Effective May 1, 2020, parties filing a formal written notice of a transaction for review by the Committee on Foreign Investment in the United States (CFIUS or the Committee) will be subject to filing fees of up to $300,000 pursuant to an interim rule issued by the U.S. Department of Treasury (Treasury). The filing fees apply to notices of covered transactions and covered real estate transactions filed with CFIUS under formal written notice procedures (whether such notices are submitted under voluntary or mandatory circumstances) but do not apply to notices submitted in abbreviated declaration form.
Imposing fees upon formal written notices but not declarations will further shift existing CFIUS practice toward the use of declarations in appropriate circumstances. Accordingly, it is critical that parties evaluate the timing considerations that come with the use of a declaration to notify CFIUS of a transaction, including in cases of successful declarations (CFIUS clears the transaction within 30 days) and unsuccessful declarations (CFIUS is unable to conclude action based on the declaration, potentially requiring the parties to file a formal written notice and to endure an additional review by CFIUS lasting 90 days or longer).
Parties with draft formal written notices pending before the Committee for feedback also should anticipate that they will be subject to filing fees if they file a revised notice for acceptance after May 1, 2020.
Summary
The interim rule implements section 1723 of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), amending section 721 of the Defense Production Act of 1950 to allow CFIUS to collect fees, and largely mirrors the terms outlined in the proposed regulations that Treasury announced on March 9, 2020. Treasury accepted public comments on the proposed rule through April 3, 2020, and has extended the public comment period on the interim rule through June 1, 2020.
Specifically, the interim rule establishes a filing fee for “covered transactions” under 31 C.F.R. part 800 and “covered real estate transactions” under 31 C.F.R. part 802 that are filed with CFIUS as formal written notices but not as CFIUS declarations. The applicable fee amount will be levied based on the value of the transaction and may not exceed the lesser of 1 percent of the value of the transaction or $300,000, adjusted annually for inflation. The transaction value will typically be assessed as 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 unless the consideration has not been or cannot reasonably be determined as of the date the parties file.
The interim rule outlines the filing fees as follows, subject to limited exceptions for extraordinary circumstances and some transactions where the value of the U.S. business contributed is a minimal percentage of the overall value of the transaction.