On Monday, March 9, 2020, the US Department of the Treasury’s (the Treasury) proposed rule for filing fees applicable to notice filings with the Committee on Foreign Investment in the United States (CFIUS or Committee) was published in the Federal Register (see 85 Fed. Reg. 13586, March 9, 2020). The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which amends section 721 of the Defense Production Act of 1950, authorized the Committee to “assess and collect a fee in an amount determined by the Committee in regulations . . .” (See FIRRMA § 1723, amending 50 U.S.C. § 4565.) As required by FIRRMA, the filing fees are proportional to the “value of the transaction” that is the subject of the filing with CFIUS.
Proposed Filing Fees
The CFIUS filing fees proposed by the rule are as follows:
|Transaction Value (US$)||Proposed Filing Fee (US$)|
|Below $500,000||No Filing fee|
|Greater than $500,000 but less than $5 million||$750|
|Greater than $5 million but less than $50 million||$7,500|
|Greater than $50 million but less than $250 million||$75,000|
|Greater than $250 million but less than $750 million||$150,000|
|Greater than $750 million||$300,000|
Only for Joint Notice Filings
The filing fees will only apply to joint notices. The fees will not apply to voluntary or mandatory declaration filings, or for reviews initiated by CFIUS. A filing fee applies to all joint notices, including those submitted in lieu of, or after CFIUS’s review of, any mandatory declaration filings. A filing fee would also apply to any joint notice that was submitted in response to a request from CFIUS (e.g., if parties to a transaction had decided not to submit a voluntary joint notice to CFIUS, but CFIUS contacted those parties and requested a joint notice).
Determining Value of Transaction
The proposed rule provides that the determinative “transaction value” for the purposes of assessing filing fees will be the total value of consideration paid by or on behalf of the foreign person who is a party to the transaction. Where consideration for the transaction is undetermined, the value of the transaction is proposed to be the fair market value of what is acquired. Where a transaction involves both US and non-US businesses, the proposed rule requires parties use the global value of the transaction except if the global value is equal to or greater than US$5 million and the US business portion is valued less than US$5 million. In such a case, only the value of the US business is considered to minimize potential disincentives where a target company has a limited presence in the US.
Must be Paid Prior to “Acceptance” of Filing
Like other regulatory filing fees (e.g., antitrust filings under the US Hart-Scott-Rodino Antitrust Improvements Act of 1976), if a CFIUS filing fee applies and has not been waived, the proposed rule provides that the fee must be paid to the Treasury prior to the CFIUS filing being accepted. If parties need to withdraw and refile that notice, however, the proposed rule does not propose a repeat filing fee as long as no material change has occurred as to the information reported in the notice.
Lower Fees Than Allowed Under FIRRMA to Minimize Impact
Under the proposed rule, the maximum filing fee of US$300,000 is the maximum fee permitted under FIRRMA; however, the tiered filing fees (amounting to 0.15% or less of the deal value) are less than authorized under FIRRMA, which permitted a fee of up to 1% of the deal value. The Treasury’s preamble to the proposed rule stated that the low fees afforded to transactions valued below US$5 million sought to alleviate burdens on small businesses. Further, the Treasury stated that the fees proposed “will not discourage filings and will allow parties to continue the practice of determining whether to file a voluntary written notice based on an evaluation of the facts and circumstances of the transaction.” (Parties to a transaction that does not trigger a mandatory filing have the option of submitting a voluntarily joint notices to CFIUS, the subsequent review and clearance of that joint notice by CFIUS provides a type of safe harbor for the transaction from future CFIUS intervention.)
Open for Comment
The Treasury “is interested in learning from the public about the impact that filing fees may have on a party’s decision to engage in a transaction and whether to seek safe harbor through the submission of a voluntary notice.” The proposed rule is open for comment until April 8, 2020.