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Implement FIRRMA: 10 Key Questions Answered
CFIUS has offered a one-month comment period for proposed rulemaking to implement
provisions of CFIUS legislation passed in August 2018.
More than a year ago, in August 2018, US President Donald Trump signed the Foreign Investment Risk
Review Modernization Act (FIRRMA) into law. FIRRMA addresses perceived gaps in the scope and
process of foreign investment review by the Committee on Foreign Investment in the United States
(CFIUS) (see previous Client Alert for further detail on FIRRMA). FIRRMA was not self-executing,
however, as most of its provisions require implementing regulations.
Almost a year ago, on October 10, 2018, the US Treasury Department issued regulations on behalf of
CFIUS as the first part of a phased implementation of FIRRMA. Those regulations launched a so-called
â€œPilot Programâ€ that, pursuant to FIRRMA, extended CFIUSâ€™ jurisdiction to certain small, but not passive,
investments (â€œnon-controlling, non-passive investmentsâ€) in US â€œcritical technologyâ€ companies. The Pilot
Program also required mandatory declarations for investments in such businesses (see previous Client
Alert for further detail on the Pilot Program).
On September 17, 2019, the Treasury Department released a second set of regulations to implement
additional provisions of FIRRMA. The proposed regulations include Provisions Pertaining to Certain
Investments in the United States by Foreign Persons and Provisions Pertaining to Certain Transactions
by Foreign Persons Involving Real Estate in the United States (together, the Proposed Regulations).
These important Proposed Regulations truly bring FIRRMA to life, articulating the expansion of CFIUSâ€™
jurisdiction to review:
ï‚· Certain non-controlling, non-passive investments in Technology, Infrastructure, and Data businesses
in the United States (so-called TID US businesses)
ï‚· Certain real estate investments
As the Treasury Department explains in short FAQs released with the proposed rulemaking, the
Proposed Regulations â€œcomprehensively implement FIRRMA.â€ And while the Proposed Regulations are
complex in many respects, and represent a notable departure from current practice, the new rules were,
of course, anticipated in FIRRMA.
Latham & Watkins September 26, 2019 | Number 2544 | Page 2
The Treasury Department issued the proposed regulations as the first step in a notice-and-comment
rulemaking process. CFIUS has thus invited public comments on the Proposed Regulations by October
17, 2019. Comments will be publicly available at https://www.regulations.gov. CFIUS will review the
comments before publishing the final regulations, which likely will occur on or before February 13, 2020.
This Client Alert addresses 10 key questions regarding the new Proposed Regulations.
1. Will the Proposed Regulations immediately change the Pilot Program regarding critical technology?
No. The Proposed Regulations do not modify the Pilot Program relating to critical technology investments,
by which CFIUS mandates filings for certain investments in US businesses that produce, design, test,
manufacture, fabricate, or develop critical technology in connection with 27 specified industries. In fact,
the Proposed Regulations explain that â€œCFIUS continues to evaluate the Pilot Program Interim Rule, and
the Department of the Treasury welcomes comments on the retention of the mandatory declaration
aspect of the Pilot Program Interim Rule for certain transactions involving critical technologies.â€
The Proposed Regulations do, however, expand CFIUSâ€™ jurisdiction to review covered investments
involving critical technology companies (the â€œTâ€ in TID US businesses) â€” without limiting the review to
companies that operate in connection with specified sensitive industries, as the Pilot Program does. The
definition of critical technology in the Proposed Regulations is the same as that set out in FIRRMA and
the Pilot Program, and includes most items that are controlled under US export control laws. Separately,
the US Commerce Department and other agencies continue to work on developing lists of â€œemergingâ€ and
â€œfoundationalâ€ technologies, as required by the Export Control Reform Act of 2018. Once implemented,
these lists will supplement the definition of critical technologies. To date, the Commerce Department has
published an Advanced Notice of Proposed Rulemaking, identifying broad categories of emerging
technologies the agencies are considering. The Commerce Department has not yet released final
regulations setting out foundational and emerging technologies.
2. Under which circumstances can CFIUS review investments in TID US businesses?
CFIUS already has the authority to review any transaction that could result in â€œcontrolâ€ of a US business
by a foreign person if that transaction could have an impact on US national security. By virtue of the
current Pilot Program, CFIUS also mandates review of certain non-controlling, non-passive investments
relating to critical technology businesses.
Consistent with FIRRMA, under the Proposed Regulations, CFIUS would also have the authority to
review a non-controlling investment by a foreign person in a TID US business that affords the foreign
person one or more of the following:
ï‚· Access to material, nonpublic technical information in the possession of the TID business
ï‚· Membership or observer rights on the board of directors or equivalent governing body of the TID
business, or the right to nominate an individual to a position on the board of directors or equivalent
ï‚· Any involvement, other than through voting of shares, in substantive decision-making of the TID
business regarding any of the following:
Latham & Watkins September 26, 2019 | Number 2544 | Page 3
o Use, development, acquisition, safekeeping, or release of sensitive personal data of
US citizens maintained or collected by the TID US business
o Use, development, acquisition, or release of critical technologies
o Management, operation, manufacture, or supply of critical infrastructure
Investments meeting these criteria are defined as covered investments. The Proposed Regulations limit
covered investments to those made in â€œunaffiliatedâ€ TID US businesses, which is to say excluding
investments in entities in which a foreign person already holds a majority of the voting interest or the right
to appoint the majority of the entityâ€™s board or equivalent governing body.
The Pilot Program for critical technologies implemented the ability under FIRRMA to submit a shorter form
â€œdeclaration,â€ rather than a full CFIUS notice. Parties to covered investments in TID US businesses will
have the choice to submit a declaration or a full notice. If the submission of a declaration is mandatory
(see question 6), parties must submit their transactions to CFIUS for review 30 days prior to the
completion of the transaction â€” as compared to the current 45 days under the existing Pilot Program for
critical technologies. The differences between a short-form declaration and a full CFIUS notice are
reviewed in this Client Alert relating to the Pilot Program.
3. Under which circumstances can CFIUS review investments in TID US businesses made through investment funds?
Under FIRRMA, indirect investment in an unaffiliated TID US business that gives a foreign limited partner
membership on a fund advisory board or committee does not in itself mean the investment is subject to
CFIUS jurisdiction. The Proposed Regulations include â€œspecific clarificationsâ€ for investment funds.
According to the Proposed Regulations, such an investment is not a covered investment if the following
factors are present:
ï‚· The fund is managed exclusively by a general partner, a managing member, or the equivalent,
and that general partner, manager, or equivalent is not the foreign investor
ï‚· If any foreign person is on an advisory board or committee of the fund, that board or committee
does not have the ability to approve, disapprove, or otherwise control investment decisions of the
fund, including decisions made by the general partner, managing member, or equivalent related
to entities in which the investment fund is invested
ï‚· The foreign limited partner does not otherwise have the ability to control the investment fund
(including by having the authority to (i) approve, disapprove, or otherwise control investment
decisions of the investment fund; (ii) approve, disapprove, or otherwise control decisions made by
the general partner, managing member, or equivalent related to entities in which the investment
fund is invested; or (iii) unilaterally dismiss, prevent the dismissal of, select, or determine the
compensation of the general partner, managing member, or equivalent)
ï‚· The foreign limited partner does not have access to material nonpublic technical information as a
result of its participation on the advisory board or committee
ï‚· The foreign limited partner is not afforded the access, rights, or involvement described in the
definition of a â€œcovered investmentâ€
These criteria largely apply today with respect to the Pilot Program.
Latham & Watkins September 26, 2019 | Number 2544 | Page 4
4. Which types of infrastructure companies qualify as TID US businesses?
The proposed critical infrastructure rules apply to 28 enumerated categories of â€œcovered investment
critical infrastructure,â€ which includes certain â€œsoftâ€ infrastructure companies, such as telecom services
and internet exchange points. To be a TID US business, a company must perform one or more
corresponding functions in connection with covered investment critical infrastructure.
Accordingly, an â€œinfrastructureâ€ TID US business is defined according to a two-step assessment set out in
the Proposed Regulations. To simplify the evaluation, the Proposed Regulations provide two lists. The
first is a list of â€œtypesâ€ of critical infrastructure, including, for example, certain air and maritime ports and
terminals, energy infrastructure (such as pipelines and refineries), significant financial market utilities and
securities exchanges, internet and telecom technologies, public water systems, and specialty
manufacturing. The list is subject to future revisions.
The second is a list of â€œfunctionsâ€: own, operate, manufacture, supply, or service. A US business that
performs one of the specified functions with respect to a correlating covered infrastructure qualifies as a
TID US business.
The examples in the table below illustrate the interplay between these lists, which are found in Appendix
A of the Provisions Pertaining to Certain Investments in the United States by Foreign Persons.
Column 1 (Covered investment critical
Column 2 (Functions related to covered
investment critical infrastructure)
(xvi) Any crude oil storage facility with the
capacity to hold 30 million barrels or more of
(xvi) Own or operate any crude oil storage
facility with the capacity to hold 30 million
barrels or more of crude oil
(xxiii) Any interstate natural gas pipeline with
an outside diameter of 20 or more inches
(xxiii) Own or operate any interstate natural
gas pipeline with an outside diameter of 20 or
(xx) Any technology service provider in the
Significant Service Provider Program of the
Federal Financial Institutions Examination
Council that provides core processing
(xx) Own or operate any technology service
provider in the Significant Service Provider
Program of the Federal Financial Institutions
Examination Council that provides core
5. Which companies with sensitive data qualify as TID US businesses?
The Proposed Regulations would allow CFIUS to review investments in an unaffiliated TID US business
that maintains or collects sensitive personal data of US citizens that may be exploited in a manner that
threatens to harm national security. Sensitive personal data include specific categories of â€œidentifiableâ€
data that can be used to determine an individualâ€™s identity, and must satisfy a two-part test. First, the data
must fall into one of the following categories:
ï‚· Data that could be used to analyze or determine an individualâ€™s financial distress or hardship
ï‚· The set of data in a consumer report, subject to certain limitations
ï‚· Data in an application for health insurance, long-term care insurance, professional liability insurance,
mortgage insurance, or life insurance
ï‚· Data relating to an individualâ€™s physical, mental, or psychological health condition
Latham & Watkins September 26, 2019 | Number 2544 | Page 5
ï‚· Non-public electronic communications between or among users of a US businessâ€™ products or
services, if a primary purpose of such product or service is to facilitate third-party user
ï‚· Geolocation data collected using positioning systems, cell phone towers, or WiFi access points such
as via a mobile application, vehicle GPS, other onboard mapping tool, or wearable electronic device
ï‚· Biometric data, including facial, voice, retina/iris, and palm/fingerprint templates
ï‚· Data for generating a state or federal government identification card
ï‚· Data concerning US government personnel security clearance status
ï‚· Data in an application for a US government personnel security clearance or an application for
employment in a position of public trust
Second, the data must be maintained or collected by a US business that:
ï‚· Targets or tailors its products or services to sensitive US government personnel or contractors
ï‚· Maintains or collects such data on greater than 1 million individuals
ï‚· Demonstrates a business objective to maintain or collect such data on more than 1 million individuals,
and such data is an integrated part of the US businessâ€™ primary products or services
Sensitive personal data also includes all genetic information (identifiable or not). For US businesses with
genetic information relating to US citizens, the thresholds identified above (e.g., businesses that maintain
or collect data on greater than 1 million individuals) do not apply.
The term â€œsensitive personalâ€ data excludes (1) data maintained or collected by a US business
concerning its own employees (unless the data pertains to employees of US government contractors who
hold US government personnel security clearances) and (2) data that is a matter of public record, such as
court records or other government records that are generally available to the public.
6. Do the Proposed Regulations introduce new requirements for investments involving foreign government-owned investors?
Yes. FIRRMA provides that CFIUS filings will become mandatory for certain investments by foreign
government-owned investors in TID US businesses, and the Proposed Regulations will implement those
provisions. This filing requirement will apply if:
ï‚· A foreign government holds a voting interest of 49% or more in a foreign investor
ï‚· The foreign investor is acquiring a voting interest of 25% or more in a TID US business
ï‚· The transaction would give the foreign investor control over the US business or is the type of non-
controlling, non-passive investment described in the answer to question 2 in this Client Alert
In determining whether the 49% and 25% thresholds are satisfied, foreign investors must consider both
direct and indirect interests, and should treat any voting interest that a parent company holds in a
subsidiary as a 100% voting interest. For instance, if a foreign government owns 100% of the voting
interest in a foreign investor, that foreign investor owns 60% of the voting interest in another company,
and that company is acquiring 25% of the voting interest in a TID US business through the type of non-
controlling, non-passive investment described above, a filing will be required because the regulations will
treat the foreign investor as indirectly acquiring 25% of the US business.
When a filing requirement applies, parties to a transaction will have to submit a full notice or a short-form
declaration at least 30 days before closing (as opposed to the current 45-day period under the existing
Latham & Watkins September 26, 2019 | Number 2544 | Page 6
Notably, although FIRRMA authorizes CFIUS to waive this requirement for particular foreign investors,
the Proposed Regulations do not provide for waivers at this time. However, this requirement relating to
foreign investors with significant government ownership does not apply to qualifying investments through
US-managed investment funds â€” an exception discussed in greater detail in the answer to question 3.
7. Do the Proposed Regulations impose a â€œwhiteâ€ list and a â€œblackâ€ list of foreign investors?
Not exactly. The Proposed Regulations provide for a limited exemption from CFIUSâ€™ expanded jurisdiction
under FIRRMA for certain foreign investors with close connections to â€œexcepted foreign states.â€ To
qualify, an investor must satisfy two requirements:
ï‚· The investor must be the government of an excepted foreign state, an individual who is a national of
one or more excepted foreign states but not also a national of a non-excepted foreign state, or an
entity with very substantial ties to one or more excepted foreign states.
â€“ In the case of an individual, a dual national of an excepted foreign state and a non-excepted
foreign state will not qualify for an exemption.
â€“ In the case of an entity: (1) the entity must be organized under the laws of and have its principal
place of business in an excepted foreign state or the US; (2) all of the entityâ€™s directors must be
nationals of excepted foreign states or the US; (3) each of the entityâ€™s owners holding certain
interests of 5% or more must themselves be from excepted foreign states or the US; and (4)
either a majority (in the case of an entity whose shares are primarily traded on an exchange in an
excepted foreign state or the US) or 90% (in the case of any other entity) of certain interests in
the investor must be held by parties from excepted foreign states or the US. Each of the entityâ€™s
parent companies must also satisfy those criteria.
ï‚· The investor and its subsidiaries must not have recently made misstatements in a CFIUS filing,
violated a mitigation agreement with CFIUS, had a transaction blocked through the CFIUS process,
been subjected to a penalty by CFIUS or the government agencies responsible for sanctions and
export controls, or been convicted of a felony.
CFIUS has not yet published the list of excepted foreign states, but the Proposed Regulations indicate
that the Committee â€œinitially intends to designate a limited number of eligible foreign statesâ€ and may
expand the list in the future.
If an investor satisfies the criteria for exemption, CFIUS will not have jurisdiction over its non-controlling
investments in TID US businesses or its real estate investments that would otherwise have been subject
to CFIUSâ€™ expanded jurisdiction under FIRRMA. Significantly, CFIUS will retain jurisdiction over
transactions that could result in â€œcontrolâ€ of a US business by an excepted investor. Because CFIUS
interprets â€œcontrolâ€ broadly, many investments by excepted investors will remain subject to the
The Proposed Regulations do not create a so-called â€œblack list.â€ They do not prohibit investments from
any country or subject investors from particular countries to additional requirements, although in practice
CFIUS will continue to apply more scrutiny to investors from countries that are perceived as high risk from
a CFIUS perspective (e.g., China and Russia).
Latham & Watkins September 26, 2019 | Number 2544 | Page 7
8. Under which circumstances will CFIUS have jurisdiction to review real estate transactions?
FIRRMA expands CFIUSâ€™ jurisdiction to authorize the Committee to review the national security impact of
foreign investments involving â€œthe purchase or lease by, or a concession to, a foreign person of private or
public real estateâ€ in the US located within (or functioning as a part of) an airport or maritime port or in
â€œclose proximity toâ€ a US military installation or other facility â€œsensitive for reasons relating to national
security.â€ The Proposed Regulations implement FIRRMAâ€™s provisions regarding real estate investments
by providing greater specificity regarding the geographic location of covered real estate. The types of real
estate investments â€” purchases but also leases â€” that would be subject to CFIUS review, if the
proposed rule is finalized as currently drafted, would include:
ï‚· Real estate located within or functioning as part of certain airports (e.g., major US passenger and
cargo airports based on volume) and maritime ports, as well as â€œjoint use airportsâ€ where both military
and civilian aircraft share use of a military airfield.
ï‚· Real estate located within one of the following areas:
â€“ One mile (close proximity) of certain military installations identified in Appendix A to the Proposed
Regulations such as Adelphi Laboratory Center in Adelphi, Maryland, Fort Belvoir in Fairfax,
Virginia, and MacDill Air Force Base in Tampa, Florida
â€“ Certain counties identified in connection with military installations identified in Appendix A, such
as Chase, Dundy, and Goshen counties in Nebraska identified in Part 3 of Appendix A in
connection with the 90th Missile Wing Francis E. Warren Air Force Base Missile Field
â€“ One to 100 miles (the extended range) of certain military installations such as real estate located
within 40 miles of Fort Benning in Columbus, Georgia
â€“ 12 nautical miles seaward of the US coastline (for offshore ranges (identified in Part 4 of
Appendix A) and if any portion of the extended range of a military installation identified in
Appendix A falls offshore)
A purchase, lease, or concession of covered real estate falls within CFIUS jurisdiction when the foreign
investor is afforded three out of four of the following property rights:
ï‚· To physically access the real estate
ï‚· To exclude others from physical access to the real estate
ï‚· To improve or develop the real estate
ï‚· To attach fixed or immovable structures or objects to the real estate
The Proposed Regulations also identify excepted real estate transactions not considered to be covered
under FIRRMA. The Proposed Regulations carve out the following real estate transactions:
ï‚· Transactions in which a foreign investor is a national of certain countries that CFIUS will identify at a
later time as â€œexcepted real estate foreign statesâ€ (an excepted real estate investor)
ï‚· The purchase/lease/concession of:
Latham & Watkins September 26, 2019 | Number 2544 | Page 8
â€“ Real estate located within an â€œurbanized areaâ€ (an area with a minimum population of at least
50,000 individuals according to the most recent US Census) or an â€œurban clusterâ€ (an area
containing at least 2,500 and less than 50,000 people) â€” except if the real estate is located
within or functioning as part of an air or maritime port, or within close proximity to a military
o A single housing unit, including fixtures and adjacent land â€” as long as the land is incidental
to the use of the real estate
o In the context of airport and maritime port leases and concessions, real estate for which the
terms of the lease or concession restrict use to retail trade, accommodation, or food service
o Commercial office space within a multi-unit commercial office building so long as, at the
completion of the transaction: (1) the amount of space occupied by a foreign person is equal
to 10% or less of the total square footage; and (2) the ratio of a foreign person and its
affiliates to the total number of tenants in the building amounts to less than 10% of the total
number of tenants
o Land owned by or held in trust for Alaskan Natives and Native Americans
FIRRMA does not institute mandatory filings for real estate transactions. Parties to a covered real estate
transaction can decide whether to file a full notice with CFIUS or submit a short-form declaration.
9. Have the new CFIUS filing fees been announced?
No. While FIRRMA authorizes CFIUS to assess a fee with respect to covered transactions for which the
parties elect to file a full notice (as opposed to a declaration), the Proposed Regulations do not address
FIRRMAâ€™s provisions regarding filing fees. The Treasury Department explained that it will eventually
publish a separate proposed rule regarding filing fees. FIRRMA authorizes CFIUS to assess and collect
filing fees that are no greater than 1% of the value of the transaction or US$300,000, whichever is less.
10. How can interested parties comment on the Proposed Regulations?
Parties interested in submitting comments may do so electronically through the Federal Governmentâ€™s
eRulemaking Portal or by mailing comments to: US Department of the Treasury, Attention: Thomas
Feddo, Assistant Secretary for Investment Security, 1500 Pennsylvania Avenue, NW, Washington, D.C.
20220. Comments are due by October 17, 2019, and will be available for public review. Please contact
any of the authors listed below for assistance with preparing and submitting comments.
There may be additional opportunities to learn more information about the rulemaking. The Treasury
Department announced that it will hold one or more teleconferences on the Proposed Regulations; the
first will occur on September 27, 2019.
Latham & Watkins September 26, 2019 | Number 2544 | Page 9
If you have questions about this Client Alert, please contact one of the authors listed below or the Latham
lawyer with whom you normally consult:
Les P. Carnegie email@example.com +1.202.637.1096 Washington, D.C.
Steven P. Croley firstname.lastname@example.org +1.202.637.2338 Washington, D.C.
Edward J. Shapiro email@example.com +1.202.637.2202 Washington, D.C.
Hui Xu firstname.lastname@example.org +86.10.5965.7006 Beijing
Annie E. S. Froehlich email@example.com +1.202.637.2375 Washington, D.C.
Jason Johnson Despain* firstname.lastname@example.org +1.202.637.2173 Washington, D.C.
Zachary N. Eddington email@example.com +1.202.637.2105 Washington, D.C.
Brittany J. Ehardt firstname.lastname@example.org +1.212.906.1865 New York
Andrew P. Galdes email@example.com +1.202.637.2155 Washington, D.C.
Natalie Hardwick Rao firstname.lastname@example.org +1.202.637.2164 Washington, D.C.
Bridget R. Reineking email@example.com +1.202.637.1015 Washington, D.C.
Cooper M. Rekrut firstname.lastname@example.org +1.202.637.2246 Washington, D.C.
Lauren Talerman email@example.com +1.202.637.2191 Washington, D.C.
*Admitted to practice in Arizona only
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Investment in the United States
Latham & Watkins September 26, 2019 | Number 2544 | Page 10
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