Overview

On August 13, 2018, President Donald Trump signed into law the Foreign Investment Risk Review Modernization Act (FIRRMA), as part of the John S. McCain National Defense Authorization Act (the Act) for fiscal year 2019. The final text of FIRRMA is available here. FIRRMA previously passed the US House of Representatives and US Senate by overwhelming votes.

FIRRMA codifies a variety of current practices of the Committee on Foreign Investments in the United States (CFIUS) and also makes a number of changes to the scope, rules and procedures governing CFIUS and its review of investments in US businesses by foreign persons under Section 721 of the Defense Production Act of 1950 (as amended, the Exon-Florio Amendment or Exon-Florio). As noted below, these changes include an expansion of the transactions potentially subject to CFIUS review, a short-form submission to CFIUS in certain circumstances and an extension to the initial review period.1

Expanded Jurisdiction

FIRRMA expands the scope of "covered transactions" that are subject to CFIUS review relating to the following:

  • Investments in critical technology, critical infrastructure and sensitive personal data

Under Exon-Florio as it existed prior to FIRRMA, investments by foreign persons in critical technology and critical infrastructure required an element of "control" as generally defined under the rules. Those rules did not specifically reference personal data as an element for CFIUS consideration (though in recent years it has become clear that this is a concern for CFIUS).2 FIRRMA expands the definition of "covered transactions" as it relates to certain investments in critical technology and critical infrastructure companies and now specifically references sensitive personal data of US citizens.3

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Footnotes

1 While certain provisions of FIRRMA became effective immediately upon enactment, many other provisions will not go into effect until implementing regulations are adopted. The provisions of FIRRMA that will go into effect immediately include, but are not limited to, an extension of the time period for reviews of foreign investments by CFIUS from 30 to 45 days and certain of the definitional changes to scope of covered transactions. Other provisions of the legislation, including most of the significant changes to the "covered transactions" definition and the declaration process described below, will go into effect on either the date that is 18 months after the bill's enactment or 30 days after a determination by CFIUS that the regulations, organizational structure, personnel and other resources necessary to administer the bill's provisions are in place. See FIRRMA, § 1727.

2 The acquisition of Genworth Financial, Inc. by China Oceanwide, a Chinese company, was delayed for a substantial period while the parties worked out information barriers and other terms satisfactory to CFIUS to avoid US personal information falling into Chinese hands. This transaction received CFIUS clearance in June 2018. The acquisition of Moneygram, Inc. by Ant Financial, a Chinese company, was announced in 2017 and then abandoned in early 2018, reportedly because of personal information issues.

3 See FIRRMA, § 1703 with respect to paragraphs (a)(4)(B)(iii) and (D) of Exon-Florio. These provisions are not immediately effective.

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