On September 15, 2020, the U.S. Department of the Treasury published a final rule (the “Final Rule”), effective on October 15, 2020, that refines the Committee on Foreign Investment in the United States (CFIUS)’s mandatory filing requirement for certain transactions, in particular those involving foreign investments in U.S. businesses that engage in activities relating to “critical technologies”.
The Final Rule eliminates the requirement that the “critical technology” be used in or designed for use in one of 27 sensitive industries identified by CFIUS. Instead, it ties the CFIUS’ mandatory filing requirement for critical technology transaction to established US export control regulations. The Final Rule does not, however, modify the definition of “critical technologies.”
Specifically, a filing with CFIUS will be now mandatory where (i) the US business involved in the transaction produces, designs, tests, manufactures, fabricates, or develops certain types of "critical technologies" and (ii) a license or other approval issued by the relevant US export control authority would be required to provide such critical technology to any of the following persons, based on principal place of business, nationality (for individuals), or other reasons: who (a) could directly control the U.S. business as a result of the transaction, (b) is directly acquiring an interest that qualifies as a "covered investment" in the U.S. business, (c) already has a direct investment in the U.S. business, but the rights held by the foreign investor are changing in ways that could result in either foreign control or a “covered investment”, (d) is a party to a transaction that is an attempt to circumvent CFIUS' jurisdiction, or (e) either individually or as part of a group of foreign investors holds a direct or indirect 25% or more voting interest in another foreign entity that falls into any of the categories listed above.