On March 4, 2020, the U.S. Department of the Treasury (Treasury) issued a proposed rule to establish–for the first time–filing fees for parties submitting jointly voluntary notices to the Committee on Foreign Investment in the United States (CFIUS). The proposed rule implements CFIUS’s new authority to collect filing fees under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). This proposed rule is not yet in effect; rather, it is open for public comment through April 3, 2020, after which Treasury will develop and publish the final rule.
The proposed fees are substantial as filing fees go and will apply in most cases, but there are important limitations to keep in mind. Among the limitations is that, under the proposed rule, the filing fees will only apply to jointly voluntary notices submitted to CFIUS, and not to the abbreviated declaration process now available for all transactions under the new CFIUS regulations that became effective in February 2020. This distinction between declarations and notices is likely intended to encourage more parties to consider the declaration process as an alternative to the full CFIUS review process, particularly for transactions that are less sensitive from a national security perspective. This would, in turn, further FIRRMA’s goals of making the CFIUS process more efficient and effective.
Proposed Fees for CFIUS Notices
The proposed rule uses a sliding scale for filing fees based on the overall value of the transaction, which, consistent with FIRRMA’s mandate, is intended to minimize the impact of these fees on small business concerns and on foreign investment in the United States more generally. The fees would apply to written notices of “covered transactions” and “covered real estate transactions” subject to CFIUS review.
The proposed filing fees for notices are tiered based on the value of the notified transaction as follows:
The proposed rule also includes guidance for calculating the value of a transaction, including for transactions where the consideration includes non-cash assets, services, interests, or in-kind considerations, and for lending transactions and leases and concessions under CFIUS’s recently expanded jurisdiction over certain real estate transactions. Going forward, parties would have to explain the methodology for calculating the transaction value in the CFIUS notice, and CFIUS will need to confirm that the applicable fee has been paid before beginning the initial 45-day notice review period.
No Fees for Short Form Declarations, But Fees Apply to Subsequent Notices
In accordance with FIRRMA, there is no fee for any declaration submitted to CFIUS, or for any unilateral review initiated by a CFIUS member agency. The filing fee does apply, however, to written notices filed by parties after CFIUS completes its review of a declaration and either (1) requests that the parties file a written notice or (2) informs the parties that it cannot come to a conclusion based on the declaration, and the parties may voluntarily file a notice. This will be an important factor for parties considering the pros and cons of submitting a declaration to CFIUS, given that one possible outcome will be having to pay a filing fee in addition to having to undergo the full CFIUS review process.
In addition, parties to a transaction for which CFIUS unilaterally initiates a review are not required to pay the filing fees. Although the proposed rule does not explicitly address this scenario, this exception would likely not apply when CFIUS makes inquiries about non-notified transactions and CFIUS “requests” that the parties subsequently “elect” to submit a notice.
Applicable filing fees can potentially be waived if the CFIUS Staff Chairperson determines that extraordinary circumstances relating to national security warrant the filing fee being waived in whole or in part. Parties to a CFIUS notice should not assume that a waiver will be granted; filing fee waivers are only valid upon written notification from CFIUS.
Future CFIUS Regulatory Actions
It is expected that CFIUS will issue additional rules implementing FIRRMA and seeking to modernize the CFIUS filing and review process. MoFo’s National Security team will continue to monitor the proposed rule as it evolves through the “notice and comment” period, along with other FIRRMA-related changes to the CFIUS process. Please contact any of the attorneys listed on this alert should you have any questions about the proposed filing fees and considerations for CFIUS filings.