E to seek written 
notification from the Committee that the Committee has concluded all 
action under section 721 with respect to the transaction;
    (3) Initiate a unilateral review of the transaction under Sec.  
800.501(c); or
    (4) Notify the parties in writing that the Committee has concluded 
all action under section 721 with respect to the transaction.
    (b) The Committee shall take action under paragraph (a) of this 
section within the time period set forth in Sec.  800.405(b).

Subpart E--Notices


Sec.  800.501  Procedures for notices.

    (a) A party or parties to a proposed or completed transaction may 
file a voluntary notice of the transaction with the Committee. 
Voluntary notice to the Committee is filed by sending an electronic 
copy of the notice that includes, in English, the information set out 
in Sec.  800.502, including the certification required under paragraph 
(l) of that section. For electronic submission instructions, see the 
Committee's section of the Department of the Treasury website, 
currently available at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (b) If the Committee determines that a transaction for which no 
voluntary notice has been filed under paragraph (a) of this section may 
be a covered transaction and may raise national security 
considerations, the Staff Chairperson, acting on the recommendation of 
the Committee, may request the parties to the transaction to provide to 
the Committee the information necessary to determine whether the 
transaction is a covered transaction, and if the Committee determines 
that the transaction is a covered transaction, to file a notice under 
paragraph (a) of such covered transaction.
    (c) With respect to any transaction:
    (1) Subject to paragraph (c)(2) of this section, any member of the 
Committee, or his designee at or above the Under Secretary or 
equivalent level, may file an agency notice to the Committee through 
the Staff Chairperson regarding a transaction if:
    (i) That member has reason to believe that the transaction is a 
covered transaction and may raise national security considerations and:
    (A) The Committee has not informed the parties to such transaction 
in writing that the Committee has concluded all action under section 
721 with respect to such transaction; and
    (B) The President has not announced a decision not to exercise the 
President's authority under section 721(d) with respect to such 
transaction; or
    (ii) The transaction is a covered transaction and:
    (A) The Committee has informed the parties to such transaction in 
writing that the Committee has concluded all action under section 721 
with respect to such transaction, or the President has announced a 
decision not to exercise the President's authority under section 721(d) 
with respect to such transaction; and
    (B) Either:
    (1) A party to such transaction submitted false or misleading 
material information to the Committee in connection with the 
Committee's consideration of such transaction or omitted material 
information, including material documents, from information submitted 
to the Committee; or
    (2) A party to such transaction or the entity resulting from 
consummation of such transaction materially breaches a mitigation 
agreement or condition described in section 721(l)(3)(A), such breach 
is certified to the Committee by the lead department or agency 
monitoring and enforcing such agreement or condition as a material 
breach, and the Committee determines that there are no other adequate 
and appropriate remedies or enforcement tools available to address such 
breach.
    (2)(i) That is an investment where a foreign person is not an 
excepted investor due to the application of Sec.  800.220(d), any 
member of the Committee, or his designee at or above the Under 
Secretary or equivalent level, may file an agency notice to the 
Committee through the Staff Chairperson regarding such investment if:
    (A) That member has reason to believe that the transaction is a 
covered transaction and may raise national security considerations;
    (B) The Committee has not informed the parties to such transaction 
in writing that the Committee has concluded all action under section 
721 with respect to such transaction; and
    (C) The President has not announced a decision not to exercise the 
President's authority under section 721(d) with respect to such 
transaction.
    (ii) No notice filed pursuant to this paragraph (c)(2) shall be 
made with respect to a transaction more than one year after the 
completion date of the transaction, unless the Chairperson of the 
Committee determines, in consultation with other members of the 
Committee, that because the foreign person no longer meets all the 
criteria set forth in Sec.  800.220(a)(1), (2), or (3)(i) through (iii) 
the transaction may threaten to impair the national security of the 
United States, and in no event shall an agency notice under this 
paragraph be made with respect to such a transaction more than three 
years after the completion date of the transaction.
    (d) Notices filed under paragraph (c) of this section are deemed 
accepted upon their receipt by the Staff Chairperson. No agency notice 
under paragraph (c)(1) of this section shall be made with respect to a 
transaction more than three years after the completion date of the 
transaction, unless the Chairperson of the Committee, in consultation 
with other members of the Committee, files such an agency notice.
    (e) No communications other than those described in paragraphs (a) 
and (c) of this section shall constitute the filing or submitting of a 
notice for purposes of section 721.
    (f) Upon receipt of the electronic copy of a notice filed under 
paragraph (a) of this section, including the certification required by 
Sec.  800.502(l), the Staff Chairperson shall promptly inspect such 
notice for completeness.
    (g) Parties to a transaction are encouraged to consult with the 
Committee in advance of filing a notice and, in appropriate cases, to 
file with the Committee a draft notice or other appropriate documents 
to aid the Committee's understanding of the transaction and to provide 
an opportunity for the Committee to request additional information to 
be included in the notice. Any such pre-notice consultation should take 
place, or any draft notice should be provided, at least five business 
days before the filing of a voluntary notice. All information and 
documentary material made available to the Committee pursuant to

[[Page 50201]]

this paragraph shall be considered to have been filed with the 
President or the President's designee for purposes of section 721(c) 
and Sec.  800.802.
    (h) Information and other documentary material provided by the 
parties to the Committee after the filing of a voluntary notice under 
this section shall be part of the notice, and shall be subject to the 
certification requirements of Sec.  800.502(m).
    (i) For any voluntarily submitted draft or formal written notice 
that includes a stipulation pursuant to section Sec.  800.502(o) that a 
transaction is a covered transaction, the Committee shall provide 
comments on a draft or formal written notice or accept a formal written 
notice of a covered transaction not later than the date that is 10 
business days after the date of submission of the draft or formal 
written notice.
    (j) No party to a transaction may file a notice pursuant to 
paragraph (a) of this section if the transaction has been subject to a 
declaration submitted pursuant to subpart D and the Committee has not 
yet taken action with respect to the transaction pursuant to Sec.  
800.407.


Sec.  800.502  Contents of voluntary notices.

    (a) If the parties to a transaction file a voluntary notice, they 
shall provide in detail the information set out in this section, which 
must be accurate and complete with respect to all parties and to the 
transaction. (See also paragraph (l) of this section and Sec.  800.204 
regarding certification requirements.)
    (b) If fewer than all the parties to a transaction file a voluntary 
notice, for example in the case of a hostile takeover, each notifying 
party shall provide the information set out in this section with 
respect to itself and, to the extent known or reasonably available to 
it, with respect to each non-notifying party.
    (c) A voluntary notice filed pursuant to Sec.  800.501 shall 
describe or provide, as applicable:
    (1) The transaction in question, including:
    (i) A summary setting forth the essentials of the transaction, 
including a statement of the purpose of the transaction, and its scope, 
both within and outside of the United States;
    (ii) The nature of the transaction, for example, whether the 
acquisition is by merger, consolidation, the purchase of voting 
interest, or otherwise;
    (iii) The name, United States address (if any), website address (if 
any), nationality (for individuals) or place of incorporation or other 
legal organization (for entities), and address of the principal place 
of business of each foreign person that is a party to the transaction;
    (iv) The name, address, website address (if any), principal place 
of business, and place of incorporation or other legal organization of 
the U.S. business that is the subject of the transaction;
    (v) The name, address, and nationality (for individuals) or place 
of incorporation or other legal organization (for entities) of:
    (A) The immediate parent, the ultimate parent, and each 
intermediate parent, if any, of the foreign person that is a party to 
the transaction;
    (B) Where the ultimate parent is a private company, the ultimate 
owner(s) of such parent; and
    (C) Where the ultimate parent is a public company, any shareholder 
with an interest of greater than five percent in such parent;
    (vi) The name, address, website address (if any), and nationality 
(for individuals) or place of incorporation or other legal organization 
(for entities) of each person that will control the U.S. business being 
acquired;
    (vii) The expected date for completion of the transaction, or the 
date it was completed;
    (viii) A good faith approximation of the net value of the interest 
acquired in the U.S. business in U.S. dollars, as of the date of the 
notice;
    (ix) The name of any and all financial institutions involved in the 
transaction, including as advisors, underwriters, or a source of 
financing for the transaction;
    (x) A copy of any partnership agreements, integration agreements, 
or other side agreements relating to the transaction;
    (xi) A statement as to whether the foreign person will acquire any 
of the following in the U.S. business:
    (A) Access to any material nonpublic technical information in the 
possession of the U.S. business, and if so, a brief explanation of the 
type of access and type of information;
    (B) Membership, observer rights, or nomination rights as set forth 
in Sec.  800.211(b)(2), and if so, a statement as to the composition of 
the board or other body both before and after the completion date of 
the transaction;
    (C) Any involvement, other than through voting shares, in 
substantive decisionmaking of the U.S. business regarding critical 
infrastructure, critical technologies, or sensitive personal data as 
set forth in Sec.  800.211(b)(3);
    (2) With respect to a transaction structured as an acquisition of 
assets of a U.S. business, a detailed description of the assets of the 
U.S. business being acquired, including the approximate value of those 
assets in U.S. dollars;
    (3) With respect to the U.S. business that is the subject of the 
transaction and any entity of which that U.S. business is a parent 
(unless that entity is excluded from the scope of the transaction):
    (i) Their respective business activities, as, for example, set 
forth in annual reports, and the product or service categories of each, 
including an estimate of U.S. market share for such product or service 
categories and the methodology used to determine market share, a list 
of direct competitors for those primary product or service categories, 
and their NAICS Code, if any;
    (ii) The street address (and mailing address, if different) within 
the United States and website address (if any) of each facility that is 
manufacturing classified or unclassified products or producing services 
described in paragraph (c)(3)(v) of this section, and their respective 
CAGE Codes, their DUNS number;
    (iii) Each contract (identified by agency and number) that is 
currently in effect or was in effect within the past five years with 
any agency of the U.S. Government involving any information, 
technology, or data that is classified under Executive Order 12958, as 
amended, its estimated final completion date, and the name, office, and 
telephone number of the contracting official;
    (iv) Any other contract (identified by agency and number) that is 
currently in effect or was in effect within the past three years with 
any U.S. Government agency or component with national defense, homeland 
security, or other national security responsibilities, including law 
enforcement responsibility as it relates to defense, homeland security, 
or national security, its estimated final completion date, and the 
name, office, and telephone number of the contracting official;
    (v) Any products or services (including research and development):
    (A) That it supplies, directly or indirectly, to any agency of the 
U.S. Government, including as a prime contractor or first tier 
subcontractor, a supplier to any such prime contractor or 
subcontractor, or, if known by the parties filing the notice, a 
subcontractor at any tier; and
    (B) If known by the parties filing the notice, for which it is a 
single qualified source (i.e., other acceptable suppliers are readily 
available to be so qualified) or a sole source (i.e., no other supplier 
has needed technology, equipment, and manufacturing process 
capabilities) for any such agencies and whether there are

[[Page 50202]]

other suppliers in the market that are available to be so qualified;
    (vi) Any products or services (including research and development) 
that:
    (A) It supplies to third parties and it knows are rebranded by the 
purchaser or incorporated into the products of another entity, and the 
names or brands under which such rebranded products or services are 
sold; and
    (B) In the case of services, it provides on behalf of, or under the 
name of, another entity, and the name of any such entities;
    (vii) For the prior three years--
    (A) A list of priority rated contracts or orders under DPAS 
regulation that the U.S. business that is the subject of the 
transaction has received and the level of priority of such contracts or 
orders (``DX'' or ``DO''); and
    (B) A list of such priority rated contracts or orders that the U.S. 
business has placed with other entities and the level of priority of 
such contracts or orders, and the acquiring party's plan to ensure that 
any new entity formed at the completion of the notified transaction (or 
the U.S. business, if no new entity is formed) complies with the DPAS 
regulations;
    (viii) A description and copy of the cyber security plan, if any, 
that will be used to protect against cyber attacks on the operation, 
design, and development of the U.S. business's services, networks, 
systems, data storage (including the collection or maintenance of 
sensitive personal data), and facilities;
    (ix) A description of whether the U.S. business performs any of the 
functions, if any, as set forth in Column 2 of appendix A to part 800. 
This statement shall include a description of such functions, including 
the applicable covered investment critical infrastructure;
    (x) A description of whether it produces, designs, tests, 
manufactures, fabricates, or develops one or more critical 
technologies;
    (xi) A description of whether it maintains or collects sensitive 
personal data, including:
    (A) The category or categories of sensitive personal data specified 
in Sec.  800.241 that the U.S. business maintains or collects or 
intends to maintain or collect;
    (B) For each category of sensitive personal data, the approximate 
number of total unique persons from whom the sensitive personal data is 
currently maintained or has been collected during the previous three 
years, if known;
    (C) A description of how the U.S. business targets or tailors its 
products or services to U.S. Government personnel or contractors (as 
described in Sec.  800.247) about whom it collects sensitive personal 
data, if applicable;
    (D) The commercial rationale of the U.S. business for maintaining 
or collecting such sensitive personal data and a description of how the 
U.S. business uses and protects such sensitive personal data, including 
a description of how decisions regarding the use of sensitive personal 
data are made, and by whom;
    (E) A description of the U.S. business's policies and practices 
regarding the sale, license, or transfer of, or grant of access to, 
sensitive personal data to third parties, including a copy of any 
notice provided to customers regarding the use and transfer of 
sensitive personal data;
    (F) A description of the U.S. business's policies and practices 
regarding retention of sensitive personal data; and
    (G) Any plans by the foreign party to the transaction to alter any 
of the foregoing;
    (4) Whether the U.S. business that is being acquired produces or 
trades in:
    (i) Items that are subject to the EAR and, if so, a description 
(which may group similar items into general product categories) of the 
items and a list of the relevant commodity classifications set forth on 
the CCL (i.e., Export Control Classification Numbers (ECCNs) or EAR99 
designation);
    (ii) Defense articles and defense services, and related technical 
data covered by the USML in the ITAR, and, if so, the category of the 
USML; articles and services for which commodity jurisdiction requests 
(22 CFR 120.4) are pending; and articles and services (including those 
under development) that may be designated or determined in the future 
to be defense articles or defense services pursuant to 22 CFR 120.3;
    (iii) Products and technology that are subject to export 
authorization administered by the Department of Energy (10 CFR part 
810), or export licensing requirements administered by the Nuclear 
Regulatory Commission (10 CFR part 110);
    (iv) Select Agents and Toxins (7 CFR part 331, 9 CFR part 121, and 
42 CFR part 73); or
    (v) Emerging and foundational technologies controlled pursuant to 
section 1758 of the Export Control Reform Act of 2018 (codified at 50 
U.S.C. 4817);
    (5) Whether the U.S. business that is the subject of the 
transaction:
    (i) Possesses any licenses, permits, or other authorizations other 
than those under the regulatory authorities listed in paragraph (c)(4) 
of this section that have been granted by an agency of the U.S. 
Government (if applicable, identification of the relevant licenses 
shall be provided); or
    (ii) Has technology that has military applications (if so, an 
identification of such technology and a description of such military 
applications shall be included);
    (6) With respect to the foreign person engaged in the transaction 
and its parents:
    (i) The business or businesses of the foreign person and its 
ultimate parent, as such businesses are described, for example, in 
annual reports, and the CAGE codes, NAICS codes, and DUNS numbers, if 
any, for such businesses;
    (ii) The plans of the foreign person for the U.S. business with 
respect to:
    (A) Reducing, eliminating, or selling research and development 
facilities;
    (B) Changing product quality;
    (C) Shutting down or moving outside of the United States facilities 
that are within the United States;
    (D) Consolidating or selling product lines or technology;
    (E) Modifying or terminating contracts referred to in paragraphs 
(c)(3)(iii) and (iv) of this section; or
    (F) Eliminating domestic supply by selling products solely to non-
domestic markets;
    (iii) Whether the foreign person is controlled by or acting on 
behalf of a foreign government, including without limitation as an 
agent or representative, or in some similar capacity, and if so, the 
identity of the foreign government;
    (iv) Whether a foreign government or a person controlled by or 
acting on behalf of a foreign government:
    (A) Has or controls ownership interests, including contingent 
equity interest, of the acquiring foreign person or any parent of the 
acquiring foreign person, and if so, the nature and amount of any such 
interests, and with regard to contingent equity interest, the terms and 
timing of conversion;
    (B) Has the right or power to appoint any of the principal officers 
or the members of the board of directors (including other persons who 
perform the duties usually associated with such titles) of the foreign 
person that is a party to the transaction or any parent of that foreign 
person;
    (C) Holds any other contingent interest (for example, such as might 
arise from a lending transaction) in the foreign acquiring party and, 
if so, the rights that are covered by this contingent interest, and the 
manner in which they would be enforced; or
    (D) Has any other affirmative or negative rights or powers that 
could be

[[Page 50203]]

relevant to the Committee's determination of whether the notified 
transaction is a foreign government-controlled transaction, and if 
there are any such rights or powers, their source (for example, a 
``golden share,'' shareholders agreement, contract, statute, or 
regulation) and the mechanics of their operation;
    (v) Any formal or informal arrangements among foreign persons that 
hold an ownership interest in the foreign person that is a party to the 
transaction or between such foreign person and other foreign persons to 
act in concert on particular matters affecting the U.S. business that 
is the subject of the transaction, and provide a copy of any documents 
that establish those rights or describe those arrangements;
    (vi) For each member of the board of directors or similar body 
(including external directors and other persons who perform the duties 
usually associated with such titles) and officers (including president, 
senior vice president, executive vice president, and other persons who 
perform duties normally associated with such titles) of the acquiring 
foreign person engaged in the transaction and its immediate, 
intermediate, and ultimate parents, and for any individual having an 
ownership interest of five percent or more in the acquiring foreign 
person engaged in the transaction and in the foreign person's ultimate 
parent, the following information:
    (A) A curriculum vitae or similar professional synopsis, provided 
as part of the main notice, and
    (B) The following ``personal identifier information,'' which, for 
privacy reasons, and to ensure limited distribution, shall be set forth 
in a separate document, not in the main notice:
    (1) Full name (last, first, middle name);
    (2) All other names and aliases used;
    (3) Business address;
    (4) Country and city of residence;
    (5) Date of birth, in the format MM/DD/YYYY;
    (6) Place of birth;
    (7) U.S. Social Security number (where applicable);
    (8) National identity number, including nationality, date and place 
of issuance, and expiration date (where applicable);
    (9) U.S. or foreign passport number (if more than one, all must be 
fully disclosed), nationality, date and place of issuance, and 
expiration date and, if a U.S. visa holder, the visa type and number, 
date and place of issuance, and expiration date; and
    (10) Dates and nature of foreign government and foreign military 
service (where applicable), other than military service at a rank below 
the top two non-commissioned ranks of the relevant foreign country; and
    (vii) The following ``business identifier information'' for the 
immediate, intermediate, and ultimate parents of the foreign person 
engaged in the transaction, including their main offices and branches:
    (A) Business name, including all names under which the business is 
known to be or has been doing business;
    (B) Business address;
    (C) Business phone number, website address, and email address; and
    (D) Employer identification number or other domestic tax or 
corporate identification number.
    (d) The voluntary notice shall list any filings with, or reports 
to, agencies of the U.S. Government that have been or will be made with 
respect to the transaction prior to its completion, indicating the 
agencies concerned, the nature of the filing or report, the date on 
which it was filed or the estimated date by which it will be filed, and 
a relevant contact point and/or telephone number within the agency, if 
known.
    (1) Example: Corporation A, a foreign person, intends to acquire 
Corporation X, which is wholly owned and controlled by a U.S. national 
and which has a Facility Security Clearance under the Department of 
Defense Industrial Security Program. See Department of Defense, 
``Industrial Security Regulation,'' DOD 5220.22-R, and ``Industrial 
Security Manual for Safeguarding Classified Information,'' DOD 5220.22-
M. Corporation X accordingly files a revised Form DD SF-328, and enters 
into discussions with the Defense Security Service about effectively 
insulating its facilities from the foreign person. Corporation X may 
also have made filings with the U.S. Securities and Exchange 
Commission, the Department of Commerce, the Department of State, or 
other federal departments and agencies. Paragraph (d) of this section 
requires that certain specific information about these filings be 
reported to the Committee in a voluntary notice.
    (e) In the case of the establishment of a joint venture in which 
one or more of the parties is contributing a U.S. business, information 
for the voluntary notice shall be prepared on the assumption that the 
foreign person that is party to the joint venture has made an 
acquisition of the existing U.S. business that the other party to the 
joint venture is contributing or transferring to the joint venture. The 
voluntary notice shall describe the name and address of the joint 
venture and the entities that established, or are establishing, the 
joint venture.
    (f) In the case of the acquisition of some but not all of the 
assets of an entity, paragraph (c) of this section requires submission 
of the specified information only with respect to the assets of the 
entity that have been or are proposed to be acquired.
    (g) Persons filing a voluntary notice shall, with respect to the 
foreign person that is a party to the transaction, its immediate 
parent, the U.S. business that is the subject of the transaction, and 
each entity of which the foreign person is a parent, append to the 
voluntary notice the most recent annual report of each such entity, in 
English. Separate reports are not required for any entity whose 
financial results are included within the consolidated financial 
results stated in the annual report of any parent of any such entity, 
unless the transaction involves the acquisition of a U.S. business 
whose parent is not being acquired, in which case the notice shall 
include the most recent audited financial statement of the U.S. 
business that is the subject of the transaction. If a U.S. business 
does not prepare an annual report and its financial results are not 
included within the consolidated financial results stated in the annual 
report of a parent, the filing shall include, if available, the 
entity's most recent audited financial statement (or, if an audited 
financial statement is not available, the unaudited financial 
statement).
    (h) Persons filing a voluntary notice shall, during the time that 
the matter is pending before the Committee or the President, promptly 
advise the Staff Chairperson of any material changes in plans, facts 
and circumstances addressed in the notice, and information provided or 
required to be provided to the Committee under this section, and shall 
file amendments to the notice to reflect such material changes. Such 
amendments shall become part of the notice filed by such persons under 
Sec.  800.501, and the certifications required under paragraphs (l) and 
(m) of this section shall apply to such amendments.
    (i) Persons filing a voluntary notice shall include a copy of the 
most recent asset or stock purchase agreement or other document 
establishing the agreed terms of the transaction.
    (j) Persons filing a voluntary notice shall include:
    (1) Complete organizational charts, both pre- and post-transaction, 
including without limitation, information that identifies the name,

[[Page 50204]]

principal place of business and place of incorporation or other legal 
organization (for entities), nationality (for individuals), and 
ownership percentage (expressed in terms of both voting and economic 
interest, if different) for each of the following:
    (i) The immediate parent, the ultimate parent, and each 
intermediate parent, if any, of each foreign person that is a party to 
the transaction;
    (ii) Where the ultimate parent is a private company, the ultimate 
owner(s) of such parent;
    (iii) Where the ultimate parent is a public company, any 
shareholder with an interest of greater than five percent in such 
parent; and
    (iv) The U.S. business that is the subject of the transaction, both 
before and after completion of the transaction; and
    (2) The opinion of the person regarding whether:
    (i) It is a foreign person;
    (ii) It is controlled by a foreign government;
    (iii) A foreign government holds a substantial interest in the 
foreign person that is party to the transaction; and
    (iv) The transaction has resulted or could result in a covered 
control transaction or a covered investment, and the reasons for its 
view, focusing in particular on any powers (for example, by virtue of a 
shareholders agreement, contract, statute, or regulation) that the 
foreign person will have with regard to the U.S. business, and how 
those powers can or will be exercised, or any other access, rights, or 
involvement the foreign person will have in a U.S. business with 
respect to critical technologies, critical infrastructure, or sensitive 
personal data.
    (k) Persons filing a voluntary notice shall include information as 
to whether:
    (1) Any party to the transaction is, or has been, a party to a 
mitigation agreement entered into or condition imposed under section 
721, and if so, shall specify the date and purpose of such agreement or 
condition and the U.S. Government signatories; and
    (2) Any party to the transaction (including such party's parents, 
subsidiaries, or entities under common control with the party) has been 
a party to a transaction previously notified to the Committee.
    (l) Each party filing a voluntary notice shall provide a 
certification of the notice consistent with Sec.  800.204. A sample 
certification may be found on the Committee's section of the Department 
of the Treasury website, currently available at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (m) At the conclusion of a review or investigation, each party that 
has filed additional information subsequent to the original notice 
shall file a final certification. (See Sec.  800.204.) A sample 
certification may be found at the Committee's section of the Department 
of the Treasury website, currently available at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (n) Parties filing a voluntary notice shall include with the notice 
a list identifying each document provided as part of the notice, 
including all documents provided as attachments or exhibits to the 
narrative response.
    (o) A party filing a voluntary notice may stipulate that the 
transaction is a covered transaction and, if the party stipulates that 
the transaction is a covered transaction, that the transaction is a 
foreign government-controlled transaction. A stipulation offered by any 
party pursuant to this section must be accompanied by a detailed 
description of the basis for the stipulation. The required description 
of the basis shall include, but is not limited to, discussion of all 
relevant information responsive to paragraphs (c)(6)(iii) through (v) 
of this section. A party that offers such a stipulation acknowledges 
that the Committee and the President are entitled to rely on such 
stipulation in determining whether the transaction is a covered 
transaction, a foreign government-controlled transaction, and/or 
subject to mandatory declaration or notice for the purposes of section 
721 and all authorities thereunder, and waives the right to challenge 
any such determination. Neither the Committee nor the President is 
bound by any such stipulation, nor does any such stipulation limit the 
ability of the Committee or the President to act on any authority 
provided under section 721 with respect to any covered transaction.


Sec.  800.503   Beginning of a 45-day review period.

    (a) The Staff Chairperson of the Committee shall accept a voluntary 
notice the next business day after the Staff Chairperson has:
    (1) Determined that the notice complies with Sec.  800.502; and
    (2) Disseminated the notice to all members of the Committee.
    (b) A 45-day period for review of a transaction shall commence on 
the date on which the voluntary notice has been accepted, agency notice 
has been received by the Staff Chairperson of the Committee, or the 
Chairperson of the Committee has requested a notice pursuant to Sec.  
800.501(b). Such review shall end no later than the forty-fifth day 
after it has commenced, or if the forty-fifth day is not a business 
day, no later than the next business day after the forty-fifth day.
    (c) The Staff Chairperson shall promptly advise in writing all 
parties to a transaction that have filed a voluntary notice of:
    (1) The acceptance of the notice;
    (2) The date on which the review begins; and
    (3) The designation of any lead agency or agencies.
    (d) Within two business days after receipt of an agency notice by 
the Staff Chairperson, the Staff Chairperson shall send written advice 
of such notice to the parties to the transaction that is subject to the 
notice. Such written advice shall identify the date on which the review 
began.
    (e) The Staff Chairperson shall promptly circulate to all Committee 
members any draft pre-filing notice, any agency notice, any complete 
notice, and any subsequent information filed by the parties.


Sec.  800.504  Deferral, rejection, or disposition of certain voluntary 
notices.

    (a) The Committee, acting through the Staff Chairperson, may:
    (1) Reject any voluntary notice that does not comply with Sec.  
800.501 or Sec.  800.502 and so inform the parties promptly in writing;
    (2) Reject any voluntary notice at any time, and so inform the 
parties promptly in writing, if, after the notice has been submitted 
and before action by the Committee or the President has been concluded:
    (i) There is a material change in the transaction as to which 
notification has been made; or
    (ii) Information comes to light that contradicts material 
information provided in the notice by the parties;
    (3) Reject any voluntary notice at any time after the notice has 
been accepted, and so inform the parties promptly in writing, if the 
party or parties that have submitted the voluntary notice do not 
provide follow-up information requested by the Staff Chairperson within 
three business days of the request, or within a longer time frame if 
the parties so request in writing and the Staff Chairperson grants that 
request in writing; or
    (4) Reject any voluntary notice before the conclusion of a review 
or investigation, and so inform the parties promptly in writing, if one 
of the parties submitting the voluntary notice has not

[[Page 50205]]

submitted the final certification required by Sec.  800.502(m).
    (b) Notwithstanding the authority of the Staff Chairperson under 
paragraph (a) of this section to reject an incomplete notice, the Staff 
Chairperson may defer acceptance of the notice, and the beginning of 
the review period specified by Sec.  800.503, to obtain any information 
required under this section that has not been submitted by the 
notifying party or parties or other parties to the transaction. Where 
necessary to obtain such information, the Staff Chairperson may inform 
any non-notifying party or parties that notice has been filed with 
respect to a proposed transaction involving the party, and request that 
certain information required under this section, as specified by the 
Staff Chairperson, be provided to the Committee within seven days after 
receipt of the Staff Chairperson's request.
    (c) The Staff Chairperson shall notify the parties when the 
Committee has found that the transaction that is the subject of a 
voluntary notice is not a covered transaction.
    (d) Examples:

    (1) Example 1. The Staff Chairperson receives a joint notice 
from Corporation A, a foreign person, and Corporation X, a company 
that is owned and controlled by U.S. nationals, with respect to 
Corporation A's intent to purchase all of the shares of Corporation 
X. The joint notice does not contain any information described under 
Sec.  800.502 concerning classified materials and products or 
services supplied to the U.S. military services. The Staff 
Chairperson may reject the notice or defer the start of the review 
period until the parties have supplied the omitted information.
    (2) Example 2. Same facts as in the first sentence of Example 1 
of this section, except that the joint notice indicates that 
Corporation A does not intend to purchase Corporation X's Division 
Y, which is engaged in classified work for a U.S. Government agency. 
Corporations A and X notify the Committee on the 40th day of the 45-
day notice period that Division Y will also be acquired by 
Corporation A. This fact constitutes a material change with respect 
to the transaction as originally notified, and the Staff Chairperson 
may reject the notice.
    (3) Example 3. The Staff Chairperson receives a joint notice by 
Corporation A, a foreign person, and Corporation X, a U.S. business, 
indicating that Corporation A intends to purchase five percent of 
the voting securities of Corporation X. Under the particular facts 
and circumstances presented, the Committee concludes that 
Corporation A's purchase of this interest in Corporation X could not 
result in a covered investment in or foreign control of Corporation 
X. The Staff Chairperson shall advise the parties in writing that 
the transaction as presented is not subject to section 721.
    (4) Example 4. The Staff Chairperson receives a voluntary notice 
involving the acquisition by Company A, a foreign person, of the 
entire interest in Company X, a U.S. business. The notice mentions 
the involvement of a second foreign person in the transaction, 
Company B, but states that Company B is merely a passive investor in 
the transaction. During the course of the review, the parties 
provide information that clarifies that Company B has the right to 
appoint two members of Company X's board of directors. This 
information contradicts the material assertion in the notice that 
Company B is a passive investor. The Committee may reject this 
notice without concluding review under section 721.


Sec.  800.505  Determination of whether to undertake an investigation.

    (a) After a review of a notified transaction under Sec.  800.503, 
the Committee shall undertake an investigation of any transaction that 
it has determined to be a covered transaction if:
    (1) A member of the Committee (other than a member designated as ex 
officio under section 721(k)) advises the Staff Chairperson that the 
member believes that the transaction threatens to impair the national 
security of the United States and that the threat has not been 
mitigated; or
    (2) The lead agency recommends, and the Committee concurs, that an 
investigation be undertaken.
    (b) The Committee shall also undertake, after a review of a covered 
transaction under Sec.  800.503, an investigation to determine the 
effects on national security of any covered transaction that:
    (1) Is a foreign government-controlled transaction; or
    (2) Would result in control by a foreign person of critical 
infrastructure of or within the United States, if the Committee 
determines that the transaction could impair the national security and 
such impairment has not been mitigated.
    (c) The Committee shall undertake an investigation as described in 
paragraph (b) of this section unless the Chairperson of the Committee 
(or the Deputy Secretary of the Treasury) and the head of any lead 
agency (or his or her delegee at the deputy level or equivalent) 
designated by the Chairperson determine on the basis of the review that 
the covered transaction will not impair the national security of the 
United States.


Sec.  800.506  Determination not to undertake an investigation.

    If the Committee determines, during the review period described in 
Sec.  800.503, not to undertake an investigation of a notified covered 
transaction, action under section 721 shall be concluded. An official 
at the Department of the Treasury shall promptly inform the parties to 
a covered transaction in writing of a determination of the Committee 
not to undertake an investigation and to conclude action under section 
721.


Sec.  800.507  Commencement of investigation.

    (a) If it is determined that an investigation should be undertaken, 
such investigation shall commence no later than the end of the review 
period described in Sec.  800.503.
    (b) An official of the Department of the Treasury shall promptly 
inform the parties to a covered transaction in writing of the 
commencement of an investigation.


Sec.  800.508  Completion or termination of investigation and report to 
the President.

    (a) Subject to paragraph (e) of this section, the Committee shall 
complete an investigation no later than the forty-fifth day after the 
date the investigation commences, or, if the forty-fifth day is not a 
business day, no later than the next business day after the forty-fifth 
day.
    (b) Upon completion or termination of any investigation, the 
Committee shall send a report to the President requesting the 
President's decision if:
    (1) The Committee recommends that the President suspend or prohibit 
the transaction;
    (2) The Committee is unable to reach a decision on whether to 
recommend that the President suspend or prohibit the transaction; or
    (3) The Committee requests that the President make a determination 
with regard to the transaction.
    (c) In circumstances when the Committee sends a report to the 
President requesting the President's decision with respect to a covered 
transaction, such report shall include information relevant to sections 
721(d)(4)(A) and (B), and shall present the Committee's recommendation. 
If the Committee is unable to reach a decision to present a single 
recommendation to the President, the Chairperson of the Committee shall 
submit a report of the Committee to the President setting forth the 
differing views and presenting the issues for decision.
    (d) Upon completion or termination of an investigation, if the 
Committee determines to conclude all deliberative action under section 
721 with regard to a notified covered transaction without sending a 
report to the President, action under section 721 shall be concluded. 
An official at the Department of the Treasury shall promptly advise the 
parties to such a transaction in writing of a determination to conclude 
action.

[[Page 50206]]

    (e) In extraordinary circumstances, the Chairperson may, upon a 
written request signed by the head of a lead agency, extend an 
investigation for one 15-day period. A request to extend an 
investigation must describe, with particularity, the extraordinary 
circumstances that warrant the Chairperson extending the investigation. 
The authority of the head of a lead agency to request the extension of 
an investigation may not be delegated to any person other than the 
deputy head (or equivalent thereof) of the lead agency. If the 
Chairperson extends an investigation pursuant to this paragraph with 
respect to a covered transaction, the Committee shall promptly notify 
the parties to the transaction of the extension.
    (f) For purposes of paragraph (e) of this section, ``extraordinary 
circumstances'' means circumstances for which extending an 
investigation is necessary and the appropriate course of action due to 
a force majeure event or to protect the national security of the United 
States.


Sec.  800.509  Withdrawal of notices.

    (a) A party (or parties) to a transaction that has filed notice 
under Sec.  800.501(a) may request in writing, at any time prior to 
conclusion of all action under section 721, that such notice be 
withdrawn. Such request shall be directed to the Staff Chairperson and 
shall state the reasons why the request is being made. Such requests 
will ordinarily be granted, unless otherwise determined by the 
Committee. An official of the Department of the Treasury will promptly 
advise the parties to the transaction in writing of the Committee's 
decision.
    (b) Any request to withdraw an agency notice by the agency that 
filed it shall be in writing and shall be effective only upon approval 
by the Committee. An official of the Department of the Treasury shall 
advise the parties to the transaction in writing of the Committee's 
decision to approve the withdrawal request within two business days of 
the Committee's decision.
    (c) In any case where a request to withdraw a notice is granted 
under paragraph (a) of this section:
    (1) The Staff Chairperson, in consultation with the Committee, 
shall establish, as appropriate:
    (i) A process for tracking actions that may be taken by any party 
to the covered transaction before notice is refiled under Sec.  
800.501; and
    (ii) Interim protections to address specific national security 
concerns with the transaction identified during the review or 
investigation of the transaction.
    (2) The Staff Chairperson shall specify a time frame, as 
appropriate, for the parties to resubmit a notice and shall advise the 
parties of that time frame in writing.
    (d) A notice of a transaction that is submitted pursuant to 
paragraph (c)(2) of this section shall be deemed a new notice for 
purposes of the regulations in this part, including Sec.  800.701.

Subpart F--Committee Procedures


Sec.  800.601  General.

    (a) In any assessment, review, or investigation of a covered 
transaction, the Committee should consider the factors specified in 
section 721(f) and, as appropriate, require parties to provide to the 
Committee the information necessary to consider such factors. The 
Committee's assessment, review, or investigation (if necessary) shall 
examine, as appropriate, whether:
    (1) The transaction is a covered transaction;
    (2) There is credible evidence to support a belief that any foreign 
person party to a covered transaction might take action that threatens 
to impair the national security of the United States; and
    (3) Provisions of law, other than section 721 and the International 
Emergency Economic Powers Act, provide adequate and appropriate 
authority to protect the national security of the United States.
    (b) During an assessment, review, or investigation, the Staff 
Chairperson may invite the parties to a notified transaction to attend 
a meeting with the Committee staff to discuss and clarify issues 
pertaining to the transaction. During an investigation, a party to the 
transaction under investigation may request a meeting with the 
Committee staff; such a request ordinarily will be granted.
    (c) The Staff Chairperson shall be the point of contact for 
receiving material filed with the Committee, including notices.
    (d) Where more than one lead agency is designated, communications 
on material matters between a party to the transaction and a lead 
agency shall include all lead agencies designated with regard to those 
matters.
    (e) The parties' description of a transaction in a declaration or 
notice does not limit the ability of the Committee to, as appropriate, 
assess, review, or investigate, or exercise any other authorities 
available under section 721 with respect to any covered transaction 
that the Committee identifies as having been notified to the Committee 
based upon the facts set forth in the declaration or notice, any 
additional information provided to the Committee subsequent to the 
original declaration or notice, or any other information available to 
the Committee.


Sec.  800.602  Role of the Secretary of Labor.

    In response to a request from the Chairperson of the Committee, the 
Secretary of Labor shall identify for the Committee any risk mitigation 
provisions proposed to or by the Committee that would violate U.S. 
employment laws or require a party to violate U.S. employment laws. The 
Secretary of Labor shall serve no policy role on the Committee.


Sec.  800.603  Materiality.

    The Committee generally will not consider as material minor 
inaccuracies, omissions, or changes relating to financial or commercial 
factors not having a bearing on national security.


Sec.  800.604  Tolling of deadlines during lapse in appropriations.

    Any deadline or time limitation under subparts D or E imposed on 
the Committee shall be tolled during a lapse in appropriations.

Subpart G--Finality of Action


Sec.  800.701  Finality of actions under section 721.

    (a) All authority available to the President or the Committee under 
section 721(d), including without limitation divestment authority, 
shall remain available at the discretion of the President with respect 
to:
    (1) Covered control transactions proposed or pending on or after 
August 23, 1988;
    (2) Transactions that, between November 10, 2018, and [EFFECTIVE 
DATE], fell within the scope of part 801 of this title; and
    (3) Covered investments proposed or pending after the effective 
date.
    (b) Subject to Sec.  800.501(c)(1)(ii), such authority shall not be 
exercised if:
    (1) The Committee, through its Staff Chairperson, has advised a 
party (or the parties) in writing that a particular transaction with 
respect to which a voluntary notice or a declaration has been filed is 
not a covered transaction;
    (2) The parties to the transaction have been advised in writing 
pursuant to Sec.  800.407(a)(4), Sec.  800.506, or Sec.  800.508(d) 
that the Committee has concluded all action under section 721 with 
respect to the covered transaction; or
    (3) The President has previously announced, pursuant to section 
721(d),

[[Page 50207]]

his decision not to exercise his authority under section 721 with 
respect to the covered transaction.
    (c) Divestment or other relief under section 721 shall not be 
available with respect to transactions that were completed prior to 
August 23, 1988.

Subpart H--Provision and Handling of Information


Sec.  800.801  Obligation of parties to provide information.

    (a) Parties to a transaction that is notified or declared under 
subparts D or E, or a transaction for which no notice or declaration 
has been submitted and for which the Staff Chairperson has requested 
information to assess whether the transaction is a covered transaction, 
shall provide information to the Staff Chairperson that will enable the 
Committee to conduct a full assessment, review, and/or investigation of 
the proposed transaction, and shall promptly advise the Staff 
Chairperson of any material changes in plans or information pursuant to 
Sec.  800.403(d) or Sec.  800.502(h). If deemed necessary by the 
Committee, information may be obtained from parties to a transaction or 
other persons through subpoena or otherwise, pursuant to the Defense 
Production Act Reauthorization of 2003, as amended, Public Law 108-195 
(50 U.S.C. 4555(a)).
    (b) Documentary materials or information required or requested to 
be filed with the Committee under this part shall be submitted in 
English. Supplementary materials, such as annual reports, written in a 
foreign language, shall be submitted in certified English translation.
    (c) Any information filed with the Committee in connection with any 
action for which a report is required pursuant to section 721(l)(3)(B) 
with respect to the implementation of a mitigation agreement or 
condition described in section 721(l)(1)(A) shall be accompanied by a 
certification that complies with the requirements of section 721(n) and 
Sec.  800.204. A sample certification may be found at the Committee's 
section of the Department of the Treasury website, currently available 
at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.


Sec.  800.802  Confidentiality.

    (a) Except as provided in paragraph (b) of this section, any 
information or documentary material submitted or filed with the 
Committee pursuant to this part, including information or documentary 
material filed pursuant to Sec.  800.501(g) shall be exempt from 
disclosure under the Freedom of Information Act, as amended (5 U.S.C. 
552, et seq.), and no such information or documentary material may be 
made public.
    (b) Paragraph (a) of this section shall not prohibit disclosure of 
the following:
    (1) Information relevant to any administrative or judicial action 
or proceeding;
    (2) Information to Congress or to any duly authorized committee or 
subcommittee of Congress;
    (3) Information important to the national security analysis or 
actions of the Committee to any domestic governmental entity, or to any 
foreign governmental entity of a United States ally or partner, under 
the exclusive direction and authorization of the Chairperson, only to 
the extent necessary for national security purposes, and subject to 
appropriate confidentiality and classification requirements; or
    (4) Information that the parties have consented to be disclosed to 
third parties.
    (c) This section shall continue to apply with respect to 
information and documentary material submitted or filed with the 
Committee in any case where:
    (1) Action has concluded under section 721 concerning a notified 
transaction;
    (2) A request to withdraw a notice or a declaration is granted 
under Sec.  800.509 or Sec.  800.406(c), respectively, or where a 
notice or a declaration has been rejected under Sec.  800.504(a) or 
Sec.  800.406(a), respectively;
    (3) The Committee determines that a notified or declared 
transaction is not a covered transaction; or
    (4) Such information or documentary material was filed pursuant to 
subpart D and the parties do not subsequently file a notice pursuant to 
subpart E.
    (d) Nothing in paragraph (a) of this section shall be interpreted 
to prohibit the public disclosure by a party of documentary material or 
information that it has submitted or filed with the Committee. Any such 
documentary material or information so disclosed may subsequently be 
reflected in the public statements of the Chairperson, who is 
authorized to communicate with the public and the Congress on behalf of 
the Committee, or of the Chairperson's designee.
    (e) The provisions of the Defense Production Act Reauthorization of 
2003, as amended (50 U.S.C. 4555(d)) relating to fines and imprisonment 
shall apply with respect to the disclosure of information or 
documentary material filed with the Committee under these regulations.

Subpart I--Penalties and Damages


Sec.  800.901  Penalties and damages.

    (a) Any person who submits a material misstatement or omission in a 
declaration or notice, or makes a false certification under Sec.  
800.404, Sec.  800.405, or Sec.  800.502 may be liable to the United 
States for a civil penalty not to exceed $250,000 per violation. The 
amount of the penalty imposed for a violation shall be based on the 
nature of the violation.
    (b) Any person who fails to comply with the requirements of Sec.  
800.401 may be liable to the United States for a civil penalty not to 
exceed $250,000 per violation or the value of the transaction, 
whichever is greater. The amount of the penalty imposed for a violation 
shall be based on the nature of the violation.
    (c) Any person who, after October 11, 2018, violates, intentionally 
or through gross negligence, a material provision of a mitigation 
agreement entered into before October 11, 2018 with, a material 
condition imposed before October 11, 2018 by, or an order issued before 
October 11, 2018 by, the United States under section 721(l) may be 
liable to the United States for a civil penalty not to exceed $250,000 
per violation or the value of the transaction, whichever is greater. 
Any person who violates a material provision of a mitigation agreement 
entered into on or after October 11, 2018 with, a material condition 
imposed on or after October 11, 2018 by, or an order issued on or after 
October 11, 2018 by, the United States under section 721(l) may be 
liable to the United States for a civil penalty not to exceed $250,000 
per violation or the value of the transaction, whichever is greater. 
The amount of the penalty imposed for a violation shall be based on the 
nature of the violation.
    (d) A mitigation agreement entered into or amended under section 
721(l) after December 22, 2008, may include a provision providing for 
liquidated or actual damages for breaches of the agreement. The 
Committee shall set the amount of any liquidated damages as a 
reasonable assessment of the harm to the national security that could 
result from a breach of the agreement. Any mitigation agreement 
containing a liquidated damages provision shall include a provision 
specifying that the Committee will consider the severity of the breach 
in deciding whether to seek a lesser amount than that stipulated in the 
agreement.
    (e) A determination to impose penalties under paragraphs (a) 
through (c) of this section must be made by the

[[Page 50208]]

Committee. Notice of the penalty, including a written explanation of 
the penalized conduct and the amount of the penalty, shall be sent to 
the penalized party electronically and by U.S. mail.
    (f) Upon receiving notice of the imposition of a penalty under 
paragraphs (a) through (c) of this section, the penalized party may, 
within 15 days of receipt of the notice of the penalty, submit a 
petition for reconsideration to the Staff Chairperson, including a 
defense, justification, or explanation for the penalized conduct. The 
Committee will review the petition and issue a final decision within 15 
days of receipt of the petition.
    (g) The penalties and damages authorized in paragraphs (a) through 
(d) of this section may be recovered in a civil action brought by the 
United States in federal district court.
    (h) Section 2 of the False Statements Accountability Act of 1996, 
as amended (18 U.S.C. 1001), shall apply to all information provided to 
the Committee under section 721, including by any party to a covered 
transaction.
    (i) The penalties and damages available under this section are 
without prejudice to other penalties, civil or criminal, available 
under law.
    (j) The imposition of a civil monetary penalty or damages pursuant 
to these regulations creates a debt due to the U.S. Government. The 
Department of the Treasury may take action to collect the penalty or 
damages assessed if not paid within the time prescribed by the 
Committee and notified to the applicable party or parties. In addition 
or instead, the matter may be referred to the Department of Justice for 
appropriate action to recover the penalty or damages.


Sec.  800.902  Effect of lack of compliance.

    (a) If, at any time after a mitigation agreement or condition is 
entered into or imposed under section 721(l), the Committee or a lead 
agency in coordination with the Staff Chairperson, as the case may be, 
determines that a party or parties to the agreement or condition are 
not in compliance with the terms of the agreement or condition, the 
Committee or a lead agency, in coordination with the Staff Chairperson 
may, in addition to the authority of the Committee to impose penalties 
pursuant to section 721(h) and to unilaterally initiate a review of any 
covered transaction pursuant to section 721(b)(1)(D)(iii):
    (1) Negotiate a plan of action for the party or parties to 
remediate the lack of compliance, with failure to abide by the plan or 
otherwise remediate the lack of compliance serving as the basis for the 
Committee to find a material breach of the agreement or condition;
    (2) Require that the party or parties submit a written notice or 
declaration under clause (i) of section 721(b)(1)(C) with respect to a 
covered transaction initiated after the date of the determination of 
noncompliance and before the date that is five years after the date of 
the determination to the Committee to initiate a review of the 
transaction under section 721(b); or
    (3) Seek injunctive relief.

Subpart J--Foreign National Security Investment Review Regimes


Sec.  800.1001  Determinations.

    (a) The Chairperson of the Committee, with the agreement of two-
thirds of the voting members of the Committee, may determine at any 
time that a foreign state has established and is effectively utilizing 
a robust process to analyze foreign investments for national security 
risks and to facilitate coordination with the United States on matters 
relating to investment security.
    (b) The Chairperson of the Committee may rescind a determination 
under paragraph (a) of this section if the Chairperson of the Committee 
determines, with the agreement of two-thirds of the voting members of 
the Committee, that such a rescission is appropriate.
    (c) The Chairperson of the Committee shall publish a notice of any 
determination or rescission of a determination under paragraph (a) or 
(b) of this section, respectively, in the Federal Register.


Sec.  800.1002  Effect of determinations.

    (a) A determination under Sec.  800.1001(a) shall take effect 
immediately upon publication of a notice of such determination under 
Sec.  800.1001(c) and remain in effect unless rescinded pursuant to 
paragraph (b) of this section.
    (b) A rescission of a determination under Sec.  800.1001(b) shall 
take effect on the date specified in the notice published under Sec.  
800.1001(c).
    (c) A determination under Sec.  800.1001(a) does not apply to any 
transaction for which a declaration or notice has been accepted by the 
Staff Chairperson pursuant to Sec.  800.405(a)(1) or Sec.  800.503(a), 
respectively.
    (d) A rescission of a determination under Sec.  800.1001(b) does 
not apply to any transaction for which:
    (1) The completion date is prior to the date upon which the 
rescission of a determination under paragraph (b) of this section 
becomes effective; or
    (2) The following has occurred before publication of the rescission 
of determination under Sec.  800.1001(c):
    (i) The parties to the transaction have executed a binding written 
agreement, or other binding document, establishing the material terms 
of the transaction that is ultimately consummated;
    (ii) A party has made a public offer to shareholders to buy shares 
of a U.S. business; or
    (iii) A shareholder has solicited proxies in connection with an 
election of the board of directors of a U.S. business or has requested 
the conversion of convertible voting securities.

Appendix A to Part 800--Covered Investment Critical Infrastructure and 
Functions Related to Covered Investment Critical Infrastructure

------------------------------------------------------------------------
                                             Column 2--Functions related
   Column 1--Covered investment critical       to covered  investment
              infrastructure                   critical infrastructure
------------------------------------------------------------------------
(i) Any:                                    (i) Own or operate any:
(a) internet protocol network that has      (a) internet protocol
 access to every other internet protocol     network that has access to
 network solely via settlement-free          every other internet
 peering; or                                 protocol network solely via
                                             settlement-free peering; or
(b) telecommunications service or           (b) telecommunications
 information service, each as defined in     service or information
 section 3(a)(2) of the Communications Act   service, each as defined in
 of 1934 (47 U.S.C. 153), as amended, or     section 3(a)(2) of the
 fiber optic cable that directly serves      Communications Act of 1934
 any military installation identified in     (47 U.S.C. 153), as
 Sec.   802.229.                             amended, or fiber optic
                                             cable that directly serves
                                             any military installation
                                             identified in Sec.
                                             802.229.
(ii) Any internet exchange point that       (ii) Own or operate any
 supports public peering.                    internet exchange point
                                             that supports public
                                             peering.

[[Page 50209]]

 
(iii) Any submarine cable system requiring  (iii) Own or operate any
 a license pursuant to section 1 of the      submarine cable system
 Cable Landing Licensing Act of 1921 (47     requiring a license
 U.S.C. 34), as amended, which includes      pursuant to section 1 of
 any associated submarine cable, submarine   the Cable Landing Licensing
 cable landing facilities, and any           Act of 1921 (47 U.S.C. 34),
 facility that performs network              as amended, which includes
 management, monitoring, maintenance, or     any associated submarine
 other operational functions for such        cable, submarine cable
 submarine cable system.                     landing facilities, and any
                                             facility that performs
                                             network management,
                                             monitoring, maintenance, or
                                             other operational functions
                                             for such submarine cable
                                             system.
(iv) Any submarine cable, landing           (iv) Supply or service any
 facility, or facility that performs         submarine cable, landing
 network management, monitoring,             facility, or facility that
 maintenance, or other operational           performs network
 function that is part of a submarine        management, monitoring,
 cable system described above in item        maintenance, or other
 (iii) of Column 1 of appendix A to part     operational function that
 800.                                        is part of a submarine
                                             cable system described
                                             above in item (iii) of
                                             Column 1 of appendix A to
                                             part 800.
(v) Any data center that is collocated at   (v) Own or operate any data
 a submarine cable landing point, landing    center that is collocated
 station, or termination station.            at a submarine cable
                                             landing point, landing
                                             station, or termination
                                             station.
(vi) Any satellite or satellite system      (vi) Own or operate any
 providing services directly to the          satellite or satellite
 Department of Defense or any component      system providing services
 thereof.                                    directly to the Department
                                             of Defense or any component
                                             thereof.
(vii) Any industrial resource other than    (vii) As applicable,
 commercially available off-the-shelf        manufacture any industrial
 items, as defined in section 4203(a) of     resource other than
 the National Defense Authorization Act      commercially available off-
 for Fiscal Year 1996 (41 U.S.C. 104), as    the-shelf items, as defined
 amended, that is manufactured or operated   in section 4203(a) of the
 for a Major Defense Acquisition Program,    National Defense
 as defined in section 7(b)(2)(A) of the     Authorization Act for
 Defense Technical Corrections Act of 1987   Fiscal Year 1996 (41 U.S.C.
 (10 U.S.C. 2430), as amended, or a Major    104), as amended, or
 System, as defined in 10 U.S.C. 2302d, as   operate any industrial
 amended and:                                resource that is a
                                             facility, in each case, for
                                             a Major Defense Acquisition
                                             Program, as defined in
                                             section 7(b)(2)(A) of the
                                             Defense Technical
                                             Corrections Act of 1987 (10
                                             U.S.C. 2430), as amended,
                                             or a Major System, as
                                             defined in 10 U.S.C. 2302d,
                                             as amended and:
(a) the U.S. business is a ``single         (a) the U.S. business is a
 source,'' ``sole source,'' or ``strategic   ``single source,'' ``sole
 multisource,'' to the extent the U.S.       source,'' or ``strategic
 business has been notified of such          multisource,'' to the
 status; or                                  extent the U.S. business
                                             has been notified of such
                                             status; or
(b) the industrial resource:                (b) the industrial resource:
(1) requires 12 months or more to           (1) requires 12 months or
 manufacture; or                             more to manufacture; or
(2) is a ``long lead'' item, to the extent  (2) is a ``long lead'' item,
 the U.S. business has been notified that    to the extent the U.S.
 such industrial resource is a ``long        business has been notified
 lead'' item.                                that such industrial
                                             resource is a ``long lead''
                                             item.
(viii) Any industrial resource, other than  (viii) Manufacture any
 commercially available off-the-shelf        industrial resource, other
 items, as defined in section 4203(a) of     than commercially available
 the National Defense Authorization Act      off-the-shelf items, as
 for Fiscal Year 1996 (41 U.S.C. 104), as    defined in section 4203(a)
 amended, that is manufactured pursuant to   of the National Defense
 a ``DX'' priority rated contract or order   Authorization Act for
 under the Defense Priorities and            Fiscal Year 1996 (41 U.S.C.
 Allocations System regulation (15 CFR       104), as amended, pursuant
 part 700, as amended) in the preceding 24   to a ``DX'' priority rated
 months.                                     contract or order under the
                                             Defense Priorities and
                                             Allocations System
                                             regulation (15 CFR part
                                             700, as amended) within 24
                                             months of the transaction
                                             in question.
(ix) Any facility in the United States      (ix) Manufacture any of the
 that manufactures:                          following in the United
                                             States:
(a) specialty metal, as defined in section  (a) specialty metal, as
 842(a)(1)(i) of the John Warner National    defined in section
 Defense Authorization Act for Fiscal Year   842(a)(1)(i) of the John
 2007 (10 U.S.C. 2533b), as amended;         Warner National Defense
                                             Authorization Act for
                                             Fiscal Year 2007 (10 U.S.C.
                                             2533b), as amended;
(b) covered material, as defined in 10      (b) covered material, as
 U.S.C. 2533c, as amended;                   defined in 10 U.S.C. 2533c,
                                             as amended;
(c) chemical weapons antidote contained in  (c) chemical weapons
 automatic injectors, as described in 10     antidote contained in
 U.S.C. 2534, as amended; or                 automatic injectors, as
                                             described in 10 U.S.C.
                                             2534, as amended; or
(d) carbon, alloy, and armor steel plate    (d) carbon, alloy, and armor
 that is in Federal Supply Class 9515 or     steel plate that is in
 is described by specifications of the       Federal Supply Class 9515
 American Society for Testing Materials or   or is described by
 the American Iron and Steel Institute.      specifications of the
                                             American Society for
                                             Testing Materials or the
                                             American Iron and Steel
                                             Institute.
(x) Any industrial resource other than      (x) As applicable,
 commercially available off-the-shelf        manufacture any industrial
 items, as defined in 41 U.S.C. 104, as      resource other than
 amended, that has been funded, in whole     commercially available off-
 or in part, by any of the following         the-shelf items, as defined
 sources in the last 60 months:              in 41 U.S.C. 104, as
                                             amended, or operate any
                                             industrial resource that is
                                             a facility, in each case,
                                             that has been funded, in
                                             whole or in part, by any of
                                             the following sources
                                             within 60 months of the
                                             transaction in question:
(a) Defense Production Act of 1950 Title    (a) Defense Production Act
 III program (50 U.S.C. 4501, et seq.), as   of 1950 Title III program
 amended;                                    (50 U.S.C. 4501, et seq.),
                                             as amended;
(b) Industrial Base Fund pursuant to        (b) Industrial Base Fund
 section 896(b)(1) of the Ike Skelton        pursuant to section
 National Defense Authorization Act for      896(b)(1) of the Ike
 Fiscal Year 2011 (10 U.S.C. 2508), as       Skelton National Defense
 amended;                                    Authorization Act for
                                             Fiscal Year 2011 (10 U.S.C.
                                             2508), as amended;
(c) Rapid Innovation Fund pursuant to       (c) Rapid Innovation Fund
 section 1073 of Ike Skelton National        pursuant to section 1073 of
 Defense Authorization Act for Fiscal Year   Ike Skelton National
 2011 (10 U.S.C. 2359a), as amended;         Defense Authorization Act
                                             for Fiscal Year 2011 (10
                                             U.S.C. 2359a), as amended;
(d) Manufacturing Technology Program        (d) Manufacturing Technology
 pursuant to 10 U.S.C. 2521, as amended;     Program pursuant to 10
                                             U.S.C. 2521, as amended;
(e) Defense Logistics Agency Warstopper     (e) Defense Logistics Agency
 Program, as described in DLA Instruction    Warstopper Program, as
 1212, Industrial Capabilities Program--     described in DLA
 Manage the WarStopper Program; or           Instruction 1212,
                                             Industrial Capabilities
                                             Program--Manage the
                                             WarStopper Program; or
(f) Defense Logistics Agency Surge and      (f) Defense Logistics Agency
 Sustainment contract, as described in       Surge and Sustainment
 Subpart 17.93 of the Defense Logistics      contract, as described in
 Acquisition Directive.                      Subpart 17.93 of the
                                             Defense Logistics
                                             Acquisition Directive.
(xi) Any system, including facilities, for  (xi) Own or operate any
 the generation, transmission,               system, including
 distribution, or storage of electric        facilities, for the
 energy comprising the bulk-power system,    generation, transmission,
 as defined in section 215(a)(1) of the      distribution, or storage of
 Federal Power Act (16 U.S.C. 824o(a)(1)),   electric energy comprising
 as amended.                                 the bulk-power system, as
                                             defined in section
                                             215(a)(1) of the Federal
                                             Power Act (16 U.S.C.
                                             824o(a)(1)), as amended.

[[Page 50210]]

 
(xii) Any electric storage resource, as     (xii) Own or operate any
 defined in 18 CFR Sec.   35.28(b)(9), as    electric storage resource,
 amended, that is physically connected to    as defined in 18 CFR Sec.
 the bulk-power system.                      35.28(b)(9), as amended,
                                             that is physically
                                             connected to the bulk-power
                                             system.
(xiii) Any facility that provides electric  (xiii) Own or operate any
 power generation, transmission,             facility that provides
 distribution, or storage directly to or     electric power generation,
 located on any military installation        transmission, distribution,
 identified in Sec.   802.229.               or storage directly to or
                                             located on any military
                                             installation identified in
                                             Sec.   802.229.
(xiv) Any industrial control system         (xiv) Manufacture or service
 utilized by:                                any industrial control
                                             system utilized by:
(a) system comprising the bulk-power        (a) system comprising the
 system as described above in item (xi) of   bulk-power system as
 Column 1 of appendix A to part 800; or      described above in item
                                             (xi) of Column 1 of
                                             appendix A to part 800; or
(b) a facility directly serving any         (b) a facility directly
 military installation as described above    serving any military
 in item (xiii) of Column 1 of appendix A    installation as described
 to part 800.                                above in item (xiii) of
                                             Column 1 of appendix A to
                                             part 800.
(xv) Any:                                   (xv) Own or operate:
(a) any individual refinery with the        (a) any individual refinery
 capacity to produce 300,000 or more         with the capacity to
 barrels per day (or equivalent) of          produce 300,000 or more
 refined oil or gas products; or             barrels per day (or
                                             equivalent) of refined oil
                                             or gas products; or
(b) collection of one or more refineries    (b) one or more refineries
 owned or operated by a single U.S.          with the capacity to
 business with the capacity to produce, in   produce, in the aggregate,
 the aggregate, 500,000 or more barrels      500,000 or more barrels per
 per day (or equivalent) of refined oil or   day (or equivalent) of
 gas products.                               refined oil or gas
                                             products.
(xvi) Any crude oil storage facility with   (xvi) Own or operate any
 the capacity to hold 30 million barrels     crude oil storage facility
 or more of crude oil.                       with the capacity to hold
                                             30 million barrels or more
                                             of crude oil.
(xvii) Any:                                 (xvii) Own or operate any:
(a) liquefied natural gas (LNG) import or   (a) liquefied natural gas
 export terminal requiring.                  (LNG) import or export
                                             terminal requiring:
(1) approval pursuant to section 3(e) of    (1) approval pursuant to
 the Natural Gas Act (15 U.S.C. 717b(e)),    section 3(e) of the Natural
 as amended, or                              Gas Act (15 U.S.C.
                                             717b(e)), as amended, or
(2) a license pursuant to section 4 of the  (2) a license pursuant to
 Deepwater Port Act of 1974 (33 U.S.C.       section 4 of the Deepwater
 1503), as amended; or                       Port Act of 1974 (33 U.S.C.
                                             1503), as amended; or
(b) natural gas underground storage         (b) natural gas underground
 facility or LNG peak-shaving facility       storage facility or LNG
 requiring a certificate of public           peak-shaving facility
 convenience and necessity pursuant to       requiring a certificate of
 section 7 of the Natural Gas Act (15        public convenience and
 U.S.C. 717f), as amended.                   necessity pursuant to
                                             section 7 of the Natural
                                             Gas Act (15 U.S.C. 717f),
                                             as amended.
(xviii) Any financial market utility that   (xviii) Own or operate any
 the Financial Stability Oversight Council   financial market utility
 has designated as systemically important    that the Financial
 pursuant to section 804 of the Dodd-Frank   Stability Oversight Council
 Wall Street Reform and Consumer             has designated as
 Protection Act (12 U.S.C. 5463), as         systemically important
 amended.                                    pursuant to section 804 of
                                             the Dodd-Frank Wall Street
                                             Reform and Consumer
                                             Protection Act (12 U.S.C.
                                             5463), as amended.
(xix) Any exchange registered under         (xix) Own or operate any
 section 6 of the Securities Exchange Act    exchange registered under
 of 1934 (15 U.S.C. 78f), as amended, that   section 6 of the Securities
 facilitates trading in any national         Exchange Act of 1934 (15
 market system security, as defined in 17    U.S.C. 78f), as amended,
 CFR Sec.   242.600, as amended, and which   that facilitates trading in
 exchange during at least four of the        any national market system
 preceding six calendar months had:          security, as defined in 17
                                             CFR Sec.   242.600, as
                                             amended, and which exchange
                                             during at least four of the
                                             preceding six calendar
                                             months had:
(a) with respect to all national market     (a) with respect to all
 system securities that are not options,     national market system
 ten percent or more of the average daily    securities that are not
 dollar volume reported by applicable        options, ten percent or
 transaction reporting plans; or             more of the average daily
                                             dollar volume reported by
                                             applicable transaction
                                             reporting plans; or
(b) with respect to all listed options,     (b) with respect to all
 fifteen percent or more of the average      listed options, fifteen
 daily dollar volume reported by             percent or more of the
 applicable national market system plans     average daily dollar volume
 for reporting transactions in listed        reported by applicable
 options.                                    national market system
                                             plans for reporting
                                             transactions in listed
                                             options.
(xx) Any technology service provider in     (xx) Own or operate any
 the Significant Service Provider Program    technology service provider
 of the Federal Financial Institutions       in the Significant Service
 Examination Council that provides core      Provider Program of the
 processing services.                        Federal Financial
                                             Institutions Examination
                                             Council that provides core
                                             processing services.
(xxi) Any rail line and associated          (xxi) Own or operate any
 connector line designated as part of the    rail line and associated
 Department of Defense's Strategic Rail      connector line designated
 Corridor Network.                           as part of the Department
                                             of Defense's Strategic Rail
                                             Corridor Network.
(xxii) Any interstate oil pipeline that:    (xxii) Own or operate any
                                             interstate oil pipeline
                                             that:
(a) has the capacity to transport:          (a) has the capacity to
                                             transport:
(1) 500,000 barrels per day or more of      (1) 500,000 barrels per day
 crude oil, or                               or more of crude oil, or
(2) 90 million gallons per day or more of   (2) 90 million gallons per
 refined petroleum product; or               day or more of refined
                                             petroleum product; or
(b) directly serves the strategic           (b) directly serves the
 petroleum reserve, as defined in section    strategic petroleum
 152 of the Energy Policy and Conservation   reserve, as defined in
 Act (42 U.S.C. 6232), as amended.           section 152 of the Energy
                                             Policy and Conservation Act
                                             (42 U.S.C. 6232), as
                                             amended.
(xxiii) Any interstate natural gas          (xxiii) Own or operate any
 pipeline with an outside diameter of 20     interstate natural gas
 or more inches.                             pipeline with an outside
                                             diameter of 20 or more
                                             inches.
(xxiv) Any industrial control system        (xxiv) Manufacture or
 utilized by:                                service any industrial
                                             control system utilized by:
(a) an interstate oil pipeline as           (a) an interstate oil
 described above in item (xxii) of Column    pipeline as described above
 1 of appendix A to part 800; or             in item (xxii) of Column 1
                                             of appendix A to part 800;
                                             or
(b) an interstate natural gas pipeline as   (b) an interstate natural
 described above in item (xxiii) of Column   gas pipeline as described
 1 of appendix A to part 800.                above in item (xxiii) of
                                             Column 1 of appendix A to
                                             part 800.
(xxv) Any airport identified in Sec.        (xxv) Own or operate any
 802.201.                                    airport identified in Sec.
                                              802.201.
(xxvi) Any:                                 (xxvi) Own or operate any:
(a) maritime port identified in Sec.        (a) maritime port identified
 802.228; or                                 in Sec.   802.228; or
(b) any individual terminal at such         (b) any individual terminal
 maritime ports.                             at such maritime ports.
(xxvii) Any public water system, as         (xxvii) Own or operate any
 defined in section 1401(4) of the Safe      public water system, as
 Drinking Water Act (42 U.S.C.               defined in section 1401(4)
 300f(4)(A)), as amended, or treatment       of the Safe Drinking Water
 works, as defined in section 212(2)(A) of   Act (42 U.S.C. 300f(4)(A)),
 the Clean Water Act (33 U.S.C. 1292(2)),    as amended, or treatment
 as amended, which:                          works, as defined in
                                             section 212(2)(A) of the
                                             Clean Water Act (33 U.S.C.
                                             1292(2)), as amended,
                                             which:

[[Page 50211]]

 
(a) regularly serves 10,000 individuals or  (a) regularly serves 10,000
 more, or                                    individuals or more, or
(b) directly serves any military            (b) directly serves any
 installation identified in Sec.             military installation
 802.229.                                    identified in Sec.
                                             802.229.
(xxviii) Any industrial control system      (xxviii) Manufacture or
 utilized by a public water system or        service any industrial
 treatment works as described above in       control system utilized by
 item (xxvii) of Column 1 of appendix A to   a public water system or
 part 800.                                   treatment works as
                                             described above in item
                                             (xxvii) of Column 1 of
                                             appendix A to part 800.
------------------------------------------------------------------------


    Dated: September 11, 2019.
Thomas Feddo,
Deputy Assistant Secretary for Investment Security.

[FR Doc. 2019-20099 Filed 9-17-19; 4:15 pm]
 BILLING CODE 4810-25-P