CFIUS Approval Process

Our Lawyers Explain the Committee on Foreign Investment in the United States (CFIUS) Approval Process

Foreign investments in the United States that raise national security concerns are subject to approval by the Committee on Foreign Investment in the United States (CFIUS). Foreign parties must comply with all CFIUS regulations when seeking approval for a proposed transaction, including submitting timely formal written notice and going through the CFIUS review process.

**Attorney Nick Oberheiden**
CFIUS Team Lead

**Attorney John W. Sellers**
CFIUS Team
Former DOJ Trial Attorney

**Glenn Karabeika**
CFIUS Team Consultant
Former HSI Special Agent

The Committee on Foreign Investment in the United States (CFIUS) is one of several federal authorities that share responsibility for protecting the national security interests of the United States. If a foreign person, foreign business, or foreign government seeks to make an investment in the United States that raises national security issues, the investment may be subject to CFIUS review—and the investment will be barred unless and until it receives CFIUS approval.

CFIUS Approval Applies to “Covered Transactions”

Investments that are subject to the CFIUS approval process are referred to as “covered transactions.” Covered transactions fall into three broad categories:

Transactions that can result in a foreign party having control of a U.S. business
Transactions that involve non-controlling investments in U.S. businesses that involve critical technology, critical infrastructure, or sensitive personal data (“TID businesses”)
Transactions that involve the acquisition or lease or real estate located within an airport or seaport, or within a certain distance of a government facility or military installation

Pursuant to CFIUS’s authority to review foreign investments, if a covered transaction would result in foreign control that presents a national security threat, CFIUS can bar the transaction. As a result parties to proposed covered transactions have a substantial interest in ensuring that CFIUS approves their transactions. At Oberheiden PC, we guide clients through the CFIUS approval process, from formal notice through negotiating a mitigation agreement if necessary.

About the CFIUS Approval Process for Investments in the United States

CFIUS’s authority comes from the Defense Production Act of 1950 (DPA), and as amended by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Pursuant to these statutes, CFIUS scrutinizes proposed foreign investments in U.S. businesses and certain real estate transactions that represent potential U.S. national security risks. Here are some key insights for transaction parties that need to seek CFIUS approval for a foreign direct investment in the United States:

1. Mandatory CFIUS Filings

When parties are preparing to move forward with covered transactions, they have two options to notify CFIUS of such transactions. They can either file a short form “Declaration,” or they can file a voluntary “Notice.”

Each of these is a written request for CFIUS to review transactions that require approval under the DPA and FIRRMA. While Declarations and Notices can both satisfy CFIUS’s mandatory filing requirement, transaction parties must carefully choose between these options based on the nature of the transaction and the other circumstances involved. As CFIUS explains, while filing a Declaration, “[m]ay be efficient for transactions that are less likely to present national security considerations,” filing a Notice, “[m]ay provide greater certainty through full CFIUS action.”

2. Filing Fees

Filing a Declaration does not require payment of a filing fees, while filing a Notice does. If a foreign investor or U.S. party submits a Notice, the applicable filing fee (if any) is due at the time of filing. Filing fees start at $750 for transactions ranging from $500,000 to $5 million in value, and reach $300,000 for transactions involving $750 million or more.

3. CFIUS Review Process

The CFIUS review process varies for Declarations and Notices. The review process for Declarations is more streamlined, with an initial 30-day assessment period. After this 30-day period, CFIUS can either approve the transaction, request a full Notice, inform the parties that it is unable to conclude the action, or initiate a unilateral review.

Notices trigger an initial 45-day review period which may be followed by an additional 45-day investigation period. At the end of the process, CFIUS can either approve the transaction, request mitigation, grant a request for withdrawal, or refer the transaction to the President.

4. Investigation Period

If transaction parties file a Notice and CFIUS cannot make a final determination within the initial 45-day review period, it can open an investigation. This typically occurs when national security concerns remain after CFIUS’s initial review. During the subsequent investigation period, transaction parties must be prepared to provide requested documentation in a timely manner, and they should have a strategy in place to steer the inquiry toward a favorable conclusion.

5. Mitigation (if Necessary)

In some cases, CFIUS will require transaction parties to alter their deal structure or implement measures to mitigate national security concerns. If mitigation is necessary, transaction parties will typically need to engage in negotiations with CFIUS personnel to determine what specific mitigation measures are required. CFIUS requires mitigation measures for about 10% of all Notices filed.

6. Withdrawal and Refiling (if Necessary)

CFIUS determinations are not subject to appeal. As a result, if a covered transaction is unlikely to receive approval even with mitigation, the best course of action will often be to withdraw the parties’ request and refile after addressing CFIUS’s concerns.

7. CFIUS Approval

If CFIUS determines that a covered transaction is permissible, it will issue a clearance letter. A clearance letter provides a safe harbor for the transaction in question. After the issuance of a clearance letter, the foreign purchaser can move forward with the acquisition as it was described in the original Declaration or Notice, subject to any mitigation measures agreed to during the approval process.

Working with CFIUS Counsel at Oberheiden PC

Our attorneys guide U.S. and foreign parties through the CFIUS approval process. We handle all CFIUS matters, including all aspects of securing approval for covered transactions. If you need to seek approval for a covered transaction, our attorneys can:

Evaluate the national security concerns implicated by the transaction and advise regarding the likelihood of securing CFIUS approval (with or without mitigation)
Assist with restructuring the transaction to meet CFIUS’s requirements or avoid the need for CFIUS approval as warranted
Advise regarding the decision to file a Declaration or Notice and then submit the appropriate filing to CFIUS
Communicate directly with CFIUS during the review process, including CFIUS’s investigation (if any) and any mitigation negotiations
Assist with finalizing the CFIUS approval process and then moving forward with closing the transaction in accordance with CFIUS’s approval and applicable law

FAQs: The CFIUS Process for Foreign Investments with US National Security Implications

What is the Committee on Foreign Investment in the United States (CFIUS)?

The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee chaired by the U.S. Department of the Treasury. It was established in 1975 by President Gerald Ford, and it is authorized to review certain foreign investments that pose potential national security threats to the United States. Parties involved in such foreign acquisitions must go through the CFIUS clearance process, which starts with submitting a formal filing in the form of either a “Declaration” or a “Notice.”

Is there a mandatory filing when seeking CFIUS approval for a foreign investment in the United States?

Yes, seeking CFIUS approval for a transaction that involves foreign control or government rights involves submitting a mandatory filing—in the form of either a “Declaration” or a “Notice.” Failure to file either a Declaration or a Notice when required can result in penalties up to the value of the transaction at issue.

The CFIUS review process can extend the timelines and costs of foreign investments in the United States, with transactions in the defense, telecommunications, and cybersecurity industries being among those most likely to face heavy scrutiny during the CFIUS approval process. As a result, foreign investors and their U.S. counterparts may choose to alter their deal structures to avoid CFIUS scrutiny in some cases.

Are CFIUS approval applications public record?

With only limited exceptions, CFIUS approval applications are not public record. In the vast majority of cases, Declarations, Notices, and other documentation submitted during the review process are maintained strictly confidential and are exempt from public disclosure under the Freedom of Information Act (FOIA).

When should transaction parties start the CFIUS approval process?

Parties contemplating transactions that are subject to review should generally start the CFIUS process as soon as they have the information and documentation they need to navigate the process successfully. Our attorneys can assist with preparing to seek CFIUS approval and provide advice regarding timing.

What other federal compliance concerns are implicated by foreign investments in the United States?

From federal import and export regulations to the International Traffic in Arms (ITAR) regulations, foreign investments in the United States can raise various other federal compliance concerns. This is true for both majority and minority investments. Our attorneys can assist with all aspects of federal compliance and generate the documentation needed to substantiate compliance if necessary.

Speak with a CFIUS Attorney at Oberheiden PC

To speak with a CFIUS attorney at Oberheiden PC, contact us today. Call 888-680-1745 or contact us confidentially online to arrange a complimentary initial consultation.