What Happened: On February 13, 2020, the most significant portion of the final rules implementing the Foreign Investment Risk Review Modernization Act (FIRRMA) became effective.1 One provision of FIRRMA that did not become effective on that date was the provision authorizing the Committee on Foreign Investments in the United States (CFIUS) to begin collecting a filing fee for certain submissions. On March 4, 2020, the US Department of Treasury released for public comment rules implementing a filing fee under FIRRMA (Fee Rule).2 Interested parties have until April 8, 2020, to provide comments.
The Bottom Line: As proposed, the Fee Rule would establish for the first time a filing fee that the parties would have to pay before CFIUS commences review of a notification filing submitted by the parties. This filing fee is payable both with respect to covered transactions under the Part 800 rules and covered real estate transactions under the Part 802 rules. Parties to transactions that may be subject to CFIUS review should consider including provisions in their transactional documents specifying who is responsible for the payment of the filing fee and under what circumstances; in certain instances, they may also want to give more serious consideration to making their initial submission to CFIUS as a declaration because of the absence of a filing fee for declarations.
The Full Story
To simplify the calculation of the filing due to CFIUS in connection with notification filings submitted by the parties, CFIUS has proposed a tiered fee schedule.
Given that FIRRMA had authorized CFIUS to charge a fee not to exceed the lesser of $300,000 or 1 percent of the value of the transaction, the fees proposed by the Fee Rule are generally well under the maximum amounts authorized in the legislation. On the other hand, depending on the precise value of the transaction, the CFIUS fee may be more or less than the fee assessed for a review of a premerger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act (HSR).
The filing fee must be paid to the Department of Treasury before CFIUS may commence review of a notification submitted to it by the parties with respect to covered transactions under the Part 800 rules and covered real estate transactions under the Part 802 rules.3 No fee is payable with respect to short-form declaration submissions4 or for notification filings made in response to a unilateral review of a transaction initiated by CFIUS. The fact that declaration filings will not require a fee may create new incentives to consider this infrequently used submission method where the parties believe that completion of the transaction will not result in significant national security issues and/or are already expecting a substantial delay between signing and closing (e.g., a lengthy HSR review).
The largest part of the Fee Rule addresses the calculation of the "value of the transaction." As a general matter, the value of the transaction will be the total value of all consideration that has been or will be paid by the foreign person in connection with the transaction. The Fee Rule includes detailed guidance for a variety of transaction types including transactions structured as purchases, transactions structured as leases, lending transactions and transactions involving a convertible security. In addition, where the transaction involves both US and non-US businesses, the value for Fee Rule purposes will generally be the value being given for the businesses on a worldwide basis subject to one important qualification. Where the worldwide value is greater than $5,000,000 but the value of the US business is less than $5,000,000, the rules propose that the filing fee--for filings under Part 800 for covered transactions--will be $750.00. Treasury has requested comment on whether a similar exception should be applied to filings under Part 802 for covered real estate transactions.