Department of the Treasury

1 Friday, November 21, 2008. Part II. Department of the Treasury Office of Investment Security 31 CFR Part 800. Regulations Pertaining to mergers , Acquisitions, and Takeovers by Foreign Persons; Final Rule dwashington3 on PRODPC61 with RULES2. VerDate Aug<31>2005 14:36 Nov 20, 2008 Jkt 217001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\ 21 NOR2. 70702 Federal Register / Vol. 73, No. 226 / Friday, November 21, 2008 / Rules and Regulations Department OF THE Treasury President Bush signed FINSA into law lead agencies. The lead agency, on on July 26, 2007, and it became effective behalf of CFIUS, may negotiate, enter Office of Investment Security on October 24, 2007. into or impose, monitor, and enforce Section 721 authorizes the President mitigation agreements or conditions 31 CFR Part 800 to review mergers , acquisitions, and with parties to a transaction to address takeovers by or with any foreign person any threats to national security posed by RIN 1505 AB88.

2 Which could result in foreign control of the transaction. FINSA requires Regulations Pertaining to mergers , any person engaged in interstate regulations to provide for an appropriate Acquisitions, and Takeovers by commerce in the United States, to role for the Secretary of Labor with Foreign Persons determine the effects of such respect to mitigation agreements. transactions on the national security of FINSA also formalizes the process by AGENCY: Department of the Treasury . the United States. FINSA codifies which CFIUS conducts national security ACTION: Final rule. aspects of the structure, role, process, reviews of any transaction that could and responsibilities of the Committee on result in foreign control of a person SUMMARY: This Final Rule amends Foreign Investment in the United States regulations in part 800 of 31 CFR that engaged in interstate commerce in the ( CFIUS'' or the Committee'') and the United States, which FINSA refers to as implement section 721 of the Defense role of executive branch departments, Production Act of 1950 ( section 721''), a covered transaction.

3 '' Specifically, agencies, and offices in CFIUS's review FINSA provides for CFIUS review of as amended by the Foreign Investment of transactions for national security and National Security Act of 2007, covered transactions, which must be concerns. A brief summary of major completed within 30 days, to determine codified at 50 App. 2170. While aspects of the statute follows. the revised regulations retain many the effect of the transaction on national FINSA formally establishes CFIUS in security and to address any national features of the prior regulations, a statute. (Previously, the sole basis for number of changes have been made to security concerns. Subject to certain the existence of CFIUS had been implement section 721, increase clarity, exceptions discussed below, FINSA. Executive Order 11858 of May 7, 1975, reflect developments in business requires an additional investigation, 40 FR 20263, 3 CFR, 1971 1975.)

4 Practices over the past several years, which must be completed within 45. Compilation, p. 990.) FINSA specifies and make additional improvements days, in the following types of cases: (1). the following as members of CFIUS: The based on experiences with the prior Where the transaction threatens to Secretary of the Treasury (who serves as regulations. impair national security and that chairperson), the Attorney General, and threat has not been mitigated prior to or DATES: Effective date: This rule is the Secretaries of Homeland Security, during the 30-day review; (2) where the effective December 22, 2008. Commerce, Defense, State, and Energy. FINSA also provides that CFIUS may transaction is a foreign government- Applicability date: See controlled transaction; (3) where the include, generally or on a case-by-case FOR FURTHER INFORMATION CONTACT: For transaction results in foreign control basis as the President deems questions about this Final Rule, contact: over critical infrastructure that, in the appropriate, the heads of any other Nova Daly, Deputy Assistant Secretary, determination of CFIUS, could impair executive Department , agency, or office.

5 Department of the Treasury , 1500 national security, if that impairment has The President designated the Trade Pennsylvania Avenue, NW., not been mitigated; or (4) where the lead Representative and the Director of the Washington, DC 20220, telephone: (202) Office of Science and Technology Policy agency recommends, and CFIUS. 622 2752, e-mail: as additional members of CFIUS in concurs, that an investigation be Welby Executive Order 11858, as amended undertaken. Executive Order 11858 also Leaman, Senior Advisor, telephone: most recently by Executive Order 13456, provides that CFIUS shall undertake an (202) 622 0099, e-mail: 73 FR 4677 (Jan. 23, 2008). In the same investigation if a member of CFIUS. Aimen Executive Order, the President directed advises the chairperson that it believes Mir, Senior Policy Analyst, telephone: that [t]he following officials (or their that the transaction threatens to impair (202) 622 0184, e-mail: designees) shall observe and, as the national security and that the threat or Mark appropriate, participate in and report to has not been mitigated.

6 Jaskowiak, Office Director, telephone: the President on [CFIUS's] activities'': To ensure accountability for CFIUS. (202) 622 5052, e-mail: (i) The Director of the Office of decisions, FINSA requires that a senior- Management and Budget, (ii) the level official of the Department of the SUPPLEMENTARY INFORMATION: Chairman of the Council of Economic Treasury and of the lead agency certify Advisors, (iii) the Assistant to the to Congress, for any covered transaction I. Background President for National Security Affairs, on which CFIUS has concluded action The Foreign Investment and National (iv) the Assistant to the President for under section 721, that CFIUS has Security Act of 2007 ( FINSA''), Public Economic Policy, and (v) the Assistant determined that there are no unresolved Law 110 49, 121 Stat. 246, which to the President for Homeland Security national security concerns. The amends section 721 of the Defense and Counterterrorism.

7 FINSA also certification must be made at a level no Production Act of 1950 ( DPA'') (50 establishes the Director of National lower than an employee appointed by App. 2170), requires the issuance Intelligence ( DNI'') and the Secretary the President by and with the advice of regulations implementing its of Labor as ex officio members of CFIUS. and consent of the Senate, for provisions following public notice and FINSA specifies that the DNI is to transactions on which CFIUS concludes comment. provide independent analyses of any action under section 721 after a review, dwashington3 on PRODPC61 with RULES2. FINSA was passed by Congress as national security threats posed by and at the Deputy Secretary level or 556, which adopted the language of transactions and is to have no other above for transactions on which CFIUS. S. 1610. Senate Report 110 80, policy role. FINSA further provides that, concludes action under section 721 after accompanying S.

8 1610, provides a for each transaction before CFIUS, the an investigation. If the President makes useful history of the various bills Department of the Treasury shall a decision on a transaction under leading to the enactment of FINSA. designate, as appropriate, one or more section 721, then he must announce his VerDate Aug<31>2005 14:36 Nov 20, 2008 Jkt 217001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\ 21 NOR2. Federal Register / Vol. 73, No. 226 / Friday, November 21, 2008 / Rules and Regulations 70703. decision publicly within 15 days of the some oral comments that were guidance on the types of transactions completion of the investigation. principally provided at a public meeting that CFIUS has reviewed and that have In addition, in order for CFIUS to held at the Department of the Treasury presented national security conclude action under section 721 for a on May 2, 2008. The written and oral considerations.

9 The guidance, among foreign government-controlled submissions comprised approximately other things, will include a discussion transaction without proceeding beyond 200 distinct comments. The comments of certain types of information the a review to an investigation, the represented a wide range of interests, Committee, based on past experience, Department of the Treasury and the lead including foreign governments, considers useful for parties filing a agency must determine, at the Deputy business groups, law firms, and a notice to provide. Secretary level or above, that the member of Congress. All comments The provisions of Subpart D. transaction will not impair the national received by the end of the comment pertaining to the contents of a voluntary security.'' Similarly, in cases where the period were posted for public viewing at notice have been expanded to reflect transaction would result in foreign information that CFIUS now routinely control over critical infrastructure, the Among the comments submitted were seeks from notifying parties.

10 By having transaction could impair national a number that welcomed the Proposed the relevant information included in security, but such impairment has been Rule as helping the Committee to each notification, CFIUS will be better mitigated during the review period, safeguard national security in a prepared to conduct an efficient and in- CFIUS may conclude action under manner consistent with the depth analysis as soon as a notice is section 721 without proceeding beyond commitment to open investment. accepted. As noted in the proposed a review if the Department of the Although one commenter believed the regulations, personal identifier Treasury and the lead agency determine, Proposed Rule would result in the information, which is needed to at the Deputy Secretary level or above, great majority'' of mergers and examine the backgrounds of members of that the transaction will not impair acquisitions being subject to reviews, the boards of directors and senior national security.