Amendments to Penalty Provisions, Provision of Information, Negotiation of Mitigation Agreements, and Other Procedures Pertaining to Certain Investments in the United States by Foreign Persons and Certain Transactions by Foreign Persons Involving Real Estate in the United States, 26107-26114 [2024-07693]

Agencies

• DEPARTMENT OF THE TREASURY
• Office of Investment Security

[Federal Register Volume 89, Number 73 (Monday, April 15, 2024)]
[Proposed Rules]
[Pages 26107-26114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07693]



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DEPARTMENT OF THE TREASURY

Office of Investment Security

31 CFR Parts 800 and 802

[Docket ID TREAS-DO-2024-0005]
RIN 1505-AC85


Amendments to Penalty Provisions, Provision of Information, 
Negotiation of Mitigation Agreements, and Other Procedures Pertaining 
to Certain Investments in the United States by Foreign Persons and 
Certain Transactions by Foreign Persons Involving Real Estate in the 
United States

AGENCY: Office of Investment Security, Department of the Treasury.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would modify certain provisions in the 
regulations of the Committee on Foreign Investment in the United States 
(CFIUS) pertaining to penalties for violations of statutory or 
regulatory provisions or agreements, conditions, or orders issued 
pursuant thereto; negotiation of mitigation agreements; requests for 
information by CFIUS; and certain other procedures.

DATES: Written comments must be received by May 15, 2024.

ADDRESSES: Written comments 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 Treasury Department to make the comments available to the public.
     Mail: Send to U.S. Department of the Treasury, Attention: 
Meena R. Sharma, Director, Office of Investment Security Policy and 
International Relations, 1500 Pennsylvania Avenue NW, Washington, DC 
20220.
    We encourage comments to be submitted via https://www.regulations.gov. Please submit comments only and include your name 
and company name (if any) and cite ``Amendments to Penalty Provisions, 
Provision of Information, Negotiation of Mitigation Agreements, and 
Other Procedures Pertaining to Certain Investments in the United States 
by Foreign Persons and Certain Transactions by Foreign Persons 
Involving Real Estate in the United States'' in all correspondence. In 
general, the Treasury Department 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: Meena R. Sharma, Director, Office of 
Investment Security Policy and International Relations 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

    The regulations at parts 800 and 802 to title 31 of the Code of 
Federal Regulations (part 800 and part 802, respectively) implement the 
provisions of section 721 of the Defense Production Act of 1950, as 
amended, which is codified at 50 U.S.C. 4565 (section 721) and which 
establishes the authorities of the Committee on Foreign Investment in 
the United States (CFIUS or the Committee). Section 721 authorizes the 
President or his designee (i.e., CFIUS) to review mergers, 
acquisitions, and takeovers by or with any foreign person that could 
result in foreign control of any U.S. business, certain noncontrolling 
investments by foreign persons in a subset of U.S. businesses, as well 
as certain real estate transactions involving foreign persons. When in 
the course of its review CFIUS identifies a national security risk that 
arises as a result of a transaction within its jurisdiction (referred 
to in the regulations as a ``covered transaction'' or, in appropriate 
cases, a ``covered real estate transaction''), it is authorized to 
negotiate and enter into agreements with the transaction parties or 
impose conditions on the transaction parties to mitigate the risk, and 
it is authorized to enforce those agreements and conditions. This 
proposed rule includes several amendments to enhance the Committee's 
identification and resolution of national security risks as well as 
CFIUS actions in response to violations.
    Among other things, the regulations at parts 800 and 802 include 
provisions that govern CFIUS's requests for information from 
transaction parties and other persons and their responses to those 
requests. For example, where CFIUS is aware of a transaction that the 
parties have not notified or declared to CFIUS, the Committee may 
request information to determine whether the transaction is a covered 
transaction. To help CFIUS mitigate risks to U.S. national security and 
ensure compliance with section 721 and its implementing regulations, 
this proposed rule sets forth amendments that would expand the 
categories of information the Committee may request from transaction 
parties and others. The proposed rule would also enhance the 
Committee's ability to communicate with parties in other contexts to 
include requirements to provide information for monitoring compliance 
with applicable obligations and determining whether a violation of such 
obligations has occurred.
    The proposed rule also includes provisions pertaining to the 
negotiation of agreements to mitigate national security risk. Section 
721(l)(3) authorizes the Committee, or a lead agency on behalf of the 
Committee, to negotiate and enter into an agreement with a party to a 
covered transaction in order to mitigate any national security risk 
that arises as a result of the covered transaction. The current 
regulations contain no provision establishing a time frame within which 
parties must respond to a Committee proposal or revision of terms to 
mitigate identified national security risks, and the Committee often 
exchanges multiple drafts with transaction parties during negotiation 
of a mitigation agreement. This proposed rule would include a provision 
ordinarily requiring transaction parties to respond to mitigation 
agreement drafts within a specified number of days.
    A final subject addressed in this proposed rule is the maximum 
penalty amount that CFIUS may impose on a party for violating section 
721 or the implementing regulations, including agreements entered into 
and conditions and orders imposed pursuant thereto, and the 
availability of such penalties outside the context of a declaration or 
notice. The regulations provide for penalties to be imposed in the 
following situations: (a) submitting a declaration or notice with a 
material misstatement or omission, or making a false certification; (b) 
failing to submit a timely declaration in the certain circumstances in 
which submission is mandatory; and (c) violating a material provision 
of a mitigation agreement, material condition imposed, or order issued. 
In each case, the amount of the penalty imposed is based on the nature 
of the violation. Currently, violations can result in a civil monetary 
penalty not to exceed $250,000 per violation, or, in certain instances, 
the greater of

[[Page 26108]]

$250,000 or the value of the transaction. This rule would amend the 
regulations by increasing the maximum penalty amount for situations 
where it is appropriate, allow the Committee to impose penalties for 
material misstatements or omissions in certain information submitted to 
the Committee outside of the submission of a declaration or notice, and 
extend the time frames related to a petition for reconsideration of a 
penalty.

II. Discussion of the Rule

A. Requesting Information and Requiring a Response for Transactions for 
Which No Notice or Declaration Was Submitted, for Compliance 
Monitoring, and for Determining Whether a Violation of Applicable 
Obligations Has Occurred

    Section 721(b)(1)(H) directs the Committee to establish a process 
to identify covered transactions for which no notice or declaration has 
been submitted to the Committee (each such transaction referred to 
hereafter as a ``non-notified transaction''). A different provision of 
the Defense Production Act of 1950 (section 705), which applies to the 
Defense Production Act in its entirety, entitles the President ``by 
regulation, subpoena, or otherwise, to obtain such information from . . 
. any person as may be necessary or appropriate, in his discretion, to 
the enforcement or administration of [the Defense Production Act of 
1950] and the regulations or orders issued thereunder.'' Section 705 
further requires the President to ``issue regulations insuring [sic] 
that the authority of [subsection (a) of section 705] will be utilized 
only after the scope and purpose of the investigation, inspection, or 
inquiry to be made have been defined by competent authority, and it is 
assured that no adequate and authoritative data are available from any 
Federal or other responsible agency.''
    In furtherance of the direction in section 721(b)(1)(H) and in 
accordance with the authority in section 705, the regulations at 
sections 800.501(b) and 802.501(b) provide that the Staff Chairperson, 
acting on the recommendation of the Committee, may request the parties 
to a non-notified transaction to provide to the Committee information 
necessary to determine whether the transaction is a ``covered 
transaction'' or a ``covered real estate transaction.'' Sections 
800.801(a) and 802.801(a) of the regulations address parties' 
obligations to respond to such requests as well as certain other 
requests for information.
    While the foregoing provisions contemplate requests related to a 
transaction's potential status as ``covered'' (i.e., subject to the 
jurisdiction of the Committee), they do not specifically address other 
types of information requests. For example, they do not expressly 
address requests for information that would enable the Committee to 
determine whether a transaction meets the criteria for a mandatory 
declaration under section 800.401, nor do they expressly address 
requests for information that would enable the Committee to determine 
whether a transaction may raise national security considerations. The 
proposed rule would amend sections 800.501(b) and 802.501(b) by 
expressly providing that the Staff Chairperson, acting on the 
recommendation of the Committee, may request information from 
transaction parties and other persons related to whether a transaction 
may raise national security considerations and, in the case of 
800.501(b), information as to whether a transaction meets the criteria 
for a mandatory declaration under section 800.401. The proposed rule 
would make corresponding amendments to sections 800.801 and 802.801, 
requiring transaction parties and other persons to respond to such 
requests for information. As required by section 705, these amendments 
would define the scope and purpose of the investigation, inspection, or 
inquiry to be made by CFIUS so as to allow CFIUS to obtain relevant 
information.
    Gathering information of the kind contemplated by the proposed 
amendments would allow the Committee to prioritize transactions that 
parties were required to submit under section 800.401 or that, in its 
view, otherwise warrant formal review. When the Committee is able to 
engage in preliminary fact-finding relevant to potential national 
security considerations prior to receiving a formal notice, the 
information it receives can inform the decision of whether and when to 
request the submission of a notice. In the event the Committee does 
request that the transaction parties file a notice, the Committee 
encourages the parties to submit the notice promptly so that the 
Committee can undertake its national security review. In the absence of 
a filing, CFIUS will consider all available options to protect national 
security, including initiating a review based on an agency notice as 
provided for in section 800.501(c). For the avoidance of doubt, the 
Committee does not intend to use its authority to obtain information 
related to risk as a substitute for a review or an investigation, but 
rather for the purpose of preventing unnecessary filings and increasing 
efficiency in connection with filings for transactions that may present 
an extant risk, benefitting both the transaction parties and national 
security. A similar efficiency would be gained by being able to request 
and require the submission of information that would enable the 
Committee to determine whether a non-notified transaction was one that 
should have been notified pursuant to the provision on mandatory 
declarations in section 800.401 of the regulations.
    The proposed rule would further amend sections 800.801(a) and 
802.801(a) to require parties to provide information to the Committee 
upon request in two other circumstances: (1) when the Committee seeks 
information to monitor compliance with or enforce the terms of a 
mitigation agreement, order, or condition, and (2) when it seeks 
information to determine whether the transaction parties had made a 
material misstatement or omitted material information during the course 
of a previously concluded review or investigation (including a review 
or investigation that ended with rejection of the parties' notice). The 
Committee currently requests information in both circumstances, but the 
regulations do not expressly obligate parties to respond. Under the 
proposed amendments, parties would be obligated to respond to such 
requests, failing which the Committee may seek to compel responses 
through issuance of a subpoena, as provided for in section 705.
    Finally, the last sentence of sections 800.801(a) and 802.801(a) of 
the regulations states that ``[i]f deemed necessary by the Committee, 
information may be obtained from parties to a transaction or other 
persons through subpoena or otherwise . . . '' (emphasis added). The 
proposed rule would amend this provision to state that if deemed 
appropriate by the Committee, the Staff Chairperson may issue a 
subpoena to obtain information. Requiring the Committee to determine 
the appropriateness of a subpoena, rather than the necessity, is in 
alignment with the criteria of section 705, which states that the 
subpoena authority may be used only after the scope and purpose have 
been defined by competent authority and assurance has been obtained 
that no adequate and authoritative data are available from any Federal 
or other responsible agency. The Department of the Treasury expects 
that this change, and the explicit assignment

[[Page 26109]]

of this function to the Staff Chairperson, will enhance operational 
efficiency.

B. Time Frame for Responding to Proposed Mitigation Terms

    In order for the Committee to complete an investigation of a 
transaction within the time prescribed by statute (i.e., 45 days), it 
is incumbent upon parties to respond to Committee proposals of terms to 
mitigate identified national security risks in a timely manner, where 
relevant. However, parts 800 and 802 currently do not require 
transaction parties to respond within a specific time frame. By 
contrast, the regulations require parties to respond to follow-up 
information requested by the Staff Chairperson in connection with a 
declaration or notice generally within two or three business days of 
the request, and this greatly facilitates the Committee's ability to 
complete its work within the statutory time frames. The absence of such 
a requirement in connection with proposed mitigation terms can 
sometimes result in a protracted process where parties may take longer 
than is reasonable to respond to the Committee's proposed terms. This 
is particularly the case with regard to reviews of closed transactions, 
in which timing is critical for the Committee when it has identified an 
extant risk to national security, but parties may be less motivated to 
respond promptly given the absence of an impending closing date. In 
some cases, parties' delayed responses impede the Committee's ability 
to fulfill its statutory obligation to complete an investigation in 45 
days and may result in parties opting to withdraw and refile their 
notice, restarting the statutory clock, in order to allow sufficient 
time to reach agreement on mitigation terms. The proposed rule would 
amend the regulations to specify a three business day period for 
substantive party responses to proposed mitigation terms (both initial 
and subsequent proposals or revisions), unless the parties request a 
longer time frame and the Staff Chairperson grants that request in 
writing. The Committee expects a substantive response to consist of 
acceptance of the terms, a counterproposal, or a detailed statement of 
reasons that the party or parties cannot comply with the proposed 
terms, which may also include a counterproposal. The regulations as 
amended by this proposal would be similar to the time frame in which 
parties are required to respond to follow-up information requests under 
sections 800.504(a)(4) and 802.504(a)(4).
    The Committee anticipates that parties will seek extensions in 
certain instances including but not limited to initial mitigation 
proposals and in instances where the proposed risk mitigation is 
complex and additional time is needed to consult with the transaction 
parties. The Staff Chairperson may grant reasonable extension requests 
on a case-by-case basis, as appropriate and taking into account views 
of the Committee and factors such as the statutory time remaining for 
the case and whether the transaction has been filed before closing. The 
proposed rule would further provide that if the parties fail to respond 
within the time frame specified, the Committee, acting through the 
Staff Chairperson, may reject the notice, which mirrors the current 
practice for missed deadlines in responding to requests for follow-up 
information for a case in review or investigation. See 31 CFR 
800.504(a)(4) and 31 CFR 802.504(a)(4).

C. Civil Monetary Penalties

    Sections 800.901(a) and 802.901(a) of the regulations set the 
penalty amount for the submission of a declaration or notice with a 
material misstatement or omission or the making of a false 
certification at a maximum of $250,000 per violation. Section 
800.901(b) sets the penalty for failure to comply with the requirements 
in section 800.401 pertaining to ``mandatory declarations'' at a 
maximum of $250,000 or the value of the transaction, whichever is 
greater, per violation. (There is no counterpart to the mandatory 
declaration provision in part 802, pertaining to real estate 
transactions.) Sections 800.901(c) and 802.901(b) set the penalty for 
violations of material provisions of mitigation agreements, material 
conditions imposed by the Committee, or orders issued by the Committee 
at a maximum of $250,000 or the value of the transaction, whichever is 
greater, per violation. The current maximum penalty amounts provided 
for in sections 800.901 and 802.901 are not specified in statute and 
were developed over 15 years ago. This proposed rule would increase the 
maximum penalty amount to $5,000,000 per violation under sections 
800.901(a) and 802.901(a); the greater of $5,000,000 or the value of 
the transaction per violation under section 800.901(b); and the greater 
of $5,000,000 or the value of the transaction (or, as discussed below, 
the value of the party's interest in the U.S. business at the time of 
the violation or time of the transaction) per violation under sections 
800.901(c) and 802.901(b). The Committee anticipates that the relevant 
value of the transaction or interest would be determined through, for 
example, audited financial statements or other industry standard 
methods of valuation. These changes would apply to violations that 
occur on or after the effective date of the final rule making the 
amendments with respect to sections 800.901(a) and (b) and 802.901(a). 
With respect to sections 800.901(c) and 802.901(b), the changes would 
apply to mitigation agreements entered into, conditions imposed, and 
orders issued on or after the effective date of the final rule making 
the amendments.
    The Committee assesses that the current penalty maximum of $250,000 
(or the greater of $250,000 or the value of the transaction) may not 
sufficiently deter or penalize certain violations. For context, from 
2013 to 2022, the median value of covered transactions filed with CFIUS 
pursuant to a joint voluntary notice was $170 million, with numerous 
transactions valued in the billions. For covered transaction 
declarations filed from 2018 (when declarations became an available 
format for submission) to 2022, the median value was over $38 million. 
Furthermore, under the definition of ``transaction'' in sections 
800.249 and 802.237, covered transactions involving businesses with 
valuations in the billions of dollars or with substantial liquidity 
might still be purported to be valued at zero dollars. This 
circumstance is due in part to the various forms a ``transaction'' may 
take under sections 800.249 and 802.237, which include an acquisition, 
or takeover including the acquisition of an ownership interest, the 
acquisition of a voting interest, a merger consolidation, or the 
formation of a joint venture; a long-term lease or concession 
arrangement; an investment; or the conversion of contingent equity 
interest. If a transaction has a low value (or a valuation of zero 
dollars), then the value of the transaction becomes irrelevant for 
penalty purposes, and the maximum penalty becomes $250,000 per 
violation, which the Committee has determined may be an insufficient 
deterrent or penalty. A higher maximum penalty stated as an absolute 
dollar amount is therefore needed. As is the case under the current 
regulations, the maximum would not necessarily be imposed, but may be 
appropriate depending on the facts and circumstances including any 
aggravating or mitigating factors as described in the Committee's 
Enforcement and Penalty Guidelines (see 87 FR 66220) available on the 
CFIUS web page of the Department of the Treasury's website.
    In the case of sections 800.901(c) and 802.901(b) (pertaining to 
violations of mitigation agreements or conditions),

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the proposed rule would further allow for the maximum penalty to be 
determined by reference to a person's interest in a U.S. business at 
the time of the violation or the transaction (which, in certain cases, 
could be greater than the value of the transaction). Thus, the maximum 
penalty for a violation of material provisions of mitigation 
agreements, material conditions imposed by the Committee, or orders 
issued by the Committee would be the greatest, per violation, of (i) 
$5,000,000, (ii) the value of the violating party's interest in the 
U.S. business (or covered real estate) at the time of the transaction, 
(iii) the value of the violating party's interest in the U.S. business 
(or covered real estate) at the time of the violation or the most 
proximate time to the violation for which assessing such value is 
practicable, or (iv) the value of the transaction. This range of 
measurements for the maximum penalty would provide an additional 
deterrent or penalty in the case of certain transactions valued at less 
than $5,000,000.
    Separately, the proposed rule would expand the list of 
circumstances in which a penalty may be imposed under sections 
800.901(a) and 802.901(a) respectively. Currently, the provision 
applies to material misstatements or omissions in a declaration or 
notice or false certifications. Under the proposed amendment, CFIUS 
penalties also would apply to material misstatements or omissions in 
contexts outside of declarations and notices--in particular, responses 
to the Committee's requests for information related to non-notified 
transactions, certain responses to the Committee's requests for 
information related to monitoring or enforcing compliance, and other 
responses to the Committee's requests for information, such as for 
agency notices, as described in sections 800.901(a)(2) and 
802.901(a)(2). Penalties of this nature are not intended to apply to 
every material misstatement or omission in a communication between 
parties and the Committee related to monitoring compliance with an 
agreement, condition, or order entered into pursuant to section 721 and 
these regulations. (In any event, there are criminal penalties for 
making false statements to the government under 18 U.S.C. 1001.) 
Pursuant to sections 800.901(a)(2) and 802.901(a)(2), the Committee 
will notify parties in writing when parties' response to a particular 
communication may be subject to a penalty under section 721 and these 
regulations due to a material misstatement or omission. The Committee 
anticipates such communications to include those relevant to requests 
for information related to non-notified transactions, failure to file a 
mandatory declaration, and compliance with, or enforcement, 
modification, or termination of a mitigation agreement, condition, or 
order imposed. The majority of the Committee's communications with 
transaction parties subject to a mitigation agreement or condition will 
not be subject to section 800.901(a)(2) or 802.901(a)(2).
    For the avoidance of doubt, while the amendments provided for in 
the proposed rule pertain to the maximum penalty that may be imposed 
for certain violations, they would not affect the Committee's 
discretion to determine the appropriate penalty in individual cases, 
similar to other Federal enforcement regimes. In exercising this 
discretion, the Committee will continue to take into account the 
specific facts and circumstances of the violation and relevant 
aggravating and mitigating factors as identified in the Committee's 
Enforcement and Penalty Guidelines (see 87 FR 66220) available on the 
CFIUS web page of the Department of the Treasury's website.
    Under current regulations, upon receiving notice of a penalty to be 
imposed, the subject person may submit a petition within 15 business 
days of receipt of such notice, subject to an extension through written 
agreement with the Committee. Similarly, the Committee has 15 business 
days to assess the petition and issue a final penalty determination. 
The proposed rule would extend both time frames to 20 business days. 
The Committee routinely grants extensions for penalty petitions, and 
the Committee's experience is that extending both time frames will 
facilitate the review of the penalty to be imposed. Consistent with the 
current regulations, persons subject to a penalty may continue to 
request extensions for submitting a petition for reconsideration. The 
Staff Chairperson may also extend the time frames due to compelling 
circumstances.

III. Rulemaking Requirements

Executive Order 12866

    This rule is not subject to the general requirements of Executive 
Order 12866, as amended, which covers review of regulations by the 
Office of Information and Regulatory Affairs in the Office of 
Management and Budget (OMB), because it relates to a foreign affairs 
function of the United States, pursuant to section 3(d)(2) of that 
order. In addition, this rule is not subject to review under section 
6(b) of Executive Order 12866 pursuant to section 1(d) of the June 9, 
2023, Memorandum of Agreement between the Treasury Department and OMB, 
which states that CFIUS regulations are not subject to OMB's standard 
centralized review process under Executive Order 12866.

Paperwork Reduction Act

    The collection of information contained in this rule has been 
previously submitted to the Office of Management and Budget (OMB) for 
review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), and approved under OMB Control Number 1505-0121. 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 OMB 
Control Number.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
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 (APA) (5 U.S.C. 553), or any other 
law. As set forth below, because regulations issued pursuant to the 
Defense Production Act of 1950, as amended (the Defense Production Act 
of 1950), such as these regulations, are not subject to the rulemaking 
requirements of the APA or other law requiring the publication of a 
general notice of proposed rulemaking, the RFA does not apply.
    The proposed rule makes amendments to the regulations implementing 
section 721 of the Defense Production Act of 1950. Section 709(a) of 
the Defense Production Act of 1950 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 
Defense Production Act of 1950 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 Defense Production Act of 1950 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 
Defense Production Act of 1950, legislative history confirms that 
Congress intended

[[Page 26111]]

that regulations under the Defense Production Act of 1950 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 
Defense Production Act of 1950 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 Defense Production Act of 1950's procedures from a rule 
that requires a general notice of proposed rulemaking. In providing the 
President with authority to suspend or prohibit the acquisition, 
merger, or takeover of, or certain other investments in, a U.S. 
business by a foreign person, and certain real estate transactions 
involving foreign persons, 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 foregoing, available data do not suggest that 
the proposed rule, if implemented, would have a significant economic 
impact on a substantial number of small entities. The proposed rule 
would modify certain provisions pertaining to penalties for violations, 
negotiation of mitigation agreements, requests for information by 
CFIUS, and certain other procedures. The proposed rule would not impose 
any new filing requirements on U.S. businesses, including small 
businesses, that receive foreign investment subject to CFIUS's 
jurisdiction.
    The proposed rule expands the categories of information the 
Committee may request from transaction parties and others in connection 
with transactions that have not been notified or declared to include 
whether a transaction meets the criteria for a mandatory declaration 
and information that would enable the Committee to determine whether a 
transaction may raise national security considerations. This proposed 
change would not have a significant economic impact on a substantial 
number of small entities for two reasons. First, the instances in which 
the Committee requests this information are limited and, on average, 
occur less than one hundred times in a year. Additionally, the volume 
of overall non-notified transactions put forward to the Committee for 
consideration may decrease as CFIUS works through its consideration of 
transactions that pre-date the Committee's current, increased level of 
resources. Second, even if some of these transactions may involve U.S. 
businesses that qualify as small entities, the Department of the 
Treasury does not anticipate that expanding information requests for 
non-notified transactions will have a significant impact on the burden 
hours for a party response. In instances of mandatory filing 
requirements, transaction parties should be conducting this analysis 
regardless of whether the Department of the Treasury reaches out.
    With regard to information requests for the purposes of monitoring 
compliance, the proposed rule would not create any new reporting 
requirements. Rather, the rule would clarify that parties are obligated 
under the regulations to provide information pertaining to the 
monitoring of a mitigation agreement, condition, or order and may be 
penalized for a material misstatement or omission in specified 
circumstances. Under the current regulations, CFIUS can penalize 
parties for submitting a declaration or notice with a material 
misstatement or omission. The amendment put forth is consistent with 
penalties already authorized under the current regulations.
    As discussed above, the proposed rule would include a provision 
ordinarily requiring transaction parties to respond to national 
security risk mitigation proposals within three business days. The 
Committee anticipates that parties would seek extensions in certain 
instances and the Committee may grant reasonable extension requests on 
a case-by-case basis, as appropriate. In recent years, the volume of 
transactions before the Committee has been below 500 annually; only a 
portion of these are subject to mitigation, and of those, many do not 
involve small entities. Thus, this change will not have a significant 
economic impact on a substantial number of small entities.
    The proposed rule would increase the civil monetary penalty maximum 
from $250,000 to $5,000,000 for certain violations and would expand the 
scope of circumstances in which a penalty may be imposed. The maximum 
penalty for a violation of material provisions of mitigation 
agreements, material conditions imposed by the Committee, or orders 
issued by the Committee would be the greatest, per violation, of (i) 
$5,000,000, (ii) the value of the violating party's interest in the 
U.S. business (or covered real estate) at the time of the transaction, 
(iii) the value of the violating party's interest in the U.S. business 
(or covered real estate) at the time of the violation, or (iv) the 
value of the transaction. In assessing the penalty amount, as noted 
above, the Committee has discretion to determine the appropriate 
penalty in individual cases which in many instances may be lower than 
the maximum allowed. In exercising this discretion, the Committee will 
continue to take into account the specific facts and circumstances of 
the violation including relevant aggravating and mitigating factors. 
Given the approach to determining the monetary penalty and the limited 
number of enforcement actions as compared to the number of transactions 
reviewed by the Committee each year, this proposed change will not have 
a significant economic impact on a substantial number of small 
entities.
    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 invites comments on the potential impacts of 
this rule on small entities.

List of Subjects

31 CFR Part 800

    Foreign investments in the U.S., Investment companies, Investments, 
Penalties, Reporting and recordkeeping requirements.

31 CFR Part 802

    Foreign investments in the U.S., Investment companies, Investments, 
Land sales, National defense, Penalties, Public lands, Real property 
acquisition, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Department of the 
Treasury proposes to amend 31 CFR parts 800 and 802 as follows:

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

0
1. The authority citation for part 800 continues to read as follows:

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

0
2. Amend Sec.  800.501 by revising paragraph (b) to read as follows:


Sec.  800.501  Procedures for notices.

* * * * *
    (b)(1) If the Committee determines that a transaction for which no 
voluntary notice or declaration has been submitted under this part, and 
with

[[Page 26112]]

respect to which the Committee has not informed the parties in writing 
that the Committee has concluded all action under section 721, 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 or other persons to provide to 
the Committee information necessary to determine whether the 
transaction is a covered transaction, whether the transaction may raise 
national security considerations, or, as appropriate, whether the 
transaction is a transaction for which a submission is or was required 
under Sec.  800.401.
    (2) If the Committee determines that a transaction referred to 
under paragraph (b)(1) of this section is a covered transaction and may 
raise national security considerations, the Staff Chairperson, acting 
on the recommendation of the Committee, may request the parties to file 
a notice of such covered transaction under paragraph (a) of this 
section.
* * * * *
0
3. Amend Sec.  800.504 by:
0
a. In paragraph (a)(3), removing the period at the end of the section 
and adding a semicolon in its place;
0
b. In paragraph (a)(4), removing ``or'' at the end of the paragraph;
0
c. In paragraph (a)(5), removing the period at the end of the paragraph 
and adding ``; or'' in its place; and
0
d. Adding paragraph (a)(6).
    The addition reads as follows:


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

    (a) * * *
    (6) Reject any voluntary notice at any time after the notice has 
been accepted, and so inform the parties promptly in writing, if the 
Committee has proposed risk mitigation terms, including revisions to 
such terms, to the party or parties that submitted the notice and the 
party or parties have failed to substantively respond to such terms 
within three business days of the proposal, or within a longer time 
frame if the parties so request in writing and the Staff Chairperson 
grants that request in writing.
* * * * *
0
4. Amend Sec.  800.801 by revising paragraph (a) to read as follows:


Sec.  800.801  Obligation of parties or other persons to provide 
information.

    (a) This paragraph (a) sets forth requirements for parties to a 
transaction or other persons to provide information to the Staff 
Chairperson or requesting lead agency in the circumstances specified in 
paragraphs (a)(1) through (6) of this section.
    (1) Parties to a transaction that is notified or declared under 
subpart D or E of this part shall provide information to the Staff 
Chairperson that will enable the Committee to conduct a full 
assessment, review, and/or investigation of the transaction.
    (2) For a transaction for which no voluntary notice or declaration 
has been submitted and for which the Staff Chairperson has requested 
information as provided for in Sec.  800.501(b), parties to the 
transaction or other persons shall provide information to the Staff 
Chairperson that will enable the Committee to determine:
    (i) Whether the transaction is a covered transaction;
    (ii) Whether the transaction may raise national security 
considerations; or
    (iii) As appropriate, whether the transaction is a transaction for 
which a submission is or was required under Sec.  800.401.
    (3) Independent of any obligations under an agreement, condition, 
or order authorized under section 721(l), parties shall provide 
information to the Staff Chairperson or the requesting lead agency so 
as to enable the Committee to assess compliance with section 721 and 
the regulations in this part or to monitor compliance with, enforce or 
modify the terms of, or decide to terminate any agreement, condition, 
or order.
    (4) Any person that has submitted information to the Committee 
shall respond to requests from the Staff Chairperson for information to 
enable the Committee to determine whether the person made any material 
misstatement or omitted material information from any such submission.
    (5) Parties to a transaction that have filed information with the 
Committee shall promptly advise the Staff Chairperson of any material 
changes to such information.
    (6) If deemed appropriate by the Committee, the Staff Chairperson 
may obtain information from parties to a transaction or other persons 
through subpoena or otherwise, under the Defense Production Act, as 
amended (50 U.S.C. 4555(a)).
* * * * *
0
5. Amend Sec.  800.901 by:
0
a. Revising paragraph (a);
0
b. In paragraph (b), removing ``$250,000'' and adding in its place 
``$5,000,000''; and
0
c. Revising paragraphs (c) and (f).
    The revisions read as follows:


Sec.  800.901  Penalties and damages.

    (a)(1) Any person who submits a declaration or notice with a 
material misstatement or omission 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 $5,000,000 per 
violation.
    (2) Any person who, in response to a request from the Staff 
Chairperson or a lead agency, submits to the Committee any information 
pursuant to Sec.  800.801(a)(2), (3), or (4) or (c) with a material 
misstatement or omission may be liable to the United States for a civil 
penalty not to exceed $5,000,000 per violation. This paragraph (a)(2) 
shall apply only with respect to responses to requests that were made 
in writing, specified a time frame for response, and indicated the 
applicability of this paragraph (a).
    (3) The amount of the penalty imposed for a violation as provided 
for in this paragraph (a) shall be based on the nature of the 
violation.
* * * * *
    (c)(1) Any person who, after December 22, 2008, 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. For clarification, under the previous sentence, 
whichever penalty amount is greater may be imposed per violation, and 
the amount of the penalty imposed for a violation shall be based on the 
nature of the violation.
    (2) Any person who violates a material provision of a mitigation 
agreement entered into on or after October 11, 2018, and before 
[EFFECTIVE DATE OF FINAL RULE], with, a material condition imposed on 
or after October 11, 2018, and before [EFFECTIVE DATE OF FINAL RULE], 
by, or an order issued on or after October 11, 2018, and before 
[EFFECTIVE DATE OF FINAL RULE], by, the United States under section 
721(l) may be liable to the United States for a civil penalty per 
violation not to exceed $250,000 or the value of the transaction, 
whichever is greater. For clarification, under the previous sentence, 
whichever penalty amount is greater may be imposed per violation, and 
the amount of the penalty imposed for a violation shall be based on the 
nature of the violation.
    (3)(i) Any person who violates a material provision of a mitigation 
agreement entered into on or after

[[Page 26113]]

[EFFECTIVE DATE OF FINAL RULE], with, a material condition imposed on 
or after [EFFECTIVE DATE OF FINAL RULE], by, or an order issued on or 
after [EFFECTIVE DATE OF FINAL RULE], by, the United States under 
section 721(l) may be liable to the United States for a civil penalty 
per violation not to exceed the greatest of:
    (A) $5,000,000;
    (B) The value of the person's interest in the U.S. business (or, as 
applicable, the parent of the U.S. business) at the time of the 
transaction;
    (C) The value of the person's interest in the U.S. business (or, as 
applicable, the parent of the U.S. business) at the time of the 
violation in question or the most proximate time to the violation for 
which assessing such value is practicable; or
    (D) The value of the transaction filed with the Committee.
    (ii) For clarification, under paragraphs (c)(3)(i)(A) through (D) 
of this section, whichever penalty amount is greatest may be imposed 
per violation, and the amount of the penalty imposed for a violation 
shall be based on the nature of the violation.
* * * * *
    (f) Upon receiving notice of a penalty to be imposed under 
paragraphs (a) through (c) of this section, the subject person may, 
within 20 business days of receipt of such notice, submit a petition 
for reconsideration to the Staff Chairperson, including a defense, 
justification, or explanation for the conduct to be penalized. The 
Committee will review the petition and issue any final penalty 
determination within 20 business days of receipt of the petition. The 
Staff Chairperson and the subject person may extend either such period 
through written agreement or, where there is a compelling circumstance 
and it is deemed appropriate by the Committee, the Staff Chairperson 
may extend either period by notifying the subject person in writing of 
the extended time frame. The Committee and the subject person may reach 
an agreement on an appropriate remedy at any time before the Committee 
issues any final penalty determination.
* * * * *

PART 802--REGULATIONS PERTAINING TO CERTAIN TRANSACTIONS BY FOREIGN 
PERSONS INVOLVING REAL ESTATE IN THE UNITED STATES

0
6. The authority citation for part 802 continues to read as follows:

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

0
7. Amend Sec.  802.501 by revising paragraph (b) to read as follows:


Sec.  802.501  Procedures for notices.

* * * * *
    (b)(1) If the Committee determines that a transaction for which no 
voluntary notice or declaration has been submitted under this part, and 
with respect to which the Committee has not informed the parties in 
writing that the Committee has concluded all action under section 721, 
may be a covered real estate transaction and may raise national 
security considerations, the Staff Chairperson, acting on the 
recommendation of the Committee, may request the parties to the 
transaction or other persons to provide to the Committee information 
necessary to determine whether the transaction is a covered real estate 
transaction or whether the transaction may raise national security 
considerations.
    (2) If the Committee determines that a transaction referred to 
under paragraph (b)(1) of this section is a covered real estate 
transaction and may raise national security considerations, the Staff 
Chairperson, acting on the recommendation of the Committee, may request 
the parties to file a notice of such covered real estate transaction 
under paragraph (a) of this section.
* * * * *
0
8. Amend Sec.  802.504 by:
0
a. In paragraph (a)(3), removing the period at the end of the section 
and adding a semicolon in its place;
0
b. In paragraph (a)(4), removing ``or'' at the end of the paragraph;
0
c. In paragraph (a)(5), removing the period and adding ``; or'' in its 
place; and
0
d. Adding paragraph (a)(6).
    The addition reads as follows:


Sec.  802.504  Deferral, rejection, or disposition of certain voluntary 
notices.

    (a) * * *
    (6) Reject any voluntary notice at any time after the notice has 
been accepted, and so inform the parties promptly in writing, if the 
Committee has proposed risk mitigation terms, including revisions to 
such terms, to the party or parties that submitted the notice and the 
party or parties have failed to substantively respond to such terms 
within three business days of the proposal, or within a longer time 
frame if the parties so request in writing and the Staff Chairperson 
grants that request in writing.
* * * * *
0
9. Amend Sec.  802.801 by revising the section heading and paragraph 
(a) to read as follows:


Sec.  802.801  Obligation of parties or other persons to provide 
information.

    (a) This paragraph (a) sets forth requirements for parties to a 
transaction or other persons to provide information to the Staff 
Chairperson or requesting lead agency in the circumstances specified in 
paragraphs (a)(1) through (6) of this section.
    (1) Parties to a transaction that is notified or declared under 
subpart D or E of this part shall provide information to the Staff 
Chairperson that will enable the Committee to conduct a full 
assessment, review, and/or investigation of the transaction.
    (2) For a transaction for which no voluntary notice or declaration 
has been submitted and for which the Staff Chairperson has requested 
information as provided for in Sec.  802.501(b), parties to the 
transaction or other persons shall provide information to the Staff 
Chairperson that will enable the Committee to determine whether the 
transaction is a covered real estate transaction or whether the 
transaction may raise national security considerations.
    (3) Independent of any obligations under an agreement, condition, 
or order authorized under section 721(l), parties shall provide 
information to the Staff Chairperson or the requesting lead agency so 
as to enable the Committee to assess compliance with section 721 and 
the regulations in this part or to monitor compliance with, enforce or 
modify the terms of, or decide to terminate any agreement, condition, 
or order.
    (4) Any person that has submitted information to the Committee 
shall respond to requests from the Staff Chairperson for information to 
enable the Committee to determine whether the party made any material 
misstatement or omitted material information from any such submission.
    (5) Parties to a transaction that have filed information with the 
Committee shall promptly advise the Staff Chairperson of any material 
changes to such information.
    (6) If deemed appropriate by the Committee, the Staff Chairperson 
may obtain information from parties to a transaction or other persons 
through subpoena or otherwise, under the Defense Production Act, as 
amended (50 U.S.C. 4555(a)).
* * * * *
0
10. Amend Sec.  802.901 by revising paragraphs (a), (b), and (e) to 
read as follows:


Sec.  802.901  Penalties and damages.

    (a)(1) Any person who submits a declaration or notice with a 
material misstatement or omission or makes a

[[Page 26114]]

false certification under Sec.  802.402, Sec.  802.403, or Sec.  
802.502 may be liable to the United States for a civil penalty not to 
exceed $5,000,000 per violation.
    (2) Any person who, in response to a request from the Staff 
Chairperson or a lead agency, submits to the Committee any information 
pursuant to Sec.  802.801(a)(2), (3), or (4) or (c), with a material 
misstatement or omission may be liable to the United States for a civil 
penalty not to exceed $5,000,000 per violation. This paragraph (a)(2) 
shall apply only with respect to responses to requests that were made 
in writing, specified a time frame for response, and indicated the 
applicability of this paragraph (a).
    (3) The amount of the penalty imposed for a violation as provided 
for in this paragraph (a) shall be based on the nature of the 
violation.
    (b)(1) Any person who violates a material provision of a mitigation 
agreement entered into on or after February 13, 2020, and before 
[EFFECTIVE DATE OF FINAL RULE], with, a material condition imposed on 
or after February 13, 2020, and before [EFFECTIVE DATE OF FINAL RULE], 
by, or an order issued on or after February 13, 2020, and before 
[EFFECTIVE DATE OF FINAL RULE], by, the United States under section 
721(l) may be liable to the United States for a civil penalty per 
violation not to exceed $250,000 or the value of the transaction, 
whichever is greater. For clarification, under the previous sentence, 
whichever penalty amount is greater may be imposed per violation, and 
the amount of the penalty imposed for a violation shall be based on the 
nature of the violation.
    (2)(i) Any person who violates a material provision of a mitigation 
agreement entered into on or after [EFFECTIVE DATE OF FINAL RULE], 
with, a material condition imposed on or after [EFFECTIVE DATE OF FINAL 
RULE], by, or an order issued on or after [EFFECTIVE DATE OF FINAL 
RULE], by, the United States under section 721(l) may be liable to the 
United States for a civil penalty per violation not to exceed the 
greatest of:
    (A) $5,000,000;
    (B) The value of the person's interest in the covered real estate 
(or, as applicable, the owner of the covered real estate) at the time 
of the transaction;
    (C) The value of the person's interest in the covered real estate 
(or, as applicable, the owner of the covered real estate) at the time 
of the violation in question or the most proximate time to the 
violation for which assessing such value is practicable; or
    (D) The value of the transaction filed with the Committee.
    (ii) For clarification, under paragraphs (b)(2)(i)(A) through (D) 
of this section, whichever penalty amount is greatest may be imposed 
per violation, and the amount of the penalty imposed for a violation 
shall be based on the nature of the violation.
* * * * *
    (e) Upon receiving notice of a penalty to be imposed under 
paragraphs (a) through (c) of this section, the subject person may, 
within 20 business days of receipt of such notice, submit a petition 
for reconsideration to the Staff Chairperson, including a defense, 
justification, or explanation for the conduct to be penalized. The 
Committee will review the petition and issue any final penalty 
determination within 20 business days of receipt of the petition. The 
Staff Chairperson and the subject person may extend either such period 
through written agreement or, where there is a compelling circumstance 
and if it is deemed appropriate by the Committee, the Staff Chairperson 
may extend either period by notifying the subject person in writing of 
the extended time frame. The Committee and the subject person may reach 
an agreement on an appropriate remedy at any time before the Committee 
issues any final penalty determination.
* * * * *

Paul M. Rosen,
Assistant Secretary for Investment Security.
[FR Doc. 2024-07693 Filed 4-12-24; 8:45 am]
BILLING CODE 4810-AK-P