Proposed Rule2021-24597
Regulations Pertaining to Certain Investments in the United States by Foreign Persons and Regulations Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 15, 2021
Issuing agencies
Treasury DepartmentInvestment Security Office
Abstract
This proposed rule would modify the definitions of "excepted foreign state" and "excepted real estate foreign state" by extending by one year the effective date of one of two criteria set forth in the definitions in the regulations implementing certain provisions of Section 721 of the Defense Production Act of 1950, as amended.
Full Text
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<title>Federal Register, Volume 86 Issue 217 (Monday, November 15, 2021)</title>
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[Federal Register Volume 86, Number 217 (Monday, November 15, 2021)]
[Proposed Rules]
[Pages 62978-62980]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-24597]
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DEPARTMENT OF THE TREASURY
Office of Investment Security
31 CFR Parts 800 and 802
Regulations Pertaining to Certain Investments in the United
States by Foreign Persons and Regulations Pertaining to Certain
Transactions by Foreign Persons Involving Real Estate in the United
States
AGENCY: Office of Investment Security, Department of the Treasury.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would modify the definitions of ``excepted
foreign state'' and ``excepted real estate foreign state'' by extending
by one year the effective date of one of two criteria set forth in the
definitions in the regulations implementing certain provisions of
Section 721 of the Defense Production Act of 1950, as amended.
DATES: Written comments must be received by December 15, 2021.
ADDRESSES: Written comments on this proposed rule may be submitted
through one of two methods:
<bullet> Electronic Submission: Comments may be submitted
electronically through the Federal government eRulemaking portal at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. Electronic submission of comments allows
the commenter maximum time to prepare and submit a comment, ensures
timely receipt, and enables the Department of the Treasury (Treasury
Department) to make the comments available to the public. Please note
that comments submitted through <a href="https://www.regulations.gov">https://www.regulations.gov</a> will be
public, and can be viewed by members of the public.
<bullet> Mail: Send to U.S. Department of the Treasury, Attention:
Laura Black, Director of Investment Security Policy and International
Relations, 1500 Pennsylvania Avenue NW, Washington, DC 20220.
Please submit comments only and include your name and company name
(if any), and cite ``Proposed Regulations Pertaining to Certain
Investments in the United States by Foreign Persons and Proposed
Regulations Pertaining to Certain Transactions by Foreign Persons
Involving Real Estate in the United States'' in all correspondence. In
general, the Treasury Department will post all comments to <a href="https://www.regulations.gov/">https://www.regulations.gov/</a> 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: Laura Black, Director of Investment
Security Policy and International Relations, or Richard Rowe, Senior
Policy Advisor, at U.S. Department of the Treasury, 1500 Pennsylvania
Avenue NW, Washington, DC 20220; telephone: (202) 622-3425; email:
<a href="/cdn-cgi/l/email-protection#b5f6f3fce0e69bf3fce7e7f8f4f5c1c7d0d4c6c0c7cc9bd2dac3"><span class="__cf_email__" data-cfemail="0645404f535528404f54544b4746727463677573747f28616970">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
[[Page 62979]]
I. Background
A. The Statute
On August 13, 2018, the Foreign Investment Risk Review
Modernization Act of 2018 (FIRRMA), Subtitle A of Title XVII of Public
Law 115-232, 132 Stat. 2173, was enacted. FIRRMA amends section 721 (as
amended, section 721) of the Defense Production Act of 1950, as
amended, which delineates the authorities and jurisdiction of the
Committee on Foreign Investment in the United States (CFIUS or the
Committee). Executive Order 13456, 73 FR 4677 (Jan. 23, 2008), directs
the Secretary of the Treasury to issue regulations under section 721.
This proposed rule is being issued pursuant to that authority.
FIRRMA maintains the Committee's jurisdiction over any transaction
which could result in foreign control of any U.S. business and broadens
the authorities of the President and CFIUS under section 721 to review
and take action to address national security concerns arising from
certain noncontrolling investments and real estate transactions
involving foreign persons. FIRRMA requires CFIUS to specify criteria to
limit the application of FIRRMA's expanded jurisdiction over these
noncontrolling investments and real estate transactions to certain
categories of foreign persons.
B. Definitions of Excepted Foreign State and Excepted Real Estate
Foreign State--Sections 800.218 and 802.214
On January 17, 2020, the Treasury Department published a final rule
at 85 FR 3112 (Part 800 Rule) that amended 31 CFR part 800 to implement
CFIUS's jurisdiction over certain non-controlling investments (which
this rule describes as ``covered investments''), as well as certain
other provisions of FIRRMA. The Treasury Department also published a
final rule at 85 FR 3158 (Part 802 Rule) that established new
regulations at part 802 of title 31 of the Code of Federal Regulations
relating to CFIUS's authorities and the process and procedures to
review transactions involving the purchase or lease by, or concession
to, a foreign person of certain real estate in the United States. The
Part 800 Rule and the Part 802 Rule each took effect on February 13,
2020, and each address FIRRMA's requirement to limit the application of
FIRRMA's expanded jurisdiction.
The ``excepted foreign state'' definition in the Part 800 Rule
operates together with other relevant terms to exclude from CFIUS's
jurisdiction covered investments by certain foreign persons who meet
certain criteria establishing sufficiently close ties to certain
foreign states. Section 800.218 defines excepted foreign state by a
two-criteria conjunctive test, with delayed effectiveness for the
second criterion. The first criterion is that the Committee identify a
foreign state as an eligible foreign state. The second criterion is
that, by the end of the two-year delayed effectiveness period (i.e., by
February 13, 2022), the Committee make a determination under Sec.
800.1001(a) for each eligible foreign state as to whether such foreign
state ``has established and is effectively utilizing a robust process''
to analyze foreign investments for national security risks and to
facilitate coordination with the United States on matters relating to
investment security.
The ``excepted real estate foreign state'' definition in the Part
802 Rule operates together with other relevant terms to exclude from
CFIUS's jurisdiction certain real estate transactions by certain
foreign persons who meet certain criteria establishing sufficiently
close ties to certain foreign states. The Part 802 Rule applies a two-
criteria conjunctive test in the definition of excepted real estate
foreign state that is analogous to the test in the Part 800 Rule,
except that the second criterion is a determination under Sec.
802.1001(a) that the foreign state must have ``made significant
progress'' in establishing and effectively utilizing the robust process
and coordination that is described in Sec. 800.1001.
On January 17, 2020, the Committee identified Australia, Canada,
and the United Kingdom of Great Britain and Northern Ireland as
eligible excepted foreign states under the Part 800 Rule and as
eligible excepted real estate foreign states under the Part 802 Rule.
Thus, as of February 13, 2020, when the Part 800 Rule and the Part 802
Rule became effective, each of the three identified eligible foreign
states was deemed to be an excepted foreign state and excepted real
estate foreign state, without regard in each case to the second
criterion, which is a determination under Sec. Sec. 800.1001 and
802.1001. In order to remain an excepted foreign state and excepted
real estate foreign state after February 12, 2022, each foreign state
must remain eligible under Sec. Sec. 800.218(a) and 802.214(a),
respectively, and the Committee must make the determinations required
under Sec. Sec. 800.1001(a) and 802.1001(a), respectively, regarding
the foreign state.
II. Proposed Change
The proposed rule would change the date in each of Sec. Sec.
800.218 and 802.214 from February 13, 2022, to February 13, 2023. The
proposed rule therefore would have the effect of extending the delayed
effectiveness period for the second criterion in each of the Part 800
and Part 802 Rules without making any change to the two-criteria
conjunctive test in either the definition of excepted foreign state or
the definition of excepted real estate foreign state. The proposed rule
would make no change to any country's status as an excepted foreign
state or excepted real estate foreign state. Under the proposed rule,
the Committee may make a determination under Sec. 800.1001 or Sec.
802.1001 for an eligible foreign state, including Australia, Canada,
the United Kingdom of Great Britain and Northern Ireland and any other
state that the Committee identifies as eligible, at any time before the
revised February 13, 2023, date.
As stated in the preambles to the Part 800 Rule and the Part 802
Rule, the two-year period of delayed effectiveness for the second
criterion in the definitions of excepted foreign state and excepted
real estate foreign state was intended, in part, to provide the initial
eligible foreign states time to ensure that their national security-
based foreign investment review processes and bilateral cooperation
with the United States on national security-based investment reviews
meet the requirement under Sec. Sec. 800.1001 and 802.1001. Extending
the time period before which such requirements become applicable is
desirable given certain ongoing changes to foreign investment review
regimes.
III. Rulemaking Requirements
Executive Order 12866
These regulations are not subject to the general requirements of
Executive Order 12866, which covers review of regulations by the Office
of Information and Regulatory Affairs in the Office of Management and
Budget (OMB), because they relate to a foreign affairs function of the
United States, pursuant to section 3(d)(2) of that order. In addition,
these regulations are not subject to review under section 6(b) of
Executive Order 12866 pursuant to section 7(c) of the April 11, 2018,
Memorandum of Agreement between the Treasury Department and OMB, which
states that CFIUS regulations are not subject to OMB's standard
centralized review process under Executive Order 12866.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq., RFA)
generally requires an agency to prepare a
[[Page 62980]]
regulatory flexibility analysis unless the agency certifies that the
rule will not, once implemented, have a significant economic impact on
a substantial number of small entities. The proposed rule would extend
the delayed effectiveness period for the second criterion in each of
the Part 800 and Part 802 Rules without making any change to the two-
criteria conjunctive test in either the definition of excepted foreign
state or excepted real estate foreign state. The proposed rule
therefore would not change the circumstances of any investor. Both
before and after the proposed rule's effectiveness, any investor with
sufficiently close ties to an eligible foreign state may be excepted
from certain aspects of CFIUS's jurisdiction, including if engaging in
a transaction with a small business. Such exception would be expected
to lessen the burden on any such small business. The proposed rule
therefore would not impose any additional burden on potential filers,
including small businesses. Considering the foregoing, the Secretary of
the Treasury certifies, pursuant to 5 U.S.C. 605(b), that this proposed
rule will not have a significant economic impact on a substantial
number of small entities.
List of Subjects
31 CFR Part 800
Foreign investments in the United States, Investments.
31 CFR Part 802
Investments, Real estate transactions in the United States.
For the reasons set forth in the preamble, the Treasury Department
proposes to amend 31 CFR parts 800 and 802 as follows:
PART 800--REGULATIONS PERTAINING TO CERTAIN INVESTMENTS IN THE
UNITED STATES BY FOREIGN PERSONS
0
1. The authority citation for part 800 continues to read:
Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.
Subpart B--Definitions
Sec. 800.218 [Amended]
0
2. Amend Sec. 800.218 introductory text by removing the year ``2022''
wherever it appears and adding in its place ``2023''.
PART 802--REGULATIONS PERTAINING TO CERTAIN TRANSACTIONS BY FOREIGN
PERSONS INVOLVING REAL ESTATE IN THE UNITED STATES
0
3. The authority citation for part 802 continues to read:
Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.
Subpart B--Definitions
Sec. 802.214 [Amended]
0
4. Amend Sec. 802.214 introductory text by removing the year ``2022''
wherever it appears and adding in its place ``2023''.
Larry McDonald,
Acting Assistant Secretary for International Markets.
[FR Doc. 2021-24597 Filed 11-10-21; 4:15 pm]
BILLING CODE 4810-25-P
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</html>Indexed from Federal Register on November 15, 2021.
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