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March 24, 2020 Download PDF
On March 4, 2020, the Treasury Department issued proposed regulations implementing the new authority under the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) for the interagency Committee on Foreign Investment in the United States (“CFIUS”) to impose filing fees in connection with the filing of notices with CFIUS. Although final regulations implementing other elements of FIRRMA went into effect on February 13, 2020, CFIUS chose to handle the imposition of filing fees through a separate rulemaking process. CFIUS is accepting comments on the proposed regulations through April 8, 2020.
Key takeaways from the proposed regulations are as follows:
- As proposed, filing fees would be imposed only in connection with the filing of notices; there would be no filing fee in connection with the filing of short-form declarations. Such an approach is in line not only with FIRRMA, but also with CFIUS’s effort to encourage transaction parties to make greater use of declarations rather than traditional notices. Although declarations have advantages over notices in terms of both cost and processing time, the potential advantages of filing a declaration are undercut by the broad discretion that CFIUS has in determining how it responds to the filing of a declaration. At the end of the 30-day review period after a declaration has been filed, while CFIUS is empowered under FIRRMA and the implementing regulations to clear the transaction, it is also empowered to (i) ask the parties to file a traditional notice or (ii) not make a decision with respect to the transaction (at which point the parties have to decide for themselves whether to file a notice in order to obtain protection against potential future action by CFIUS). Based on the broad discretion that CFIUS has and the manner in which CFIUS has been exercising its discretion to date, it seems likely that most transaction parties will choose to file declarations only where they are confident that a transaction will be easy to clear.
- The proposed regulations set forth the following tiered approach to filing fees for notices, based on the value of the transaction:
- less than $500,000 – no fee;
- equal to or greater than $500,000 but less than $5 million – $750;
- equal to or greater than $5 million but less than $50 million – $7,500;
- equal to or greater than $50 million but less than $250 million – $75,000;
- equal to or greater than $250 million but less than $750 million – $150,000; and
- equal to or greater than $750 million – $300,000.
- Under the proposed regulations, the “value of the transaction” is defined as “the total value of all consideration that has been or will be provided in the context of the transaction by or on behalf of the foreign person that is a party to the transaction, including cash, assets, shares or other ownership interests, debt forgiveness, or services or other in-kind consideration.” Where an acquisition or investment involves both a U.S. business and one or more non-U.S. businesses, the value of the transaction includes the non-U.S. businesses. However, where the value of the transaction is $5 million or more but the value of the interests or rights acquired in the U.S. business is less than $5 million, the filing fee will be set at $750, regardless of the total value of the transaction.
- The proposed regulations provide that, where a notice is submitted that triggers the fee, the fee would have to paid by electronic payment before CFIUS will accept the notice (and therefore before the statutory time clock will begin to run).
- Under the proposed regulations, there is no carve-out for transactions signed before the regulations go into effect, nor is there any carve-out for transactions where the parties have already submitted a draft notice to CFIUS. Rather, as proposed, notices that are filed after the regulations go into effect would be subject to the fee.
- Aside from having a transaction valued at less than $500,000, the only exceptions to the filing fee for notices under the proposed regulations are as follows:
- Where CFIUS determines that a transaction is not a covered transaction or a covered real estate transaction (i.e., not subject to CFIUS jurisdiction), the Treasury Department will refund the filing fee that was paid when the notice was submitted.
- Where the parties have paid the filing fee and CFIUS has permitted the parties to pull and re-file a notice, the parties will not have to pay the fee again, provided that the CFIUS Staff Chairperson has not determined that a material change to the transaction has occurred, or a material inaccuracy or omission was made by the parties in information submitted to CFIUS, that requires CFIUS to consider new information.
- Where the CFIUS Staff Chairperson has determined that extraordinary circumstances relating to national security warrant a waiver of the fee, the fee may be waived in whole or in part.
By contrast, the fee requirement fully applies under the proposed regulations where the parties have filed a notice because they were directed by CFIUS to do so.
- Going forward, for larger transactions where the risk profile suggests that a notice should be filed with CFIUS, it will be advisable for transaction parties to consider the question of how they wish to allocate responsibility for the filing fee.
We will continue to monitor developments related to implementation of FIRRMA, and we will provide further updates as appropriate.
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 Our prior memorandum on the adoption of FIRRMA can be found here: https://www.paulweiss.com/practices/transactional/mergers-acquisitions/publications/president-trump-signs-cfius-reform-legislation?id=26899.
 Our prior memorandum on the final regulations implementing FIRRMA can be found here: https://www.paulweiss.com/practices/transactional/mergers-acquisitions/publications/final-cfius-regulations-implementing-the-foreign-investment-risk-review-modernization-act-of-2018-are-now-in-effect?id=30718.