May 21, 2020

On May 21, 2020, the U.S. Treasury Department published a proposed rule to modify the regulations of the Committee on Foreign Investment of the United States (CFIUS). The proposed rule would modify the mandatory declaration provision for certain foreign investment transactions involving critical technologies to base it on export controls. Under the current rule, determining whether a declaration is required is based on North American Industry Classification System (NAICS) codes. The proposed rule eliminates the requirements based on NAICS codes and instead bases the declaration requirement on “whether certain U.S. government authorizations would be required to export, re-export, transfer (in country), or retransfer the critical technologies to certain transaction parties and foreign persons in the ownership chain.” The proposed rule also makes clarifying amendments to the definition for the term “substantial interest” in the provision that establishes how to calculate the percentage interest held indirectly by one entity in another.

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