Pursuant to an interim rule published on April 29, the Committee on Foreign Investment in the United States (CFIUS) will implement fees for certain filings made on or after May 1, 2020. The fees apply to notice filings regarding covered transactions involving U.S. businesses or real estate. Consistent with the proposed rule issued in March, the fees range from $750 to $300,000, depending on the value of the transaction. The fee must be paid before CFIUS will accept a notice for review. Transactions valued at less than $500,000 or submitted for CFIUS review by way of declarations are not subject to filing fees. Funds generated by the new fee structure will be used to support the work of CFIUS.
The filing fees established by the interim rule are as follows:
- Transaction value of less than $500,000 – no filing fee
- Transaction value of equal to or greater than $500,000, but less than $5 million – $750 filing fee
- Transaction value of equal to or greater than $5 million, but less than $50 million – $7,500 filing fee
- Transaction value of equal to or greater than $50 million, but less than $250 million – $75,000 filing fee
- Transaction value of equal to or greater than $250 million, but less than $750 million – $150,000 filing fee
- Transaction value of equal to or greater than $750 million – $300,000 filing fee
Generally, CFIUS will determine transaction values based on the “total value of all consideration that has been or will be provided in the context of the transaction by or on behalf of the foreign person that is a party to the transaction, including cash, assets, shares or other ownership interests, debt forgiveness, or services or other in-kind consideration.” The interim rule sets out the methodology for valuing various types of consideration, including securities, noncash assets, loans and conversion of previously acquired contingent equity interests.
For transactions involving both U.S. and non-U.S. assets, the value of the transaction will be calculated on the basis of the entire transaction rather than the value of the U.S. business alone, with one exception. If a transaction valued at $5 million or more includes one or more non-U.S. businesses, the value of which is less than $5 million, the filing fee will be reduced to $750.
Certain other exceptions to the general rule on determination of transaction value are also provided. In the case of contribution of one or more U.S. businesses to a joint venture, the transaction will be valued at the fair market value of the assets of the U.S. businesses contributed, determined in accordance with the definition of fair market value provided in the rule. Special provisions also apply to valuing any real estate transaction structured as a lease or concession. Furthermore, if the parties have not determined or cannot reasonably determine the consideration to be provided by the foreign person(s) as of the date of filing, the transaction value for fee calculation purposes will be the fair market value of the interest being acquired as of the filing date.
Parties filing a notice to CFIUS must electronically remit the requisite fee before CFIUS will accept the notice and begin its review. In addition, the notice must specify the value of the transaction and the fee due as calculated by the parties and provide an explanation of the valuation methodology and fee calculation. However, the interim rule further provides that CFIUS is not bound to accept the parties’ characterization of the transaction value or fee due.
CFIUS may waive filing fees if “extraordinary circumstances relating to national security” warrant doing so. In addition, if CFIUS permits a filer to withdraw and refile a notice, the filer will not be required to pay an additional filing fee unless CFIUS determines that a material change to the transaction occurred or a material inaccuracy or omission was made by the parties in the original filing. Filing fees will not be refunded in whole or in part unless CFIUS determines that (i) a transaction is not a covered transaction or a covered real estate transaction, or (ii) the filer(s) of the notice paid an amount in excess of the requisite filing fee.
Parties interested in commenting on the interim rule may do so through June 1, 2020. The comment period for the proposed rule expired on April 3, but in recognition of the challenges posed by the COVID-19 pandemic, the rule has been issued as an interim rule in order to provide time for interested parties to submit additional comments.