On October 5, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule that imposes new multilateral controls on six “emerging technologies,” agreed during the December 2019 plenary meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement). These recently developed or developing technologies “essential for the national security of the United States” include forensic hacking tools, surveillance software, sub-orbital craft, and manufacturing tools and technology used to make integrated circuits and semiconductors.
On September 18, 2020, the U.S. Commerce Department published two rules defining the scope of prohibited transactions related to the mobile applications, WeChat and TikTok. The scope of prohibited transactions clarified the two parallel executive orders (EOs) issued by the Trump administration on August 6, 2020, which required the Commerce Department to impose restrictions on both platforms.
The scope of prohibited transactions are the same for both WeChat and TikTok. Prohibited transactions do not include individual use of these mobile platforms to exchange personal or business information. However, the rule would effectively shut down WeChat and TikTok within the United States via mobile application storefronts (e.g., Apple Store and Google Play), and additional restrictions would further impair the apps’ functionality and user experience.
Beginning on May 1, 2020, the Committee on Foreign Investment in the United States (CFIUS) will require a fee for any joint voluntary notice of a “covered transaction” or “covered real estate transaction.” This requirement also applies to (i) voluntary notices filed after CFIUS has completed its assessment of a declaration, (ii) voluntary notices filed for transactions subject to mandatory declarations, and (iii) voluntary notices filed in lieu of a declaration when the transaction is not subject to a mandatory declaration. There is no fee to submit a declaration with CFIUS or if CFIUS initiates a unilateral review. Continue reading →
On March 6, 2020, President Trump issued an Executive Order (EO) instructing the Chinese company Beijing Shiji Information Technology Co. Ltd. (Shiji) to divest its acquisition of StayNTouch Inc., a U.S.-based software company providing management systems to hotels. Pursuant to the EO, Shiji is required to fully divest its interest in StayNTouch within 120 days, with the possibility of a 90-day extension. The President determined that there was “credible evidence” that Shiji, through its acquisition of StayNTouch, “might take action that threatens to impair the national security of the United States.” The EO does not specify CFIUS’s particular concerns but it appears that StayNTouch’s platform could provide Shiji with access to a large database of personal and financial information of its users.
On September 17, 2019, the U.S. Department of Treasury issued two new proposed rules for the Committee on Foreign Investment in the United States (CFIUS) implementing the Foreign Investment Risk Review Modernization Act (FIRRMA), which was enacted in August 2018. The first proposed rule covers, among other things, FIRRMA’s expansion of CFIUS’ jurisdiction to non-controlling investments in U.S. businesses engaged in critical technology, critical infrastructure and sensitive personal data. The second proposed rule addresses FIRRMA’s expansion of CFIUS’ jurisdiction over certain real estate transactions.
Recent comments from Bureau of Industry (BIS) officials at the BIS Update indicate the U.S. Government is progressing towards more detailed proposed rules with respect to both “emerging” and “foundational” technologies that will become subject to future export controls. This required rulemaking is part of an interagency effort mandated by the Export Control Reform Act (ECRA) of 2018.
The Committee on Foreign Investment in the U.S. (CFIUS) has cleared the acquisition of Beijing OmniVision Technologies Co., Ltd. by Shanghai Will Semiconductor Co., a PRC-listed company, according to an April 16, 2019, filing with the securities regulators in China. This is welcome news after a string of negative decisions by CFIUS.
On November 19, 2018, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued a proposed rulemaking seeking public comment on criteria for identifying emerging technologies that are essential to U.S. national security.
The U.S. Department of the Treasury issued temporary regulations establishing a partial pilot program implementing two key changes to the jurisdiction and review of transactions by the Committee on Foreign Investment in the United States (CFIUS). The pilot program (1) expands the scope of transactions subject to review by CFIUS to include certain “other investments” involving foreign persons and critical technologies (though not critical infrastructure or companies with personal identifier information); and (2) makes effective a mandatory declaration provision for all transactions that fall within the specific scope of the pilot program. The pilot program will largely impact investments in companies involved in critical technologies pertaining to a specified list of industries by NAICS code, including the aircraft, semiconductor, nuclear, and telecommunications sectors. It also makes filing declarations a mandatory requirement for covered transactions involving these companies, which include acquisitions of control as well as non-controlling investments (including investments of less than 10%) that afford the foreign investor certain rights.
Importantly, the pilot program will commence on November 10, 2018 and will apply on a global basis (i.e., there is no country exemption at this time). The pilot program will not apply to transactions completed prior to November 10 or to transactions for which the parties have executed a binding written agreement or other document establishing the material terms of the transaction prior to October 11, 2018.
On August 13, 2018, President Trump formally signed the 2019 National Defense Authorization Act, signaling a number of substantial changes on the horizon for government contractors and foreign investors in the United States. In “President Trump Signs FY 2019 NDAA,” our colleagues Richard B. Oliver, Glenn Sweatt, Alexander B. Ginsberg and Kevin Massoudi offer a roundup of Pillsbury’s coverage of the key issues.