83_FR_51519 83 FR 51322 - Determination and Temporary Provisions Pertaining to a Pilot Program To Review Certain Transactions Involving Foreign Persons and Critical Technologies

83 FR 51322 - Determination and Temporary Provisions Pertaining to a Pilot Program To Review Certain Transactions Involving Foreign Persons and Critical Technologies

DEPARTMENT OF THE TREASURY
Office of Investment Security

Federal Register Volume 83, Issue 197 (October 11, 2018)

Page Range51322-51334
FR Document2018-22182

This interim rule sets forth the scope of, and procedures for, a pilot program of the Committee on Foreign Investment in the United States (CFIUS, or the Committee) under section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Pursuant to section 1727(c) of FIRRMA, this pilot program implements the authorities provided in two sections of FIRRMA that did not take effect upon the statute's enactment. First, the pilot program expands the scope of transactions subject to review by CFIUS to include certain investments involving foreign persons and critical technologies. Second, the pilot program makes effective FIRRMA's mandatory declarations provision for all transactions that fall within the specific scope of the pilot program. The pilot program is temporary and will end no later than March 5, 2020.

Federal Register, Volume 83 Issue 197 (Thursday, October 11, 2018)
[Federal Register Volume 83, Number 197 (Thursday, October 11, 2018)]
[Rules and Regulations]
[Pages 51322-51334]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-22182]


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DEPARTMENT OF THE TREASURY

Office of Investment Security

31 CFR Part 801

RIN 1505-AC61


Determination and Temporary Provisions Pertaining to a Pilot 
Program To Review Certain Transactions Involving Foreign Persons and 
Critical Technologies

AGENCY: Office of Investment Security, Department of the Treasury.

ACTION: Interim rule.

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SUMMARY: This interim rule sets forth the scope of, and procedures for, 
a pilot program of the Committee on Foreign Investment in the United 
States (CFIUS, or the Committee) under section 721 of the Defense 
Production Act of 1950, as amended by the Foreign Investment Risk 
Review Modernization Act of 2018 (FIRRMA). Pursuant to section 1727(c) 
of FIRRMA, this pilot program implements the authorities provided in 
two sections of FIRRMA that did not take effect upon the statute's 
enactment. First, the pilot program expands the scope of transactions 
subject to review by CFIUS to include certain investments involving 
foreign persons and critical technologies. Second, the pilot program 
makes effective FIRRMA's mandatory declarations provision for all 
transactions that fall within the specific scope of the pilot program. 
The pilot program is temporary and will end no later than March 5, 
2020.

DATES: Effective date: These provisions are effective November 10, 
2018.
    Applicability date: See Sec.  801.103.
    Comment date: Written comments must be received by November 10, 
2018.

ADDRESSES: Written comments on the interim rule may be submitted 
through one of two methods:
     Electronic Submission of Comments: Interested persons may 
submit comments electronically through the Federal government 
eRulemaking Portal at https://www.regulations.gov. Electronic 
submission of comments allows the commenter maximum time to prepare and 
submit a comment, ensures timely receipt, and enables the Department to 
make them available to the public. Comments submitted electronically 
through the https://www.regulations.gov website can be viewed by other 
commenters and interested members of the public.
     Mail: Send to U.S. Department of the Treasury, Attention: 
Thomas Feddo, Deputy Assistant Secretary for Investment Security, 1500 
Pennsylvania Avenue NW, Washington, DC 20220.
    In general, Treasury will post all comments to www.regulations.gov 
without change, including any business or personal information 
provided, such as names, addresses, email addresses, or telephone 
numbers. All comments received, including attachments and other 
supporting material, will be part of the public record and subject to 
public disclosure. You should only submit information that you wish to 
make publicly available.

FOR FURTHER INFORMATION CONTACT: For questions about this interim rule, 
contact: Thomas Feddo, Deputy Assistant Secretary for Investment 
Security; Laura Black, Director of Investment Security Policy and 
International Relations; Meena Sharma, Senior Policy Advisor; or 
Juliana Gabrovsky, Policy Advisor, at U.S. Department of the Treasury, 
1500 Pennsylvania Avenue NW, Washington, DC 20220; telephone: (202) 
622-3425; email: [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    The Foreign Investment Risk Review Modernization Act of 2018 
(FIRRMA), Subtitle A of Title XVII of Public Law 115-232 (Aug. 13, 
2018), amended section 721 of the Defense Production Act of 1950 (DPA). 
Prior to the enactment of FIRRMA, section 721 of the DPA (section 721) 
authorized the President, acting through the Committee, to review 
mergers, acquisitions, and takeovers by or with any foreign person 
which could result in foreign control of any person engaged in 
interstate commerce in the United States, to determine the effects of 
such transactions on the national security of the United States. FIRRMA 
modified and broadened the authorities of the President and CFIUS under 
section 721 in several ways including, without limitation, by expanding 
the scope of

[[Page 51323]]

foreign investments in the United States subject to national security 
review pursuant to section 721.
    Section 1727(a) of FIRRMA made certain provisions of FIRRMA 
effective immediately upon enactment on August 13, 2018. Section 
1727(b) of FIRRMA, however, delayed the effectiveness of any provision 
of FIRRMA not specified in section 1727(a) until the earlier of: (1) 
The date that is 18 months after the date of enactment of FIRRMA (i.e., 
February 13, 2020); or (2) the date that is 30 days after publication 
in the Federal Register of a determination by the chairperson of CFIUS 
that the regulations, organizational structure, personnel, and other 
resources necessary to administer the new provisions are in place.
    Notwithstanding section 1727(b), section 1727(c) of FIRRMA 
authorizes CFIUS to conduct one or more pilot programs to implement any 
authority provided pursuant to any provision of, or amendment made by, 
FIRRMA that did not take effect immediately upon enactment. Section 
1727(c) states that a pilot program may not commence until the date 
that is 30 days after publication in the Federal Register of a 
determination by the chairperson of CFIUS of the scope of, and 
procedures for, the pilot program. This document and the interim rule 
set forth herein constitute the required determination of the scope of, 
and procedures for, a CFIUS pilot program relating to critical 
technologies pursuant to section 1727(c)(2) of FIRRMA.

II. Waiver of Public Comment Requirement for Temporary Provisions

    The interim rule set forth in this document implements a pilot 
program, pursuant to section 721, relating to foreign investment into 
certain U.S. businesses that produce, design, test, manufacture, 
fabricate, or develop one or more critical technologies. Section 709(a) 
of the DPA (50 U.S.C. 4559(a)) provides that regulations issued under 
the DPA are not subject to the rulemaking requirements of the 
Administrative Procedure Act (APA). Moreover, to the extent that the 
rulemaking requirements of the APA were determined to apply to this 
interim rule, the provisions of the APA requiring notice of proposed 
rulemaking, opportunity for public participation, and delay in 
effective date (5 U.S.C. 553), as well as the provisions of Executive 
Order 13771, are inapplicable because this interim rule involves a 
foreign affairs function of the United States. By its terms, the pilot 
program to be implemented pursuant to this interim rule regulates the 
conduct of foreign persons seeking to acquire certain interests in 
particular U.S. businesses, precisely because the acquisition of such 
interests could harm the strategic national security interests of the 
United States vis-[agrave]-vis other nations.
    Notwithstanding that the rulemaking requirements of the APA do not 
apply to this interim rule, Section 709(b)(1) of the DPA provides that, 
except as otherwise provided in section 709, any regulation issued 
under the DPA must be published in the Federal Register and opportunity 
for public comment must be provided for not less than 30 days, 
consistent with the requirements of 5 U.S.C. 553(b).
    Section 709(b)(2) of the DPA (50 U.S.C. 4559(b)(2)), however, 
provides that the requirements of section 709(b)(1) may be waived if: 
(1) The officer authorized to issue the regulation finds that urgent 
and compelling circumstances make compliance with such requirements 
impracticable; (2) the regulation is issued on a temporary basis \1\; 
and (3) the publication of such temporary regulation is accompanied by 
the finding made under (1) (and a brief statement of the reasons for 
such finding) and an opportunity for public comment is provided for not 
less than 30 days before any regulation becomes final.
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    \1\ Temporary regulations with no specific expiration date are 
``interim rules'' for purposes of Federal Register classification.
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    The regulations set forth in this document meet the three 
requirements of section 709(b)(2) of the DPA for the reasons below, and 
therefore qualify for waiver of the public comment requirement of 
section 709(b)(1) of the DPA.
    First, as required by section 709(b)(2)(A) of the DPA, and for the 
reasons described in part III, below, the Secretary of the Treasury 
finds, and the Committee agrees, that urgent and compelling 
circumstances make completion of the process for public participation 
in rulemaking set forth in section 709 of the DPA impracticable prior 
to the effectiveness of this interim rule.
    Second, pursuant to section 1727(c)(1) of FIRRMA, the authority for 
a pilot program is time limited to no more than 570 days following the 
date of FIRRMA's enactment, making any FIRRMA pilot program inherently 
temporary. Consistent with that limitation and the requirement of 
section 709(b)(2)(B) of the DPA, these regulations are issued on a 
temporary basis. Section 801.101 sets forth the duration of the pilot 
program regulations.
    Third, consistent with the requirement of section 709(b)(2)(C) of 
the DPA, if the Committee intends to make the provisions of this 
interim rule final, CFIUS will complete the process for public 
participation in rulemaking set forth in section 709 of the DPA in 
conjunction with the issuance of a final rule.
    Given the pilot program's scope and objectives, considering and 
responding to public comments prior to the effectiveness of this 
interim rule would be inconsistent with U.S. foreign affairs interests 
because it would delay the effective date of the pilot program, which 
could provide threat actors with time to harm U.S. national security by 
quickly acquiring U.S. critical technologies, contrary to the urgent 
and compelling circumstances justifying this program, as discussed 
below.
    As a result, the Committee is providing an immediate opportunity 
for public comment on this interim rule and will consider and address 
such comments in the process of promulgating any final rule, consistent 
with section 709(b)(3) of the DPA. This approach appropriately balances 
the urgency of the pilot program with the need for public participation 
in the formulation of any final rule.

III. Urgent and Compelling Circumstances for the Pilot Program

    The passage of FIRRMA was based upon concerns that, as noted at 
section 1702(b)(4) of FIRRMA, ``the national security landscape has 
shifted in recent years, and so has the nature of the investments that 
pose the greatest potential risk to national security. . . .'' FIRRMA 
provides CFIUS time to develop the resources and regulations necessary 
to administer all of FIRRMA's provisions before the statute becomes 
fully effective. Notwithstanding this, FIRRMA also provides the 
authority for pilot programs and, in doing so, recognizes the need to 
immediately assess and address significant risks to national security 
posed by some foreign investments.
    In order to be effective in identifying and addressing these 
national security risks, FIRRMA recognizes that there may be 
circumstances in which the Committee deems it appropriate to require 
mandatory declarations for specific types of transactions. This pilot 
program establishes mandatory declarations for certain transactions 
involving investments by foreign persons in certain U.S. businesses 
that produce, design, test, manufacture, fabricate, or develop one or 
more critical technologies. The purpose of the pilot program is to 
assess and address

[[Page 51324]]

ongoing risks to the national security of the United States resulting 
from two urgent and compelling circumstances: (1) The ability and 
willingness of some foreign parties to obtain equity interests in U.S. 
businesses in order to affect certain decisions regarding, or to obtain 
certain information relating to, critical technologies; and (2) the 
rapid pace of technological change in certain U.S. industries. The 
Committee has developed this pilot program without exempting any 
country from the mandatory declaration requirement in order to 
understand and examine, in a comprehensive manner, the nature of 
foreign direct investment as it relates to critical technologies and 
the pilot program industries. Further, foreign investors that may 
present national security concerns are becoming increasingly 
sophisticated in structuring investments in a manner that may obfuscate 
those concerns, including by utilizing entities in other jurisdictions. 
As a result, CFIUS is implementing this pilot program on a global 
basis. The pilot program will inform the full implementation of FIRRMA, 
including the Committee's approach with respect to the country 
specification provision in FIRRMA.
    Technological superiority has long underpinned the United States' 
military strategy and national security innovation base. The 
Administration supports protecting our national security from emerging 
risks while maintaining an open investment policy. Although the vast 
majority of foreign direct investment in the United States provides 
economic benefits to our nation--including the promotion of economic 
growth, productivity, competitiveness, and job creation--some foreign 
direct investment threatens to undermine the technological superiority 
that is critical to U.S. national security. Specifically, the threat to 
critical technology industries is more significant than ever as some 
foreign parties seek, through various means, to acquire sensitive 
technologies with relevance for U.S. national security. Foreign 
investment in U.S. critical technologies has grown significantly in the 
past decade, and an enhanced framework is needed to address the 
potential impacts of this growth on U.S. national security.
    Prior to FIRRMA, CFIUS's authorities did not sufficiently address 
the new and emerging risks that foreign direct investment can pose to 
U.S. technological superiority. For example, foreign investors do not 
need to acquire a controlling interest in order to affect certain 
decisions made by, or obtain certain information from, a U.S. business 
with respect to the use, development, acquisition, or release of 
critical technology. CFIUS's authorities, however, only applied to 
transactions that could result in foreign control of a U.S. business. 
Consequently, CFIUS had no authority to prevent a foreign entity from 
acquiring a non-controlling interest in a U.S. business that produces, 
designs, tests, manufactures, fabricates, or develops one or more 
critical technologies. FIRRMA provides CFIUS new authorities to address 
the national security concerns that may arise from these investments, 
but those authorities were not immediately effective upon FIRRMA's 
enactment.
    Together, the pace of technological change in certain critical 
technology industries, the significant growth in foreign investment in 
certain industries relevant to national security, and the current 
inability of CFIUS to examine certain non-controlling transactions 
creates urgent and compelling circumstances for the pilot program that 
make completion of the process for public participation in rulemaking 
set forth in section 709 of the DPA impracticable prior to the 
effectiveness of this interim rule. Implementing the pilot program 
expeditiously is necessary both to protect critical technologies and to 
evaluate how best to implement certain aspects of FIRRMA in the long-
term. The temporary nature of the pilot program and the short timeframe 
within which to gather data to help inform the full implementation of 
FIRRMA compel a rapid implementation of this interim rule. Delaying 
effectiveness of the interim rule would create an unacceptable risk of 
erosion of U.S. technological superiority. Without immediate action, 
foreign parties will be able to influence the use of, and decisions 
made by U.S. businesses with respect to, critical technologies through 
the types of investments FIRRMA is intended to address. The list of 
pilot program industries identified in Annex A has been carefully 
developed by the U.S. government to narrowly scope the pilot program to 
include only those industries in which the threat of erosion of 
technological superiority from some foreign direct investment requires 
immediate action. As noted above, the Committee invites comments on 
this interim rule, will consider any comments received, and if the 
Committee intends to make the provisions of this interim rule final, 
will include in any final rule responses to such comments.
    Notwithstanding the issuance of this interim rule, the regulations 
at part 800 remain in effect.

IV. Discussion of the Pilot Program Interim Rule

Subpart-by-Subpart Overview of the Pilot Program Interim Rule

    The interim rule builds upon existing rules governing CFIUS's 
review of transactions for national security considerations and adds a 
pilot program with two purposes. First, the pilot program expands the 
scope of transactions subject to review by CFIUS to include 
transactions subject to a portion of FIRRMA's ``other investments'' 
provision. Second, the pilot program makes effective FIRRMA's mandatory 
declarations provision for transactions that fall within the specific 
scope of the pilot program. The scope, procedures, and terms used in 
the pilot program are specific to the pilot program and subject to 
change in the proposed final rule implementing FIRRMA. The following 
discussion provides an overview of each subpart of the interim rule.
Subpart A
    Subpart A sets forth the scope of the pilot program, its 
applicability based on the timing of certain events relating to a 
transaction, and the effect of the pilot program on other laws. FIRRMA 
authorizes the Committee to conduct one or more pilot programs to 
implement any authority provided pursuant to any provision of, or 
amendment made by, FIRRMA that did not take effect on the date of its 
enactment. This pilot program expands the scope of transactions subject 
to review by CFIUS to include certain investments by foreign persons in 
certain U.S. businesses that produce, design, test, manufacture, 
fabricate, or develop one or more critical technologies. The pilot 
program also requires the submission of declarations with basic 
information regarding certain covered transactions, unless the parties 
elect to file a notice instead. The purpose of implementing a pilot 
program addressing these areas is to confront the rapid changes in 
certain critical technology industries, the significant growth of 
certain types of foreign investment in those industries, and the 
current inability of CFIUS to review non-controlling transactions, 
which creates an unacceptable risk of undermining U.S. technological 
superiority in industries with national security implications. The 
regulations in this interim rule supplement existing regulations 
implementing section 721 of the DPA, which remain in effect. Consistent 
with section 1727(c)(1) of FIRRMA, the pilot program implemented 
through these regulations

[[Page 51325]]

will end no later than March 5, 2020, the date that is 570 days after 
the enactment of FIRRMA. These regulations will be amended, replaced, 
or removed no later than the date on which the pilot program ends.
    As set forth in section 801.103(b), these regulations do not apply 
to transactions for which the completion date is prior to the pilot 
program effective date, or transactions for which the parties have 
executed a binding written agreement or other document establishing the 
material terms of the transaction prior to October 11, 2018.
    Consistent with CFIUS's existing regulations under part 800, the 
pilot program does not affect or limit other authorities of the 
government.
Subpart B
    Subpart B sets forth defined terms used in the remainder of the 
pilot program regulations. The following discussion describes several 
key terms from subpart B.
    Section 801.203. FIRRMA defines the term ``investment'' as 
including the acquisition of a ``contingent equity interest,'' but does 
not define the term ``contingent equity interest.'' The pilot program 
interim rule provides a definition for the term contingent equity 
interest.
    Section 801.204. The term critical technologies is defined 
consistent with the definition set forth in FIRRMA.
    Section 801.206. The term investment is defined consistent with the 
definition set forth in FIRRMA.
    Section 801.207. FIRRMA provides clarification that certain types 
of investments by foreign persons as limited partners or the equivalent 
on an advisory board or a committee of an investment fund will not be 
considered ``other investments'' for the purposes of FIRRMA, as 
reflected in section 801.304 of these regulations. The term investment 
fund is defined in subpart B by reference to the Investment Company Act 
of 1940 (15 U.S.C. 80a-1 et seq.).
    Section 801.208. In this interim rule, the Committee is 
implementing the portion of the definition of the term material 
nonpublic technical information in FIRRMA that is related to critical 
technologies. The portion of FIRRMA's definition of the term ``material 
nonpublic technical information'' that relates to critical 
infrastructure is not part of this pilot program.
    Section 801.209. The term pilot program covered investment 
implements most of the definition of ``other investment'' in FIRRMA. 
The pilot program, however, does not implement a portion of the third 
part of the ``other investment'' definition in FIRRMA regarding 
involvement, other than through voting of shares, in substantive 
decisionmaking regarding sensitive personal data of U.S. citizens or 
critical infrastructure.
    Section 801.210. The term pilot program covered transaction 
includes the new concept of ``pilot program covered investment,'' 
described above. The term pilot program covered transaction also 
includes transactions that could result in foreign control of a U.S. 
business, consistent with the language in FIRRMA, but only to the 
extent that the U.S. business is a pilot program U.S. business.
    Section 801.213. The term pilot program U.S. business includes any 
U.S. business that produces, designs, tests, manufactures, fabricates, 
or develops a critical technology that is either utilized in connection 
with the U.S. business's activity in one or more pilot program 
industries, or designed by the U.S. business specifically for use in 
one or more pilot program industries. For purposes of the pilot 
program, this definition has been narrowly scoped to allow CFIUS to 
assess and address the foreign investment transactions most likely to 
raise concerns regarding the technological superiority of the United 
States in industries of national security importance.
Subpart C
    Subpart C describes the coverage of the pilot program with a focus 
on pilot program covered investments. The analysis as to whether a 
transaction could result in control of a pilot program U.S. business by 
a foreign person generally follows the same analysis as under part 800, 
with the additional requirement that the U.S. business in question must 
be a pilot program U.S. business. The examples provided throughout 
subpart C are intended to illustrate the application of the definitions 
to the particular hypothetical situations. The examples are presented 
for the purpose of aiding the understanding of readers. They neither 
limit the definitions set forth in subpart B nor exhaust the scenarios 
to which such definitions could apply.
    Subpart C illustrates that, where CFIUS has concluded all action 
under section 721 for a pilot program covered investment (regardless of 
whether the notification was made through a declaration or a notice), 
any incremental investment that meets the requirements of section 
801.209, even if involving the same foreign person in the same pilot 
program U.S. business, will nevertheless be a pilot program covered 
investment and subject to this pilot program.
    Subpart C also implements portions of section 1703 of FIRRMA that 
limit the application of CFIUS authority over certain types of 
investment fund investments and provides an explicit exception for 
investments involving air carriers.
Subpart D
    Subpart D requires that the parties to a pilot program covered 
transaction submit to the Committee a declaration regarding the 
transaction, unless the parties elect to submit a written notice 
pursuant to subpart E instead. Generally, mandatory declarations must 
be made at least 45 days before the expected completion date of the 
transaction. As noted in section 801.401(d), the regulatory safe harbor 
described in section 800.204(e) is not available for pilot program 
covered transactions for which the Committee completes all action under 
section 721 on the basis of a declaration, irrespective of whether the 
transaction could result in foreign control of a U.S. business. Any 
subsequent or incremental acquisition that constitutes a pilot program 
covered transaction must be submitted to CFIUS through a notice or 
declaration. For the avoidance of doubt, transactions that could result 
in control of a pilot program U.S. business by a foreign person and 
that are filed as a written notice, and for which the Committee 
completes all action under section 721, would receive the benefit of 
the regulatory safe harbor described in section 800.204(e).
    FIRRMA distinguishes declarations from notices in three primary 
respects: (1) The length of the submission; (2) the time for CFIUS's 
consideration of the submission; and (3) the Committee's options for 
disposition of the submission. The interim rule recognizes these 
distinctions in the manner described below.
    First, section 801.403 sets forth the information required in a 
declaration, which is consistent with FIRRMA's requirement that CFIUS 
establish declarations as ``abbreviated notices that would not 
generally exceed 5 pages in length.'' As part of the declaration 
process, parties will have the opportunity to voluntarily stipulate 
that the transaction is a pilot program covered transaction and, if so, 
whether the transaction could result in control of a pilot program U.S. 
business by a foreign person and whether the transaction is a foreign-
government controlled transaction. Such stipulations would streamline 
certain aspects of CFIUS's review of a declaration, thereby reducing 
the burden on CFIUS and potentially

[[Page 51326]]

leading to a faster resolution for the submitting parties.
    Second, consistent with FIRRMA, section 801.404 requires that the 
Committee take action on a declaration within 30 days of the 
Committee's receipt of the declaration from the Staff Chairperson. The 
Staff Chairperson will circulate the declaration to the Committee after 
inspecting the declaration and determining it to be complete. This 
implements FIRRMA's distinction that CFIUS complete review of a notice 
within 45 days and take action upon a declaration within 30 days.
    Finally, section 801.407 implements FIRRMA's mandate that the 
Committee take one of four actions with respect to a declaration: (1) 
Request that the parties file a notice; (2) inform the parties that 
CFIUS cannot complete action under section 721 on the basis of the 
declaration, and that they may file a notice to seek written 
notification from the Committee that the Committee has completed all 
action under section 721 with respect to the transaction; (3) initiate 
a unilateral review of the transaction through an agency notice; or (4) 
notify the parties that CFIUS has completed all action under section 
721.
    Section 801.407 also makes clear that parties may not submit more 
than one declaration for the same or a substantially similar 
transaction without approval from the Staff Chairperson. The purpose of 
this is to avoid situations where, due to the abbreviated information 
requests, a party or parties file a declaration even before the 
material terms of a transaction have been agreed upon, subsequently 
complete their negotiations, and attempt to withdraw and resubmit a new 
declaration for the same or a substantially similar transaction.
    The distinctions between notices and declarations outlined here--
that is, the complexity of the submission and the parties' desired 
timing--underpin the primary interrelated factors that parties should 
consider when determining whether a pilot program covered transaction 
is best notified to the Committee through a declaration or a notice.
    As noted above, the scope, procedures, and certain terms used in 
the pilot program are specific to the pilot program and subject to 
change in the proposed final rule implementing FIRRMA.
Subpart E
    Subpart E generally applies the existing CFIUS procedural 
regulations in part 800 to notices of pilot program covered 
transactions. This subpart recognizes that parties, at their 
discretion, may elect to file a notice for a pilot program covered 
transaction instead of a declaration. The purpose of the subpart is to 
clarify that, where parties elect to file a notice instead of a 
declaration, or file a notice for a pilot program covered transaction 
following the Committee's action on a declaration, the procedural 
elements of CFIUS's existing regulations under part 800 generally will 
apply to that notice. Certain additional information will be required 
from the parties with respect to any pilot program covered investment 
notified to the Committee through a notice.
    For the avoidance of doubt, while the pilot program implements 
certain provisions of FIRRMA that allow CFIUS to review certain non-
controlling transactions involving critical technology in specified 
industries, it does not change CFIUS's analysis with respect to a 
transaction that could result in foreign control of a U.S. business 
under the regulations at part 800.
    Additionally, a party (or parties) to a pilot program covered 
transaction that has filed a written notice pursuant to section 
800.401(a) regarding the transaction may not submit to the Committee a 
declaration regarding the same transaction, or a substantially similar 
transaction, without the approval of the Staff Chairperson. The purpose 
of the declaration is to allow for an assessment of certain information 
relating to certain transactions that may not, because of the scope and 
other factors, necessitate the collection of all of the information set 
forth in section 800.402(c). As noted above, parties should consider 
whether the transaction is of the type that would be appropriate for a 
declaration, or whether it would be more appropriate to notify the 
Committee of the transaction by filing a written notice.
Subpart F
    Subpart F implements authorities provided pursuant to, and 
amendments made by, FIRRMA.

Executive Order 12866

    These regulations are not subject to the general requirements of 
Executive Order 12866 because they relate to a foreign affairs function 
of the United States pursuant to section 3(d)(2) of that order.

Paperwork Reduction Act

    The collection of information contained in this rule has been 
submitted to the Office of Management and Budget in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and assigned 
control number 1505-0121. Under the Paperwork Reduction Act, an agency 
may not conduct or sponsor, and a person is not required to respond to, 
a collection of information unless it displays a valid control number 
assigned by the Office of Management and Budget.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to prepare a regulatory flexibility 
analysis, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The RFA applies when an agency is required to publish a general notice 
of proposed rulemaking under section 553(b) of the APA, or any other 
law. As set forth below, because regulations issued pursuant to the DPA 
are not subject to the rulemaking provisions of the APA, or other law 
requiring the publication of a general notice of proposed rulemaking, 
the RFA does not apply.
    This interim rule implements section 721 of the DPA. Section 709(a) 
of the DPA provides that the regulations issued under it are not 
subject to the rulemaking requirements of the APA. Section 709(b)(1) 
instead provides that any regulation issued under the DPA be published 
in the Federal Register and opportunity for public comment be provided 
for not less than 30 days. (Notwithstanding the notice requirements of 
section 709(b)(1), section 709(b)(2) of the DPA waives the DPA's public 
comment provision for temporary provisions. As discussed in part II 
above, this interim rule implements a pilot program and is issued 
pursuant to the section 709(b)(2) waiver provision.) Section 709(b)(3) 
of the DPA also provides that all comments received during the public 
comment period be considered and the publication of the final 
regulation contain written responses to such comments. Consistent with 
the plain text of the DPA, legislative history confirms that Congress 
intended that regulations under the DPA be exempt from the notice and 
comment provisions of the APA and instead provided that the agency 
include a statement that interested parties were consulted in the 
formulation of the final regulation. See H.R. Conf. Rep. No. 102-1028, 
at 42 (1992) and H.R. Rep. No. 102-208 pt. 1, at 28 (1991). The limited 
public participation procedures described in the DPA do not require a 
general notice of proposed rulemaking as set forth in the RFA. Further, 
the mechanisms for

[[Page 51327]]

publication and public participation are sufficiently different to 
distinguish the DPA procedures from a rule that requires a general 
notice of proposed rulemaking. In providing the President with expanded 
authority to suspend or prohibit the acquisition, merger, or takeover 
of, or certain other investments in, a domestic firm by a foreign firm 
if such action would threaten to impair the national security, Congress 
could not have contemplated that regulations implementing such 
authority would be subject to RFA analysis. For these reasons, the RFA 
does not apply to these regulations.

List of Subjects in 31 CFR Part 801

    Foreign investments in the United States, Investigations, National 
defense, Reporting and recordkeeping requirements.

0
Accordingly, under the authority provided by section 1727(c) of FIRRMA, 
for the reasons stated in the preamble, the Department of the Treasury 
amends 31 CFR chapter VIII by adding part 801 as follows:

PART 801--PILOT PROGRAM TO REVIEW CERTAIN TRANSACTIONS INVOLVING 
FOREIGN PERSONS AND CRITICAL TECHNOLOGIES

Subpart A--General
Sec.
801.101 Scope.
801.102 Effect on other law.
801.103 Applicability rule.
Subpart B--Definitions
801.201 General.
801.202 Completion date.
801.203 Contingent equity interest.
801.204 Critical technologies.
801.205 FIRRMA.
801.206 Investment.
801.207 Investment fund.
801.208 Material nonpublic technical information.
801.209 Pilot program covered investment.
801.210 Pilot program covered transaction.
801.211 Pilot program effective date.
801.212 Pilot program industry.
801.213 Pilot program U.S. business.
801.214 Unaffiliated pilot program U.S. business.
Subpart C--Pilot Program Covered Transactions
801.301 Control.
801.302 Transactions that are pilot program covered transactions.
801.303 Transactions that are not pilot program covered 
transactions.
801.304 Treatment of certain investment fund investments.
801.305 Exception for air carriers.
801.306 Timing rule for contingent equity interests.
Subpart D--Mandatory Declarations Under the Pilot Program
801.401 Mandatory declarations under the pilot program.
801.402 Procedures for declarations under the pilot program.
801.403 Contents of declarations under the pilot program.
801.404 Beginning of thirty-day period.
801.405 General.
801.406 Rejection, disposition, or withdrawal of declarations.
801.407 Committee actions.
801.408 Confidentiality.
801.409 Penalties.
Subpart E--Notice of Pilot Program Covered Transaction
801.501 Notice of pilot program covered transactions.
801.502 Applicability of part 800.
801.503 Additional contents of written notice.
801.504 Agency notice of pilot program covered transactions.
Subpart F--Implementation of Certain Authority Provided in FIRRMA
801.601 Implementation of certain authority regarding covered 
transactions.
801.602 Implementation of certain authority regarding mandatory 
declarations.

Annex A to Part 801--Industries

    Authority:  50 U.S.C. 4565; Pub. L. 115-232.

Subpart A--General


Sec.  801.101   Scope.

    The regulations in this part implement a pilot program in 
accordance with section 1727(c) of the Foreign Investment Risk Review 
Modernization Act of 2018. Pursuant to section 1727(c), the pilot 
program implements authorities provided in certain provisions of, or 
amendments made by, the Foreign Investment Risk Review Modernization 
Act of 2018 that did not take effect on the date of its enactment. This 
pilot program expands the scope of transactions reviewable by CFIUS to 
include certain investments by foreign persons in certain U.S. 
businesses that produce, design, test, manufacture, fabricate, or 
develop one or more critical technologies. The pilot program also 
requires that parties to a pilot program covered transaction notify 
CFIUS of the transaction by either submitting a declaration or filing a 
written notice. The regulations in this part supplement the existing 
regulations implementing section 721 of the Defense Production Act of 
1950, as amended, under part 800 to Title 31 CFR Chapter VIII, which 
remain in effect. The pilot program implemented through these 
regulations will end no later than the date on which the full 
regulations implementing the Foreign Investment Risk Review 
Modernization Act of 2018 become effective, and in no event later than 
the date that is 570 days after the enactment of the Foreign Investment 
Risk Review Modernization Act of 2018. These regulations will be 
amended, replaced, or removed no later than the date on which the pilot 
program ends.


Sec.  801.102   Effect on other law.

    Unless otherwise indicated, nothing in this part shall be construed 
as altering or affecting any other authority, process, regulation, 
investigation, enforcement measure, or review provided by or 
established under any other provision of federal law, including the 
International Emergency Economic Powers Act (50 U.S.C. 1701-1706), or 
any other authority of the President or the Congress under the 
Constitution of the United States.


Sec.  801.103  Applicability rule.

    (a) Except as provided in paragraph (b) of this section and 
otherwise in this part, the regulations in this part apply from the 
pilot program effective date.
    (b) The regulations in this part do not apply to any transaction 
for which:
    (1) The completion date is prior to the pilot program effective 
date; or
    (2) The following has occurred before October 11, 2018:
    (i) The parties to the transaction have executed a binding written 
agreement or other document establishing the material terms of the 
transaction;
    (ii) A party has made a public offer to shareholders to buy shares 
of a pilot program U.S. business; or
    (iii) A shareholder has solicited proxies in connection with an 
election of the board of directors of a pilot program U.S. business or 
has requested the conversion of convertible voting securities.

Subpart B--Definitions


Sec.  801.201  General.

    Unless otherwise indicated, terms used in the regulations in this 
part that are defined in Sec. Sec.  800.201 through 800.228 of this 
chapter have the meanings set forth therein.


Sec.  801.202  Completion date.

    The term completion date means, with respect to a transaction, the 
date upon which an ownership interest, including a contingent equity 
interest, is conveyed, assigned, delivered, or otherwise transferred to 
a person, or a change in rights occurs.

[[Page 51328]]

Sec.  801.203  Contingent equity interest.

    The term contingent equity interest means a financial instrument 
that currently does not entitle its owner or holder to voting rights 
but is convertible into an equity interest with voting rights.


Sec.  801.204   Critical technologies.

    The term critical technologies means the following:
    (a) Defense articles or defense services included on the United 
States Munitions List set forth in the International Traffic in Arms 
Regulations (ITAR) (22 CFR parts 120-130).
    (b) Items included on the Commerce Control List set forth in 
Supplement No. 1 to part 774 of the Export Administration Regulations 
(EAR) (15 CFR parts 730-774) and controlled:
    (1) Pursuant to multilateral regimes, including for reasons 
relating to national security, chemical and biological weapons 
proliferation, nuclear nonproliferation, or missile technology; or
    (2) For reasons relating to regional stability or surreptitious 
listening.
    (c) Specially designed and prepared nuclear equipment, parts and 
components, materials, software, and technology covered by 10 CFR part 
810 (relating to assistance to foreign atomic energy activities).
    (d) Nuclear facilities, equipment, and material covered by 10 CFR 
part 110 (relating to export and import of nuclear equipment and 
material).
    (e) Select agents and toxins covered by 7 CFR part 331, 9 CFR part 
121, or 42 CFR part 73.
    (f) Emerging and foundational technologies controlled pursuant to 
section 1758 of the Export Control Reform Act of 2018.


Sec.  801.205   FIRRMA.

    The term FIRRMA means the Foreign Investment Risk Review 
Modernization Act of 2018, Subtitle A of Title XVII of Public Law 115-
232 (Aug. 13, 2018).


Sec.  801.206   Investment.

    The term investment means the acquisition of equity interest, 
including contingent equity interest.


Sec.  801.207  Investment fund.

    The term investment fund means any entity that is an ``investment 
company,'' as defined in section 3(a) of the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.), or would be an ``investment company'' 
but for one or more of the exemptions provided in section 3(b) or 3(c) 
thereunder.


Sec.  801.208   Material nonpublic technical information.

    (a) The term material nonpublic technical information means 
information that is not available in the public domain, and is 
necessary to design, fabricate, develop, test, produce, or manufacture 
critical technologies, including processes, techniques, or methods.
    (b) The term material nonpublic technical information does not 
include financial information regarding the performance of an entity.


Sec.  801.209   Pilot program covered investment.

    The term pilot program covered investment means an investment, 
direct or indirect, by a foreign person in an unaffiliated pilot 
program U.S. business that could not result in control by a foreign 
person of a pilot program U.S. business and that affords the foreign 
person:
    (a) Access to any material nonpublic technical information in the 
possession of the pilot program U.S. business;
    (b) Membership or observer rights on the board of directors or 
equivalent governing body of the pilot program U.S. business or the 
right to nominate an individual to a position on the board of directors 
or equivalent governing body of the pilot program U.S. business; or
    (c) Any involvement, other than through voting of shares, in 
substantive decisionmaking of the pilot program U.S. business regarding 
the use, development, acquisition, or release of critical technology.


Sec.  801.210   Pilot program covered transaction.

    The term pilot program covered transaction means:
    (a) Any pilot program covered investment; or
    (b) Any transaction by or with any foreign person that could result 
in foreign control of any pilot program U.S. business, including such a 
transaction carried out through a joint venture.


Sec.  801.211   Pilot program effective date.

    The term pilot program effective date means November 10, 2018.


Sec.  801.212  Pilot program industry.

    The term pilot program industry means any industry identified in 
Annex A to part 801 by reference to the North American Industry 
Classification System (NAICS).


Sec.  801.213  Pilot program U.S. business.

    The term pilot program U.S. business means any U.S. business that 
produces, designs, tests, manufactures, fabricates, or develops a 
critical technology that is:
    (a) Utilized in connection with the U.S. business's activity in one 
or more pilot program industries; or
    (b) Designed by the U.S. business specifically for use in one or 
more pilot program industries.


Sec.  801.214   Unaffiliated pilot program U.S. business.

    The term unaffiliated pilot program U.S. business means, with 
respect to a foreign person, a pilot program U.S. business in which 
that foreign person does not directly hold more than fifty percent of 
the outstanding voting interest or have the right to appoint more than 
half of the members of the board of directors or equivalent governing 
body.

Subpart C--Pilot Program Covered Transactions


Sec.  801.301   Control.

    For the sole purpose of determining whether a transaction could 
result in control of a pilot program U.S. business by a foreign person, 
the provisions set forth in subpart C of this part (excluding Sec.  
800.302(b) of this chapter and the examples thereunder) regarding 
covered transactions shall apply to any pilot program covered 
transaction declared to the Committee pursuant to Sec.  801.401 or 
notified to the Committee pursuant to Sec.  801.501.


Sec.  801.302  Transactions that are pilot program covered 
transactions.

    Transactions that are pilot program covered transactions include, 
without limitation:
    (a) A transaction that meets the requirements of Sec.  801.209, 
irrespective of the percentage of voting interest acquired.

    Example 1. Corporation A, a foreign person, proposes to acquire 
a four percent, non-controlling equity interest in Corporation B. 
Corporation B is a U.S. business that manufactures a critical 
technology as part of its business in a pilot program industry. 
Corporation B is therefore a pilot program U.S. business. Pursuant 
to the terms of the investment, a designee of Corporation A will 
have the right to observe the meetings of the board of directors of 
Corporation B. The proposed transaction is a pilot program covered 
investment and therefore a pilot program covered transaction.

    Example 2. Corporation A, a foreign person, proposes to acquire 
a four percent, non-controlling equity interest in Corporation B, a 
pilot program U.S. business as described above. Pursuant to the 
terms of the investment, Corporation A has approval rights with 
respect to Corporation B's licensing of a critical technology to 
third parties. Corporation A is therefore involved

[[Page 51329]]

in substantive decisionmaking with respect to Corporation B and the 
proposed transaction is a pilot program covered investment and a 
pilot program covered transaction.

    (b) A transaction that meets the requirements of Sec.  801.209, 
irrespective of the fact that the Committee concluded all action under 
section 721 for a previous pilot program covered investment by the same 
foreign person in the same pilot program U.S. business, where such 
transaction involves the acquisition of access or rights described by 
Sec.  801.209 in addition to those notified to the Committee in the 
transaction for which the Committee previously concluded action.

    Example. The Committee concludes all action under section 721 
with respect to a pilot program covered investment by Corporation A, 
a foreign person, in which Corporation A acquires a four percent, 
non-controlling equity interest with board observer rights in 
Corporation B, a pilot program U.S. business. One year later, 
Corporation A proposes to acquire an additional five percent equity 
interest in Corporation B, resulting in Corporation A holding a nine 
percent, non-controlling equity interest in Corporation B. Pursuant 
to the terms of the additional investment, Corporation A will be 
provided access to material nonpublic technical information in the 
possession of Corporation B to which Corporation A did not 
previously have access. The proposed transaction is a pilot program 
covered investment and therefore a pilot program covered transaction 
because the transaction involves both an acquisition of an equity 
interest in a pilot program U.S. business and a new right to access 
material nonpublic technical information.

    (c) A transaction that meets the requirements of Sec.  801.209, 
irrespective of the fact that the critical technology produced, 
designed, tested, manufactured, fabricated, or developed by the pilot 
program U.S. business became controlled pursuant to section 1758 of the 
Export Control Reform Act of 2018 after the pilot program effective 
date, unless any of the criteria set forth in paragraphs (b)(2)(i) 
through (b)(2)(iii) of Sec.  801.103 is satisfied with respect to the 
transaction prior to the critical technology becoming controlled 
pursuant to section 1758 of the Export Control Reform Act of 2018.

    Example. Corporation A, a foreign person, has executed a written 
agreement establishing the material terms of a proposed non-
controlling investment in Corporation B, a pilot program U.S. 
business. The proposed investment will afford Corporation A access 
to material nonpublic technical information in the possession of 
Corporation B. The only controlled technology produced, designed, 
tested, manufactured, fabricated, or developed by Corporation B 
became controlled pursuant to section 1758 of the Export Control 
Reform Act of 2018 after the pilot program effective date but prior 
to the date upon which the written agreement establishing the 
material terms of the investment was executed. The proposed 
transaction is a pilot program covered investment and therefore a 
pilot program covered transaction.

    (d) A transaction by or with any foreign person that could result 
in foreign control of any pilot program U.S. business.

    Example. Corporation A, a foreign person, acquires a 40 percent 
interest and the ability to determine important matters with respect 
to Corporation B, a U.S. pilot program business. The proposed 
transaction is a pilot program covered transaction.


Sec.  801.303  Transactions that are not pilot program covered 
transactions.

    Transactions that are not pilot program covered transactions 
include, without limitation:
    (a) An investment by a foreign person in a U.S. business that 
manufactures a technology that it utilizes in connection with its 
activity in one or more pilot program industries, but does not produce, 
design, test, manufacture, fabricate, or develop one or more critical 
technologies.

    Example. Corporation A, a foreign person, proposes to acquire a 
four percent, non-controlling equity interest in Corporation B, a 
U.S. business that operates in a pilot program industry. Pursuant to 
the terms of the investment, a designee of Corporation A will have 
the right to observe the meetings of the board of directors of 
Corporation B. Corporation B does not produce, design, test, 
manufacture, fabricate, or develop any critical technology. Assuming 
no other relevant facts, the proposed transaction is not a pilot 
program covered transaction.

    (b) An investment by a foreign person in a pilot program U.S. 
business that does not afford the foreign person any of the rights 
specified in paragraphs (a), (b), or (c) of Sec.  801.209 or any 
control rights.

    Example. The Committee concluded all action under section 721 
with respect to a pilot program covered transaction in which 
Corporation A, a foreign person, acquired a four percent, non-
controlling equity interest with board observer rights in 
Corporation B, a pilot program U.S. business. One year later, 
Corporation A proposes to acquire an additional five percent equity 
interest in Corporation B, which would result in Corporation A 
holding a nine percent, non-controlling equity interest in 
Corporation B. The proposed investment does not afford Corporation A 
any additional rights with respect to Corporation B, including the 
rights specified in Sec.  801.209. Assuming no other relevant facts, 
the proposed transaction is not a pilot program covered transaction.

    (c) A transaction that results or could result in control by a 
foreign person of a U.S. business that is not a pilot program U.S. 
business.

    Example. Corporation A, a foreign person, proposes to purchase 
all of the shares of Corporation B, which is a U.S. business that 
operates in a pilot program industry but does not produce, design, 
test, manufacture, fabricate, or develop any critical technology. As 
the sole owner, Corporation A will have the right to elect directors 
and appoint other primary officers of Corporation B. Assuming no 
other relevant facts, the proposed transaction is not a pilot 
program covered transaction. It is, however, a covered transaction 
(see Sec.  800.301 of this chapter).


Sec.  801.304  Treatment of certain investment fund investments.

    (a) An indirect investment by a foreign person in a pilot program 
U.S. business through an investment fund that affords the foreign 
person (or a designee of the foreign person) membership as a limited 
partner or equivalent on an advisory board or a committee of the fund 
shall not be considered a pilot program covered transaction with 
respect to the foreign person if:
    (1) The fund is managed exclusively by a general partner, a 
managing member, or an equivalent;
    (2) The foreign person is not the general partner, managing member, 
or equivalent;
    (3) The advisory board or committee does not have the ability to 
approve, disapprove, or otherwise control:
    (i) Investment decisions of the investment fund; or
    (ii) Decisions made by the general partner, managing member, or 
equivalent related to entities in which the investment fund is 
invested;
    (4) The foreign person does not otherwise have the ability to 
control the investment fund, including the authority:
    (i) To approve, disapprove, or otherwise control investment 
decisions of the investment fund;
    (ii) To 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) To unilaterally dismiss, prevent the dismissal of, select, or 
determine the compensation of the general partner, managing member, or 
equivalent;
    (5) The foreign person does not have access to material nonpublic 
technical information as a result of its participation on the advisory 
board or committee; and
    (6) The investment otherwise meets the requirements of paragraph 
(4)(D) of subsection (a) of section 721 made effective by part 801.
    (b) For the purposes of paragraphs (a)(3) and (4), and except as 
provided in

[[Page 51330]]

paragraph (c) of this section, a waiver of a potential conflict of 
interest, a waiver of an allocation limitation, or a similar activity, 
applicable to a transaction pursuant to the terms of an agreement 
governing an investment fund shall not be considered to constitute 
control of investment decisions of the investment fund or decisions 
relating to entities in which the investment fund is invested.
    (c) In extraordinary circumstances, the Committee may consider the 
waiver of a potential conflict of interest, the waiver of an allocation 
limitation, or a similar activity, applicable to a transaction pursuant 
to the terms of an agreement governing an investment fund, to 
constitute control of investment decisions of the investment fund or 
decisions relating to entities in which the investment fund is 
invested.

    Example 1. Corporation A, a foreign person, makes an investment 
in an investment fund as a limited partner. The investment confers 
membership on an advisory board of the investment fund. The 
investment fund holds 100 percent of the ownership interests in a 
pilot program U.S. business. Corporation A will have the right to 
approve decisions made by the general partner with respect to the 
use and development of the critical technologies produced by the 
pilot program U.S. business. This transaction is a pilot program 
covered transaction.
    Example 2. Corporation A, a foreign person, makes an investment 
in an investment fund as a limited partner. The investment confers 
membership on an advisory board of the investment fund. The 
investment fund holds 100 percent of the ownership interests in a 
pilot program U.S. business. Corporation A is not the general 
partner that wholly manages the investment fund. Corporation A lacks 
any ability to control the investment fund or its decisions. As a 
member of the advisory board, Corporation A has the right to vote on 
the compensation of the general partner and the right to vote on the 
dismissal of the general partner for cause, but does not have the 
power to determine either of these matters unilaterally. Assuming no 
other relevant facts, this transaction is not a pilot program 
covered transaction with respect to Corporation A.


Sec.  801.305  Exception for air carriers.

    No investment involving an air carrier, as defined in section 
40102(a)(2) of title 49, United States Code, that holds a certificate 
issued under section 41102 of that title shall be a pilot program 
covered transaction.


Sec.  801.306  Timing rule for contingent equity interests.

    The provisions set forth in Sec.  800.304 of this chapter regarding 
convertible voting instruments shall apply to contingent equity 
interests.

Subpart D--Mandatory Declarations Under the Pilot Program


Sec.  801.401   Mandatory declarations under the pilot program.

    (a) Except as provided in paragraph (b) of this section, the 
parties to a pilot program covered transaction shall submit to the 
Committee a declaration with information regarding the transaction in 
accordance with Sec.  801.402.
    (b) Notwithstanding paragraph (a) of this section, parties to a 
pilot program covered transaction may elect to submit a written notice 
pursuant to subpart E of this part regarding the transaction instead of 
a declaration. Parties to a pilot program covered transaction that have 
filed with the Committee a written notice regarding a transaction 
pursuant to Sec.  801.501 may not submit to the Committee a declaration 
regarding the same transaction or a substantially similar transaction 
without the approval of the Staff Chairperson.
    (c) Parties shall submit to the Committee the declaration required 
pursuant to paragraph (a) of this section, or a written notice pursuant 
to paragraph (b) of this section, no later than:
    (1) November 10, 2018, or promptly thereafter, if the completion 
date of the transaction is between November 10, 2018 and December 25, 
2018; or
    (2) 45 days before the completion date of the transaction, if the 
completion date of the transaction is after December 25, 2018.
    (d) Section 800.204(e) of this chapter shall not apply with respect 
to any pilot program covered transaction for which the Committee 
completes all action under section 721 pursuant to Sec.  801.407(a)(4).


Sec.  801.402  Procedures for declarations under the pilot program.

    (a) A party or parties shall submit a declaration of a pilot 
program covered transaction pursuant to Sec.  801.401 by submitting 
electronically the information set out in Sec.  801.403, including the 
certifications required thereunder, to the Staff Chairperson in 
accordance with the submission instructions on the Committee's section 
of the Department of the Treasury website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (b) No communications other than those described in paragraph (a) 
of this section shall constitute the submission of a declaration for 
purposes of section 721.
    (c) Information and other documentary material submitted to the 
Committee pursuant to this section shall be considered to have been 
filed with the President or the President's designee for purposes of 
section 721(c).
    (d) Persons filing a declaration shall, during the time that the 
matter is pending before the Committee, promptly advise the Staff 
Chairperson of any material changes in plans, facts, or circumstances 
addressed in the declaration, and any material change in information 
required to be provided to the Committee under Sec.  801.406(a)(3). 
Such changes shall become part of the declaration filed by such persons 
under Sec.  801.401, and the certification required under Sec.  
801.405(c) shall apply to such changes.


Sec.  801.403   Contents of declarations under the pilot program.

    (a) The party or parties submitting a declaration of a pilot 
program covered transaction pursuant to Sec.  801.401 shall provide the 
information set out in this section, which must be accurate and 
complete with respect to all parties and to the transaction. (See also 
paragraphs (d) and (e) of this section.)
    (b) If fewer than all the parties to a transaction submit a 
declaration, the Committee may, at its discretion, request that the 
parties to the transaction file a written notice of the transaction 
under Sec.  801.501, if the Staff Chairperson determines that the 
information provided by the submitting party or parties in the 
declaration is insufficient for the Committee to assess the 
transaction.
    (c) Subject to paragraph (e) of this section, a declaration 
submitted pursuant to Sec.  801.401 shall describe or provide, as 
applicable:
    (1) The name of the foreign person(s) and pilot program U.S. 
business(es) that are parties to, or, in applicable cases, the subject 
of the transaction, as well as the name, telephone number, and email 
address of the primary point of contact for each party.
    (2) The following information regarding the transaction in 
question, including:
    (i) A brief description of the nature of the transaction and its 
structure (e.g., share purchase, merger, asset purchase);
    (ii) The percentage of voting interest acquired;
    (iii) The percentage of economic interest acquired;
    (iv) Whether the pilot program U.S. business has multiple classes 
of ownership;
    (v) The total transaction value in U.S. dollars;
    (vi) The expected closing date; and
    (vii) All sources of financing for the transaction.

[[Page 51331]]

    (3) The following:
    (i) A statement as to whether a party to the transaction is 
stipulating that the transaction is a pilot program covered transaction 
and a description of the basis for the stipulation; and
    (ii) A statement as to whether a party to the transaction is 
stipulating that the transaction could result in control of a pilot 
program U.S. business by a foreign person or that the transaction is a 
foreign government-controlled transaction and, in each case, a 
description of the basis for the stipulation.
    (4) A statement as to whether the foreign person will acquire any 
of the following in the pilot program U.S. business:
    (i) Access to any material nonpublic technical information in the 
possession of the pilot program U.S. business, and if so, a brief 
explanation of the type of access and type of information;
    (ii) Membership, observer rights, or nomination rights as set forth 
in Sec.  801.209(b), and if so, a statement as to the composition of 
the board or other body both before and after the completion date of 
the transaction;
    (iii) Any involvement, other than through voting shares, in 
substantive decisionmaking of the pilot program U.S. business regarding 
the use, development, acquisition, or release of critical technologies 
and if so, a statement as to the involvement in such substantive 
decisionmaking; or
    (iv) Any rights that could result in the foreign person acquiring 
control of the pilot program U.S. business and, if so, a brief 
explanation of these rights.
    (5) The following information regarding the pilot program U.S. 
business:
    (i) Website address;
    (ii) Principal place of business;
    (iii) Place of incorporation or organization; and
    (iv) A list of the addresses or geographic coordinates (to at least 
the fourth decimal) of all locations of the pilot program U.S. 
business, including the pilot program U.S. business's headquarters, 
facilities, and operating locations.
    (6) With respect to the pilot program U.S. business that is the 
subject of the transaction and any entity of which that pilot program 
U.S. business is a parent, a brief summary of their respective business 
activities, as, for example, set forth in annual reports, and the 
product or service categories of each, including the applicable six-
digit NAICS codes.
    (7) A statement as to which critical technology or critical 
technologies the pilot program U.S. business and its subsidiaries 
produce, design, test, manufacture, fabricate, or develop, and the 
relevant six-digit NAICS code or codes, as applicable under Sec. Sec.  
801.212 and 801.213, for each critical technology listed. This 
statement shall include a description (which may group similar items 
into general product categories) of the items and a list of any 
relevant Export Control Classification Numbers under the EAR and United 
States Munitions List categories under the ITAR, and, if applicable, 
identify whether any are specially designed and prepared nuclear 
equipment, parts and components, materials, software, and technology 
covered by 10 CFR part 810, nuclear facilities, equipment, and 
materials covered by 10 CFR part 110 or select agents and toxins 
covered by 7 CFR part 331, 9 CFR part 121 or 42 CFR part 73.
    (8) A statement as to whether the pilot program U.S. business has 
any contracts (including any subcontracts, if known) that are currently 
in effect or were in effect within the past three years with any U.S. 
Government agency or component, or in the past 10 years if the contract 
included access to personally identifiable information of U.S. 
Government personnel.
    (9) A statement as to whether the pilot program U.S. business has 
any contracts (including any subcontracts, if known) that are currently 
in effect or were in effect within the past five years involving 
information, technology, or data that is classified under Executive 
Order 12958, as amended.
    (10) A statement as to whether the pilot program U.S. business has 
received any grant or other funding from the Department of Defense or 
the Department of Energy, or participated in or collaborated on any 
defense or energy program or product involving one or more critical 
technologies or pilot program industries within the past five years.
    (11) A statement as to whether the pilot program U.S. business 
participated in a Defense Production Act Title III Program (50 U.S.C. 
4501 et seq.) within the past seven years.
    (12) A statement as to whether the pilot program U.S. business has 
received or placed priority rated contracts or orders under the Defense 
Priorities and Allocations System (DPAS) regulation (15 CFR part 700), 
and the level(s) of priority of such contracts or orders (DX or DO) 
within the past three years.
    (13) The name of the ultimate parent of the foreign person.
    (14) A complete organizational chart, including, without 
limitation, information that identifies the name, principal place of 
business and place of incorporation or other legal organization (for 
entities), and nationality (for individuals) for each of the following:
    (i) The immediate parent, the ultimate parent, and each 
intermediate parent, if any, of each foreign person that is a party to 
the transaction;
    (ii) Where the ultimate parent is a private company, the ultimate 
owner(s) of such parent; and
    (iii) Where the ultimate parent is a public company, any 
shareholder with an interest of greater than five percent in such 
parent.
    (15) Information regarding all foreign government ownership in the 
foreign person's ownership structure, including nationality and 
percentage of ownership, as well as any rights that a foreign 
government holds, directly or indirectly, with respect to the foreign 
person.
    (16) With respect to the foreign person that is party to the 
transaction and any of its parents, as applicable, a brief summary of 
their respective business activities, as, for example, set forth in 
annual reports.
    (17) A statement as to whether any party to the transaction has 
been party to another transaction previously notified or submitted to 
the Committee, and the case number assigned by the Committee regarding 
such transaction(s).
    (18) A statement (including relevant jurisdiction and criminal case 
law number or legal citation) as to whether the pilot program U.S. 
business, the foreign person, or any parent or subsidiary of the 
foreign person has been convicted in the last ten years of a crime in 
any jurisdiction.
    (d) Each party submitting a declaration shall provide a 
certification of the information contained in the declaration 
consistent with Sec.  800.202 of this chapter. A sample certification 
may be found on the Committee's section of the Department of the 
Treasury website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (e) A party that offers a stipulation pursuant to paragraph (c)(3) 
of this section acknowledges that the Committee and the President are 
entitled to rely on such stipulation in determining whether the 
transaction is a pilot program covered transaction, a transaction that 
could result in control of a pilot program U.S. business by a foreign 
person, or a foreign government-controlled transaction for the purposes 
of section 721 and all authorities thereunder, and waives the right to 
challenge any such determination. Neither the Committee nor the 
President

[[Page 51332]]

is bound by any such stipulation, nor does any such stipulation limit 
the ability of the Committee or the President to act on any authority 
provided under section 721 with respect to any pilot program covered 
transaction.


Sec.  801.404  Beginning of thirty-day period.

    (a) Upon receipt of a declaration submitted pursuant to Sec.  
801.401, the Staff Chairperson shall promptly inspect the declaration 
and shall promptly notify in writing all parties to a transaction that 
have submitted a declaration that:
    (1) The Staff Chairperson has accepted the declaration and 
circulated the declaration to the Committee, and the date on which the 
assessment described in paragraph (b) of this section begins; or
    (2) The Staff Chairperson has determined not to accept the 
declaration and circulate the declaration to the Committee because the 
declaration is incomplete, and provide an explanation of the material 
respects in which the declaration is incomplete.
    (b) A thirty-day period for assessment of a pilot program covered 
transaction that is the subject of a declaration shall commence on the 
date on which the declaration is received by the Committee from the 
Staff Chairperson. Such period shall end no later than the thirtieth 
day after it has commenced, or if the thirtieth day is not a business 
day, no later than the next business day after the thirtieth day.


Sec.  801.405  General.

    (a) In assessing a pilot program covered transaction submitted 
pursuant to Sec.  801.401, the Committee should consider the factors 
specified in section 721(f) and, as appropriate, require parties to 
provide to the Committee the information necessary to consider such 
factors. The Committee's assessment shall examine, as appropriate, 
whether:
    (1) The transaction constitutes a pilot program covered transaction 
and whether it could result in foreign government control over a pilot 
program U.S. business;
    (2) There is credible evidence to support a belief that any foreign 
person exercising control of the pilot program U.S. business or 
exercising rights related to a pilot program covered investment might 
take action that threatens to impair the national security of the 
United States; and
    (3) Provisions of law, other than section 721 and the International 
Emergency Economic Powers Act, provide adequate and appropriate 
authority to protect the national security of the United States with 
respect to the risk arising from the pilot program covered transaction.
    (b) During the thirty-day assessment period, the Staff Chairperson 
may invite the parties to a pilot program covered transaction to attend 
a meeting with the Committee staff to discuss and clarify issues 
pertaining to the transaction.
    (c) If the Committee notifies the parties to a transaction that 
have submitted a declaration pursuant to Sec.  801.401 that the 
Committee intends to complete all action under section 721 with respect 
to that transaction, each party that has submitted additional 
information subsequent to the original declaration shall file a 
certification as described in Sec.  800.202 of this chapter. A sample 
certification may be found on the Committee's section of the Department 
of the Treasury website at https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.
    (d) If a party fails to provide the certification required under 
paragraph (c) of this section, the Committee may, at its discretion, 
take any of the actions under Sec.  801.407(a).


Sec.  801.406  Rejection, disposition, or withdrawal of declarations.

    (a) The Committee, acting through the Staff Chairperson, may:
    (1) Reject any declaration that does not comply with Sec.  801.403 
and so inform the parties promptly in writing;
    (2) Reject any declaration at any time, and so inform the parties 
promptly in writing, if, after the declaration has been submitted and 
before the Committee has taken one of the actions specified in Sec.  
801.407(a):
    (i) There is a material change in the pilot program covered 
transaction as to which a declaration has been submitted; or
    (ii) Information comes to light that contradicts material 
information provided in the declaration by the party (or parties); or
    (3) Reject any declaration at any time after the declaration has 
been submitted, and so inform the parties promptly in writing, if the 
party (or parties) that submitted the declaration does not provide 
follow-up information requested by the Staff Chairperson within two 
business days of the request, or within a longer time frame if the 
party (or parties) so request in writing and the Staff Chairperson 
grants that request in writing.
    (b) The Staff Chairperson shall notify the parties that submitted a 
declaration when the Committee has found that the transaction that is 
the subject of a declaration is not a pilot program covered 
transaction.
    (c) Parties to a transaction that have submitted a declaration 
pursuant to Sec.  801.401(a) may request in writing, at any time prior 
to the Committee taking action under Sec.  801.407(a), that such 
declaration be withdrawn. Such request shall be directed to the Staff 
Chairperson and shall state the reasons why the request is being made 
and state whether the transaction that is the subject of the 
declaration is being fully and permanently abandoned. An official of 
the Department of the Treasury will promptly advise the parties to the 
transaction in writing of the Committee's decision.
    (d) The Committee may not request or recommend that a declaration 
be withdrawn and refiled, except to permit parties to a pilot program 
covered transaction to correct material errors or omissions in the 
declaration submitted with respect to that pilot program covered 
transaction.
    (e) A party (or parties) may not submit more than one declaration 
for the same or a substantially similar transaction without approval 
from the Staff Chairperson.


Sec.  801.407  Committee actions.

    (a) Upon receiving a declaration submitted pursuant to Sec.  
801.401 with respect to a pilot program covered transaction, the 
Committee may, at the discretion of the Committee:
    (1) Request that the parties to the transaction file a written 
notice pursuant to subpart E;
    (2) Inform the parties to the transaction that the Committee is not 
able to complete action under section 721 with respect to the 
transaction on the basis of the declaration and that the parties may 
file a written notice under part 800 to seek written notification from 
the Committee that the Committee has concluded all action under section 
721 with respect to the transaction;
    (3) Initiate a unilateral review of the transaction under Sec.  
801.504; or
    (4) Notify the parties in writing that the Committee has concluded 
all action under section 721 with respect to the transaction.
    (b) The Committee shall take action under paragraph (a) within the 
time period set forth in Sec.  801.404(b).


Sec.  801.408  Confidentiality.

    The provisions of Sec.  800.702 of this chapter shall apply to 
information submitted to the Committee through a declaration.


Sec.  801.409  Penalties.

    (a) Any person who fails to comply with the requirements of Sec.  
801.401 may be liable to the United States for a civil

[[Page 51333]]

penalty not to exceed the value of the pilot program covered 
transaction.
    (b) The provisions of Sec.  800.801(a), (d), (e), (f), (g), and (h) 
shall apply to a declaration submitted to the Committee pursuant to 
Sec.  801.401.

Subpart E--Notice of Pilot Program Covered Transaction


Sec.  801.501   Notice of pilot program covered transactions.

    Parties to a pilot program covered transaction may notify the 
Committee of the transaction by filing with the Committee a written 
notice pursuant to Sec.  800.401(a) of this chapter and this subpart.


Sec.  801.502  Applicability of part 800.

    (a) The provisions set forth in Subpart D--Notice; Subpart E--
Committee Procedures: Review and Investigation; Subpart F--Finality of 
Action; Subpart G--Provision and Handling of Information; and Subpart 
H--Penalties of Part 800 regarding covered transactions shall apply to 
any pilot program covered transaction notified to the Committee.
    (b) Section 800.204(e) shall not apply with respect to any pilot 
program covered investment for which the Committee completes all action 
under section 721 pursuant to Sec.  800.504 or Sec.  800.506(d) of this 
chapter.


Sec.  801.503  Additional contents of written notice.

    (a) In addition to the information required pursuant to Sec.  
800.402(c), a written notice of a pilot program covered transaction 
filed pursuant to Sec.  800.401(a) of this chapter shall include the 
following information:
    (1) A statement as to whether a party to the transaction is 
stipulating that the transaction is a pilot program covered transaction 
and a description of the basis for the stipulation;
    (2) A statement as to whether the foreign person will acquire any 
of the following in the pilot program U.S. business:
    (i) Access to any material nonpublic technical information in the 
possession of the pilot program U.S. business, and if so, a brief 
explanation of the type of access and type of information;
    (ii) Membership, observer rights, or nomination rights as set forth 
in Sec.  801.209(b), and if so, a statement as to the composition of 
the board or other body both before and after the transaction; or
    (iii) Any involvement, other than through voting shares, in 
substantive decisionmaking of the United States business regarding the 
use, development, acquisition, or release of critical technologies and 
if so, a statement as to the involvement in such substantive 
decisionmaking; and
    (3) With respect to the pilot program U.S. business that is the 
subject of the transaction, a statement as to which critical technology 
or critical technologies the pilot program U.S. business and its 
subsidiaries produce, design, test, manufacture, fabricate, or develop, 
and the relevant six-digit NAICS code, as applicable under Sec. Sec.  
801.212 and 801.213, for each critical technology listed. This 
statement shall include a description (which may group similar items 
into general product categories) of the items and a list of any 
relevant Export Control Classification Numbers under the EAR and United 
States Munitions List categories under the ITAR, and, if applicable, 
identify whether any are specially designed and prepared nuclear 
equipment, parts and components, materials, software, and technology 
covered by 10 CFR part 810, nuclear facilities, equipment, and 
materials covered by 10 CFR part 110 or select agents and toxins 
covered by 7 CFR part 331, 9 CFR part 121 or 42 CFR part 73.
    (b) If the party (or parties) stipulate pursuant to Sec.  
800.402(n) of this chapter that the pilot program covered transaction 
that is the subject of the written notice could result in a covered 
transaction under part 800, the party (or parties) are not required to 
include in the written notice the information required by this section.
    (c) A party that offers a stipulation acknowledges that the 
Committee and the President are entitled to rely on such stipulation in 
determining whether the transaction is a pilot program covered 
transaction, a transaction that could result in control of a pilot 
program U.S. business by a foreign person, or a foreign government-
controlled transaction for the purposes of section 721 and all 
authorities thereunder, and waives the right to challenge any such 
determination. Neither the Committee nor the President is bound by any 
such stipulation, nor does any such stipulation limit the ability of 
the Committee or the President to act on any authority provided under 
section 721 with respect to any pilot program covered transaction.


Sec.  801.504  Agency notice of pilot program covered transactions.

    Any member of the Committee, or his designee at or above the Under 
Secretary or equivalent level, may file an agency notice to the 
Committee through the Staff Chairperson regarding a pilot program 
covered transaction for which no declaration has been submitted 
pursuant to Sec.  801.401 and no written notice has been filed under 
Sec.  801.501(a) if that member has reason to believe that the 
transaction is a pilot program covered transaction and may raise 
national security considerations. Notices filed under this paragraph 
are deemed accepted upon their receipt by the Staff Chairperson.

Subpart F--Implementation of Certain Authority Provided In FIRRMA


Sec.  801.601  Implementation of certain authority regarding covered 
transactions.

    Paragraphs (4)(A)(ii) (solely with respect to clauses (iii)(II) and 
(iv)(II) (solely with respect to an investment described in section 
721(a)(4)(B)(iii)(II)) of subparagraph (B)), (4)(B)(iii)(II), 
(4)(B)(iv)(II) (solely with respect to an investment described in 
section 721(a)(4)(B)(iii)(II)), (4)(D)(i)(I), 4(D)(i)(II), 
(4)(D)(i)(III)(bb), (4)(D)(ii)(I)(bb), (4)(D)(ii)(II), (4)(D)(iii)(I), 
(4)(D)(iv), and (4)(D)(v) of subsection (a) of section 721 shall take 
effect on the pilot program effective date solely with respect to any 
pilot program covered transaction. Paragraph (4)(A)(ii) (solely with 
respect to clauses (iv)(I) and (v) of subparagraph (B)) of subsection 
(a) of section 721 shall take effect on the pilot program effective 
date.


Sec.  801.602   Implementation of certain authority regarding mandatory 
declarations.

    Paragraphs (1)(C)(v)(I), (II), (III), (IV)(aa), (IV)(cc), (IV)(dd), 
(IV)(ee), (IV)(ff), and (IV)(gg) of subsection (b) of section 721 shall 
take effect on the pilot program effective date solely with respect to 
any pilot program covered transaction.

Annex A to Part 801--Industries

Aircraft Manufacturing
NAICS Code: 336411
Aircraft Engine and Engine Parts Manufacturing
NAICS Code: 336412
Alumina Refining and Primary Aluminum Production
NAICS Code: 331313
Ball and Roller Bearing Manufacturing
NAICS Code: 332991
Computer Storage Device Manufacturing
NAICS Code: 334112
Electronic Computer Manufacturing
NAICS Code: 334111
Guided Missile and Space Vehicle Manufacturing
NAICS Code: 336414
Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit 
Parts Manufacturing
NAICS Code: 336415
Military Armored Vehicle, Tank, and Tank Component Manufacturing
NAICS Code: 336992
Nuclear Electric Power Generation
NAICS Code: 221113

[[Page 51334]]

Optical Instrument and Lens Manufacturing
NAICS Code: 333314
Other Basic Inorganic Chemical Manufacturing
NAICS Code: 325180
Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment 
Manufacturing
NAICS Code: 336419
Petrochemical Manufacturing
NAICS Code: 325110
Powder Metallurgy Part Manufacturing
NAICS Code: 332117
Power, Distribution, and Specialty Transformer Manufacturing
NAICS Code: 335311
Primary Battery Manufacturing
NAICS Code: 335912
Radio and Television Broadcasting and Wireless Communications 
Equipment Manufacturing
NAICS Code: 334220
Research and Development in Nanotechnology
NAICS Code: 541713
Research and Development in Biotechnology (except Nanobiotechnology)
NAICS Code: 541714
Secondary Smelting and Alloying of Aluminum
NAICS Code: 331314
Search, Detection, Navigation, Guidance, Aeronautical, and Nautical 
System and Instrument Manufacturing
NAICS Code: 334511
Semiconductor and Related Device Manufacturing
NAICS Code: 334413
Semiconductor Machinery Manufacturing
NAICS Code: 333242
Storage Battery Manufacturing
NAICS Code: 335911
Telephone Apparatus Manufacturing
NAICS Code: 334210
Turbine and Turbine Generator Set Units Manufacturing
NAICS Code: 333611

    Dated: October 4, 2018.
Steven T. Mnuchin,
Secretary.
[FR Doc. 2018-22182 Filed 10-10-18; 8:45 am]
 BILLING CODE 4810-25-P



                                             51322            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             ■ a. In paragraph (a) remove ‘‘, after the                 (b) Require that the party or parties              submit comments electronically through
                                             effective date, intentionally or through                submit a written notice under clause (i)              the Federal government eRulemaking
                                             gross negligence,’’;                                    of section 721(b)(1)(C) with respect to a             Portal at https://www.regulations.gov.
                                             ■ b. Revise paragraph (b);                              covered transaction initiated after the               Electronic submission of comments
                                             ■ c. Redesignate paragraph (g) as                       date of the determination of                          allows the commenter maximum time to
                                             paragraph (h); and                                      noncompliance and before the date that                prepare and submit a comment, ensures
                                             ■ d. Add a new paragraph (g).                           is five years after the date of the                   timely receipt, and enables the
                                                The revision and addition read as                    determination to the Committee to                     Department to make them available to
                                             follows:                                                initiate a review of the transaction                  the public. Comments submitted
                                                                                                     under section 721(b); or                              electronically through the https://
                                             § 800.801   Penalties.                                     (c) Seek injunctive relief.                        www.regulations.gov website can be
                                             *      *     *    *     *                                 Dated: October 4, 2018.                             viewed by other commenters and
                                                (b) Any person who, after the effective              Heath Tarbert,                                        interested members of the public.
                                             date, violates, intentionally or through
                                                                                                     Assistant Secretary for International Markets.           • Mail: Send to U.S. Department of
                                             gross negligence, a material provision of                                                                     the Treasury, Attention: Thomas Feddo,
                                                                                                     [FR Doc. 2018–22187 Filed 10–10–18; 8:45 am]
                                             a mitigation agreement entered into                                                                           Deputy Assistant Secretary for
                                                                                                     BILLING CODE 4810–25–P
                                             before October 11, 2018, with, a material                                                                     Investment Security, 1500 Pennsylvania
                                             condition imposed before October 11,                                                                          Avenue NW, Washington, DC 20220.
                                             2018 by, or an order issued before                                                                               In general, Treasury will post all
                                                                                                     DEPARTMENT OF THE TREASURY
                                             October 11, 2018 by, the United States                                                                        comments to www.regulations.gov
                                             under section 721(l) may be liable to the               Office of Investment Security                         without change, including any business
                                             United States for a civil penalty not to                                                                      or personal information provided, such
                                             exceed $250,000 per violation or the                    31 CFR Part 801                                       as names, addresses, email addresses, or
                                             value of the transaction, whichever is                                                                        telephone numbers. All comments
                                             greater. Any person who violates a                      RIN 1505–AC61
                                                                                                                                                           received, including attachments and
                                             material provision of a mitigation                      Determination and Temporary                           other supporting material, will be part
                                             agreement entered into on or after                      Provisions Pertaining to a Pilot                      of the public record and subject to
                                             October 11, 2018, with, a material                      Program To Review Certain                             public disclosure. You should only
                                             condition imposed on or after October                   Transactions Involving Foreign                        submit information that you wish to
                                             11, 2018, by, or an order issued on or                  Persons and Critical Technologies                     make publicly available.
                                             after October 11, 2018, by, the United                                                                        FOR FURTHER INFORMATION CONTACT: For
                                             States under section 721(l) may be liable               AGENCY:  Office of Investment Security,               questions about this interim rule,
                                             to the United States for a civil penalty                Department of the Treasury.                           contact: Thomas Feddo, Deputy
                                             not to exceed $250,000 per violation or                 ACTION: Interim rule.                                 Assistant Secretary for Investment
                                             the value of the transaction, whichever                                                                       Security; Laura Black, Director of
                                             is greater.’’;                                          SUMMARY:    This interim rule sets forth
                                                                                                     the scope of, and procedures for, a pilot             Investment Security Policy and
                                             *      *     *    *     *                               program of the Committee on Foreign                   International Relations; Meena Sharma,
                                                (g) Section 1001 of title 18, United                 Investment in the United States (CFIUS,               Senior Policy Advisor; or Juliana
                                             States Code, shall apply to all                         or the Committee) under section 721 of                Gabrovsky, Policy Advisor, at U.S.
                                             information provided to the Committee                   the Defense Production Act of 1950, as                Department of the Treasury, 1500
                                             under section 721 by any party to a                     amended by the Foreign Investment                     Pennsylvania Avenue NW, Washington,
                                             covered transaction.                                    Risk Review Modernization Act of 2018                 DC 20220; telephone: (202) 622–3425;
                                             *      *     *    *     *                               (FIRRMA). Pursuant to section 1727(c)                 email: CFIUS.pilotprogram@
                                             ■ 25. Add § 800.802 to subpart H to read                of FIRRMA, this pilot program                         treasury.gov.
                                             as follows:                                             implements the authorities provided in                SUPPLEMENTARY INFORMATION:
                                                                                                     two sections of FIRRMA that did not
                                             § 800.802   Effect of lack of compliance.                                                                     I. Background
                                                                                                     take effect upon the statute’s enactment.
                                               If, at any time after a mitigation                    First, the pilot program expands the                     The Foreign Investment Risk Review
                                             agreement or condition is entered into                  scope of transactions subject to review               Modernization Act of 2018 (FIRRMA),
                                             or imposed under section 721(l), the                    by CFIUS to include certain investments               Subtitle A of Title XVII of Public Law
                                             Committee or lead agency, as the case                   involving foreign persons and critical                115–232 (Aug. 13, 2018), amended
                                             may be, determines that a party or                      technologies. Second, the pilot program               section 721 of the Defense Production
                                             parties to the agreement or condition are               makes effective FIRRMA’s mandatory                    Act of 1950 (DPA). Prior to the
                                             not in compliance with the terms of the                 declarations provision for all                        enactment of FIRRMA, section 721 of
                                             agreement or condition, the Committee                   transactions that fall within the specific            the DPA (section 721) authorized the
                                             or lead agency may, in addition to the                  scope of the pilot program. The pilot                 President, acting through the
                                             authority of the Committee to impose                    program is temporary and will end no                  Committee, to review mergers,
                                             penalties pursuant to section 721(h) and                later than March 5, 2020.                             acquisitions, and takeovers by or with
                                             to unilaterally initiate a review of any                DATES: Effective date: These provisions               any foreign person which could result
                                             covered transaction pursuant to section                 are effective November 10, 2018.                      in foreign control of any person engaged
                                             721(b)(1)(D)(iii):                                         Applicability date: See § 801.103.                 in interstate commerce in the United
khammond on DSK30JT082PROD with RULES




                                               (a) Negotiate a plan of action for the                   Comment date: Written comments                     States, to determine the effects of such
                                             party or parties to remediate the lack of               must be received by November 10, 2018.                transactions on the national security of
                                             compliance, with failure to abide by the                ADDRESSES: Written comments on the                    the United States. FIRRMA modified
                                             plan or otherwise remediate the lack of                 interim rule may be submitted through                 and broadened the authorities of the
                                             compliance serving as the basis for the                 one of two methods:                                   President and CFIUS under section 721
                                             Committee to find a material breach of                     • Electronic Submission of                         in several ways including, without
                                             the agreement or condition;                             Comments: Interested persons may                      limitation, by expanding the scope of


                                        VerDate Sep<11>2014   19:54 Oct 10, 2018   Jkt 247001   PO 00000   Frm 00022   Fmt 4700   Sfmt 4700   E:\FR\FM\11OCR1.SGM   11OCR1


                                                              Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations                                           51323

                                             foreign investments in the United States                certain interests in particular U.S.                       Third, consistent with the
                                             subject to national security review                     businesses, precisely because the                       requirement of section 709(b)(2)(C) of
                                             pursuant to section 721.                                acquisition of such interests could harm                the DPA, if the Committee intends to
                                                Section 1727(a) of FIRRMA made                       the strategic national security interests               make the provisions of this interim rule
                                             certain provisions of FIRRMA effective                  of the United States vis-à-vis other                   final, CFIUS will complete the process
                                             immediately upon enactment on August                    nations.                                                for public participation in rulemaking
                                             13, 2018. Section 1727(b) of FIRRMA,                       Notwithstanding that the rulemaking                  set forth in section 709 of the DPA in
                                             however, delayed the effectiveness of                   requirements of the APA do not apply                    conjunction with the issuance of a final
                                             any provision of FIRRMA not specified                   to this interim rule, Section 709(b)(1) of              rule.
                                             in section 1727(a) until the earlier of: (1)            the DPA provides that, except as                           Given the pilot program’s scope and
                                             The date that is 18 months after the date               otherwise provided in section 709, any                  objectives, considering and responding
                                             of enactment of FIRRMA (i.e., February                  regulation issued under the DPA must                    to public comments prior to the
                                             13, 2020); or (2) the date that is 30 days              be published in the Federal Register                    effectiveness of this interim rule would
                                             after publication in the Federal Register               and opportunity for public comment                      be inconsistent with U.S. foreign affairs
                                             of a determination by the chairperson of                must be provided for not less than 30                   interests because it would delay the
                                             CFIUS that the regulations,                             days, consistent with the requirements                  effective date of the pilot program,
                                             organizational structure, personnel, and                of 5 U.S.C. 553(b).                                     which could provide threat actors with
                                             other resources necessary to administer                    Section 709(b)(2) of the DPA (50                     time to harm U.S. national security by
                                             the new provisions are in place.                        U.S.C. 4559(b)(2)), however, provides                   quickly acquiring U.S. critical
                                                Notwithstanding section 1727(b),                     that the requirements of section                        technologies, contrary to the urgent and
                                             section 1727(c) of FIRRMA authorizes                    709(b)(1) may be waived if: (1) The                     compelling circumstances justifying this
                                             CFIUS to conduct one or more pilot                      officer authorized to issue the regulation              program, as discussed below.
                                             programs to implement any authority                     finds that urgent and compelling                           As a result, the Committee is
                                             provided pursuant to any provision of,                  circumstances make compliance with                      providing an immediate opportunity for
                                             or amendment made by, FIRRMA that                       such requirements impracticable; (2) the                public comment on this interim rule
                                             did not take effect immediately upon                    regulation is issued on a temporary                     and will consider and address such
                                             enactment. Section 1727(c) states that a                basis 1; and (3) the publication of such                comments in the process of
                                             pilot program may not commence until                    temporary regulation is accompanied by                  promulgating any final rule, consistent
                                             the date that is 30 days after publication              the finding made under (1) (and a brief                 with section 709(b)(3) of the DPA. This
                                             in the Federal Register of a                            statement of the reasons for such                       approach appropriately balances the
                                             determination by the chairperson of                     finding) and an opportunity for public                  urgency of the pilot program with the
                                             CFIUS of the scope of, and procedures                   comment is provided for not less than                   need for public participation in the
                                             for, the pilot program. This document                   30 days before any regulation becomes                   formulation of any final rule.
                                             and the interim rule set forth herein                   final.                                                  III. Urgent and Compelling
                                             constitute the required determination of                   The regulations set forth in this                    Circumstances for the Pilot Program
                                             the scope of, and procedures for, a                     document meet the three requirements
                                             CFIUS pilot program relating to critical                                                                           The passage of FIRRMA was based
                                                                                                     of section 709(b)(2) of the DPA for the
                                             technologies pursuant to section                                                                                upon concerns that, as noted at section
                                                                                                     reasons below, and therefore qualify for
                                             1727(c)(2) of FIRRMA.                                                                                           1702(b)(4) of FIRRMA, ‘‘the national
                                                                                                     waiver of the public comment
                                                                                                                                                             security landscape has shifted in recent
                                             II. Waiver of Public Comment                            requirement of section 709(b)(1) of the
                                                                                                                                                             years, and so has the nature of the
                                             Requirement for Temporary Provisions                    DPA.
                                                                                                        First, as required by section                        investments that pose the greatest
                                                The interim rule set forth in this                   709(b)(2)(A) of the DPA, and for the                    potential risk to national security. . . .’’
                                             document implements a pilot program,                                                                            FIRRMA provides CFIUS time to
                                                                                                     reasons described in part III, below, the
                                             pursuant to section 721, relating to                                                                            develop the resources and regulations
                                                                                                     Secretary of the Treasury finds, and the
                                             foreign investment into certain U.S.                                                                            necessary to administer all of FIRRMA’s
                                                                                                     Committee agrees, that urgent and
                                             businesses that produce, design, test,                                                                          provisions before the statute becomes
                                                                                                     compelling circumstances make
                                             manufacture, fabricate, or develop one                                                                          fully effective. Notwithstanding this,
                                                                                                     completion of the process for public
                                             or more critical technologies. Section                                                                          FIRRMA also provides the authority for
                                                                                                     participation in rulemaking set forth in
                                             709(a) of the DPA (50 U.S.C. 4559(a))                                                                           pilot programs and, in doing so,
                                                                                                     section 709 of the DPA impracticable
                                             provides that regulations issued under                                                                          recognizes the need to immediately
                                                                                                     prior to the effectiveness of this interim
                                             the DPA are not subject to the                                                                                  assess and address significant risks to
                                                                                                     rule.
                                             rulemaking requirements of the                             Second, pursuant to section 1727(c)(1)               national security posed by some foreign
                                             Administrative Procedure Act (APA).                     of FIRRMA, the authority for a pilot                    investments.
                                             Moreover, to the extent that the                                                                                   In order to be effective in identifying
                                                                                                     program is time limited to no more than
                                             rulemaking requirements of the APA                                                                              and addressing these national security
                                                                                                     570 days following the date of
                                             were determined to apply to this interim                                                                        risks, FIRRMA recognizes that there
                                                                                                     FIRRMA’s enactment, making any
                                             rule, the provisions of the APA                                                                                 may be circumstances in which the
                                                                                                     FIRRMA pilot program inherently
                                             requiring notice of proposed                                                                                    Committee deems it appropriate to
                                                                                                     temporary. Consistent with that
                                             rulemaking, opportunity for public                                                                              require mandatory declarations for
                                                                                                     limitation and the requirement of
                                             participation, and delay in effective date                                                                      specific types of transactions. This pilot
                                                                                                     section 709(b)(2)(B) of the DPA, these
                                             (5 U.S.C. 553), as well as the provisions                                                                       program establishes mandatory
                                                                                                     regulations are issued on a temporary
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                                             of Executive Order 13771, are                                                                                   declarations for certain transactions
                                                                                                     basis. Section 801.101 sets forth the
                                             inapplicable because this interim rule                                                                          involving investments by foreign
                                                                                                     duration of the pilot program
                                             involves a foreign affairs function of the                                                                      persons in certain U.S. businesses that
                                                                                                     regulations.
                                             United States. By its terms, the pilot                                                                          produce, design, test, manufacture,
                                             program to be implemented pursuant to                     1 Temporary regulations with no specific              fabricate, or develop one or more critical
                                             this interim rule regulates the conduct                 expiration date are ‘‘interim rules’’ for purposes of   technologies. The purpose of the pilot
                                             of foreign persons seeking to acquire                   Federal Register classification.                        program is to assess and address


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                                             51324            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             ongoing risks to the national security of               business with respect to the use,                     IV. Discussion of the Pilot Program
                                             the United States resulting from two                    development, acquisition, or release of               Interim Rule
                                             urgent and compelling circumstances:                    critical technology. CFIUS’s authorities,
                                                                                                                                                           Subpart-by-Subpart Overview of the
                                             (1) The ability and willingness of some                 however, only applied to transactions
                                                                                                                                                           Pilot Program Interim Rule
                                             foreign parties to obtain equity interests              that could result in foreign control of a
                                             in U.S. businesses in order to affect                   U.S. business. Consequently, CFIUS had                   The interim rule builds upon existing
                                             certain decisions regarding, or to obtain               no authority to prevent a foreign entity              rules governing CFIUS’s review of
                                             certain information relating to, critical               from acquiring a non-controlling                      transactions for national security
                                             technologies; and (2) the rapid pace of                 interest in a U.S. business that                      considerations and adds a pilot program
                                             technological change in certain U.S.                    produces, designs, tests, manufactures,               with two purposes. First, the pilot
                                             industries. The Committee has                           fabricates, or develops one or more                   program expands the scope of
                                             developed this pilot program without                    critical technologies. FIRRMA provides                transactions subject to review by CFIUS
                                             exempting any country from the                          CFIUS new authorities to address the                  to include transactions subject to a
                                             mandatory declaration requirement in                    national security concerns that may                   portion of FIRRMA’s ‘‘other
                                             order to understand and examine, in a                   arise from these investments, but those               investments’’ provision. Second, the
                                             comprehensive manner, the nature of                     authorities were not immediately                      pilot program makes effective FIRRMA’s
                                             foreign direct investment as it relates to              effective upon FIRRMA’s enactment.                    mandatory declarations provision for
                                             critical technologies and the pilot                        Together, the pace of technological                transactions that fall within the specific
                                             program industries. Further, foreign                                                                          scope of the pilot program. The scope,
                                                                                                     change in certain critical technology
                                             investors that may present national                                                                           procedures, and terms used in the pilot
                                                                                                     industries, the significant growth in
                                             security concerns are becoming                                                                                program are specific to the pilot
                                                                                                     foreign investment in certain industries
                                             increasingly sophisticated in structuring                                                                     program and subject to change in the
                                                                                                     relevant to national security, and the
                                             investments in a manner that may                                                                              proposed final rule implementing
                                                                                                     current inability of CFIUS to examine
                                             obfuscate those concerns, including by                                                                        FIRRMA. The following discussion
                                                                                                     certain non-controlling transactions
                                             utilizing entities in other jurisdictions.                                                                    provides an overview of each subpart of
                                                                                                     creates urgent and compelling
                                             As a result, CFIUS is implementing this                                                                       the interim rule.
                                                                                                     circumstances for the pilot program that
                                             pilot program on a global basis. The                    make completion of the process for                    Subpart A
                                             pilot program will inform the full                      public participation in rulemaking set
                                             implementation of FIRRMA, including                                                                              Subpart A sets forth the scope of the
                                                                                                     forth in section 709 of the DPA                       pilot program, its applicability based on
                                             the Committee’s approach with respect                   impracticable prior to the effectiveness
                                             to the country specification provision in                                                                     the timing of certain events relating to
                                                                                                     of this interim rule. Implementing the                a transaction, and the effect of the pilot
                                             FIRRMA.                                                 pilot program expeditiously is necessary
                                                Technological superiority has long                                                                         program on other laws. FIRRMA
                                                                                                     both to protect critical technologies and             authorizes the Committee to conduct
                                             underpinned the United States’ military
                                                                                                     to evaluate how best to implement                     one or more pilot programs to
                                             strategy and national security
                                                                                                     certain aspects of FIRRMA in the long-                implement any authority provided
                                             innovation base. The Administration
                                                                                                     term. The temporary nature of the pilot               pursuant to any provision of, or
                                             supports protecting our national
                                                                                                     program and the short timeframe within                amendment made by, FIRRMA that did
                                             security from emerging risks while
                                                                                                     which to gather data to help inform the               not take effect on the date of its
                                             maintaining an open investment policy.
                                             Although the vast majority of foreign                   full implementation of FIRRMA compel                  enactment. This pilot program expands
                                             direct investment in the United States                  a rapid implementation of this interim                the scope of transactions subject to
                                             provides economic benefits to our                       rule. Delaying effectiveness of the                   review by CFIUS to include certain
                                             nation—including the promotion of                       interim rule would create an                          investments by foreign persons in
                                             economic growth, productivity,                          unacceptable risk of erosion of U.S.                  certain U.S. businesses that produce,
                                             competitiveness, and job creation—                      technological superiority. Without                    design, test, manufacture, fabricate, or
                                             some foreign direct investment                          immediate action, foreign parties will be             develop one or more critical
                                             threatens to undermine the                              able to influence the use of, and                     technologies. The pilot program also
                                             technological superiority that is critical              decisions made by U.S. businesses with                requires the submission of declarations
                                             to U.S. national security. Specifically,                respect to, critical technologies through             with basic information regarding certain
                                             the threat to critical technology                       the types of investments FIRRMA is                    covered transactions, unless the parties
                                             industries is more significant than ever                intended to address. The list of pilot                elect to file a notice instead. The
                                             as some foreign parties seek, through                   program industries identified in Annex                purpose of implementing a pilot
                                             various means, to acquire sensitive                     A has been carefully developed by the                 program addressing these areas is to
                                             technologies with relevance for U.S.                    U.S. government to narrowly scope the                 confront the rapid changes in certain
                                             national security. Foreign investment in                pilot program to include only those                   critical technology industries, the
                                             U.S. critical technologies has grown                    industries in which the threat of erosion             significant growth of certain types of
                                             significantly in the past decade, and an                of technological superiority from some                foreign investment in those industries,
                                             enhanced framework is needed to                         foreign direct investment requires                    and the current inability of CFIUS to
                                             address the potential impacts of this                   immediate action. As noted above, the                 review non-controlling transactions,
                                             growth on U.S. national security.                       Committee invites comments on this                    which creates an unacceptable risk of
                                                Prior to FIRRMA, CFIUS’s authorities                 interim rule, will consider any                       undermining U.S. technological
                                             did not sufficiently address the new and                comments received, and if the                         superiority in industries with national
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                                             emerging risks that foreign direct                      Committee intends to make the                         security implications. The regulations in
                                             investment can pose to U.S.                             provisions of this interim rule final, will           this interim rule supplement existing
                                             technological superiority. For example,                 include in any final rule responses to                regulations implementing section 721 of
                                             foreign investors do not need to acquire                such comments.                                        the DPA, which remain in effect.
                                             a controlling interest in order to affect                  Notwithstanding the issuance of this               Consistent with section 1727(c)(1) of
                                             certain decisions made by, or obtain                    interim rule, the regulations at part 800             FIRRMA, the pilot program
                                             certain information from, a U.S.                        remain in effect.                                     implemented through these regulations


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                                                              Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations                                       51325

                                             will end no later than March 5, 2020,                   the ‘‘other investment’’ definition in                  Subpart C also implements portions of
                                             the date that is 570 days after the                     FIRRMA regarding involvement, other                   section 1703 of FIRRMA that limit the
                                             enactment of FIRRMA. These                              than through voting of shares, in                     application of CFIUS authority over
                                             regulations will be amended, replaced,                  substantive decisionmaking regarding                  certain types of investment fund
                                             or removed no later than the date on                    sensitive personal data of U.S. citizens              investments and provides an explicit
                                             which the pilot program ends.                           or critical infrastructure.                           exception for investments involving air
                                                As set forth in section 801.103(b),                     Section 801.210. The term pilot                    carriers.
                                             these regulations do not apply to                       program covered transaction includes
                                                                                                     the new concept of ‘‘pilot program                    Subpart D
                                             transactions for which the completion
                                             date is prior to the pilot program                      covered investment,’’ described above.                   Subpart D requires that the parties to
                                             effective date, or transactions for which               The term pilot program covered                        a pilot program covered transaction
                                             the parties have executed a binding                     transaction also includes transactions                submit to the Committee a declaration
                                             written agreement or other document                     that could result in foreign control of a             regarding the transaction, unless the
                                             establishing the material terms of the                  U.S. business, consistent with the                    parties elect to submit a written notice
                                             transaction prior to October 11, 2018.                  language in FIRRMA, but only to the                   pursuant to subpart E instead.
                                                Consistent with CFIUS’s existing                     extent that the U.S. business is a pilot              Generally, mandatory declarations must
                                             regulations under part 800, the pilot                   program U.S. business.                                be made at least 45 days before the
                                             program does not affect or limit other                     Section 801.213. The term pilot                    expected completion date of the
                                             authorities of the government.                          program U.S. business includes any                    transaction. As noted in section
                                                                                                     U.S. business that produces, designs,                 801.401(d), the regulatory safe harbor
                                             Subpart B                                               tests, manufactures, fabricates, or                   described in section 800.204(e) is not
                                                Subpart B sets forth defined terms                   develops a critical technology that is                available for pilot program covered
                                             used in the remainder of the pilot                      either utilized in connection with the                transactions for which the Committee
                                             program regulations. The following                      U.S. business’s activity in one or more               completes all action under section 721
                                             discussion describes several key terms                  pilot program industries, or designed by              on the basis of a declaration,
                                             from subpart B.                                         the U.S. business specifically for use in             irrespective of whether the transaction
                                                Section 801.203. FIRRMA defines the                  one or more pilot program industries.                 could result in foreign control of a U.S.
                                             term ‘‘investment’’ as including the                    For purposes of the pilot program, this               business. Any subsequent or
                                             acquisition of a ‘‘contingent equity                    definition has been narrowly scoped to                incremental acquisition that constitutes
                                             interest,’’ but does not define the term                allow CFIUS to assess and address the                 a pilot program covered transaction
                                             ‘‘contingent equity interest.’’ The pilot               foreign investment transactions most                  must be submitted to CFIUS through a
                                             program interim rule provides a                         likely to raise concerns regarding the                notice or declaration. For the avoidance
                                             definition for the term contingent equity               technological superiority of the United               of doubt, transactions that could result
                                             interest.                                               States in industries of national security             in control of a pilot program U.S.
                                                Section 801.204. The term critical                   importance.                                           business by a foreign person and that
                                             technologies is defined consistent with                                                                       are filed as a written notice, and for
                                                                                                     Subpart C
                                             the definition set forth in FIRRMA.                                                                           which the Committee completes all
                                                Section 801.206. The term investment                   Subpart C describes the coverage of                 action under section 721, would receive
                                             is defined consistent with the definition               the pilot program with a focus on pilot               the benefit of the regulatory safe harbor
                                             set forth in FIRRMA.                                    program covered investments. The                      described in section 800.204(e).
                                                Section 801.207. FIRRMA provides                     analysis as to whether a transaction                     FIRRMA distinguishes declarations
                                             clarification that certain types of                     could result in control of a pilot                    from notices in three primary respects:
                                             investments by foreign persons as                       program U.S. business by a foreign                    (1) The length of the submission; (2) the
                                             limited partners or the equivalent on an                person generally follows the same                     time for CFIUS’s consideration of the
                                             advisory board or a committee of an                     analysis as under part 800, with the                  submission; and (3) the Committee’s
                                             investment fund will not be considered                  additional requirement that the U.S.                  options for disposition of the
                                             ‘‘other investments’’ for the purposes of               business in question must be a pilot                  submission. The interim rule recognizes
                                             FIRRMA, as reflected in section 801.304                 program U.S. business. The examples                   these distinctions in the manner
                                             of these regulations. The term                          provided throughout subpart C are                     described below.
                                             investment fund is defined in subpart B                 intended to illustrate the application of                First, section 801.403 sets forth the
                                             by reference to the Investment Company                  the definitions to the particular                     information required in a declaration,
                                             Act of 1940 (15 U.S.C. 80a–1 et seq.).                  hypothetical situations. The examples                 which is consistent with FIRRMA’s
                                                Section 801.208. In this interim rule,               are presented for the purpose of aiding               requirement that CFIUS establish
                                             the Committee is implementing the                       the understanding of readers. They                    declarations as ‘‘abbreviated notices that
                                             portion of the definition of the term                   neither limit the definitions set forth in            would not generally exceed 5 pages in
                                             material nonpublic technical                            subpart B nor exhaust the scenarios to                length.’’ As part of the declaration
                                             information in FIRRMA that is related to                which such definitions could apply.                   process, parties will have the
                                             critical technologies. The portion of                     Subpart C illustrates that, where                   opportunity to voluntarily stipulate that
                                             FIRRMA’s definition of the term                         CFIUS has concluded all action under                  the transaction is a pilot program
                                             ‘‘material nonpublic technical                          section 721 for a pilot program covered               covered transaction and, if so, whether
                                             information’’ that relates to critical                  investment (regardless of whether the                 the transaction could result in control of
                                             infrastructure is not part of this pilot                notification was made through a                       a pilot program U.S. business by a
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                                             program.                                                declaration or a notice), any incremental             foreign person and whether the
                                                Section 801.209. The term pilot                      investment that meets the requirements                transaction is a foreign-government
                                             program covered investment                              of section 801.209, even if involving the             controlled transaction. Such
                                             implements most of the definition of                    same foreign person in the same pilot                 stipulations would streamline certain
                                             ‘‘other investment’’ in FIRRMA. The                     program U.S. business, will nevertheless              aspects of CFIUS’s review of a
                                             pilot program, however, does not                        be a pilot program covered investment                 declaration, thereby reducing the
                                             implement a portion of the third part of                and subject to this pilot program.                    burden on CFIUS and potentially


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                                             51326            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             leading to a faster resolution for the                  recognizes that parties, at their                     U.S.C. 3507(d)) and assigned control
                                             submitting parties.                                     discretion, may elect to file a notice for            number 1505–0121. Under the
                                                Second, consistent with FIRRMA,                      a pilot program covered transaction                   Paperwork Reduction Act, an agency
                                             section 801.404 requires that the                       instead of a declaration. The purpose of              may not conduct or sponsor, and a
                                             Committee take action on a declaration                  the subpart is to clarify that, where                 person is not required to respond to, a
                                             within 30 days of the Committee’s                       parties elect to file a notice instead of a           collection of information unless it
                                             receipt of the declaration from the Staff               declaration, or file a notice for a pilot             displays a valid control number
                                             Chairperson. The Staff Chairperson will                 program covered transaction following                 assigned by the Office of Management
                                             circulate the declaration to the                        the Committee’s action on a declaration,              and Budget.
                                             Committee after inspecting the                          the procedural elements of CFIUS’s
                                             declaration and determining it to be                                                                          Regulatory Flexibility Act
                                                                                                     existing regulations under part 800
                                             complete. This implements FIRRMA’s                      generally will apply to that notice.                     The Regulatory Flexibility Act (RFA)
                                             distinction that CFIUS complete review                  Certain additional information will be                (5 U.S.C. 601 et seq.) generally requires
                                             of a notice within 45 days and take                     required from the parties with respect to             an agency to prepare a regulatory
                                             action upon a declaration within 30                     any pilot program covered investment                  flexibility analysis, unless the agency
                                             days.                                                   notified to the Committee through a                   certifies that the rule will not have a
                                                Finally, section 801.407 implements                  notice.                                               significant economic impact on a
                                             FIRRMA’s mandate that the Committee                        For the avoidance of doubt, while the              substantial number of small entities.
                                             take one of four actions with respect to                pilot program implements certain                      The RFA applies when an agency is
                                             a declaration: (1) Request that the                     provisions of FIRRMA that allow CFIUS                 required to publish a general notice of
                                             parties file a notice; (2) inform the                   to review certain non-controlling                     proposed rulemaking under section
                                             parties that CFIUS cannot complete                      transactions involving critical                       553(b) of the APA, or any other law. As
                                             action under section 721 on the basis of                technology in specified industries, it                set forth below, because regulations
                                             the declaration, and that they may file                 does not change CFIUS’s analysis with                 issued pursuant to the DPA are not
                                             a notice to seek written notification                   respect to a transaction that could result            subject to the rulemaking provisions of
                                             from the Committee that the Committee                   in foreign control of a U.S. business                 the APA, or other law requiring the
                                             has completed all action under section                  under the regulations at part 800.                    publication of a general notice of
                                             721 with respect to the transaction; (3)                   Additionally, a party (or parties) to a            proposed rulemaking, the RFA does not
                                             initiate a unilateral review of the                     pilot program covered transaction that                apply.
                                             transaction through an agency notice; or                has filed a written notice pursuant to                   This interim rule implements section
                                             (4) notify the parties that CFIUS has                   section 800.401(a) regarding the                      721 of the DPA. Section 709(a) of the
                                             completed all action under section 721.                 transaction may not submit to the                     DPA provides that the regulations
                                                Section 801.407 also makes clear that                Committee a declaration regarding the                 issued under it are not subject to the
                                             parties may not submit more than one                    same transaction, or a substantially                  rulemaking requirements of the APA.
                                             declaration for the same or a                           similar transaction, without the                      Section 709(b)(1) instead provides that
                                             substantially similar transaction without               approval of the Staff Chairperson. The                any regulation issued under the DPA be
                                             approval from the Staff Chairperson.                    purpose of the declaration is to allow for            published in the Federal Register and
                                             The purpose of this is to avoid                         an assessment of certain information                  opportunity for public comment be
                                             situations where, due to the abbreviated                relating to certain transactions that may             provided for not less than 30 days.
                                             information requests, a party or parties                not, because of the scope and other                   (Notwithstanding the notice
                                             file a declaration even before the                      factors, necessitate the collection of all            requirements of section 709(b)(1),
                                             material terms of a transaction have                                                                          section 709(b)(2) of the DPA waives the
                                                                                                     of the information set forth in section
                                             been agreed upon, subsequently                                                                                DPA’s public comment provision for
                                                                                                     800.402(c). As noted above, parties
                                             complete their negotiations, and attempt                                                                      temporary provisions. As discussed in
                                                                                                     should consider whether the transaction
                                             to withdraw and resubmit a new                                                                                part II above, this interim rule
                                                                                                     is of the type that would be appropriate
                                             declaration for the same or a                                                                                 implements a pilot program and is
                                                                                                     for a declaration, or whether it would be
                                             substantially similar transaction.                                                                            issued pursuant to the section 709(b)(2)
                                                                                                     more appropriate to notify the
                                                The distinctions between notices and                                                                       waiver provision.) Section 709(b)(3) of
                                                                                                     Committee of the transaction by filing a
                                             declarations outlined here—that is, the                                                                       the DPA also provides that all
                                                                                                     written notice.
                                             complexity of the submission and the                                                                          comments received during the public
                                             parties’ desired timing—underpin the                    Subpart F                                             comment period be considered and the
                                             primary interrelated factors that parties                 Subpart F implements authorities                    publication of the final regulation
                                             should consider when determining                        provided pursuant to, and amendments                  contain written responses to such
                                             whether a pilot program covered                         made by, FIRRMA.                                      comments. Consistent with the plain
                                             transaction is best notified to the                                                                           text of the DPA, legislative history
                                             Committee through a declaration or a                    Executive Order 12866                                 confirms that Congress intended that
                                             notice.                                                   These regulations are not subject to                regulations under the DPA be exempt
                                                As noted above, the scope,                           the general requirements of Executive                 from the notice and comment provisions
                                             procedures, and certain terms used in                   Order 12866 because they relate to a                  of the APA and instead provided that
                                             the pilot program are specific to the                   foreign affairs function of the United                the agency include a statement that
                                             pilot program and subject to change in                  States pursuant to section 3(d)(2) of that            interested parties were consulted in the
                                             the proposed final rule implementing                    order.                                                formulation of the final regulation. See
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                                             FIRRMA.                                                                                                       H.R. Conf. Rep. No. 102–1028, at 42
                                                                                                     Paperwork Reduction Act                               (1992) and H.R. Rep. No. 102–208 pt. 1,
                                             Subpart E                                                 The collection of information                       at 28 (1991). The limited public
                                               Subpart E generally applies the                       contained in this rule has been                       participation procedures described in
                                             existing CFIUS procedural regulations                   submitted to the Office of Management                 the DPA do not require a general notice
                                             in part 800 to notices of pilot program                 and Budget in accordance with the                     of proposed rulemaking as set forth in
                                             covered transactions. This subpart                      Paperwork Reduction Act of 1995 (44                   the RFA. Further, the mechanisms for


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                                                              Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations                                        51327

                                             publication and public participation are                Subpart D—Mandatory Declarations Under                regulations implementing the Foreign
                                             sufficiently different to distinguish the               the Pilot Program                                     Investment Risk Review Modernization
                                             DPA procedures from a rule that                         801.401 Mandatory declarations under the              Act of 2018 become effective, and in no
                                             requires a general notice of proposed                       pilot program.                                    event later than the date that is 570 days
                                             rulemaking. In providing the President                  801.402 Procedures for declarations under             after the enactment of the Foreign
                                             with expanded authority to suspend or                       the pilot program.                                Investment Risk Review Modernization
                                                                                                     801.403 Contents of declarations under the
                                             prohibit the acquisition, merger, or                                                                          Act of 2018. These regulations will be
                                                                                                         pilot program.
                                             takeover of, or certain other investments               801.404 Beginning of thirty-day period.               amended, replaced, or removed no later
                                             in, a domestic firm by a foreign firm if                801.405 General.                                      than the date on which the pilot
                                             such action would threaten to impair                    801.406 Rejection, disposition, or                    program ends.
                                             the national security, Congress could                       withdrawal of declarations.
                                             not have contemplated that regulations                  801.407 Committee actions.                            § 801.102   Effect on other law.
                                             implementing such authority would be                    801.408 Confidentiality.                                 Unless otherwise indicated, nothing
                                             subject to RFA analysis. For these                      801.409 Penalties.                                    in this part shall be construed as
                                             reasons, the RFA does not apply to these                Subpart E—Notice of Pilot Program                     altering or affecting any other authority,
                                             regulations.                                            Covered Transaction                                   process, regulation, investigation,
                                                                                                     801.501 Notice of pilot program covered               enforcement measure, or review
                                             List of Subjects in 31 CFR Part 801
                                                                                                         transactions.                                     provided by or established under any
                                               Foreign investments in the United                     801.502 Applicability of part 800.                    other provision of federal law, including
                                             States, Investigations, National defense,               801.503 Additional contents of written                the International Emergency Economic
                                             Reporting and recordkeeping                                 notice.                                           Powers Act (50 U.S.C. 1701–1706), or
                                                                                                     801.504 Agency notice of pilot program                any other authority of the President or
                                             requirements.                                               covered transactions.                             the Congress under the Constitution of
                                             ■ Accordingly, under the authority                      Subpart F—Implementation of Certain                   the United States.
                                             provided by section 1727(c) of FIRRMA,                  Authority Provided in FIRRMA
                                             for the reasons stated in the preamble,                                                                       § 801.103   Applicability rule.
                                                                                                     801.601 Implementation of certain
                                             the Department of the Treasury amends                       authority regarding covered transactions.            (a) Except as provided in paragraph
                                             31 CFR chapter VIII by adding part 801                  801.602 Implementation of certain                     (b) of this section and otherwise in this
                                             as follows:                                                 authority regarding mandatory                     part, the regulations in this part apply
                                                                                                         declarations.                                     from the pilot program effective date.
                                             PART 801—PILOT PROGRAM TO
                                                                                                     Annex A to Part 801—Industries                           (b) The regulations in this part do not
                                             REVIEW CERTAIN TRANSACTIONS
                                             INVOLVING FOREIGN PERSONS AND                                                                                 apply to any transaction for which:
                                                                                                       Authority: 50 U.S.C. 4565; Pub. L. 115–
                                             CRITICAL TECHNOLOGIES                                   232.                                                     (1) The completion date is prior to the
                                                                                                                                                           pilot program effective date; or
                                             Subpart A—General                                       Subpart A—General                                        (2) The following has occurred before
                                             Sec.                                                                                                          October 11, 2018:
                                                                                                     § 801.101    Scope.
                                             801.101    Scope.
                                                                                                        The regulations in this part                          (i) The parties to the transaction have
                                             801.102    Effect on other law.
                                                                                                     implement a pilot program in                          executed a binding written agreement or
                                             801.103    Applicability rule.
                                                                                                     accordance with section 1727(c) of the                other document establishing the
                                             Subpart B—Definitions                                   Foreign Investment Risk Review                        material terms of the transaction;
                                             801.201 General.                                        Modernization Act of 2018. Pursuant to                   (ii) A party has made a public offer to
                                             801.202 Completion date.                                section 1727(c), the pilot program                    shareholders to buy shares of a pilot
                                             801.203 Contingent equity interest.                     implements authorities provided in                    program U.S. business; or
                                             801.204 Critical technologies.                          certain provisions of, or amendments                     (iii) A shareholder has solicited
                                             801.205 FIRRMA.                                         made by, the Foreign Investment Risk
                                             801.206 Investment.                                                                                           proxies in connection with an election
                                                                                                     Review Modernization Act of 2018 that                 of the board of directors of a pilot
                                             801.207 Investment fund.
                                             801.208 Material nonpublic technical
                                                                                                     did not take effect on the date of its                program U.S. business or has requested
                                                 information.                                        enactment. This pilot program expands                 the conversion of convertible voting
                                             801.209 Pilot program covered investment.               the scope of transactions reviewable by               securities.
                                             801.210 Pilot program covered transaction.              CFIUS to include certain investments by
                                             801.211 Pilot program effective date.                   foreign persons in certain U.S.                       Subpart B—Definitions
                                             801.212 Pilot program industry.                         businesses that produce, design, test,
                                                                                                                                                           § 801.201   General.
                                             801.213 Pilot program U.S. business.                    manufacture, fabricate, or develop one
                                             801.214 Unaffiliated pilot program U.S.                 or more critical technologies. The pilot                Unless otherwise indicated, terms
                                                 business.                                           program also requires that parties to a               used in the regulations in this part that
                                             Subpart C—Pilot Program Covered
                                                                                                     pilot program covered transaction notify              are defined in §§ 800.201 through
                                             Transactions                                            CFIUS of the transaction by either                    800.228 of this chapter have the
                                                                                                     submitting a declaration or filing a                  meanings set forth therein.
                                             801.301 Control.
                                                                                                     written notice. The regulations in this
                                             801.302 Transactions that are pilot program                                                                   § 801.202   Completion date.
                                                 covered transactions.
                                                                                                     part supplement the existing regulations
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                                             801.303 Transactions that are not pilot                 implementing section 721 of the                         The term completion date means,
                                                 program covered transactions.                       Defense Production Act of 1950, as                    with respect to a transaction, the date
                                             801.304 Treatment of certain investment                 amended, under part 800 to Title 31                   upon which an ownership interest,
                                                 fund investments.                                   CFR Chapter VIII, which remain in                     including a contingent equity interest, is
                                             801.305 Exception for air carriers.                     effect. The pilot program implemented                 conveyed, assigned, delivered, or
                                             801.306 Timing rule for contingent equity               through these regulations will end no                 otherwise transferred to a person, or a
                                                 interests.                                          later than the date on which the full                 change in rights occurs.


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                                             51328            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             § 801.203   Contingent equity interest.                 § 801.208 Material nonpublic technical                designs, tests, manufactures, fabricates,
                                                The term contingent equity interest                  information.                                          or develops a critical technology that is:
                                             means a financial instrument that                          (a) The term material nonpublic                      (a) Utilized in connection with the
                                             currently does not entitle its owner or                 technical information means                           U.S. business’s activity in one or more
                                             holder to voting rights but is convertible              information that is not available in the              pilot program industries; or
                                             into an equity interest with voting                     public domain, and is necessary to                      (b) Designed by the U.S. business
                                             rights.                                                 design, fabricate, develop, test, produce,            specifically for use in one or more pilot
                                                                                                     or manufacture critical technologies,                 program industries.
                                             § 801.204   Critical technologies.                      including processes, techniques, or
                                                                                                                                                           § 801.214 Unaffiliated pilot program U.S.
                                                The term critical technologies means                 methods.                                              business.
                                             the following:                                             (b) The term material nonpublic
                                                                                                                                                             The term unaffiliated pilot program
                                                (a) Defense articles or defense services             technical information does not include
                                                                                                                                                           U.S. business means, with respect to a
                                             included on the United States                           financial information regarding the
                                                                                                                                                           foreign person, a pilot program U.S.
                                             Munitions List set forth in the                         performance of an entity.
                                                                                                                                                           business in which that foreign person
                                             International Traffic in Arms                                                                                 does not directly hold more than fifty
                                                                                                     § 801.209 Pilot program covered
                                             Regulations (ITAR) (22 CFR parts 120–                                                                         percent of the outstanding voting
                                                                                                     investment.
                                             130).                                                                                                         interest or have the right to appoint
                                                (b) Items included on the Commerce                      The term pilot program covered
                                                                                                     investment means an investment, direct                more than half of the members of the
                                             Control List set forth in Supplement No.                                                                      board of directors or equivalent
                                             1 to part 774 of the Export                             or indirect, by a foreign person in an
                                                                                                     unaffiliated pilot program U.S. business              governing body.
                                             Administration Regulations (EAR) (15
                                             CFR parts 730–774) and controlled:                      that could not result in control by a
                                                                                                                                                           Subpart C—Pilot Program Covered
                                                (1) Pursuant to multilateral regimes,                foreign person of a pilot program U.S.
                                                                                                                                                           Transactions
                                             including for reasons relating to                       business and that affords the foreign
                                             national security, chemical and                         person:                                               § 801.301   Control.
                                             biological weapons proliferation,                          (a) Access to any material nonpublic                  For the sole purpose of determining
                                             nuclear nonproliferation, or missile                    technical information in the possession               whether a transaction could result in
                                             technology; or                                          of the pilot program U.S. business;                   control of a pilot program U.S. business
                                                (2) For reasons relating to regional                    (b) Membership or observer rights on               by a foreign person, the provisions set
                                             stability or surreptitious listening.                   the board of directors or equivalent                  forth in subpart C of this part (excluding
                                                                                                     governing body of the pilot program                   § 800.302(b) of this chapter and the
                                                (c) Specially designed and prepared
                                                                                                     U.S. business or the right to nominate                examples thereunder) regarding covered
                                             nuclear equipment, parts and
                                                                                                     an individual to a position on the board              transactions shall apply to any pilot
                                             components, materials, software, and
                                                                                                     of directors or equivalent governing                  program covered transaction declared to
                                             technology covered by 10 CFR part 810
                                                                                                     body of the pilot program U.S. business;              the Committee pursuant to § 801.401 or
                                             (relating to assistance to foreign atomic
                                                                                                     or                                                    notified to the Committee pursuant to
                                             energy activities).
                                                                                                        (c) Any involvement, other than                    § 801.501.
                                                (d) Nuclear facilities, equipment, and
                                                                                                     through voting of shares, in substantive
                                             material covered by 10 CFR part 110                                                                           § 801.302 Transactions that are pilot
                                                                                                     decisionmaking of the pilot program
                                             (relating to export and import of nuclear                                                                     program covered transactions.
                                                                                                     U.S. business regarding the use,
                                             equipment and material).                                                                                        Transactions that are pilot program
                                                                                                     development, acquisition, or release of
                                                (e) Select agents and toxins covered                 critical technology.                                  covered transactions include, without
                                             by 7 CFR part 331, 9 CFR part 121, or                                                                         limitation:
                                             42 CFR part 73.                                         § 801.210 Pilot program covered                         (a) A transaction that meets the
                                                (f) Emerging and foundational                        transaction.                                          requirements of § 801.209, irrespective
                                             technologies controlled pursuant to                        The term pilot program covered                     of the percentage of voting interest
                                             section 1758 of the Export Control                      transaction means:                                    acquired.
                                             Reform Act of 2018.                                        (a) Any pilot program covered                        Example 1. Corporation A, a foreign
                                                                                                     investment; or                                        person, proposes to acquire a four percent,
                                             § 801.205   FIRRMA.
                                                                                                        (b) Any transaction by or with any                 non-controlling equity interest in
                                               The term FIRRMA means the Foreign                     foreign person that could result in                   Corporation B. Corporation B is a U.S.
                                             Investment Risk Review Modernization                    foreign control of any pilot program U.S.             business that manufactures a critical
                                             Act of 2018, Subtitle A of Title XVII of                business, including such a transaction                technology as part of its business in a pilot
                                             Public Law 115–232 (Aug. 13, 2018).                     carried out through a joint venture.                  program industry. Corporation B is therefore
                                                                                                                                                           a pilot program U.S. business. Pursuant to
                                             § 801.206   Investment.                                 § 801.211    Pilot program effective date.            the terms of the investment, a designee of
                                               The term investment means the                                                                               Corporation A will have the right to observe
                                                                                                      The term pilot program effective date
                                             acquisition of equity interest, including                                                                     the meetings of the board of directors of
                                                                                                     means November 10, 2018.                              Corporation B. The proposed transaction is a
                                             contingent equity interest.
                                                                                                     § 801.212    Pilot program industry.                  pilot program covered investment and
                                             § 801.207   Investment fund.                                                                                  therefore a pilot program covered transaction.
                                                                                                       The term pilot program industry
                                                The term investment fund means any                   means any industry identified in Annex                   Example 2. Corporation A, a foreign
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                                             entity that is an ‘‘investment company,’’                                                                     person, proposes to acquire a four percent,
                                                                                                     A to part 801 by reference to the North               non-controlling equity interest in
                                             as defined in section 3(a) of the                       American Industry Classification                      Corporation B, a pilot program U.S. business
                                             Investment Company Act of 1940 (15                      System (NAICS).                                       as described above. Pursuant to the terms of
                                             U.S.C. 80a–1 et seq.), or would be an                                                                         the investment, Corporation A has approval
                                             ‘‘investment company’’ but for one or                   § 801.213    Pilot program U.S. business.
                                                                                                                                                           rights with respect to Corporation B’s
                                             more of the exemptions provided in                       The term pilot program U.S. business                 licensing of a critical technology to third
                                             section 3(b) or 3(c) thereunder.                        means any U.S. business that produces,                parties. Corporation A is therefore involved



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                                                              Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations                                           51329

                                             in substantive decisionmaking with respect              Export Control Reform Act of 2018 after the           a U.S. business that is not a pilot
                                             to Corporation B and the proposed                       pilot program effective date but prior to the         program U.S. business.
                                             transaction is a pilot program covered                  date upon which the written agreement
                                             investment and a pilot program covered                  establishing the material terms of the                   Example. Corporation A, a foreign person,
                                             transaction.                                            investment was executed. The proposed                 proposes to purchase all of the shares of
                                                                                                     transaction is a pilot program covered                Corporation B, which is a U.S. business that
                                                (b) A transaction that meets the                                                                           operates in a pilot program industry but does
                                                                                                     investment and therefore a pilot program
                                             requirements of § 801.209, irrespective                                                                       not produce, design, test, manufacture,
                                                                                                     covered transaction.
                                             of the fact that the Committee                                                                                fabricate, or develop any critical technology.
                                             concluded all action under section 721                    (d) A transaction by or with any                    As the sole owner, Corporation A will have
                                             for a previous pilot program covered                    foreign person that could result in                   the right to elect directors and appoint other
                                                                                                     foreign control of any pilot program U.S.             primary officers of Corporation B. Assuming
                                             investment by the same foreign person                                                                         no other relevant facts, the proposed
                                             in the same pilot program U.S. business,                business.
                                                                                                                                                           transaction is not a pilot program covered
                                             where such transaction involves the                       Example. Corporation A, a foreign person,           transaction. It is, however, a covered
                                             acquisition of access or rights described               acquires a 40 percent interest and the ability        transaction (see § 800.301 of this chapter).
                                             by § 801.209 in addition to those                       to determine important matters with respect
                                             notified to the Committee in the                        to Corporation B, a U.S. pilot program                § 801.304 Treatment of certain investment
                                                                                                     business. The proposed transaction is a pilot         fund investments.
                                             transaction for which the Committee
                                                                                                     program covered transaction.                             (a) An indirect investment by a
                                             previously concluded action.
                                                                                                                                                           foreign person in a pilot program U.S.
                                               Example. The Committee concludes all                  § 801.303 Transactions that are not pilot
                                                                                                     program covered transactions.
                                                                                                                                                           business through an investment fund
                                             action under section 721 with respect to a
                                                                                                                                                           that affords the foreign person (or a
                                             pilot program covered investment by                       Transactions that are not pilot
                                             Corporation A, a foreign person, in which                                                                     designee of the foreign person)
                                                                                                     program covered transactions include,                 membership as a limited partner or
                                             Corporation A acquires a four percent, non-             without limitation:
                                             controlling equity interest with board                                                                        equivalent on an advisory board or a
                                                                                                       (a) An investment by a foreign person               committee of the fund shall not be
                                             observer rights in Corporation B, a pilot
                                             program U.S. business. One year later,
                                                                                                     in a U.S. business that manufactures a                considered a pilot program covered
                                             Corporation A proposes to acquire an                    technology that it utilizes in connection             transaction with respect to the foreign
                                             additional five percent equity interest in              with its activity in one or more pilot                person if:
                                             Corporation B, resulting in Corporation A               program industries, but does not                         (1) The fund is managed exclusively
                                             holding a nine percent, non-controlling                 produce, design, test, manufacture,                   by a general partner, a managing
                                             equity interest in Corporation B. Pursuant to           fabricate, or develop one or more critical            member, or an equivalent;
                                             the terms of the additional investment,                 technologies.                                            (2) The foreign person is not the
                                             Corporation A will be provided access to
                                             material nonpublic technical information in               Example. Corporation A, a foreign person,           general partner, managing member, or
                                             the possession of Corporation B to which                proposes to acquire a four percent, non-              equivalent;
                                             Corporation A did not previously have                   controlling equity interest in Corporation B,            (3) The advisory board or committee
                                             access. The proposed transaction is a pilot             a U.S. business that operates in a pilot              does not have the ability to approve,
                                             program covered investment and therefore a              program industry. Pursuant to the terms of            disapprove, or otherwise control:
                                             pilot program covered transaction because               the investment, a designee of Corporation A              (i) Investment decisions of the
                                             the transaction involves both an acquisition            will have the right to observe the meetings           investment fund; or
                                             of an equity interest in a pilot program U.S.           of the board of directors of Corporation B.              (ii) Decisions made by the general
                                             business and a new right to access material             Corporation B does not produce, design, test,
                                                                                                                                                           partner, managing member, or
                                             nonpublic technical information.                        manufacture, fabricate, or develop any
                                                                                                     critical technology. Assuming no other                equivalent related to entities in which
                                               (c) A transaction that meets the                      relevant facts, the proposed transaction is not       the investment fund is invested;
                                             requirements of § 801.209, irrespective                 a pilot program covered transaction.                     (4) The foreign person does not
                                             of the fact that the critical technology                                                                      otherwise have the ability to control the
                                                                                                        (b) An investment by a foreign person
                                             produced, designed, tested,                                                                                   investment fund, including the
                                                                                                     in a pilot program U.S. business that                 authority:
                                             manufactured, fabricated, or developed                  does not afford the foreign person any
                                             by the pilot program U.S. business                                                                               (i) To approve, disapprove, or
                                                                                                     of the rights specified in paragraphs (a),            otherwise control investment decisions
                                             became controlled pursuant to section                   (b), or (c) of § 801.209 or any control
                                             1758 of the Export Control Reform Act                                                                         of the investment fund;
                                                                                                     rights.                                                  (ii) To approve, disapprove, or
                                             of 2018 after the pilot program effective
                                                                                                       Example. The Committee concluded all                otherwise control decisions made by the
                                             date, unless any of the criteria set forth
                                                                                                     action under section 721 with respect to a            general partner, managing member, or
                                             in paragraphs (b)(2)(i) through (b)(2)(iii)             pilot program covered transaction in which            equivalent related to entities in which
                                             of § 801.103 is satisfied with respect to               Corporation A, a foreign person, acquired a           the investment fund is invested; or
                                             the transaction prior to the critical                   four percent, non-controlling equity interest            (iii) To unilaterally dismiss, prevent
                                             technology becoming controlled                          with board observer rights in Corporation B,          the dismissal of, select, or determine the
                                             pursuant to section 1758 of the Export                  a pilot program U.S. business. One year later,
                                                                                                                                                           compensation of the general partner,
                                             Control Reform Act of 2018.                             Corporation A proposes to acquire an
                                                                                                     additional five percent equity interest in            managing member, or equivalent;
                                               Example. Corporation A, a foreign person,             Corporation B, which would result in                     (5) The foreign person does not have
                                             has executed a written agreement                        Corporation A holding a nine percent, non-            access to material nonpublic technical
                                             establishing the material terms of a proposed           controlling equity interest in Corporation B.         information as a result of its
                                             non-controlling investment in Corporation B,            The proposed investment does not afford               participation on the advisory board or
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                                             a pilot program U.S. business. The proposed             Corporation A any additional rights with
                                             investment will afford Corporation A access
                                                                                                                                                           committee; and
                                                                                                     respect to Corporation B, including the rights           (6) The investment otherwise meets
                                             to material nonpublic technical information             specified in § 801.209. Assuming no other
                                             in the possession of Corporation B. The only                                                                  the requirements of paragraph (4)(D) of
                                                                                                     relevant facts, the proposed transaction is not       subsection (a) of section 721 made
                                             controlled technology produced, designed,               a pilot program covered transaction.
                                             tested, manufactured, fabricated, or                                                                          effective by part 801.
                                             developed by Corporation B became                         (c) A transaction that results or could                (b) For the purposes of paragraphs
                                             controlled pursuant to section 1758 of the              result in control by a foreign person of              (a)(3) and (4), and except as provided in


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                                             51330            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             paragraph (c) of this section, a waiver of              Subpart D—Mandatory Declarations                      Committee pursuant to this section shall
                                             a potential conflict of interest, a waiver              Under the Pilot Program                               be considered to have been filed with
                                             of an allocation limitation, or a similar                                                                     the President or the President’s designee
                                             activity, applicable to a transaction                   § 801.401 Mandatory declarations under                for purposes of section 721(c).
                                                                                                     the pilot program.                                      (d) Persons filing a declaration shall,
                                             pursuant to the terms of an agreement
                                             governing an investment fund shall not                     (a) Except as provided in paragraph                during the time that the matter is
                                             be considered to constitute control of                  (b) of this section, the parties to a pilot           pending before the Committee,
                                             investment decisions of the investment                  program covered transaction shall                     promptly advise the Staff Chairperson of
                                             fund or decisions relating to entities in               submit to the Committee a declaration                 any material changes in plans, facts, or
                                             which the investment fund is invested.                  with information regarding the                        circumstances addressed in the
                                                                                                     transaction in accordance with                        declaration, and any material change in
                                                (c) In extraordinary circumstances,                  § 801.402.
                                             the Committee may consider the waiver                                                                         information required to be provided to
                                                                                                        (b) Notwithstanding paragraph (a) of               the Committee under § 801.406(a)(3).
                                             of a potential conflict of interest, the                this section, parties to a pilot program
                                             waiver of an allocation limitation, or a                                                                      Such changes shall become part of the
                                                                                                     covered transaction may elect to submit               declaration filed by such persons under
                                             similar activity, applicable to a                       a written notice pursuant to subpart E
                                             transaction pursuant to the terms of an                                                                       § 801.401, and the certification required
                                                                                                     of this part regarding the transaction
                                             agreement governing an investment                                                                             under § 801.405(c) shall apply to such
                                                                                                     instead of a declaration. Parties to a
                                             fund, to constitute control of investment                                                                     changes.
                                                                                                     pilot program covered transaction that
                                             decisions of the investment fund or                     have filed with the Committee a written               § 801.403 Contents of declarations under
                                             decisions relating to entities in which                 notice regarding a transaction pursuant               the pilot program.
                                             the investment fund is invested.                        to § 801.501 may not submit to the                       (a) The party or parties submitting a
                                                Example 1. Corporation A, a foreign                  Committee a declaration regarding the                 declaration of a pilot program covered
                                             person, makes an investment in an                       same transaction or a substantially                   transaction pursuant to § 801.401 shall
                                             investment fund as a limited partner. The               similar transaction without the approval              provide the information set out in this
                                             investment confers membership on an                     of the Staff Chairperson.                             section, which must be accurate and
                                             advisory board of the investment fund. The                 (c) Parties shall submit to the                    complete with respect to all parties and
                                             investment fund holds 100 percent of the                Committee the declaration required
                                             ownership interests in a pilot program U.S.                                                                   to the transaction. (See also paragraphs
                                                                                                     pursuant to paragraph (a) of this section,            (d) and (e) of this section.)
                                             business. Corporation A will have the right
                                                                                                     or a written notice pursuant to                          (b) If fewer than all the parties to a
                                             to approve decisions made by the general
                                             partner with respect to the use and                     paragraph (b) of this section, no later               transaction submit a declaration, the
                                             development of the critical technologies                than:                                                 Committee may, at its discretion,
                                             produced by the pilot program U.S. business.               (1) November 10, 2018, or promptly                 request that the parties to the
                                             This transaction is a pilot program covered             thereafter, if the completion date of the             transaction file a written notice of the
                                             transaction.                                            transaction is between November 10,                   transaction under § 801.501, if the Staff
                                                Example 2. Corporation A, a foreign                  2018 and December 25, 2018; or                        Chairperson determines that the
                                             person, makes an investment in an                          (2) 45 days before the completion date
                                             investment fund as a limited partner. The                                                                     information provided by the submitting
                                                                                                     of the transaction, if the completion date
                                             investment confers membership on an                                                                           party or parties in the declaration is
                                                                                                     of the transaction is after December 25,
                                             advisory board of the investment fund. The                                                                    insufficient for the Committee to assess
                                                                                                     2018.
                                             investment fund holds 100 percent of the                   (d) Section 800.204(e) of this chapter             the transaction.
                                             ownership interests in a pilot program U.S.             shall not apply with respect to any pilot                (c) Subject to paragraph (e) of this
                                             business. Corporation A is not the general
                                                                                                     program covered transaction for which                 section, a declaration submitted
                                             partner that wholly manages the investment                                                                    pursuant to § 801.401 shall describe or
                                             fund. Corporation A lacks any ability to                the Committee completes all action
                                                                                                     under section 721 pursuant to                         provide, as applicable:
                                             control the investment fund or its decisions.                                                                    (1) The name of the foreign person(s)
                                             As a member of the advisory board,                      § 801.407(a)(4).
                                                                                                                                                           and pilot program U.S. business(es) that
                                             Corporation A has the right to vote on the
                                             compensation of the general partner and the             § 801.402 Procedures for declarations                 are parties to, or, in applicable cases, the
                                             right to vote on the dismissal of the general           under the pilot program.                              subject of the transaction, as well as the
                                             partner for cause, but does not have the                   (a) A party or parties shall submit a              name, telephone number, and email
                                             power to determine either of these matters              declaration of a pilot program covered                address of the primary point of contact
                                             unilaterally. Assuming no other relevant                transaction pursuant to § 801.401 by                  for each party.
                                             facts, this transaction is not a pilot program          submitting electronically the                            (2) The following information
                                             covered transaction with respect to                     information set out in § 801.403,                     regarding the transaction in question,
                                             Corporation A.                                          including the certifications required                 including:
                                             § 801.305   Exception for air carriers.                 thereunder, to the Staff Chairperson in                  (i) A brief description of the nature of
                                                                                                     accordance with the submission                        the transaction and its structure (e.g.,
                                               No investment involving an air                        instructions on the Committee’s section               share purchase, merger, asset purchase);
                                             carrier, as defined in section 40102(a)(2)              of the Department of the Treasury                        (ii) The percentage of voting interest
                                             of title 49, United States Code, that                   website at https://home.treasury.gov/                 acquired;
                                             holds a certificate issued under section                policy-issues/international/the-                         (iii) The percentage of economic
                                             41102 of that title shall be a pilot                    committee-on-foreign-investment-in-the-               interest acquired;
                                             program covered transaction.                            united-states-cfius.                                     (iv) Whether the pilot program U.S.
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                                                                                                        (b) No communications other than                   business has multiple classes of
                                             § 801.306 Timing rule for contingent equity
                                             interests.
                                                                                                     those described in paragraph (a) of this              ownership;
                                                                                                     section shall constitute the submission                  (v) The total transaction value in U.S.
                                               The provisions set forth in § 800.304                 of a declaration for purposes of section              dollars;
                                             of this chapter regarding convertible                   721.                                                     (vi) The expected closing date; and
                                             voting instruments shall apply to                          (c) Information and other                             (vii) All sources of financing for the
                                             contingent equity interests.                            documentary material submitted to the                 transaction.


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                                                              Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations                                       51331

                                                (3) The following:                                   manufacture, fabricate, or develop, and               incorporation or other legal organization
                                                (i) A statement as to whether a party                the relevant six-digit NAICS code or                  (for entities), and nationality (for
                                             to the transaction is stipulating that the              codes, as applicable under §§ 801.212                 individuals) for each of the following:
                                             transaction is a pilot program covered                  and 801.213, for each critical technology                (i) The immediate parent, the ultimate
                                             transaction and a description of the                    listed. This statement shall include a                parent, and each intermediate parent, if
                                             basis for the stipulation; and                          description (which may group similar                  any, of each foreign person that is a
                                                (ii) A statement as to whether a party               items into general product categories) of             party to the transaction;
                                             to the transaction is stipulating that the              the items and a list of any relevant                     (ii) Where the ultimate parent is a
                                             transaction could result in control of a                Export Control Classification Numbers                 private company, the ultimate owner(s)
                                             pilot program U.S. business by a foreign                under the EAR and United States                       of such parent; and
                                             person or that the transaction is a                     Munitions List categories under the                      (iii) Where the ultimate parent is a
                                             foreign government-controlled                           ITAR, and, if applicable, identify                    public company, any shareholder with
                                             transaction and, in each case, a                        whether any are specially designed and                an interest of greater than five percent
                                             description of the basis for the                        prepared nuclear equipment, parts and                 in such parent.
                                             stipulation.                                            components, materials, software, and                     (15) Information regarding all foreign
                                                (4) A statement as to whether the                    technology covered by 10 CFR part 810,                government ownership in the foreign
                                             foreign person will acquire any of the                  nuclear facilities, equipment, and                    person’s ownership structure, including
                                             following in the pilot program U.S.                     materials covered by 10 CFR part 110 or               nationality and percentage of
                                             business:                                               select agents and toxins covered by 7                 ownership, as well as any rights that a
                                                (i) Access to any material nonpublic                 CFR part 331, 9 CFR part 121 or 42 CFR                foreign government holds, directly or
                                             technical information in the possession                 part 73.                                              indirectly, with respect to the foreign
                                             of the pilot program U.S. business, and                    (8) A statement as to whether the pilot            person.
                                             if so, a brief explanation of the type of               program U.S. business has any contracts                  (16) With respect to the foreign person
                                             access and type of information;                         (including any subcontracts, if known)                that is party to the transaction and any
                                                (ii) Membership, observer rights, or                 that are currently in effect or were in               of its parents, as applicable, a brief
                                             nomination rights as set forth in                       effect within the past three years with               summary of their respective business
                                             § 801.209(b), and if so, a statement as to              any U.S. Government agency or                         activities, as, for example, set forth in
                                             the composition of the board or other                   component, or in the past 10 years if the             annual reports.
                                             body both before and after the                          contract included access to personally                   (17) A statement as to whether any
                                             completion date of the transaction;                     identifiable information of U.S.                      party to the transaction has been party
                                                (iii) Any involvement, other than                    Government personnel.                                 to another transaction previously
                                             through voting shares, in substantive                      (9) A statement as to whether the pilot            notified or submitted to the Committee,
                                             decisionmaking of the pilot program                     program U.S. business has any contracts               and the case number assigned by the
                                             U.S. business regarding the use,                        (including any subcontracts, if known)                Committee regarding such
                                             development, acquisition, or release of                 that are currently in effect or were in               transaction(s).
                                             critical technologies and if so, a                      effect within the past five years                        (18) A statement (including relevant
                                             statement as to the involvement in such                 involving information, technology, or                 jurisdiction and criminal case law
                                             substantive decisionmaking; or                          data that is classified under Executive               number or legal citation) as to whether
                                                (iv) Any rights that could result in the             Order 12958, as amended.                              the pilot program U.S. business, the
                                             foreign person acquiring control of the                    (10) A statement as to whether the                 foreign person, or any parent or
                                             pilot program U.S. business and, if so,                 pilot program U.S. business has                       subsidiary of the foreign person has
                                             a brief explanation of these rights.                    received any grant or other funding from              been convicted in the last ten years of
                                                (5) The following information                        the Department of Defense or the                      a crime in any jurisdiction.
                                             regarding the pilot program U.S.                        Department of Energy, or participated in                 (d) Each party submitting a
                                             business:                                               or collaborated on any defense or energy              declaration shall provide a certification
                                                (i) Website address;                                 program or product involving one or                   of the information contained in the
                                                (ii) Principal place of business;                    more critical technologies or pilot                   declaration consistent with § 800.202 of
                                                (iii) Place of incorporation or                      program industries within the past five               this chapter. A sample certification may
                                             organization; and                                       years.                                                be found on the Committee’s section of
                                                (iv) A list of the addresses or                         (11) A statement as to whether the                 the Department of the Treasury website
                                             geographic coordinates (to at least the                 pilot program U.S. business participated              at https://home.treasury.gov/policy-
                                             fourth decimal) of all locations of the                 in a Defense Production Act Title III                 issues/international/the-committee-on-
                                             pilot program U.S. business, including                  Program (50 U.S.C. 4501 et seq.) within               foreign-investment-in-the-united-states-
                                             the pilot program U.S. business’s                       the past seven years.                                 cfius.
                                             headquarters, facilities, and operating                    (12) A statement as to whether the                    (e) A party that offers a stipulation
                                             locations.                                              pilot program U.S. business has                       pursuant to paragraph (c)(3) of this
                                                (6) With respect to the pilot program                received or placed priority rated                     section acknowledges that the
                                             U.S. business that is the subject of the                contracts or orders under the Defense                 Committee and the President are
                                             transaction and any entity of which that                Priorities and Allocations System                     entitled to rely on such stipulation in
                                             pilot program U.S. business is a parent,                (DPAS) regulation (15 CFR part 700),                  determining whether the transaction is
                                             a brief summary of their respective                     and the level(s) of priority of such                  a pilot program covered transaction, a
                                             business activities, as, for example, set               contracts or orders (DX or DO) within                 transaction that could result in control
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                                             forth in annual reports, and the product                the past three years.                                 of a pilot program U.S. business by a
                                             or service categories of each, including                   (13) The name of the ultimate parent               foreign person, or a foreign government-
                                             the applicable six-digit NAICS codes.                   of the foreign person.                                controlled transaction for the purposes
                                                (7) A statement as to which critical                    (14) A complete organizational chart,              of section 721 and all authorities
                                             technology or critical technologies the                 including, without limitation,                        thereunder, and waives the right to
                                             pilot program U.S. business and its                     information that identifies the name,                 challenge any such determination.
                                             subsidiaries produce, design, test,                     principal place of business and place of              Neither the Committee nor the President


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                                             51332            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             is bound by any such stipulation, nor                   risk arising from the pilot program                      (c) Parties to a transaction that have
                                             does any such stipulation limit the                     covered transaction.                                  submitted a declaration pursuant to
                                             ability of the Committee or the President                  (b) During the thirty-day assessment               § 801.401(a) may request in writing, at
                                             to act on any authority provided under                  period, the Staff Chairperson may invite              any time prior to the Committee taking
                                             section 721 with respect to any pilot                   the parties to a pilot program covered                action under § 801.407(a), that such
                                             program covered transaction.                            transaction to attend a meeting with the              declaration be withdrawn. Such request
                                                                                                     Committee staff to discuss and clarify                shall be directed to the Staff
                                             § 801.404   Beginning of thirty-day period.             issues pertaining to the transaction.                 Chairperson and shall state the reasons
                                                (a) Upon receipt of a declaration                       (c) If the Committee notifies the                  why the request is being made and state
                                             submitted pursuant to § 801.401, the                    parties to a transaction that have                    whether the transaction that is the
                                             Staff Chairperson shall promptly inspect                submitted a declaration pursuant to                   subject of the declaration is being fully
                                             the declaration and shall promptly                      § 801.401 that the Committee intends to               and permanently abandoned. An official
                                             notify in writing all parties to a                      complete all action under section 721                 of the Department of the Treasury will
                                             transaction that have submitted a                       with respect to that transaction, each                promptly advise the parties to the
                                             declaration that:                                       party that has submitted additional                   transaction in writing of the
                                                (1) The Staff Chairperson has                        information subsequent to the original                Committee’s decision.
                                             accepted the declaration and circulated                 declaration shall file a certification as                (d) The Committee may not request or
                                             the declaration to the Committee, and                   described in § 800.202 of this chapter. A             recommend that a declaration be
                                             the date on which the assessment                        sample certification may be found on                  withdrawn and refiled, except to permit
                                             described in paragraph (b) of this                      the Committee’s section of the                        parties to a pilot program covered
                                             section begins; or                                      Department of the Treasury website at                 transaction to correct material errors or
                                                (2) The Staff Chairperson has                        https://home.treasury.gov/policy-issues/              omissions in the declaration submitted
                                             determined not to accept the declaration                international/the-committee-on-foreign-               with respect to that pilot program
                                             and circulate the declaration to the                    investment-in-the-united-states-cfius.                covered transaction.
                                             Committee because the declaration is                       (d) If a party fails to provide the                   (e) A party (or parties) may not submit
                                             incomplete, and provide an explanation                  certification required under paragraph                more than one declaration for the same
                                             of the material respects in which the                   (c) of this section, the Committee may,               or a substantially similar transaction
                                             declaration is incomplete.                              at its discretion, take any of the actions            without approval from the Staff
                                                (b) A thirty-day period for assessment               under § 801.407(a).                                   Chairperson.
                                             of a pilot program covered transaction
                                             that is the subject of a declaration shall              § 801.406 Rejection, disposition, or                  § 801.407   Committee actions.
                                             commence on the date on which the                       withdrawal of declarations.                              (a) Upon receiving a declaration
                                             declaration is received by the                             (a) The Committee, acting through the              submitted pursuant to § 801.401 with
                                             Committee from the Staff Chairperson.                   Staff Chairperson, may:                               respect to a pilot program covered
                                             Such period shall end no later than the                    (1) Reject any declaration that does               transaction, the Committee may, at the
                                             thirtieth day after it has commenced, or                not comply with § 801.403 and so                      discretion of the Committee:
                                             if the thirtieth day is not a business day,             inform the parties promptly in writing;                  (1) Request that the parties to the
                                             no later than the next business day after                  (2) Reject any declaration at any time,            transaction file a written notice
                                             the thirtieth day.                                      and so inform the parties promptly in                 pursuant to subpart E;
                                                                                                     writing, if, after the declaration has been              (2) Inform the parties to the
                                             § 801.405   General.                                    submitted and before the Committee has                transaction that the Committee is not
                                               (a) In assessing a pilot program                      taken one of the actions specified in                 able to complete action under section
                                             covered transaction submitted pursuant                  § 801.407(a):                                         721 with respect to the transaction on
                                             to § 801.401, the Committee should                         (i) There is a material change in the              the basis of the declaration and that the
                                             consider the factors specified in section               pilot program covered transaction as to               parties may file a written notice under
                                             721(f) and, as appropriate, require                     which a declaration has been submitted;               part 800 to seek written notification
                                             parties to provide to the Committee the                 or                                                    from the Committee that the Committee
                                             information necessary to consider such                     (ii) Information comes to light that               has concluded all action under section
                                             factors. The Committee’s assessment                     contradicts material information                      721 with respect to the transaction;
                                             shall examine, as appropriate, whether:                 provided in the declaration by the party                 (3) Initiate a unilateral review of the
                                               (1) The transaction constitutes a pilot               (or parties); or                                      transaction under § 801.504; or
                                             program covered transaction and                            (3) Reject any declaration at any time                (4) Notify the parties in writing that
                                             whether it could result in foreign                      after the declaration has been submitted,             the Committee has concluded all action
                                             government control over a pilot program                 and so inform the parties promptly in                 under section 721 with respect to the
                                             U.S. business;                                          writing, if the party (or parties) that               transaction.
                                               (2) There is credible evidence to                     submitted the declaration does not                       (b) The Committee shall take action
                                             support a belief that any foreign person                provide follow-up information                         under paragraph (a) within the time
                                             exercising control of the pilot program                 requested by the Staff Chairperson                    period set forth in § 801.404(b).
                                             U.S. business or exercising rights related              within two business days of the request,
                                             to a pilot program covered investment                   or within a longer time frame if the                  § 801.408   Confidentiality.
                                             might take action that threatens to                     party (or parties) so request in writing                The provisions of § 800.702 of this
                                             impair the national security of the                     and the Staff Chairperson grants that                 chapter shall apply to information
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                                             United States; and                                      request in writing.                                   submitted to the Committee through a
                                               (3) Provisions of law, other than                        (b) The Staff Chairperson shall notify             declaration.
                                             section 721 and the International                       the parties that submitted a declaration
                                             Emergency Economic Powers Act,                          when the Committee has found that the                 § 801.409   Penalties.
                                             provide adequate and appropriate                        transaction that is the subject of a                    (a) Any person who fails to comply
                                             authority to protect the national security              declaration is not a pilot program                    with the requirements of § 801.401 may
                                             of the United States with respect to the                covered transaction.                                  be liable to the United States for a civil


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                                                              Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations                                             51333

                                             penalty not to exceed the value of the                  critical technologies and if so, a                    submitted pursuant to § 801.401 and no
                                             pilot program covered transaction.                      statement as to the involvement in such               written notice has been filed under
                                                (b) The provisions of § 800.801(a), (d),             substantive decisionmaking; and                       § 801.501(a) if that member has reason
                                             (e), (f), (g), and (h) shall apply to a                    (3) With respect to the pilot program              to believe that the transaction is a pilot
                                             declaration submitted to the Committee                  U.S. business that is the subject of the              program covered transaction and may
                                             pursuant to § 801.401.                                  transaction, a statement as to which                  raise national security considerations.
                                                                                                     critical technology or critical                       Notices filed under this paragraph are
                                             Subpart E—Notice of Pilot Program                       technologies the pilot program U.S.                   deemed accepted upon their receipt by
                                             Covered Transaction                                     business and its subsidiaries produce,                the Staff Chairperson.
                                                                                                     design, test, manufacture, fabricate, or
                                             § 801.501 Notice of pilot program covered
                                             transactions.                                           develop, and the relevant six-digit                   Subpart F—Implementation of Certain
                                                                                                     NAICS code, as applicable under                       Authority Provided In FIRRMA
                                                Parties to a pilot program covered
                                                                                                     §§ 801.212 and 801.213, for each critical
                                             transaction may notify the Committee of                                                                       § 801.601 Implementation of certain
                                                                                                     technology listed. This statement shall
                                             the transaction by filing with the                      include a description (which may group
                                                                                                                                                           authority regarding covered transactions.
                                             Committee a written notice pursuant to                  similar items into general product                       Paragraphs (4)(A)(ii) (solely with
                                             § 800.401(a) of this chapter and this                   categories) of the items and a list of any            respect to clauses (iii)(II) and (iv)(II)
                                             subpart.                                                relevant Export Control Classification                (solely with respect to an investment
                                                                                                     Numbers under the EAR and United                      described in section 721(a)(4)(B)(iii)(II))
                                             § 801.502   Applicability of part 800.
                                                                                                     States Munitions List categories under                of subparagraph (B)), (4)(B)(iii)(II),
                                                (a) The provisions set forth in Subpart                                                                    (4)(B)(iv)(II) (solely with respect to an
                                             D—Notice; Subpart E—Committee                           the ITAR, and, if applicable, identify
                                                                                                     whether any are specially designed and                investment described in section
                                             Procedures: Review and Investigation;                                                                         721(a)(4)(B)(iii)(II)), (4)(D)(i)(I),
                                             Subpart F—Finality of Action; Subpart                   prepared nuclear equipment, parts and
                                                                                                     components, materials, software, and                  4(D)(i)(II), (4)(D)(i)(III)(bb),
                                             G—Provision and Handling of                                                                                   (4)(D)(ii)(I)(bb), (4)(D)(ii)(II), (4)(D)(iii)(I),
                                             Information; and Subpart H—Penalties                    technology covered by 10 CFR part 810,
                                                                                                     nuclear facilities, equipment, and                    (4)(D)(iv), and (4)(D)(v) of subsection (a)
                                             of Part 800 regarding covered                                                                                 of section 721 shall take effect on the
                                             transactions shall apply to any pilot                   materials covered by 10 CFR part 110 or
                                                                                                     select agents and toxins covered by 7                 pilot program effective date solely with
                                             program covered transaction notified to                                                                       respect to any pilot program covered
                                             the Committee.                                          CFR part 331, 9 CFR part 121 or 42 CFR
                                                                                                     part 73.                                              transaction. Paragraph (4)(A)(ii) (solely
                                                (b) Section 800.204(e) shall not apply                                                                     with respect to clauses (iv)(I) and (v) of
                                             with respect to any pilot program                          (b) If the party (or parties) stipulate
                                                                                                     pursuant to § 800.402(n) of this chapter              subparagraph (B)) of subsection (a) of
                                             covered investment for which the                                                                              section 721 shall take effect on the pilot
                                             Committee completes all action under                    that the pilot program covered
                                                                                                     transaction that is the subject of the                program effective date.
                                             section 721 pursuant to § 800.504 or
                                             § 800.506(d) of this chapter.                           written notice could result in a covered              § 801.602 Implementation of certain
                                                                                                     transaction under part 800, the party (or             authority regarding mandatory declarations.
                                             § 801.503   Additional contents of written              parties) are not required to include in                  Paragraphs (1)(C)(v)(I), (II), (III),
                                             notice.                                                 the written notice the information                    (IV)(aa), (IV)(cc), (IV)(dd), (IV)(ee),
                                                (a) In addition to the information                   required by this section.                             (IV)(ff), and (IV)(gg) of subsection (b) of
                                             required pursuant to § 800.402(c), a                       (c) A party that offers a stipulation              section 721 shall take effect on the pilot
                                             written notice of a pilot program                       acknowledges that the Committee and                   program effective date solely with
                                             covered transaction filed pursuant to                   the President are entitled to rely on such            respect to any pilot program covered
                                             § 800.401(a) of this chapter shall include              stipulation in determining whether the                transaction.
                                             the following information:                              transaction is a pilot program covered
                                                (1) A statement as to whether a party                transaction, a transaction that could                 Annex A to Part 801—Industries
                                             to the transaction is stipulating that the              result in control of a pilot program U.S.             Aircraft Manufacturing
                                             transaction is a pilot program covered                  business by a foreign person, or a                    NAICS Code: 336411
                                             transaction and a description of the                    foreign government-controlled                         Aircraft Engine and Engine Parts
                                             basis for the stipulation;                              transaction for the purposes of section                 Manufacturing
                                                (2) A statement as to whether the                    721 and all authorities thereunder, and               NAICS Code: 336412
                                             foreign person will acquire any of the                  waives the right to challenge any such                Alumina Refining and Primary Aluminum
                                             following in the pilot program U.S.                     determination. Neither the Committee                    Production
                                             business:                                                                                                     NAICS Code: 331313
                                                                                                     nor the President is bound by any such                Ball and Roller Bearing Manufacturing
                                                (i) Access to any material nonpublic                 stipulation, nor does any such                        NAICS Code: 332991
                                             technical information in the possession                 stipulation limit the ability of the                  Computer Storage Device Manufacturing
                                             of the pilot program U.S. business, and                 Committee or the President to act on                  NAICS Code: 334112
                                             if so, a brief explanation of the type of               any authority provided under section                  Electronic Computer Manufacturing
                                             access and type of information;                         721 with respect to any pilot program                 NAICS Code: 334111
                                                (ii) Membership, observer rights, or                 covered transaction.                                  Guided Missile and Space Vehicle
                                             nomination rights as set forth in                                                                               Manufacturing
                                             § 801.209(b), and if so, a statement as to              § 801.504 Agency notice of pilot program              NAICS Code: 336414
                                             the composition of the board or other                   covered transactions.                                 Guided Missile and Space Vehicle
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                                             body both before and after the                            Any member of the Committee, or his                   Propulsion Unit and Propulsion Unit Parts
                                                                                                                                                             Manufacturing
                                             transaction; or                                         designee at or above the Under
                                                                                                                                                           NAICS Code: 336415
                                                (iii) Any involvement, other than                    Secretary or equivalent level, may file               Military Armored Vehicle, Tank, and Tank
                                             through voting shares, in substantive                   an agency notice to the Committee                       Component Manufacturing
                                             decisionmaking of the United States                     through the Staff Chairperson regarding               NAICS Code: 336992
                                             business regarding the use,                             a pilot program covered transaction for               Nuclear Electric Power Generation
                                             development, acquisition, or release of                 which no declaration has been                         NAICS Code: 221113



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                                             51334            Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / Rules and Regulations

                                             Optical Instrument and Lens Manufacturing               extending the entire width of the river,                Under 5 U.S.C. 553(d)(3), the Coast
                                             NAICS Code: 333314                                      from mile marker (MM) 469 to MM                       Guard finds that good cause exists for
                                             Other Basic Inorganic Chemical                          470.5 in Cincinnati, OH. This safety                  making this rule effective less than 30
                                               Manufacturing                                         zone is necessary to provide for the                  days after publication in the Federal
                                             NAICS Code: 325180
                                             Other Guided Missile and Space Vehicle
                                                                                                     safety of persons, vessels, and the                   Register. Delaying this rule would be
                                               Parts and Auxiliary Equipment                         marine environment during the                         contrary to public interest because
                                               Manufacturing                                         Yeatman’s Cove fireworks display. Entry               immediate action is necessary to
                                             NAICS Code: 336419                                      into, transiting through, or anchoring                respond to the potential safety hazards
                                             Petrochemical Manufacturing                             within this safety zone is prohibited                 associated with the fireworks display.
                                             NAICS Code: 325110                                      unless authorized by the Captain of the
                                             Powder Metallurgy Part Manufacturing
                                                                                                                                                           III. Legal Authority and Need for Rule
                                                                                                     Port Sector Ohio Valley or a designated
                                             NAICS Code: 332117                                      representative.                                          The Coast Guard is issuing this rule
                                             Power, Distribution, and Specialty                                                                            under authority in 33 U.S.C. 1231. The
                                                                                                     DATES: This rule is effective from 8 p.m.
                                               Transformer Manufacturing                                                                                   Captain of the Port Sector Ohio Valley
                                             NAICS Code: 335311                                      through 9 p.m. on October 11, 2018.
                                                                                                                                                           (COTP) has determined that potential
                                             Primary Battery Manufacturing                           ADDRESSES: To view documents
                                                                                                                                                           hazards associated with the fireworks
                                             NAICS Code: 335912                                      mentioned in this preamble as being                   display will be a safety concern for all
                                             Radio and Television Broadcasting and                   available in the docket, go to http://
                                               Wireless Communications Equipment                                                                           navigable waters of the Ohio River
                                                                                                     www.regulations.gov, type USCG–2018–                  extending from mile marker (MM) 469
                                               Manufacturing                                         0855 in the ‘‘SEARCH’’ box and click
                                             NAICS Code: 334220                                                                                            to MM 470.5. The purpose of this rule
                                                                                                     ‘‘SEARCH.’’ Click on Open Docket                      is to ensure safety of persons, vessels,
                                             Research and Development in
                                               Nanotechnology                                        Folder on the line associated with this               and the marine environment before,
                                             NAICS Code: 541713                                      rule.                                                 during, and after the Yeatman’s Cove
                                             Research and Development in Biotechnology               FOR FURTHER INFORMATION CONTACT: If                   fireworks.
                                               (except Nanobiotechnology)                            you have questions on this rule, call or
                                             NAICS Code: 541714                                      email Petty Officer Matthew Roberts,                  IV. Discussion of the Rule
                                             Secondary Smelting and Alloying of                      Marine Safety Detachment Cincinnati,                     This rule establishes a temporary
                                               Aluminum                                              U.S. Coast Guard; telephone 513–921–
                                             NAICS Code: 331314
                                                                                                                                                           safety zone from 8 p.m. through 9 p.m.
                                             Search, Detection, Navigation, Guidance,
                                                                                                     9033, email SECOHV-WWM@USCG.Mil.                      on October 11, 2018. The temporary
                                               Aeronautical, and Nautical System and                 SUPPLEMENTARY INORMATION:                             safety zone will cover all navigable
                                               Instrument Manufacturing                                                                                    waters of the Ohio River, extending the
                                                                                                     I. Table of Abbreviations
                                             NAICS Code: 334511                                                                                            entire width of the river, from MM 469
                                             Semiconductor and Related Device                        CFR Code of Federal Regulations                       to MM 470.5. The duration of the
                                               Manufacturing                                         COTP Captain of the Port Sector Ohio                  temporary safety zone is intended to
                                             NAICS Code: 334413                                          Valley                                            ensure the safety of vessels and these
                                             Semiconductor Machinery Manufacturing                   DHS Department of Homeland Security
                                                                                                     FR Federal Register                                   navigable waters before, during, and
                                             NAICS Code: 333242
                                             Storage Battery Manufacturing                           MM Mile marker                                        after the scheduled fireworks display.
                                             NAICS Code: 335911                                      NPRM Notice of proposed rulemaking                       No vessel or person will be permitted
                                             Telephone Apparatus Manufacturing                       § Section                                             to enter the temporary safety zone
                                             NAICS Code: 334210                                      U.S.C. United States Code                             without obtaining permission from the
                                             Turbine and Turbine Generator Set Units                                                                       COTP or a designated representative. A
                                                                                                     II. Background Information and
                                               Manufacturing                                                                                               designated representative is a
                                             NAICS Code: 333611
                                                                                                     Regulatory History
                                                                                                                                                           commissioned, warrant, or petty officer
                                               Dated: October 4, 2018.                                  The Coast Guard is issuing this                    of the U.S. Coast Guard assigned to
                                                                                                     temporary rule without prior notice and               units under the operational control of
                                             Steven T. Mnuchin,
                                                                                                     opportunity to comment pursuant to                    USCG Sector Ohio Valley. Persons or
                                             Secretary.                                              authority under section 4(a) of the                   vessels may request permission to enter
                                             [FR Doc. 2018–22182 Filed 10–10–18; 8:45 am]            Administrative Procedure Act (APA) (5                 the safety zone from the COTP or a
                                             BILLING CODE 4810–25–P                                  U.S.C. 553(b)). This provision                        designated representative. They may be
                                                                                                     authorizes an agency to issue a rule                  contacted on VHF–FM radio channel 16
                                                                                                     without prior notice and opportunity to               or phone at 1–800–253–7465. If
                                             DEPARTMENT OF HOMELAND                                  comment when the agency for good                      permission is granted, all persons and
                                             SECURITY                                                cause finds that those procedures are                 vessels must transit at their slowest safe
                                                                                                     ‘‘impracticable, unnecessary, or contrary             speed and comply with all lawful
                                             Coast Guard                                             to the public interest.’’ Under 5 U.S.C.              directions issued by the COTP or a
                                                                                                     553(b)(3)(B), the Coast Guard finds that              designated representative. The COTP or
                                             33 CFR Part 165                                         good cause exists for not publishing a                a designated representative will inform
                                             [Docket Number USCG–2018–0855]                          notice of proposed rulemaking (NPRM)                  the public of the enforcement date and
                                                                                                     with respect to this rule because it is               times for this safety zone, as well as any
                                             RIN 1625–AA00                                           impracticable. This safety zone must be               changes, through Broadcast Notices to
                                                                                                     established by October 11, 2018, and we               Mariners (BNMs), Local Notices to
                                             Safety Zone; Ohio River, Cincinnati,
                                                                                                     lack sufficient time to provide a                     Mariners (LNMs), and/or Marine Safety
                                             OH
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                                                                                                     reasonable comment period and then                    Information Bulletins (MSIBs) as
                                             AGENCY:    Coast Guard, DHS.                            consider those comments before issuing                appropriate.
                                             ACTION:   Temporary final rule.                         this rule. The NPRM process would
                                                                                                     delay the establishment of the safety                 V. Regulatory Analyses
                                             SUMMARY:   The Coast Guard is                           zone until after the scheduled date of                  We developed this rule after
                                             establishing a temporary safety zone for                the fireworks and compromise public                   considering numerous statutes and
                                             all navigable waters of the Ohio River,                 safety.                                               Executive Orders related to rulemaking.


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Document Created: 2018-10-11 15:36:46
Document Modified: 2018-10-11 15:36:46
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionInterim rule.
DatesEffective date: These provisions are effective November 10, 2018.
ContactFor questions about this interim rule, contact: Thomas Feddo, Deputy Assistant Secretary for Investment Security; Laura Black, Director of Investment Security Policy and International Relations; Meena Sharma, Senior Policy Advisor; or Juliana Gabrovsky, Policy Advisor, at U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220; telephone: (202) 622-3425; email: [email protected]
FR Citation83 FR 51322 
RIN Number1505-AC61
CFR AssociatedForeign Investments in the United States; Investigations; National Defense and Reporting and Recordkeeping Requirements

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