Proposed Rules on CFIUS Mandatory Declarations Released: No More NAICS Codes!

On May 21, 2020, the Department of the Treasury released a proposed rule that would modify the requirements for Committee on Foreign Investment in the United States (CFIUS) mandatory declarations. This proposed change includes removing the North American Industry Classification System (NAICS) codes criteria. These changes have been anticipated since new CFIUS regulations went into effect on February 13, 2020 and the Department of the Treasury announced that future changes regarding mandatory declarations for critical technology transactions were forthcoming. Written comments on the proposed rule must be submitted by June 22, 2020.

Currently, foreign investment transactions that require a mandatory CFIUS declaration include transactions where the U.S. business produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies in connection with any of the 27 specified industries referenced by their NAICS codes. These industries were formerly known as “Pilot Program industries” before the new CFIUS regulations went into effect and include biotechnology and nanotechnology. The proposed rule removes the NAICS code analysis from the determination of whether a mandatory declaration is required for certain foreign investment transactions. Instead, the proposed rule leverages existing U.S. export control requirements to mandate declarations where a technology or item couldn’t be transferred absent an export license...