Rule2024-27310
Penalty Provisions, Provision of Information, Negotiation of Mitigation Agreements, and Other Procedures Pertaining to Certain Investments in the United States by Foreign Persons and 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 26, 2024
Effective
December 26, 2024
Issuing agencies
Treasury DepartmentInvestment Security Office
Abstract
This final rule revises certain provisions of the regulations of the Committee on Foreign Investment in the United States (CFIUS) pertaining to penalties for violations of statutory or regulatory provisions or agreements, conditions, or orders issued pursuant thereto; negotiation of mitigation agreements; requests for information by CFIUS; and certain other procedures.
Full Text
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[Federal Register Volume 89, Number 228 (Tuesday, November 26, 2024)]
[Rules and Regulations]
[Pages 93179-93187]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27310]
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DEPARTMENT OF THE TREASURY
Office of Investment Security
31 CFR Parts 800 and 802
[Docket ID TREAS-DO-2024-0006]
RIN 1505-AC85
Penalty Provisions, Provision of Information, Negotiation of
Mitigation Agreements, and Other Procedures Pertaining to Certain
Investments in the United States by Foreign Persons and Certain
Transactions by Foreign Persons Involving Real Estate in the United
States
AGENCY: Office of Investment Security, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This final rule revises certain provisions of the regulations
of the Committee on Foreign Investment in the United States (CFIUS)
pertaining to penalties for violations of statutory or regulatory
provisions or agreements, conditions, or orders issued pursuant
thereto; negotiation of mitigation agreements; requests for information
by CFIUS; and certain other procedures.
DATES: This final rule is effective on December 26, 2024.
FOR FURTHER INFORMATION CONTACT: Meena R. Sharma, Director, Office of
Investment Security Policy and International Relations 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#a5e6e3ecf0f68bf7c0c2d0c9c4d1cccacbd6e5d1d7c0c4d6d0d7dc8bc2cad3"><span class="__cf_email__" data-cfemail="793a3f302c2a572b1c1e0c15180d1016170a390d0b1c180a0c0b00571e160f">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The regulations at parts 800 and 802 to title 31 of the Code of
Federal Regulations (parts 800 and 802, respectively) implement the
provisions of section 721 of the Defense Production Act of 1950 (DPA),
as amended, which is codified at 50 U.S.C. 4565 (section 721) and which
establishes the authorities of the Committee on Foreign Investment in
the United States (CFIUS or the Committee). Section 721 authorizes the
President or his designee (i.e., CFIUS) to review mergers,
acquisitions, and takeovers by or with any foreign person that could
result in foreign control of any U.S. business, certain noncontrolling
investments by foreign persons in a subset of U.S. businesses, as well
as certain real estate transactions involving foreign persons. When in
the course of its review CFIUS identifies a national security risk that
arises as a result of a transaction within its jurisdiction (referred
to in the regulations as a ``covered transaction'' or ``covered real
estate transaction'' as appropriate), it is authorized to negotiate and
enter into agreements with the transaction parties or impose conditions
on the transaction parties, including through the issuance of orders,
to mitigate the risk. CFIUS is further authorized to enforce those
agreements, conditions, and orders, including through assessing a
penalty.
On April 15, 2024, the U.S. Department of the Treasury (Treasury
Department) published in the Federal Register a notice of proposed
rulemaking (proposed rule) (89 FR 26107) that proposed amendments to
certain provisions of parts 800 and 802. Specifically, the proposed
rule included amendments that would: (1) expand the categories of
information that CFIUS
[[Page 93180]]
may request from transaction parties and other persons; (2) introduce a
time frame within which parties would ordinarily be required to respond
to a Committee proposal to mitigate identified national security risk
(including any revision of such a proposal); (3) expand the instances
in which CFIUS may use its subpoena authority; (4) expand the
circumstances in which a civil monetary penalty may be imposed; (5)
increase the maximum civil monetary penalty available for certain
violations of CFIUS's statute or regulations, including as related to
mitigation agreements, conditions, or orders; and (6) extend the time
frames for a party's submission of a petition for reconsideration of a
penalty and the Committee's response to such a petition.
Further explanation of the proposed changes can be found at 89 FR
26107. The public was given an opportunity to comment on the proposed
rule, and comments were due by May 15, 2024. The Treasury Department
received 728 comment submissions, of which 718 were duplicates or near
duplicates. Comments are discussed in the following section along with
the changes made in this final rule.
II. Summary of Comments and Changes From the Proposed Rule
During the public comment period, the Treasury Department received
728 comment submissions reflecting a range of views. The Treasury
Department considered each comment submitted on the proposed rule and
made one revision to this final rule in response to the comments. The
section-by-section analysis below discusses the comments received,
explains the Treasury Department's responses to the comments, and
describes changes made in this final rule in light of the comments.
A. Requesting Information From Transaction Parties and Other Persons--
Sections 800.501, 802.501, 800.801, and 802.801
One commenter expressed the view that the provisions pertaining to
requesting information from ``other persons'' are without any
limitation and recommended that the provisions be modified to make
clear that such other persons must have a connection to a particular
transaction. Additionally, the commenter recommended that the
Committee's evaluation of the adequacy of a non-party's response to a
CFIUS request for information should be based on whether the response
sufficiently addressed the specific questions posed, rather than
whether the Committee derived any benefit from the response. Finally,
the commenter proposed that if such other persons or transaction
parties omit information from a response to a CFIUS inquiry about a
transaction, a determination of whether that omission constitutes a
violation of the statute or regulations should be subject to a
``knowledge qualifier''--i.e., the Committee should determine a
person's omission constitutes a violation if the person ``knew or
should have known,'' for example, that the information omitted was
responsive to the Committee's inquiry. Such a qualifier would be
warranted, according to the commenter, because persons who are not
transaction parties may not be familiar with CFIUS and its authorities.
The final rule makes no change in response to this comment. As
discussed in the proposed rule, CFIUS, acting on behalf of the
President, currently has authority pursuant to section 705 of the DPA
to obtain information from ``any person as may be necessary or
appropriate . . . to the enforcement or administration of [section 721
and the regulations thereunder].'' Therefore, CFIUS may, if
appropriate, request and compel through issuance of a subpoena the
production of information not only from transaction parties but also
from other persons to aid in the enforcement or administration of the
CFIUS statute and regulations. The proposed rule addressed requests for
information when such information pertains to a transaction that has
been notified or declared to the Committee or, in certain
circumstances, a transaction for which no notice or declaration has
been submitted (a non-notified transaction). The Committee proposed to
be able to seek and compel information to enable it to determine
whether a transaction is a covered transaction, whether it may raise
national security concerns such that the Committee should review it (if
it is a covered transaction), and whether the transaction is of a type
for which submission of a declaration was mandatory. Because any
request made or subpoena issued must be in furtherance of one of the
foregoing purposes, as specified in the proposed rule, the Committee's
authority is not ``without any limitation whatsoever,'' as suggested by
the commenter. Furthermore, in determining the sufficiency of a party's
response to an inquiry, the Committee would assess whether the
information provided adequately responded to the question posed, as the
commenter suggests. In determining whether to issue a request for
information or (as appropriate) subpoena to a person other than the
transaction parties, CFIUS will consider the relationship of the other
person to the relevant transaction and the information sought and will
comply with applicable confidentiality provisions in section 721(c). In
addition, as with information submitted by transaction parties, CFIUS
will treat information submitted by third parties in accordance with
its confidentiality obligations. It would be challenging to specify in
regulations an exhaustive list of ``other persons'' to whom CFIUS may
issue requests (or, as appropriate, subpoenas) for information. The
identity of such other persons may vary depending on the nature of the
transaction and transaction parties as well as the information that
CFIUS needs to obtain. The Committee can envision situations in which
it would seek information from third persons such as banks,
underwriters, or service providers to transaction parties. There may be
situations in which relevant information is possessed by other third
parties and the Committee would consider it appropriate to seek
information from such third parties.
Moreover, the Committee does not consider it appropriate to put in
place what the commenter refers to as a ``knowledge qualifier'' for
purposes of determining whether a third party's omission of information
from a submission to CFIUS constitutes a violation of the statute or
regulations. (As noted above, while the commenter used the phrase
``knowledge qualifier,'' CFIUS understood it to be referring to the
responding party's knowledge with respect to whether information is
appropriate to include in response to the Committee's information
request.) For CFIUS to impose a penalty on a transaction party or other
person for an omission of information, the omission would have to be
material. That condition appears to address the concern underlying the
comment at issue. Further, when CFIUS requests information--whether
from a transaction party or a third party--it identifies its authority
for doing so, and that enables the respondent to evaluate applicable
obligations itself or with legal counsel.
Another commenter addressed the proposal to expand the categories
of information that CFIUS can request from parties to non-notified
transactions. As noted above, under the proposed rule CFIUS would be
able to request not only information relevant to determining whether a
transaction is a covered transaction but also information relevant to
national security risk (and whether a transaction is subject to the
mandatory declaration provisions). The commenter expressed concern
that, if
[[Page 93181]]
adopted, this provision would allow CFIUS to inquire about transactions
that are outside its jurisdiction (i.e., transactions that are not
covered transactions), and parties to those transactions would be
obligated to respond.
The final rule makes no change in response to this comment.
Consistent with its statutory obligation to establish a process to
identify certain non-notified transactions (section 721(b)(1)(H)) and
the current regulations (see Sec. 800.501(b), and with respect to
covered real estate transactions, see Sec. 802.501(b)), CFIUS requests
information about non-notified transactions only where the Committee
has determined that the transaction ``may be a covered transaction and
may raise national security considerations.'' Before requesting that
parties notify their transaction to CFIUS, the Committee assesses
jurisdiction and issues a request only if the Committee determines that
the transaction is, in fact, a covered transaction and may raise
national security considerations. Expanding the information that CFIUS
may request from parties to non-notified transactions to include
information pertaining to national security risk would not replace the
full risk-based assessment that occurs during the formal review of a
declaration or notice. Nor would it replace or circumvent the threshold
determination made by CFIUS as to whether a transaction is a covered
transaction. Engaging in preliminary fact-finding relevant to national
security considerations, however, could help the Committee determine
whether and when to request a notice from transaction parties. As
explained in the proposed rule, this fact-finding should help focus the
transactions the Committee requests for filing, benefitting both
transaction parties and national security.
B. Time Frame for Responding to Proposed Mitigation Terms--Sections
800.504 and 802.504
Several commenters expressed the view that three business days is
not enough time for transaction parties to substantively respond to
mitigation proposals, and that imposing such a time frame will not
improve the mitigation negotiation process. These comments are
discussed in more detail below along with the change in the final rule
made in response to these comments.
One commenter expressed the view that mitigation proposals can
introduce measures that would significantly impact the efficiency and
competitiveness of the U.S. business and can also reflect an imperfect
understanding of the U.S. business, including its technology and
operations. Under such circumstances, transaction parties may struggle
to determine the appropriate response to the Committee, making it a
challenge to respond in three days. Another commenter expressed the
view that the initial draft of a mitigation agreement, which is often
developed by CFIUS, may not reflect a full understanding of the
transaction parties' operations, which in turn may necessitate
extensive analysis and revision by the transaction parties that often
takes more than three business days. The commenter also expressed
strong support for earlier engagement between the Committee and
transaction parties in the mitigation proposal process and a
standardized and transparent process for implementing mitigation
agreements for both CFIUS and transaction parties. The commenter
suggested the Committee create a standard and transparent process to
create a record of how mitigation agreements are to be interpreted and
applied post-execution to bring clarity and facilitate compliance,
particularly when there is staff turnover or when enforcement personnel
are different from the personnel involved in the negotiation of the
agreement. A third commenter expressed the view that a three-day
deadline could preclude input on mitigation measures from relevant
business units. A fourth commenter expressed the view that the majority
of transaction parties are incentivized to work collaboratively with
the Committee to negotiate mitigation proposals as transactions are
often notified to CFIUS prior to their completion, in some cases with
CFIUS clearance as a condition for closing the transaction. The
commenter noted that the Committee and transaction parties are better
served when there is additional time to fully consider how proposed
mitigation terms would be implemented. Though the proposed rule
included the option for extension requests, the commenter expressed
that transaction parties may spend too much time preparing such a
request as opposed to preparing a substantive response to the
Committee. Another commenter expressed the view that three business
days is not enough time for transaction parties to review proposed
mitigation measures, analyze the operational considerations of such
measures, coordinate internally, reach agreement, and prepare a
substantive response to CFIUS. The commenter further expressed that
such a time frame is not analogous to the time frame for transaction
parties to respond to information requests given the complexity of the
issues associated with mitigation agreements. The final commenter on
this topic noted that a three-day time frame may result in transaction
parties accepting mitigation terms without conducting the requisite
analysis and assessment.
Several commenters also proposed alternatives to a standard three-
day response time frame. Some of these commenters suggested that CFIUS
impose a time frame not as a routine matter but only when, in the
discretion of the Staff Chairperson, a fixed deadline is determined to
be warranted by relevant circumstances, with extensions available upon
request and as needed. For example, the Staff Chairperson might impose
a deadline if prior interaction with the transaction parties has shown
them to be insufficiently responsive. Commenters also suggested that
the three-day time frame be extended to five business days, and one
commenter suggested 10 business days. To help resolve mitigation
proposals in the time required by statute, one commenter suggested that
a time frame be implemented for the Committee's proposal of mitigation
terms. Additionally, commenters expressed the view that rejection of a
notice, the remedy for failure to respond in the time frame specified,
would not be in the interest of national security, because removing the
case from CFIUS review until the transaction parties refile the
transaction would delay the implementation of effective mitigation
measures. The commenters noted that this is most relevant for closed
transactions, where an extant risk may be present and transaction
parties are not as incentivized to finalize review of the transaction
with CFIUS. One commenter suggested that rejection in this instance
should require approval of a Secretary or Deputy Secretary from each
CFIUS member agency, akin to the current requirement in CFIUS
regulations with respect to a 15-day extension of the statutory
investigation period in extraordinary circumstances. The commenters
suggested that CFIUS utilize its existing authority to impose interim
mitigation measures to address national security risk pending a
finalized mitigation agreement.
One commenter expressed the view that interim mitigation measures
better address risks to national security that arise from closed
transactions, and that such measures are also effective at addressing
immediate national security risks that arise from pre-closing
[[Page 93182]]
transactions. Another commenter further cited to the Committee's
authority to impose mitigation measures (beyond interim measures)
which, in the commenter's view, is a more effective tool to facilitate
efficient negotiation of mitigation agreements.
In response to these comments, the final rule does not contain a
three-day time frame for responding to mitigation proposals as a
default rule in each instance the Committee sends mitigation terms to
parties. Instead, it provides that the Staff Chairperson may impose a
time frame of no fewer than three business days on a discretionary
basis in consideration of certain factors identified in the
regulations. As discussed in the preamble to the proposed rule, in
CFIUS's experience there have been instances in which transaction
parties have been relatively less motivated to respond promptly to a
mitigation proposal, and in some of those instances delayed responses
have impeded the Committee's ability to address national security risks
and fulfill its statutory obligation to complete an investigation in 45
days. Based on that experience, allowing the Staff Chairperson, at
their discretion, to impose a time frame for response to a mitigation
proposal is warranted. In exercising that discretion, the Staff
Chairperson may consider the nature of the transaction, the time
remaining in the investigation, and the transaction parties' past
responsiveness, among other factors. This change from the proposed rule
was made in consideration of the comments articulating specific
challenges in negotiating effective mitigation terms that a U.S.
business can operationalize within a three-day, broadly applicable time
frame. Because CFIUS must coordinate input from subject matter experts
and Committee staff across the nine member agencies, a time frame for
CFIUS to provide mitigation proposals, as one commenter suggested, is
similarly not feasible. The Committee recognizes the importance of
allowing sufficient time for consideration and negotiation, and also
appreciates that many transaction parties negotiate with the Committee
expeditiously. However, there are some instances in which the
timeliness of resolution is not a compelling motivation for the
transaction parties, and it is in those situations that the Staff
Chairperson may determine it appropriate to impose a time frame for a
party's response.
Additionally, the final rule retains the proposal to allow CFIUS to
reject a notice as a remedy for parties' failure to respond to proposed
mitigation terms in the time frame specified for two independent
reasons. First, rejection is consistent with the Staff Chairperson's
existing authority to reject a notice for any of the reasons listed
under Sec. Sec. 800.504(a) and 802.504(a), including for a failure to
provide follow-up information within three business days of CFIUS's
request. Approval by a Secretary or Deputy Secretary, as suggested by
one commenter, would not be consistent with this existing rejection
framework. Second, while rejection of the notice may not be an
appropriate remedy in every instance of a missed deadline, as the
commenters point out, there are circumstances in which rejection due to
failure to substantively respond to a mitigation proposal within the
specified time frame would be appropriate and in the interest of
national security (for instance, where parties have not provided timely
responses but are interested in receiving CFIUS approval in a timely
manner). Accordingly, to account for the unique circumstances of each
transaction, the authority of the Committee, acting through the Staff
Chairperson, to reject the notice on this basis would be discretionary.
In response to comments that CFIUS's authority to impose conditions
to mitigate national security risk is a better remedy than rejection
for failure to respond to mitigation proposals, and that interim
mitigation conditions are already an effective tool, the final rule
makes no changes. However, when parties fail to respond to such
proposals and when otherwise necessary, the Committee may exercise its
existing authority under section 721(b)(2)(A) and (l)(3)(A) to impose
and enforce any condition with any party to a covered transaction to
mitigate any risk to the national security of the United States that
arises as a result of a covered transaction. CFIUS has the authority to
impose such measures on a final or interim basis at any point during a
covered transaction's review or investigation. For example, CFIUS may
impose measures on the parties to a covered transaction to address
specific national security concerns identified during the review or
investigation of a covered transaction until such time that the
Committee has concluded action. Pursuant to section 721(l)(1), CFIUS
also has the authority to, on an interim basis, suspend a proposed or
pending covered transaction that may pose a risk to the national
security of the United States for such time as the covered transaction
is under review or investigation. Conditions may also be imposed on a
final basis for transactions prior to closing, as well as for completed
transactions. CFIUS will consider the appropriateness and effectiveness
of imposing conditions on an interim or final basis in determining
whether to specify a time frame to respond to mitigation proposals. Any
condition imposed would be based on a risk-based analysis conducted by
the Committee and would be reasonably calculated to be effective, allow
for compliance in an appropriately verifiable way, and enable effective
monitoring of compliance with and enforcement of the terms of the
condition.
C. Civil Monetary Penalties--Sections 800.901 and 802.901
One commenter requested that the Treasury Department clarify the
rationale for the increase in the maximum civil monetary penalty, and
that the maximum not be increased to $5,000,000 in certain contexts.
The commenter suggested that only transactions valued at less than
$5,000,000 should be subject to a penalty up to $5,000,000 and that for
transactions valued at $5,000,000 or more, where transaction value can
serve as the maximum, the penalty maximum should not be revised or
revised only modestly. With respect to imposing monetary penalties for
breaches of a mitigation agreement, the commenter also expressed the
view that most breaches occur due to human error or a lack of
understanding of the mitigation terms. Alternatively, several
commenters expressed support for increasing the penalty maximum. One
commenter expressed support for a penalty up to $5,000,000, and two
commenters suggested that the penalty maximum be higher than
$5,000,000. The final rule makes no changes to the proposed text of
Sec. Sec. 800.901 and 802.901 in response to these comments.
Under the regulations being amended, CFIUS has the authority to
impose a maximum civil monetary penalty of $250,000 for submission of a
declaration or notice with a material misstatement or omission, or the
making of a false certification. CFIUS also had the authority to impose
a maximum civil monetary penalty of the greater of $250,000 or the
value of the transaction for failure to file a mandatory declaration
and for violating a material provision of a mitigation agreement,
condition, or order. The Committee's statutory penalty authority at
section 721(h)(2)(A) provides no maximum dollar amount. The current
penalty maximum of $250,000 was established through regulations issued
over 15 years ago and has never been adjusted. CFIUS's experience in
reviewing hundreds of transactions annually and
[[Page 93183]]
monitoring compliance with over 200 national security agreements is
that a higher maximum penalty for transactions of any size would be
more effective to address the conduct that occurred and to deter future
violations. Independent of that experience, as discussed in the
proposed rule, some transactions have a low transaction value, which
makes the value of the transaction an inadequate cap for an appropriate
penalty. In response to the comment that most violations are
unintentional, the Treasury Department notes that consistent with
current practice, the finding of a violation will not necessarily lead
to a monetary penalty. The maximum penalty will serve as an upper limit
in cases where a penalty is appropriate; each penalty assessment will
continue to be based on the nature of the violation; and CFIUS will
continue to take into account the aggravating and mitigating factors
surrounding the conduct (see the CFIUS Enforcement and Penalty
Guidelines at 87 FR 66220).
D. Additional Comments Received
One commenter expressed the view that the proposed rule would deter
foreign investment into the United States. The Treasury Department
notes that CFIUS operates within the United States' longstanding open
investment policy and focuses solely on the national security risks
posed by transactions before it. Not all foreign direct investment in
the United States is subject to CFIUS's jurisdiction, and this rule
does not change that jurisdiction or national security mandate. As
such, the final rule makes no change in response to this comment.
Additionally, over 700 comment submissions included duplicate or
near-duplicate comments that broadly expressed support for CFIUS,
including the expansion of CFIUS's investigative capabilities and the
Committee's authority to impose penalties. Several of these submissions
also included comments expressing views that are outside the scope of
CFIUS and the proposed rule. For example, one commenter suggested that
foreign investment into residential real estate should be curtailed to
alleviate homelessness, and another suggested that large corporations
should be broken up to benefit consumers. Two other comment submissions
included comments on topics not addressed in the proposed rule. One
commenter discussed their views regarding marijuana production in
Maine, and another expressed views on the U.S. political system and
increases in the cost of certain goods. In addition, one comment
submission was a test comment with no other content. The final rule
makes no changes in response to these comments.
III. Applicability of Provisions
The amendments published in this final rule will apply from the
effective date set forth herein. Many of the provisions in this final
rule pertain to CFIUS processes and will apply to all Committee actions
after the effective date. For example, parties to a transaction not
submitted to CFIUS will be required to provide requested information to
enable the Committee to determine whether a transaction may raise
national security considerations in connection with any information
request the Committee makes pursuant to Sec. 800.501(b)(1) after the
effective date. Transaction parties currently subject to a mitigation
agreement, condition, or order may be required to provide requested
information to enable the Committee to monitor and enforce any
agreement pursuant to Sec. 800.801(a)(3) or Sec. 802.801(a)(3) after
the effective date.
For transactions already under review or investigation by the
Committee at the time of the effective date of this final rule, the
amendments to Sec. Sec. 800.504 and 802.504, which allow the Committee
to impose deadlines for responses to proposed national security
agreements, will not apply. So that transaction parties have sufficient
notice of the new requirements, those sections will apply only to
notices accepted by the Committee after the effective date. Similarly,
the extended deadlines in Sec. Sec. 800.901(f) and 802.901(e) will not
apply to penalty notices and petitions pending at the time of the
effective date. The 20-business-day deadline for responses and the
Committee's authority to extend such a time frame under compelling
circumstances will apply to parties that receive a notice of penalty
issued by CFIUS after the effective date.
For transaction parties subject to a mitigation agreement,
condition, or order as of the effective date of this final rule, the
penalty provisions for a violation of such agreement, condition, or
order in effect at the time of the agreement, condition, or order will
continue to apply, as specified in Sec. Sec. 800.901(c)(1) and (2) and
802.901(b)(1), as amended. However, conduct by such parties that is not
governed by an agreement, condition, or order, such as a material
misstatement or omission made to the Committee, will be subject to
enforcement under the regulations as amended by this final rule after
the effective date. CFIUS may impose a maximum civil monetary penalty
of $5,000,000 for any violation of any national security agreement
executed after the effective date of the final rule.
IV. Severability
The provisions of this final rule are separate and severable from
one another. If any provision of this rule is stayed or determined to
be invalid, it is the Treasury Department's intention that the
remaining provisions shall continue in effect. Each of the amendments
in this rule pertains to a different part of CFIUS's process--including
non-notified information requests, mitigation proposals during review
and investigation, compliance monitoring, and penalty determinations--
and the changes to each of these processes are not dependent on one
another.
V. Rulemaking Requirements
Executive Order 12866
This rule is not subject to the general requirements of Executive
Order 12866, as amended, which covers review of regulations by the
Office of Information and Regulatory Affairs in the Office of
Management and Budget (OMB), because it relates to a foreign affairs
function of the United States, pursuant to section 3(d)(2) of that
order. In addition, this rule is not subject to review under section
6(b) of Executive Order 12866 pursuant to section 1(d) of the June 9,
2023, 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.
Paperwork Reduction Act
The collection of information contained in this rule has been
previously submitted to the OMB for review in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and approved under
OMB Control Number 1505-0121. 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 OMB Control Number.
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, once
implemented, have a significant economic impact on a substantial number
of small entities. The RFA applies whenever an agency is required to
publish a general notice of proposed rulemaking under section 553(b) of
the
[[Page 93184]]
Administrative Procedure Act (APA) (5 U.S.C. 553), or any other law. As
set forth below, because regulations issued pursuant to the DPA, such
as these regulations, are not subject to the rulemaking requirements of
the APA or other law requiring the publication of a general notice of
proposed rulemaking, the RFA does not apply.
The final rule makes amendments to the regulations implementing
section 721 of the DPA (85 FR 3112 and 85 FR 3158), which the Treasury
Department previously determined would not significantly impact a
substantial number of small entities. The amendments in this final rule
do not change that analysis or determination. The Treasury Department
also invited public comment on how the proposed rule would affect small
entities and did not receive any specific comments on this topic.
Congressional Review Act
This final rule has been submitted to the OMB's Office of
Information and Regulatory Affairs, which has determined that the rule
is not a ``major'' rule under the Congressional Review Act.
List of Subjects
31 CFR Part 800
Foreign investments in the U.S., Investment companies, Investments,
Penalties, Reporting and recordkeeping requirements.
31 CFR Part 802
Foreign investments in the U.S., Investment companies, Investments,
Land sales, National defense, Penalties, Public lands, Real property
acquisition, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Treasury Department
amends 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 as follows:
Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.
0
2. Amend Sec. 800.104 by revising paragraph (a) and adding paragraph
(f) to read as follows:
Sec. 800.104 Applicability rule.
(a) Except as provided in paragraphs (b) through (f) of this
section and otherwise in this part, the regulations in this part apply
from February 13, 2020.
* * * * *
(f) Notwithstanding paragraphs (b) through (d) of this section, the
amendments to this part published in the Federal Register on November
26, 2024 apply from December 26, 2024.
0
3. Amend Sec. 800.501 by revising paragraph (b) to read as follows:
Sec. 800.501 Procedures for notices.
* * * * *
(b)(1) If the Committee determines that a transaction for which no
voluntary notice or declaration has been submitted under this part, and
with respect to which the Committee has not informed the parties in
writing that the Committee has concluded all action under section 721,
may be a covered transaction and may raise national security
considerations, the Staff Chairperson, acting on the recommendation of
the Committee, may request the parties to the transaction or other
persons to provide to the Committee information necessary to determine
whether the transaction is a covered transaction, whether the
transaction may raise national security considerations, or, as
appropriate, whether the transaction is a transaction for which a
submission is or was required under Sec. 800.401.
(2) If the Committee determines that a transaction referred to
under paragraph (b)(1) of this section is a covered transaction and may
raise national security considerations, the Staff Chairperson, acting
on the recommendation of the Committee, may request the parties to file
a notice of such covered transaction under paragraph (a) of this
section.
* * * * *
0
4. Amend Sec. 800.504 by:
0
a. In paragraph (a)(3), removing the period at the end of the paragraph
and adding a semicolon in its place;
0
b. In paragraph (a)(4), removing ``or'' at the end of the paragraph;
0
c. In paragraph (a)(5), removing the period at the end of the paragraph
and adding ``; or'' in its place;
0
d. Adding paragraph (a)(6);
0
e. Redesignating paragraph (d) as paragraph (e); and
0
f. Adding new paragraph (d).
The additions read as follows:
Sec. 800.504 Deferral, rejection, or disposition of certain voluntary
notices.
(a) * * *
(6) Reject any voluntary notice at any time after the notice has
been accepted, and so inform the parties promptly in writing, if the
Committee has proposed risk mitigation terms, including revisions to
such terms, and if the Staff Chairperson has imposed a time frame for
responding to such terms as set forth in paragraph (d) of this section,
to the party or parties that submitted the notice, and the party or
parties have failed to substantively respond to such terms within the
time frame specified.
* * * * *
(d) The Staff Chairperson may impose a time frame of no fewer than
three business days for the party or parties to provide a substantive
response to proposed risk mitigation terms, including revisions to such
terms. The time frame may be extended if the parties so request in
writing and the Staff Chairperson grants that request in writing. In
determining whether to impose such a time frame, the Staff Chairperson
may consider:
(1) The statutory deadline for completing an investigation under
section 721(b)(2)(C)(i);
(2) The risk to the national security of the United States arising
from the transaction;
(3) The party's or parties' responsiveness to the Committee;
(4) The nature of the transaction;
(5) The appropriateness of suspending, or imposing conditions on,
the transaction under section 721(l); and
(6) Other such factors the Staff Chairperson may determine to be
appropriate in connection with a specific transaction.
* * * * *
0
5. Amend Sec. 800.801 by revising the section heading and paragraph
(a) to read as follows:
Sec. 800.801 Obligation of parties or other persons to provide
information.
(a) This paragraph (a) sets forth requirements for parties to a
transaction or other persons to provide information to the Staff
Chairperson or requesting lead agency in the circumstances specified in
paragraphs (a)(1) through (6) of this section.
(1) Parties to a transaction that is notified or declared under
subpart D or E of this part shall provide information to the Staff
Chairperson that will enable the Committee to conduct a full
assessment, review, and/or investigation of the transaction.
(2) For a transaction for which no voluntary notice or declaration
has been submitted and for which the Staff Chairperson has requested
information as provided for in Sec. 800.501(b), parties to the
transaction or other persons shall provide information to the Staff
Chairperson that will enable the Committee to determine:
[[Page 93185]]
(i) Whether the transaction is a covered transaction;
(ii) Whether the transaction may raise national security
considerations; or
(iii) As appropriate, whether the transaction is a transaction for
which a submission is or was required under Sec. 800.401.
(3) Independent of any obligations under an agreement, condition,
or order authorized under section 721(l), parties shall provide
information to the Staff Chairperson or the requesting lead agency so
as to enable the Committee to assess compliance with section 721 and
the regulations in this part or to monitor compliance with, enforce or
modify the terms of, or decide to terminate any agreement entered into,
condition imposed, or order issued.
(4) Any person that has submitted information to the Committee
shall respond to requests from the Staff Chairperson for information to
enable the Committee to determine whether the person made any material
misstatement or omitted material information from any such submission.
(5) Parties to a transaction that have filed information with the
Committee shall promptly advise the Staff Chairperson of any material
changes to such information.
(6) If deemed appropriate by the Committee, the Staff Chairperson
may obtain information from parties to a transaction or other persons
through subpoena or otherwise, under the Defense Production Act, as
amended (50 U.S.C. 4555(a)).
* * * * *
0
6. Amend Sec. 800.901 by:
0
a. Revising paragraph (a);
0
b. In paragraph (b), removing ``$250,000'' and adding in its place
``$5,000,000''; and
0
c. Revising paragraphs (c) and (f).
The revisions read as follows:
Sec. 800.901 Penalties and damages.
(a)(1) Any person who submits a declaration or notice with a
material misstatement or omission or makes a false certification under
Sec. 800.404, Sec. 800.405, or Sec. 800.502 may be liable to the
United States for a civil penalty not to exceed $5,000,000 per
violation.
(2) Any person who, in response to a request from the Staff
Chairperson or a lead agency, submits to the Committee any information
pursuant to Sec. 800.801(a)(2), (3), or (4) or (c) with a material
misstatement or omission may be liable to the United States for a civil
penalty not to exceed $5,000,000 per violation. This paragraph (a)(2)
shall apply only with respect to responses to requests that were made
in writing, specified a time frame for response, and indicated the
applicability of this paragraph (a).
(3) The amount of the penalty imposed for a violation as provided
for in this paragraph (a) shall be based on the nature of the
violation.
* * * * *
(c)(1) Any person who, after December 22, 2008, violates,
intentionally or through gross negligence, a material provision of a
mitigation agreement entered into before October 11, 2018, with, a
material condition imposed before October 11, 2018, by, or an order
issued before October 11, 2018, by, the United States under section
721(l) may be liable to the United States for a civil penalty not to
exceed $250,000 per violation or the value of the transaction,
whichever is greater. For clarification, under the previous sentence,
whichever penalty amount is greater may be imposed per violation, and
the amount of the penalty imposed for a violation shall be based on the
nature of the violation.
(2) Any person who violates a material provision of a mitigation
agreement entered into on or after October 11, 2018, and before
December 26, 2024, with, a material condition imposed on or after
October 11, 2018, and before December 26, 2024, by, or an order issued
on or after October 11, 2018, and before December 26, 2024, by, the
United States under section 721(l) may be liable to the United States
for a civil penalty per violation not to exceed $250,000 or the value
of the transaction, whichever is greater. For clarification, under the
previous sentence, whichever penalty amount is greater may be imposed
per violation, and the amount of the penalty imposed for a violation
shall be based on the nature of the violation.
(3)(i) Any person who violates a material provision of a mitigation
agreement entered into on or after December 26, 2024, with, a material
condition imposed on or after December 26, 2024, by, or an order issued
on or after December 26, 2024, by, the United States under section
721(l) may be liable to the United States for a civil penalty per
violation not to exceed the greatest of:
(A) $5,000,000;
(B) The value of the person's interest in the U.S. business (or, as
applicable, the parent of the U.S. business) at the time of the
transaction;
(C) The value of the person's interest in the U.S. business (or, as
applicable, the parent of the U.S. business) at the time of the
violation in question or the most proximate time to the violation for
which assessing such value is practicable; or
(D) The value of the transaction filed with the Committee.
(ii) For clarification, under paragraphs (c)(3)(i)(A) through (D)
of this section, whichever penalty amount is greatest may be imposed
per violation, and the amount of the penalty imposed for a violation
shall be based on the nature of the violation.
* * * * *
(f) Upon receiving notice of a penalty to be imposed under any of
paragraphs (a) through (c) of this section, the subject person may,
within 20 business days of receipt of such notice, submit a petition
for reconsideration to the Staff Chairperson, including a defense,
justification, or explanation for the conduct to be penalized. The
Committee will review the petition and issue any final penalty
determination within 20 business days of receipt of the petition. The
Staff Chairperson and the subject person may extend either such period
through written agreement or, where there is a compelling circumstance
and it is deemed appropriate by the Committee, the Staff Chairperson
may extend either period by notifying the subject person in writing of
the extended time frame. The Committee and the subject person may reach
an agreement on an appropriate remedy at any time before the Committee
issues any final penalty determination.
* * * * *
PART 802--REGULATIONS PERTAINING TO CERTAIN TRANSACTIONS BY FOREIGN
PERSONS INVOLVING REAL ESTATE IN THE UNITED STATES
0
7. The authority citation for part 802 continues to read as follows:
Authority: 50 U.S.C. 4565; E.O. 11858, as amended, 73 FR 4677.
0
8. Amend Sec. 802.104 by revising paragraph (a) and adding paragraph
(c) to read as follows:
Sec. 802.104 Applicability rule.
(a) Except as provided in paragraphs (b) and (c) of this section
and otherwise in this part, the regulations in this part apply from
February 13, 2020.
* * * * *
(c) Notwithstanding paragraph (b) of this section, the amendments
to this part published in the Federal Register on November 26, 2024
apply from December 26, 2024.
0
9. Amend Sec. 802.501 by revising paragraph (b) to read as follows:
Sec. 802.501 Procedures for notices.
* * * * *
[[Page 93186]]
(b)(1) If the Committee determines that a transaction for which no
voluntary notice or declaration has been submitted under this part, and
with respect to which the Committee has not informed the parties in
writing that the Committee has concluded all action under section 721,
may be a covered real estate transaction and may raise national
security considerations, the Staff Chairperson, acting on the
recommendation of the Committee, may request the parties to the
transaction or other persons to provide to the Committee information
necessary to determine whether the transaction is a covered real estate
transaction or whether the transaction may raise national security
considerations.
(2) If the Committee determines that a transaction referred to
under paragraph (b)(1) of this section is a covered real estate
transaction and may raise national security considerations, the Staff
Chairperson, acting on the recommendation of the Committee, may request
the parties to file a notice of such covered real estate transaction
under paragraph (a) of this section.
* * * * *
0
10. Amend Sec. 802.504 by:
0
a. In paragraph (a)(3), removing the period at the end of the paragraph
and adding a semicolon in its place;
0
b. In paragraph (a)(4), removing ``or'' at the end of the paragraph;
0
c. In paragraph (a)(5), removing the period and adding ``; or'' in its
place;
0
d. Adding paragraph (a)(6);
0
e. Redesignating paragraph (d) as paragraph (e); and
0
f. Adding new paragraph (d).
The additions read as follows:
Sec. 802.504 Deferral, rejection, or disposition of certain voluntary
notices.
(a) * * *
(6) Reject any voluntary notice at any time after the notice has
been accepted, and so inform the parties promptly in writing, if the
Committee has proposed risk mitigation terms, including revisions to
such terms, and if the Staff Chairperson has imposed a time frame for
responding to such terms as set forth in paragraph (d) of this section,
to the party or parties that submitted the notice and the party or
parties have failed to substantively respond to such terms within the
time frame specified.
* * * * *
(d) The Staff Chairperson may impose a time frame of no fewer than
three business days for the party or parties to provide a substantive
response to proposed risk mitigation terms, including revisions to such
terms. The time frame may be extended if the parties so request in
writing and the Staff Chairperson grants that request in writing. In
determining whether to impose such a time frame, the Staff Chairperson
may consider:
(1) The statutory deadline for completing an investigation under
section 721(b)(2)(C)(i);
(2) The risk to the national security of the United States arising
from the transaction;
(3) The party's or parties' responsiveness to the Committee;
(4) The nature of the transaction;
(5) The appropriateness of suspending, or imposing conditions on,
the transaction under section 721(l); and
(6) Other such factors the Staff Chairperson may determine to be
appropriate in connection with a specific transaction.
* * * * *
0
11. Amend Sec. 802.801 by revising the section heading and paragraph
(a) to read as follows:
Sec. 802.801 Obligation of parties or other persons to provide
information.
(a) This paragraph (a) sets forth requirements for parties to a
transaction or other persons to provide information to the Staff
Chairperson or requesting lead agency in the circumstances specified in
paragraphs (a)(1) through (6) of this section.
(1) Parties to a transaction that is notified or declared under
subpart D or E of this part shall provide information to the Staff
Chairperson that will enable the Committee to conduct a full
assessment, review, and/or investigation of the transaction.
(2) For a transaction for which no voluntary notice or declaration
has been submitted and for which the Staff Chairperson has requested
information as provided for in Sec. 802.501(b), parties to the
transaction or other persons shall provide information to the Staff
Chairperson that will enable the Committee to determine whether the
transaction is a covered real estate transaction or whether the
transaction may raise national security considerations.
(3) Independent of any obligations under an agreement, condition,
or order authorized under section 721(l), parties shall provide
information to the Staff Chairperson or the requesting lead agency so
as to enable the Committee to assess compliance with section 721 and
the regulations in this part or to monitor compliance with, enforce or
modify the terms of, or decide to terminate any agreement entered into,
condition imposed, or order issued.
(4) Any person that has submitted information to the Committee
shall respond to requests from the Staff Chairperson for information to
enable the Committee to determine whether the party made any material
misstatement or omitted material information from any such submission.
(5) Parties to a transaction that have filed information with the
Committee shall promptly advise the Staff Chairperson of any material
changes to such information.
(6) If deemed appropriate by the Committee, the Staff Chairperson
may obtain information from parties to a transaction or other persons
through subpoena or otherwise, under the Defense Production Act, as
amended (50 U.S.C. 4555(a)).
* * * * *
0
12. Amend Sec. 802.901 by revising paragraphs (a), (b), and (e) to
read as follows:
Sec. 802.901 Penalties and damages.
(a)(1) Any person who submits a declaration or notice with a
material misstatement or omission or makes a false certification under
Sec. 802.402, Sec. 802.403, or Sec. 802.502 may be liable to the
United States for a civil penalty not to exceed $5,000,000 per
violation.
(2) Any person who, in response to a request from the Staff
Chairperson or a lead agency, submits to the Committee any information
pursuant to Sec. 802.801(a)(2), (3), or (4) or (c), with a material
misstatement or omission may be liable to the United States for a civil
penalty not to exceed $5,000,000 per violation. This paragraph (a)(2)
shall apply only with respect to responses to requests that were made
in writing, specified a time frame for response, and indicated the
applicability of this paragraph (a).
(3) The amount of the penalty imposed for a violation as provided
for in this paragraph (a) shall be based on the nature of the
violation.
(b)(1) Any person who violates a material provision of a mitigation
agreement entered into on or after February 13, 2020, and before
December 26, 2024, with, a material condition imposed on or after
February 13, 2020, and before December 26, 2024, by, or an order issued
on or after February 13, 2020, and before December 26, 2024, by, the
United States under section 721(l) may be liable to the United States
for a civil penalty per violation not to exceed $250,000 or the value
of the transaction, whichever is greater. For clarification, under the
previous sentence, whichever penalty amount is greater may be imposed
per violation, and the amount of the penalty imposed for a violation
shall be based on the nature of the violation.
[[Page 93187]]
(2)(i) Any person who violates a material provision of a mitigation
agreement entered into on or after December 26, 2024, with, a material
condition imposed on or after December 26, 2024, by, or an order issued
on or after December 26, 2024, by, the United States under section
721(l) may be liable to the United States for a civil penalty per
violation not to exceed the greatest of:
(A) $5,000,000;
(B) The value of the person's interest in the covered real estate
(or, as applicable, the owner of the covered real estate) at the time
of the transaction;
(C) The value of the person's interest in the covered real estate
(or, as applicable, the owner of the covered real estate) at the time
of the violation in question or the most proximate time to the
violation for which assessing such value is practicable; or
(D) The value of the transaction filed with the Committee.
(ii) For clarification, under paragraphs (b)(2)(i)(A) through (D)
of this section, whichever penalty amount is greatest may be imposed
per violation, and the amount of the penalty imposed for a violation
shall be based on the nature of the violation.
* * * * *
(e) Upon receiving notice of a penalty to be imposed under any of
paragraphs (a) through (c) of this section, the subject person may,
within 20 business days of receipt of such notice, submit a petition
for reconsideration to the Staff Chairperson, including a defense,
justification, or explanation for the conduct to be penalized. The
Committee will review the petition and issue any final penalty
determination within 20 business days of receipt of the petition. The
Staff Chairperson and the subject person may extend either such period
through written agreement or, where there is a compelling circumstance
and if it is deemed appropriate by the Committee, the Staff Chairperson
may extend either period by notifying the subject person in writing of
the extended time frame. The Committee and the subject person may reach
an agreement on an appropriate remedy at any time before the Committee
issues any final penalty determination.
* * * * *
Paul M. Rosen,
Assistant Secretary for Investment Security.
[FR Doc. 2024-27310 Filed 11-25-24; 8:45 am]
BILLING CODE 4810-AK-P
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